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Share Name | Share Symbol | Market | Type |
---|---|---|---|
National Security Group Inc | NASDAQ:NSEC | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 16.36 | 16.32 | 16.40 | 0 | 01:00:00 |
þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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63-1020300
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(State or Other Jurisdiction of
Incorporation or Organization)
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(IRS Employer
Identification No.)
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661 East Davis Street
Elba, Alabama
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36323
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(Address of principal executive offices)
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(Zip-Code)
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PART I. FINANCIAL INFORMATION
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Page No.
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Item 1. Financial Statements (unaudited)
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PART II. OTHER INFORMATION
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▪
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The insurance industry is highly competitive and the Company encounters significant competition in all lines of business from other insurance companies. Many of the competing companies have more abundant financial resources than the Company.
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▪
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Insurance is a highly regulated industry. It is possible that legislation may be enacted which would have an adverse effect on the Company’s business.
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▪
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The Company is subject to regulation by state governments for each of the states in which it conducts business. The Company cannot predict the subject of any future regulatory initiative(s) or its (their) impact on the Company’s business.
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▪
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The Company is rated by various insurance rating agencies. If a rating is downgraded from its current level by one of these agencies, sales of the Company’s products and stock could be adversely impacted.
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▪
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The Company’s financial results are adversely affected by increases in policy claims received by the Company. While a manageable risk, this fluctuation is often unpredictable.
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▪
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The Company’s investments are subject to a variety of risks. Investments are subject to defaults and changes in market value. Market value can be affected by changes in interest rates, market performance and the economy.
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▪
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The Company mitigates risk associated with life policies through implementing effective underwriting and reinsurance strategies. These factors mitigate, not eliminate, risk related to mortality and morbidity exposure. The Company has established reserves for claims and future policy benefits based on amounts determined by independent actuaries. There is no assurance that these estimated reserves will prove to be sufficient or that the Company will not incur claims exceeding reserves, which could result in operating losses.
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▪
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The Company mitigates risk associated with property and casualty policies through implementing effective underwriting and reinsurance strategies. The Company obtains reinsurance which increases underwriting capacity and limits the risk associated with policy claims. The Company is subject to credit risk with regard to reinsurers as reinsurance does not alleviate the Company’s liability to its insured’s for the ceded risks. The Company utilizes a third-party to develop a reinsurance treaty with reinsurers who are reliable and financially stable. However, there is no guarantee that booked reinsurance recoverable will actually be recovered. A reinsurer’s insolvency or inability to make payments due could have a material adverse impact on the financial condition of the Company.
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▪
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The Company’s ability to continue to pay dividends to shareholders is contingent upon profitability and capital adequacy of the insurance subsidiaries. The insurance subsidiaries operate under regulatory restrictions that could limit the ability to fund future dividend payments of the Company. An adverse event or series of events could materially impact the ability of the insurance subsidiaries to fund future dividends and consequently the Board of Directors would have to suspend the declaration of dividends to shareholders.
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▪
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The Company is subject to the risk of adverse settlements or judgments resulting from litigation. It is difficult to predict or quantify the expected results of litigation because the outcome depends on decisions of the court and jury that are based on facts and legal arguments presented at the trial.
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June 30,
|
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December 31,
|
||||
|
|
2012
|
|
2011
|
||||
ASSETS
|
|
(unaudited)
|
|
|
||||
Investments
|
|
|
|
|
||||
Fixed maturities held-to-maturity, at amortized cost (estimated fair value: 2012 - $2,501;
2011 - $3,497)
|
|
$
|
2,336
|
|
|
$
|
3,303
|
|
Fixed maturities available-for-sale, at estimated fair value (cost: 2012 - $68,936;
2011 -$69,980)
|
|
72,446
