SEGMENTS

The Company’s property and casualty insurance operations comprise one business segment. The property and casualty insurance segment consists of seven lines of business: dwelling fire and extended coverage, homeowners (including mobile homeowners), ocean marine, other liability, private passenger auto liability, commercial auto liability and auto physical damage. Management organizes the business utilizing a niche strategy focusing on lower valued dwellings as well as non-standard automobile products. Our chief decision makers (President, Chief Financial Officer and Chief Executive Officer) review results and operating plans making decisions on resource allocations on a company-wide basis. The Company’s products are primarily produced through agents within the states in which we operate. The Company’s life and accident and health operations comprise the second business segment. The life and accident and health insurance segment consists of two lines of business: traditional life insurance and accident and health insurance.

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

The following table presents the Company’s gross and net premiums written for the property and casualty segment and the life and accident and health segment for the three month and nine month periods ended September 30, 2011 and 2010, respectively:



	Three Months Ended						Nine-Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Premiums written:
Life, accident and health operations:
Traditional life insurance	$	1,302		$	1,281		$	2,688		$	3,891
Accident and health insurance	475			524			958			1,501
Total life, accident and health	1,777			1,805			3,646			5,392

Property and Casualty operations:
Dwelling fire & extended coverage	6,551			6,849			20,518			20,893
Homeowners (Including mobile homeowners)	6,223			6,491			19,669			20,627
Ocean marine	431			502			947			1,058
Other liability	338			325			1,049			1,006
Private passenger auto liability	410			974			1,657			2,987
Commercial auto liability	80			120			291			373
Auto physical damage	185			364			696			1,165
Total property and casualty	14,218			15,625			44,827			48,109

Gross premiums written	$	15,995		$	17,430		$	48,473		$	53,501

Reinsurance premium ceded	(1,612		)	(1,596		)	(6,116		)	(4,678		)

Net premiums written	$	14,383		$	15,834		$	42,357		$	48,823

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

The following table presents the Company’s gross and net premiums earned for the property and casualty segment and the life and accident and health segment for the three month and six month periods ended September 30, 2011 and 2010, respectively:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
Premiums earned:
Life, accident and health operations:
Traditional life insurance	1,225		1,273		3,914		3,952
Accident and health insurance	509		525		1,466		1,497
Total life, accident and health	1,734		1,798		5,380		5,449

Property and Casualty operations:
Dwelling fire & extended coverage	6,606		6,642		19,771		19,263
Homeowners (Including mobile homeowners)	6,230		6,423		18,701		20,287
Ocean marine	294		326		913		958
Other liability	332		326		963		969
Private passenger auto liability	502		873		1,942		2,508
Commercial auto liability	80		120		291		373
Auto physical damage	206		337		776		1,044
Total property and casualty	14,250		15,047		43,357		45,402

Gross premiums earned	15,984		16,845		48,737		50,851
Reinsurance premium ceded	(1,644	)	(1,597	)	(6,206	)	(4,662	)

Net premiums earned	14,340		15,248		42,531		46,189