The National Security Group, Inc. (NASDAQ:NSEC) results for the
three months ended March 31, 2021 and 2020, based on U.S. generally
accepted accounting principles, were reported today as follows:
Unaudited Consolidated Financial
Summary
Three months ended
March 31,
2021
2020
Gross premiums written
$
18,834,000
$
17,131,000
Net premiums written
$
16,386,000
$
15,331,000
Net premiums earned
$
15,062,000
$
14,955,000
Net investment income
804,000
964,000
Net investment gains (losses)
310,000
(990,000
)
Other income
136,000
145,000
Total Revenues
16,312,000
15,074,000
Policyholder benefits and settlement
expenses
9,303,000
10,583,000
Amortization of deferred policy
acquisition costs
971,000
1,065,000
Commissions
2,136,000
2,075,000
General and administrative expenses
2,304,000
1,394,000
Taxes, licenses and fees
536,000
721,000
Interest expense
138,000
261,000
Total Benefits, Losses and
Expenses
15,388,000
16,099,000
Income (Loss) Before Income
Taxes
924,000
(1,025,000
)
Income tax expense (benefit)
202,000
(165,000
)
Net Income (Loss)
$
722,000
$
(860,000
)
Income (Loss) Per Common Share
$
0.29
$
(0.34
)
Reconciliation of Net Income (Loss) to
non-GAAP Measurement
Net income (loss)
$
722,000
$
(860,000
)
Income tax expense (benefit)
202,000
(165,000
)
Investment (gains) losses, net
(310,000
)
990,000
Pretax Income (Loss) From
Operations
$
614,000
$
(35,000
)
Management Commentary on Results of Operations
Summary:
For the three months ended March 31, 2021, the Company had net
income of $722,000, $0.29 income per share, compared to a net loss
of $860,000, $0.34 loss per share, for the three months ended March
31, 2020; a quarter over quarter improvement of $1,582,000. Pretax
income from operations for the first quarter of 2021 totaled
$614,000 compared to a pretax loss from operations of $35,000 in
the first quarter of 2020. Results for the first quarter of 2021
were positively impacted by a $1,280,000 decrease in claims and was
the primary reason for the $649,000 improvement in pretax income
from operations in the first quarter of 2021, compared to the same
period in 2020.
For the three months ended March 31, 2021, the Company had
investment gains of $310,000 compared to an investment loss of
$990,000 for the three months ended March 31, 2020. A primary
reason for the increase in first quarter 2021 investment gains,
compared to first quarter 2020 investment losses was realized gains
on the sale of equity securities totaling $357,000 compared to
realized losses on the sale of equity securities totaling $25,000
last year. In addition, an increase in market value of our equity
investments held for sale totaled $3,000, in the first quarter of
2021, compared to a decline in market value of equity investments
held for sale of $599,000, in the first quarter of 2020.
The Company ended the first quarter of 2021 with claims totaling
$9,303,000 compared to $10,583,000 for the same period last year.
The P&C segment was the primary source of the decrease with
overall claims down $1,280,000 in first quarter 2021 compared to
first quarter of 2020. The primary component of the decline was
claims reported from weather related events which declined
$833,000, in the first quarter of 2021, compared to the same period
last year. In addition, reported fire losses were down $270,000 in
the first quarter of 2021 compared to the first quarter of
2020.
Three-month period ended March 31, 2021 compared to
three-month period ended March 31, 2020
Premium Revenue:
For the three months ended March 31, 2021, net premiums earned
were up $107,000 at $15,062,000 compared to $14,955,000 during the
same period last year. The increase in premium revenue was
primarily driven by an increase in net earned premium, in the
P&C segment, of $150,000 or 1.1%. The increase in P&C
segment net earned premium was primarily attributable to a 5.5%
increase in gross earned premium in our homeowners program coupled
with a 5.4% increase in gross earned premium in our dwelling fire
program. The increase in P&C segment gross earned premium was
partially offset by a 36.3% increase in reinsurance premium ceded
due to an increase in reinsurance costs related to our 2021
catastrophe reinsurance contract renewal. We are implementing rate
increases across all of our property insurance offerings to offset
the cost of this increase in catastrophe reinsurance.
