RICHFIELD, Ohio National Interstate Corporation has reported "disappointing" second-quarter financial results to its shareholders, as well as unwelcome news to its policyholders: higher rates are here or on the way.

Increased claims losses and a drop in premium income for one of its four principal business segments resulted in the lower second-quarter earnings at National Interstate, a leading motorcoach industry insurer.

The company said it earned $7.26 million during the three months ended June 30, or 37 cents per diluted share, compared to net income of $8.6 million, or 41 cents per diluted share, for the same period last year.

Said National Interstate President and CEO Dave Michelson: "We were disappointed with the underwriting results for the 2012 second quarter, which contributed to an elevated combined ratio for the first half of 2012.

"We have experienced severity in several of our commercial products, and our specialty personal lines products are not improving as quickly as we would like. The combination of timing of larger claims, loss cost inflation, and the delayed impact of the rate increases we are now getting in most products has contributed to the rise in our loss and loss-adjustment expense ratio.

"On the positive side, our underwriting expenses are well controlled and have remained flat," noted Michelson.

In both the first and second quarters of this year, National Interstate experienced higher-than-average claims in several of its commercial products, which the company said contributed to the higher-than-expected loss and loss-adjustment expense ratios.

Gross premiums written by National Interstate during this years second quarter totaled $160.1 million, an increase of 2.3 percent over last years second period.

Gross premiums for the first half of this year amounted to $290.4 million, essentially unchanged from the first six months of 2011.

National Interstate reported higher premium income from three of its four main business segments during the second quarter. Premium income rose 3.9 percent in its alternative risk transfer (captives) unit, 3 percent in its transportation component, and 4.3 percent in its Hawaii and Alaska division.

A portion of the increase posted by the transportation unit, which includes part of National Interstates motorcoach insurance business, resulted from rate increases that "are starting to occur with some regularity."

National Interstate also insures motorcoach companies through its captive (alternative risk transfer) program.

Meanwhile, the companys specialty personal lines segment, which includes insurance for RVs and smaller commercial vehicles, saw premium income decline 8.7 percent during the first half of this year.

"We expected flat top-line results through the first half of 2012 because of the actions we took last year related to two products in the program business portion of the (alternative risk transfer) component, which comprised 8.2 percent of 2011 second-quarter gross premiums written, and underwriting actions related to the specialty personal lines products," said Michelson.

"However, we are encouraged by the modest overall increase in gross premiums written for the quarter and growth in three of the four components.

"Our top line is performing as expected and improved investment income has added to our profitability. However, our underwriting results for the first six months of 2012 are below our expectations of a combined ratio in the low-to-mid 90s.

"Adverse claims, including large claims in traditionally well-performing products have impacted the results. We have and will continue to closely monitor all large commercial accounts not meeting our underwriting expectations for appropriate action, and we are getting rate increases in most of our commercial products.

"In our specialty personal lines component, we have filed rate increases in virtually all states in both the recreation vehicle and commercial vehicle products. We believe all of these actions will have a favorable impact going forward," said Michelson.

National Interstate directors approved a dividend of 10 cents per common share, payable Sept. 4, to shareholders of record Aug. 20.

In a separate announcement, National Interstate said it is expanding its trucking insurance program by targeting heavy haul, crane and rigging operations.

The program is offering coverage for auto liability, physical damage, workers' compensation and general liability.

"The heavy haul, crane and rigging industry is highly specialized, and we have creative insurance solutions to meet the needs of this market," said George Skuggen, assistant vice president of truck products.

For information about the company, go to www.nationalinterstate.com.