|
|
|
73,074
|
|
||
Equity securities available-for-sale, at estimated fair value (cost: 2012 - $4,559;
2011 - $4,931)
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7,875
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8,547
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||
Trading securities
|
|
40
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|
80
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|
||
Mortgage loans on real estate, at cost
|
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386
|
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390
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Investment real estate, at book value
|
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5,774
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5,745
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Policy loans
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|
1,241
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|
1,244
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Company owned life insurance
|
|
5,831
|
|
|
5,660
|
|
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Other invested assets
|
|
3,848
|
|
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3,929
|
|
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Total Investments
|
|
99,777
|
|
|
101,972
|
|
||
Cash
|
|
6,345
|
|
|
3,393
|
|
||
Accrued investment income
|
|
776
|
|
|
706
|
|
||
Policy receivables and agents' balances, net
|
|
10,109
|
|
|
8,805
|
|
||
Reinsurance recoverable
|
|
1,960
|
|
|
2,778
|
|
||
Deferred policy acquisition costs
|
|
9,703
|
|
|
9,558
|
|
||
Property and equipment, net
|
|
2,482
|
|
|
2,528
|
|
||
Accrued income tax recoverable
|
|
1,496
|
|
|
1,669
|
|
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Deferred income tax asset
|
|
4,282
|
|
|
—
|
|
||
Other assets
|
|
1,200
|
|
|
1,045
|
|
||
Total Assets
|
|
$
|
138,130
|
|
|
$
|
132,454
|
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|
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|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
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|
|
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|
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Property and casualty benefit and loss reserves
|
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$
|
12,369
|
|
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$
|
14,386
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Accident and health benefit and loss reserves
|
|
2,172
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|
|
2,122
|
|
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Life and annuity benefit and loss reserves
|
|
29,813
|
|
|
29,605
|
|
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Unearned premiums
|
|
26,906
|
|
|
25,232
|
|
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Policy and contract claims
|
|
686
|
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|
652
|
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Other policyholder funds
|
|
1,429
|
|
|
1,408
|
|
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Short-term notes payable
|
|
625
|
|
|
485
|
|
||
Litigation settlement
|
|
13,000
|
|
|
—
|
|
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Long-term debt
|
|
12,372
|
|
|
12,372
|
|
||
Deferred income tax liability
|
|
—
|
|
|
86
|
|
||
Other liabilities
|
|
8,095
|
|
|
8,091
|
|
||
Total Liabilities
|
|
107,467
|
|
|
94,439
|
|
||
Contingencies
|
|
|
|
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|
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Shareholders' equity
|
|
|
|
|
|
|
||
Common stock
|
|
2,467
|
|
|
2,467
|
|
||
Additional paid-in capital
|
|
4,951
|
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|
4,951
|
|
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Accumulated other comprehensive income
|
|
3,557
|
|
|
3,640
|
|
||
Retained earnings
|
|
19,688
|
|
|
26,957
|
|
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Total Shareholders' Equity
|
|
30,663
|
|
|
38,015
|
|
||
Total Liabilities and Shareholders' Equity
|
|
$
|
138,130
|
|
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$
|
132,454
|
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Three Months Ended
|
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Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
REVENUES
|
|
|
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|
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|
||||||||
Net premiums earned
|
$
|
12,533
|
|
|
$
|
13,321
|
|
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$
|
26,029
|
|
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$
|
28,191
|
|
Net investment income
|
1,066
|
|
|
1,171
|
|
|
2,201
|
|
|
2,228
|
|
||||
Net realized investment gains
|
865
|
|
|
261
|
|
|
1,071
|
|
|
1,031
|
|
||||
Other income
|
193
|
|
|
256
|
|
|
390
|
|
|
511
|
|
||||
Total revenues
|
14,657
|
|
|
15,009
|
|
|
29,691
|
|
|
31,961
|
|
||||
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
||||
Policyholder benefits paid
|
7,976
|
|
|
15,682
|
|
|
15,821
|
|
|
25,004
|
|
||||
Policy acquisition costs
|
2,933
|
|
|
3,071
|
|
|
5,705
|
|
|
5,995
|
|
||||
General expenses
|
1,835
|
|
|
2,418
|
|
|
4,323
|
|
|
4,589
|
|
||||
Litigation settlement and defense costs
|
12,670
|
|
|
482
|
|
|
13,259
|
|
|
789
|
|
||||
Taxes, licenses and fees
|
438
|
|
|
622
|
|
|
930
|
|
|
1,102
|
|
||||
Interest expense
|
288
|
|
|
285
|
|
|
580
|
|
|
570
|
|
||||
Total expenses
|
26,140
|
|
|
22,560
|
|
|
40,618
|
|
|
38,049
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Loss Before Income Taxes
|
(11,483
|
)
|
|
(7,551
|
)
|
|
(10,927
|
)
|
|
(6,088
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
INCOME TAX (BENEFIT) EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
||||
Current
|
145
|
|
|
(2,515
|
)
|
|
173
|
|
|
(2,165
|
)
|
||||
Deferred
|
(4,322
|
)
|
|
(91
|
)
|
|
(4,325
|
)
|
|
27
|
|
||||
|
(4,177
|
)
|
|
(2,606
|
)
|
|
(4,152
|
)
|
|
(2,138
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Net Loss
|
$
|
(7,306
|
)
|
|
$
|
(4,945