Gross written premium increased significantly in the first
quarter of 2021 compared to the same period last year. Gross
written premium for the three months ended March 31, 2021 was
$18,834,000 compared to $17,131,000 for the same period last year,
an increase of 9.9%. The primary factor contributing to the
increase in gross written premium is a re-underwriting project in
our P&C subsidiary which began during the fourth quarter of
2020 for policy renewals beginning in January 2021. In order to
mitigate the impact of an increase in average claim cost due to
inflation associated with increasing cost of home repairs and
construction materials, we are currently re-underwriting our book
of P&C business. We are placing particular focus on adequacy of
property valuations to better reflect an increase in our average
claim cost due to increases in repair cost. Through this process of
re-underwriting, we will work through substantially all of our
annual policy renewals by December 31, 2021. The renewal rate on
policies renewing in the first quarter of 2021 was 92.5%, which is
in line with our five year average renewal rate. While our policy
risk count as of March 31, 2021 is down approximately 3.7% compared
to March 31, 2020, P&C segment gross written premium is up
11.2% for the three months ended March 31, 2021 compared to the
same period last year reflecting a higher average premium per
policy. With the current expanded re-underwriting process just
taking effect with first quarter 2021 policy renewals, this
increase in written premium is expected to lead to increased earned
premium in subsequent quarters of 2021 as the project ramps up.
In addition to the re-underwriting project, we have implemented
multiple rate increases to help offset the 29.4% increase in
reinsurance costs we incurred with the 2021 renewal of our
catastrophe reinsurance. We have focused on implementing rate
increases in the states and programs most impacted by the increase
in catastrophe reinsurance cost, primarily states with
costal/hurricane exposure. With the rising costs of reinsurance
taking effect on January 1, 2021, we have worked diligently to
incorporate these increases into our rate filings as quickly as
possible in 2021. We currently anticipate the completion and
implementation of current year rate filings for most of our states
and programs by mid-year 2021 with increases taking effect at each
annual policy renewal over the subsequent twelve months of renewals
in each program.
Investment Gains (Losses):
Investment gains, for the three months ended March 31, 2021,
were $310,000 compared to investment losses of $990,000 for the
same period last year. The primary reason for the investment gain,
in the first quarter of 2021, was a gain on equity securities of
$357,000 compared to a loss on equity securities of $25,000 for the
same period last year. For the three months ended March 31, 2021,
the market value of our equity investments increased $3,000
compared to a decrease in market value of equity investments of
$599,000 for the same period last year. Partially offsetting the
first quarter of 2021 investment gains was a decrease in value of
COLI investments totaling $57,000 compared to a decrease of
$251,000 for the same period last year. Investment losses in the
first quarter of 2020 were also impacted by other-than-temporary
impairments (OTTI) on investment securities of $238,000 while no
OTTI was incurred for the three months ended March 31, 2021.
Net Income (Loss):
For the three months ended March 31, 2021, the Company had net
income of $722,000, $0.29 income per share, compared to a net loss
of $860,000, $0.34 loss per share, for the same period last year.
The primary reasons for the first quarter 2021 net income, compared
to the first quarter 2020 net loss, was a decrease in property and
casualty insured losses coupled with an increase in P&C segment
earned premium. The reduction in weather related claims in the
P&C segment through March 31, 2021, compared to March 31, 2020,
was the primary reason for the decline in claims. The increase in
P&C subsidiary premium was primarily driven by the
re-underwriting project and rate filing increases discussed
previously.
Pretax Income (Loss) from Operations:
For the three months ended March 31, 2021, our pretax income
from operations was $614,000 compared to a pretax loss from
operations of $35,000 for the three months ended March 31, 2020; an
increase of $649,000. As discussed above, a decrease in both
weather related claim activity and fire losses in our P&C
segment coupled with an increase in premium in our P&C segment
were the primary reasons for the income from operations in the
first quarter of 2021, compared to the same period last year.
P&C Segment Combined Ratio:
The P&C segment ended the first quarter of 2021 with a GAAP
basis combined ratio of 95.8%. Reported catastrophe losses totaled
$1,736,000 and added 12.6 percentage points to the combined ratio.
In comparison, the P&C segment ended the first quarter of 2020
with a GAAP basis combined ratio of 107.6% with $2,252,000 in
reported catastrophe losses increasing the combined ratio by 16.5
percentage points. Non-catastrophe wind and hail losses were down
$317,000 for the three months ended March 31, 2021 compared to the
same period in 2020. Reported non-catastrophe wind and hail losses,
in the first quarter of 2021, totaled $1,293,000 and added 9.4
percentage points to the first quarter 2021 combined ratio. In
comparison, non-catastrophe wind and hail losses reported in the
first quarter of 2020 totaled $1,610,000 and added 11.8 percentage
points to the first quarter 2020 combined ratio. In addition,
reported fire losses were down $270,000 during the first quarter of
2021 compared to the first quarter of 2020. Reported fire losses
totaled $3,270,000, for the three months ended March 31, 2021, and
added 23.7 percentage points to the 2021 combined ratio. In
comparison, in the first quarter of 2020, reported fire losses
totaled $3,540,000 and added 25.9 percentage points to the 2020
combined ratio.
