þ | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 63-1020300 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) | |
661 East Davis Street Elba, Alabama | 36323 | |
(Address of principal executive offices) | (Zip-Code) |
Class | Outstanding March 15, 2019 | |
Common Stock $1.00 par value | 2,527,136 shares |
Page No. | |
PART I | |
PART II | |
PART III | |
PART IV | |
Certifications |
1. | Definitive proxy statement for the 2019 Annual Meeting of Stockholders to be held May 17, 2019 is incorporated by reference into Part III of this report. The proxy statement will be filed no later than 120 days from December 31, 2018. |
2. | Current Report on Form 8-K for event occurring on February 28, 2019 is incorporated into Part IV of this report. |
▪ | The insurance industry is highly competitive and the Company encounters significant competition in all lines of business from other insurance companies. Many of the competing companies have more abundant financial resources than the Company. |
▪ | Insurance is a highly regulated industry. It is possible that legislation may be enacted which would have an adverse effect on the Company's business. |
▪ | The Company is subject to regulation by state governments for each of the states in which it conducts business. The Company cannot predict the subject of any future regulatory initiative(s) or its (their) impact on the Company's business. Company insurance rates are also subject to approval by state insurance departments in each of these states. We are often limited in the level of rate increases we can obtain. |
▪ | The Company is rated by various insurance rating agencies. If a rating is downgraded from its current level by one of these agencies, sales of the Company's products and stock price could be adversely impacted. |
▪ | The Company's financial results are adversely affected by increases in policy claims received by the Company. While a manageable risk, this variance is often unpredictable. |
▪ | The Company's investments are subject to a variety of risks. Investments are subject to defaults and changes in market value. Market value can be affected by changes in interest rates, market performance and the economy. |
▪ | The Company mitigates risk associated with life policies through implementing effective underwriting and reinsurance strategies. These factors mitigate, not eliminate, risk related to mortality and morbidity exposure. The Company has established reserves for claims and future policy benefits based on amounts determined by independent actuaries. There is no assurance that these estimated reserves will prove to be sufficient or that the Company will not incur claims exceeding reserves, which could result in operating losses and loss of capital. |
▪ | The Company mitigates risk associated with property and casualty policies through implementing effective underwriting and reinsurance strategies. The Company obtains reinsurance which increases underwriting capacity and limits the risk associated with policy claims. The Company is subject to credit risk with regard to reinsurers as reinsurance does not alleviate the Company's liability to its insured's for the ceded risks. The Company utilizes a third-party to develop a reinsurance treaty with reinsurers who are reliable and financially stable. However, there is no guarantee that booked reinsurance recoverable will actually be recovered. A reinsurer's insolvency or inability to make payments due could have a material adverse impact on the financial condition of the Company. |
▪ | The Company's ability to continue to pay dividends to shareholders is contingent upon profitability and capital adequacy of the insurance subsidiaries. The insurance subsidiaries operate under regulatory restrictions that could limit the ability to fund future dividend payments of the Company. An adverse event or series of events could materially impact the ability of the insurance subsidiaries to fund future dividends, and consequently, the Board of Directors would have to suspend the declaration of dividends to shareholders. |
▪ | The Company is subject to the risk of adverse settlements or judgments resulting from litigation of contested claims. It is difficult to predict or quantify the expected results of litigation because the outcome depends on decisions of the court and jury that are based on facts and legal arguments presented at the trial. |
State | Percent of Direct Written Premium | |||||||||||||
2018 | 2017 | |||||||||||||
Alabama | $ | 16,261,000 | 26.65 | % | $ | 16,966,000 | 27.59 | % | ||||||
Arkansas | 1,941,000 | 3.18 | % | 2,086,000 | 3.39 | % | ||||||||
Georgia | 9,786,000 | 16.04 | % | 9,172,000 | 14.91 | % | ||||||||
Louisiana | 5,178,000 | 8.49 | % | 6,068,000 | 9.87 | % | ||||||||
Mississippi | 10,816,000 | 17.73 | % | 10,808,000 | 17.58 | % | ||||||||
Oklahoma | 6,828,000 | 11.19 | % | 6,580,000 | 10.70 | % | ||||||||
South Carolina | 6,793,000 | 11.14 | % | 6,477,000 | 10.53 | % | ||||||||
Tennessee | 3,404,000 | 5.58 | % | 3,341,000 | 5.43 | % | ||||||||
$ | 61,007,000 | 100.00 | % | $ | 61,498,000 | 100.00 | % |
Year Ended December 31, | |||||||
2018 | 2017 | ||||||
Net premiums earned: | |||||||
Fire, allied lines and homeowners | $ | 54,837,000 | $ | 55,044,000 | |||
Other | — | — | |||||
Total net earned premium | $ | 54,837,000 | $ | 55,044,000 |
Gross unpaid losses per | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||||||||||||||||||||||||||||||||
Consolidated Balance Sheet | $ | 14,436 | $ | 12,646 | $ | 13,184 | $ | 14,386 | $ | 11,214 | $ | 8,734 | $ | 8,321 | $ | 9,645 | $ | 7,530 | $ | 7,075 | $ | 8,208 | ||||||||||||||||||||||
Ceded reserves | (2,421 | ) | (549 | ) | (1,329 | ) | (2,381 | ) | (1,229 | ) | (782 | ) | (839 | ) | (1,381 | ) | (1,184 | ) | (327 | ) | (1,384 | ) | ||||||||||||||||||||||
Net unpaid losses | $ | 12,015 | $ | 12,097 | $ | 11,855 | $ | 12,005 | $ | 9,985 | $ | 7,952 | $ | 7,482 | $ | 8,264 | $ | 6,346 | $ | 6,748 | $ | 6,824 | ||||||||||||||||||||||
Cumulative net payments: | 1 year later | $ | 5,636 | $ | 5,349 | $ | 5,738 | $ | 4,035 | $ | 4,827 | $ | 2,900 | $ | 2,990 | $ | 4,482 | $ | 2,950 | $ | 3,069 | |||||||||||||||||||||||
2 years later | 6,350 | 6,305 | 7,239 | 5,346 | 6,670 | 3,539 | 3,503 | 4,839 | 3,364 | |||||||||||||||||||||||||||||||||||
3 years later | 6,725 | 6,764 | 7,841 | 6,483 | 7,426 | 3,782 | 3,863 | 5,007 | ||||||||||||||||||||||||||||||||||||
4 years later | 6,980 | 7,244 | 8,382 | 7,001 | 7,496 | 3,910 | 4,113 | |||||||||||||||||||||||||||||||||||||
5 years later | 7,295 | 7,701 | 8,419 | 7,001 | 7,536 | 4,085 | ||||||||||||||||||||||||||||||||||||||
6 years later | 7,390 | 7,725 | 8,433 | 7,060 | 7,572 | |||||||||||||||||||||||||||||||||||||||
7 years later | 7,406 | 7,743 | 8,453 | 7,108 | ||||||||||||||||||||||||||||||||||||||||
8 years later | 7,509 | 7,746 | 8,452 | |||||||||||||||||||||||||||||||||||||||||
9 years later | 7,512 | 7,746 | ||||||||||||||||||||||||||||||||||||||||||
10 years later | 7,512 | |||||||||||||||||||||||||||||||||||||||||||
Net Liability re-estimated: | 1 year later | 9,438 | 8,621 | 11,443 | 9,606 | 9,354 | 6,698 | 5,597 | 6,333 | 4,495 | 5,060 | |||||||||||||||||||||||||||||||||
2 years later | 7,916 | 8,869 | 11,064 | 8,439 | 9,360 | 5,185 | 4,559 | 5,756 | 4,642 | |||||||||||||||||||||||||||||||||||
3 years later | 8,179 | 9,033 | 9,725 | 8,500 | 8,483 | 4,348 | 4,605 | 5,916 | ||||||||||||||||||||||||||||||||||||
4 years later | 8,514 | 8,418 | 9,178 | 7,661 | 7,700 | 4,460 | 4,428 | |||||||||||||||||||||||||||||||||||||
5 years later | 7,855 | 8,064 | 8,854 | 7,091 | 7,683 | 4,365 | ||||||||||||||||||||||||||||||||||||||
6 years later | 7,641 | 8,092 | 8,453 | 7,157 | 7,592 | |||||||||||||||||||||||||||||||||||||||
7 years later | 7,707 | 7,762 | 8,457 | 7,124 | ||||||||||||||||||||||||||||||||||||||||
8 years later | 7,528 | 7,750 | 8,452 | |||||||||||||||||||||||||||||||||||||||||
9 years later | 7,516 | 7,746 | ||||||||||||||||||||||||||||||||||||||||||
10 years later | 7,512 | |||||||||||||||||||||||||||||||||||||||||||
Net cumulative redundancy (deficiency) | $ | 4,503 | $ | 4,351 | $ | 3,403 | $ | 4,881 | $ | 2,393 | $ | 3,587 | $ | 3,054 | $ | 2,348 | $ | 1,704 | $ | 1,688 |
For The Years Ended December 31, | |||||||||
2018 | 2017 | ||||||||
Change in Loss and LAE Reserves | Adjusted Loss and LAE Reserves | % Change in Equity | Adjusted Loss and LAE Reserves | % Change in Equity | |||||
*Loss and LAE reserves are in thousands | |||||||||
(10.0)% | $ | 7,387 | 1.79% | $ | 6,368 | 1.48% | |||
(7.5)% | 7,592 | 1.34% | 6,544 | 1.11% | |||||
(5.0)% | 7,798 | 0.89% | 6,721 | 0.74% | |||||
(2.5)% | 8,003 | 0.45% | 6,898 | 0.37% | |||||
Reported | 8,208 | —% | 7,075 | —% | |||||
2.5% | 8,413 | (0.45)% | 7,252 | (0.37)% | |||||
5.0% | 8,618 | (0.89)% | 7,429 | (0.74)% | |||||
7.5% | 8,824 | (1.34)% | 7,606 | (1.11)% | |||||
10.0% | 9,029 | (1.79)% | 7,782 | (1.48)% |
State | Percentage of Total Direct Premiums | |||||||||||||
2018 | 2017 | |||||||||||||
Alabama | $ | 3,538,000 | 57.37 | % | $ | 3,616,000 | 57.96 | % | ||||||
Florida | 62,000 | 1.01 | % | 60,000 | 0.96 | % | ||||||||
Georgia | 1,316,000 | 21.34 | % | 1,319,000 | 21.14 | % | ||||||||
Mississippi | 590,000 | 9.57 | % | 615,000 | 9.86 | % | ||||||||
South Carolina | 419,000 | 6.79 | % | 415,000 | 6.65 | % | ||||||||
Tennessee | 50,000 | 0.81 | % | 37,000 | 0.59 | % | ||||||||
Texas | 192,000 | 3.11 | % | 177,000 | 2.84 | % | ||||||||
$ | 6,167,000 | 100.00 | % | $ | 6,239,000 | 100.00 | % |
Line of Business | Home Service Agent | Independent Agent | Other | |||||||||
Industrial | $ | 43,000 | $ | — | $ | 32,000 | ||||||
Ordinary | 1,437,000 | 2,588,000 | 21,000 | |||||||||
Group Life | — | 9,000 | 63,000 | |||||||||
A&H Group | — | 105,000 | 158,000 | |||||||||
A&H Other | 215,000 | 1,329,000 | 19,000 | |||||||||
Total Premium by Distribution Method | $ | 1,695,000 | $ | 4,031,000 | $ | 293,000 |
Year ended December 31, | |||||||
2018 | 2017 | ||||||
Life insurance in force at end of period: | |||||||
Ordinary-whole life | $ | 164,231,000 | $ | 166,112,000 | |||
Term life | 23,243,000 | 24,483,000 | |||||
Industrial life | 15,735,000 | 16,231,000 | |||||
$ | 203,209,000 | $ | 206,826,000 | ||||
Life insurance issued: | |||||||
Ordinary-whole life | $ | 16,742,000 | $ | 20,957,000 | |||
$ | 16,742,000 | $ | 20,957,000 | ||||
Net premiums earned: | |||||||
Life insurance | $ | 4,193,000 | $ | 4,291,000 | |||
Accident and health insurance | 1,826,000 | 1,828,000 | |||||
$ | 6,019,000 | $ | 6,119,000 |
• | Our catastrophe reinsurance cost is negotiated annually and effective January 1 of each year. The reinsurance market in which we operate is unregulated, and our reinsurance cost is based on negotiated rates that adjust annually. Due to increased frequency of storms over the past fifteen years and cycles of limited reinsurance market capacity, we often experience rate increases in which we have limited ability to negotiate and often cannot include these increases in our rates until the new reinsurance agreement is negotiated. Due to increased cat loads in more storm prone areas, significant year over year increases in cat cost can often temporarily eliminate our profit margins in some areas and significantly compress our overall profit margins priced into our insurance coverages. |
• | We have a geographic concentration in the Southeastern U.S. which is exposed to significant hurricane risk. We believe that we are often not adequately compensated for certain heavily exposed risk through a combination of limits on allowable margin and regulatory delays in obtaining rate increases. We often have to manage these exposures using alternatives to pricing, such as limits on new business production, to help us manage exposure concentrations and protect our capital position. |
• | Due to increasing catastrophe reinsurance cost, we have incurred increases in our reinsurance retentions/deductibles. Again, due to limits to profit margins, we are often not adequately compensated for the increased risk associated with these higher reinsurance retentions due to overall limits on underwriting margins in some of the states in which we operate. |
Stock Closing Prices | |||||||||||||||
2018 | 2017 | ||||||||||||||
High | Low | High | Low | ||||||||||||
First Quarter | $ | 17.17 | $ | 15.20 | $ | 17.57 | $ | 14.35 | |||||||
Second Quarter | $ | 16.75 | $ | 15.45 | $ | 16.59 | $ | 13.81 | |||||||
Third Quarter | $ | 17.24 | $ | 13.52 | $ | 14.74 | $ | 11.81 | |||||||
Fourth Quarter | $ | 14.75 | $ | 12.00 | $ | 16.40 | $ | 12.18 |
Dividends Per Share | |||||||
2018 | 2017 | ||||||
First Quarter | $ | 0.05 | $ | 0.05 | |||
Second Quarter | $ | 0.05 | $ | 0.05 | |||
Third Quarter | $ | 0.05 | $ | 0.05 | |||
Fourth Quarter | $ | 0.05 | $ | 0.05 |
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||
Equity compensation plans approved by security holders | — | — | 139,464 | |||||
Equity compensation plans not approved by security holders | — | — | — | |||||
Total | — | — | 139,464 |
Selected Financial Data: | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||
Net premiums written | $ | 60,717 | $ | 61,388 | $ | 61,525 | $ | 60,389 | $ | 58,204 | |||||||||
Net premiums earned | $ | 60,856 | $ | 61,163 | $ | 61,398 | $ | 59,462 | $ | 56,653 | |||||||||
Net investment income | 3,567 | 3,647 | 3,892 | 3,462 | 3,823 | ||||||||||||||
Net investment gains (losses) | (178 | ) | 234 | 998 | 503 | 100 | |||||||||||||
Other income | 612 | 596 | 605 | 623 | 3,816 | ||||||||||||||
Total revenues | $ | 64,857 | $ | 65,640 | $ | 66,893 | $ | 64,050 | $ | 64,392 | |||||||||
Net income (loss) | $ | 779 | $ | (1,203 | ) | $ | 3,063 | $ | 4,697 | $ | 7,616 | ||||||||
Comprehensive income (loss) | $ | (1,330 | ) | $ | 1 | $ | 3,545 | $ | 2,450 | $ | 9,452 | ||||||||
Total assets | $ | 144,231 | $ | 146,438 | $ | 148,579 | $ | 147,841 | $ | 144,865 | |||||||||
Total debt outstanding | $ | 14,352 | $ | 15,639 | $ | 17,126 | $ | 17,957 | $ | 19,572 | |||||||||
Total shareholders' equity | $ | 45,866 | $ | 47,625 | $ | 48,052 | $ | 44,883 | $ | 42,757 | |||||||||
Shares outstanding (at year end, in thousands) | 2,527 | 2,522 | 2,517 | 2,512 | 2,507 | ||||||||||||||
Key measures: | |||||||||||||||||||
Return on average equity | 1.67 | % | (2.51 | )% | 6.59 | % | 10.72 | % | 19.98 | % | |||||||||
Yield on investments, before tax | 3.1 | % | 3.2 | % | 3.4 | % | 3.1 | % | 3.6 | % | |||||||||
Debt to equity | 31.3 | % | 32.8 | % | 35.6 | % | 40.0 | % | 45.8 | % | |||||||||
US GAAP combined ratio (P&C Segment) | 102.4 | % | 102.3 | % | 94.6 | % | 91.0 | % | 87.4 | % | |||||||||
P&C Catastrophe losses, net | $ | 18,516 | $ | 14,280 | $ | 9,742 | $ | 5,373 | $ | 2,628 | |||||||||
Catastrophe loss impact on combined ratio (percentage points) | 16.66 | 25.67 | 17.47 | 10.11 | 5.23 | ||||||||||||||
Per share data: | |||||||||||||||||||
Book value | $ | 18.15 | $ | 18.88 | $ | 19.09 | $ | 17.87 | $ | 17.05 | |||||||||
Net income (loss) | $ | 0.31 | $ | (0.48 | ) | $ | 1.22 | $ | 1.87 | $ | 3.04 | ||||||||
Dividends paid | $ | 0.20 | $ | 0.20 | $ | 0.18 | $ | 0.16 | $ | 0.12 |
Quarterly Information: | Premiums | Investment & Other Income | Investment Gains (Losses) | Claims and Benefit Payments | Net Income (Loss) | Net Income (Loss) Per Share | |||||||||||||||||
2018 | |||||||||||||||||||||||
First Quarter | $ | 15,059 | $ | 942 | $ | (125 | ) | $ | 9,427 | $ | 471 | $ | 0.19 | ||||||||||
Second Quarter | 15,260 | 1,146 | (203 | ) | 9,772 | 457 | 0.18 | ||||||||||||||||
Third Quarter | 15,445 | 1,168 | 453 | 9,825 | 907 | 0.36 | |||||||||||||||||
Fourth Quarter | 15,092 | 923 | (303 | ) | 11,385 | (1,056 | ) | (0.42 | ) | ||||||||||||||
$ | 60,856 | $ | 4,179 | $ | (178 | ) | $ | 40,409 | $ | 779 | $ | 0.31 |
2017 | |||||||||||||||||||||||
First Quarter | $ | 15,040 | $ | 1,078 | $ | 160 | $ | 11,146 | $ | (316 | ) | $ | (0.13 | ) | |||||||||
Second Quarter | 15,331 | 1,075 | 77 | 12,581 | (999 | ) | (0.39 | ) | |||||||||||||||
Third Quarter | 15,467 | 1,089 | 75 | 11,184 | (557 | ) | (0.22 | ) | |||||||||||||||
Fourth Quarter | 15,325 | 1,001 | (78 | ) | 7,958 | 669 | 0.26 | ||||||||||||||||
$ | 61,163 | $ | 4,243 | $ | 234 | $ | 42,869 | $ | (1,203 | ) | $ | (0.48 | ) |
• | The Property and Casualty (P&C) segment is the most significant segment, accounting for 90.9% of gross earned premium in 2018. The P&C segment has insurance in-force in the states of Alabama, Arkansas, Georgia, Louisiana, Mississippi, Oklahoma, South Carolina, and Tennessee. |
• | The Life segment accounted for 9.1% of gross premium revenue in 2018. The Life segment is licensed to underwrite life and accident and health insurance in Alabama, Florida, Georgia, Mississippi, South Carolina, Tennessee and Texas. |
Consolidated Financial Summary | Year ended December 31, | |||||||
(dollars in thousands, except per share) | 2018 | 2017 | ||||||
Gross premiums written | $ | 67,174 | $ | 67,737 | ||||
Net premiums written | $ | 60,717 | $ | 61,388 | ||||
Net premiums earned | $ | 60,856 | $ | 61,163 | ||||
Net investment income | 3,567 | 3,647 | ||||||
Investment gains (losses) | (178 | ) | 234 | |||||
Other income | 612 | 596 | ||||||
Total Revenues | 64,857 | 65,640 | ||||||
Policyholder benefits and settlement expenses | 40,409 | 42,869 | ||||||
Amortization of deferred policy acquisition costs | 3,597 | 3,589 | ||||||
Commissions | 7,555 | 7,723 | ||||||
General and administrative expenses | 8,839 | 8,821 | ||||||
Taxes, licenses and fees | 2,157 | 2,445 | ||||||
Interest expense | 1,235 | 1,307 | ||||||
Total Benefits, Losses and Expenses | 63,792 | 66,754 | ||||||
Income (Loss) Before Income Taxes | 1,065 | (1,114 | ) | |||||
Income tax expense | 286 | 89 | ||||||
Net Income (Loss) | $ | 779 | $ | (1,203 | ) | |||
Income (Loss) Per Common Share | $ | 0.31 | $ | (0.48 | ) | |||
Reconciliation of Net Income (Loss) to non-GAAP Measurement | ||||||||
Net income (loss) | $ | 779 | $ | (1,203 | ) | |||
Income tax expense | 286 | 89 | ||||||
Investment (gains) losses, net | 178 | (234 | ) | |||||
Pretax Income (Loss) From Operations | $ | 1,243 | $ | (1,348 | ) |
Selected Balance Sheet Highlights | December 31, 2018 | December 31, 2017 | ||||||
(dollars in thousands) | ||||||||
Invested Assets | $ | 112,690 | $ | 114,731 | ||||
Cash | $ | 5,676 | $ | 6,644 | ||||
Total Assets | $ | 144,231 | $ | 146,438 | ||||
Policy Liabilities | $ | 77,988 | $ | 76,674 | ||||
Total Debt | $ | 14,352 | $ | 15,639 | ||||
Accumulated Other Comprehensive (Loss) Income | $ | (1,570 | ) | $ | 2,646 | |||
Shareholders' Equity | $ | 45,866 | $ | 47,625 | ||||
Book Value Per Share | $ | 18.15 | $ | 18.88 |
(dollars in thousands) | 2018 | % | 2017 | % | |||||||||
Life, accident and health insurance | $ | 6,019 | 9.9 | % | $ | 6,119 | 10.0 | % | |||||
Property and casualty insurance | 54,837 | 90.1 | % | 55,044 | 90.0 | % | |||||||
$ | 60,856 | 100.0 | % | $ | 61,163 | 100.0 | % |
(dollars in thousands) | 2018 | 2017 | |||||
REVENUE | |||||||
Net premiums earned | $ | 6,019 | $ | 6,119 | |||
Net investment income | 2,722 | 2,551 | |||||
Net investment gains (losses) | (78 | ) | 71 | ||||
Other income | 1,078 | 1,045 | |||||
Total Revenues | $ | 9,741 | $ | 9,786 | |||
BENEFITS AND EXPENSES | |||||||
Policyholder benefits paid or provided | $ | 5,242 | $ | 5,045 | |||
Amortization of deferred policy acquisition costs | 838 | 812 | |||||
Commissions | 288 | 343 | |||||
General and administrative expenses | 2,111 | 1,929 | |||||
Insurance taxes, licenses and fees | 220 | 208 | |||||
Interest expense | 48 | 73 | |||||
Total Expenses | $ | 8,747 | $ | 8,410 | |||
INCOME BEFORE INCOME TAXES | $ | 994 | $ | 1,376 |
Year ended December 31, | ||||||||
2018 | 2017 | |||||||
Fixed maturities | $ | 2,108 | $ | 1,942 | ||||
Equity securities | 37 | 32 | ||||||
Mortgage loans on real estate | 8 | 9 | ||||||
