<PAGE>   1

                                    FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                   Quarterly Report Under Section 13 or 15 (d)
                     of the Securities Exchange Act of 1934


For the Quarterly Period Ended September 30, 1997

Commission file number 0-15886

                           The Navigators Group, Inc.
             (Exact name of registrant as specified in its charter)

          Delaware                                            13-3138397
--------------------------------------------------------------------------------
(State or other jurisdiction of                              (IRS Employer
incorporation or organization)                            Identification No.)

       123 William Street, New York, New York                    10038
--------------------------------------------------------------------------------
      (Address of principal executive offices)                (Zip Code)

                                 (212) 349-1600
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report.)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes  |X|                No  |_|

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.

On November 10, 1997 there were 8,337,217 shares of common stock, $0.10 par
value, issued and outstanding.


                                       1
<PAGE>   2

                   THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

                                      INDEX

                                                                       Page No.
                                                                       --------

Part I.  FINANCIAL INFORMATION:

      Consolidated Balance Sheets
              September 30, 1997 and December 31, 1996 .....................  3

      Consolidated Statements of Income
              Three Months Ended September 30, 1997 and 1996 ...............  4
              Nine Months Ended September 30, 1997 and 1996 ................  5

      Consolidated Statements of Cash Flows
              Nine Months Ended September 30, 1997 and 1996 ................  6

      Notes to Interim Consolidated Financial Statements ...................  7

      Management's Discussion and Analysis of Financial
              Condition and Results of Operations ..........................  9

Part II.  OTHER INFORMATION ................................................ 15


                                       2
<PAGE>   3

                   THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                     September 30,  December 31,
                                                                                          1997         1996
                                                                                     -------------  ------------
                                                                                      (Unaudited)
<S>                                                                                      <C>          <C>     
                                     ASSETS
    Investments and cash:
      Fixed maturities, available for sale, at fair value
         (amortized cost: 1997, $210,683; 1996, $210,042) .............................  $217,640     $215,072
      Equity securities, at fair value (cost: 1997, $5,122; 1996, $7,538) .............     6,919       10,281
      Short-term investments, at cost which approximates fair value ...................    24,725       11,826
      Cash ............................................................................     1,486        1,460
      Other investments ...............................................................     1,619        2,081
                                                                                         --------     --------
              Total investments and cash ..............................................   252,389      240,720
                                                                                                     
    Premiums in course of collection ..................................................    42,582       35,108
    Commissions receivable ............................................................     7,063        6,782
    Accrued investment income .........................................................     3,163        3,302
    Prepaid reinsurance premiums ......................................................    20,467       11,540
    Reinsurance receivable on paid and unpaid loss and loss adjustment expenses .......   141,920      143,345
    Federal income tax receivable .....................................................        --           33
    Net deferred Federal income tax benefit ...........................................     8,613        9,517
    Deferred policy acquisition costs .................................................     5,531        3,658
    Other assets ......................................................................     3,877        3,090
                                                                                         --------     --------
                                                                                                     
              Total Assets ............................................................  $485,605     $457,095
                                                                                         ========     ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:                                                                                         
    Reserves for loss and loss adjustment expenses ....................................  $272,127     $269,601
    Unearned premium ..................................................................    47,054       33,917
    Reinsurance balances payable ......................................................    15,384       11,581
    Bank loan .........................................................................    17,000       17,000
    Deferred state and local income taxes .............................................     1,206        1,119
    Federal income tax payable ........................................................        29           --
    Note payable to shareholder .......................................................       942          942
    Accounts payable and other liabilities ............................................     4,637        7,393
                                                                                         --------     --------
              Total liabilities .......................................................   358,379      341,553
                                                                                         --------     --------
                                                                                                     
Commitments and contingencies .........................................................        --           --
                                                                                                     
