National Interstate Corporation Reports 2012 Fourth Quarter and Full Year Results
GlobeNewswire |
- Gross premiums written increased in 2012: fourth quarter up 37%, full year up 9%
- 2012 fourth quarter and full year net income trail last year
Gross premiums written increased 36.8% for the 2012 fourth quarter and 9.0% for the 2012 full year compared to the same 2011 periods reflecting growth in the alternative risk transfer (ART) and transportation components.
Earnings
Net income, determined in accordance with U.S. generally accepted accounting principles (GAAP), includes items that may not be indicative of our ongoing operations. The following table identifies such items and reconciles estimated net income to net income from operations, a non-GAAP financial measure that we believe is a useful tool for investors and analysts in analyzing ongoing operating trends.
Three Months Ended |
Year Ended |
|||
2012 | 2011¹ | 2012 | 2011¹ | |
(In thousands, except per share data) | (In thousands, except per share data) | |||
Net after-tax earnings from operations | ||||
After-tax net realized gain from investments | 2,065 | 996 | 4,042 | 2,910 |
After-tax impact from balance sheet guaranty for |
184 | 165 | 262 | (1,926) |
Net income | ||||
Net after-tax earnings from operations per share, diluted | ||||
After-tax net realized gain from investments per share, diluted | 0.11 | 0.05 | 0.21 | 0.15 |
After-tax impact from balance sheet guaranty for |
0.01 | 0.01 | 0.01 | (0.10) |
Net income per share, diluted | ||||
¹ 2011 results have been retrospectively adjusted for the changes to accounting for deferred policy acquisition costs required under Accounting Standards Update No. 2010-26 ("ASU 2010-26"). |
Net after-tax earnings from operations include underwriting income and net investment income. After-tax realized gains from investments and the after-tax impact on underwriting results related to the balance sheet guaranty from the
Underwriting Results:
Three Months Ended |
Year Ended |
|||
2012 | 2011¹ | 2012 | 2011¹ | |
Losses and loss adjustment expense ratio | 76.4% | 67.6% | 74.4% | 70.4% |
Underwriting expense ratio | 22.3% | 24.5% | 23.1% | 24.0% |
Combined ratio | 98.7% | 92.1% | 97.5% | 94.4% |
These underwriting ratios exclude the impact of the runoff of the guaranteed |
||||
¹ 2011 results have been retrospectively adjusted for the changes to accounting for deferred policy acquisition costs required under Accounting Standards Update No. 2010-26 ("ASU 2010-26"). |
Claims: The loss and loss adjustment expense (LAE) ratio for the 2012 fourth quarter of 76.4% increased approximately 2.5 percentage points due to unfavorable development from prior year claims and losses incurred from Superstorm Sandy. Excluding these items claims results were in line with the first three quarters of 2012. The higher 2012 fourth quarter loss and LAE ratio is also in sharp contrast to the unusually strong 2011 fourth quarter underwriting results in which the Company experienced low claims frequency and severity in its passenger transportation products as well as favorable development from prior year claims. The Company did not consider the claims from Superstorm Sandy to be material in relation to the industry losses caused by the storm. The 2012 fourth quarter loss and LAE ratio increased 1.3 percentage points due to the unfavorable development from prior year claims of
$1.6 million which compared to$1.4 million of favorable development for the 2011 fourth quarter.The loss and LAE ratio for the 2012 full year of 74.4% was elevated reflecting adverse claims including those related to several products for which underwriting actions have been taken as well as large claims in traditionally well performing products.
Underwriting Expenses: The underwriting expense ratios for the 2012 fourth quarter and full year improved compared to the same periods of 2011 and remained within the expected range. The Company's quarterly underwriting expense ratios can vary based on the mix of business written but has remained relatively consistent for the past several years.
Investments:
Net investment income of
The Company realized a portion of the portfolio appreciation as reflected in the net realized gains on investments of
Fair Value | Net Unrealized Gain (Loss) | |
(In thousands) | ||
U.S government and agencies | ||
Foreign government | 5,660 | 73 |
State and local government | 361,826 | 17,166 |
Mortgage backed securities | 242,299 | 8,169 |
Corporate obligations | 207,211 | 11,950 |
Other debt obligations | 11,428 | 107 |
Preferred redeemable securities | 4,231 | 96 |
Total fixed maturities | ||
Equity securities | ||
Total fixed maturities and equity securities |
Gross Premiums Written
The table below summarizes gross premiums written by business component:
Three Months Ended |
||||
2012 | 2011 | |||
Amount | Percent | Amount | Percent | |
(Dollars in thousands) | ||||
Alternative Risk Transfer | 58.6% | 54.6% | ||
Transportation | 48,136 | 30.7% | 36,358 | 31.7% |
Specialty Personal Lines | 11,353 | 7.2% | 10,644 | 9.3% |
3,419 | 2.2% | 3,465 | 3.0% | |
Other | 2,008 | 1.3% | 1,645 | 1.4% |
Gross premiums written | 100.0% | 100.0% | ||
Year Ended |
||||
2012 | 2011 | |||
Amount | Percent | Amount | Percent | |
(Dollars in thousands) | ||||
Alternative Risk Transfer | 55.2% | 54.2% | ||
Transportation | 180,786 | 31.5% | 162,870 | 30.9% |
Specialty Personal Lines | 51,026 | 8.9% | 53,729 | 10.2% |
18,383 | 3.2% | 18,137 | 3.5% | |
Other | 7,161 | 1.2% | 6,225 | 1.2% |
Gross premiums written | 100.0% | 100.0% |
The Company experienced top line growth of 36.8% in the 2012 fourth quarter, contributing to an increase of 9.0% in 2012 full year gross premiums written compared to the same periods in 2011.
