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Cincinnati insurer seeks to buy rest of National Interstate

By Jim Mackinnon
Beacon Journal business writer

A large Cincinnati insurer wants to buy up all remaining shares of Richfield-based specialty insurance company National Interstate Corp. that it doesn’t own.

American Financial Group Inc., which already owns 52 percent of National Interstate, on Wednesday offered to purchase the rest of the company stock — more than 9.5 million shares — for $28 apiece. AFG is headed by Carl Lindner III and S. Craig Lindner, co-chief executive officers.

AFG subsidiaries own 10.2 million shares of National Interstate, according to filings with the Securities and Exchange Commission.

In addition, half of the directors on National Interstate’s 10-person board are current or retired AFG executives. They are:

• Joseph Consolino, AFG’s executive vice president and chief financial officer. He is National Interstate’s board chairman.

• Gary Gruber, vice president of AFG subsidiary Great American Property & Casualty Group and Great American Insurance Co.

• Keith Jensen, who retired in March 2013 as AFG senior vice president and chief financial officer.

• Donald D. Larson, president and chief operating officer of Great American Property & Casualty Group and Great American Insurance Co.

• Vito Peraino, general counsel and senior vice president of American Financial Group Inc.

A New York law firm, Kirby McInerney, sent out a news release Wednesday saying it was investigating whether there was a breach of fiduciary duties by National Interstate’s board regarding the proposed transaction, including whether the offer is in shareholders’ best interests.

The initial $266.6 million cash offer sent National Interstate’s stock price soaring above $28 a share. Shares rose $6.84, or 30.9 percent, to $29.01.

When a stock price rises above an initial offer, it is considered an indication that shareholders are expecting a higher offer will be coming.

AFG said the stock purchase would be made through subsidiary Great American Insurance Co. AFG said its tender offer expires midnight on March 6.

National Interstate did not respond publicly on Wednesday to AFG’s tender offer.

American Financial’s per-share offer is less than National Interstate’s high of the last 52 weeks, $35.68, which was reached on July 17.

AFG reported nearly $5.1 billion in revenue for 2013, up from nearly $5 billion in 2012. The company reported net income of $471 million, or $5.16 a share last year, compared with net income of $488 million, or $5.09 per share for 2012.

The AFG offer comes as National Interstate, founded in 1989 by Alan Spachman, is celebrating its 25th anniversary. Spachman remains as a member of the company’s board; he stepped down as board chairman on Feb. 15 last year.

National Interstate became a publicly traded company in 2005. If the AFG purchase succeeds, it becomes privately held.

National Interstate recently reported that it had $632 million in gross premiums written in 2013, up 10.2 percent from $573.5 million for fiscal 2012. Net income for the year is expected to range from 86 cents to 92 cents per share, down from $1.75 a share for fiscal 2012, the company said. National Interstate expects to hold a conference call with industry analysts on Feb. 26 to discuss 2013 fourth-quarter and fiscal-year results.

Jim Mackinnon can be reached at 330-996-3544 or


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