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National Interstate Beats on Q4 Earnings, Revs

Zacks Equity Research

National Interstate Corporation (NATL) delivered operating earnings of 40 cents per share in the fourth quarter of 2013, surpassing the Zacks Consensus Estimate of 36 cents by 11.1%. Likewise, results improved 29% year over year.

The improvement stemmed from sustained solid investment income and better underwriting results.

National Interstate’s net income, including net realized gains from investments, came in at 43 cents per share, a penny ahead of the year-ago quarter number.

The reported results coincided with the mid-point of the company’s guidance.

Behind the Headlines

National Interstate’s top line improved 10.6% year over year to $148.2 million, attributable to higher net investment income (up 13.6% year over year) and higher premiums earned (up 12.5% year over year). The results comfortably exceeded the Zacks Consensus Estimate of $135 million.

Gross premiums written scaled up 14% in the quarter owing to growth in the Alternative Risk Transfer (:ART) and Transportation components.

Growing invested assets combined with improvement in fixed income yields and strong equity markets aided favorable investment results.

Total expenses of National Interstate was $138 million, spiked 13.1% from the year-ago quarter due to increased losses and loss adjustment expenses (up 17.5% year over year) and higher expense on amounts withheld (escalating 58% year over year).

Combined ratio deteriorated 10 basis points year over year to 98.8% in the reported quarter but figured within the expected range of 98–99%.

Full-Year 2013 Highlights

National Interstate’s operating net income in 2013 came in at 67 cents per share, down 56.5% from the 2012 number. Net income was 89 cents per share, deteriorating 49% from the 2012 equivalent. Results were, however, at the mid-point of the company’s guidance.

National Interstate’s 2013 revenues improved 13.2% year over year to $568.9 million.

Financial Update

National Interstate exited 2013 with cash invested assets of $1.07 billion, improving from $1.05 billion as on Dec 31, 2012.

Total assets of $1.62 billion increased 3.2% from the 2012 year-end level.

Long-term debt of $12 million was flat year over year.

Total shareholders’ equity stood at nearly $352.3 million as of Dec 31, 2013 decreasing slightly from $352 million at the 2012 year-end level.

Book value per share increased 4% to $17.28 as of Dec 31, 2013 from $16.61 as of Dec 31, 2012.

Return on equity was 5.0% in 2013, down from 9.8% in 2012.  

Performances by Other Property and Casualty Insurers

American Financial Group Inc. (AFG) reported fourth-quarter operating earnings per share of $1.28, which comfortably beat the Zacks Consensus Estimate of $1.23. On a year-over-year basis, earnings surged 91%.

EMC Insurance Group Inc. (EMCI) reported fourth-quarter operating net earnings of 95 cents a share, down 4% year over year. However, the number exceeded the Zacks Consensus Estimate of 87 cents a share by 9.2%.

Global Indemnity Plc (GBLI) reported operating earnings per share of 76 cents for the fourth quarter of 2013. The results outpaced the Zacks Consensus Estimate of 31 cents and the year-ago figure of 18 cents.

Zacks Rank

National Interstate presently carries a Zacks Rank #4 (Sell).

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