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Discontinued Operations | T 3. Discontinued Operations NLC Sale On June 30, 2020, Hilltop completed the sale of all of the outstanding capital stock of NLC, which comprised the operations of the insurance segment, for cash proceeds of $154.1 million. Hilltop recognized a gain associated with this transaction of $32.3 million, net of customary transaction costs of $5.1 million and was subject to post-closing adjustments. During the third quarter of 2020, Hilltop recognized a $0.7 million pre-tax post-closing adjustment to income from discontinued operations related to the finalization of the June 30, 2020 closing balance sheet, resulting in an aggregate gain on the sale of NLC of $33.1 million. The resulting book gain from this sale transaction was not recognized for tax purposes due to the excess tax basis over book basis being greater than the recorded book gain. Any tax loss related to this transaction is deemed disallowed pursuant to the rules under the Internal Revenue Code. During the first quarter of 2020, management had determined that the pending sale of NLC met the criteria to be presented as discontinued operations. Therefore, NLC’s results and its assets and liabilities have been presented as discontinued operations in the consolidated financial statements. All related notes to consolidated financial statements for discontinued operations have been included in this note. The following table details the carrying amounts of assets and liabilities of NLC reflected in the consolidated balance sheet under the caption “Assets of discontinued operations” and “Liabilities of discontinued operations”, respectively.
The following table presents the results of discontinued operations for NLC for the periods indicated.
Securities The available for sale securities held by NLC at December 31, 2019 reflected in the consolidated balance sheets under the caption “Assets of discontinued operations” were primarily comprised of U.S. Treasury, residential mortgage-backed and corporate debt securities with aggregate unrealized gross gains of $2.5 million and measured using Level 2 inputs on a recurring basis. NLC’s available for sale portfolio had nominal unrealized gross losses at December 31, 2019. NLC had unrealized net gains of $1.1 million from the equity securities held at December 31, 2019, measured using Level 1 inputs on a recurring basis. No activity was recognized for NLC equity securities for the three months ended September 30, 2020 as the sale was finalized June 30, 2020. NLC recognized net losses of $0.1 million during the three months ended September 30, 2019, and recognized net gains of $1.4 million during the nine months ended September 30, 2019 due to changes in the fair value of equity securities still held at the balance sheet date. Reinsurance Activity The effects of reinsurance on premiums written and earned are included within discontinued operations for all periods presented and are summarized as follows (in thousands).
The effects of reinsurance on incurred losses and LAE are included within discontinued operations for all periods and are as follows (in thousands).
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