Alternative Risk Transfer: The ART component grew 47.0% for the 2012 fourth quarter which moved the year-to-date gross premiums written for the component 10.8% ahead of the 2011 full year. The 2012 fourth quarter growth in the ART component is attributable primarily to new national account business as well as increasing rates which were partially offset by declines related to certain program business that is in run-off. National account business is comprised of larger entities for which the Company designs customized alternative risk programs. Due to their relative size, new national accounts are often in the pipeline for multiple periods and can cause lumpiness in quarterly gross premiums written.
Transportation: The Transportation component grew 32.4% in the 2012 fourth quarter primarily due to growth in the truck and moving and storage products. These products also contributed to the 11.0% growth in this component for the 2012 full year. In 2012, the transportation products benefitted from rate increases with increasing magnitude during the year and product extensions.
Specialty Personal Lines: Gross premiums written in the specialty personal lines component increased 6.7% in the 2012 fourth quarter. For the 2012 full year gross premiums are down 5.0% compared to 2011 as a result of underwriting and pricing actions related to the commercial vehicle product and a trend towards purchasing direct versus through agents for the recreational vehicle product.
Hawaii andAlaska : Gross premiums written for the 2012 fourth quarter and full year were flat compared to the same periods last year, respectively, which is as expected.
Summary Comments
"We continually talk about the potential variances in our quarter to quarter top and bottom line results," stated
Earnings Conference Call
The Company will hold a conference call to discuss the 2012 fourth quarter and full year results on
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, any weaknesses in the financial markets and other factors, including prevailing interest rate levels and stock and credit market performance which may affect or continue to affect (among other things) our ability to sell our products and to collect amounts due to us, our ability to access capital resources and the costs associated with such access to capital and the market value of our investments; our ability to manage our growth strategy, customer response to new products and marketing initiatives; tax law and accounting 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.
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SELECTED FINANCIAL DATA | ||||
(In thousands, except per share data) | ||||
Three Months Ended |
Twelve Months Ended |
|||
2012 | 2011(c) | 2012 | 2011(c) | |
Operating Data: | ||||
Gross premiums written | ||||
Net premiums written | ||||
Premiums earned | ||||
Net investment income | 8,078 | 8,233 | 34,927 | 30,554 |
Net realized gains on investments (*) | 3,177 | 1,533 | 6,219 | 4,477 |
Other | 804 | 711 | 3,278 | 3,541 |
Total revenues | 134,034 | 120,873 | 502,473 | 468,518 |
Losses and loss adjustment expenses | 93,142 | 74,741 | 341,008 | 308,357 |
Commissions and other underwriting expenses | 23,213 | 22,814 | 89,917 | 87,860 |
Other operating and general expenses | 4,787 | 4,572 | 19,151 | 17,432 |
Expense on amounts withheld | 994 | 1,182 | 3,953 | 3,910 |
Interest expense | 357 | 131 | 615 | 298 |
Total expenses | 122,493 | 103,440 | 454,644 | 417,857 |
Income before income taxes | 11,541 | 17,433 | 47,829 | 50,661 |
Provision for income taxes | 3,277 | 5,191 | 13,535 | 15,113 |
Net income | ||||
Per Share Data: | ||||
Net income per common share, basic | ||||
Net income per common share, assuming dilution | ||||
Weighted number of common shares outstanding, basic | 19,524 | 19,383 | 19,446 | 19,371 |
Weighted number of common shares outstanding, diluted | 19,653 | 19,522 | 19,579 | 19,491 |
Cash dividend per common share | ||||
(*) Consists of the following: | ||||
Realized gains before impairment losses | ||||
Total losses on securities with impairment charges | (472) | (2,665) | (886) | (2,811) |
Non-credit portion recognized in other comprehensive income | (24) | 756 | (24) | 756 |
Net impairment charges recognized in earnings | (496) | (1,909) | (910) | (2,055) |
Net realized gains on investments | ||||
GAAP Ratios: | ||||
Losses and loss adjustment expense ratio | 76.4% | 67.7% | 74.4% | 71.7% |
Underwriting expense ratio | 22.3% | 24.2% | 23.1% | 23.7% |
Combined ratio | 98.7% | 91.9% | 97.5% | 95.4% |
Return on equity (a) | 9.8% | 10.8% | ||
Average shareholders' equity | ||||
At |
At |
|||
2012 | 2011(c) | |||
Balance Sheet Data (GAAP): | ||||
Cash and invested assets | ||||
Reinsurance recoverable | 174,345 | 199,081 | ||
Intangible assets | 8,355 | 8,660 | ||
Total assets | 1,570,224 | 1,523,378 | ||
Unpaid losses and loss adjustment expenses | 775,305 | 776,576 | ||
Debt | 12,000 | 22,000 | Total shareholders' equity | |
Total shareholders' equity, excluding unrealized gains/losses on fixed maturities | ||||
Book value per common share, basic (at period end) | ||||
Book value per common share, excluding unrealized gains/losses on fixed maturities (at period end) | ||||
Common shares outstanding at period end (b) | 19,591 | 19,398 | ||
(a) The ratio of annualized net income to average shareholders' equity at the beginning and end of the period | ||||
(b) Common shares outstanding at period end include all vested common shares. At |
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(c ) 2011 results have been retrospectively adjusted for the changes to accounting for deferred policy acquisition costs required under Accounting Standards Update No. 2010-26 |
CONTACT:Tanya Inama National Interstate Corporation 877-837-0339 [email protected]www.natl.com
Source:
Copyright: | 2013 GlobeNewswire, Inc. |
Wordcount: | 2969 |
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