National Interstate Corporation today reported net income for the third quarter ended Sept. 30, 2006 of $6.5 million ($0.34 per share diluted), compared to $8.2 million ($0.43 per share diluted) for the third quarter of 2005.
The 20.7 percent decrease in net income for the third quarter of 2006 compared to the third quarter of 2005 is primarily attributable to increased severity from new losses occurring during the quarter and expenses that were more in line with expectations than the favorable expenses that were incurred during last year’s third quarter. These higher losses and normalized expenses were offset by a 42.5 percent increase in net investment income in the quarter compared to the third quarter of 2005.
Net income for the first nine months of 2006 was $24.3 million ($1.26 per share diluted), an increase of 8.6 percent or $1.9 million compared to $22.4 million ($1.18 per share diluted) for the same period of 2005. The higher net income reflects a 13.7 percent increase in total revenues offset by a 2.8 percentage point increase in the GAAP combined operating ratio from 82.4 percent to 85.2 percent for the first nine months of 2005 and 2006, respectively.
Alan Spachman, chairman and president of National Interstate Corp. stated, “We were pleased with the improvement in our top line and investment results. We were not surprised that losses spiked upward in the third quarter of this year due to an atypical number of large losses, or that the unusually low underwriting expense ratio returned to a more normal level when compared to the same quarter last year. We historically have accurately projected loss results over twelve month periods, but can and do experience loss ratio peaks and valleys in any specific month or quarter. Our underwriting expense ratio during the third quarter was consistent with our expectations even though it was higher than the same quarter last year. We highlighted the favorable one- time expense variances when they occurred last year and remain satisfied with operating expenses at the current levels.”
For the 2006 third quarter, gross premiums written of $61.7 million and net premiums written of $51.0 million grew 8.3% and 8.4%, respectively. Gross premiums written for the first nine months of 2006 increased 4.9 percent to $244 million, compared to $232.7 million for the same period last year, and net premiums written increased 6.7 percent $190 million compared to $178 for the same period of 2005.
The premium growth in both the third quarter and first nine months resulted from increases in the Alternative Risk Transfer, Specialty Personal Lines, and Hawaii/Alaska business components offset by decreases in the Transportation and Other (primarily assigned risk policies) components. Alternative Risk Transfer is the fastest growing component with increases of 78.3% and 12.1% for the third quarter and first nine months of 2006, respectively, compared to the same periods last year. Premiums for the assigned risk policies, which were received from state insurance plans and the Company has no control over, were down 76.6% for the third quarter of 2006 compared to the third quarter of 2005 and 30.7 percent for the first nine months of 2006 compared to the first nine months of 2005. Excluding assigned risk policies, gross premiums written grew 14.5 percent and 5.8 percent for the third quarter and nine months ended September 30, 2006, respectively, compared to the same periods of 2005.
National Interstate Corp. is a specialty property and casualty insurance company with a niche orientation and focus on the transportation industry. Products offered 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.
Source: National Interstate Corp.
Topics Profit Loss Ohio
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