The National Security Group, Inc. (NASDAQ:NSEC) results for the
three months ended March 31, 2019 and 2018, based on U.S. generally
accepted accounting principles, were reported today as follows:
Unaudited Consolidated Financial Summary
Three months ended March 31, 2019
2018 Gross premiums written $ 16,936,000 $ 16,965,000
Net premiums written $ 15,600,000 $ 15,780,000
Net premiums earned $ 14,718,000 $ 15,059,000 Net investment
income 962,000 920,000 Net investment gains (losses) 2,120,000
(264,000 ) Other income 146,000 161,000
Total
Revenues 17,946,000 15,876,000 Policyholder
benefits and settlement expenses 9,023,000 9,427,000 Amortization
of deferred policy acquisition costs 980,000 803,000 Commissions
2,033,000 2,060,000 General and administrative expenses 2,332,000
2,003,000 Taxes, licenses and fees 687,000 649,000 Interest expense
295,000 302,000
Total Benefits, Losses and
Expenses 15,350,000 15,244,000
Income Before
Income Taxes 2,596,000 632,000 Income tax expense
153,000 161,000
Net Income $ 2,443,000
$ 471,000
Income Per Common Share $ 0.97 $
0.19
Reconciliation of Net Income to non-GAAP
Measurement Net income $ 2,443,000 $ 471,000 Income tax expense
153,000 161,000 Investment (gains) losses, net (2,120,000 ) 264,000
Pretax Income From Operations $ 476,000 $
896,000
Management Commentary on Results of Operations
Summary:
For the three months ended March 31, 2019, net income for the
Company totaled $2,443,000, $0.97 income per share, compared to net
income of $471,000, $0.19 income per share, for the three months
ended March 31, 2018; a year over year increase of $1,972,000. The
increase in net income was primarily driven by an increase in
investment gains on our investment in company owned life insurance.
Pretax income from operations for the first quarter of 2019 totaled
$476,000 compared to a pretax income from operations of $896,000 in
the first quarter of 2018. The primary reason for the $420,000
decrease in pretax income from operations in the first quarter of
2019, compared to the same period in 2018, was a $341,000 decrease
in net premiums earned. The decline in net premiums earned was due
to an increase in ceded premium related to higher cost of
catastrophe reinsurance in our P&C segment.
Premium Revenue:
For the three-month period ended March 31, 2019, net premiums
earned were down $341,000 at $14,718,000 compared to $15,059,000
during the same period in 2018. The decrease in premium revenue was
primarily driven by a decline in net earned premium in the P&C
segment of $270,000. The decline in gross earned premium was
primarily attributable to a decrease in our surplus lines business
in coastal Louisiana. In addition, as mentioned previously, ceded
premium was up $144,000 or 8.9%, in the first quarter of 2019,
compared to the same period in 2018 due to an increase in cost of
our catastrophe reinsurance.
Investment Gains (Losses):
Investment gains for the three-month period ended March 31, 2019
were $2,120,000 compared to investment losses of $264,000 for the
three-month period ended March 31, 2018. The primary reason for the
increase in first quarter 2019 investment gains compared to the
first quarter 2018 investment loss was a gain on company owned life
insurance (COLI) of $1,792,000.
In 2018, due to a change in GAAP, unrealized gains and losses on
equity investments are required to be reported as a component of
investment gains/losses on the statement of operations. These
amounts were previously reported as a component of Other
Comprehensive Income. For the three months ended March 31, 2019,
investment losses include a $126,000 increase in accumulated gains
on equity securities held for investment. This increase in
accumulated gains was driven by an overall improvement in stock
market values experienced in the first quarter of 2019.
Net Income:
For the quarter ended March 31, 2019, the Company had net income
of $2,443,000, $0.97 income per share, compared to net income of
$471,000, $0.19 income per share, for the same period in 2018. The
primary reason for the increase in first quarter 2019 earnings
compared to first quarter 2018 earnings was the gain on company
owned life insurance mentioned previously.
Pretax Income from Operations:
For the three-month period ended March 31, 2019, our pretax
income from operations was $476,000 compared to a pretax income
from operations of $896,000 for the three-month period ended March
31, 2018; a decrease of $420,000. The primary reason for the
decrease in pretax income from operations in the first quarter of
2019 compared to the same period in 2018 was a decrease in net
premiums earned driven by an increase in ceded premium related to
our catastrophe reinsurance.