Investment real estate | 543 | 544 | ||||||
Policy loans | 141 | 130 | ||||||
Other | 1 | 18 | ||||||
2,838 | 2,675 | |||||||
Less: Investment expenses | 116 | 124 | ||||||
Net investment income | $ | 2,722 | $ | 2,551 |
Year ended December 31, | |||||||
2018 | 2017 | ||||||
Fixed maturities | $ | 96 | $ | (105 | ) | ||
Equity securities | — | 174 | |||||
Change in fair value of equity securities | (87 | ) | — | ||||
Other, principally real estate | (71 | ) | 2 | ||||
Other-than-temporary impairments | (16 | ) | — | ||||
Net investment gains (losses) | $ | (78 | ) | $ | 71 |
(dollars in thousands) | 2018 | 2017 | |||||
REVENUE | |||||||
Net premiums earned | $ | 54,837 | $ | 55,044 | |||
Net investment income | 1,330 | 1,571 | |||||
Net investment gains (losses) | (100 | ) | 163 | ||||
Other income | 609 | 592 | |||||
Total Revenues | $ | 56,676 | $ | 57,370 | |||
BENEFITS AND EXPENSES | |||||||
Policyholder benefits paid or provided | $ | 35,735 | $ | 38,391 | |||
Amortization of deferred policy acquisition costs | 2,759 | 2,777 | |||||
Commissions | 7,267 | 7,380 | |||||
General and administrative expenses | 8,472 | 8,087 | |||||
Insurance taxes, licenses and fees | 1,937 | 2,237 | |||||
Total Expenses | $ | 56,170 | $ | 58,872 | |||
INCOME (LOSS) BEFORE INCOME TAXES | $ | 506 | $ | (1,502 | ) |
(dollars in thousands) | 2018 | 2017 | ||||||||||||||
Line of Business | Premium Earned | % of NPE | Premium Earned | % of NPE | 2018 Increase (Decrease) over 2017 | |||||||||||
Dwelling Fire/Allied Lines | $ | 39,412 | 71.9 | % | $ | 38,485 | 69.9 | % | 2.4 | % | ||||||
Homeowners | 21,801 | 39.7 | % | 22,831 | 41.5 | % | (4.5 | )% | ||||||||
Catastrophe Reinsurance Premium Ceded | (6,376 | ) | (11.6 | )% | (6,272 | ) | (11.4 | )% | 1.7 | % | ||||||
Net Premium Earned | $ | 54,837 | 100.0 | % | $ | 55,044 | 100.0 | % | (0.4 | )% |
Layer | Reinsurers' Limits of Liability |
First Layer | 100% of $13,500,000 in excess of $4,000,000 retention |
Second Layer | 100% of $25,000,000 in excess of $17,500,000 |
Third Layer | 100% of $30,000,000 in excess of $42,500,000 |
Gross Losses | Net Losses 1 | Net Losses as a Percent Equity 2 | ||||||||||||||||
Loss Return Period | Yearly Probability of Exceeding | Severe Thunderstorm | Hurricane | Severe Thunderstorm | Hurricane | Severe Thunderstorm | Hurricane | |||||||||||
20 Years | 5 | % | $ | 3,143 | $ | 16,833 | $ | 2,483 | $ | 3,160 | 5.41 | % | 6.89 | % | ||||
50 Years | 2 | % | $ | 4,708 | $ | 30,128 | $ | 3,160 | $ | 3,160 | 6.89 | % | 6.89 | % | ||||
100 Years | 1 | % | $ | 6,096 | $ | 42,765 | $ | 3,160 | $ | 3,160 | 6.89 | % | 6.89 | % | ||||
250 Years | 0.4 | % | $ | 8,448 | $ | 63,604 | $ | 3,160 | $ | 3,160 | 6.89 | % | 6.89 | % | ||||
500 Years | 0.2 | % | $ | 10,811 | $ | 79,525 | $ | 3,160 | $ | 8,710 | 6.89 | % | 18.99 | % |
Year ended December 31, | ||||||||
2018 | 2017 | |||||||
Fixed maturities | $ | 1,663 | $ | 1,389 | ||||
Equity securities | 47 | 45 | ||||||
Company owned life insurance change in surrender value | (374 | ) | 110 | |||||
Other | 23 | 56 | ||||||
1,359 | 1,600 | |||||||
Less: Investment expenses | 29 | 29 | ||||||
Net investment income | $ | 1,330 | $ | 1,571 |
Year ended December 31, | |||||||
2018 | 2017 | ||||||
Fixed maturities | $ | 32 | $ | 163 | |||
Change in fair value of equity securities | (132 | ) | — | ||||
Net investment gains (losses) | $ | (100 | ) | $ | 163 |
For the year ended December 31, 2018 | For the year ended December 31, 2017 | |||||||||||||||
Catastrophe event | Reported Losses & LAE | Claim Count | Catastrophe event | Reported Losses & LAE | Claim Count | |||||||||||
Cat 1814 (Feb 24-26) | $ | 160 | 52 | Cat 1711 (Jan 1-3) | $ | 800 | 181 | |||||||||
Cat 1817 (Mar 18-20) | 1,151 | 215 | Cat 1713 (Jan 18-22) | 2,162 | 371 | |||||||||||
Cat 1821 (Apr 13-16) | 631 | 147 | Cat 1719 (Feb 28-Mar 2) | 562 | 146 | |||||||||||
Cat 1824 (May 12-16) | 149 | 36 | Cat 1720 (Mar 6-9) | 127 | 44 | |||||||||||
Cat 1827 (May 29-June 1) | 255 | 50 | Cat 1721 (Mar 21-22) | 304 | 76 | |||||||||||
Cat 1835 (June 24-26) | 290 | 48 | Cat 1722 (Mar 26-28) | 440 | 80 | |||||||||||
Cat 1836 (June 28) | 419 | 69 | Cat 1724 (Apr 2-3) | 775 | 154 | |||||||||||
Cat 1840 (July 19-22) | 338 | 64 | Cat 1725 (Apr 4-6) | 673 | 167 | |||||||||||
Cat 1852 (Sept 13-16) | 1,292 | 371 | Cat 1728 (Apr 21-25) | 433 | 68 | |||||||||||
Cat 1857 (Oct 10-14) | 13,378 | 2,312 | Cat 1730 (Apr 28-May 1) | 799 | 182 | |||||||||||
Cat 1731 (May 3-5) | 498 | 104 | ||||||||||||||
Cat 1732 (May 8-11) | 314 | 61 | ||||||||||||||
Cat 1733 (May 15-18) | 323 | 57 | ||||||||||||||
Cat 1734 (May 27-28) | 628 | 84 | ||||||||||||||
Cat 1738 (June 16-19) | 154 | 52 | ||||||||||||||
T.S. Cindy (June 21-25) | 555 | 105 | ||||||||||||||
Cat 1742 (Aug 5-8) | 120 | 42 | ||||||||||||||
Cat 1743 (Aug 25-31) | 309 | 77 | ||||||||||||||
Cat 1744 (Sept 11-15) | 3,622 | 992 | ||||||||||||||
Cat 1746 (Oct 7-9) | 292 | 103 | ||||||||||||||
Cat 1751 (Oct 23-24) | 147 | 19 | ||||||||||||||
Misc cats less than $100k | 453 | 144 | Misc cats less than $100k | 243 | 51 | |||||||||||
Total Before Reinsurance | $ | 18,516 | 3,508 | Total Cat losses | $ | 14,280 | 3,216 | |||||||||
Less: Reinsurance (Cat 1857) | (9,378 | ) | ||||||||||||||
Total Net Cat Losses | $ | 9,138 | ||||||||||||||
Non-cat wind & hail | $ | 6,792 | 2,025 | Non-cat wind & hail | $ | 5,649 | 1,596 |
• | The loss and loss expense ratio, which measures losses and loss adjustment expenses incurred as a percentage of premium revenue. |
• | The underwriting expense ratio, which measures underwriting expenses incurred (e.g., agents' commissions, premium taxes, and other administrative underwriting expenses) as a percentage of premium revenue. |
2018 | 2017 | ||||
Loss and LAE Ratio (Non-Cat) | 48.50 | % | 42.32 | % | |
Loss and LAE Ratio (Cat) | 16.67 | % | 25.67 | % | |
Underwriting Expense Ratio | 37.26 | % | 34.26 | % | |
Combined Ratio | 102.43 | % | 102.25 | % |
(dollars in thousands) | 2018 | 2017 | |||||
REVENUE | |||||||
Net investment income | $ | 55 | $ | 65 | |||
Other income | 1,006 | 1,019 | |||||
Total Revenues | $ | 1,061 | $ | 1,084 | |||
EXPENSES | |||||||
General and administrative expenses | $ | 309 | $ | 838 | |||
Interest expense | 1,187 | 1,234 | |||||
Total Expenses | $ | 1,496 | $ | 2,072 | |||
LOSS BEFORE INCOME TAXES | $ | (435 | ) | $ | (988 | ) |
% of Total Bond Portfolio | ||||
S&P or Equivalent Ratings | 2018 | 2017 | ||
AAA/AA+ | 43.69% | 38.08% | ||
AA | 4.01% | 6.29% | ||
AA- | 3.39% | 2.88% | ||
A+ | 0.75% | 2.47% | ||
A | 4.76% | 5.57% | ||
A- | 5.83% | 6.11% | ||
BBB+ | 6.13% | 8.39% | ||
BBB | 19.13% | 18.46% | ||
BBB- | 7.62% | 5.14% | ||
Below Investment Grade | 4.69% | 6.61% |
December 31, 2018 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Available-for-sale securities: | ||||||||||||||||
U.S. Government corporations and agencies | $ | 4,820 | $ | 31 | $ | 107 | $ | 4,744 | ||||||||
Agency mortgage backed securities | 27,492 | 159 | 545 | 27,106 | ||||||||||||
Asset backed securities | 10,901 | 7 | 248 | 10,660 | ||||||||||||
Private label mortgage backed securities | 5,869 | 105 | 27 | 5,947 | ||||||||||||
Corporate bonds | 36,935 | 407 | 1,551 | 35,791 | ||||||||||||
States, municipalities and political subdivisions | 10,059 | 105 | 91 | 10,073 | ||||||||||||
Foreign governments | 801 | 3 | — | 804 | ||||||||||||
Total fixed maturities | $ | 96,877 | $ | 817 | $ | 2,569 | $ | 95,125 | ||||||||
Equity securities | 1,842 | 2,464 | — | 4,306 | ||||||||||||
Total | $ | 98,719 | $ | 3,281 | $ | 2,569 | $ | 99,431 | ||||||||
Held-to-maturity securities: | ||||||||||||||||
Agency mortgage backed securities | $ | 1,449 | $ | 16 | $ | 22 | $ | 1,443 | ||||||||
Total | $ | 1,449 | $ | 16 | $ | 22 | $ | 1,443 |
December 31, 2017 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Available-for-sale securities: | ||||||||||||||||
U.S. Government corporations and agencies | $ | 6,307 | $ | 131 | $ | 51 | $ | 6,387 | ||||||||
Agency mortgage backed securities | 20,858 | 232 | 468 | 20,622 | ||||||||||||
Asset backed securities | 9,000 | 132 | 72 | 9,060 | ||||||||||||
Private label mortgage backed securities | 4,637 | 258 | — | 4,895 | ||||||||||||
Corporate bonds | 39,127 | 1,103 | 321 | 39,909 | ||||||||||||
States, municipalities and political subdivisions | 13,758 | 389 | 54 | 14,093 | ||||||||||||
Foreign governments | 780 | 12 | — | 792 | ||||||||||||
Total fixed maturities | $ | 94,467 | $ | 2,257 | $ | 966 | $ | 95,758 | ||||||||
Equity securities | 1,842 | 2,667 | — | 4,509 | ||||||||||||
Total | $ | 96,309 | $ | 4,924 | $ | 966 | $ | 100,267 | ||||||||
Held-to-maturity securities: | ||||||||||||||||
Agency mortgage backed securities | $ | 1,616 | $ | 29 | $ | — | $ | 1,645 | ||||||||
Total | $ | 1,616 | $ | 29 | $ | — | $ | 1,645 |
(Dollars in Thousands) | Amortized Cost | Fair Value | ||||||
Available-for-sale securities: | ||||||||
Due in one year or less | $ | 2,183 | $ | 2,190 | ||||
Due after one year through five years | 17,179 | 17,027 | ||||||
Due after five years through ten years | 27,625 | 27,052 | ||||||
Due after ten years | 49,890 | 48,856 | ||||||
Total | $ | 96,877 | $ | 95,125 | ||||
Held-to-maturity securities: | ||||||||
Due in one year or less | $ | — | $ | — | ||||
Due after one year through five years | 43 | 45 | ||||||
Due after five years through ten years | — | — | ||||||
Due after ten years | 1,406 | 1,398 | ||||||
Total | $ | 1,449 | $ | 1,443 |
Year Ended December 31, | |||||||
2018 | 2017 | ||||||
Net investment income | $ | 3,567 | $ | 3,647 | |||
Average current yield on investments | 3.1 | % | 3.2 | % | |||
Total return on investments | 0.3 | % | 4.6 | % | |||
Net gains (losses) on investments (before taxes) | $ | (178 | ) | $ | 234 | ||
Change in accumulated net unrealized gains (losses) (before income taxes) | $ | (3,042 | ) | $ | 1,403 |
Maturity | Available- for-Sale | Held-to-Maturity | Total | Percentage of Total | |||||||||||
Maturity in less than 1 year | $ | 2,183 | $ | — | $ | 2,183 | 2.21 | % | |||||||
Maturity in 1-5 years | 17,179 | 43 | 17,222 | 17.52 | % | ||||||||||
Maturity in 5-10 years | 27,625 | — | 27,625 | 28.10 | % | ||||||||||
Maturity after 10 years | 49,890 | 1,406 | 51,296 | 52.17 | % | ||||||||||
$ | 96,877 | $ | 1,449 | $ | 98,326 | 100.00 | % |
Payments due by period | |||||||||||||||||||
Contractual Obligations | Total | Less than 1 year | Years 1 through 3 | Years 4 through 5 | More than 5 years | ||||||||||||||
Notes payable | $ | 2,200 | $ | 2,200 | $ | — | $ | — | $ | — | |||||||||
Debt obligations1 | $ | 12,152 | $ | — | $ | — | $ | — | $ | 12,152 | |||||||||
Interest on debt obligations1 | $ | 14,237 | $ | 1,118 | $ | 2,443 | $ | 1,598 | $ | 9,078 | |||||||||
Property and casualty claim reserves2 | $ | 8,208 | $ | 7,207 | $ | 911 | $ | 74 | $ | 16 | |||||||||
Future life insurance obligations3 | $ | 70,496 | $ | 4,493 | $ | 12,004 | $ | 6,917 | $ | 47,082 | |||||||||
1 Long-term debt, consisting of two separate issues of trust preferred securities, a line of credit and the long-term portion of an installment note is assumed to be settled at contractual maturity. Interest on long-term debt is calculated using the interest rates in effect at December 31, 2018 for each issue. Interest on long-term debt is accrued and settled quarterly on the trust preferred securities, monthly on the line of credit and annually on the installment note. Therefore, the timing and amount of interest payments may vary from the calculated value included in the table above. These calculations do not take into account any potential prepayments. For additional information regarding long-term debt and interest on long-term debt, please see Note 8, Notes Payable and Long-term Debt, in the notes to Consolidated Financial Statements. | |||||||||||||||||||
2 The anticipated payout of property and casualty claim reserves, which includes loss and loss adjustment expenses, are based upon historical payout patterns. Both the timing and amount of these payments may vary from the payment indicated. For additional details on payout patterns please see Note 9. | |||||||||||||||||||
3 Future life insurance obligations consist primarily of estimated future contingent benefit payments and surrender benefits on policies in force at December 31, 2018. These estimated payments are computed using assumptions for future mortality, morbidity and persistency. In contrast to this table, the majority of NSIC’s obligations is recorded on the balance sheet at the current account values and do not incorporate an expectation of future market growth, interest crediting or future deposits. Therefore, the estimated future life insurance obligations presented in this table significantly exceed the liabilities recorded in the Company’s consolidated balance sheet. Due to the significance of the assumptions used, the actual amount and timing of such payments may differ significantly from the estimated amounts. Management believes that current assets, future premiums and investment income will be sufficient to fund all future life insurance obligations. |
• | Reinsurance |
• | Deferred Policy Acquisition Costs |
• | Income Taxes |
• | Fair Values of Financial Instruments |
• | Claim Liabilities |
• | Recognition of Revenue |
• | Contingencies |
Index to Financial Statements | |
Consolidated Financial Statements: | |
Consolidated Balance Sheets – December 31, 2018 and 2017 | |
Consolidated Statements of Operations – Years Ended December 31, 2018 and 2017 | |
Consolidated Statements of Comprehensive Income (Loss) – Years Ended December 31, 2018 and 2017 | |
Consolidated Statements of Changes in Shareholders’ Equity – Years Ended December 31, 2018 and 2017 | |
Consolidated Statements of Cash Flows – Years Ended December 31, 2018 and 2017 | |
Financial Statement Schedules: | |
and 2017 | |
Schedule II. Condensed Financial Information of Registrant – December 31, 2018 and 2017 | |
Schedule III. Supplementary Insurance Information – December 31, 2018 and 2017 | |
Schedule IV. Reinsurance – Years Ended December 31, 2018 and 2017 | |
Schedule V. Valuation and Qualifying Accounts – Years Ended December 31, 2018 and 2017 | |
All other Schedules are not required under related instructions or are not applicable and therefore have been omitted. |
/s/ Warren Averett, LLC |
We have served as The National Group, Inc.’s auditor since 2009. |
Birmingham, Alabama |
March 15, 2019 |
December 31, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
Investments | ||||||||
Fixed maturities held-to-maturity, at amortized cost (estimated fair value: 2018 - $1,443; 2017 - $1,645) | $ | 1,449 | $ | 1,616 | ||||
Fixed maturities available-for-sale, at estimated fair value (cost: 2018 - $96,877; 2017 - $94,467) | 95,125 | 95,758 | ||||||
Equity securities, at estimated fair value (cost: 2018 - $1,842; 2017 - $1,842) | 4,306 | 4,509 | ||||||
Trading securities | 107 | 107 | ||||||
Mortgage loans on real estate, at cost | 156 | 162 | ||||||
Investment real estate, at book value | 2,945 | 3,221 | ||||||
Policy loans | 1,854 | 1,810 | ||||||
Company owned life insurance | 4,600 | 4,974 | ||||||
Other invested assets | 2,148 | 2,574 | ||||||
Total Investments | 112,690 | 114,731 | ||||||
Cash and cash equivalents | 5,676 | 6,644 | ||||||
Accrued investment income | 774 | 768 | ||||||
Policy receivables and agents' balances, net | 11,185 | 11,653 | ||||||
Reinsurance recoverable | 1,772 | 366 | ||||||
Deferred policy acquisition costs | 7,834 | 8,124 | ||||||
Property and equipment, net | 1,649 | 1,781 | ||||||
Income tax recoverable | 1,463 | 393 | ||||||
Deferred income tax asset, net | 716 | 1,487 | ||||||
Other assets | 472 | 491 | ||||||
Total Assets | $ | 144,231 | $ | 146,438 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Property and casualty benefit and loss reserves | $ | 8,208 | $ | 7,075 | ||||
Accident and health benefit and loss reserves | 3,803 | 3,595 | ||||||
Life and annuity benefit and loss reserves | 33,671 | 33,283 | ||||||
Unearned premiums | 29,999 | 30,112 | ||||||
Policy and contract claims | 792 | 903 | ||||||
Other policyholder funds | 1,515 | 1,706 | ||||||
Short-term notes payable and current portion of long-term debt | 2,200 | 1,300 | ||||||
Long-term debt | 12,152 | 14,339 | ||||||
Other liabilities | 6,025 | 6,500 | ||||||
Total Liabilities | 98,365 | 98,813 | ||||||
Contingencies | ||||||||
Shareholders' equity | ||||||||
Common stock | 2,527 | 2,522 | ||||||
Additional paid-in capital | 5,554 | 5,483 | ||||||
Accumulated other comprehensive income (loss) | (1,570 | ) | 2,646 | |||||
Retained earnings | 39,355 | 36,974 | ||||||
Total Shareholders' Equity | 45,866 | 47,625 | ||||||
Total Liabilities and Shareholders' Equity | $ | 144,231 | $ | 146,438 |
Year ended December 31, | |||||||
2018 | 2017 | ||||||
REVENUES | |||||||
Net premiums earned | $ | 60,856 | $ | 61,163 | |||
Net investment income | 3,567 | 3,647 | |||||
Investment gains (losses) | (178 | ) | 234 | ||||
Other income | 612 | 596 | |||||
Total Revenues | 64,857 | 65,640 | |||||
BENEFITS, LOSSES AND EXPENSES | |||||||
Policyholder benefits and settlement expenses | 40,409 | 42,869 | |||||
Amortization of deferred policy acquisition costs | 3,597 | 3,589 | |||||
Commissions | 7,555 | 7,723 | |||||
General and administrative expenses | 8,839 | 8,821 | |||||
Taxes, licenses and fees | 2,157 | 2,445 | |||||
Interest expense | 1,235 | 1,307 | |||||
Total Benefits, Losses and Expenses | 63,792 | 66,754 | |||||
Income (Loss) Before Income Taxes | 1,065 | (1,114 | ) | ||||
INCOME TAX EXPENSE (BENEFIT) | |||||||
Current | (1,045 | ) | (206 | ) | |||
Deferred | 1,331 | 295 | |||||
286 | 89 | ||||||
Net Income (Loss) | $ | 779 | $ | (1,203 | ) | ||
INCOME (LOSS) PER COMMON SHARE BASIC AND DILUTED | $ | 0.31 | $ | (0.48 | ) | ||
DIVIDENDS DECLARED PER SHARE | $ | 0.20 | $ | 0.20 |
Year ended December 31, | ||||||||
2018 | 2017 | |||||||
Net income (loss) | $ | 779 | $ | (1,203 | ) | |||
Other comprehensive income (loss), net of tax | ||||||||
Changes in: | ||||||||
Unrealized gains (losses) on securities, net of reclassification adjustment of $100 and $153 for 2018 and 2017, respectively | (2,404 | ) | 926 | |||||
Unrealized gain on interest rate swap | 295 | 278 | ||||||
Other comprehensive income (loss), net of tax | (2,109 | ) | 1,204 | |||||
Comprehensive income (loss) | $ | (1,330 | ) | $ | 1 |
Total | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Common Stock | Additional Paid-in Capital | |||||||||||||||
Balance at December 31, 2016 | $ | 48,052 | $ | 39,116 | $ | 1,007 | $ | 2,517 | $ | 5,412 | |||||||||
Comprehensive income: | |||||||||||||||||||
Net loss for 2017 | (1,203 | ) | (1,203 | ) | — | — | — | ||||||||||||
Other comprehensive income (net of tax) | 1,204 | — | 1,204 | — | — | ||||||||||||||
Reclassification of tax effects to AOCI | — | (435 | ) | 435 | — | — | |||||||||||||
Common stock issued | 76 | — | — | 5 | 71 | ||||||||||||||
Cash dividends | $ | (504 | ) | $ | (504 | ) | $ | — | $ | — | $ | — | |||||||
Balance at December 31, 2017 | 47,625 | 36,974 | 2,646 | 2,522 | 5,483 | ||||||||||||||
Cumulative effect of change in accounting principle | — | 2,107 | (2,107 | ) | — | — | |||||||||||||
Comprehensive income (loss): | |||||||||||||||||||
Net income for 2018 | 779 | 779 | — | — | — | ||||||||||||||
Other comprehensive loss (net of tax) | (2,109 | ) | — | (2,109 | ) | — | — | ||||||||||||
Common stock issued | 76 | — | — | 5 | 71 | ||||||||||||||
Cash dividends | (505 | ) | (505 | ) | — | — | — | ||||||||||||
Balance at December 31, 2018 | $ | 45,866 | $ | 39,355 | $ | (1,570 | ) | $ | 2,527 | $ | 5,554 |
Year ended December 31, | |||||||
2018 | 2017 | ||||||
Cash Flows from Operating Activities | |||||||
Net income (loss) | $ | 779 | $ | (1,203 | ) | ||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation expense and amortization/accretion, net | 312 | 514 | |||||
