The National Security Group, Inc. (NASDAQ:NSEC) releases
preliminary estimates of insured catastrophe losses from Hurricanes
Sally and Delta along with updated estimates of catastrophe losses
from Hurricane Laura incurred by property and casualty subsidiary
National Security Fire & Casualty.
Hurricane Sally
On September 16, 2020, Hurricane Sally made landfall near Gulf
Shores, Alabama as a category 2 storm. Hurricane Sally had maximum
sustained winds of 105 mph at landfall and was the eighth tropical
cyclone, in the 2020 Atlantic hurricane season, to impact the
continental U.S.
Our pre-tax loss due to Hurricane Sally is expected to be
$2,000,000, net of recoveries under our catastrophe aggregate
reinsurance. Net of tax, Hurricane Sally will reduce our 2020
earnings by $1,580,000 and will reduce earnings per share by $0.62.
The impact of Hurricane Sally will be reflected in our third
quarter financial results. To date, we have had approximately 600
claims reported from Hurricane Sally with approximately 90% of
total claims from this event incurred by our Alabama
policyholders.
Based on our analysis of historical reporting patterns,
preliminary post event model estimates and assessment of claims to
date, we estimate our ultimate gross losses from Hurricane Sally to
be in the range of $3,000,000 to $3,500,000. While we expect to
recover $1,000,000 to $1,500,000 under our catastrophe aggregate
reinsurance, based on our estimate of gross losses, we do not
expect losses from Hurricane Sally to impact our primary
catastrophe reinsurance coverage which is triggered once gross
losses exceed $4 million from a single catastrophe event. This
first layer of catastrophe reinsurance was reinstated for a second
event following losses from Hurricane Laura.
Hurricane Laura - Revision to the Range of Estimated Gross
Losses
We are revising our estimate of gross losses due to Hurricane
Laura. This revision to gross losses (before reinsurance) is being
made following more detailed analysis of reported claims and is
primarily due to much higher damage severity to risks, particularly
mobile homes, located in areas exposed to Hurricane Laura's
category 3 and 4 winds. To date, Hurricane Laura has produced 781
claims with incurred losses exceeding $15,000,000. Approximately
90% of these claims have been reported by our Louisiana
policyholders. As disclosed in our previous press release regarding
Hurricane Laura, our pre-tax loss net reinsurance recoveries, is
expected to be $2,250,000. Net of tax, Hurricane Laura will reduce
our 2020 earnings by $1,778,000 and will reduce earnings per share
by $0.70. The impact of Hurricane Laura will be reflected in our
third quarter financial results.
Based on our analysis of historical reporting patterns, post
event model output and review of claims reported to date, we
estimate our revised ultimate gross losses from Hurricane Laura to
be in the range of $17,000,000 to $19,000,000. Based on our
estimate of gross losses, we expect losses from Hurricane Laura to
remain well below the upper limits of our catastrophe reinsurance
coverage.
The Company maintains catastrophe reinsurance coverage to
mitigate loss exposure from catastrophic events. With our 2020
primary catastrophe contract placement, our single event
catastrophe retention remained unchanged from the prior year at
$4,000,000. Also unchanged from last year, we maintain catastrophe
reinsurance covering incurred losses of a single catastrophe event
up to $72,500,000 beyond our retention. Our catastrophe reinsurance
has one reinstatement provision for any layers eroded by an earlier
event in the same calendar year subject to the same $72,500,000
upper limit.
In our 2020 contract, we also placed catastrophe aggregate
coverage of $2,000,000 in excess of a $2,000,000 aggregate annual
deductible with provision for one reinstatement. This additional
coverage effectively lowers our second and third event retention to
$2,000,000. Because we were impacted by one catastrophe event in
the second quarter of 2020 that exceeded the $2,000,000 aggregate
annual deductible under our catastrophe aggregate coverage, both
Hurricane Laura and Hurricane Sally losses will trigger recoveries
under this aggregate coverage and our maximum retention will be
$2,000,000 for each event. We will also pay a $250,000
reinstatement premium on this aggregate layer.
Hurricane Delta
On October 9, 2020, Hurricane Delta made landfall near Creole,
Louisiana in Cameron Parish as a category 2 storm. This was the
second hurricane landfall in Cameron Parish in 2020 as Hurricane
Laura made landfall less than 15 miles west in late August.
Hurricane Delta had maximum sustained winds of 100 mph at landfall
and was a record tenth tropical cyclone to impact the continental
U.S. during the 2020 Atlantic hurricane season. While Hurricane
Delta was significantly less intense compared to Hurricane Laura,
we have to consider the previous impacts of Hurricane Laura in
establishing our estimate of gross losses (before reinsurance
recoveries) from Delta. We will establish an estimated range of
gross insured losses from Hurricane Delta after we have an
opportunity to review post event models and initial claim reports.
Net of reinsurance recoveries, we expect pre-tax losses from
Hurricane Delta to be in the range of $2,500,000 to $3,500,000.
Losses from Hurricane Delta will be reflected in our fourth quarter
financial results.
About The National Security Group, Inc
The National Security Group, Inc. (NASDAQ Symbol: NSEC), through
its property and casualty and life insurance subsidiaries, offers
property, casualty, life, accident and health insurance in ten
states. The Company primarily writes personal lines property
coverage including specialty market 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 2019 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20201012005823/en/
Brian McLeod - Chief Financial Officer @ (334)
897-2273.
National Security (NASDAQ:NSEC)
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