AFG American Financial Group

National Interstate Corporation Announces 2005 First Quarter Financial Results RICHFIELD, May 12 /PRNewswire-FirstCall/ -- National Interstate Corporation (NASDAQ:NATL) today reported net income for the first quarter ended March 31, 2005 of $7.2 million ($.39 per share) compared to $5.0 million ($.32 per share) for the 2004 first quarter. The 43.6% increase in the 2005 net income reflects higher profits from operations and investments. (Logo: http://www.newscom.com/cgi-bin/prnh/20050114/NILOGO ) Gross premiums written for the 2005 first quarter of $103.6 million grew 16.5% compared with the same quarter last year. This increase was primarily attributable to volume growth in our alternative risk transfer and specialty personal lines products. Net premiums written for the 2005 first quarter of $73.6 million grew 30.3% compared to the same quarter last year. The higher growth rate in net premiums written compared to gross premiums written reflects increased participation in the loss layers ceded under our traditional transportation and alternative risk transfer reinsurance agreements. Premiums earned for the 2005 first quarter of $43.2 million grew 30.9% compared to the same quarter last year. The 2005 first quarter GAAP combined ratio was 80.6%, 3.1 points better than the 2004 first quarter. This improvement reflects a 3.2 point decrease in the GAAP underwriting expense ratio as fixed expenses increased at a slower rate than our revenue growth. The losses and loss adjustment ratio for the 2005 first quarter of 60.4% was comparable to the same quarter last year. Net investment income for the 2005 first quarter of $2.7 million grew 51.8% compared to the same quarter last year. This increase reflects a 48.4% increase in average net invested assets in 2005 attributable to the growth in premiums written and the proceeds net of debt repayment of $25.4 million from our initial public offering completed in February 2005. Commenting on the results, Alan Spachman, Chairman and President of National Interstate Corporation, said, "All aspects of our business compared favorably to the prior year. We are pleased with our earnings and premium growth. We will continue to focus on maintaining our underwriting discipline through appropriate risk selection and adequate pricing." About National Interstate Corporation National Interstate Corporation (the "Company"), founded in 1989, is a specialty property and casualty insurance company with a niche orientation and focus on the transportation industry. The Company differentiates itself within its 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. The Company's products include property and casualty insurance for transportation companies, group captive insurance programs for transportation companies (alternative risk transfer), specialty personal lines, primarily recreational vehicle and watercraft coverage, and transportation and general commercial insurance in Hawaii. The Company distributes our insurance products through multiple channels including independent agents and brokers, affiliated agencies and agent Internet initiatives. Their insurance subsidiaries are rated "A" (Excellent) by A.M. Best Co. The Company is a subsidiary of the Great American Insurance Company, a property-casualty insurance subsidiary of American Financial Group, Inc. (NYSE:AFG) Nasdaq. The Company is headquartered in Richfield, Ohio, which is located in northeastern Ohio between Cleveland and Akron. In February 2005, the Company completed an initial public offering (IPO) in which it issued 3,350,000 shares and selling shareholders offered 1,074,000 shares at an initial offering price of $13.50 per share. Proceeds to the Company from the offering totaled approximately $40.4 million after deduction for the underwriting discount and offering expenses. Net proceeds were used to repay a loan from National Interstate's majority shareholder, Great American Insurance Company and for other general corporate purposes. Forward Looking Statements This release may contain forward-looking statements that are subject to risks and uncertainties. Although National Interstate Corporation believes that the expectations reflected in its forward-looking statements are reasonable, actual results could differ materially from those expectations. Important cautionary statements and risk factors that could affect actual results are discussed in materials filed by National Interstate Corporation with the Securities and Exchange Commission. We assume no obligation to update this release, which speaks as of the date issued. Contact: Mike Bourgon VP - Investor Relations (330) 659-8900 NATIONAL INTERSTATE CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA (in thousands, except per share data) At and for the three months March 31, 2005 2004 (a) Operating Data: Gross premiums written $103,577 $88,940 Net premiums written $73,629 $56,492 Premiums earned $43,177 $32,996 Net investment income 2,667 1,757 Net realized gains 115 692 Other income 2,044 1,781 Total revenues 48,003 37,226 Losses and loss adjustment expenses 26,067 19,898 Commissions and other underwriting expense 8,788 7,878 Other operating and general expenses 1,984 1,619 Interest expense 401 254 Total expenses 37,240 29,649 Income before income taxes 10,763 7,577 Provision for income taxes 3,608 2,594 Net income $7,155 $4,983 Per Share Data: Earnings per common share, basic $.40 $.33 Earnings per common share, assuming dilution .39 .32 Book value per common share, basic (at period end) $6.23 $3.70 Weighted average number of common shares outstanding, basic 17,941 15,024 Weighted average number of common shares outstanding, diluted 18,199 15,379 Common shares outstanding at period end 18,965 15,024 GAAP Ratios: Losses and loss adjustment expense ratio 60.4% 60.3% Underwriting expense ratio 20.2% 23.4% Combined ratio 80.6% 83.7% Return on equity(c) 30.0% 37.9% At March 31, At December 31, 2005 2004 Balance Sheet Data (GAAP): Cash and investments $290,914 $238,951 Reinsurance recoverable 68,911 63,128 Total assets 521,889 401,236 Unpaid losses and loss adjustment expenses 185,343 171,031 Long-term debt (b) 17,235 32,547 Total shareholders' equity $118,193 $72,789 Policyholder Surplus (Statutory) $97,114 $92,124 (a) 2004 net income and earnings per share reflect a correction from amounts previously disclosed (refer to March 31, 2005 Form 10-Q). (b) Long-term debt at December 31, 2004 includes a $15 million loan from Great American Insurance Company that was paid in full in February 2005. (c) The ratio of net income to the average of shareholders' equity at the beginning and at end of the period. http://www.newscom.com/cgi-bin/prnh/20050114/NILOGO http://photoarchive.ap.org/ DATASOURCE: National Interstate Corporation CONTACT: Mike Bourgon, VP - Investor Relations of National Interstate Corporation, +1-330-659-8900, or Web site: http://www.nationalinterstate.com/

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