(Increase) decrease in cash surrender value of company owned life insurance | 374 | (110 | ) | ||||
Net (gains) losses on investments | 178 | (234 | ) | ||||
Deferred income taxes | 1,331 | 295 | |||||
Amortization of deferred policy acquisition costs | 3,597 | 3,589 | |||||
Changes in assets and liabilities: | |||||||
Change in receivable for securities sold | — | 499 | |||||
Change in accrued investment income | (6 | ) | 8 | ||||
Change in reinsurance recoverable | (1,406 | ) | 1,414 | ||||
Policy acquisition costs deferred | (3,307 | ) | (3,362 | ) | |||
Change in accrued income taxes | (1,070 | ) | 548 | ||||
Change in net policy liabilities and claims | 1,969 | 200 | |||||
Change in other assets/liabilities, net | 420 | 155 | |||||
Other, net | 6 | 3 | |||||
Net cash provided by operating activities | 3,177 | 2,316 | |||||
Cash Flows from Investing Activities | |||||||
Purchase of: | |||||||
Available-for-sale securities | (16,621 | ) | (18,720 | ) | |||
Property and equipment | (29 | ) | (62 | ) | |||
Proceeds from sale or maturities of: | |||||||
Held-to-maturity securities | 179 | 280 | |||||
Available-for-sale securities | 14,172 | 17,477 | |||||
Real estate held for investment | 188 | — | |||||
Property and equipment | — | 2 | |||||
Other invested assets, net | (38 | ) | (90 | ) | |||
Net cash used in investing activities | (2,149 | ) | (1,113 | ) | |||
Cash Flows from Financing Activities | |||||||
Change in other policyholder funds | (191 | ) | 77 | ||||
Repayments of long-term debt | — | (2,000 | ) | ||||
Change in short-term notes payable | (1,300 | ) | 500 | ||||
Dividends paid | (505 | ) | (504 | ) | |||
Net cash used in financing activities | (1,996 | ) | (1,927 | ) | |||
Net change in cash and cash equivalents | (968 | ) | (724 | ) | |||
Cash and cash equivalents, beginning of year | 6,644 | 7,368 | |||||
Cash and cash equivalents, end of period | $ | 5,676 | $ | 6,644 |
• | Held-to-maturity investments are fixed maturity securities for which the Company has the positive intent and ability to hold to maturity. These securities are reported at cost, adjusted for amortization of premiums and accretion of discounts which are recognized in interest income using methods which approximate level yields over the period to maturity. |
• | Trading securities are securities acquired with the intent to sell in the near term and are carried at fair value with changes in fair value reported in earnings. |
• | Securities available-for-sale are fixed maturity securities and equity securities not classified as either held-to-maturity or trading. These securities are reported at fair value. Substantially all of our fixed maturity and equity securities are classified as available-for-sale. |
• | the Company has the intent to sell the security |
• | it is more likely-than-not that the Company will be required to sell the security before recovery of its amortized cost basis |
• | the Company does not expect to recover the entire amortized cost basis of the security |
• | Fixed income security fair values are based on quoted market prices when available. If not available, fair values are based on values obtained from investment brokers and independent pricing services. |
• | Equity security fair values are based on quoted market prices. |
• | Multiple observable inputs are not available for some of our investments, primarily private placements and limited partnerships. Management values these investments either using non-binding broker quotes or pricing models that utilize market based assumptions that have limited observable inputs. These investments compose less than 1% of total assets. |
Years of Issue | Interest Rate | |
1947 - 1968 | 4% | |
1969 - 1978 | 6% graded to 5% | |
1979 - 2003 | 7% graded to 6% | |
2004 - 2012 | 5.25% | |
2013 - 2014 | 4.25% | |
2015 - 2018 | 4% |
2018 | 2017 | ||||||
NSIC - including realized capital gains of $71 and $71, respectively | $ | 1,558 | $ | 1,554 | |||
NSFC - including realized capital gains of $39 and $114, respectively | $ | 786 | $ | (921 | ) | ||
Omega - including realized capital gains of $7 and $49, respectively | $ | (64 | ) | $ | 34 | ||
Statutory risk-based adjusted capital: | |||||||
NSIC - including AVR of $766 and $841, respectively | $ | 16,043 | $ | 15,689 | |||
NSFC - including investment in Omega of $7,280 and $7,482, respectively | $ | 34,645 | $ | 34,188 | |||
Omega | $ | 10,783 | $ | 10,983 |
Available-for-sale securities: | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
U.S. Government corporations and agencies | $ | 4,820 | $ | 31 | $ | 107 | $ | 4,744 | ||||||||
Agency mortgage backed securities | 27,492 | 159 | 545 | 27,106 | ||||||||||||
Asset backed securities | 10,901 | 7 | 248 | 10,660 | ||||||||||||
Private label mortgage backed securities | 5,869 | 105 | 27 | 5,947 | ||||||||||||
Corporate bonds | 36,935 | 407 | 1,551 | 35,791 | ||||||||||||
States, municipalities and political subdivisions | 10,059 | 105 | 91 | 10,073 | ||||||||||||
Foreign governments | 801 | 3 | — | 804 | ||||||||||||
Total fixed maturities | 96,877 | 817 | 2,569 | 95,125 | ||||||||||||
Equity securities | 1,842 | 2,464 | — | 4,306 | ||||||||||||
Total | $ | 98,719 | $ | 3,281 | $ | 2,569 | $ | 99,431 |
Held-to-maturity securities: | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Agency mortgage backed securities | $ | 1,449 | $ | 16 | $ | 22 | $ | 1,443 | ||||||||
Total | $ | 1,449 | $ | 16 | $ | 22 | $ | 1,443 |
Available-for-sale securities: | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
U.S. Government corporations and agencies | $ | 6,307 | $ | 131 | $ | 51 | $ | 6,387 | ||||||||
Agency mortgage backed securities | 20,858 | 232 | 468 | 20,622 | ||||||||||||
Asset backed securities | 9,000 | 132 | 72 | 9,060 | ||||||||||||
Private label mortgage backed securities | 4,637 | 258 | — | 4,895 | ||||||||||||
Corporate bonds | 39,127 | 1,103 | 321 | 39,909 | ||||||||||||
States, municipalities and political subdivisions | 13,758 | 389 | 54 | 14,093 | ||||||||||||
Foreign governments | 780 | 12 | — | 792 | ||||||||||||
Total fixed maturities | 94,467 | 2,257 | 966 | 95,758 | ||||||||||||
Equity securities | 1,842 | 2,667 | — | 4,509 | ||||||||||||
Total | $ | 96,309 | $ | 4,924 | $ | 966 | $ | 100,267 |
Held-to-maturity securities: | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Agency mortgage backed securities | $ | 1,616 | $ | 29 | $ | — | $ | 1,645 | ||||||||
Total | $ | 1,616 | $ | 29 | $ | — | $ | 1,645 |
(Dollars in Thousands) | Amortized Cost | Fair Value | ||||||
Available-for-sale securities: | ||||||||
Due in one year or less | $ | 2,183 | $ | 2,190 | ||||
Due after one year through five years | 17,179 | 17,027 | ||||||
Due after five years through ten years | 27,625 | 27,052 | ||||||
Due after ten years | 49,890 | 48,856 | ||||||
Total | $ | 96,877 | $ | 95,125 | ||||
Held-to-maturity securities: | ||||||||
Due in one year or less | $ | — | $ | — | ||||
Due after one year through five years | 43 | 45 | ||||||
Due after five years through ten years | — | — | ||||||
Due after ten years | 1,406 | 1,398 | ||||||
Total | $ | 1,449 | $ | 1,443 |
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||
December 31, 2018 | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Total Securities in a Loss Position | |||||||||||||||||||
U.S. Government corporations and agencies | $ | — | $ | — | $ | 3,209 | $ | 107 | $ | 3,209 | $ | 107 | 6 | |||||||||||||
Agency mortgage backed securities | 5,504 | 45 | 10,969 | 500 | 16,473 | 545 | 38 | |||||||||||||||||||
Asset backed securities | 5,824 | 146 | 2,741 | 102 | 8,565 | 248 | 12 | |||||||||||||||||||
Private label mortgage backed securities | 1,348 | 27 | — | — | 1,348 | 27 | 2 | |||||||||||||||||||
Corporate bonds | 16,583 | 709 | 9,823 | 842 | 26,406 | 1,551 | 51 | |||||||||||||||||||
States, municipalities and political subdivisions | 1,242 | 10 | 4,420 | 81 | 5,662 | 91 | 11 | |||||||||||||||||||
$ | 30,501 | $ | 937 | $ | 31,162 | $ | 1,632 | $ | 61,663 | $ | 2,569 | 120 |
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||
December 31, 2018 | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Total Securities in a Loss Position | |||||||||||||||||||
Agency mortgage backed securities | $ | 1,026 | $ | 22 | $ | — | $ | — | $ | 1,026 | $ | 22 | 2 | |||||||||||||
$ | 1,026 | $ | 22 | $ | — | $ | — | $ | 1,026 | $ | 22 | 2 |
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||
December 31, 2017 | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Total Securities in a Loss Position | |||||||||||||||||||
U.S. Government corporations and agencies | $ | 2,275 | $ | 31 | $ | 991 | $ | 20 | $ | 3,266 | $ | 51 | 5 | |||||||||||||
Agency mortgage backed securities | 8,475 | 204 | 5,544 | 264 | 14,019 | 468 | 26 | |||||||||||||||||||
Asset backed securities | — | — | 2,413 | 72 | 2,413 | 72 | 4 | |||||||||||||||||||
Private label mortgage backed securities | — | — | — | — | — | — | 0 | |||||||||||||||||||
Corporate bonds | 6,567 | 166 | 5,607 | 155 | 12,174 | 321 | 20 | |||||||||||||||||||
States, municipalities and political subdivisions | 2,176 | 7 | 2,574 | 47 | 4,750 | 54 | 9 | |||||||||||||||||||
$ | 19,493 | $ | 408 | $ | 17,129 | $ | 558 | $ | 36,622 | $ | 966 | 64 |
Year ended December 31, | |||||||
2018 | 2017 | ||||||
Fixed maturities | $ | 3,803 | $ | 3,377 | |||
Equity securities | 106 | 95 | |||||
Mortgage loans on real estate | 7 | 9 | |||||
Investment real estate | 3 | 4 | |||||
Policy loans | 142 | 130 | |||||
Company owned life insurance change in surrender value | (374 | ) | 110 | ||||
Other | 25 | 74 | |||||
3,712 | 3,799 | ||||||
Less: Investment expenses | 145 | 152 | |||||
Net investment income | $ | 3,567 | $ | 3,647 |
Year ended December 31, | |||||||
2018 | 2017 | ||||||
Fixed maturities | $ | 128 | $ | 58 | |||
Equity securities | — | 174 | |||||
Change in fair value of equity securities | (203 | ) | — | ||||
Other, principally real estate | (87 | ) | 2 | ||||
Other-than-temporary impairments | (16 | ) | — | ||||
Net investment gains (losses) | $ | (178 | ) | $ | 234 |
December 31, 2018 | December 31, 2017 | ||||||
Net change in unrealized gains (losses) on available-for-sale securities before deferred tax | $ | (3,042 | ) | $ | 1,402 | ||
Deferred income tax | 638 | (476 | ) | ||||
Net change in unrealized gains (losses) on available-for-sale securities | $ | (2,404 | ) | $ | 926 |
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Financial Assets | ||||||||||||||||
Fixed maturities available-for-sale | ||||||||||||||||
U.S. Government corporations and agencies | $ | 4,744 | $ | 4,147 | $ | 597 | $ | — | ||||||||
Agency mortgage backed securities | 27,106 | 11,756 | 15,350 | — | ||||||||||||
Asset backed securities | 10,560 | 2,839 | 7,721 | — | ||||||||||||
Corporate bonds | 35,791 | — | 35,791 | — | ||||||||||||
Private label asset backed securities | 5,947 | — | 5,947 | — | ||||||||||||
States, municipalities and political subdivisions | 10,073 | — | 10,073 | — | ||||||||||||
Foreign governments | 804 | 804 | — | — | ||||||||||||
Trading securities | 107 | 107 | — | — | ||||||||||||
Equity securities | 4,306 | 3,181 | — | 1,125 | ||||||||||||
Total Financial Assets | $ | 99,438 | $ | 22,834 | $ | 75,479 | $ | 1,125 | ||||||||
Financial Liabilities | ||||||||||||||||
Interest rate swap | $ | (234 | ) | $ | — | $ | — | $ | (234 | ) | ||||||
Total Financial Liabilities | $ | (234 | ) | $ | — | $ | — | $ | (234 | ) |
For the year ended December 31, 2018 | Equity Securities | Interest Rate Swap | ||||||
Beginning balance | $ | 1,073 | $ | (608 | ) | |||
Total gains or losses (realized and unrealized): | ||||||||
Included in earnings | 52 | — | ||||||
Included in other comprehensive income | — | 374 | ||||||
Purchases: | — | — | ||||||
Sales: | — | — | ||||||
Issuances: | — | — | ||||||
Settlements: | — | — | ||||||
Transfers in/(out) of Level 3 | — | — | ||||||
Ending balance | $ | 1,125 | $ | (234 | ) | |||
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held as of December 31, 2018: | $ | — | $ | — |
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Financial Assets | ||||||||||||||||
Fixed maturities available-for-sale | ||||||||||||||||
U.S. Government corporations and agencies | $ | 6,387 | $ | 6,387 | $ | — | $ | — | ||||||||
Agency mortgage backed securities | 20,622 | 7,827 | 12,795 | — | ||||||||||||
Asset backed securities | 9,060 | 3,445 | 5,615 | — | ||||||||||||
Corporate bonds | 39,909 | — | 39,909 | — | ||||||||||||
Private label asset backed securities | 4,895 | — | 4,895 | — | ||||||||||||
States, municipalities and political subdivisions | 14,093 | — | 14,093 | — | ||||||||||||
Foreign governments | 792 | 792 | — | — | ||||||||||||
Trading securities | 107 | 107 | — | — | ||||||||||||
Equity securities available-for-sale | 4,509 | 3,436 | — | 1,073 | ||||||||||||
Total Financial Assets | $ | 100,374 | $ | 21,994 | $ | 77,307 | $ | 1,073 | ||||||||
Financial Liabilities | ||||||||||||||||
Interest rate swap | $ | (608 | ) | $ | — | $ | — | $ | (608 | ) | ||||||
Total Financial Liabilities | $ | (608 | ) | $ | — | $ | — | $ | (608 | ) |
For the year ended December 31, 2017 | Equity Securities Available-for-Sale | Interest Rate Swap | ||||||
Beginning balance | $ | 1,258 | $ | (1,030 | ) | |||
Total gains or losses (realized and unrealized): | ||||||||
Included in earnings | — | — | ||||||
Included in other comprehensive income | 114 | 422 | ||||||
Purchases: | 46 | — | ||||||
Sales: | (345 | ) | — | |||||
Issuances: | — | — | ||||||
Settlements: | — | — | ||||||
Transfers in/(out) of Level 3 | — | — | ||||||
Ending balance | $ | 1,073 | $ | (608 | ) | |||
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held as of December 31, 2017: | $ | — | $ | — |
December 31, 2018 | December 31, 2017 | |||||||||||||||
Assets and related instruments | Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | ||||||||||||
Held-to-maturity securities | $ | 1,449 | $ | 1,443 | $ | 1,616 | $ | 1,645 | ||||||||
Mortgage loans | 156 | 156 | 162 | 162 | ||||||||||||
Policy loans | 1,854 | 1,854 | 1,810 | 1,810 | ||||||||||||
Company owned life insurance | 4,600 | 4,600 | 4,974 | 4,974 | ||||||||||||
Other invested assets | 2,148 | 2,148 | 2,574 | 2,574 | ||||||||||||
Liabilities and related instruments | ||||||||||||||||
Other policyholder funds | 1,515 | 1,515 | 1,706 | 1,706 | ||||||||||||
Short-term notes payable and current portion of long-term debt | 2,200 | 2,200 | 1,300 | 1,300 | ||||||||||||
Long-term debt | 12,152 | 12,152 | 14,339 | 14,339 |
December 31, 2018 | December 31, 2017 | ||||||
Building and improvements | $ | 3,378 | $ | 3,378 | |||
Electronic data processing equipment | 1,504 | 1,512 | |||||
Furniture and fixtures | 477 | 486 | |||||
5,359 | 5,376 | ||||||
Less accumulated depreciation | 3,710 | 3,595 | |||||
Property and equipment, net | $ | 1,649 | $ | 1,781 |
As of December 31, 2018 | As of December 31, 2017 | |||||||
General expenses | $ | 1,067 | $ | 1,069 | ||||
Unearned premiums | 1,265 | 1,269 | ||||||
Claims liabilities | 552 | 484 | ||||||
AMT credit | — | 1,575 | ||||||
Impairment on real estate owned | 119 | 116 | ||||||
Unrealized losses on securities available-for-sale | 368 | — | ||||||
Unrealized loss on interest rate swaps | 49 | 128 | ||||||
Deferred tax assets | 3,420 | 4,641 | ||||||
Depreciation | (79 | ) | (88 | ) | ||||
Deferred policy acquisition costs | (1,645 | ) | (1,706 | ) | ||||
Pre-1984 policyholder surplus account | (463 | ) | (529 | ) | ||||
Unrealized gains on securities available-for-sale | — | (831 | ) | |||||
Unrealized gains on equity securities | (517 | ) | — | |||||
Deferred tax liabilities | (2,704 | ) | (3,154 | ) | ||||
Net deferred tax asset | $ | 716 | $ | 1,487 |
Years ended December 31, | ||||||||
2018 | 2017 | |||||||
Deferred policy acquisition costs | $ | (61 | ) | $ | (77 | ) | ||
Other-than-temporary impairments | (3 | ) | — | |||||
Unearned premiums | 4 | (10 | ) | |||||
General expenses | 2 | (45 | ) | |||||
Depreciation | (9 | ) | 7 | |||||
Claims liabilities | (68 | ) | (38 | ) | ||||
AMT credit | 1,575 | (345 | ) | |||||
Impact of repeal of special provision on pre-1984 policyholder surplus | (66 | ) | 857 | |||||
Unrealized gains on equity securities | (43 | ) | — | |||||
Impact of TCJA change in corporate tax rate | — | (54 | ) | |||||
Deferred income tax expense (benefit) | $ | 1,331 | $ | 295 |
Years ended December 31, | ||||||
2018 | 2017 | |||||
Federal income tax rate applied to pre-tax income/loss | 21.0 | % | 34.0 | % | ||
Dividends received deduction and tax-exempt interest | (2.4 | )% | 5.8 | % | ||
Company owned life insurance | 7.4 | % | 3.4 | % | ||
Small life deduction | — | % | 30.7 | % | ||
Pre-1984 policyholder surplus account at current statutory rate | — | % | (76.9 | )% | ||
Other, net | 0.9 | % | (5.0 | )% | ||
Effective federal income tax rate | 26.9 | % | (8.0 | )% |
December 31, | December 31, | |||||||
2018 | 2017 | |||||||
Current portion of installment note payable due in November with variable interest rate equal to the WSJ prime rate plus 0.5%. Unsecured. | $ | 2,200 | $ | 800 | ||||
Line of credit with variable interest rate equal to the WSJ prime rate, subject to a 5.0% floor; maturity March 2020 (renewed March 2018). Interest payments due quarterly. Unsecured. | — | 500 | ||||||
$ | 2,200 | $ | 1,300 |
December 31, | December 31, | |||||||
2018 | 2017 | |||||||
Promissory note with variable interest rate equal to the WSJ prime rate plus 0.5%; maturity November 2019. Annual installment payments beginning November 2017 with final balloon payment due November 30, 2019. Unsecured. | $ | — | $ | 2,200 | ||||
Subordinated debentures issued on December 15, 2005 with floating rate interest equal to 3-Month LIBOR plus 375 basis points; net of $159,000 in debt issuance cost ($168,000 in 2017); maturity December 2035. Interest payable quarterly. Redeemable prior to maturity. Unsecured. | 9,120 | 9,111 | ||||||
Subordinated debentures issued on June 21, 2007 with floating rate interest equal to 3-Month LIBOR plus 340 basis points; net of $61,000 in debt issuance cost ($65,000 in 2017); maturity June 15, 2037. Interest payable quarterly. Redeemable prior to maturity. Unsecured. | 3,032 | 3,028 | ||||||
$ | 12,152 | $ | 14,339 |
2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | |||||||||||||||||
$ | 2,200 | $ | — | $ | — | $ | — | $ | — | $ | 12,152 |
Years ended December 31, | ||||||||
2018 | 2017 | |||||||
Summary of claims and claim adjustment expense reserves | ||||||||
Balance, beginning of year | $ | 7,075 | $ | 7,531 | ||||
Less reinsurance recoverable on unpaid losses | 327 | 1,184 | ||||||
Net balances at beginning of year | 6,748 | 6,347 | ||||||
Net losses: | ||||||||
Provision for claims and claim adjustment expenses for claims arising in current year | 36,457 | 39,604 | ||||||
Estimated claims and claim adjustment expenses for claims arising in prior years | (722 | ) | (1,213 | ) | ||||
Total increases | 35,735 | 38,391 | ||||||
Claims and claim adjustment expense payments for claims arising in: | ||||||||
Current year | 31,833 | 34,609 | ||||||
Prior years | 3,826 | 3,381 | ||||||
Total payments | 35,659 | 37,990 | ||||||
Net balance at end of period | 6,824 | 6,748 | ||||||
Plus reinsurance recoverable on unpaid losses | 1,384 | 327 | ||||||
Claims and claim adjustment expense reserves at end of period | $ | 8,208 | $ | 7,075 |
For the Years Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||||||||||||||||||||
Incurred Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance | |||||||||||||||||||||||||||||||||||||||||||||
Unaudited | |||||||||||||||||||||||||||||||||||||||||||||
IBNR Reserves Dec. 31, 2018 | Cumulative Number of Reported Claims | ||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 31,425 | $ | 30,236 | $ | 30,442 | $ | 30,432 | $ | 30,484 | $ | 30,362 | $ | 30,306 | $ | 30,280 | $ | 30,280 | $ | 30,280 | $ | — | 7,996 | ||||||||||||||||||||||