Stockholders' equity:                                                                                
    Preferred stock, $0.10 par value, authorized 1,000,000 shares, no shares issued ...        --           --
    Common stock, $0.10 par value, authorized 10,000,000 shares, issued and outstanding              
       8,337,217 in 1997 and 8,237,900 in 1996 ........................................       834          824
    Additional paid-in capital ........................................................    37,426       36,202
    Net unrealized gains on securities available for sale, net of income taxes of                    
       $2,976 in 1997 and $2,643 in 1996 ..............................................     5,778        5,131
    Foreign currency translation adjustment, net of income taxes ......................        27           78
    Retained earnings .................................................................    83,161       73,307
                                                                                         --------     --------
              Total stockholders' equity ..............................................   127,226      115,542
                                                                                         --------     --------
                                                                                                     
              Total Liabilities and Stockholders' Equity ..............................  $485,605     $457,095
                                                                                         ========     ========
</TABLE>

      See accompanying notes to interim consolidated financial statements.


                                       3
<PAGE>   4

                   THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                   (In thousands, except net income per share)

<TABLE>
<CAPTION>
                                                               Three Months Ended
                                                                  September 30,
                                                               ------------------
                                                                 1997       1996
                                                                 ----       ----
                                                                   (Unaudited)
<S>                                                            <C>        <C>     
Revenues:
   Net earned premium .......................................  $ 21,701   $ 19,849
   Commission income ........................................     1,086      2,482
   Net investment income ....................................     3,749      3,251
   Net realized capital gains ...............................     1,798         31
   Other income .............................................        17        181
                                                               --------   --------
         Total revenues .....................................    28,351     25,794
                                                               --------   --------

Operating expenses:
   Net losses and loss adjustment expenses incurred .........    13,161     12,206
   Commission expense .......................................     4,606      3,041
   Other operating expenses .................................     5,213      5,328
   Interest expense .........................................       323        306
                                                               --------   --------
         Total operating expenses ...........................    23,303     20,881
                                                               --------   --------

Equity income (loss) in affiliated company, net of income tax      (178)     1,408
                                                               --------   --------

Income before income taxes ..................................     4,870      6,321
                                                               --------   --------

Income tax expense:
   Current ..................................................     1,282      1,348
   Deferred .................................................       125       (279)
                                                               --------   --------
         Total income tax expense ...........................     1,407      1,069
                                                               --------   --------

   Net income ...............................................  $  3,463   $  5,252
                                                               ========   ========

Per share data:
Average common and common equivalent shares outstanding .....     8,394      8,305

Net income per share ........................................  $   0.41   $   0.63
                                                               ========   ========
</TABLE>

      See accompanying notes to interim consolidated financial statements.


                                       4
<PAGE>   5

                   THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                   (In thousands, except net income per share)

<TABLE>
<CAPTION>
                                                           Nine Months Ended
                                                              September 30,
                                                           -----------------
                                                             1997      1996
                                                             ----      ----
                                                               (Unaudited)
<S>                                                         <C>      <C>     
Revenues:
   Net earned premium ....................................  $62,276  $ 57,252
   Commission income .....................................    4,202     6,871
   Net investment income .................................   10,676    10,369
   Net realized capital gains ............................    2,252       377
   Other income ..........................................      177       508
                                                            -------  --------
         Total revenues ..................................   79,583    75,377
                                                            -------  --------

Operating expenses:
   Net losses and loss adjustment expenses incurred ......   37,418    35,780
   Commission expense ....................................   11,672     8,355
   Other operating expenses ..............................   16,696    14,334
   Interest expense ......................................      927     1,438
                                                            -------  --------
         Total operating expenses ........................   66,713    59,907
                                                            -------  --------

Equity income in affiliated company, net of income tax ...      376     1,408
                                                            -------  --------

Income before income taxes ...............................   13,246    16,878
                                                            -------  --------

Income tax expense (benefit):
   Current ...............................................    2,712     3,937
   Deferred ..............................................      680      (320)
                                                            -------  --------
         Total income tax expense ........................    3,392     3,617
                                                            -------  --------

   Net income ............................................  $ 9,854  $ 13,261
                                                            =======  ========

Per share data:
   Average common and common equivalent shares outstanding    8,364     8,308

   Net income per share ..................................  $  1.18  $   1.60
                                                            =======  ========
</TABLE>

      See accompanying notes to interim consolidated financial statements.