|
)
|
|
$
|
(6,775
|
)
|
|
$
|
(3,950
|
)
|
|
|
|
|
|
|
|
|
||||||||
LOSS PER COMMON SHARE
|
$
|
(2.96
|
)
|
|
$
|
(2.00
|
)
|
|
$
|
(2.75
|
)
|
|
$
|
(1.60
|
)
|
|
|
|
|
|
|
|
|
||||||||
DIVIDENDS DECLARED PER SHARE
|
$
|
0.10
|
|
|
$
|
0.15
|
|
|
$
|
0.20
|
|
|
$
|
0.30
|
|
|
Three Months
Ended June 30,
|
|
Six Months Ended
June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Net loss:
|
$
|
(7,306
|
)
|
|
$
|
(4,945
|
)
|
|
$
|
(6,775
|
)
|
|
$
|
(3,950
|
)
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
||||||||
Changes in:
|
|
|
|
|
|
|
|
||||||||
Unrealized gains (losses) on securities
|
(201
|
)
|
|
465
|
|
|
76
|
|
|
285
|
|
||||
Unrealized loss on interest rate swap
|
(244
|
)
|
|
(103
|
)
|
|
(159
|
)
|
|
(55
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss), net of tax
|
(445
|
)
|
|
362
|
|
|
(83
|
)
|
|
230
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Comprehensive loss
|
$
|
(7,751
|
)
|
|
$
|
(4,583
|
)
|
|
$
|
(6,858
|
)
|
|
$
|
(3,720
|
)
|
|
|
Total
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at December 31, 2011
|
|
$
|
38,015
|
|
|
$
|
26,957
|
|
|
$
|
3,640
|
|
|
$
|
2,467
|
|
|
$
|
4,951
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net loss six months ended 6/30/2012
|
|
(6,775
|
)
|
|
(6,775
|
)
|
|
|
|
|
|
|
|
|
|
|||||
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Unrealized gain on securities, net of reclassification adjustment of $704
|
|
76
|
|
|
|
|
|
76
|
|
|
|
|
|
|
|
|||||
Unrealized gain on interest rate swap
|
|
(159
|
)
|
|
|
|
|
(159
|
)
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total comprehensive loss
|
|
(6,858
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends
|
|
(494
|
)
|
|
(494
|
)
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at June 30, 2012 (Unaudited)
|
|
$
|
30,663
|
|
|
$
|
19,688
|
|
|
$
|
3,557
|
|
|
$
|
2,467
|
|
|
$
|
4,951
|
|
|
|
Six Months Ended
|
||||||
|
|
June 30,
|
||||||
|
|
2012
|
|
2011
|
||||
Cash Flows from Operating Activities
|
|
|
|
|
||||
Net loss
|
|
$
|
(6,775
|
)
|
|
$
|
(3,950
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
||
Change in accrued investment income
|
|
(70
|
)
|
|
109
|
|
||
Change in reinsurance recoverable
|
|
818
|
|
|
(1,832
|
)
|
||
Change in deferred policy acquisition costs
|
|
(145
|
)
|
|
(27
|
)
|
||
Change in accrued income tax recoverable
|
|
173
|
|
|
(2,604
|
)
|
||
Change in deferred income taxes
|
|
(4,325
|
)
|
|
(27
|
)
|
||
Depreciation expense
|
|
286
|
|
|
187
|
|
||
Change in policy liabilities and claims
|
|
(1,376
|
)
|
|
2,195
|
|
||
Change in litigation settlement
|
|
13,000
|
|
|
—
|
|
||
Other, net
|
|
(1,569
|
)
|
|
(1,660
|
)
|
||
Net cash provided (used) by operating activities
|
|
17
|
|
|
(7,609
|
)
|
||
|
|
|
|
|
||||
Cash Flows from Investing Activities
|
|
|
|
|
|
|
||
Cost of investments acquired
|
|
(15,267
|
)
|
|
(11,777
|
)
|
||
Sale and maturity of investments
|
|
18,690
|
|
|
19,847
|
|
||
Purchase of property and equipment
|
|
(155
|
)
|
|
(31
|
)
|
||
Net cash provided by investing activities
|
|
3,268
|
|
|
8,039
|
|
||
|
|
|
|
|
||||
Cash Flows from Financing Activities
|
|
|
|
|
|
|
||
Change in other policyholder funds
|
|
21
|
|
|
28
|
|
||
Change in short-term notes payable
|
|
140
|
|
|
(325
|
)
|
||
Dividends paid
|
|
(494
|
)
|
|
(740
|
)
|
||
Net cash used in financing activities
|
|
(333
|
)
|
|
(1,037
|
)
|
||
|
|
|
|
|
||||
Net change in cash and cash equivalents
|
|
2,952
|
|
|
(607
|
)
|
||
|
|
|
|
|
||||
Cash and cash equivalents, beginning of period
|
|
3,393
|
|
|
1,572
|
|
||
|
|
|
|
|
||||
Cash and cash equivalents, end of period
|
|
$
|
6,345
|
|
|
$
|
965
|
|
Layer
|
Reinsurers' Limits of Liability
|
First Layer
|
95% of $6,000,000 in excess of $4,000,000
|
Second Layer
|
95% of $7,500,000 in excess of $10,000,000
|
Third Layer
|
100% of $25,000,000 in excess of $17,500,000
|
Fourth Layer
|
100% of $30,000,000 in excess of $42,500,000
|
Available-for-sale securities:
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
Corporate debt securities
|
|
$
|
30,876
|
|
|
$
|
1,703
|
|
|
$
|
233
|
|
|
$
|
32,346
|
|
Trust preferred securities
|
|
537
|
|
|
—
|
|
|
2
|
|
|
535
|
|
||||
Mortgage backed securities
|
|
6,640
|
|
|
215
|
|
|
22
|
|
|
6,833
|
|
||||
Private label mortgage backed securities
|
|
8,354
|
|
|
212
|
|
|
5
|
|
|
8,561
|
|
||||
Obligations of states and political subdivisions
|
|
14,334
|
|
|
1,187
|
|
|
—
|
|
|
15,521
|
|
||||
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
|
|
8,195
|
|
|
465
|
|
|
10
|
|
|
8,650
|
|
||||
Total fixed maturities
|
|
68,936
|
|
|
3,782
|
|
|
272
|
|
|
72,446
|
|
||||
Equity securities
|
|
4,559
|
|
|
3,859
|
|
|
543
|
|
|
7,875
|
|
||||
Total
|
|
$
|
73,495
|
|
|
$
|
7,641
|
|
|
$
|
815
|
|
|
$
|
80,321
|
|
Held-to-maturity securities:
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
Mortgage backed securities
|
|
$
|
1,619
|
|
|
$
|
121
|
|
|
$
|
—
|
|
|
$
|
1,740
|
|
Private label mortgage backed securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Obligations of states and political subdivisions
|
|
515
|
|
|
27
|
|
|
—
|
|
|
542
|
|
||||
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
|
|
202
|
|
|
17
|
|
|
—
|
|
|
219
|
|
||||
Total
|
|
$
|
2,336
|
|
|
$
|
165
|
|
|
$
|
—
|
|
|
$
|
2,501
|
|
Available-for-sale securities:
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
Corporate debt securities
|
|
$
|
19,907
|
|
|
$
|
1,340
|
|
|
$
|
267
|
|
|
$
|
20,980
|
|
Trust preferred securities
|
|
537
|
|
|
—
|
|
|
58
|
|
|
479
|
|
||||
Mortgage backed securities
|
|
7,587
|
|
|
307
|
|
|
23
|
|
|
7,871
|
|
||||
Private label mortgage backed securities
|
|
9,716
|
|
|
199
|
|
|
62
|
|
|
9,853
|
|
||||
Obligations of states and political subdivisions
|
|
18,355
|
|
|
1,142
|
|
|
15
|
|
|
19,482
|
|
||||
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
|
|
13,878
|
|
|
534
|
|
|
3
|
|
|
14,409
|
|
||||
Total fixed maturities
|
|
69,980
|
|
|
3,522
|
|
|
428
|
|
|
73,074
|
|
||||
Equity securities
|
|
4,931
|
|
|
4,206
|
|
|
590
|
|
|
8,547
|
|
||||
Total
|
|
$
|
74,911
|
|
|
$
|
7,728
|
|
|
$
|
1,018
|
|
|