2010 | — | 30,610 | 29,918 | 29,805 | 29,718 | 29,687 | 29,672 | 29,641 | 29,660 | 29,659 | — | 5,888 | |||||||||||||||||||||||||||||||||
2011 | — | — | 35,203 | 33,957 | 34,233 | 34,711 | 34,806 | 34,650 | 34,658 | 34,663 | 7 | 8,127 | |||||||||||||||||||||||||||||||||
2012 | — | — | — | 29,959 | 30,190 | 30,402 | 30,091 | 29,948 | 29,885 | 29,827 | — | 5,198 | |||||||||||||||||||||||||||||||||
2013 | — | — | — | — | 27,436 | 27,147 | 27,076 | 27,023 | 27,191 | 27,236 | 154 | 5,204 | |||||||||||||||||||||||||||||||||
2014 | — | — | — | — | — | 25,929 | 26,422 | 26,290 | 26,225 | 26,130 | 8 | 4,747 | |||||||||||||||||||||||||||||||||
2015 | — | — | — | — | — | — | 31,484 | 30,861 | 30,360 | 30,890 | 372 | 5,842 | |||||||||||||||||||||||||||||||||
2016 | — | — | — | — | — | — | — | 36,287 | 35,343 | 35,399 | 204 | 5,183 | |||||||||||||||||||||||||||||||||
2017 | — | — | — | — | — | — | — | — | 40,210 | 38,958 | 425 | 5,321 | |||||||||||||||||||||||||||||||||
2018 | — | — | — | — | — | — | — | — | — | 37,079 | 3,254 | 4,500 | |||||||||||||||||||||||||||||||||
Total | $ | 320,121 |
Cumulative Paid Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance | ||||||||||||||||||||||||||||||||||||||||||
Unaudited | ||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 25,245 | $ | 29,281 | $ | 29,869 | $ | 29,847 | $ | 30,004 | $ | 30,265 | $ | 30,274 | $ | 30,280 | $ | 30,280 | $ | 30,280 | ||||||||||||||||||||||
2010 | — | 26,064 | 29,201 | 29,404 | 29,507 | 29,639 | 29,640 | 29,640 | 29,660 | 29,659 | ||||||||||||||||||||||||||||||||
2011 | — | — | 31,488 | 33,080 | 33,484 | 34,167 | 34,622 | 34,621 | 34,641 | 34,647 | ||||||||||||||||||||||||||||||||
2012 | — | — | — | 26,162 | 29,135 | 29,614 | 29,765 | 29,834 | 29,835 | 29,823 | ||||||||||||||||||||||||||||||||
2013 | — | — | — | — | 24,157 | 26,114 | 26,487 | 26,661 | 26,788 | 26,976 | ||||||||||||||||||||||||||||||||
2014 | — | — | — | — | — | 22,844 | 25,461 | 25,800 | 26,033 | 26,095 | ||||||||||||||||||||||||||||||||
2015 | — | — | — | — | — | — | 25,923 | 30,066 | 30,190 | 30,296 | ||||||||||||||||||||||||||||||||
2016 | — | — | — | — | — | — | — | 31,893 | 34,722 | 35,029 | ||||||||||||||||||||||||||||||||
2017 | — | — | — | — | — | — | — | — | 35,209 | 38,245 | ||||||||||||||||||||||||||||||||
2018 | — | — | — | — | — | — | — | — | — | 32,456 | ||||||||||||||||||||||||||||||||
Total | $ | 313,506 | ||||||||||||||||||||||||||||||||||||||||
All outstanding liabilities before 2008, net of reinsurance | 209 | |||||||||||||||||||||||||||||||||||||||||
Liabilities for claims and claim adjustment expenses, net of reinsurance | $ | 6,824 |
Average Annual Percentage Payout of Incurred Claims by Age (in Years), Net of Reinsurance | ||||||||||||||||||||||||||||||||
Unaudited | ||||||||||||||||||||||||||||||||
Years | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | ||||||||||||||||||||||
87.8 | % | 9.5 | % | 1.1 | % | 0.5 | % | 0.7 | % | 0.2 | % | 0.2 | % | — | % | — | % | — | % |
Reconciliation of the Disclosure of Incurred and Paid Claims Development to the Liability for Unpaid Claims and Claim Adjustment Expenses | |||||||
December 31, 2018 | December 31, 2017 | ||||||
Net outstanding liabilities | |||||||
Homeowners' insurance | $ | 2,418 | $ | 2,384 | |||
Dwelling fire insurance | 2,602 | 2,799 | |||||
Other Liability insurance | 1,804 | 1,463 | |||||
Other short-duration insurance lines | — | 102 | |||||
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance | 6,824 | 6,748 | |||||
Reinsurance recoverable on unpaid claims | |||||||
Homeowners' insurance | 537 | 327 | |||||
Dwelling fire insurance | 847 | — | |||||
Other Liability insurance | — | — | |||||
Other short-duration insurance lines | — | — | |||||
Total reinsurance recoverable on unpaid claims | 1,384 | 327 | |||||
Insurance lines other than short-duration | — | — | |||||
Unallocated claims adjustment expenses | — | — | |||||
Other | — | — | |||||
— | — | ||||||
Total gross liability for unpaid claims and claim adjustment expense | $ | 8,208 | $ | 7,075 |
For the Years Ended December 31, | ||||||||||||||||||
2016 | 2017 | 2018 | ||||||||||||||||
Incurred Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance | ||||||||||||||||||
Unaudited | ||||||||||||||||||
IBNR Reserves Dec. 31, 2018 | Cumulative Number of Reported Claims | |||||||||||||||||
2016 | $ | 960 | $ | 962 | $ | 883 | $ | — | 1,185 | |||||||||
2017 | 1,008 | 964 | — | 1,826 | ||||||||||||||
2018 | 1,037 | 358 | 1,141 |
Cumulative Paid Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance | |||||||||||||||
Unaudited | |||||||||||||||
2016 | $ | 658 | $ | 874 | $ | 882 | |||||||||
2017 | 725 | 881 | |||||||||||||
2018 | 747 |
Average Annual Percentage Payout of Incurred Claims by Age | |||||||||||
Unaudited | |||||||||||
Years | 1 | 2 | 3 | ||||||||
73.9 | % | 21.3 | % | 4.7 | % |
Layer | Reinsurers' Limits of Liability |
First Layer | 100% of $13,500,000 in excess of $4,000,000 retention |
Second Layer | 100% of $25,000,000 in excess of $17,500,000 |
Third Layer | 100% of $30,000,000 in excess of $42,500,000 |
December 31, 2018 | December 31, 2017 | ||||||||||||||||
Authorized | Issued | Outstanding | Authorized | Issued | Outstanding | ||||||||||||
Preferred Stock, $1 par value | 500,000 | — | — | 500,000 | — | — | |||||||||||
Class A Common Stock, $1 par value | 2,000,000 | — | — | 2,000,000 | — | — | |||||||||||
Common Stock, $1 par value | 3,000,000 | 2,527,136 | 2,527,136 | 3,000,000 | 2,522,312 | 2,522,312 |
Year ended December 31, | ||||||||
2018 | 2017 | |||||||
Gains and Losses on Cash Flow Hedges | ||||||||
Balance at beginning of period | $ | (480 | ) | $ | (679 | ) | ||
Other comprehensive income for period: | ||||||||
Other comprehensive gain before reclassifications | 295 | 278 | ||||||
Reclassification adjustment - legislative tax rate change | — | (79 | ) | |||||
Net current period other comprehensive income | 295 | 199 | ||||||
Balance at end of period | $ | (185 | ) | $ | (480 | ) | ||
Unrealized Gains and Losses on Available-for-Sale Securities | ||||||||
Balance at beginning of period | $ | 3,126 | $ | 1,686 | ||||
Other comprehensive income (loss) for period: | ||||||||
Other comprehensive income (loss) before reclassifications | (2,304 | ) | 1,079 | |||||
Reclassification adjustment - legislative tax rate change | — | 514 | ||||||
Reclassification adjustment - gains on equity securities | (2,107 | ) | — | |||||
Amounts reclassified from accumulated other comprehensive income (loss) | (100 | ) | (153 | ) | ||||
Net current period other comprehensive income (loss) | (4,511 | ) | 1,440 | |||||
Balance at end of period | $ | (1,385 | ) | $ | 3,126 | |||
Total Accumulated Other Comprehensive Income (Loss) at end of period | $ | (1,570 | ) | $ | 2,646 |
Details about Accumulated Other Comprehensive Income Components | Amounts Reclassified from Accumulated Other Comprehensive Income | Affected Line Item in the Statement Where Net Income is Presented | ||||
Unrealized Gains and Losses on Available-for-Sale Securities | $ | 127 | Net investment gains | |||
127 | Total before tax | |||||
(27 | ) | Tax (expense) or benefit | ||||
$ | 100 | Net of Tax |
Details about Accumulated Other Comprehensive Income Components | Amounts Reclassified from Accumulated Other Comprehensive Income | Affected Line Item in the Statement Where Net Income is Presented | ||||
Unrealized Gains and Losses on Available-for-Sale Securities | $ | 232 | Net investment gains | |||
232 | Total before tax | |||||
(79 | ) | Tax (expense) or benefit | ||||
$ | 153 | Net of Tax |
Assets by industry segment | Total | P&C Insurance Operations | Life Insurance Operations | Non-Insurance Operations | ||||||||||||
December 31, 2018 | $ | 144,231 | $ | 80,994 | $ | 59,479 | $ | 3,758 | ||||||||
December 31, 2017 | $ | 146,438 | $ | 80,241 | $ | 60,709 | $ | 5,488 |
Year ended December 31, 2018 | P&C Insurance Operations | Life Insurance Operations | Non-Insurance Operations | Inter- company Eliminations | Total | ||||||||||||||
REVENUE | |||||||||||||||||||
Net premiums earned | $ | 54,837 | $ | 6,019 | $ | — | $ | — | $ | 60,856 | |||||||||
Net investment income | 1,330 | 2,722 | 55 | (540 | ) | 3,567 | |||||||||||||
Investment losses | (100 | ) | (78 | ) | — | — | (178 | ) | |||||||||||
Other income | 609 | 1,078 | 1,006 | (2,081 | ) | 612 | |||||||||||||
56,676 | 9,741 | 1,061 | (2,621 | ) | 64,857 | ||||||||||||||
BENEFITS AND EXPENSES | |||||||||||||||||||
Policyholder benefits paid | 35,735 | 5,242 | — | (568 | ) | 40,409 | |||||||||||||
Amortization of deferred policy acquisition costs | 2,759 | 838 | — | — | 3,597 | ||||||||||||||
Commissions | 7,267 | 288 | — | — | 7,555 | ||||||||||||||
General and administrative expenses | 8,472 | 2,111 | 309 | (2,053 | ) | 8,839 | |||||||||||||
Taxes, licenses and fees | 1,937 | 220 | — | — | 2,157 | ||||||||||||||
Interest expense | — | 48 | 1,187 | — | 1,235 | ||||||||||||||
56,170 | 8,747 | 1,496 | (2,621 | ) | 63,792 | ||||||||||||||
Income (Loss) Before Income Taxes | 506 | 994 | (435 | ) | — | 1,065 | |||||||||||||
INCOME TAX EXPENSE (BENEFIT) | (97 | ) | 232 | 151 | — | 286 | |||||||||||||
Net Income (Loss) | $ | 603 | $ | 762 | $ | (586 | ) | $ | — | $ | 779 |
Year ended December 31, 2017 | P&C Insurance Operations | Life Insurance Operations | Non-Insurance Operations | Inter-company Eliminations | Total | |||||||||||||||
REVENUE | ||||||||||||||||||||
Net premiums earned | $ | 55,044 | $ | 6,119 | $ | — | $ | — | $ | 61,163 | ||||||||||
Net investment income | 1,571 | 2,551 | 65 | (540 | ) | 3,647 | ||||||||||||||
Investment gains | 163 | 71 | — | — | 234 | |||||||||||||||
Other income | 592 | 1,045 | 1,019 | (2,060 | ) | 596 | ||||||||||||||
57,370 | 9,786 | 1,084 | (2,600 | ) | 65,640 | |||||||||||||||
BENEFITS AND EXPENSES | ||||||||||||||||||||
Policyholder benefits paid | 38,391 | 5,045 | — | (567 | ) | 42,869 | ||||||||||||||
Amortization of deferred policy acquisition costs | 2,777 | 812 | — | — | 3,589 | |||||||||||||||
Commissions | 7,380 | 343 | — | — | 7,723 | |||||||||||||||
General and administrative expenses | 8,087 | 1,929 | 838 | (2,033 | ) | 8,821 | ||||||||||||||
Taxes, licenses and fees | 2,237 | 208 | — | — | 2,445 | |||||||||||||||
Interest expense | — | 73 | 1,234 | — | 1,307 | |||||||||||||||
58,872 | 8,410 | 2,072 | (2,600 | ) | 66,754 | |||||||||||||||
Income (Loss) Before Income Taxes | (1,502 | ) | 1,376 | (988 | ) | — | (1,114 | ) | ||||||||||||
INCOME TAX EXPENSE (BENEFIT) | (142 | ) | 157 | 74 | — | 89 | ||||||||||||||
Net Income (Loss) | $ | (1,360 | ) | $ | 1,219 | $ | (1,062 | ) | $ | — | $ | (1,203 | ) |
Year ended December 31, | ||||||||
2018 | 2017 | |||||||
Life, accident and health operations premiums written: | ||||||||
Traditional life insurance | $ | 4,336 | $ | 4,411 | ||||
Accident and health insurance | 1,831 | 1,828 | ||||||
Gross life, accident and health | 6,167 | 6,239 | ||||||
Reinsurance premium ceded | (81 | ) | (77 | ) | ||||
Net life, accident and health premiums written | $ | 6,086 | $ | 6,162 | ||||
Property and Casualty operations premiums written: | ||||||||
Dwelling fire & extended coverage | $ | 37,598 | $ | 37,034 | ||||
Homeowners (Including mobile homeowners) | 21,214 | 22,319 | ||||||
Other liability | 2,195 | 2,145 | ||||||
Gross property and casualty | 61,007 | 61,498 | ||||||
Reinsurance premium ceded | (6,376 | ) | (6,272 | ) | ||||
Net property and casualty written | $ | 54,631 | $ | 55,226 | ||||
Consolidated gross premiums written | $ | 67,174 | $ | 67,737 | ||||
Reinsurance premium ceded | (6,457 | ) | (6,349 | ) | ||||
Consolidated net premiums written | $ | 60,717 | $ | 61,388 |
Year ended December 31, | ||||||||
2018 | 2017 | |||||||
Life, accident and health operations premiums earned: | ||||||||
Traditional life insurance | $ | 4,273 | $ | 4,368 | ||||
Accident and health insurance | 1,827 | 1,828 | ||||||
Gross life, accident and health | 6,100 | 6,196 | ||||||
Reinsurance premium ceded | (81 | ) | (77 | ) | ||||
Net life, accident and health premiums earned | $ | 6,019 | $ | 6,119 | ||||
Property and Casualty operations premiums earned: | ||||||||
Dwelling fire & extended coverage | $ | 37,232 | $ | 36,373 | ||||
Homeowners (Including mobile homeowners) | 21,801 | 22,831 | ||||||
Other liability | 2,180 | 2,112 | ||||||
Gross property and casualty | 61,213 | 61,316 | ||||||
Reinsurance premium ceded | (6,376 | ) | (6,272 | ) | ||||
Net property and casualty earned | $ | 54,837 | $ | 55,044 | ||||
Consolidated gross premiums earned | $ | 67,313 | $ | 67,512 | ||||
Reinsurance premium ceded | (6,457 | ) | (6,349 | ) | ||||
Consolidated net premiums earned | $ | 60,856 | $ | 61,163 |
THE NATIONAL SECURITY GROUP, INC. (dollars in thousands) | |||||||||||||||||||||||
December 31, 2018 | December 31, 2017 | ||||||||||||||||||||||
Cost | Fair Value | Amount per the Balance Sheet | Cost | Fair Value | Amount per the Balance Sheet | ||||||||||||||||||
Securities Held-to-Maturity: | |||||||||||||||||||||||
Agency mortgage backed securities | $ | 1,449 | $ | 1,443 | $ | 1,449 | $ | 1,616 | $ | 1,645 | $ | 1,616 | |||||||||||
Total Securities Held-to-Maturity | 1,449 | 1,443 | 1,449 | 1,616 | 1,645 | 1,616 | |||||||||||||||||
Securities Available-for-Sale: | |||||||||||||||||||||||
Equity Securities: | |||||||||||||||||||||||
Banks and insurance companies | 1,064 | 2,044 | 2,044 | 1,064 | 1,966 | 1,966 | |||||||||||||||||
Industrial and all other | 778 | 2,262 | 2,262 | 778 | 2,543 | 2,543 | |||||||||||||||||
Total equity securities | 1,842 | 4,306 | 4,306 | 1,842 | 4,509 | 4,509 | |||||||||||||||||
Debt Securities: | |||||||||||||||||||||||
U.S. Government corporations and agencies | 4,820 | 4,744 | 4,744 | 6,307 | 6,387 | 6,387 | |||||||||||||||||
Agency mortgage backed securities | 27,492 | 27,106 | 27,106 | 20,858 | 20,622 | 20,622 | |||||||||||||||||
Asset backed securities | 10,901 | 10,660 | 10,660 | 9,000 | 9,060 | 9,060 | |||||||||||||||||
Private label asset backed securities | 5,869 | 5,947 | 5,947 | 4,637 | 4,895 | 4,895 | |||||||||||||||||
Corporate bonds | 36,935 | 35,791 | 35,791 | 39,127 | 39,909 | 39,909 | |||||||||||||||||
States, municipalities and political subdivisions | 10,059 | 10,073 | 10,073 | 13,758 | 14,093 | 14,093 | |||||||||||||||||
Foreign governments | 801 | 804 | 804 | 780 | 792 | 792 | |||||||||||||||||
Total Debt Securities | 96,877 | 95,125 | 95,125 | 94,467 | 95,758 | 95,758 | |||||||||||||||||
Total Available-for-Sale | 98,719 | 99,431 | 99,431 | 96,309 | 100,267 | 100,267 | |||||||||||||||||
Total Securities | 100,168 | 100,874 | 100,880 | 97,925 | 101,912 | 101,883 | |||||||||||||||||
Trading securities | 107 | 107 | 107 | 107 | 107 | 107 | |||||||||||||||||
Mortgage loans on real estate | 156 | 156 | 156 | 162 | 162 | 162 | |||||||||||||||||
Investment real estate | 2,945 | 2,945 | 2,945 | 3,221 | 3,221 | 3,221 | |||||||||||||||||
Policy loans | 1,854 | 1,854 | 1,854 | 1,810 | 1,810 | 1,810 | |||||||||||||||||
Company owned life insurance | 4,315 | 4,600 | 4,600 | 4,315 | 4,974 | 4,974 | |||||||||||||||||
Other invested assets | 2,148 | 2,148 | 2,148 | 2,574 | 2,574 | 2,574 | |||||||||||||||||
Total investments | $ | 111,693 | $ | 112,684 | $ | 112,690 | $ | 110,114 | $ | 114,760 | $ | 114,731 |
THE NATIONAL SECURITY GROUP, INC. (PARENT COMPANY) | |||||||
BALANCE SHEETS | |||||||
(dollars in thousands) | |||||||
December 31, | |||||||
2018 | 2017 | ||||||
Assets | |||||||
Fixed maturities available-for-sale, at estimated fair value | $ | 932 | $ | 1,446 | |||
Investment real estate, at book value | 356 | 356 | |||||
Cash | 523 | 1,753 | |||||
Investment in subsidiaries (equity method) eliminated upon consolidation | 59,229 | 61,001 | |||||
Income tax recoverable | 1,012 | — | |||||
Deferred income tax asset | 601 | 1,745 | |||||
Other assets | 490 | 494 | |||||
Total Assets | $ | 63,143 | $ | 66,795 | |||
Liabilities and Shareholders' Equity | |||||||
Liabilities | |||||||
Accrued general expenses | $ | 2,691 | $ | 2,923 | |||
Interest rate swaps | 234 | 608 | |||||
Short-term notes payable | 2,200 | 1,300 | |||||
Long-term debt | 12,152 | 14,339 | |||||
Total Liabilities | 17,277 | 19,170 | |||||
Total Shareholders' Equity | 45,866 | 47,625 | |||||
Total Liabilities and Shareholders' Equity | $ | 63,143 | $ | 66,795 |
THE NATIONAL SECURITY GROUP, INC. (PARENT COMPANY) | |||||||
STATEMENTS OF INCOME | |||||||
(dollars in thousands) | |||||||
Years Ended December 31, | |||||||
2018 | 2017 | ||||||
Income | |||||||
Dividends (eliminated upon consolidation) | $ | 750 | $ | 900 | |||
Holding company management service fees | 1,006 | 1,019 | |||||
Other income | 55 | 65 | |||||
1,811 | 1,984 | ||||||
Expenses | |||||||
State taxes | 43 | 43 | |||||
Interest | 1,187 | 1,234 | |||||
Other expenses | 266 | 792 | |||||
1,496 | 2,069 | ||||||
Income (loss) before income taxes and equity in undistributed earnings of subsidiaries | 315 | (85 | ) | ||||
Income tax expense (benefit) | 151 | 74 | |||||
Income (loss) before equity in undistributed earnings of subsidiaries | 164 | (159 | ) | ||||
Equity in undistributed earnings of subsidiaries | 615 | (1,044 | ) | ||||
Net income (loss) | $ | 779 | $ | (1,203 | ) |
THE NATIONAL SECURITY GROUP, INC. (PARENT COMPANY) | |||||||
STATEMENTS OF CASH FLOWS | |||||||
(dollars in thousands) | |||||||
Years Ended | |||||||
December 31, | |||||||
2018 | 2017 | ||||||
Cash Flows from Operating Activities: | |||||||
Net income | $ | 779 | $ | (1,203 | ) | ||
Adjustments to reconcile net income to net cash provided by (used in)operating activities: | |||||||
Equity in undistributed earnings of subsidiaries | (615 | ) | 1,044 | ||||
Income taxes | 58 | 210 | |||||
Other, net | (137 | ) | 2,016 | ||||
Net cash provided by operating activities | 85 | 2,067 | |||||
Cash Flows from Investing Activities: | |||||||
Net sales (purchases) of investments | 490 | — | |||||
Net cash provided by investing activities | 490 | — | |||||
Cash Flows from Financing Activities: | |||||||
Net (repayments) proceeds from debt | (1,300 | ) | (1,500 | ) | |||
Cash dividends | (505 | ) | (504 | ) | |||
Net cash used in financing activities | (1,805 | ) | (2,004 | ) | |||
Net change in cash and cash equivalents | (1,230 | ) | 63 | ||||
Cash and cash equivalents, at beginning of year | 1,753 | 1,690 | |||||
Cash and cash equivalents, at end of year | $ | 523 | $ | 1,753 |
THE NATIONAL SECURITY GROUP, INC. | |||||||||||||||||||||||
(dollars in thousands) | Deferred Acquisition Costs | Future Policy Benefits | Unearned Premiums | Unpaid Losses | |||||||||||||||||||
At December 31, 2018: | |||||||||||||||||||||||
Life and accident and health insurance | $ | 4,416 | $ | 37,474 | $ | 10 | $ | 792 | |||||||||||||||
Property and casualty insurance | 3,418 | — | 30,102 | 7,075 | |||||||||||||||||||
Total | $ | 7,834 | $ | 37,474 | $ | 30,112 | $ | 7,867 | |||||||||||||||
At December 31, 2017: | |||||||||||||||||||||||
Life and accident and health insurance | $ | 4,690 | $ | 36,878 | $ | 10 | $ | 903 | |||||||||||||||
Property and casualty insurance | 3,434 | — | 30,102 | 7,075 | |||||||||||||||||||
Total | $ | 8,124 | $ | 36,878 | $ | 30,112 | $ | 7,978 | |||||||||||||||
Premium Revenue | Net Investment Income | Other Income | Benefits, Claims, Losses and Settlement Expenses | Commissions, Amortization of Policy Acquisition Costs | General Expenses, Taxes, Licenses and Fees | ||||||||||||||||||
For the year ended December 31, 2018: | |||||||||||||||||||||||
Life and accident and health insurance | $ | 6,019 | $ | 2,722 | $ | 1,078 | $ | 5,242 | $ | 1,126 | $ | 2,331 | |||||||||||
Property and casualty insurance | 54,837 | 1,330 | 609 | 35,735 | 10,026 | 10,409 | |||||||||||||||||
