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TheStreet Open House

National Interstate Corporation Reports 2013 Third Quarter And First Nine Months Results

  • Net income per share of $.37 for the 2013 third quarter improved compared to the 2013 second quarter
  • Gross premiums written up 4% for the third quarter and 9% year-to-date

RICHFIELD, Ohio, Oct. 29, 2013 (GLOBE NEWSWIRE) -- National Interstate Corporation (Nasdaq:NATL) today reported results for the 2013 third quarter and first nine months. Net income of $.37 per share, diluted for the 2013 third quarter trailed the 2012 third quarter but was significantly improved compared to the 2013 second quarter. Lower claims costs for the 2013 third quarter compared to the previous quarter drove the improved underwriting margins.

Gross premiums written increased 4% and 9% for the three and nine months ended September 30, 2013, respectively, compared to the same 2012 periods primarily attributable to growth in the transportation component.

Earnings

The table below reconciles the Company's net income per share determined in accordance with U.S. generally accepted accounting principles (GAAP) to after-tax earnings from operations and after-tax realized gains from investments, both of which are non-GAAP financial measures. Net after-tax earnings from operations include underwriting income and net investment income.

  Three Months Ended September 30,   Nine Months Ended September 30,
  2013 2012   2013 2012
  (In thousands, except per share data)   (In thousands, except per share data)
Net after-tax earnings from operations $     6,398 $     8,448   $   5,483 $ 24,053
After-tax net realized gains from investments  880  571    3,532  1,977
  Net income $ 7,278 $ 9,019   $  9,015 $ 26,030
           
Net after-tax earnings from operations per share, diluted $ 0 .33 $ 0.43   $  0.28 $ 1.23
After-tax net realized gains from investments per share, diluted   0.04    0.03      0.18   0.10
 Net income per share, diluted $ 0.37 $ 0.46   $ 0.46 $ 1.33

Underwriting Results:

Dave Michelson, President and Chief Executive Officer said, "Our 99.3% combined ratio for the 2013 third quarter while still elevated above our historical performance, improved compared to the second quarter. The volatility we experienced last quarter related to an unusual number of large claims and reserve strengthening which did not recur this quarter. We again had unfavorable development from prior year claims but the 2013 accident year is generating a modest underwriting profit. We have been touched by similar issues facing other carriers that write commercial auto liability coverage. The rates we are charging continue to improve and underwriting actions are ongoing, including the decision this quarter to exit the personal lines commercial vehicle product as well as another smaller product within the program portion of alternative risk transfer (ART). "

  Three Months Ended September 30, Nine Months Ended September 30,
  2013 2012 2013 2012
Losses and loss adjustment expense ratio 78.7% 73.4% 82.4% 73.7%
Underwriting expense ratio 20.6% 23.1% 21.2% 23.4%
Combined ratio 99.3% 96.5% 103.6% 97.1%

Claims: The loss and loss adjustment expense (LAE) ratio for the 2013 third quarter of 78.7% was 5.3 percentage points worse than the 2012 third quarter but improved over the 2013 second quarter. The improvement reflected an unusually high 2013 second quarter loss and LAE ratio primarily attributable to reserve strengthening and large claims activity which was not as prevalent in the 2013 third quarter. During the 2013 third quarter the Company again experienced unfavorable development from prior year claims of $5.3 million from several accident years which added 4.0 percentage points to the 2013 third quarter loss and LAE ratio and compares to $0.1 million favorable development in the 2012 third quarter. Excluding prior year claims development, the quarter over quarter loss and LAE ratios would have been comparable.

For the 2013 first nine months the Company has experienced an elevated loss and LAE ratio due to several factors: increased claims severity particularly in the second quarter related to passenger transportation and moving and storage, unfavorable development from prior year claims in part from runoff ART program business and commercial vehicle, and the adverse impact of several years of margin deterioration from the competitive market conditions that began to subside in 2012.  

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