$
|
81,621
|
|
Held-to-maturity securities:
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
Mortgage backed securities
|
|
$
|
2,026
|
|
|
$
|
125
|
|
|
$
|
—
|
|
|
$
|
2,151
|
|
Private label mortgage backed securities
|
|
55
|
|
|
1
|
|
|
—
|
|
|
56
|
|
||||
Obligations of states and political subdivisions
|
|
996
|
|
|
50
|
|
|
—
|
|
|
1,046
|
|
||||
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
|
|
226
|
|
|
18
|
|
|
—
|
|
|
244
|
|
||||
Total
|
|
$
|
3,303
|
|
|
$
|
194
|
|
|
$
|
—
|
|
|
$
|
3,497
|
|
|
|
(Dollars in Thousands)
|
||||||
|
|
Amortized
Cost
|
|
Fair
Value
|
||||
Available-for-sale securities:
|
|
|
|
|
||||
Due in one year or less
|
|
$
|
1,115
|
|
|
$
|
1,134
|
|
Due after one year through five years
|
|
14,420
|
|
|
15,489
|
|
||
Due after five years through ten years
|
|
21,148
|
|
|
22,329
|
|
||
Due after ten years
|
|
32,253
|
|
|
33,494
|
|
||
|
|
|
|
|
||||
Total
|
|
$
|
68,936
|
|
|
$
|
72,446
|
|
|
|
|
|
|
||||
Held-to-maturity securities:
|
|
|
|
|
|
|
||
Due in one year or less
|
|
$
|
—
|
|
|
$
|
—
|
|
Due after one year through five years
|
|
516
|
|
|
544
|
|
||
Due after five years through ten years
|
|
473
|
|
|
507
|
|
||
Due after ten years
|
|
1,347
|
|
|
1,450
|
|
||
|
|
|
|
|
||||
Total
|
|
$
|
2,336
|
|
|
$
|
2,501
|
|
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
||||||||||||||||||||
June 30, 2012
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Total
Securities in
a Loss Position
|
||||||||||||
Fixed maturities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Corporate debt securities
|
|
$
|
8,368
|
|
|
$
|
81
|
|
|
$
|
2,647
|
|
|
$
|
152
|
|
|
$
|
11,015
|
|
|
$
|
233
|
|
|
27
|
Trust preferred securities
|
|
—
|
|
|
—
|
|
|
535
|
|
|
2
|
|
|
535
|
|
|
2
|
|
|
1
|
||||||
Mortgage backed securities
|
|
1,155
|
|
|
22
|
|
|
—
|
|
|
—
|
|
|
1,155
|
|
|
22
|
|
|
4
|
||||||
Private label mortgage backed securities
|
|
—
|
|
|
—
|
|
|
117
|
|
|
5
|
|
|
117
|
|
|
5
|
|
|
1
|
||||||
Obligations of state and political subdivisions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0
|
||||||
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
|
|
608
|
|
|
2
|
|
|
254
|
|
|
8
|
|
|
862
|
|
|
10
|
|
|
3
|
||||||
Equity securities
|
|
184
|
|
|
8
|
|
|
1,050
|
|
|
535
|
|
|
1,234
|
|
|
543
|
|
|
5
|
||||||
|
|
$
|
10,315
|
|
|
$
|
113
|
|
|
$
|
4,603
|
|
|
$
|
702
|
|
|
$
|
14,918
|
|
|
$
|
815
|
|
|
41
|
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
||||||||||||||||||||
December 31, 2011
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Total
Securities in a Loss Position
|
||||||||||||
Fixed maturities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Corporate debt securities
|
|
$
|
4,703
|
|
|
$
|
166
|
|
|
$
|
899
|
|
|
$
|
101
|
|
|
$
|
5,602
|
|
|
$
|
267
|
|
|
15
|
Trust preferred securities
|
|
479
|
|
|
58
|
|
|
—
|
|
|
—
|
|
|
479
|
|
|
58
|
|
|
1
|
||||||
Mortgage backed securities
|
|
883
|
|
|
21
|
|
|
198
|
|
|
2
|
|
|
1,081
|
|
|
23
|
|
|
3
|
||||||
Private label mortgage backed securities
|
|
1,860
|
|
|
15
|
|
|
1,094
|
|
|
47
|
|
|
2,954
|
|
|
62
|
|
|
9
|
||||||
Obligations of state and political subdivisions
|
|
—
|
|
|
—
|
|
|
1,803
|
|
|
15
|
|
|
1,803
|
|
|
15
|
|
|
5
|
||||||
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
|
|
260
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
260
|
|
|
3
|
|
|
1
|
||||||
Equity securities
|
|
391
|
|
|
49
|
|
|
802
|
|
|
541
|
|
|
1,193
|
|
|
590
|
|
|
6
|
||||||
|
|
$
|
8,576
|
|
|
$
|
312
|
|
|
$
|
4,796
|
|
|
$
|
706
|
|
|
$
|
13,372
|
|
|
$
|
1,018
|
|
|
40
|
|
|
(Dollars in thousands)
|
||||||
|
|
Six-month period ended June 30, 2012
|
|
Year Ended December 31, 2011
|
||||
|
|
(unaudited)
|
|
|
||||
Net change in unrealized appreciation on available-for-sale securities before deferred tax
|
|
$
|
115
|
|
|
$
|
1,792
|
|
Deferred income tax
|
|
(39
|
)
|
|
(534
|
)
|
||
Net change in unrealized appreciation on available-for-sale securities
|
|
$
|
76
|
|
|
$
|
1,258
|
|
|
|
June 30, 2012
|
|
December 31, 2011
|
||||
|
|
(unaudited)
|
|
|
||||
General expenses
|
|
$
|
1,211
|
|
|
$
|
1,576
|
|
Unearned premiums
|
|
1,827
|
|
|
1,714
|
|
||
Claims liabilities
|
|
249
|
|
|
271
|
|
||
Litigation settlement
|
|
4,420
|
|
|
—
|
|
||
NOL carry forward
|
|
1,594
|
|
|
1,363
|
|
||
Other-than-temporary impairments on securities owned
|
|
231
|
|
|
258
|
|
||
Unrealized loss on interest rate swaps
|
|
489
|
|
|
407
|
|
||
Deferred tax assets
|
|
10,021
|
|
|
5,589
|
|
||
|
|
|
|
|
||||
Depreciation
|
|
(120
|
)
|
|
(144
|
)
|
||
Deferred policy acquisition costs
|
|
(3,299
|
)
|
|
(3,250
|
)
|
||
Unrealized gains on securities available-for-sale
|
|
(2,320
|
)
|
|
(2,281
|
)
|
||
Deferred tax liabilities
|
|
(5,739
|
)
|
|
(5,675
|
)
|
||
|
|
|
|
|
||||
Net deferred tax asset (liability)
|
|
$
|
4,282
|
|
|
$
|
(86
|
)
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2012
|
|
2011
|
||||
Deferred policy acquisition costs
|
|
$
|
49
|
|
|
$
|
304
|
|
Other-than-temporary impairments
|
|
27
|
|
|
(69
|
)
|
||
Trading securities
|
|
—
|
|
|
10
|
|
||
Unearned premiums
|
|
(113
|
)
|
|
(102
|
)
|
||
General expenses
|
|
(61
|
)
|
|
(98
|
)
|
||
Depreciation
|
|
(24
|
)
|
|
(16
|
)
|
||
Claim liabilities
|
|
22
|
|
|
(2
|
)
|
||
Litigation settlement
|
|
(3,995
|
)
|
|
—
|
|
||
NOL carry forward
|
|
(230
|
)
|
|
—
|
|
||
|
|
|
|
|
||||
Deferred income tax (benefit) expense
|
|
$
|
(4,325
|
)
|
|
$
|
27
|
|
|
|
Six Months Ended June 30,
|
||||
|
|
2012
|
|
2011
|
||
Federal income tax rate applied to pre-tax income/loss
|
|
34.00
|
%
|
|
34.00
|
%
|
Dividends received deduction and tax-exempt interest
|
|
0.80
|
%
|
|
1.70
|
%
|
Company owned life insurance
|
|
0.50
|
%
|
|
0.70
|
%
|
Small life deduction
|
|
2.10
|
%
|
|
3.10
|
%
|
Other, net
|
|
0.60
|
%
|
|
(4.40
|
)%
|
|
|
|
|
|
||
Effective federal income tax rate
|
|
38.00
|
%
|
|
35.10
|
%
|
|
|
(Dollars in thousands)
|
||||||
|
|
2012
|
|
2011
|
||||
Line of credit with variable interest rate equal to the WSJ prime rate, subject to a 5.0% floor; maturity January 2013. Interest payments due quarterly. Unsecured.