Other | — | 55 | 1,006 | — | — | 309 | |||||||||||||||||
Total | $ | 60,856 | $ | 4,107 | $ | 2,693 | $ | 40,977 | $ | 11,152 | $ | 13,049 | |||||||||||
For the year ended December 31, 2017: | |||||||||||||||||||||||
Life and accident and health insurance | $ | 6,119 | $ | 2,551 | $ | 1,045 | $ | 5,045 | $ | 1,155 | $ | 2,137 | |||||||||||
Property and casualty insurance | 55,044 | 1,571 | 592 | 38,391 | 10,157 | 10,324 | |||||||||||||||||
Other | — | 65 | 1,019 | — | — | 838 | |||||||||||||||||
Total | $ | 61,163 | $ | 4,187 | $ | 2,656 | $ | 43,436 | $ | 11,312 | $ | 13,299 | |||||||||||
Note: Investment income and other operating expenses are reported separately by segment and not allocated. |
THE NATIONAL SECURITY GROUP, INC. | ||||||||||||||||||
(dollars in thousands) | Gross Amount | Ceded to Other Companies | Assumed from Other Companies | Net Amount | Percentage of Amount Assumed to Net | |||||||||||||
For the year ended December 31, 2018 | ||||||||||||||||||
Life insurance in force | $ | 203,209 | $ | 9,730 | $ | — | $ | 193,479 | — | % | ||||||||
Premiums: | ||||||||||||||||||
Life insurance and accident and health insurance | $ | 6,100 | $ | 81 | $ | — | $ | 6,019 | — | % | ||||||||
Property and casualty insurance | 61,213 | 6,376 | — | 54,837 | — | % | ||||||||||||
Total premiums | $ | 67,313 | $ | 6,457 | $ | — | $ | 60,856 | — | % | ||||||||
For the year ended December 31, 2017 | ||||||||||||||||||
Life insurance in force | $ | 206,826 | $ | 10,413 | $ | — | $ | 196,413 | — | % | ||||||||
Premiums: | ||||||||||||||||||
Life insurance and accident and health insurance | $ | 6,196 | $ | 77 | $ | — | $ | 6,119 | — | % | ||||||||
Property and casualty insurance | 61,316 | 6,272 | — | 55,044 | — | % | ||||||||||||
Total premiums | $ | 67,512 | $ | 6,349 | $ | — | $ | 61,163 | — | % |
The National Security Group, Inc. | ||||||||
Years ended December 31, 2018 and 2017 | ||||||||
(dollars in thousands) | ||||||||
2018 | 2017 | |||||||
Balance, January 1 Allowance for Doubtful Accounts | $ | 4 | $ | 7 | ||||
Additions | 8 | 1 | ||||||
Deletions | 8 | 4 | ||||||
Balance, December 31 Allowance for Doubtful Accounts | $ | 4 | $ | 4 |
1. | Consolidated financial statements, notes thereto and related information of The National Security Group, Inc. (the “Company”) are included in Item 8 of Part II of this report: |
• | Report of Independent Registered Public Accounting Firm |
• | Consolidated Balance Sheets - December 31, 2018 and 2017 |
• | Consolidated Statements of Income (Loss) - Years ended December 31, 2018 and 2017 |
• | Consolidated Statements of Comprehensive Income - Years ended December 31, 2018 and 2017 |
• | Consolidated Statements of Shareholders' Equity - Years ended December 31, 2018 and 2017 |
• | Consolidated Statements of Cash Flows - Years ended December 31, 2018 and 2017 |
• | Notes to the Consolidated Financial Statements |
2. | Additional financial statement schedules and report of independent registered accounting firm are furnished herewith pursuant to the requirements of Form 10-K: |
The National Security Group, Inc. | |
Schedule I | Summary of Investments Other Than Investments in Related Parties |
Schedule II | Condensed Financial Information of the Registrant |
Schedule III | Supplementary Insurance Information |
Schedule IV | Reinsurance |
Schedule V | Valuation and Qualifying Accounts |
3. | Exhibits filed as part of this Form 10-K: |
11. | Computation of Earnings Per Share filed Herewith, See Note 1 to Consolidated Financial Statements. |
14. | Code of Ethics, See Additional Information in Part 1, Item 1 of This Report |
Subsidiaries of the Registrant | |
Certification Pursuant to 18 U. S. C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
Certification Pursuant to 18 U. S. C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
Certification Pursuant to 18 U. S. C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
Date of Report | Date Filed | Description | ||
October 18, 2018 | October 18, 2018 | |||
October 19, 2018 | October 22, 2018 | |||
November 13, 2018 | November 13, 2018 |
/s/ Brian R. McLeod | /s/ William L. Brunson, Jr. | |
Brian R. McLeod | William L. Brunson, Jr. | |
Chief Financial Officer and Treasurer | President, Chief Executive Officer and Director |
/s/ Charles Arnold | /s/ Mickey L. Murdock |
/s/ Fleming Brooks | /s/ Frank B. O'Neil |
/s/ Jack E. Brunson | /s/ Donald Pittman |
/s/ William L. Brunson, Jr. | /s/ Paul C. Wesch |
/s/ Fred D. Clark, Jr. | /s/ L. Brunson White |
/s/ Elizabeth Crawford | /s/ Walter P. Wilkerson |
/s/ Brian R. McLeod |
Subsidiaries of The National Security Group, Inc. | State of Incorporation | |
The National Security Insurance Company (NSIC) | Alabama | |
The National Security Fire & Casualty Company (NSFC) | Alabama | |
Omega One Insurance Company (Omega One) | Alabama |
Date: March 15, 2019 | |
/s/ William L. Brunson, Jr. | |
William L. Brunson, Jr. | |
President and Chief Executive Officer |
Date: March 15, 2019 | |
/s/ Brian R. McLeod | |
Brian R. McLeod | |
Chief Financial Officer |
Date: March 15, 2019 | |||
/s/ William L. Brunson, Jr. | /s/ Brian R. McLeod | ||
Name: William L. Brunson, Jr. Title: Chief Executive Officer | Name: Brian R. McLeod, CPA Title: Chief Financial Officer |
Document and Entity Information Document - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Mar. 15, 2019 |
Jun. 30, 2018 |
|
Document and Entity Information [Abstract] | |||
Entity Registrant Name | NATIONAL SECURITY GROUP INC | ||
Entity Central Index Key | 0000865058 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Smaller Reporting Company | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Common Stock, Shares Outstanding | 2,527,136 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 19,777,251 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Investments | ||
Fixed maturities held-to-maturity, at estimated fair value | $ 1,443 | $ 1,645 |
Fixed maturities available-for-sale, at cost | 96,877 | 94,467 |
Equity securities, at cost | $ 1,842 | $ 1,842 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
REVENUES | ||
Net premiums earned | $ 60,856 | $ 61,163 |
Net investment income | 3,567 | 3,647 |
Net investment gains (losses) | (178) | 234 |
Other income | 612 | 596 |
Total Revenues | 64,857 | 65,640 |
BENEFITS, LOSSES AND EXPENSES | ||
Policyholder benefits and settlement expenses | 40,409 | 42,869 |
Amortization of deferred policy acquisition costs | 3,597 | 3,589 |
Commissions | 7,555 | 7,723 |
General and administrative expenses | 8,839 | 8,821 |
Taxes, licenses and fees | 2,157 | 2,445 |
Interest expense | 1,235 | 1,307 |
Total Benefits, Losses and Expenses | 63,792 | 66,754 |
Income (Loss) Before Income Taxes | 1,065 | (1,114) |
INCOME TAX EXPENSE (BENEFIT) | ||
Current | (1,045) | (206) |
Deferred | 1,331 | 295 |
Total income tax expense | 286 | 89 |
Net Income (Loss) | $ 779 | $ (1,203) |
INCOME (LOSS) PER COMMON SHARE BASIC AND DILUTED (in dollars per share) | $ 0.31 | $ (0.48) |
DIVIDENDS DECLARED PER SHARE (in dollars per share) | $ 0.20 | $ 0.20 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income (loss) | $ 779 | $ (1,203) |
Other comprehensive income (loss), net of tax | ||
Unrealized gains (losses) on securities, net of reclassification adjustment of $100 and $153 for 2018 and 2017, respectively | (2,404) | 926 |
Unrealized gain on interest rate swap | 295 | 278 |
Other comprehensive income (loss), net of tax | (2,109) | 1,204 |
Comprehensive income (loss) | $ (1,330) | $ 1 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||
Reclassification adjustment | $ 100 | $ 153 |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - USD ($) $ in Thousands |
Total |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Common Stock |
Additional Paid-in Capital |
---|---|---|---|---|---|
Balance at Dec. 31, 2016 | $ 48,052 | $ 39,116 | $ 1,007 | $ 2,517 | $ 5,412 |
Net income (loss) | (1,203) | (1,203) | |||
Other comprehensive income (Loss) (net of tax) | 1,204 | 1,204 | |||
Reclassification of tax effects to AOCI | (435) | 435 | |||
Common stock issued | 76 | 5 | 71 | ||
Cash dividends | (504) | (504) | |||
Balance at Dec. 31, 2017 | 47,625 | 36,974 | 2,646 | 2,522 | 5,483 |
Cumulative effect of change in accounting principle | 0 | 2,107 | (2,107) | ||
Net income (loss) | 779 | 779 | |||
Other comprehensive income (Loss) (net of tax) | (2,109) | (2,109) | |||
Common stock issued | 76 | 5 | 71 | ||
Cash dividends | (505) | (505) | |||
Balance at Dec. 31, 2018 | $ 45,866 | $ 39,355 | $ (1,570) | $ 2,527 | $ 5,554 |
SIGNIFICANT ACCOUNTING POLICIES |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SIGNIFICANT ACCOUNTING POLICIES | SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements include the accounts of The National Security Group, Inc. (the Company) and its wholly-owned subsidiaries: National Security Insurance Company (NSIC), National Security Fire and Casualty Company (NSFC) and NATSCO, Inc. (NATSCO). NSFC includes a wholly-owned subsidiary, Omega One Insurance Company (Omega). The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the consolidated financial statements have been included. All significant intercompany transactions and accounts have been eliminated in the consolidated financial statements. The financial information presented herein should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, which includes information and disclosures not presented herein. Description of Business NSIC is licensed in the states of Alabama, Florida, Georgia, Mississippi, South Carolina, Tennessee and Texas and was organized in 1947 to provide life and burial insurance policies to the home service market. Business is produced by both company and independent agents. Primary products include ordinary life, accident and health, supplemental hospital, and cancer insurance products. NSFC is licensed in Alabama, Arkansas, Florida, Georgia, Kentucky, Mississippi, Oklahoma, South Carolina, Tennessee and West Virginia. In addition, NSFC operates on a surplus lines basis in Louisiana. NSFC operates in various property and casualty lines, the most significant of which are: dwelling fire and extended coverage, homeowners and mobile homeowners. Omega is licensed in the states of Alabama and Louisiana. Omega currently has no insurance policies in-force but is party to an intercompany reinsurance agreement with NSFC. Intercompany transactions are eliminated upon consolidation in the accompanying consolidated financial statements. The Company is incorporated under the laws of the State of Delaware. Its common stock is traded on the NASDAQ Global Market under the ticker symbol NSEC. Pursuant to the regulations of the United States Securities and Exchange Commission (SEC), the Company is considered a “Smaller Reporting Company” as defined by SEC Rule 12b-2 of the Exchange Act. The Company has elected to comply with the scaled disclosure requirements of Regulation S-K and only two years of financial statements are included herein. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Among the more significant estimates included in these consolidated financial statements are reserves for future life insurance policy benefits, liabilities for losses and loss adjustment expenses, reinsurance recoverable associated with loss and loss adjustment expense liabilities, deferred policy acquisition costs, deferred income tax assets and liabilities, assessments of other-than-temporary impairments on investments and accruals for contingencies. Actual results could differ from the estimates used in preparing these consolidated financial statements. Concentration of Risk The Company's property and casualty subsidiaries, composing 90% of consolidated direct written premium, produced business during 2018 in eight states. However, 53% of property and casualty segment direct written premium is generated in the states of Alabama, Mississippi and Louisiana, subjecting the Company to significant geographic concentration. Consequently, adverse weather conditions or changes in the legal, regulatory or economic environment could adversely impact the Company. The Company's life, accident and health insurance subsidiary, composing approximately 10% of consolidated direct written premium, is licensed in seven states. However, over 79% of life segment direct premium is generated in the states of Alabama and Georgia. Consequently, changes in the legal, regulatory or economic environment in these states could adversely impact the Company. For the year ended December 31, 2018, one agency individually produced greater than 5% of the Company's direct written premium. Investments The Company's investment securities are classified as follows:
Changes in fair value of trading securities are reported in the statement of operations. Changes in fair value of fixed maturity securities available-for-sale are reported as net unrealized gains or losses as a component of other comprehensive income. Changes in fair value of equity securities available-for-sale are reported as investment gains/losses in the statement of operations. Prior to January 1, 2018, changes in fair value of equity securities available-for-sale were reported as net unrealized gains or losses as a component of other comprehensive income. Gains and losses were recorded in the statement of operations only when equity securities were sold or were other-than-temporarily impaired. Investment gains and losses on fixed maturity securities arise when the investments are sold. Investment gains and losses on the sale of fixed maturity investments available-for-sale are determined using the specific-identification method and include write downs for fixed maturity securities considered to be other-than-temporarily impaired. When a fixed maturity security has a decline in value, where fair value is below amortized cost, an other-than-temporary impairment (OTTI) is triggered in circumstances where:
If the Company intends to sell the security or if it is more-likely-than-not the Company will be required to sell the security before recovery, an OTTI is recognized as a realized loss in the statement of operations equal to the difference between the security's amortized cost and its fair value. If the Company does not intend to sell the security or it is not more-likely-than-not that the Company will be required to sell the security before recovery, the OTTI is separated into an amount representing the credit loss, which is recognized as a investment loss in the statement of operations, and the amount related to all other factors, which is recognized in other comprehensive income. Interest on fixed income securities is credited to income as it accrues on the principal amounts outstanding adjusted for amortization of premiums and accretion of discounts computed utilizing the interest method. Premiums and discounts on mortgage backed securities amortize or accrete using anticipated prepayments with changes in anticipated prepayments accounted for prospectively. The model used to determine anticipated prepayment assumptions for mortgage backed securities uses separate home sale, refinancing, curtailment and pay-off assumptions derived from a variety of industry sources. Mortgage backed security valuations are subject to prospective adjustments in yield due to changes in prepayment assumptions. The utilization of the prospective method will result in a recalculated effective yield that will equate the carrying amount of the investment to the present value of the projected future cash flows. The recalculated yield is used to accrue income on investments for subsequent periods. Mortgage loans and policy loans are stated at the unpaid principal balance of such loans, net of any related allowance for loan losses. Investment real estate is reported at cost, less allowances for depreciation computed on the straight-line basis. Investment real estate consists primarily of undeveloped commercial real estate. Other investments consist primarily of investments in notes and equity investments in limited liability companies. The Company has no influence or control over the operating or financial policies of the limited liability companies, and consequently, these investments are accounted for using the cost method. The Company owns life insurance (COLI) contracts on certain management and supervisory employees each having a face amount of approximately $2,000,000 (including cash surrender value at the time of payment). The Company's original investment in currently in-force company owned life insurance is $4,315,000. The primary purpose of the program is to offset future employee benefit expenses through earnings on the cash value of the policies. The Company is the owner and principal beneficiary of these policies. The life insurance contracts are carried at their current cash surrender value. Cash surrender value at December 31, 2018 and December 31, 2017 was $4,600,000 and $4,974,000, respectively. Changes in cash surrender values are included in the statement of operations. The change in surrender value included in the statement of operations for the years ended December 31, 2018 and 2017 was a decrease of $374,000 and an increase of $110,000, respectively. Proceeds from the COLI contracts are recorded when the benefits become payable under the terms of the policy and proceeds in excess of cash surrender value are recognized as a gain on company owned life insurance. Cash and cash equivalents consist of demand deposit and money market accounts and investments with maturities of three months or less when purchased. Cash and cash equivalents are carried at cost, which approximates fair value. Investments with other-than-temporary impairment in value are written down to estimated realizable values and losses recognized as a component of investments gains and losses in the Consolidated Statements of Operations. The fair value of the investment becomes its new cost basis. Fair Values of Financial Instruments The Company uses the following methods and assumptions to estimate fair values: Investments
Receivables and reinsurance recoverable - The carrying amounts reported approximate fair value. Interest rate swaps - The estimated fair value of the interest rate swaps is based on valuations received from financial institution counterparties. Trust preferred securities obligations and line of credit obligations - The carrying amounts reported for these instruments are equal to the principal balance outstanding and approximate fair value. Policy Receivables Receivable balances are reported at unpaid balances, less a provision for credit losses. Accounts Receivable Accounts receivable are reported at net realizable value. Management determines the allowance for doubtful accounts based on historical losses and current economic conditions. On a continuing basis, management analyzes delinquent receivables, and once these receivables are determined to be uncollectible, they are written off through a charge against an existing allowance account or against earnings. Property and Equipment Property and equipment is carried at cost less accumulated depreciation and includes expenditures that substantially increase the useful lives of existing property and equipment. Significant costs incurred for internally developed software are capitalized and amortized over estimated useful lives of 3 years. Maintenance, repairs, and minor renovations are charged to expense as incurred. Upon sale or retirement of property and equipment, the costs and related accumulated depreciation are eliminated from the respective account and the resulting gain or loss is included in the statement of operations. The Company provides for depreciation of property and equipment using the straight-line method designed to amortize costs over estimated useful lives. Estimated useful lives range up to 40 years for buildings and from 3-10 years for equipment, furniture and fixtures. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Statement of Cash Flows For purposes of reporting cash flows, cash includes cash-on-hand, demand deposits with banks and overnight investments consisting primarily of repurchase agreements. Premium Revenue Life insurance premiums are recognized as revenues when due. Property and casualty insurance premiums include direct writings plus reinsurance assumed less reinsurance ceded and are recognized on a pro-rata basis over the terms of the policies. Unearned premiums represent that portion of direct premiums written that are applicable to the unexpired terms of policy contracts in force and is reported as a liability. Prepaid reinsurance premiums represent the unexpired portion of premiums ceded to reinsurers and are reported as an asset. Deferred Policy Acquisition Costs The costs of acquiring new insurance business are deferred and amortized over the lives of the policies. Deferred costs include commissions, premium taxes, other agency compensation and expenses, and other underwriting expenses directly related to the level of new business produced. Acquisition costs relating to life contracts are amortized over the premium paying period 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 limits the amount deferred to a percentage of related unearned premiums. Policy Liabilities The liability for future life insurance policy benefits is computed using a net level premium method including the following assumptions:
