-- Net Income -- Up 31.7% for the 2007 second quarter and 25.9% year
to date.
-- Earnings per Share -- Up 29.8% for the 2007 second quarter and
25.0% year to date.
-- Return on Average Shareholders' Equity -- 24.3% at June 30, 2007
-- Gross Premiums Written -- Up 12.6% for the 2007 second quarter and
11.3% year to date.
RICHFIELD, Ohio, Aug. 2, 2007 (PRIME NEWSWIRE) -- National Interstate Corporation (Nasdaq:NATL) today reported record quarterly net income of $11.9 million ($.61 per share diluted) for the 2007 second quarter, compared to $9.0 million ($.47 per share diluted) for the 2006 second quarter. Net income of $22.3 million ($1.15 per share diluted) for the six months ended June 30, 2007 increased 25.9% compared to $17.7 million ($.92 per share diluted) for the six months ended June 30, 2006. Total revenues were up 22.0% for the quarter and 21.3% year to date and the Company continues to experience strong underwriting results, both of which contributed to the higher earnings.
For the 2007 second quarter, gross premiums written of $81.9 million were 12.6% above the $72.7 million reported for the 2006 second quarter, and the 2007 second quarter net premiums written of $66.5 million were 11.8% above the $59.5 million reported for the 2006 second quarter. Gross premiums written of $202.8 million for the six months ended June 30, 2007 increased 11.3% compared to $182.3 million reported for same period last year, and June 30, 2007 year-to-date net premiums written of $153.8 million increased 10.7% compared to $138.9 million for the same period last year. Comparing the 2007 second quarter and six months to the same periods in 2006, 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 continued to occur in the Company's Alternative Risk Transfer component which increased 33.7% and 15.9% for the 2007 second quarter and year to date, respectively, compared to the same periods in 2006. The table below summarizes gross premiums written by business component:
Three Months Ended June 30,
-------------------------------------
2007 2006
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in thousands)
Alternative Risk Transfer $ 33,721 41.2% $ 25,228 34.7%
Transportation 25,238 30.8% 24,741 34.0%
Specialty Personal Lines 16,037 19.6% 15,056 20.7%
Hawaii and Alaska 5,933 7.2% 5,921 8.1%
Other 954 1.2% 1,782 2.5%
-------- ------ -------- -----
Gross Premiums Written $ 81,883 100.00% $ 72,728 100.0%
======== ====== ======== =====
Six Months Ended June 30,
-------------------------------------
2007 2006
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in thousands)
Alternative Risk Transfer $110,431 54.4% $ 95,292 52.3%
Transportation 47,113 23.2% 43,260 23.7%
Specialty Personal Lines 30,973 15.3% 28,829 15.8%
Hawaii and Alaska 12,087 6.0% 11,664 6.4%
Other 2,209 1.1% 3,221 1.8%
-------- ------ -------- -----
Gross Premiums Written $202,813 100.0% $182,266 100.0%
======== ====== ======== =====
"We have remained disciplined and maintained relatively flat pricing levels in spite of the continued soft commercial market cycle. Our overall double digit top line growth and the fact that all of our product components are ahead of last year demonstrates our ability to identify growth opportunities regardless of market conditions. We continue to identify new product opportunities and expanded offerings for our existing programs," commented Dave Michelson, President and Chief Operating Officer of National Interstate Corporation.
The GAAP combined ratio of 81.3% for the 2007 second quarter was 1.0 percentage point lower than 82.3% for the 2006 second quarter, and the GAAP combined ratio of 82.0% for the six months ended June 30, 2007 was 0.2 percentage points higher than 81.8% for the same period last year. The loss and loss adjustment expense ratio of 58.8% for the 2007 second quarter and 58.9% year to date were consistent with the ratios of 58.1% and 58.7% reported for the same periods in 2006. The Company continues to experience favorable loss and loss adjustment expense reserve development. The Company's reserves developed favorably by $3.0 million in the 2007 second quarter compared to $3.6 million in the 2006 second quarter and $4.6 million for the six months ended June 30, 2007 compared to $2.1 million for the six months ended June 30, 2006. The 2007 second quarter underwriting expense ratio of 22.5% was 1.7 points lower compared to 24.2% reported for the 2006 second quarter, reflecting lower commission expense. The underwriting expense ratio was 23.1% for the six months ended June 30, 2007 and 2006.
