1301106--3/21/2006--National_Interstate

related topics

{loss, insurance, financial}

{personnel, key, retain}

{interest, director, officer}

{debt, indebtedness, cash}

{financial, litigation, operation}

{stock, price, share}

{product, market, service}

{provision, law, control}

{operation, natural, condition}

{acquisition, growth, future}

{cost, contract, operation}

{condition, economic, financial}

We face competition from companies with greater financial resources, broader product lines, higher ratings and stronger financial performance than us, which may impair our ability to retain existing customers, attract new customers and maintain our profitability and financial strength. If we are not able to attract and retain independent agents and brokers, our revenues could be negatively affected. We are subject to comprehensive regulation, and our ability to earn profits may be restricted by these regulations. As a holding company, we are dependent on the results of operations of our insurance company subsidiaries to meet our obligations and pay future dividends. We are currently rated A (Excellent) by A.M. Best, their third highest rating out of 16 rating categories. A decline in our rating below A could adversely affect our position in the insurance market, make it more difficult to market our insurance products and cause our premiums and earnings to decrease. New claim and coverage issues are continually emerging in the insurance industry, and these new issues could negatively impact our revenues, our business operations or our reputation. If our claims payments and related expenses exceed our reserves, our financial condition and results of operations could be adversely affected. Our inability to retain our senior executives and other key personnel could adversely affect our business. Market fluctuations, changes in interest rates or a need to generate liquidity can have significant and negative effects on our investment portfolio. We may not be successful in reducing our risk and increasing our underwriting capacity through reinsurance arrangements, which could adversely affect our business, financial condition and results of operations. We are subject to credit risk with respect to the obligations of our reinsurers and certain of our insureds. The inability of our risk sharing partners to meet their obligations could adversely affect our profitability. We may not be successful in executing our business plan for our US Virgin Islands servicing operations. Your interests as a holder of our common shares may be different than the interests of our majority shareholder, Great American Insurance Company. We may have conflicts of interest with our majority shareholder, Great American Insurance Company, that we are unable to resolve in our favor. Provisions in our organizational documents, Ohio corporate law and the insurance laws of Ohio, Pennsylvania and Hawaii could impede an attempt to replace or remove our management or Directors or prevent or delay a merger or sale, which could diminish the value of our common shares. Future sales of our common shares may affect the trading price of our common shares.

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1301106--3/21/2006--National_Interstate_CORP