|
|
$
|
625
|
|
|
$
|
485
|
|
|
|
(Dollars in thousands)
|
||||||
|
|
2012
|
|
2011
|
||||
|
|
|
|
|
||||
Subordinated debentures issued on December 15, 2005 with fixed interest rate of 8.83% each distribution period thereafter until December 15, 2015 when the coupon rate shall equal the 3-Month LIBOR plus 3.75% applied to the outstanding principal; maturity December 2035. Interest payments due quarterly. All may be redeemed at any time following the tenth anniversary of issuance. Unsecured.
|
|
$
|
9,279
|
|
|
$
|
9,279
|
|
|
|
|
|
|
||||
Subordinated debentures issued on June 21, 2007 with a floating interest rate equal to the 3 Month LIBOR plus 3.40% applied to the outstanding principal; maturity June 15, 2037. Interest payments due quarterly. All may be redeemed at any time following the fifth anniversary of issuance. Unsecured.
|
|
3,093
|
|
|
3,093
|
|
||
|
|
$
|
12,372
|
|
|
$
|
12,372
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||||
Description
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities available-for-sale
|
|
|
|
|
|
|
|
|
||||||||
Corporate debt securities
|
|
$
|
32,346
|
|
|
$
|
—
|
|
|
$
|
32,346
|
|
|
$
|
—
|
|
Trust preferred securities
|
|
535
|
|
|
—
|
|
|
535
|
|
|
—
|
|
||||
Mortgage backed securities
|
|
6,833
|
|
|
—
|
|
|
6,833
|
|
|
—
|
|
||||
Private label mortgage backed securities
|
|
8,561
|
|
|
—
|
|
|
8,561
|
|
|
—
|
|
||||
Obligations of states and political subdivisions
|
|
15,521
|
|
|
—
|
|
|
15,521
|
|
|
—
|
|
||||
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies
|
|
8,650
|
|
|
8,650
|
|
|
—
|
|
|
—
|
|
||||
Trading securities
|
|
40
|
|
|
40
|
|
|
—
|
|
|
—
|
|
||||
Equity securities available-for-sale
|
|
7,875
|
|
|
7,087
|
|
|
—
|
|
|
788
|
|
||||
Total Financial Assets
|
|
$
|
80,361
|
|
|
$
|
15,777
|
|
|
$
|
63,796
|
|
|
$
|
788
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest rate swap
|
|
$
|
1,437
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,437
|
|
Total Financial Liabilities
|
|
$
|
1,437
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,437
|
|
For the quarter ended June 30, 2012
|
|
Equity Securities Available-for-Sale
|
|
Interest Rate Swap
|
||||
Beginning balance
|
|
$
|
642
|
|
|
$
|
(1,196
|
)
|
Total gains or losses (realized and unrealized):
|
|
|
|
|
|
|
||
Included in earnings
|
|
—
|
|
|
—
|
|
||
Included in other comprehensive income
|
|
3
|
|
|
(241
|
)
|
||
Purchases:
|
|
143
|
|
|
—
|
|
||
Sales:
|
|
—
|
|
|
—
|
|
||
Issuances:
|
|
—
|
|
|
—
|
|
||
Settlements
|
|
—
|
|
|
—
|
|
||
Transfers in/(out) of Level 3
|
|
—
|
|
|
—
|
|
||
Ending balance
|
|
$
|
788
|
|
|
$
|
(1,437
|
)
|
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held as of June 30, 2012:
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||||
Description
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities available-for-sale
|
|
|
|
|
|
|
|
|
||||||||
Corporate debt securities
|
|
$
|
20,980
|
|
|
$
|
—
|
|
|
$
|
20,980
|
|
|
$
|
—
|
|
Trust preferred securities
|
|
479
|
|
|
—
|
|
|
479
|
|
|
—
|
|
||||
Mortgage backed securities
|
|
7,871
|
|
|
—
|
|
|
7,871
|
|
|
—
|
|
||||
Private label mortgage backed securities
|
|
9,853
|
|
|
—
|
|
|
9,853
|
|
|
—
|
|
||||
Obligations of states and political subdivisions
|
|
19,482
|
|
|
—
|
|
|
19,482
|
|
|
—
|
|
||||
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies
|
|
14,409
|
|
|
14,409
|
|
|
—
|
|
|
—
|
|
||||
Trading securities
|
|
80
|
|
|
80
|
|
|
—
|
|
|
—
|
|
||||
Equity securities available-for-sale
|
|
8,547
|
|
|
7,905
|
|
|
—
|
|
|
642
|
|
||||
Total Financial Assets
|
|
$
|
81,701
|
|
|
$
|
22,394
|
|
|
$
|
58,665
|
|
|
$
|
642
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swap
|
|
$
|
1,196
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,196
|
|
Total Financial Liabilities
|
|
$
|
1,196
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,196
|
|
For the year ended December 31, 2011
|
|
Equity Securities Available-for-Sale
|
|
Interest Rate Swap
|
||||
Beginning balance
|
|
$
|
787
|
|
|
$
|
(227
|
)
|
Total gains or losses (realized and unrealized):
|
|
|
|
|
|
|
||
Included in earnings
|
|
—
|
|
|
—
|
|
||
Included in other comprehensive income
|
|
(145
|
)
|
|
(969
|
)
|
||
Purchases:
|
|
—
|
|
|
—
|
|
||
Sales:
|
|
—
|
|
|
—
|
|
||
Issuances:
|
|
—
|
|
|
—
|
|
||
Settlements
|
|
—
|
|
|
—
|
|
||
Transfers in/(out) of Level 3
|
|
—
|
|
|
—
|
|
||
Ending balance
|
|
$
|
642
|
|
|
$
|
(1,196
|
)
|
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held as of December 31, 2011:
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
June 30, 2012
|
|
December 31, 2011
|
||||||||||||
|
|
Carrying
Value
|
|
Estimated
Fair Value
|
|
Carrying
Value
|
|
Estimated
Fair Value
|
||||||||
Assets and related instruments
|
|
|
|
|
|
|
|
|
||||||||
Mortgage loans
|
|
$
|
386
|
|
|
$
|
386
|
|
|
$
|
390
|
|
|
$
|
390
|
|
Policy loans
|
|
1,241
|
|
|
1,241
|
|
|
1,244
|
