GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

National Interstate Corp. Reports Operating Results (10-Q)

August 03, 2012 | About:
10qk

10qk

18 followers
National Interstate Corp. (NATL) filed Quarterly Report for the period ended 2012-06-30.

National Interstate Corporation has a market cap of $520 million; its shares were traded at around $24.72 with a P/E ratio of 15.6 and P/S ratio of 1.1. The dividend yield of National Interstate Corporation stocks is 1.5%. National Interstate Corporation had an annual average earning growth of 1.4% over the past 10 years.

Highlight of Business Operations:

Our net income from operations for the three and six months ended June 30, 2012 was $7.0 million ($0.36 per share diluted) and $15.5 million ($0.79 per share diluted), respectively, compared to $7.7 million ($0.39 per share diluted) and $17.6 million ($0.90 per share diluted) for the same periods in 2011. These decreases were driven by the elevated loss and LAE ratios from our ongoing operations for the three and six months ended June 30, 2012 of 74.7% and 73.9%, respectively, which excludes the impact from the runoff of the guaranteed Vanliner business, as compared to 72.2% and 69.7% for the same periods in 2011. The loss ratio increase for the second quarter of 2012 was driven by higher than average claims severity experienced in several of our historically profitable commercial products, while the loss ratio elevation for the first six months of 2012 was concentrated in an ART product also included in the quarterly periods unfavorable loss results and another typically profitable product in our Hawaii and Alaska component. Adverse claim development from prior years loss reserves also contributed to the claims results for the first half of 2012. Partially offsetting the elevated loss results was the growth in net investment income for both the second quarter and first six months of 2012, which was attributable to a shift into higher-yielding state and local government obligations and mortgage-backed securities that was concentrated in the second half of 2011.

We recorded after-tax net realized gains from investments of $0.3 million ($0.01 per share diluted) and $1.4 million ($0.08 per share diluted) for the second quarter and first six months of 2012, respectively, compared to $0.9 million ($0.04 per share diluted) and $1.6 million ($0.08 per share diluted) for the comparative periods in 2011. Our after-tax net realized gains for the three months ended June 30, 2012 were primarily generated by sales of securities partially offset by net losses associated with equity partnership investments, while the after-tax net realized gains for the comparable period in 2011 related primarily to sales of securities. The after-tax net realized gains for both the six months ended June 30, 2012 and 2011 were driven by sales of securities.

Three months ended June 30, 2012 compared to June 30, 2011. Our consolidated loss and LAE ratio for the second quarter of 2012 increased 0.9 percentage points to 74.7% compared to 73.8% in the same period in 2011. The loss and LAE ratio for our ongoing operations, which excludes the impact from the runoff of the guaranteed Vanliner business, was 74.7% for the three months ended June 30, 2012 compared to 72.2% for the same period in 2011. This increase over the prior period is primarily attributable to higher than average claims severity experienced in several of our historically profitable commercial products during the three months ended June 30, 2012. We expect that these products results in future periods will be more consistent with our historical results. However, we will continue to closely monitor the products performance and will respond with rate increases or non-renewals, as necessary. For the second quarter of 2012, we had favorable development from prior years loss reserves of $0.2 million, or 0.2 percentage points, compared to favorable development of $0.7 million, or 0.7 percentage points, in the second quarter of 2011. This favorable development was primarily related to settlements below the established case reserves and revisions to our estimated future settlements on an individual case by case basis. The prior years loss reserve development for both periods is not considered to be unusual or significant to prior years reserves based on the history of our business and the timing of events in the claims adjustment process.

Six months ended June 30, 2012 compared to June 30, 2011. Our consolidated loss and LAE ratio for the six months ended June 30, 2012 increased 1.5 percentage points to 73.9% compared to 72.4% in the same period in 2011. The loss and LAE ratio for our ongoing operations, which excludes the impact from the runoff of the guaranteed Vanliner business, was 73.9% for the first six months of 2012 compared to 69.7% for the same period in 2011. This increase over the prior period is primarily attributable to higher than average claims severity experienced in two historically profitable products within our Hawaii and Alaska and ART transportation components during the six months ended June 30, 2012, as well as adverse claim development from prior years loss reserves. For the six months ended June 30, 2012, we had unfavorable development from prior years loss reserves of $1.7 million, or 0.8 percentage points, compared to favorable development of $0.5 million, or 0.3 percentage points, for the first six months of 2011.

$2.2 million and $2.5 million, respectively. The pre-tax net realized gains for both the second quarter and first six months of 2012 were primarily generated from net realized gains associated with sales or redemptions of securities totaling $1.8 million and $2.2 million, respectively. Equity partnership investments produced net losses of $1.3 million and net gains of $0.1 million for the second quarter and first half of 2012, respectively. The pre-tax net realized gains for both the three and six months ended June 30, 2011 were primarily generated from net realized gains associated with sales of securities totaling $1.0 million and $2.0 million, respectively. Additionally, we recorded gains of $0.3 million and $0.5 million associated with equity partnership investments for the three and six months ended June 30, 2011, respectively.

Read the The complete Report

About the author:

10qk
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 0.0/5 (0 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK