(Updates shares in the second paragraph.)
July 29 (Bloomberg) -- National Interstate Corp., the insurer that focuses on transportation risks, fell the most since March after higher-than-expected claims wiped out second- quarter profit.
The insurer dropped 7.6 percent to $26.04 at 4 p.m. in New York trading.
The net loss widened to $10.7 million from $6.28 million a year earlier, the Richfield, Ohio-based company said in a statement late yesterday. The operating loss, which excludes some investments, was 57 cents a share, compared with the average estimate of analysts surveyed by Bloomberg for a profit of 37 cents.
National Interstate had to add $20 million to reserves in the quarter after determining it charged too little in 2010, 2011 and 2012 for commercial auto coverage. Insurers such as David Einhorn’s Greenlight Capital Re Ltd. and Loews Corp.’s CNA Financial Corp. have also been burned after misjudging risks tied to vehicles used by business clients.
“The most problematic aspect of the reserve charge is that NATL had incurred adverse reserve development in the prior six quarters,” Vincent DeAugustino, an analyst with Keefe Bruyette & Woods Inc., said in a note to investors yesterday, using the company’s ticker symbol. “The remaining question is whether NATL’s reserve charge truly cleans up its balance sheet.”
National Interstate is majority owned by American Financial Group Inc., the Cincinnati-based insurer led by members of the Lindner family. American Financial fell 0.9 percent after posting profit yesterday that beat estimates.
Dave Michelson, the chief executive officer of National Interstate, has been increasing rates and seeking to minimize risks as he works to improve results.
“This is clearly not the target we set for ourselves,” Michelson said in the statement. “Although it is taking longer than expected, we believe our current business is moving towards underwriting results that are more in line with our expectations.”