|
|
1,244
|
|
||||
Company owned life insurance
|
|
5,831
|
|
|
5,831
|
|
|
5,660
|
|
|
5,660
|
|
||||
Other invested assets
|
|
3,848
|
|
|
3,848
|
|
|
3,929
|
|
|
3,929
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Liabilities and related instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other policyholder funds
|
|
1,429
|
|
|
1,429
|
|
|
1,408
|
|
|
1,408
|
|
||||
Short-term debt
|
|
625
|
|
|
625
|
|
|
485
|
|
|
485
|
|
||||
Long-term debt
|
|
12,372
|
|
|
12,372
|
|
|
12,372
|
|
|
12,372
|
|
Three-Month Period Ended June 30, 2012
|
Total
|
|
P&C Insurance Operations
|
|
Life Insurance Operations
|
|
Non-Insurance Operations
|
||||||||
REVENUE
|
|
|
|
|
|
|
|
||||||||
Net premiums earned
|
$
|
12,533
|
|
|
$
|
10,814
|
|
|
$
|
1,719
|
|
|
$
|
—
|
|
Net investment income
|
1,066
|
|
|
529
|
|
|
520
|
|
|
17
|
|
||||
Net realized investment gains
|
865
|
|
|
75
|
|
|
790
|
|
|
—
|
|
||||
Other income
|
193
|
|
|
192
|
|
|
1
|
|
|
—
|
|
||||
|
14,657
|
|
|
11,610
|
|
|
3,030
|
|
|
17
|
|
||||
BENEFITS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
||||
Policyholder benefits paid
|
7,976
|
|
|
6,763
|
|
|
1,213
|
|
|
—
|
|
||||
Policy acquisition costs
|
2,933
|
|
|
2,594
|
|
|
339
|
|
|
—
|
|
||||
General and administrative expenses
|
1,835
|
|
|
1,111
|
|
|
644
|
|
|
80
|
|
||||
Litigation settlement and defense costs
|
12,670
|
|
|
—
|
|
|
—
|
|
|
12,670
|
|
||||
Taxes, licenses and fees
|
438
|
|
|
385
|
|
|
53
|
|
|
—
|
|
||||
Interest expense
|
288
|
|
|
—
|
|
|
35
|
|
|
253
|
|
||||
|
26,140
|
|
|
10,853
|
|
|
2,284
|
|
|
13,003
|
|
||||
Income (Loss) Before Income Taxes
|
$
|
(11,483
|
)
|
|
$
|
757
|
|
|
$
|
746
|
|
|
$
|
(12,986
|
)
|
Three-Month Period Ended June 30, 2011
|
Total
|
|
P&C Insurance Operations
|
|
Life Insurance Operations
|
|
Non-Insurance Operations
|
||||||||
REVENUE
|
|
|
|
|
|
|
|
||||||||
Net premiums earned
|
$
|
13,321
|
|
|
$
|
11,544
|
|
|
$
|
1,777
|
|
|
$
|
—
|
|
Net investment income
|
1,171
|
|
|
606
|
|
|
461
|
|
|
104
|
|
||||
Net realized investment gains
|
261
|
|
|
257
|
|
|
4
|
|
|
—
|
|
||||
Other income
|
256
|
|
|
254
|
|
|
2
|
|
|
—
|
|
||||
|
15,009
|
|
|
12,661
|
|
|
2,244
|
|
|
104
|
|
||||
BENEFITS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
||||
Policyholder benefits paid
|
15,682
|
|
|
14,386
|
|
|
1,296
|
|
|
—
|
|
||||
Policy acquisition costs
|
3,071
|
|
|
2,751
|
|
|
320
|
|
|
—
|
|
||||
General and administrative expenses
|
2,418
|
|
|
1,601
|
|
|
594
|
|
|
223
|
|
||||
Litigation settlement and defense costs
|
482
|
|
|
—
|
|
|
—
|
|
|
482
|
|
||||
Taxes, licenses and fees
|
622
|
|
|
516
|
|
|
106
|
|
|
—
|
|
||||
Interest expense
|
285
|
|
|
—
|
|
|
16
|
|
|
269
|
|
||||
|
22,560
|
|
|
19,254
|
|
|
2,332
|
|
|
974
|
|
||||
Loss Before Income Taxes
|
$
|
(7,551
|
)
|
|
$
|
(6,593
|
)
|
|
$
|
(88
|
)
|
|
$
|
(870
|
)
|
Six-Month Period Ended June 30, 2012
|
Total
|
|
P&C Insurance Operations
|
|
Life Insurance Operations
|
|
Non-Insurance Operations
|
||||||||
REVENUE
|
|
|
|
|
|
|
|
||||||||
Net premiums earned
|
$
|
26,029
|
|
|
$
|
22,558
|
|
|
$
|
3,471
|
|
|
$
|
—
|
|
Net investment income
|
2,201
|
|
|
1,140
|
|
|
1,028
|
|
|
33
|
|
||||
Net realized investment gains
|
1,071
|
|
|
207
|
|
|
862
|
|
|
2
|
|
||||
Other income
|
390
|
|
|
388
|
|
|
2
|
|
|
—
|
|
||||
|
29,691
|
|
|
24,293
|
|
|
5,363
|
|
|
35
|
|
||||
BENEFITS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
||||
Policyholder benefits paid
|
15,821
|
|
|
13,176
|
|
|
2,645
|
|
|
—
|
|
||||
Policy acquisition costs
|
5,705
|
|
|
5,138
|
|
|
567
|
|
|
—
|
|
||||
General and administrative expenses
|
4,323
|
|
|
2,940
|
|
|
1,092
|
|
|
291
|
|
||||
Litigation settlement and defense costs
|
13,259
|
|
|
—
|
|
|
—
|
|
|
13,259
|
|
||||
Taxes, licenses and fees
|
930
|
|
|
815
|
|
|
115
|
|
|
—
|
|
||||
Interest expense
|
580
|
|
|
—
|
|
|
37
|
|
|
543
|
|
||||
|
40,618
|
|
|
22,069
|
|
|
4,456
|
|
|
14,093
|
|
||||
Income (Loss) Before Income Taxes
|
$
|
(10,927
|
)
|
|
$
|
2,224
|
|
|
$
|
907
|
|
|
$
|
(14,058
|
)
|
Six-Month Period Ended June 30, 2011
|
Total
|
|
P&C Insurance Operations
|
|
Life Insurance Operations
|
|
Non-Insurance Operations
|
||||||||
REVENUE
|
|
|
|
|
|
|
|
||||||||
Net premiums earned
|
$
|
28,191
|
|
|
$
|
24,545
|
|
|
$
|
3,646
|
|
|
$
|
—
|
|
Net investment income
|
2,228
|
|
|
1,233
|
|
|
958
|
|
|
37
|
|
||||
Net realized investment gains
|
1,031
|
|
|
643
|
|
|
358
|
|
|
30
|
|
||||
Other income
|
511
|
|
|
509
|
|
|
2
|
|
|
—
|
|
||||
|
31,961
|
|
|
26,930
|
|
|
4,964
|
|
|
67
|
|
||||
BENEFITS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
||||
Policyholder benefits paid
|
25,004
|
|
|
22,197
|
|
|
2,807
|
|
|
—
|
|
||||
Policy acquisition costs
|
5,995
|
|
|
5,491
|
|
|
504
|
|
|
—
|
|
||||
General and administrative expenses
|
4,589
|
|
|
3,052
|
|
|
1,174
|
|
|
363
|
|
||||
Litigation settlement and defense costs
|
789
|
|
