Income before taxes and cumulative effect adjustment: 1998 % 1997 % 1996 % ---- - ----- -- ----- --- Life and accident and health insurance $ 2,489 225.0 $ 2,171 64.6 $ 1,141 70.4 Property and casualty insurance ...... (1,000) (90.4) 1,572 46.8 1,192 73.4 Other .............. (383) (34.6) (383) (11.4) (710) (43.8) ------- ----- ------ ----- ------- ----- $ 1,106 100.0 $ 3,360 100.0 $ 1,621 100.0 ======= ===== ====== ===== ======= =====
The most significant operating result in the property and casualty subsidiaries was the continued poor performance of the subsidiaries private passenger and commercial automobile programs. The combined ratio of these programs, which produced over $7.7 million in earned premium, was over 150%. Pretax losses from these automobile programs totaled over $4.1 million. Two of the programs, both in Louisiana, have been discontinued. The remaining in-force policies from a private passenger auto program expired in late 1998, and in early 1999, a commercial taxi program in Louisiana was discontinued. The remaining in-force policies from this program will not expire until mid-1999. Based on previous loss experience, the taxi program is expected to incur losses in excess of earned premium until the remaining policies expire. These two programs accounted for 1998 pretax losses of $2.7 million.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The National Security Group, Inc. and subsidiaries at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles.
NOTE 2 - STATUTORY ACCOUNTING PRACTICES: The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles (GAAP) which vary in certain respects from reporting practices prescribed or permitted by insurance regulatory authorities. The significant differences for statutory reporting include: (a) acquisition costs of acquiring new business are charged to operations as incurred, (b) life policy liabilities are established utilizing interest and mortality factors specified by regulatory authorities, (c) the Asset Valuation Reserve (AVR) and the Interest Maintenance Reserve (IMR) are recorded as liabilities, (d) deferred income taxes are not provided, and (e) non-admitted assets (furniture and equipment, agents' debit balances and prepaid expenses) are charged directly to surplus.
Year ended December 31, 1998 1997 1996 ------- ------- ------- Net increase (decrease) in unrealized appreciation on available-for-sale securities before deferred income tax .... $ (472) $ 6,266 $ 1,340 Deferred income tax ......................... 121 (1,711) (372) ------- ------- ------- Net increase (decrease) in unrealized appreciation on available-for-sale securities ............................... $ (351) $ 4,555 $ 968 ======= ======= =======
NOTE 5 - INCOME TAXES: Total income tax expense varies from amounts computed by applying current federal income tax rates to income before income taxes. The reasons for these differences and the approximate tax effects are as follows: