RICHFIELD, Ohio, Feb. 26 /PRNewswire-FirstCall/ -- National
Interstate Corporation (NASDAQ:NATL) today reported record net
income of $11.4 million ($.59 per share diluted) for the 2006
fourth quarter, compared to $7.9 million ($.41 per share diluted)
for the 2005 fourth quarter. Net income of $35.7 million ($1.85 per
share diluted) for the 2006 full year increased 17.9% compared to
$30.3 million ($1.60 per share diluted) for 2005. The increase in
the 2006 fourth quarter and full year net income reflects the
Company's increased revenues and continued strong underwriting and
investment results. (Logo:
http://www.newscom.com/cgi-bin/prnh/20050114/NILOGO ) For the 2006
fourth quarter, gross premiums written of $61.5 million were 64.7%
above the $37.3 million reported for the 2005 fourth quarter, and
the 2006 fourth quarter net premiums written of $52.0 million were
56.7% above the $33.2 million reported for the same period last
year. Gross premiums written of $305.5 million for the 2006 full
year increased 13.1% compared to $270.0 million for the 2005 full
year, and 2006 full year net premiums written of $241.9 million
increased 14.6% compared to $211.1 million for the 2005 full year.
Comparing the 2006 fourth quarter to the 2005 fourth quarter, the
Company experienced growth in all of its business components except
the Other component, which is comprised primarily of policies
assigned from involuntary state plans, over which the Company has
no control. The most significant growth for both the 2006 fourth
quarter and full year occurred in the Alternative Risk Transfer
component, reflecting additional policies written in existing
programs as well as the introduction of several new programs. The
table below summarizes gross premiums written by business
component: Three months ended December 31, Year ended December 31,
2006 2005 2006 2005 Amount Percent Amount Percent Amount Percent
Amount Percent (Dollars in thousands) Alternative Risk Transfer
$22,430 36.5% $2,825 7.6% $135,283 44.3% $103,537 38.4% Transpor-
tation 21,980 35.7% 18,549 49.7% 89,399 29.3% 90,751 33.6%
Specialty Personal Lines 11,001 17.9% 9,946 26.6% 52,060 17.0%
45,935 17.0% Hawaii and Alaska 4,731 7.7% 4,641 12.4% 23,267 7.6%
22,486 8.3% Other 1,369 2.2% 1,377 3.7% 5,495 1.8% 7,327 2.7% Gross
Premiums Written $61,511 100.0% $37,338 100.0% $305,504 100.0%
$270,036 100.0% "We have grown our commercial products by
maintaining relatively flat pricing for our renewal business and
adding new customers. Our Specialty Personal Lines growth reflects
moderate rate increases and additional policies in force,"
commented Dave Michelson, President and Chief Operating Officer of
National Interstate Corporation. The GAAP combined ratio of 78.9%
for the 2006 fourth quarter was 4.3 percentage points lower than
83.2% for the 2005 fourth quarter, and the GAAP combined ratio of
83.5% for the 2006 full year was 0.9 percentage points higher than
82.6% for the 2005 full year. The combined ratio comparisons for
both the fourth quarter and full year reflect lower loss and loss
adjustment expense ratios offset by higher underwriting expense
ratios. The loss and loss adjustment expense ratio for the 2006
fourth quarter was 53.6% compared to 58.6% for the same period last
year. This improvement in the 2006 fourth quarter reflects a
smaller number of larger losses compared to 2005 and offsets the
higher severity experienced earlier in this year. The 2006 full
year loss and loss adjustment expense ratio of 59.6% was 0.8
percentage points lower than 2005. This decrease was primarily
attributable to favorable development of prior year reserves of
$7.5 million (4.9% of net loss and loss adjustment expense
reserves) in 2006 compared to $5.2 million (4.7% of net loss and
loss adjustment expense reserves) in 2005. The 2006 fourth quarter
underwriting expense ratio was 25.3% compared to 24.7% for the 2005
fourth quarter, and 23.9% for the 2006 full year compared to 22.2%
for the 2005 full year. The 2005 fourth quarter and full year