|
—
|
|
|
—
|
|
|
789
|
|
||||
Taxes, licenses and fees
|
1,102
|
|
|
876
|
|
|
226
|
|
|
—
|
|
||||
Interest expense
|
570
|
|
|
—
|
|
|
31
|
|
|
539
|
|
||||
|
38,049
|
|
|
31,616
|
|
|
4,742
|
|
|
1,691
|
|
||||
Income (Loss) Before Income Taxes
|
$
|
(6,088
|
)
|
|
$
|
(4,686
|
)
|
|
$
|
222
|
|
|
$
|
(1,624
|
)
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|||||||||||
|
|
June 30,
|
|
June 30,
|
|||||||||||
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|||||||
Life, accident and health operations premiums written:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Traditional life insurance
|
|
$
|
1,248
|
|
|
$
|
1,226
|
|
|
2,458
|
|
|
$
|
2,531
|
|
Accident and health insurance
|
|
455
|
|
|
474
|
|
|
919
|
|
|
958
|
|
|||
Total life, accident and health
|
|
1,703
|
|
|
1,700
|
|
|
3,377
|
|
|
3,489
|
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Property and Casualty operations premiums written:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Dwelling fire & extended coverage
|
|
7,825
|
|
|
7,271
|
|
|
14,752
|
|
|
13,968
|
|
|||
Homeowners (Including mobile homeowners)
|
|
6,745
|
|
|
7,439
|
|
|
12,232
|
|
|
13,446
|
|
|||
Ocean marine
|
|
363
|
|
|
397
|
|
|
447
|
|
|
516
|
|
|||
Other liability
|
|
409
|
|
|
377
|
|
|
766
|
|
|
711
|
|
|||
Private passenger auto liability
|
|
(12
|
)
|
|
393
|
|
|
57
|
|
|
1,247
|
|
|||
Commercial auto liability
|
|
—
|
|
|
92
|
|
|
6
|
|
|
211
|
|
|||
Auto physical damage
|
|
(5
|
)
|
|
175
|
|
|
31
|
|
|
511
|
|
|||
Total property and casualty
|
|
15,325
|
|
|
16,144
|
|
|
28,291
|
|
|
30,610
|
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Gross premiums written
|
|
17,028
|
|
|
17,844
|
|
|
31,668
|
|
|
34,099
|
|
|||
Reinsurance premium ceded
|
|
(2,443
|
)
|
|
(3,039
|
)
|
|
(4,126
|
)
|
|
(4,568
|
)
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Net premiums written
|
|
$
|
14,585
|
|
|
$
|
14,805
|
|
|
27,542
|
|
|
$
|
29,531
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Life, accident and health operations premiums earned:
|
|
|
|
|
|
|
|
|
||||||||
Traditional life insurance
|
|
$
|
1,270
|
|
|
$
|
1,302
|
|
|
$
|
2,558
|
|
|
$
|
2,688
|
|
Accident and health insurance
|
|
449
|
|
|
475
|
|
|
913
|
|
|
958
|
|
||||
Total life, accident and health
|
|
1,719
|
|
|
1,777
|
|
|
3,471
|
|
|
3,646
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Property and Casualty operations premiums earned:
|
|
|
|
|
|
|
|
|
||||||||
Dwelling fire & extended coverage
|
|
6,665
|
|
|
6,666
|
|
|
13,212
|
|
|
13,165
|
|
||||
Homeowners (Including mobile homeowners)
|
|
5,790
|
|
|
6,227
|
|
|
11,694
|
|
|
12,471
|
|
||||
Ocean marine
|
|
275
|
|
|
300
|
|
|
543
|
|
|
619
|
|
||||
Other liability
|
|
343
|
|
|
321
|
|
|
683
|
|
|
631
|
|
||||
Private passenger auto liability
|
|
93
|
|
|
685
|
|
|
328
|
|
|
1,441
|
|
||||
Commercial auto liability
|
|
—
|
|
|
92
|
|
|
6
|
|
|
211
|
|
||||
Auto physical damage
|
|
44
|
|
|
274
|
|
|
151
|
|
|
571
|
|
||||
Total property and casualty
|
|
13,210
|
|
|
14,565
|
|
|
26,617
|
|
|
29,109
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Gross premiums earned
|
|
14,929
|
|
|
16,342
|
|
|
30,088
|
|
|
32,755
|
|
||||
Reinsurance premium ceded
|
|
(2,396
|
)
|
|
(3,021
|
)
|
|
(4,059
|
)
|
|
(4,564
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net premiums earned
|
|
$
|
12,533
|
|
|
$
|
13,321
|
|
|
$
|
26,029
|
|
|
$
|
28,191
|
|
|
June 30, 2012
|
|
December 31, 2011
|
||||||||||||||
|
Authorized
|
|
Issued
|
|
Outstanding
|
|
Authorized
|
|
Issued
|
|
Outstanding
|
||||||
Preferred Stock, $1 par value
|
500,000
|
|
|
—
|
|
|
—
|
|
|
500,000
|
|
|
—
|
|
|
—
|
|
Class A Common Stock, $1 par value
|
2,000,000
|
|
|
—
|
|
|
—
|
|
|
2,000,000
|
|
|
—
|
|
|
—
|
|
Common Stock, $1 par value
|
3,000,000
|
|
|
2,466,600
|
|
|
2,466,600
|
|
|
3,000,000
|
|
|
2,466,600
|
|
|
2,466,600
|
|
|
|
Three-Months Ended
|
|
Percent
|
|||||||
|
|
2012
|
|
2011
|
|
increase (decrease)
|
|||||
Life, accident and health segment:
|
|
|
|
|
|
|
|||||
Traditional life insurance
|
|
$
|
1,270,000
|
|
|
$
|
1,302,000
|
|
|
(2.5
|
)%
|
Accident and health insurance
|
|
449,000
|
|
|
475,000
|
|
|
(5.5
|
)%
|
||
Total life, accident and health
|
|
1,719,000
|
|
|
1,777,000
|
|
|
(3.3
|
)%
|
||
|
|
|
|
|
|
|
|||||
Property and Casualty segment:
|
|
|
|
|
|
|
|
|
|
||
Dwelling fire & extended coverage
|
|
6,665,000
|
|
|
6,666,000
|
|
|
—
|
%
|
||
Homeowners (Including mobile homeowners)
|
|
5,790,000
|
|
|
6,227,000
|
|
|
(7.0
|
)%
|
||
Ocean marine
|
|
275,000
|
|
|
300,000
|
|
|
(8.3
|
)%
|
||
Other liability
|
|
343,000
|
|
|
321,000
|
|
|
6.9
|
%
|
||
Private passenger auto liability
|
|
93,000
|
|
|
685,000
|
|
|
(86.4
|
)%
|
||
Commercial auto liability
|
|
—
|
|
|
92,000
|
|
|
(100.0
|
)%
|
||
Auto physical damage
|
|
44,000
|
|
|
274,000
|
|
|
(83.9
|
)%
|
||
Reinsurance premium ceded
|
|
(2,396,000
|
)
|
|
