The National Security Group, Inc. Releases Third Quarter Earnings

The National Security Group, Inc. (the Company) (Nasdaq: NSEC), today reported results for the quarter and nine months ended September 30, 2010 and 2009, based on accounting principles generally accepted in the United States of America, as follows:
     
Three Months Nine Months
Ended September 30 Ended September 30
2010   2009 2010   2009
 
REVENUES
Net premiums earned $ 15,248 $ 14,357 $ 46,189 $ 44,950
Net investment income 1,175 1,603 3,696 4,214
Net realized investment gains (losses) 75 79 1,433 (151 )
Other Income 259   208   814 541  
 
Total Revenues 16,757   16,247   52,132 49,554  
 
BENEFITS AND EXPENSES
Policyholder benefits paid or provided 10,096 9,131 29,630 28,237
Policy acquisition costs 3,082 3,432 8,800 9,699
General expenses 2,792 2,483 7,532 6,979
Taxes, licenses and fees 525 376 1,492 1,356
Interest expense 294   277   859 842  
Total Expenses
16,789   15,699   48,313 47,113  
 
(Loss) Income Before Income Taxes (32 ) 548   3,819 2,441  
 
INCOME TAX (BENEFIT) EXPENSE (255 ) (103 ) 888 217  
 
Net Income $ 223   $ 651   $ 2,931 $ 2,224  
 
 
EARNINGS PER COMMON SHARE $ 0.09   $ 0.26   $ 1.19 $ 0.90  
 

For the quarter ended September 30, 2010, the Company had net income of $223,000 ($0.09 per share) compared to net income of $651,000 ($0.26 per share) for the same period last year. The most significant factors contributing to the decline in the third quarter of 2010 were a $965,000 increase in policyholder benefits paid or provided coupled with a $309,000 increase in general expenses. The 10.6% increase in policyholder benefits paid or provided was largely related to a $659,000 increase in losses paid during the third quarter of 2010 compared to the same period last year in the P&C segment combined with a $320,000 increase in death and maturity benefits in the Life segment for the same time period. The 12.4% increase in general expenses was primarily related to litigation expense. Positively impacting the quarter were an $891,000 ($0.36 per share) increase in net premiums earned as well as a $350,000 reduction in policy acquisition costs.

For the nine-months ended September 30, 2010, the Company had net income of $2,931,000 ($1.19 per share) compared to net income of $2,224,000 ($0.90 per share) for the same period last year. The year-to-date increase of $1,584,000 in net realized investment gains was the primary reason for the improvement in net income in 2010 compared to the same period in 2009. The increase in year-to-date net income was partially offset by a $1,393,000 increase in policyholder benefits paid or provided. Year-to-date incurred losses were up in the first nine-months of 2010 in the life segment as well as in the homeowners and automobile programs in the P&C segment compared to the same period last year.

At September 30, 2010, the Company had aggregate equity capital, unrealized investment gains (net of income taxes) and retained earnings of $44,870,000 ($18.19 per share), up $3,702,000 ($1.50 per share) compared to $41,168,000 ($16.69 per share) at December 31, 2009. Factors contributing to the change in equity for the nine months ended September 30, 2010 were year-to-date net income of $2,931,000, recoveries in market values of fixed maturities and equity securities of $2,312,000, a net loss on interest rate swaps of $431,000 and dividends paid of $1,110,000.

The National Security Group, Inc., through its property & casualty and life insurance subsidiaries, offers property, casualty, life, accident and health insurance in twelve states. For more financial information please visit the investor section our website www.nationalsecuritygroup.com.

Copyright Business Wire 2010

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