Net investment income for the 2007 second quarter was $5.6 million compared to $4.3 million for the 2006 second quarter and $10.7 million compared to $8.2 million for the six months ended June 30, 2007 and 2006, respectively. Approximately of the 31.0% increase in net investment income for both the quarter and year to date reflected continued growth in average cash and invested assets as well as higher yields on the short term, fixed income, and preferred stock portfolios. Cash flow from operations of $38.0 million for the first six months of 2007 contributed to the increase in cash and invested assets. The Company did not have any exposure in its mortgage backed/collateralized mortgage obligations related to the subprime lending sector.
Alan Spachman, Chairman and Chief Executive Officer of National Interstate Corporation said, "I am extremely pleased with our excellent results and our ability to perform in all market cycles. We are confident in our business plan and continue to realize the benefits of effective execution. Profitability is ahead of our expectations for the first six months of 2007 and we remain optimistic about our prospects for the future."
The Company also announced that its Board of Directors approved a $0.05 per share dividend at its August 2, 2007 meeting. The cash dividend will be payable on September 14, 2007 to shareholders of record of the Company's common stock as of the close of business on August 31, 2007.
Conference Call
The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on Friday, August 3, 2007 at 10:00 a.m. eastern daylight saving time. The conference call will be webcast live and a recording will be available on the Company's website at http://invest.natl.com.
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 holding 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 of insurance products focused primarily on recreational vehicle owners and small commercial vehicle accounts, 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:AFG) (Nasdaq: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.
NATIONAL INTERSTATE CORPORATION
SELECTED FINANCIAL DATA
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2007 2006 2007 2006
-------- -------- -------- --------
Operating Data:
Gross premiums
written $ 81,883 $ 72,728 $202,813 $182,266
======== ======== ======== ========
Net premiums written $ 66,534 $ 59,522 $153,762 $138,929
======== ======== ======== ========
Premiums earned $ 63,265 $ 52,429 $123,555 $102,744
Net investment income 5,586 4,276 10,731 8,175
Net realized gains 207 145 272 515
Other income 955 540 1,820 1,017
-------- -------- -------- --------
Total revenues 70,013 57,390 136,378 112,451
Losses and loss
adjustment expenses 37,187 30,438 72,720 60,334
Commissions and other
underwriting expense 11,144 9,934 22,545 18,699
Other operating and
general expenses 3,166 2,806 6,195 5,194
Expense on amounts
withheld 882 500 1,644 905
Interest expense 385 379 767 743
-------- -------- -------- --------
Total expenses 52,764 44,057 103,871 85,875
-------- -------- -------- --------
Income before income
taxes 17,249 13,333 32,507 26,576
Provision for income
taxes 5,391 4,330 10,182 8,847
-------- -------- -------- --------
Net income $ 11,858 $ 9,003 $ 22,325 $ 17,729
======== ======== ======== ========
Per Share Data:
Earnings per common
share, basic $ 0.62 $ 0.47 $ 1.16 $ 0.93
Earnings per common
share, assuming
dilution 0.61 0.47 1.15 0.92
Book value per common
share, basic (at
period end) $ 10.09 $ 7.96 $ 10.09 $ 7.96
Weighted average
number of common
shares outstanding,
basic 19,192 19,136 19,183 19,119
Weighted average
number of common
shares outstanding,
diluted 19,374 19,279 19,355 19,271
Common shares
outstanding at period
end (b) 19,220 19,145 19,220 19,145
Cash dividend per
common share $ 0.05 $ 0.04 $ 0.10 $ 0.08
GAAP Ratios:
Losses and loss
adjustment expense
ratio 58.8% 58.1% 58.9% 58.7%
Underwriting expense
ratio 22.5% 24.2% 23.1% 23.1%
-------- -------- -------- --------
Combined ratio 81.3% 82.3% 82.0% 81.8%
======== ======== ======== ========
Return on equity (a) -- -- 24.3% 24.3%
Average shareholders'
equity $189,343 $149,340 $183,848 $145,998
Balance Sheet Data At June 30, At Dec. 31,
(GAAP): 2007 2006
---- ----
Cash and investments $440,141 $406,454
Reinsurance recoverable 107,419 90,070
Total assets 916,420 806,248
Unpaid losses and loss
adjustment expenses 299,693 265,966
Long-term debt 15,464 15,464
Total shareholders'
equity $193,933 $173,763
(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) Common shares outstanding at quarter and period end includes all
common shares that have full voting rights, including unvested
shares.