                                       5
<PAGE>   6

                   THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                               Nine Months Ended
                                                                 September  30,
                                                               -----------------
                                                                1997       1996
                                                                ----       ----
                                                                  (Unaudited)
<S>                                                           <C>        <C>     
 Operating activities:
    Net income .............................................  $  9,854   $ 13,261
    Adjustments to reconcile net income to net
        cash provided by operating activities:
      Depreciation and amortization ........................       352        456
      Reinsurance receivable on paid and unpaid
        losses and loss adjustment expenses ................     1,425     10,247
      Reserve for losses and loss adjustment expenses ......     2,526     (9,887)
      Prepaid reinsurance premiums .........................    (8,927)    (1,100)
      Unearned premium .....................................    13,137      5,494
      Premiums in course of collection .....................    (7,474)   (14,529)
      Commissions receivable ...............................      (281)      (364)
      Deferred policy acquisition costs ....................    (1,873)    (1,048)
      Accrued investment income ............................       138        107
      Reinsurance balances payable .........................     3,804      1,572
      Federal income tax ...................................        62       (835)
      Net deferred Federal income tax ......................       593       (260)
      Net realized capital (gains) .........................    (2,252)      (377)
      Other ................................................       689         51
                                                              --------   --------
         Net cash provided by operating activities .........    11,773      2,788
                                                              --------   --------

 Investing activities:
    Fixed maturities available for sale:
         Redemptions and maturities ........................     8,267      8,022
         Sales .............................................    63,568     29,661
         Purchases .........................................   (72,646)   (40,778)
    Equity securities:
         Sales .............................................     8,633      2,050
         Purchases .........................................    (4,008)    (2,478)
    Payable for securities purchased .......................    (3,258)        (1)
    Net sales (purchases) of short-term investments ........   (12,902)    (3,741)
    Purchase of property and equipment .....................      (635)      (230)
                                                              --------   --------
         Net cash (used in) investing activities ...........   (12,981)    (7,495)
                                                              --------   --------

Financing activities:
    Repayment of bank loan .................................         0     (2,500)
    Proceeds from exercise of stock options ................     1,234        698
                                                              --------   --------
         Net cash provided by (used in) financing activities     1,234     (1,802)
                                                              --------   --------

Increase (decrease) in cash ................................        26     (6,509)

Cash at beginning of period ................................     1,460      7,333
                                                              --------   --------

Cash at end of period ......................................  $  1,486   $    824
                                                              ========   ========
</TABLE>

      See accompanying notes to interim consolidated financial statements.


                                       6
<PAGE>   7

                   THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

               Notes to Interim Consolidated Financial Statements

(1)   Accounting Policies

      The interim financial statements are unaudited but reflect all adjustments
      which, in the opinion of management, are necessary to provide a fair
      statement of the results of The Navigators Group, Inc. and its
      subsidiaries (the "Company") for the interim periods presented. All such
      adjustments are of a normal recurring nature. The results of operations
      for any interim period are not necessarily indicative of results for the
      full year. These financial statements should be read in conjunction with
      the financial statements and notes hereto contained in the Company's Form
      10-K for the year ended December 31, 1996.

(2)   Reinsurance Ceded

      The Company's ceded earned premiums were $18,540,000 and $15,821,000 for
      the three months ended September 30, 1997 and 1996, respectively, and
      $52,700,000 and $43,139,000 for the nine months ended September 30, 1997
      and 1996, respectively. The Company's ceded losses were $22,146,000 and
      $27,359,000 for the three months ended September 30, 1997 and 1996,
      respectively, and were $41,995,000 and $45,431,000 for the nine months
      ended September 30, 1997 and 1996, respectively.

