National Interstate Corp., headquartered in Richfield, Ohio, reported 2012 first quarter gross premiums written of $130.2 million and net after-tax earnings from operations of $8.6 million or $.44 per share.
Gross premiums written decreased 3 percent compared to the 2011 first quarter due to previously reported activity related to certain products in the program business portion of the company’s alternative risk transfer (ART) component.
Net after-tax earnings from operations also decreased 13.6 percent compared to last year reflecting adverse claims results in the quarter offset by higher investment income.
The company’s loss and loss adjustment expense (LAE) ratio for the 2012 first quarter of 73.1 percent was 6.1 percentage points higher than the 2011 first quarter. The period over period variance was due in part to favorable claims results experienced in the 2011 first quarter when compared to the 2011 full year, elevated claims severity in the 2012 first quarter in primarily two products which have historically been profitable, and the impact from adverse claim development from prior years’ loss reserves.
In the 2012 first quarter, certain products in the Hawaii and Alaska and ART components had higher than average claims severity.
The underwriting expense ratio of 23.3 percent for the2012 first quarter is consistent with the 23.6 percent underwriting expense ratio for the 2011 first quarter and within the expected range.
“We are disappointed to start the year with elevated claims results. However, there does appear to be an element of timing considering our history of annual favorable prior year claims development and the fact that this first quarter severity occurred in traditionally well performing products,” President and Chief Executive Officer Dave Michelson said in the announcement.
“Market conditions continue to be competitive but we are starting to see overall single digit rate increases with some consistency in our traditional commercial businesses which contributed to the growth in the Transportation component. We are also filing rate increases in our Specialty Personal Lines products,” Michelson said.
The company said a 6 percent decline for the quarter in the alternative risk transfer component is attributable to changes in 2011 related to the two program business products, one of which had significant underwriting actions and another which was terminated. Excluding these programs, the ART component grew 5.1 percent in the 2012 first quarter when compared to the 2011 first quarter.
The transportation component grew 3 percent in the 2012 first quarter. This growth resulted primarily from the truck product with an increase in both exposures and rates during the quarter.
Gross premiums written in the specialty personal lines component declined throughout 2011, which continued in the 2012 first quarter. Underwriting and pricing actions related to the commercial vehicle product and a trend towards purchasing direct versus through agents for the recreational vehicle product have adversely affected the top line for this component.
First quarter 2012 gross premiums written in Hawaii and Alaska were 6 percent ahead of the 2011 first quarter.
Source: National Interstate Corp.