NSEC National Security Group Inc

The National Security Group, Inc. (the Company) (Nasdaq: NSEC), today reported results for the quarter and nine months ended September 30, 2008 and 2007, based on accounting principles generally accepted in the United States of America, as follows: � Three Months Ended September 30 � Nine Months Ended September 30 � � 2008 � 2007 � 2008 � 2007 � Premium Income $ 11,707,000 $ 15,913,000 $ 42,261,000 $ 46,362,000 Investment Income 1,332,000 1,216,000 3,894,000 3,629,000 Realized Investment (Losses) Gains (1,174,000 ) (4,000 ) (1,026,000 ) 529,000 Other Income 254,000 � 261,000 � 927,000 � 820,000 Total Revenues $ 12,119,000 � $ 17,386,000 � $ 46,056,000 � $ 51,340,000 � (Loss) Income from Continuing Operations $ (6,945,000 ) $ 1,505,000 $ (6,199,000 ) $ 3,169,000 Income (Loss) from Discontinued Operations - � - � - � 1,319,000 Net (Loss) Income $ (6,945,000 ) $ 1,505,000 � $ (6,199,000 ) $ 4,488,000 � (Loss) Earnings Per Share from Continuing Operations $ (2.82 ) $ 0.61 $ (2.51 ) $ 1.28 Earnings Per Share from Discontinued Operations - � - � - � 0.54 Net (Loss) Earnings Per Common Share $ (2.82 ) $ 0.61 � $ (2.51 ) $ 1.82 For the three months ended September 30, 2008, the Company reported a net loss of $(6,945,000) or $(2.82) per share, as compared to net income of $1,505,000, or $0.61 per share in the same three month period last year. Primary factors contributing to the loss for the three months ended September 30, 2008 are investment write downs due to �Other Than Temporary Impairments� in the investment portfolio and catastrophe losses from Hurricane Gustav and Hurricane Ike. Investment write downs totaled $(1,277,000) net of tax, or $(0.52) per share. Hurricane losses from insurance claims incurred from Hurricane Gustav and Hurricane Ike totaled $(5,900,000) net of tax, or $(2.39) per share. Premium revenue for the three month period ended September 30, 2008 declined 26% compared to the same period last year. The most significant factor contributing to the decline in premium revenue for the quarter was an increase in ceded premium due to the payment of catastrophe reinstatement premium triggered by Hurricane Gustav. However, the Company has experienced a decline in core premium revenue of 7% during 2008. For the nine months ended September 30, 2008, the Company reported a net loss of $(6,199,000) or $(2.51) per share, as compared to net income of $4,488,000, or $1.82 per share in the same nine month period last year. Third quarter hurricane and investment losses were the primary factors contributing to the year to date loss in 2008. Shareholders� equity as of September 30, 3008 totaled $35,106,000, a decline of 22% for the quarter. Hurricane losses and realized investment losses due to impairment write downs were the primary factors contributing to the decline in the Company�s capital position. However, a decline in market value of the Company�s investment portfolio of approximately 5% led to a decline in accumulated unrealized capital gains of $5,346,000 further reducing the capital position of the Company at September 30, 2008. While the decline in the Company�s capital position due to these unprecedented events of the last quarter have been significant, the Company remains well capitalized at levels that are sufficient to support current business plans. The National Security Group, Inc., through its property & casualty and life insurance subsidiaries, offers property, casualty, life, accident and health insurance in twelve states.