(3)   Future Application of Accounting Standards

      In February 1997, the Financial Accounting Standards Board issued
      Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per
      Share. This statement provides new accounting and reporting standards for
      earnings per share. It will replace the currently used primary and fully
      diluted earnings per share with basic and diluted earnings per share.
      Basic earnings per share excludes dilution and is computed by dividing
      income available to common shareholders by the weighted average number of
      common shares outstanding for the period. Diluted earnings per share
      represents the potential dilution that could occur if all stock options
      and other stock-based awards, as well as convertible securities, were
      exercised and converted into common stock if their effect is dilutive.
      This statement, effective for year-end 1997 financial statements, requires
      that prior period earnings per share data be restated. The Company does
      not expect adoption of this statement to have a material impact on
      earnings per common share amounts.


                                       7
<PAGE>   8

      SFAS No. 130, Reporting Comprehensive Income, was issued in June 1997 and
      establishes standards for the reporting and presentation of comprehensive
      income and its components in a full set of financial statements.
      Comprehensive income encompasses all changes in shareholders' equity
      (except those arising from transactions with owners) and includes net
      income, net unrealized capital gains or losses on available for sale
      securities and foreign currency translation adjustments. As this new
      standard only requires additional information in a financial statement, it
      will not affect the Company's financial position or results of operations.
      SFAS No. 130 is effective for fiscal years beginning after December 15,
      1997, with earlier application permitted. The Company is currently
      evaluating the presentation alternatives permitted by the statement.

      SFAS No. 131, Disclosures about Segments of an Enterprise and Related
      Information, was issued in June 1997 and establishes standards for the
      reporting of information relating to operating segments in annual
      financial statements, as well as disclosure of selected information in
      interim financial reports. This statement supersedes SFAS No. 14,
      Financial Reporting for Segments of a Business Enterprise, which requires
      reporting segment information by industry and geographic area (industry
      approach). Under SFAS No. 131, operating segments are defined as
      components of a company for which separate financial information is
      available and is used by management to allocate resources and assess
      performance (management approach). This statement is effective for
      year-end 1998 financial statements. Interim financial information will be
      required beginning in 1999 (with comparative 1998 information).

(4)   Acquisition of Mander Thomas & Cooper (Underwriting Agencies) Limited

      In August 1997, the Company signed a letter of intent to acquire 100% of
      Mander, Thomas & Cooper (Underwriting Agencies) Limited, a Lloyd's of
      London marine underwriting managing agency and its wholly owned
      subsidiary, Millennium Underwriting Limited. The transaction is expected
      to close in December 1997. The acquisition is subject to definitive
      documentation and regulatory approvals.

(5)   Subsequent Event

      On October 22, 1997, Navigators Insurance Company was licensed by the U.K.
      Department of Trade and Industry to operate an insurance branch in the
      United Kingdom.


                                       8
<PAGE>   9

                           THE NAVIGATORS GROUP, INC.

Management's Discussion and Analysis of
Financial Condition and Results of Operations

General

      The Navigators Group Inc., ( the "Parent Company") is a holding company
with 12 wholly owned subsidiaries (collectively, the "Company").

      Two of the Company's subsidiaries are insurance companies: Navigators
Insurance Company ("Navigators Insurance") and NIC Insurance Company ("NIC").
Navigators Insurance is the Company's largest insurance company subsidiary and
has been active since 1983. It specializes principally in underwriting marine,
aviation and onshore energy insurance. The Company discontinued writing inland
marine insurance (except for onshore energy) during 1997 and is significantly
reducing its program business in the second half of 1997 in order to focus on
its core businesses. NIC is a wholly owned subsidiary of Navigators Insurance,
was licensed in 1989 and began operations in 1990. It underwrites a small book
of surplus lines property insurance in certain states and, pursuant to an
intercompany reinsurance pooling agreement, cedes 100% of its gross direct
writings from this business to Navigators Insurance in exchange for assuming 10%
of the total retained business of Navigators Insurance. Navigators and NIC are
collectively referred to herein as the "Insurance Companies".

