SC 14D9

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Schedule 14D-9

(Rule 14d-101)

SOLICITATION/RECOMMENDATION STATEMENT

UNDER SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934

(Amendment No.     )

National Interstate Corporation

(Name of Subject Company)

T. Rowe Price Associates, Inc.

(Name of Person Filing Statement)

Common Stock, Par Value $.01 Per Share

(Title of Class of Securities)

63654U100

(CUSIP Number of Class of Securities)

David Oestreicher

Vice President

100 East Pratt Street

Baltimore, Maryland 21202

(410) 345-2628

(Name, Address and Telephone Number of Person Authorized to Receive Notice and Communications

on Behalf of the Person Filing Statement)

¨ Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

ITEM 1. SUBJECT COMPANY INFORMATION.

Name and Address

The name of the subject company is National Interstate Corporation, an Ohio corporation (the “Company”), the address of the principal executive office of the Company is 3250 Interstate Drive, Richfield, Ohio 44286-9000, and its telephone number at such address is (330) 659-8900.

Class of Securities

The title of the class of equity securities to which this Schedule 14D-9 relates is the common shares, par value $0.01 per share of the Company (the “Shares”, each a “Share”, and the holders of such Shares, “Shareholders”). As of February 17, 2014, 19,729,303 Shares were issued and outstanding.

ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.

Name and Address of Person Filing this Statement

This statement is being filed by T. Rowe Price Associates, Inc., a Maryland corporation (the “Adviser”), with its principal business office being located at 100 East Pratt Street, Baltimore, Maryland 21202 and its business telephone number being (410) 345-2000. The Adviser is an investment adviser registered under the Investment Advisers Act of 1940, as amended. The Adviser serves as investment adviser to various clients (“Advisory Clients”, each an “Advisory Client”) that own shares of the Company.

Tender Offer

This Statement relates to the tender offer by Great American Insurance Company, an Ohio corporation (the “Purchaser”), which is a wholly-owned subsidiary of American Financial Group, Inc. (“AFG”) to purchase all of the outstanding Shares that the Purchaser does not already own for $30.00 per share (the “Amended Offer Price”), net to the seller in cash, without interest, subject to applicable withholding taxes. The offer is disclosed in a combined Tender Offer Statement, Letter of Transmittal and Offer to Purchase (collectively, the “Transmittal Documents”) filed by the Purchaser under cover of Schedule TO with the United States Securities and Exchange Commission (the “SEC”) on February 5, 2014, as amended by Amendment No. 1, dated February 18, 2014, Amendment No. 2, dated February 21, 2014, and Amendment No. 3, dated February 24, 2014 (together with all exhibits thereto and subsequent amendments thereto, the “Schedule TO”). The offer is subject to the conditions set forth in the Transmittal Documents. The Purchaser has stated that if it purchases Shares in the offer such that it will own at least 90% of the issued and outstanding Shares, the Purchaser or an affiliate of the Purchaser, intends to merge with the Company (the “merger”). As a result of the merger, each then issued and outstanding Share (other than Shares held by the Purchaser and held by Shareholders who validly perfect their dissenters’ rights under the Ohio Revised Code) will be cancelled and converted into and represent the right to receive the Amended Offer Price.

The Schedule TO states that the principal executive office of the Purchaser is located at 301 East Fourth Street, Cincinnati, Ohio 45202, and its telephone number at such address is (513) 579-2121.

ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.

Not applicable.

ITEM 4. THE SOLICITATION OR RECOMMENDATION

The Adviser sent a letter (the “Letter) to the non-independent members of the Company’s Board of Directors on February 24, 2014, outlining its concerns about both the process the Company’s Board of Directors undertook to evaluate the transaction as well as the consideration offered by the Purchaser. A copy of the Letter is included as Exhibit 1 to this Schedule 14D-9 and is incorporated herein by reference. The Adviser does not currently intend to tender any of the Shares it beneficially owns pursuant to the Tender Offer.

ITEM 5. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.

Not applicable.

ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.

(1)	1. Advisory Clients
	2. February 5, 2014
	3. 397,600 shares
	4. 28.859 per share
	5. Sales on NASDAQ
(2)	1. Advisory Clients
	2. February 6, 2014
	3. 4,600 shares
	4. $29.000 per share
	5. Sales on NASDAQ
(3)	1. Advisory Clients
	2. February 11, 2014
	3. 400 shares
	4. $28.922 per share
	5. Sales on NASDAQ

ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.

Not applicable.