underwriting expense ratios were favorably impacted by
non-recurring items primarily related to expenses for insolvencies,
other state fees, and assigned risk business. The 2006 fourth
quarter and full year underwriting expense ratios reflect
normalized expenses related to insolvencies and other state fees,
and were approximately 0.3 percentage points higher than 2005 due
to accounting for stock based compensation required from the
adoption of SFAS No. 123R. The underwriting expense ratios were
consistent year over year when considering these items. Alan
Spachman, Chairman and Chief Executive Officer of National
Interstate Corporation said, "Our record fourth quarter results did
not surprise us. Several ongoing marketing initiatives produced
results during the fourth quarter and claims severity patterns
returned to historic seasonal levels. This quarter again highlights
the potential for significant fluctuations in our quarterly results
due to our new product introductions and the timing of large loss
occurrences. Overall, we are pleased that we were able to achieve a
GAAP combined ratio in the low 80's for the fourth consecutive
year." Net investment income for the 2006 fourth quarter was $4.9
million compared to $3.5 million for the same quarter last year,
and $17.6 million for 2006 full year compared to $12.5 million for
the 2005 full year. The net investment income increases of 37.7%
and 40.3% for the fourth quarter and full year of 2006
respectively, over the same periods in 2005, reflected an increase
in average cash and invested assets and higher interest rates
available on the short term and fixed income portfolios. The growth
in cash and invested assets resulted from positive cash flow from
operations and reinvestment of investment earnings. For the 2006
full year, the Company generated cash flow from operations of $83.3
million contributing to a 26.9% increase in cash and investments.
Mr. Spachman concluded, "We achieved a return on average
shareholders' equity of 22.8% in 2006, again exceeding our stated
objective of inflation plus 15%. It is also exciting to report
another year of top line growth and record profits. Over the last
three years we have achieved a compounded annual growth rate of
16.5% in gross premiums written and 12.1% in earnings per share. We
expect 2007 growth and profit increases to continue the trends
established over the past few years." About National Interstate
Corporation National Interstate Corporation (NASDAQ:NATL), founded
in 1989, completed an initial public offering in February 2005. We
are a specialty property and casualty insurance company with a
niche orientation and focus on the transportation industry. We
differentiate ourselves within our markets by offering insurance
products and services designed to meet the unique needs of targeted
insurance buyers that we believe are underserved by the insurance
industry. Our products include property and casualty insurance for
transportation companies, captive insurance programs for commercial
risks that we refer to as our alternative risk transfer component,
specialty personal lines consisting primarily of recreational
vehicle coverage, and transportation and general commercial
insurance in Hawaii and Alaska. We offer our insurance products
through multiple distribution channels including independent agents
and brokers, affiliated agencies and agent Internet initiatives.
Our insurance subsidiaries are rated "A" (Excellent) by A.M. Best
Company. National Interstate is an independently operated
subsidiary of Great American Insurance Company, a property-casualty
subsidiary of American Financial Group, Inc. (NYSE:AFGNASDAQ:AFG).
The Company is headquartered in Richfield, Ohio, which is located
in northeastern Ohio between Cleveland and Akron. Forward-Looking
Statements This document, including any information incorporated by
reference, contains "forward-looking statements" (within the
meaning of the Private Securities Litigation Reform Act of 1995).
All statements, trend analyses and other information contained in
this press release relative to markets for our products and trends
in our operations or financial results, as well as other statements
including words such as "may," "target," "anticipate," "believe,"
"plan," "estimate," "expect," "intend," "project," and other
similar expressions, constitute forward-looking statements. We made
these statements based on our plans and current analyses of our
business and the insurance industry as a whole. We caution that
these statements may and often do vary from actual results and the
differences between these statements and actual results can be
material. Factors that could contribute to these differences
include, among other things: general economic conditions and other
factors, including prevailing interest rate levels and stock and
credit market performance which may affect (among other things) our
ability to sell our products, our ability to access capital
resources and the costs associated with such access to capital and
the market value of our investments; customer response to new
products and marketing initiatives; tax law changes; increasing
competition in the sale of our insurance products and services and
the retention of existing customers; changes in legal environment;
regulatory changes or actions, including those relating to
regulation of the sale, underwriting and pricing of insurance
products and services and capital requirements; levels of natural
catastrophes, terrorist events, incidents of war and other major
losses; adequacy of insurance reserves; and availability of
reinsurance and ability of reinsurers to pay their obligations. The
forward-looking statements herein are made only as of the date of
this document. The Company assumes no obligation to publicly update
any forward- looking statements. Contact: Tanya Inama National
Interstate Corporation 877-837-0339 NATIONAL INTERSTATE CORPORATION
SELECTED FINANCIAL DATA (In thousands, except per share data) Three
months ended Year ended December 31, December 31, 2006 2005 2006
2005 Operating Data: Gross premiums written $61,511 $37,338
$305,504 $270,036 Net premiums written $51,965 $33,153 $241,916
$211,106 Premiums earned $57,956 $51,931 $217,319 194,397 Net
investment income 4,876 3,542 17,579 12,527 Net realized gains
(losses) 479 (206) 1,193 278 Other income 784 500 2,387 1,974 Total
revenues 64,095 55,767 238,478 209,176 Losses and loss adjustment
expenses 31,065 30,408 129,491 117,449 Commissions and other
underwriting expense 12,689 10,434 42,671 35,741 Other operating
and general expenses 2,754 2,870 11,619 9,428 Interest expense 390
358 1,522 1,421 Total expenses 46,898 44,070 185,303 164,039 Income
before income taxes 17,197 11,697 53,175 45,137 Provision for
income taxes 5,769 3,775 17,475 14,857 Net income $11,428 $7,922
$35,700 $30,280 Per Share Data: Earnings per common share, basic
$0.60 $0.42 $1.87 $1.62 Earnings per common share, assuming
dilution $0.59 $0.41 $1.85 $1.60 Book value per common share, basic
(at period end) 9.07 7.32 9.07 7.32 Weighted average number of
common shares outstanding, basic 19,158 19,041 19,136 18,737
Weighted average number of common shares outstanding, diluted
19,379 19,244 19,302 18,975 Common shares outstanding at period end
19,159 19,055 19,159 19,055 Cash dividend per common share $0.04
$0.04 $0.16 $0.08 GAAP Ratios: Losses and loss adjustment expense
ratio 53.6% 58.6% 59.6% 60.4% Underwriting expense ratio 25.3%
24.7% 23.9% 22.2% Combined ratio 78.9% 83.2% 83.5% 82.6% Return on
equity (a) 22.8% 28.5% Average shareholders' equity $156,648
$106,161 At December 31, 2006 At December 31, 2005 Balance Sheet
Data (GAAP): Cash and investments $406,454 $320,220 Reinsurance
recoverable 90,070 77,834 Total assets 806,248 523,003 Unpaid
losses and loss adjustment expenses 265,966 223,207 Long-term debt
15,464 16,297 Total shareholders' equity $173,763 $139,533
Statutory Data: (b) Policyholder Surplus (Statutory) (c) $148,266
$122,825 (a) The ratio of net income to the average of
shareholders' equity at the beginning and at end of the period.
Return on equity calculation is completed for year-to-date results
only. (b) While financial data is reported in accordance with
accounting principles generally accepted in the United States, or
GAAP, for shareholder and other investment purposes, it is reported
on a statutory basis for insurance regulatory purposes. Certain
statutory expenses differ from amounts reported under GAAP.
Specifically, under GAAP, premium taxes and other variable costs
incurred in connection with writing new and renewal business are
capitalized and amortized on a pro rata basis over the period in
which the related premiums are earned. On a statutory basis, these
items are expensed as incurred. In addition, certain other
expenses, such as those related to the expensing or amortization of
computer software, are accounted for differently for statutory
purposes than the treatment accorded under GAAP. (c) The statutory
policyholder surplus of National Interstate Insurance Company,
which includes the statutory policyholder surplus of its
subsidiaries, National Interstate Insurance Company of Hawaii, Inc.
and Triumphe Casualty Company.
http://www.newscom.com/cgi-bin/prnh/20050114/NILOGO
http://photoarchive.ap.org/ DATASOURCE: National Interstate
Corporation CONTACT: Tanya Inama of National Interstate
Corporation, +1-877-837-0339, or Web site:
http://www.nationalinterstate.com/
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