The National Security Group, Inc. Releases Financial Results

The National Security Group, Inc. (NASDAQ: NSEC) financial results for the three-months and six-months ended June 30, 2012 and 2011, based on accounting principles generally accepted in the United States of America, were reported today as follows:

			Three Months Ended June 30										Six Months Ended June 30
			2012					2011					2012					2011
Premium Earned			$	12,533,000				$	13,321,000				$	26,029,000				$	28,191,000
Investment Income				1,066,000					1,171,000					2,201,000					2,228,000
Realized Investment Gains				865,000					261,000					1,071,000					1,031,000
Other Income				193,000					256,000					390,000					511,000
Total Revenues			$	14,657,000				$	15,009,000				$	29,691,000				$	31,961,000
Net Loss			$	(7,306,000	)			$	(4,945,000	)			$	(6,775,000	)			$	(3,950,000	)
Net Loss Per Share			$	(2.96	)			$	(2.00	)			$	(2.75	)			$	(1.60	)

On June 20, 2012, The National Security Group, Inc. (the Company) reached a settlement agreement in the Mobile Attic related litigation previously disclosed in its annual and quarterly reports filed with the Securities and Exchange Commission on forms 10-K and 10-Q. The Company and the plaintiff entered into an agreement before the Court to end all outstanding litigation between the parties. The agreement will consist of a settlement in which the Company will pay the plaintiff $13,000,000 over 9 years on terms and conditions to be finalized by the parties in the final definitive agreement. The financial impact of this settlement is reflected in the current year net income figures presented in the table above and discussion below.

For the three-months ended June 30, 2012, the Company had a net loss of $7,306,000, $2.96 per share, compared to a net loss of $4,945,000, $2.00 per share, for the same period last year. The primary factor contributing to the net loss for the three-months ended June 30, 2012 was the settlement of longstanding litigation related to the Company's sale of an investment in Mobile Attic, Inc. The settlement and associated legal fees resulted in a charge to pretax earnings of $12,670,000 in the second quarter and resulted in a net of tax reduction in second quarter net income of $8,362,000. For the three-months ended June 30, 2011, the net loss included a significant increase in policyholder benefits paid resulting from tornado and wind claims related to a series of severe weather events occurring during the month of April 2011 which caused widespread destruction and led to $12,632,000 in gross incurred losses and adjustment expenses. Net of reinsurance recoveries, these events reduced pretax earnings by $6,518,000 and reduced net income by $4,302,000 in the second quarter of 2011.

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