      Another subsidiary, Navigators Corporate Underwriters Limited ("NCUL"),
which was formed in the fourth quarter of 1996, is admitted to underwrite marine
and related lines of business at Lloyd's of London as a corporate member with
limited liability, commencing with the 1997 year of account.

      Seven of the Company's subsidiaries are a group of underwriting management
companies: Somerset Marine, Inc., Somerset of Georgia, Inc., Somerset Insurance
Services of Texas, Inc., Somerset Insurance Services of California Inc.,
Somerset Insurance Services of Washington, Inc., Somerset Marine (UK) Limited
("Somerset (UK)") and Somerset Asia Pacific Pty. Limited ("Somerset Asia")
(collectively, the "Somerset Companies"). The Somerset Companies produce, manage
and underwrite insurance and reinsurance for Navigators Insurance, NIC and ten
unaffiliated insurance companies.

      Somerset Asia, a wholly-owned subsidiary, was formed in the third quarter
of 1996 and operates from an office in Sydney, Australia. This office
concentrates on marine, onshore energy, engineering and construction business
primarily in Indonesia, Thailand, Malaysia, Taiwan, China and Vietnam. The
Australia office began writing business in early 1997. Somerset Asia is
supported by Somerset Services Pte. Limited which provides loss prevention
consultancy to Somerset Asia's assureds and producers. Somerset Services Pte.
Limited is a wholly owned subsidiary of Somerset Asia formed in September 1997
and located in Singapore.

      Somerset (UK), formed in the fourth quarter of 1996, will concentrate on
marine, aviation, energy, engineering and construction business. In addition,
Navigators Insurance 


                                       9
<PAGE>   10

was authorized to operate a U.K. branch on October 22, 1997. Somerset (UK) will
begin producing business in the fourth quarter of 1997 for the U.K. branch of
Navigators Insurance.

      During 1997, the Company merged four subsidiaries, Somerset Re Management,
Inc., Navigators Management Corporation, Somerset Casualty Agency, Inc. and
Somerset Property, Inc. into Somerset Marine, Inc. Somerset Marine Aviation
Property Managers, Inc. is an inactive subsidiary.

      The Company's revenue is primarily comprised of premiums, commissions and
investment income. The Insurance Companies derive substantially all of their
business from the Somerset Companies through either business written
specifically for the Insurance Companies or through Navigators Insurance's
direct participation in, or reinsuring certain members of, insurance pools
managed by the Somerset Companies. The insurance business and operations of the
Insurance Companies are managed by Somerset Marine, Inc.

      The Somerset Companies specialize principally in writing marine, aviation
and onshore energy insurance. The Somerset Companies underwrite marine business
through a syndicate of insurance companies, Navigators Insurance having the
largest participation in the syndicate. They derive their revenue from
commissions, investment income, service fees and cost reimbursement arrangements
from the Parent Company, Navigators Insurance, NIC and ten unaffiliated
insurers. Commissions are earned both on a fixed percentage of premiums and on
underwriting profits on business placed with the participating insurance
companies within the syndicate. Property and casualty insurance premiums
historically have been cyclical in nature and, accordingly, during a "hard
market" demand for property and casualty insurance exceeds supply, or capacity,
and as a result, premiums and commissions may increase. On the downturn of the
property and casualty cycle, supply exceeds demand, and as a result, premiums
and commissions may decrease.

      The Parent Company, Navigators Insurance, NIC and the Somerset Companies
earn investment income on cash balances and invested assets. The Somerset
Companies also earn investment income on fiduciary funds which are invested,
subject to applicable insurance regulations, primarily in short-term
instruments.

      In August 1997, the Company signed a letter of intent to acquire 100% of
Mander, Thomas & Cooper (Underwriting Agencies) Limited, a Lloyd's of London
marine underwriting managing agency and its wholly owned subsidiary, Millennium
Underwriting Limited. The transaction is expected to close in December 1997. The
acquisition is subject to definitive documentation and regulatory approvals.