(3,021,000
|
)
|
|
(20.7
|
)%
|
||
Total property and casualty
|
|
10,814,000
|
|
|
11,544,000
|
|
|
(6.3
|
)%
|
||
|
|
|
|
|
|
|
|||||
Total earned premium revenue
|
|
$
|
12,533,000
|
|
|
$
|
13,321,000
|
|
|
(5.9
|
)%
|
|
|
Six months ended June 30,
|
|
Percent
|
|||||||
|
|
2012
|
|
2011
|
|
increase (decrease)
|
|||||
Life, accident and health operations:
|
|
|
|
|
|
|
|||||
Traditional life insurance
|
|
$
|
2,558,000
|
|
|
$
|
2,688,000
|
|
|
(4.8
|
)%
|
Accident and health insurance
|
|
913,000
|
|
|
958,000
|
|
|
(4.7
|
)%
|
||
Total life, accident and health
|
|
3,471,000
|
|
|
3,646,000
|
|
|
(4.8
|
)%
|
||
|
|
|
|
|
|
|
|||||
Property and Casualty operations:
|
|
|
|
|
|
|
|
|
|
||
Dwelling fire & extended coverage
|
|
13,212,000
|
|
|
13,165,000
|
|
|
0.4
|
%
|
||
Homeowners (Including mobile homeowners)
|
|
11,694,000
|
|
|
12,471,000
|
|
|
(6.2
|
)%
|
||
Ocean marine
|
|
543,000
|
|
|
619,000
|
|
|
(12.3
|
)%
|
||
Other liability
|
|
683,000
|
|
|
631,000
|
|
|
8.2
|
%
|
||
Private passenger auto liability
|
|
328,000
|
|
|
1,441,000
|
|
|
(77.2
|
)%
|
||
Commercial auto liability
|
|
6,000
|
|
|
211,000
|
|
|
(97.2
|
)%
|
||
Auto physical damage
|
|
151,000
|
|
|
571,000
|
|
|
(73.6
|
)%
|
||
Reinsurance premium ceded
|
|
(4,059,000
|
)
|
|
(4,564,000
|
)
|
|
(11.1
|
)%
|
||
Total property and casualty
|
|
22,558,000
|
|
|
24,545,000
|
|
|
(8.1
|
)%
|
||
|
|
|
|
|
|
|
|||||
Total earned premium revenue
|
|
$
|
26,029,000
|
|
|
$
|
28,191,000
|
|
|
(7.7
|
)%
|
•
|
In late 2011, we discontinued both our private passenger and commercial automobile programs. These two program accounted for approximately 6% of net written premium in 2011, down from nearly 10% in 2010 but had produced significant underwriting losses over the last five years. Due to a combination of reduced capital levels and a view that it would take some time to achieve underwriting profitability, we made the decision to discontinue the program in order to reduce surplus strain and underwriting leverage in the P&C subsidiaries.
|
•
|
We have incurred substantial losses from catastrophe events over the past seven years. These events have driven up catastrophe reinsurance cost and forced our catastrophe reinsurance deductible up from $2 million in 2005 to $4 million in our 2012 renewal. As our cat retention has increased, we have attempted to achieve higher margins in our insurance rate structure in order to compensate for the additional risk of the higher catastrophe reinsurance retention but with limited success due to regulatory constraints primarily because this additional retention was not a "hard dollar" cost in our rate structure. So, since we were limited in our ability to increase margins for this additional retained risk and due to the capital erosion incurred in 2011, in the second quarter of 2012 we placed additional reinsurance cover in the form of reinsurance premium protection (RPP). The RPP cover will serve to reduce our risk from a major catastrophe and strengthen our capital position. The effect of adding this additional RPP cover is to reduce our modeled 100 year event net cost (net of reinsurance recoveries) from approximately $9 million (pretax) to an estimated $4.5 million (pretax). A 100 year event is defined a an event that has approximately a 1% probability of occurring in a given year. This additional cover added $1.3 million to our cat reinsurance cost and will compress margins in 2012 as we go through the process of updating rates to reflect this higher cost but will help protect capital from major events going forward.
|
10.1
|
|
Settlement Agreement between Bagley Family Revocable Trust, Mobile Attic, Inc. and The National Security Group, Inc. dated August 3, 2012.
|
|
|
|
10.2
|
|
Promissory Note between Bagley Family Revocable Trust and The National Security Group, Inc. dated August 3, 2012.
|
|
|
|
31.1
|
|
Certification Pursuant to 18 U. S. C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
31.2
|
|
Certification Pursuant to 18 U. S. C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32.1
|
|
Certification Pursuant to 18 U. S. C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
Date of Report
|
|
Date Filed
|
|
Description
|
|
|
|
|
|
April 13, 2012
|
|
April 17, 2012
|
|
Press release, dated April 17, 2012, issued by The National Security Group, Inc.
|
|
|
|
|
|
May 14, 2012
|
|
May 14, 2012
|
|
Press release, dated May 14, 2012, issued by The National Security Group, Inc.
|
|
|
|
|
|
May 18, 2012
|
|
May 22, 2012
|
|
Item 5.07 - announcement of annual meeting voting results
|
|
|
|
|
|
June 20, 2012
|
|
June 22, 2012
|
|
Item 8.01 - announcement of litigation settlement
|
/s/ William L. Brunson, Jr.
|
|
/s/ Brian R. McLeod
|
William L. Brunson, Jr.
|
|
Brian R. McLeod
|
President and Chief Executive Officer
|
|
Vice President and Chief Financial Officer
|
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