Book value is equivalent to Stockholders’ equity and book value per share is calculated by dividing Stockholders’ equity by the number of outstanding shares at the end of the interim period.
Unless the context requires otherwise, the terms “we,” “us,” “our,” or “our Company” are used to mean The Navigators Group, Inc., a Delaware holding company established in 1982, and its subsidiaries. The terms “Parent” or “Parent Company” are used to mean The Navigators Group, Inc. without our subsidiaries.
Average renewal premium rates for our Int’l Insurance reporting segment for the year ended December 31, 2014 decreased 2.1%, due to decrease of 6.4%, and 4.2% in our Int’l P&C and Int’l Professional Liability operating segments, respectively, partially offset by an increase of 2.0% in our Int’l Marine operating segment.
Net earned premiums increased $10.5 million for the year ended December 31, 2014 as compared to the same period in 2013, primarily driven by an increase in our Int’l Professional Liability operating segment of $13.5 million due to strong growth in Gross written premiums as well as an increase in our Int’l P&C operating segment of $6.7 million driven by changes in our proportional reinsurance coverage. These increases were partially offset by a decrease in our Int’l Marine operating segment of $9.7 million due to declines in Gross written premiums.
The Commission expense ratio increased 1.4 points for the year ended December 31, 2015 compared to the same period in 2014, resulting from an increase in profit commission expenses in our A&H and P&C products.
Navigators Corporate Underwriters, Ltd., our wholly-owned corporate member at Lloyd’s, may pay dividends to our Parent Company up to the extent of available profits that have been distributed from the Syndicate. As of December 31, 2015, that amount was $1.1 million (£0.8 million).
Net cash used in investing activities was $249.9 million for the year ended December 31, 2015 compared to $219.5 million for the comparable period in 2014. Fluctuations in cash provided by, or used in, investing activities is primarily due to changes in operating cash flows and the associated ongoing management of our investment portfolio.
The following table sets forth our U.S. Treasury bonds, agency bonds and foreign government bonds, as well as our state, municipality and political subdivision bond holdings by sector:
The exposure to credit risk from any one reinsurer is managed through diversification by reinsuring with a number of different reinsurers, principally in the United States and European reinsurance markets. When reinsurance is placed, the standards of acceptability generally require that a reinsurer must have a rating from A.M. Best and/or S&P of “A” or better, or an equivalent financial strength if not rated, plus at least $500 million in policyholders’ surplus. The Reinsurance Security Committee, which is included within the Enterprise Risk Management Finance and Credit Sub-Committee, monitors the financial strength of the reinsurers and the related reinsurance recoverables and periodically reviews the list of acceptable reinsurers.
We recognize deferred tax assets and liabilities, which primarily result from temporary differences between the amounts recorded in our Consolidated Financial Statements and the tax basis of our assets and liabilities. At each balance sheet date, we assess the need to establish a valuation allowance that reduces deferred tax assets when it is more likely than not that all, or some portion, of the deferred tax assets will not be realized. The valuation allowance is based on all available information including projections of future taxable income from each tax-paying component in each tax jurisdiction, principally derived from available tax planning strategies. Projections of future taxable income incorporate several assumptions of future business and operations that are apt to differ from actual experience. We regularly review our deferred tax assets for recoverability, taking into consideration our history of earnings, expectations for future earnings, taxable income in carryback years and the expected timing of the reversals of existing temporary differences. When we believe it is more likely than not that a deferred tax asset will not be realized, we establish a valuation allowance for that deferred tax asset. Our valuation allowance as of December 31, 2015 is $0.7 million.