Results of Operations

      General. The results of operations of the Company during the first nine
months of 1997 reflect intense market competition in the core marine and
aviation lines. The first quarter of 1996 included adjustments to premiums,
commission expense and interest expense resulting in a $1.0 million reduction in
pre-tax income due to the Company's rollback liability under California's
Proposition 103.


                                       10
<PAGE>   11

      Revenues. Gross written premium for the first nine months of 1997
increased by 21% to $128,113,000 from $105,885,000 for the first nine months of
1996 primarily due to the $18,206,000 of marine premium produced by two Lloyd's
of London syndicates for NCUL and secondarily due to the increased premium
volume in the onshore energy business and the engineering and construction
business, partially offset by decreases in the aviation and inland marine
premium.

      The following table sets forth the Company's gross written premium by line
of business and percentage of the total gross written premium and net written
premium in the aggregate:

<TABLE>
<CAPTION>
                                               Nine Months Ended September 30,
                                               -------------------------------
                                                     1997            1996
                                              ----------------  ---------------

                                                    (Dollars in thousands)
                                                    ----------------------
<S>                                           <C>          <C>  <C>          <C>
Marine .....................................  $  40,992    32%  $  40,236    38%

Aviation ...................................     24,891    19%     28,097    27%

Inland Marine ..............................      7,984     6%     10,900    10%

Onshore Energy .............................      7,461     6%      5,093     5%

Engineering and Construction ...............      4,812     4%         --    --

Lloyd's Syndicates - Marine ................     18,206    14%         --    --

Specialty Reinsurance and Non-Marine
    Program Insurance ......................     23,767    19%     21,559    20%
                                              ---------   ---   ---------   ---

      Total Gross Written Premium ..........    128,113   100%    105,885   100%
                                              ---------   ===   ---------   ===

Ceded Written Premium ......................    (61,627)          (44,239)     
                                              ---------         ---------

      Total Net Written Premium ............  $  66,486         $  61,646      
                                              =========         =========
</TABLE>

      Marine Premium. Marine gross written premium (non-Lloyd's) increased 1.9%
when comparing the first nine months of 1997 to the first nine months of 1996
due to Navigators Insurance's increased participation in the marine pools from
41% in 1996 to 48% in 1997. Marine premium has been subject to continued pricing
competition.

      Aviation Premium. Aviation gross written premium decreased 11.4% from the
first nine months of 1996 to the first nine months of 1997 due to price
competition in the aviation insurance market.

      Inland Marine Premium. Inland marine gross written premium decreased 26.8%
from the first nine months of 1996 to the first nine months of 1997. The Company
discontinued writing this business in mid 1997.


                                       11
<PAGE>   12

      Onshore Energy Premium. The Company began in 1996 to underwrite onshore
energy business which principally focuses on the oil and gas, chemical and
petrochemical, and power generation industries with coverages primarily for
property damage and machinery breakdown. Onshore energy premium increased 46.5%
from the first nine months of 1996 to the first nine months of 1997.

      Engineering and Construction Premium. In 1997 Somerset Asia began writing
engineering and construction risks in Southeast Asia.

      Lloyd's Syndicates - Marine Premium. NCUL provided capacity to two Lloyd's
syndicates in 1997 which produced $18,206,000 of marine premium in the first
nine months of 1997. The underwriting results from the Lloyd's syndicates are
included in the Company's financials in detail but are not included in the
Insurance Companies results since NCUL is owned 100% by the Parent Company.

      Specialty Reinsurance and Non-Marine Program Insurance Premium. Gross
written specialty reinsurance and non-marine program insurance premium increased
10.2% from the first nine months of 1996 to the first nine months of 1997 due to
increased premium in the non-marine program business. The Company is
significantly reducing its program business in the second half of 1997.

      Ceded Premium. The increase in ceded premium resulted from the increase in
the engineering and construction business and in the non-marine program business
which are heavily reinsured, and from the ceded portion of the marine premium.