ITEM 8. ADDITIONAL INFORMATION.

Not applicable.

ITEM 9. EXHIBITS.

Exhibit No.	Description
1	Letter, dated February 24, 2014, from T. Rowe Price Associates, Inc. to the non-independent members of the Board of Directors of National Interstate Corporation.

SIGNATURE

After due inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.

T. Rowe Price Associates, Inc.
By:	/s/ David Oestreicher
Name:	David Oestreicher
Title:	Vice President

Dated: February 25, 2014

EX-1

Exhibit 1

T. ROWE PRICE ASSOCIATES, INC. WWW.TROWEPRICE.COM

P.O. Box 89000

Baltimore, Maryland

21289-4102

4515 Painters Mill Road

Owings Mills, Maryland

21117-4903

Phone          410-345-2000

Toll Free     800-638-7890

Feb. 24, 2014

Mr. Jeff E. Consolino

Mr. Gary J. Gruber

Mr. Keith A. Jensen

Mr. Donald D. Larson

Mr. David W. Michelson

Mr. Vito C. Peraino

National Interstate Corp.

3250 Interstate Dr.

Richfield OH 44286

To the non-independent members of the Board of National Interstate Corporation:

On behalf of the advisory clients of T. Rowe Price Associates, Inc., who are shareholders of National Interstate, we are writing to inform you that we do not currently intend to participate in the tender offer disclosed on Feb. 21 under the terms offered.

As of today, our clients own 1.57 million shares of National Interstate, representing about 8 percent of the common shares outstanding. As experienced investors in the U.S. smaller companies marketplace broadly and the property and casualty insurance industry specifically, we understand the value that can be created as a result of the well-executed combination of complementary businesses. We also understand the dynamics of industry consolidation within the P&C business well.

We do, however, always apply extra scrutiny to any transactions involving a conflict of interest between the negotiating parties, such as Great American Insurance Company’s offer for National Interstate. This approach is based on many years of investment experience, which have made clear that such conflicts are exceedingly difficult for Boards of Directors to manage while also meeting their duties of loyalty to all shareholders.

Having analyzed this transaction carefully, we note that we have rarely come away with concerns as substantial as those we have identified here. In short, we are quite troubled about both the process the National Interstate Board undertook to evaluate the transaction as well as the consideration offered.

In our view, four of you, as directors on the National Interstate Board, face a direct conflict in terms of serving both the interests of Great American, where you are professionally affiliated, and the interests of the National Interstate shareholders you represent. Mr. Michelson and Mr. Jensen are less directly conflicted but, as noted in the company’s most recent proxy, you are not independent. Therefore, we would have expected the Board to have made every effort to mitigate its conflict, to the best of its ability, using well-established techniques such as (a) establishing an independent review committee comprising the independent members of the Board; (b) facilitating the use of separate legal counsel and valuation expertise by the independent review committee; and (c) insisting on some form of a majority-of-the-minority clause for shareholder approval of the offer.

In our experience, when a conflicted Board takes the care to employ some or all of these procedures, it provides at least some measure of comfort to the minority shareholders of the entity being acquired that their interests were considered alongside the (conflicting) interests of the majority owner. Such procedures also ensure that more information is made available for the minority shareholders facing a voting or tender decision.

With the Great American tender offer, none of these procedures was employed, and therefore none of the incremental information they would have produced is available to us. We are particularly appalled that no fairness opinion was obtained for the most recent offer. With a fiduciary duty to the advisory clients we represent, we are hampered in our ability to make this tender-offer decision on their behalf without any assurance that a fair, thorough and independent assessment of National Interstate’s value was ever undertaken.

For this reason, we have elected not to participate in the offer at this time. Our concerns are so strong about the lapses in basic standards of corporate governance evident in this situation that we will file this letter with the U.S. Securities and Exchange Commission in order to make public our position. In an effort to be fair and transparent, we felt it was appropriate to first notify you, the non-independent directors responsible for this improper tender-offer process, about our intentions.

Sincerely,

/s/ Preston G. Athey	/s/ J. David Wagner
Preston G. Athey	J. David Wagner
Vice President	Vice President
T. Rowe Price Associates, Inc.	T. Rowe Price Associates, Inc.

/s/ Gabriel Solomon

Gabriel Solomon

Vice President

T. Rowe Price Associates, Inc.

cc: Mr. Alan Spachman

Mr. Michael Spachman

Mr. Joel Schiavone

Mr. Donald W. Schwegman