Transportation Insurer National Interstate Posts Surprise Loss

July 31, 2013

National Interstate Corp., the insurer majority owned by American Financial Group Inc., plunged the most since 2008 after reserves for claims in prior periods proved inadequate, fueling a surprise quarterly loss.

National Interstate, which insures transportation providers, fell 18 percent to $26.70 at 4:30 p.m. in New York, the worst performer in the 495-company Russell 2000 Financial Services Index.

The second-quarter net loss of $6.28 million, or 32 cents a share, compares with profit of $7.27 million, or 37 cents, a year earlier, the Richfield, Ohio-based insurer said in a statement late yesterday. The average estimate was for a profit of 41 cents, according to a Bloomberg survey of five analysts.

“We are obviously disappointed with our underwriting results,” National Interstate Chief Executive Officer Dave Michelson said in the statement. “We experienced an unusual number and magnitude of large claims. We also addressed emerging deficiencies in a portion of our claims reserves.”

Costs tied to prior-year incidents were $8.4 million. The insurer spent $1.14 on claims and expenses for every premium dollar, compared with an underwriting profit a year earlier. Higher costs were fueled by three claims, two tied to passenger transportation and one in moving and storage, the company said.

“We are concerned and disappointed with the adverse reserve development,” Robert Paun, an analyst at Sidoti & Co., said in a research note. While he said the costs were uncharacteristic of the company, Paun cited “several years of weak pricing and unfavorable market conditions in the commercial auto and transportation segments that could result in future adverse adjustments.”

Paun, who has a neutral rating on the insurer, cut his full-year earnings-per-share estimate to 58 cents from $1.67. National Interstate has declined about 7.4 percent this year.

 

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Latest Comments

  • August 28, 2013 at 1:18 pm
    not surprised says:
    Fewer policies are being written by them. They do not have as large of a bucket of premium to go to as larger companies and reserves are set low. NIIC is super conservative an... read more
  • August 2, 2013 at 11:50 am
    Randy says:
    Just wait until the tail on their workers compensation policies slaps their results into the tank. They've been under pricing workers' compensation for trucking risks in Cali... read more
  • August 1, 2013 at 10:57 am
    InsGuy says:
    I agree. But, this may be more of situation of under-reserving your losses to improve your results/capital. What do you bet they just completed an audit by a Reinsurer?
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