      Net Written Premium. The net written premium increased 7.9% from the first
nine months of 1996 to the first nine months of 1997 primarily due to the
premium produced by the Lloyd's syndicates partially offset by a decrease in the
aviation premium due to continued price competition and by $1,400,000 of
reinstatement premium from our portion of a jury award against an insured in
Louisiana.

      Net Earned Premium. Net earned premium for the first nine months of 1997
was $62,276,000 as compared to $57,252,000 for the first nine months of 1996.
Net earned premium for the three months ended September 30, 1997 and 1996 was
$21,701,000 and $19,849,000, respectively. Net earned premium generally follows
the pattern of written premium but at a slower rate since unearned premium from
the prior year is partially earned in the current period along with a portion of
the premium written in the current period.

      Commission Income. Commission income decreased 39% from $6,871,000 for the
first nine months of 1996 to $4,202,000 for the first nine months of 1997 and
decreased 56% for the three months ended September 30, 1997 from the same period
in 1996. The decrease is primarily due to the decrease in the marine premium
from which the Company receives commission income from the unaffiliated members
of the marine pools as the result of Navigators Insurance's increased
participation in the marine pools. The 1997 commission income includes $207,000
of profit commission earned under the Company's management agreement with
Riverside Underwriters for business written as a corporate name at Lloyd's of
London compared to $755,000 for the first nine months of 1996. The management
agreement has been terminated for business effective after December 31, 1996.


                                       12
<PAGE>   13

      Net Investment Income. Net investment income increased 3% to $10,676,000
during the first nine months of 1997 from $10,369,000 during the corresponding
period in 1996 primarily due to the overall increase in invested assets and the
decrease of municipal securities in the portfolio, partially offset by decreased
fiduciary funds held at the Somerset Companies.

      Net Realized Capital Gains. Pre-tax net income included $2,252,000 of
realized capital gains for the first nine months of 1997 compared to $377,000
for the same period last year. On an after tax basis, the realized capital gains
were $0.18 per share in 1997 and $0.03 per share in 1996. Pretax income for the
three months ended September 30, 1997 and 1996 included realized capital gains
of $1,798,000 and $31,000, respectively. On an after tax basis, the realized
gains represented $0.14 per share and $0.00 per share for the respective three
month periods.

      Expenses. The ratio of loss and loss adjustment expenses incurred to net
earned premium was 60.1% and 62.5% during the first nine months of 1997 and
1996, respectively. This decrease was primarily due to improved loss ratios in
the onshore energy and inland marine lines of business. The loss ratios were
60.6% and 61.5% for the three months ended September 30, 1997 and 1996.

      Commission expense as a percentage of net earned premium was 18.7% and
14.6% during the first nine months of 1997 and 1996, respectively, and 21.2% and
15.3% for the three month periods ended September 30, 1997 and 1996,
respectively. The increases from 1996 to 1997 were primarily due to increased
excess of loss reinsurance in 1997 on the marine, aviation and onshore energy
lines of business which lowers net premium with no corresponding ceding
commission to offset the commission expense incurred on the gross premium and to
a higher commission percentage on the Lloyd's of London premium.

      Other operating expenses increased 16.5% to $16,696,000 during the first
nine months of 1997 from $14,334,000 during the corresponding period of 1996 and
decreased 2.1% for the three months ended September 30, 1997 compared to the
same period in 1996. The nine month increase was primarily due to operating
expenses incurred by Somerset (UK) and Somerset Asia. The decrease in the third
quarter was primarily due to savings from staff reductions in the inland marine
and program lines of business and a bonus accrual in the third quarter of 1996
related to earnings in that quarter, partially offset by the Somerset (UK) and
Somerset Asia expenses.

      Interest expense decreased 35.5% to $927,000 during the first nine months
of 1997 from $1,438,000 during the corresponding period of 1996. This decrease
was primarily due to $368,000 of interest expense recorded in the first quarter
of 1996 attributable to the Company's rollback liability under California's
Proposition 103. In addition, the loan balance under the Company's Amended
Credit Agreement (as defined below) decreased from $19,500,000 at December 31,
1995 to $17,000,000 at September 30, 1996 as the result of repayments during the
first nine months of 1996. The loan balance at September 30, 1997 was
$17,000,000.


                                       13
<PAGE>   14

      Income Taxes. The effective tax rate, excluding the equity income in
affiliated company (Riverside Underwriters), was 26.4% and 23.4% for the nine
months ended September 30, 1997 and 1996, respectively. The increase in the
effective tax rate was primarily due to losses in Somerset (UK) and Somerset
Asia that are not currently deductible for Federal tax calculations.

      Net Income. The Company had net income of $9,854,000 for the first nine
months of 1997 compared to net income of $13,261,000 for the same period last
year. On a per share basis, this represents net income per share of $1.18 and
$1.60 for the first nine months of 1997 and 1996, respectively. The Company had
net income of $3,463,000 or $0.41 per share for the three months ended September
30, 1997 compared to net income of $5,252,000 or $0.63 per share for the same
period in 1996. The decrease in net income was primarily due to the Somerset
(UK) and Somerset Asia expenses in 1997, lower earnings from the Company's
investment in Riverside Underwriters and the third quarter 1997 reinstatement
premium resulting from a jury award against an insured.

Liquidity and Capital Resources

      Cash flow from operations was $11,773,000 and $2,788,000 for the first
nine months of 1997 and 1996, respectively. The 1996 cash flow was negatively
impacted by payment of Northridge, California earthquake losses. Invested assets
and cash increased to $252,389,000 at September 30, 1997 from $240,720,000 at
December 31, 1996 as the result of the positive cash flow.

      The Company's credit agreement, amended on November 19, 1996 (the "Amended
Credit Agreement"), currently provides for a $18.5 million revolving credit loan
facility of which $17 million was being utilized at September 30, 1997 and a $30
million letter of credit facility of which $25.7 million was being utilized at
September 30, 1997.

      The revolving credit loan facility decreases in quarterly increments of
$500,000 commencing with the first quarter of 1997 through the third quarter of
1999, and in varying increments thereafter through December 31, 2002. The
Amended Credit Agreement contains covenants common to agreements of this type.
Based on $17 million of the revolving credit loan facility being utilized, the
first $500,000 payment is due July 1, 1998.

      The Company has been engaged in forming subsidiaries in the London market
using its own funds and may incur indebtedness in connection with the future
acquisition of Mander, Thomas & Cooper (Underwriting Agencies) Limited.

      As of September 30, 1997, the Company's consolidated stockholders' equity
was $127,226,000, an increase of 10.1% from $115,542,000 at December 31, 1996.


                                       14
<PAGE>   15

Part II - Other Information

Item 1.       Legal Proceedings:

              The Company is not a party to or the subject of, any material
              pending legal proceedings which depart from the ordinary routine
              litigation incident to the kinds of business conducted by the
              Company.

Item 2.       Changes in Securities:

              None.

Item 3.       Defaults Upon Senior Securities:

              None.

Item 4.       Submissions of Matters to a Vote of Securities Holders:

              None.

Item 5.       Other Information:

              None.

Item 6.       Exhibits and Reports on Form 8-K:

              (a)     Exhibits:

              Exhibit No.        Description of Exhibit
              -----------        ----------------------

                  27.1           Financial Data Schedule

              (b)    Reports on Form 8-K:

                         There were no reports on Form 8-K filed for the nine
                         months ended September 30, 1997.


                                       15
<PAGE>   16

                                   SIGNATURES


      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                         The Navigators Group, Inc.
                                         ---------------------------
                                               (Registrant)


   November 14, 1997                     /s/ Bradley D. Wiley
------------------------                 --------------------------------------
      (Date)                             Bradley D. Wiley
                                         Senior Vice President, Chief Financial
                                         Officer and Secretary


                                       16
<PAGE>   17

                                INDEX OF EXHIBITS

                                                              Sequentially
                                                              Numbered
Exhibit No.        Description of Exhibit                     Page
-----------        ----------------------                     -------------

    27.1           Financial Data Schedule