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 in the life subsidiary, and (d) non-admitted assets (primarily furniture and equipment, agents' debit balances and prepaid expenses) are charged directly to surplus.

Statutory net gains (losses) from operations and capital and surplus, excluding intercompany transactions, are summarized as follows:



	2013		2012
NSIC - including realized capital gains of $111 and $1,722, respectively	$	1,427	$	1,425
NSFC - including realized capital gains of $939 and $842, respectively; excluding prior year intercompany gain on real estate of $2,417 ($1,595, net of tax)	$	2,389	$	874
Omega - including realized capital gains of $81 and $241, respectively	$	890	$	1,157
Statutory risk-based adjusted capital:
NSIC - including AVR of $806 and $748, respectively	$	12,383	$	11,092
NSFC - including investment in Omega of $5,473 and $4,459, respectively	$	26,317	$	24,089
Omega	$	8,975	$	7,961

The above amounts exclude allocation of direct expenses of the Company. NSIC, NSFC and Omega are in compliance with statutory restrictions with regard to minimum amounts of surplus and capital.