Mortality assumptions include various percentages of the 1955-60 and 1965-70 Select and Ultimate Basic Male Mortality Table. Withdrawal assumptions are based on the Company's experience. Policyholder Benefit and Claim Settlement Expenses The liability for unpaid claims represents the estimated liability for unpaid loss and loss adjustment expenses incurred but not yet reported under insurance contracts for loss events that have occurred on or before the balance sheet date. The liability for claims and related adjustment expenses are determined using case-basis evaluations and statistical analysis and represent estimates of the ultimate net cost of all losses incurred through December 31 of each year. Liability estimates are continually reviewed and adjusted as necessary; such adjustments are included in the period in which they are determined. Liability estimates are based on reports of losses from policyholders, individual case loss estimates, and estimates of losses incurred but not yet reported. Policyholder benefit and settlement expenses in the consolidated statement of operations include paid claims, settlement cost and changes in claim liability estimates. Loss and adjustment expenses charged to earnings are net of amounts recovered and estimates of recoverable amounts under ceded reinsurance contracts. Earnings Per Share Earnings per share of common stock is based on the weighted average number of shares outstanding during each year. The adjusted weighted average shares outstanding were 2,525,325 at December 31, 2018 and 2,520,431 at December 31, 2017. The Company did not have any dilutive securities as of December 31, 2018 and 2017. Reinsurance The Company's insurance operations re-insure certain risks in order to limit losses, minimize exposure to large risks, provide additional capacity for future growth and effect business-sharing arrangements. See Note 10 for additional information regarding the Company's reinsurance practices. Income Taxes The Company files a consolidated United States federal income tax return that includes the holding company and its subsidiaries. The Company is currently subject to a statutory rate of 21%. Tax related interest and penalties are reported as components of income tax expense. The Company uses the asset and liability method of accounting for income taxes. Deferred income taxes arise from the recognition of temporary differences between financial statement carrying amounts and the tax basis of the Company's assets and liabilities and capital or operating loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. The effect of a change in tax rates is recognized in the period the new rate is enacted. Changes in deferred tax assets and liabilities are included as a component of income tax expense, with the exception of changes impacting other comprehensive income. Changes in deferred tax assets and liabilities associated with components of other comprehensive income are charged or credited to other comprehensive income. The Company evaluates all tax positions taken on its U.S. federal income tax return. No material uncertainties exist for any tax positions taken by the Company. Contingencies Liabilities for loss contingencies arising from, but not limited to, litigation, claims, assessments, fines and penalties are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Significant attorney fees are estimated and recorded when incurred. Reclassifications Certain 2017 amounts have been reclassified from the prior year consolidated financial statements to conform to the 2018 presentation. Advertising The Company expenses advertising costs as incurred. Concentration of Credit Risk The Company maintains cash balances which are generally held in non-interest bearing demand deposit accounts subject to FDIC insured limits of $250,000 per entity. At December 31, 2018, the net amount exceeding FDIC insured limits was $3,897,000 at three financial institutions. The Company has not experienced any losses in such accounts. Management of the Company reviews financial information of financial institutions on a quarterly basis and believes the Company is not exposed to any significant credit risk on cash and cash equivalents. Policy receivables are reported at unpaid balances. Policy receivables are generally offset by associated unearned premium liabilities and are not subject to significant credit risk. Receivables from agents, less provision for credit losses, are composed of balances due from independent agents. At December 31, 2018, the single largest balance due from one agent totaled $516,000. Reinsurance contracts do not relieve the Company of its obligations to policyholders. A failure of a reinsurer to meet its obligation could result in losses to the insurance subsidiaries. Allowances for losses on reinsurance recoverables are established if amounts are believed to be uncollectible. At December 31, 2018 and December 31, 2017, no amounts were deemed uncollectible. The Company, at least annually, evaluates the financial condition of all reinsurers and evaluates any potential concentrations of credit risk. At December 31, 2018, management does not believe the Company is exposed to any significant credit risk related to its reinsurance program. Accounting Changes Not Yet Adopted Changes to the Disclosure Requirements for Fair Value Measurement In August 2018, the FASB issued guidance to that removes, modifies and adds to the disclosure requirements related to fair value measurements. The guidance removes the requirements to disclose the amount and reasons for transfers between Level 1 and Level 2 assets, the policy for timing and transfers between levels and the valuation process for Level 3 fair value measurements. The guidance modifies disclosure requirements for investments in certain entities that calculate net asset value and clarifies the purpose of the measurement uncertainty disclosure. The guidance adds requirements to disclose changes in unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value measurements and to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company does not expect the adoption to have a material impact on its financial position or results of operations. Targeted Improvements to the Accounting for Long-Duration Contracts In August 2018, the FASB issued guidance to improve the existing recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity. The guidance improves timeliness of recognizing changes in the liability for future policy benefits and modifies the rate used to discount future cash flows. The guidance will simplify and improve accounting for certain market-based options or guarantees associated with deposit type contracts and simplify the amortization of deferred policy acquisition costs. The guidance also introduces certain financial statement presentation requirements, as well as significant additional quantitative and qualitative disclosures. The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this new guidance. Due to the nature and extent of the changes required to the Company’s life insurance operations, the adoption of this standard is expected to have a material impact on the consolidated financial statements. Contingent Put and Call Options in Debt Instruments In March 2016, the FASB issued guidance that clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those years. The Company does not expect the adoption to have a material impact on its financial position or results of operations. Financial Instruments - Credit Losses In June 2016, the FASB issued guidance that replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The FASB released additional guidance in November 2018 that provides scope clarification. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those years. The Company does not expect the adoption to have a material impact on its financial position or results of operations. Recently Adopted Accounting Standards Improvements to Nonemployee Share-Based Payment Accounting In June 2018, the FASB issued guidance to simplify the accounting for nonemployee share-based payment awards. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year The Company does not make any material share-based payments. The Company adopted this guidance on January 1, 2019. The adoption of this guidance did not have a material impact on its financial position or results of operations. Income Statement - Reporting Comprehensive Income In February 2018, the FASB issued guidance that allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The guidance eliminates the stranded tax effects resulting from the Tax Cuts and Jobs Act and improves the usefulness of information reported to financial statement users. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those periods. Early adoption is permitted. The Company adopted this guidance as of December 31, 2017. The adoption of this guidance resulted in a $435,000 reclassification to accumulated other comprehensive income from retained earnings related to stranded tax effects resulting from the Tax Cuts and Jobs Act. Receivables - Nonrefundable Fees and Other Costs In March 2017, the FASB issued guidance that shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. The guidance is effective for fiscal years beginning after December 15, 2018 and interim reporting periods within those fiscal years. The Company adopted this guidance on January 1, 2019. The adoption of this guidance did not have a significant impact on our financial position, results of operations or cash flows. Derivatives and Hedging In August 2017, the FASB issued guidance that amends and simplifies hedge accounting guidance in order to enable entities to better portray the economic results of their risk management activities. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those periods. Early adoption is permitted. The Company adopted this guidance on January 1, 2019. The Company has two swaps designated as cash flow hedges. One expires March 15, 2019 and one expires March 15, 2020. The adoption of this guidance did not have a significant impact on our financial position, results of operations, cash flows or related disclosures. Leases In February 2016, the FASB issued guidance that requires lessees (for capital and operating leases) to recognize the lease liability and right-of-use asset at the commencement date of the lease. Additional transition guidance was issued in 2018. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. The Company adopted this guidance on January 1, 2019. The Company leases automobiles and some office equipment. These leases are not considered material. The adoption of this guidance did not have a material impact on its financial position or results of operations. Revenue from Contracts with Customers In May 2014, FASB issued guidance on a comprehensive new revenue recognition standard. This standard will not impact accounting for insurance contracts, leases, financial instruments and guarantees. For those contracts that are impacted by the new guidance, the guidance will require an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to, in exchange for those goods or services. The guidance requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued a deferral of the effective date by one year. This guidance is effective retrospectively for fiscal years beginning after December 15, 2017 and interim periods within those years. Early adoption of this standard is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Insurance contracts are specifically scoped out of this new guidance. The Company does not have policy fees or any material services that may be subject to the new revenue recognition guidance. The Company adopted this guidance as of January 1, 2018. The adoption of this guidance did not have an impact on its consolidated financial statements. Recognition and Measurement of Financial Assets and Financial Liabilities In January 2016, the FASB issued guidance that requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. The guidance requires entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes and requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset. The guidance eliminates the requirement for public companies to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. This guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The Company adopted this guidance as of January 1, 2018. The adoption of this guidance resulted in a $2,107,000 reclassification to retained earnings from accumulated other comprehensive income related to accumulated unrealized gains on equity securities as well as recognition of a $160,000 loss, net of tax, related to the change in value of equity securities. Classification of Certain Cash Receipts and Cash Payments In August 2016, the FASB issued guidance that clarifies how certain cash receipts and cash payments shall be presented and classified in the statement of cash flows. This guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company adopted this guidance as of January 1, 2018. The adoption of this guidance did not have a significant impact on our financial position, results of operations or cash flows. Compensation - Stock Compensation In May 2017, the FASB issued guidance to provide clarity and reduce diversity in practice as well as cost and complexity when there is a change in the terms or conditions of a share-based payment award. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The Company adopted this guidance as of January 1, 2018. The adoption of this guidance did not have a significant impact on our financial position, results of operations or cash flows. |
VARIABLE INTEREST ENTITIES |
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Variable Interest Entities [Abstract] | |
VARIABLE INTEREST ENTITIES | VARIABLE INTEREST ENTITIES The Company holds a passive interest in a limited partnership that is considered to be a Variable Interest Entity (VIE) under the provisions of ASC 810 Consolidation. The Company is not the primary beneficiary of the entity and is not required to consolidate under ASC 810. The entity is a private placement investment fund formed for the purpose of investing in private equity investments. The Company owns less than 1% of the limited partnership. The carrying value of the investment totals $116,000 and is included as a component of Other Invested Assets in the accompanying consolidated balance sheets. In December 2005, the Company formed National Security Capital Trust I, a statutory trust created under the Delaware Statutory Trust Act, for the sole purpose of issuing, in private placement transactions, $9,000,000 of trust preferred securities (TPS) and using the proceeds thereof, together with the equity proceeds received from the Company in the initial formation of the Trust, to purchase $9,279,000 of variable rate subordinated debentures issued by the Company. The Company owns all voting securities of the Trust and the subordinated debentures are the sole assets of the Trust. The Trust will meet the obligations of the TPS with the interest and principal paid on the subordinated debentures. The Company received net proceeds from the TPS transactions, after commissions and other costs of issuance, of $9,005,000. The Company also holds all the voting securities issued by the Trust and such trusts are considered to be VIE's. The Trust is not consolidated because the Company is not the primary beneficiary of the trust. The Subordinated Debentures, disclosed in Note 8, are reported in the accompanying consolidated balance sheets as a component of long-term debt. The Company's equity investments in the Trust total $279,000 and are included in Other Assets in the accompanying consolidated balance sheets. In June 2007, the Company formed National Security Capital Trust II for the sole purpose of issuing, in private placement transactions, $3,000,000 of trust preferred securities (TPS) and using the proceeds thereof, together with the equity proceeds received from the Company in the initial formation of the Trust, to purchase $3,093,000 unsecured junior subordinated deferrable interest debentures. The Company owns all voting securities of the Trust and the subordinated debentures are the sole assets of the Trust. The Trust will meet the obligations of the TPS with the interest and principal paid on the subordinated debentures. The Company received net proceeds from the TPS transactions, after commissions and other costs of issuance, of $2,995,000. The Company also holds all the voting securities issued by the Trust and such trusts are considered to be VIE's. The Trust is not consolidated because the Company is not the primary beneficiary of the Trust. The Subordinated Debentures, disclosed in Note 8, are reported in the accompanying consolidated balance sheets as a component of long-term debt. The Company's equity investments in the Trust total $93,000 and are included in Other Assets in the accompanying consolidated balance sheets. |
STATUTORY ACCOUNTING PRACTICES |
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STATUTORY ACCOUNTING PRACTICES | 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 income (loss) and capital and surplus, excluding intercompany transactions, are summarized as follows:
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. |
INVESTMENTS |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENTS | INVESTMENTS Our investment in available-for-sale securities, which are reported at fair value, includes fixed maturity securities and equity securities. Net unrealized gains or losses on equity securities prior to January 1, 2018, and on fixed maturities are reported after-tax as a component of other comprehensive income. As of January 1, 2018, changes in fair value of equity securities are reported in investment gains/losses as a component of net income. The amortized cost and aggregate fair values of investments in available-for-sale securities as of December 31, 2018 are as follows (dollars in thousands):
The amortized cost and aggregate fair values of investments in held-to-maturity securities as of December 31, 2018 are as follows (dollars in thousands):
The amortized cost and aggregate fair values of investments in available-for-sale securities as of December 31, 2017 are as follows (dollars in thousands):
