Similar to last year, except for the increase in number, the term hurricane will be prominent throughout management’s discussion. During the third quarter of 2005 three hurricanes affected the Company’s Property and Casualty coverage areas: Hurricanes Dennis, Katrina and Rita. Losses resulting from the impact of these third quarter hurricanes significantly influenced the financial results for the year ended December 31, 2005. While total losses, just as with Hurricane Ivan, were mitigated through risk management using catastrophe excess of loss reinsurance; the Company’s share of total losses and catastrophe reinsurance reinstatement premium reduced net income by over $7,400,000.
After reinsurance recoveries, pre-tax losses and expenses from third quarter hurricanes totaled over $7,909,000 and a catastrophe reinsurance reinstatement premium of $2,400,000 was also incurred in the third and fourth quarters of 2005. Third quarter losses from Hurricanes Dennis, Katrina and Rita were the primary reason for the decline in net income. Losses and related expenses from 2005 hurricanes reduced 2005 net income by approximately $6,804,000 or $2.76 per share.
Consolidated net income for 2005 was $1,558,000 compared to $3,113,000 in 2004, a decline of 49.95%. On a per share basis earnings were $0.63 in 2005 compared to $1.26 in 2004.
The Company’s leasing operations are conducted through its 50% owned subsidiary, Mobile Attic, Inc. Mobile Attic was incorporated in August of 2001 and is a joint venture with a manufacturing partner, Cash Brothers Leasing of Elba, Alabama. As detailed in Note 1 (a) of the consolidated financial statements on page 37, the Company consolidated its investment in the subsidiary Mobile Attic, Inc.
In December of 2005, The National Security Group completed the issuance of debt through a trust preferred securities offering. Specific details of the offering are discussed on Form 8-K filed December 12, 2005 and are incorporated herein by reference. The primary purpose of the offering was to increase regulatory capital of the primary property and casualty subsidiary, NSFC. Upon receipt of the proceeds of the $9.2 million debt issuance, the Company made an additional capital contribution to NSFC of $6,000,000. Over the past five years, NSFC has generated significant growth in premium revenue. Due to losses incurred from four hurricanes over the past two years, regulatory surplus had not kept pace with the rate of premium growth. In order to put NSFC in a better position to react to opportunities for continued growth going forward, we felt it prudent to boost the regulatory capital of NSFC via the proceeds of the long term debt issuance.
Realized gains and losses on the sale of securities available-for-sale are determined using the
Other invested assets consist principally of state sponsored investments with a portion of the
Franchisee, including training on the operations of the business as well as training on the loading and unloading of the storage containers. Mobile Attic recognizes initial fees as revenue when substantially all initial services required by the franchise agreement are performed, which is generally upon opening of a franchise location.
The costs of acquiring new insurance business are deferred and amortized over the lives of the
contracts, or the first renewal period of term policies, if earlier. Assumptions utilized in amortization are consistent with those utilized in computing policy liabilities.
The method of computing the deferred policy acquisition costs for property and casualty policies
The Company maintains cash depository accounts which, at times, may exceed federally insured
The class, as preliminarily certified, would not permit any class members to opt out of the settlement and preliminarily enjoins all similar litigation against the Company’s subsidiary. In the settlement, the Company’s subsidiary denied all claims and allegations made in the lawsuit. The proposed settlement is subject to final approval by the Court following a fairness hearing which is presently scheduled to be held on May 11, 2006.