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Spring Storms: Projected Losses For National Security Group, Inc.

The National Security Group, Inc. (NASDAQ: NSEC)… The month of April, 2011 brought forth an unprecedented series of weather events. While we have historically incurred significant losses from hurricanes, we have experienced the most severe spring storm season in Company history. As a result of the severe weather in the month, total incurred losses from April 2011 severe weather outbreaks are expected to exceed $8.5 million. These losses were incurred by Company subsidiaries National Security Fire and Casualty Company and Omega One Insurance Company. The April 2011 storms will be the most costly non-hurricane related losses incurred in Company history. Widespread tornado, hail and windstorm events impacted over 1,600 of our policyholders in the states of Alabama, Arkansas, Georgia, Mississippi, Oklahoma, South Carolina and Tennessee.

The single largest concentrations of losses are in the States of Alabama and Mississippi due to the April 26 th and 27 th tornado outbreak, which is among the worst tornado outbreaks in US history. Over 1,100 claims have been reported from this storm and total insured losses are expected to exceed $6.8 million. To add perspective to the scale of this storm system, in prior years the Company had never incurred losses from a single spring storm system exceeding $1 million.

The Company maintains catastrophe reinsurance to mitigate the impact of single large catastrophic events. Current estimates of pre-tax losses, net of reinsurance, total $6.4 million from all April storms. Based on preliminary estimates, second quarter net income will be reduced by $4.2 million. On a per share basis, earnings will be reduced by approximately $1.71 as a result of April storm activity. The projected impact on earnings is based on total Company insured losses of $8.5 million on a pre-tax basis.

Gross loss estimates were derived by an evaluation of reported claims to date which is the best information available to management at this time. The estimates could be materially affected by, among other things, the number of insureds impacted by the storms, the amount and timing of losses actually incurred and reported by insureds, and the preliminary nature of current estimates. However, with the largest event reaching the lower limits of catastrophe reinsurance, the net impact of any additional reported claims is not expected to have any additional material impact on net incurred losses or net income beyond current estimates.

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