RICHFIELD, Ohio The year 2008 wont end soon enough for National Interstate Corporation, parent company of National Interstate Insurance Co.

Thats because the motorcoach industrys second-largest auto liability insurer has suffered significant investment losses as a result of the Wall Street meltdown and has incurred unusually large losses as a result of crashes occurring at charter bus companies it insures.

The investment losses National Interstate realized during the third quarter spread red ink to its bottom line. The company reported a net loss of $4.2 million, or 22 cents a share, for the three months end Sept. 30, compared to profits of $10.1 million, or 52 cents per diluted share, during the same period last year.

Although National Interstate had net income from operations of $4.4 million during this years third quarter, that was overshadowed by net realized losses from investments of $8.6 million, or 45 cents a share.

For the first nine months of this year, National Interstate earned $9.7 million, or 50 cents per diluted share, compared to profits of $32.5 million, or $1.67 per share diluted, for the same nine months in 2007.

National Interstate realized no tax savings from its third-quarter investment losses because, said the company, a tax benefit could not be recognized in the current year. "If the company generates investment gains in future periods it may be able to recognize the tax benefit from the 2008 realized investment losses," National Interstate noted.

In September, National Interstate announced it would sustain investment losses "caused by the global financial crisis." Its losses stem largely from company investments in financial institutions, Fannie Mae, Freddie Mac and Lehman Brothers. (See Oct. 1 Bus & Motorcoach News.)

The third-quarter investment losses apparently will not be National Interstates last. In its third-quarter report, the company said it has an additional $27 million in unrealized losses from a variety of securities and other financial investments.

"The adverse impact from investments on our overall results is reflective of the unprecedented investment environment we are experiencing," said National Interstate President and CEO Dave Michelson. "We continue to monitor our investments closely with an emphasis on maintaining a high quality portfolio."

National Interstates difficulties were not confined to the financial markets. Lower underwriting profits contributed to a decline in net income from operations during the third quarter.

During the first half of 08, National Interstate experienced "unusually high loss severity" that continued in the third quarter. Its most significant losses were in the charter bus sector.

"While the losses have occurred with both large and small charter companies, we have focused our attention on the small fleet operators, which represent a relatively small portion of our public transportation premium, and has historically performed well," said Michelson.

"We are in the process of reviewing our entire in-force small fleet book of charter transportation business to ensure that our high underwriting standards remain in place," said Michelson. "Other initiatives centered on risk selection and pricing adequacy have been implemented relative to the entire charter transportation product."

Summing up, Michelson said that "so far, 2008 has been extremely challenging. The turmoil in the investment markets has hurt our bottom line, but we believe our overall quality bias for investments will get us through the crisis. Although not as strong as prior years, our underwriting results are profitable and actions have been taken in response to the unusually high losses we have encountered.

"Our liquidity and capital position remains strong and we are confident we will return to our historical performance levels," Michelson asserted.

The market value of National Interstates cash and invested assets was $544.1 million as of Sept. 30, consisting of 91.2 percent cash and investment- grade, fixed-income investments.

National Interstates board approved a six-cents-per-share dividend, payable Dec. 12, to stockholders of record Nov. 28. The dividend rate was unchanged.