The amortized cost and aggregate fair values of investments in held-to-maturity securities as of December 31, 2017 are as follows (dollars in thousands):
The amortized cost and aggregate fair value of debt securities at December 31, 2018, by contractual maturity, are presented in the following table (dollars in thousands). Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
A summary of securities available-for-sale with unrealized losses as of December 31, 2018, along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows (dollars in thousands):
A summary of securities held-to-maturity with unrealized losses as of December 31, 2018 along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows:
A summary of securities available-for-sale with unrealized losses as of December 31, 2017, along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows (dollars in thousands):
There were no equity securities or securities held-to-maturity with unrealized losses as of December 31, 2017. The Company conducts periodic reviews to identify and evaluate securities in an unrealized loss position in order to identify other-than-temporary impairments. For securities in an unrealized loss position, the Company assesses whether the Company has the intent to sell the security or more-likely-than-not will be required to sell the security before the anticipated recovery. If either of these conditions is met, the Company is required to recognize an other-than-temporary impairment with the entire unrealized loss reported in earnings. For securities in an unrealized loss position that do not meet these conditions, the Company assesses whether the impairment of a security is other-than-temporary. If the impairment is determined to be other-than-temporary, the Company is required to separate the other-than-temporary impairments into two components: the amount representing the credit loss and the amount related to all other factors. The credit loss is the portion of the amortized book value in excess of the net present value of the projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment. The credit loss component of other-than-temporary impairments is reported in earnings, whereas the amount relating to factors other than credit losses are recorded in other comprehensive income, net of taxes. Management has evaluated each security in a significant unrealized loss position in the fixed maturity investment portfolio. The Company has no material exposure to sub-prime mortgage loans and approximately 4.69% of the fixed income investment portfolio is rated below investment grade. Based on a review of the available financial information, the prospect for future earnings of each company and consideration of the Company’s intent and ability to hold the securities until market values recovered, it was determined that, other than the impairment described below, the securities in an accumulated loss position in the portfolio were temporary impairments. For the year ended December 31, 2018, the Company realized a $16,000 other-than-temporary impairment representing a credit loss on a mortgage backed security. For the year ended December 31, 2017, the Company realized no other-than-temporary impairments. At December 31, 2018, the three largest losses not realized as an impairment in the fixed maturity portfolio totaled $145,000, $99,000 and $94,000. Each of these losses were driven by changes in market interest rates. At December 31, 2017, the single largest loss not realized as an impairment was in the fixed maturity portfolio totaled $75,000. The second largest loss position in the fixed maturity portfolio totaled $60,000. The third largest loss position in fixed maturity portfolio totaled $53,000. Major categories of investment income are summarized as follows (dollars in thousands):
Major categories of investment gains and losses are summarized as follows (dollars in thousands):
An analysis of the net change in unrealized gains and losses on available-for-sale securities follows (dollars in thousands):
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FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES | FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES Our available-for-sale securities consists of fixed maturity and equity securities which are recorded at fair value in the accompanying consolidated balance sheets. We are permitted to elect to measure financial instruments and certain other items at fair value, with the change in fair value recorded in earnings. We elected not to measure any eligible items using the fair value option. Accounting standards define fair value as the price that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework to make the measurement of fair value more consistent and comparable. In determining fair value, we primarily use prices and other relevant information generated by market transactions involving identical or comparable assets. The Company categorizes assets and liabilities carried at their fair value based upon a fair value hierarchy: Level 1 – Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 1 assets and liabilities consist of money market fund deposits and certain of our marketable debt and equity instruments, including equity instruments offsetting deferred compensation, that are traded in an active market with sufficient volume and frequency of transactions. Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets include certain of our marketable debt and equity instruments with quoted market prices that are traded in less active markets or priced using a quoted market price for similar instruments. Level 2 assets also include marketable equity instruments with security-specific restrictions that would transfer to the buyer, marketable debt instruments priced using indicator prices which represent non-binding market consensus prices that can be corroborated by observable market quotes, as well as derivative contracts and debt instruments priced using inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Marketable debt instruments in this category generally include commercial paper, bank time deposits, repurchase agreements for fixed-income instruments, and a majority of floating-rate notes, corporate bonds, and municipal bonds. Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. Level 3 assets and liabilities include marketable debt instruments, non-marketable equity investments, derivative contracts, and company issued debt with values are determined using inputs that are both unobservable and significant to the values of the instruments being measured. Level 3 assets also include marketable debt instruments that are priced using indicator prices that we were unable to corroborate with observable market quotes. Marketable debt instruments in this category generally include asset-backed securities and certain floating-rate notes, corporate bonds, and municipal bonds. Assets/Liabilities Measured at Fair Value on a Recurring Basis Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 are summarized in the following table by the type of inputs applicable to the fair value measurements (in thousands):
The methods and assumptions the Company uses to estimate the fair value of assets and liabilities measured at fair value on a recurring basis are summarized below. Fixed maturities available-for-sale — The fair values of the Company’s public fixed maturity securities are generally based on prices obtained from independent pricing services. Consistent with the fair value hierarchy described above, securities with validated quotes from pricing services are generally reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs. Trading securities — Trading securities consist primarily of mutual funds whose fair values are determined consistent with similar instruments described above under “Fixed Maturities” and below under “Equity Securities.” Equity securities — Equity securities consist principally of investments in common and preferred stock of publicly traded companies and privately traded securities. The fair values of our publicly traded equity securities are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the fair value hierarchy. Estimated fair values for our privately traded equity securities require a substantial level of judgment. Privately traded equity securities are classified within Level 3. Interest rate swaps — Interest rate swaps are recorded at fair value either as assets, within other assets or as liabilities, within other liabilities. The fair values of our interest rate swaps are provided by a third-party broker and are classified within Level 3. As of December 31, 2018, Level 3 fair value measurements of assets include $1,125,000 of equity securities in a local community bank whose value is based on an evaluation of the financial statements of the entity. The Company does not develop the unobservable inputs used in measuring fair value. As of December 31, 2018, Level 3 fair value measurements of liabilities include $234,000 net fair value of various interest rate swap agreements whose value is based on analysis provided by a third party that utilizes financial modeling tools and assumptions on interest and other factors. The Company does not develop the unobservable inputs used in measuring fair value. Additional information regarding the interest rate swap agreements is provided in Note 8. The table below presents a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2018 (in thousands):
For the year ended ended December 31, 2018, there were no assets or liabilities measured at fair values on a nonrecurring basis. Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2017 are summarized in the following table by the type of inputs applicable to the fair value measurements (in thousands):
The table below presents a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2017 (in thousands):
For the year ended December 31, 2017, there were no assets or liabilities measured at fair values on a nonrecurring basis. The Company is exposed to certain risks in the normal course of its business operations. The primary risk that is managed through the use of derivatives is interest rate risk on floating rate borrowings. This risk is managed through the use of interest rate swap agreements which are designated as cash flow hedges. For cash flow hedges, the effective portion of the gain or loss on the interest rate swap is included as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction is recognized in earnings. The Company does not hold or issue derivatives that are not designated as hedging instruments. See Note 8 for additional information about the interest rate swap agreements. The following methods and assumptions were used to estimate fair value of each class of financial instrument for which it is practical to estimate that value: Cash and cash equivalents — the carrying amount is a reasonable estimate of fair value. Fixed maturities held-to-maturity — the carrying amount is amortized cost; the fair values of the Company’s public fixed maturity securities that are classified as held-to-maturity are generally based on prices obtained from independent pricing services. Mortgage loans — the carrying amount is a reasonable estimate of fair value due to the restrictive nature and limited marketability of the mortgage notes. Policy loans — the carrying amount is a reasonable estimate of fair value. Company owned life insurance — the carrying amount is a reasonable estimate of fair value. Other invested assets — the carrying amount is a reasonable estimate of fair value. Other policyholder funds — the carrying amount is a reasonable estimate of fair value. Debt — the carrying amount is a reasonable estimate of fair value. The carrying amount and estimated fair value of the Company’s financial instruments as of December 31, 2018 and December 31, 2017 are as follows (in thousands):
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PROPERTY AND EQUIPMENT |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT | PROPERTY AND EQUIPMENT Major categories of property and equipment are summarized as follows (dollars in thousands):
Depreciation expense for the year ended ended December 31, 2018 was $161,000 ($121,000 for the year ended December 31, 2017). |
INCOME TAXES |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | INCOME TAXES On December 22, 2017, the President signed the Tax Cuts and Jobs Act (TCJA), a comprehensive tax legislation which, among other things, reduced the Company's statutory federal income tax rate from 34% to 21% effective January 1, 2018. In addition to the reduction in tax rates, the TCJA makes broad and complex changes to the Internal Revenue Code that will introduce changes to many tax related exclusions, deductions and credits. At December 31, 2017, $1,575,000 in AMT credit was booked as a deferred tax asset. Effective December 31, 2018, the Company recognized the AMT credit in federal income tax recoverable as Management anticipates $1,077,000 will be recovered with the 2018 return and the remainder recovered by 2021 pursuant to allowable amounts under the TCJA. Management believes that, based on its historical pattern of taxable income, the Company will produce sufficient income in the future to realize its deferred tax assets. The Company recognized net deferred tax asset positions of $716,000 at December 31, 2018 and $1,487,000 at December 31, 2017. The tax effect of significant differences representing deferred tax assets and liabilities are as follows (dollars in thousands):
The appropriate income tax effects of changes in temporary differences are as follows (dollars in thousands):
Total income tax expense (benefit) varies from amounts computed by applying current federal income tax rates to income or loss before income taxes. The reasons for these differences and the approximate tax effects are as follows:
The Company recognizes tax-related interest and penalties as a component of tax expense. The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is not subject to examinations by authorities related to its U.S. federal or state income tax filings for years prior to 2014. Tax returns have been filed through the year 2017. |
NOTES PAYABLE AND LONG-TERM DEBT |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES PAYABLE AND LONG-TERM DEBT | NOTES PAYABLE AND LONG-TERM DEBT Short-term debt and current portion of long-term debt consisted of the following as of December 31, 2018 and December 31, 2017 (dollars in thousands):
Long-term debt consisted of the following as of December 31, 2018 and December 31, 2017 (dollars in thousands):
Annual maturities of all outstanding debt for the next five years and beyond are as follows (dollars in thousands):
The Company has entered into various swap agreements related to the trust preferred securities. On March 19, 2009, the Company entered into a forward swap effective September 17, 2012, with a notional amount of $3,000,000 and designated the swap as a hedge against changes in cash flows attributable to changes in the benchmark interest rate (LIBOR) associated with the subordinated debentures issued June 21, 2007. Quarterly, commencing September 17, 2012, under the terms of the forward swap, the Company will pay interest at a fixed rate of 7.02% until March 15, 2019. On May 26, 2010, the Company entered into a forward swap with a notional amount of $9,000,000 effective December 15, 2015, which hedges against changes in cash flows following the termination of the fixed rate period. Quarterly, commencing March 16, 2016 under the terms of the forward swap, the Company pays interest at a fixed rate of 8.49% until March 15, 2020. The swaps entered into in 2009 and 2010 have fair values of $6,000 (liability) and $228,000 (liability), respectively, for a total liability of $234,000 at December 31, 2018 ($608,000 at December 31, 2017). The swap liability is reported as a component of other liabilities on the consolidated balance sheets. A net valuation gain of $295,000 (net of tax) is included in accumulated other comprehensive income related to the swap agreements at December 31, 2018. A net valuation gain of $278,000 (net of tax) was included in accumulated other comprehensive income related to the swap at December 31, 2017. We use dollar offset at the hedge's inception and for each reporting period thereafter to assess whether the derivative used in a hedging transaction is expected to be, and has been, effective in offsetting changes in the fair value of the hedged item. Since inception, no portion of the hedged item has been deemed ineffective. For all hedges, we discontinue hedge accounting if it is determined that a derivative is not expected to be, or has ceased to be, effective as a hedge. The Company’s interest rate swaps include provisions requiring the Company to post collateral when the derivative is in a net liability position. At December 31, 2018, the Company has securities on deposit with fair market values of $932,000 (all of which is posted as collateral). At December 31, 2017, the Company had securities on deposit with fair market values of $1,446,000 (all of which is posted as collateral). See Note 5 for additional information about the interest rate swaps. |
POLICY AND CLAIM RESERVES |
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Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
POLICY AND CLAIM RESERVES | POLICY AND CLAIM RESERVES The Company regularly updates its reserve estimates as new information becomes available and events occur that may impact the resolution of unsettled claims. Reserve estimation can be an inherently uncertain process and reserves estimates can be revised up or down depending on changes in circumstances. Changes in prior years' reserve estimates are reflected in the results of operations in the year such changes are determined. The following table is a reconciliation of beginning and ending property and casualty reserve balances for claims and claim adjustment expense (dollars in thousands):
The slight increase in claim and claim adjustment expense reserves before reinsurance recoverable is primarily due to the increase in reserves associated with Hurricane Florence which occurred in September of 2018. The estimate for claims arising in prior years was reduced $250,000 in 2018 (reduced $1,355,000 in 2017) due to favorable loss development during the year on claims arising in prior years. The Company has a geographic exposure to catastrophe losses in certain areas of the country. Catastrophes can be caused by various events including hurricanes, windstorms, earthquakes, hail, severe winter weather, explosions and fires, and the incidence and severity of catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Most catastrophe losses are restricted to small geographic areas; however, hurricanes and earthquakes may produce significant damage in large, heavily populated areas. The Company generally seeks to reduce its exposure to catastrophes through individual risk selection and the purchase of catastrophe reinsurance. At December 31, 2018, the Company's estimate of unpaid losses and adjustment expenses for claims incurred in prior years related to catastrophes that exceeded our retention totaled $18,000 before reinsurance ($115,000 in 2017). Because the Company has exhausted its catastrophe coverage limits available for Hurricane Katrina any additional development will not be covered by reinsurance. The claim development table that follows present incurred and cumulative paid claims and adjustment expense by accident year. Information presented is undiscounted and net of reinsurance (dollars in thousands). Homeowners, Dwelling Fire and Other Liability
The cumulative number of reported claims presented above is reported on a per claimant basis.