P&C Segment Combined Ratio:
For the quarter ended March 31, 2019, the P&C segment had a
GAAP combined ratio of 99.1%. Reported claims from cat events
totaling $955,000 combined with reported claims from
non-catastrophe wind and hail totaling $2,081,000 increased the
P&C segment combined ratio in the first quarter of 2019 by 22.9
percentage points. In comparison, for the quarter ended March 31,
2018, the P&C segment had a GAAP combined ratio of 97.0%.
Reported claims from cat events totaling $758,000 combined with
reported claims from non-catastrophe wind and hail totaling
$1,159,000 increased the P&C segment combined ratio in the
first quarter of 2018 by 14.2 percentage points. Partially
offsetting the increase in catastrophe losses and non-cat wind and
hail losses in the first quarter of 2019 was a decrease in fire
related losses of $1,289,000 compared to the same period in the
prior year.
Selected Balance Sheet
Highlights
March 31,2019
December 31,2018
UNAUDITED Invested Assets $ 116,690,000 $ 112,690,000 Cash $
7,418,000 $ 5,676,000 Total Assets $ 149,839,000 $ 144,231,000
Policy Liabilities $ 78,635,000 $ 77,988,000 Total Debt $
14,355,000 $ 14,352,000 Accumulated Other Comprehensive Income
(Loss) $ 189,000 $ (1,570,000 ) Shareholders' Equity $ 49,942,000 $
45,866,000 Book Value Per Share $ 19.76 $ 18.15
Management Commentary on Financial Position
Invested Assets:
Invested assets as of March 31, 2019 were $116,690,000 compared
to $112,690,000 as of December 31, 2018. The increase in invested
assets was primarily due to $1,709,000 in cash flow from operating
activities enabling additional investment in the fixed income
investment portfolio.
Cash:
The Company, primarily through its insurance subsidiaries, had
$7,418,000 in cash and cash equivalents at March 31, 2019,
compared to $5,676,000 at December 31, 2018. The increase in
cash in the first quarter of 2019, compared to 2018, was due to
positive cash flow from insurance operations.
Total Assets:
Total assets as of March 31, 2019 were $149,839,000 compared to
$144,231,000 at December 31, 2018. Positive cash flow from
insurance operations contributed to an increase in purchases of
fixed maturity securities and increases in market value of or
portfolio of fixed maturity securities further contributed to the
increase in total assets for the first quarter of 2019.
Policy Liabilities:
Policy related liabilities were $78,635,000 at March 31, 2019,
compared to $77,988,000 at December 31, 2018; an increase of
$647,000 or 0.8%. The primary reason for the increase in policy
liabilities in the first quarter of 2019 compared to 2018 was an
increase in unearned premium. This increase in unearned premium is
seasonal as we typically issue and renew a larger number of annual
insurance contracts during the first and second quarters of each
year compared to the remainder of the year.
Debt Outstanding:
Total debt at March 31, 2019 was virtually unchanged at
$14,355,000 compared to $14,352,000 at December 31, 2018.
Shareholders' Equity:
Shareholders' equity as of March 31, 2019 was $49,942,000,
up $4,076,000 compared to December 31, 2018 Shareholders'
equity of $45,866,000. Book value per share was $19.76 at
March 31, 2019, compared to $18.15 per share at
December 31, 2018, an increase of $1.61 per share. The primary
factors contributing to the increase in both book value per share
and Shareholders' equity were net income of $2,443,000 and
accumulated other comprehensive income of $1,759,000. Offsetting
the increase in Shareholders' equity was shareholder dividends of
$126,000.
The National Security Group, Inc. (NASDAQ
Symbol: NSEC), through its property & casualty (P&C) and
life insurance subsidiaries, offers property, casualty, life,
accident and health insurance in ten states. The Company writes
primarily personal lines property coverage including dwelling fire
and windstorm, homeowners, and mobile homeowners lines of
insurance. The Company also offers life, accident and health,
supplemental hospital and cancer insurance products. The Company
was founded in 1947 and is based in Elba, Alabama. Additional
information about the Company, including additional details of
recent financial results, can be found on our website:
www.nationalsecuritygroup.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190514006066/en/
Brian McLeod - Chief Financial Officer @ (334) 897-2273.
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