Management Commentary on Financial Position
Selected Balance Sheet
Highlights
March 31, 2021
December 31, 2020
(UNAUDITED)
Invested Assets
$
104,805,000
$
99,150,000
Cash
$
17,242,000
$
19,887,000
Total Assets
$
151,575,000
$
150,540,000
Policy Liabilities
$
84,104,000
$
82,869,000
Total Debt
$
13,680,000
$
13,677,000
Accumulated Other Comprehensive Income
$
2,439,000
$
3,585,000
Shareholders' Equity
$
44,790,000
$
45,366,000
Book Value Per Share
$
17.70
$
17.93
Invested Assets:
Invested assets at March 31, 2021 were $104,805,000 compared to
$99,150,000 at December 31, 2020; an increase of 5.7%. The increase
in invested assets was primarily due to an increase in new
investments of positive cash flow from operations and partial
re-investment of December 31, 2020 available cash. This was offset
by a decline, primarily in market value of available-for-sale fixed
maturity investments, of $2,069,000. This decline in market value
of fixed maturity investments was primarily driven by an increase
in intermediate and long-term market interest rates during the
quarter.
Cash:
The Company, primarily through its insurance subsidiaries, had
$17,242,000 in cash and cash equivalents at March 31, 2021,
compared to $19,887,000 at December 31, 2020. Cash decreased
$2,645,000 in the first quarter of 2021 primarily due to the
purchase of available-for-sale fixed maturity securities in our
P&C subsidiary investment portfolio.
Total Assets:
Total assets at March 31, 2021 were $151,575,000 compared to
$150,540,000 at December 31, 2020. Positive cash flow from
insurance operations contributed to an increase in purchases of
fixed maturity securities. Due to an increase in market interest
rates, fixed maturity investments classified as available-for-sale
decreased in market value, partially offsetting the increase in new
investments in the first quarter of 2021.
Policy Liabilities:
Policy related liabilities were $84,104,000 at March 31, 2021,
compared to $82,869,000 at December 31, 2020; an increase of
$1,235,000 or 1.5%. The primary reason for the increase in policy
liabilities was a $1,995,000 increase in P&C segment unearned
premium, in the first quarter of 2021, compared to 2020. The
increase in unearned premium was primarily driven by an 11.2%
quarter over quarter increase in P&C segment gross written
premium in the first quarter of 2021. This increase in gross
written premium was primarily due to the impact of increased
average policy premium as we began re-underwriting our P&C
in-force policies starting with January 1, 2021 renewals.
Debt Outstanding:
Total debt was comparable at March 31, 2021 at $13,680,000
compared to $13,677,000 at December 31, 2020. Our debt is held at
the holding company level.
Shareholders' Equity:
Shareholders' equity as of March 31, 2021 was $44,790,000, down
$576,000, compared to December 31, 2020 Shareholders' equity of
$45,366,000. Book value per share was $17.70 at March 31, 2021,
compared to $17.93 per share at December 31, 2020; a decline of
1.3% or $0.23 per share. The primary factors contributing to the
decrease in both book value per share and Shareholders' equity were
a decrease in accumulated other comprehensive income of $1,146,000
and shareholder dividends paid of $152,000. Partially offsetting
these decreases was net income of $722,000.
About The National Security Group, Inc.:
The National Security Group, Inc. (NASDAQ:NSEC), through its
property & casualty 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.
Information about forward-looking statements
Any statement contained in this report which is not a historical
fact, or which might otherwise be considered an opinion or
projection concerning the Company or its business, whether
expressed or implied, is meant as and should be considered a
forward-looking statement as that term is defined in the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are based on assumptions and opinions concerning a
variety of known and unknown risks, including but not limited to
changes in market conditions, natural disasters and other
catastrophic events, increased competition, changes in availability
and cost of reinsurance, changes in governmental regulations,
technological changes, political and legal contingencies and
general economic conditions, as well as other risks and
uncertainties more completely described in the Company’s filings
with the Securities and Exchange Commission. If any of these
assumptions or opinions proves incorrect, any forward-looking
statements made on the basis of such assumptions or opinions may
also prove materially incorrect in one or more respects and may
cause future results to differ materially from those contemplated,
projected, estimated or budgeted in such forward-looking
statements.
Significant uncertainties still remain regarding the ultimate
impacts of the COVID-19 pandemic on future premium revenue, losses,
claims settlement costs and investment results. These uncertainties
could have a material adverse impact on our net income and results
of operations. Additional information and disclosures related to
risk factors are discussed in our 2020 Annual Report on Form 10-K
as well as our latest Form 10-Q and should be read in conjunction
with this Form 8-K.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210514005523/en/
Brian McLeod - Chief Financial Officer @ (334) 897-2273.
National Security (NASDAQ:NSEC)
Historical Stock Chart
From Jun 2024 to Jul 2024
National Security (NASDAQ:NSEC)
Historical Stock Chart
From Jul 2023 to Jul 2024