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» National Interstate Corporation. Q2 2010 Earnings Call Transcript
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» National Interstate Corporation Q3 2008 (Qtr 9/30/2008) Earnings Call Transcript
Net earnings from operations is a non-GAAP financial measure which sets aside items that are generally not considered to be part of ongoing operations such as realized gains or losses on investments. We believe this non-GAAP measure to be a useful tool for analysts and investors in analyzing ongoing operating trends. As such it will be discussed for various financial periods during this call. A reconciliation of net earnings from operations to net income is included in our earnings release.I’d now like to turn the call to Mr. Dave Michelson. David Michelson Thank you, Julie. And good morning and thank you for joining today’s conference call. The fourth quarter numbers looked very different to all of us, since this is the first time that Vanliner was included in our quarterly results. Since the acquisition was effective July 1, we do reflect the fourth quarter of Vanliner activity. However, the 2010 third quarter is not necessarily a representation of the quarterly impact we expect to see from Vanliner in 2011. The initial income result from purchase accounting associated with the acquisition added $0.03 per share to our net income and although the addition of the Vanliner business has affected the quarter-over-quarter underwriting ratio comparisons, the overall impact on earnings in the Vanliner underwriting results was breakeven for the 2010 third quarter and that was consistent with our expectations. The addition of Vanliner caused unusual variances in the underwriting expense ratio and the loss in LAE ratio. Specifically, the 2010 third quarter underwriting expense ratio was favorably impacted and the loss in LAE ratio was unfavorably impacted from the initial fair value reporting of the Vanliner balance sheet. However, even though the ratios were affected, the Vanliner impact on consolidated underwriting earnings was at breakeven. As we look ahead in 2011, we did not expect the Vanliner business to cause operating ratio variances at the same level in future quarters, but we do expect the business to be accretive to future earnings.
From top-line perspective, Vanliner added $28 million to gross premiums written for the third quarter. This Vanliner written premium was in line with our expectations and consistent with historical third quarter moving and storage volume. The moving and storage business normally has higher written premium in the first and third quarters of the year and as such we do not expect Vanliner to contribute the same level of top-line growth in the 2010 fourth quarter.Vanliner was a significant transaction for us and because it has affected the period-over-period comparisons of our financial results, it is difficult not to mention it throughout this discussion. However as we all know we have a few other areas to talk about. Our 2010 third quarter net income of $0.46 per share included $0.40 per share of earnings from operations. Our businesses excluding Vanliner are maintaining a combined ratio of approximately 90% for the first nine months of 2010 and slightly higher in the third quarter. Our third quarter combined ratios are normally elevated due to seasonality related to our claims. For the past three years our third quarter combined ratios have been in the mid 90s. For the 2010 third quarter and for the first nine months, our underwriting expense ratio and exclusive of Vanliner was 22.5% and 24.4% respective. Costs related to the acquisition incurred mostly in the first two quarters and variations in the mix of business written head for us quarterly variations in the 2010 underwriting expenses. However, our expense structure is relatively unchanged and we expected that our underwriting expense ratio will continue to run in the mid 20s as it has for the past several years. Read the rest of this transcript for free on seekingalpha.com