The tables presented above represent homeowners, dwelling fire and other liability lines of business. The Company combined the data for these lines of business because the policy coverage and payout pattern for homeowners and dwelling fire are not materially different. Also, other liability is combined with dwelling fire because liability coverage is only sold as an additional coverage offered only with the dwelling fire policy. The Company offers no stand alone liability products. Management periodically estimates the liability for claims that have been reported but not paid and for claims incurred but not reported (IBNR). Management utilizes expected losses along with historical data analysis of paid and incurred loss development patterns over the past ten years to aide in establishing the claims liability. Management also separately evaluates any recent large events in establishing claim reserves. The Company also engages a consulting actuary to review managements' estimates of claim liabilities each year. There has been no material change in reserving methodology in 2018 compared to prior years. As shown in the table above depicting average annual payout of incurred claims, 87.8% of claims are settled within twelve months of the date of loss and cumulatively, 97.3% of claims are settled within two years of the date of loss. While reserves for reported but unpaid and incurred but not reported claims can ultimately prove to be excessive or deficient, the short duration of the Company's claim liabilities serves to lesson the uncertainty compared to longer tail lines of insurance. The Company has no material exposure to difficult to estimate long tail liabilities such as toxic waste cleanup, asbestos related illness or other environmental remediation exposures.
Accident and Health Claim Reserves The Company, through its life insurance subsidiary, underwrites a limited number of short duration accident and health contracts. These claims are typically settled in three years or less and the reserve for unpaid claims totaled $358,000 at December 31, 2018 ($367,000 at December 31, 2017). These claims are a component of policy and contract claims which totaled $792,000 at December 31, 2018 ($903,000 at December 31, 2017). Cumulative incurred and paid claims over the last three years, along with annual percentage payouts related to accident and health claims, is as follows (dollars in thousands):
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REINSURANCE |
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Dec. 31, 2018 | |||||||||||||
Reinsurance Disclosures [Abstract] | |||||||||||||
REINSURANCE | REINSURANCE The Company's insurance operations utilize reinsurance in the risk management process in order to limit losses, minimize exposure to large risks, provide additional capacity for future growth and effect business-sharing arrangements. Life reinsurance is placed through yearly renewable term coverage. Property and casualty reinsurance is placed on an excess of loss basis to cover losses from catastrophe events. Reinsurance contracts do not relieve the insurance subsidiaries of the obligation indemnify policyholders with respect to the underlying insurance contracts. Failure of re-insurers to honor their obligations could result in credit related losses to the insurance subsidiaries. The insurance subsidiaries evaluate the financial conditions of their reinsurance companies and monitor concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the companies to minimize their exposure to significant losses from reinsurance insolvencies. In the normal course of business, NSFC seeks to reduce the loss that may arise from catastrophes or other individually significant large loss events that cause unfavorable underwriting results or have adverse impacts on regulatory capital levels by re-insuring certain levels of risk in various areas of exposure with reinsurance companies. NSFC maintains a catastrophe reinsurance agreement to cover losses from catastrophic events, primarily hurricanes and tropical storms. Under the catastrophe reinsurance program, the Company retains the first $4,000,000 in losses from each catastrophe event. Catastrophe reinsurance coverage is maintained in three layers as follows:
Each reinsurance layer covers events occurring from January 1 through December 31 of the contract year. All significant reinsurance companies under the program carry A.M. Best ratings of A- (Excellent) or higher, or equivalent ratings. The Company's catastrophe reinsurance contract allows for one reinstatement. The Company maintains reinstatement premium protection (RPP) to cover reinstatement premiums incurred. The RPP further reduces risk from a major catastrophe and serves to protect the Company's capital position by reducing the modeled 100 year event net cost. Amounts recoverable from re-insurers are estimated in a manner consistent with the claim liability associated with the underlying insurance policies. Amounts paid for prospective reinsurance contracts are reported as prepaid reinsurance premiums and amortized over the remaining contract period. In the normal course of business, NSIC seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to reinsurance companies under excess coverage contracts. NSIC retains a maximum of $50,000 of coverage per individual life. Cost is amortized over the reinsurance contract period. At December 31, 2018, the largest reinsurance recoverable of a single reinsurer was $125,000 ($322,000 at December 31, 2017). Amounts reported as ceded incurred losses were related to development of losses from prior year catastrophes. |
EMPLOYEE BENEFIT PLANS |
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Dec. 31, 2018 | |
Retirement Benefits [Abstract] | |
EMPLOYEE BENEFIT PLANS | EMPLOYEE BENEFIT PLANS The Company and its subsidiaries have an established retirement savings plan (401K Plan). All full-time employees are eligible to participate, and all employer contributions are fully vested for employees who have completed 1,000 hours of service in the year of contribution. Company matching contributions for the years ended December 31, 2018 and 2017 amounted to $201,000 and $187,000, respectively. The Company contributes dollar-for-dollar matching contributions up to 5% of compensation subject to government limits. The Company established a non-qualified plan under which Company directors are allowed to defer all or a portion of directors' fees into various investment options. A supplemental executive retirement plan (SERP) covers named executive officers, with the Company contributing 15% of executive compensation to the plan. Contributions to the plan are fully vested upon the earlier of death, disability, change in control, or ten years of participation in the plan. Costs for amounts related to the non-qualified deferred compensation plans for the years ended December 31, 2018 and 2017 amounted to an approximate decrease of $128,000 and increase of $215,000 in employee benefit related expenses, respectively. The Company and its subsidiaries established an Employee Stock Ownership Plan (ESOP) in January 2010, to enable eligible employees to acquire a proprietary interest in the Company's common stock and to provide retirement and other benefits to such employees. There were contributions of $232,000 during the year ended December 31, 2018 and contributions of $268,000 during the year ended December 31, 2017. All contributions were made in cash for purchase of Company shares in the open market. The Company has not allocated newly issued shares directly to the plan and the plan has no debt. |
REGULATORY REQUIREMENTS AND DIVIDEND RESTRICTIONS |
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Dec. 31, 2018 | |
Regulatory Requirements and Dividend Restrictions [Abstract] | |
REGULATORY REQUIREMENTS AND DIVIDEND RESTRICTIONS | REGULATORY REQUIREMENTS AND DIVIDEND RESTRICTIONS The Company is dependent on dividends from its insurance subsidiaries to fund operations and for the payment of shareholder dividends. Dividend payments from the insurance subsidiaries are subject to regulatory review/approval and statutory limitations. The statutory limitations are outlined as follows: The amount of dividends paid from NSIC to the Company in any year may not exceed, without prior approval of regulatory authorities, the greater of 10% of statutory surplus as of the end of the preceding year, or the statutory net gain from operations for the preceding year. At December 31, 2018, NSIC's retained earnings unrestricted for the payment of dividends in the next twelve months amounted to $1,583,000. NSFC is similarly restricted in the amount of dividends payable to the Company; dividends may not exceed the greater of 10% of statutory surplus as of the end of the preceding year, or net income for the preceding year. At December 31, 2018, NSFC's retained earnings unrestricted for the payment of dividends in the next twelve months amounted to $3,464,000. The payment of any subsidiary dividend requires prior notice to the regulatory authorities who may disallow the dividend if, in their judgment, payment of the dividend would have an adverse effect on the surplus of the subsidiary. Additionally, there are other considerations that can limit the payment of dividends to amounts less than statutory limits. Some of these considerations include potential adverse impact on regulatory capital ratios and impact on ratings issued by rating agencies such as A.M. Best and Demotech. At December 31, 2018, securities with market values of $3,031,000 ($2,928,000 at December 31, 2017) were pledged with various states pursuant to statutory requirements. |
SHAREHOLDERS' EQUITY |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHAREHOLDERS' EQUITY | SHAREHOLDERS' EQUITY During the year ended December 31, 2018 and year ended December 31, 2017, changes in shareholders' equity consisted of net income of $779,000 and net loss of $1,203,000, respectively; dividends paid of $505,000 in 2018 and $504,000 in 2017; other comprehensive loss of $2,109,000 in 2018 and other comprehensive income of $1,204,000 in 2017. Other comprehensive income/loss consisted of changes in accumulated unrealized gains/losses on securities available-for-sale and changes in accumulated unrealized losses on interest rate swaps. Preferred Stock Preferred Stock may be issued in one or more series as shall from time to time be determined and authorized by the Board of Directors. The directors may make specific provisions regarding (a) the voting rights, if any (b) whether such dividends are to be cumulative or noncumulative (c) the redemption provisions, if any (d) participating rights, if any (e) any sinking fund or other retirement provisions (f) dividend rates (g) the number of shares of such series and (h) liquidation preference. There is currently no Preferred Stock issued or outstanding. Common Stock The holders of the Class A Common Stock will have one-twentieth of one vote per share, and the holders of the common stock will have one vote per share. There is currently no Class A Common Stock issued or outstanding. In the event of any liquidation, dissolution or distribution of the assets of the Company remaining after the payments to the holders of the Preferred Stock of the full preferential amounts to which they may be entitled as provided in the resolution or resolutions creating any series thereof, the remaining assets of the Company shall be divided and distributed among the holders of both classes of common stock, except as may otherwise be provided in any such resolution or resolutions. The table below provides information regarding the Company's preferred and common stock as of December 31, 2018 and December 31, 2017:
On May 18, 2018, 4,824 shares of common stock were issued to directors as compensation under the 2009 Equity Incentive Plan previously approved by shareholders. |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive income (loss) ("AOCI") includes certain items that are reported directly within a separate component of shareholders' equity. The following table presents changes in AOCI balances (dollars in thousands):
The following table presents the amounts reclassified out of AOCI for the year ended December 31, 2018 (dollars in thousands):
The following table presents the amounts reclassified out of AOCI for the year ended December 31, 2017 (dollars in thousands):
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SEGMENTS |
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Segment Reporting, Disclosure of Entity's Reportable Segments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENTS | SEGMENTS The Company’s property and casualty insurance operations comprise one business segment. The property and casualty insurance segment primarily underwrites home insurance coverage with primary lines of business consisting of dwelling fire and extended coverage, homeowners (including mobile homeowners) and other liability. Management organizes the business utilizing a niche strategy focusing on lower valued dwellings and older homes that can be difficult to insure in the standard insurance market. Our chief decision makers (Chief Executive Officer, Chief Financial Officer and President) review results and operating plans making decisions on resource allocations on a company-wide basis. The Company’s products are primarily produced through independent 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 supplemental accident and health insurance. Total assets by industry segment at December 31, 2018 and December 31, 2017 are summarized below (dollars in thousands):
Premium revenues and operating income by business segment for the years ended December 31, 2018 and 2017 are summarized below (dollars in thousands):
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 years ended December 31, 2018 and 2017, respectively:
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 years ended December 31, 2018 and 2017, respectively:
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CONTINGENCIES |
12 Months Ended |
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Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
CONTINGENCIES | CONTINGENCIES In the ordinary course of business, the Company and its subsidiaries are routinely a defendant in or party to pending or threatened legal actions and proceedings related to the conduct of their insurance operations. These suits can involve alleged breaches of contracts, torts, including bad faith and fraud claims based on alleged wrongful or fraudulent acts of the Company's subsidiaries, and other miscellaneous causes of action. It is inherently difficult to predict the outcome of such matters, particularly when the claimant seeks very large or indeterminate damages or when the matters present novel legal theories or involve multiple parties. An accrued liability is established when loss contingencies are both probable and estimable. However, there is potential loss exposure in excess of any accrued amounts. The Company monitors pending matters for further development that could affect the amount of the accrued liability. The Company's property & casualty subsidiaries had one action remaining in Texas filed in the aftermath of Hurricane Ike at December 31, 2018. This is an individual action with allegations of underpayment of a hurricane-related claim. The suit seeks a variety of remedies, including actual and/or punitive damages in unspecified amounts and/or declaratory relief. The Company maintains loss and loss adjustment expense reserves on litigated claims that occur in the routine course of business in the insurance operations of the subsidiaries. These reserves are included in the liability for benefit and loss reserves on the balance sheet. |
SUPPLEMENTAL CASH FLOW INFORMATION |
12 Months Ended |
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Dec. 31, 2018 | |
Supplemental Cash Flow Elements [Abstract] | |
SUPPLEMENTAL CASH FLOW INFORMATION | SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest during the year ended December 31, 2018 was $1,231,000 ($1,285,000 in 2017). Cash paid for income taxes during the year ended December 31, 2018 was $25,000. There was no cash paid for income taxes during the year ended December 31, 2017. During the year ended December 31, 2018, non-cash changes in equity included $5,000 in common stock issued to Directors in lieu of cash compensation along with a corresponding $71,000 increase in additional paid-in capital. |
SUBSEQUENT EVENTS |
12 Months Ended |
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Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS Management has evaluated subsequent events and their potential effects on these consolidated financial statements through the filing date of this Form 10-K. |
Schedule I. Summary of Investments Other Than Investments in Related Parties |
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Summary of Investments, Other than Investments in Related Parties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule I. Summary of Investments Other Than Investments in Related Parties |
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Schedule II. Condensed Financial Information of Registrant |
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Condensed Financial Information of Registrant [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Scheule II. Condensed Financial Information of Registrant | Schedule II. Condensed Financial Information of Registrant
Notes to Condensed Financial Information of Registrant Note 1 - Basis of Presentation Pursuant to the rules and regulations of the Securities and Exchange Commission, the Condensed Financial Information of the Registrant does not include all of the information and notes normally included with financial statements prepared in accordance with generally accepted accounting principles. It is, therefore, suggested that this Condensed Financial Information be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Registrant’s Annual Report as referenced in Form 10-K, Part II, Item 8, page 45. Note 2 - Cash Dividends and Asset Transfers from Insurance Subsidiaries In 2018, cash dividends of $750,000 were paid to the Registrant by its subsidiaries ($900,000 in 2017). |
Schedule III. Supplementary Insurance Information |
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Supplementary Insurance Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule III. Supplementary Insurance Information | Schedule III. Supplementary Insurance Information
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Schedule IV. Reinsurance |
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Reinsurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule IV. Reinsurance | Schedule IV. Reinsurance
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Schedule V. Valuation and Qualifying Accounts |
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Valuation and Qualifying Accounts [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule V. Valuation and Qualifying Accounts | Schedule V. Valuation and Qualifying Accounts
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SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Dec. 31, 2018 | ||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||
Principles of Consolidation and Basis of Presentation | The accompanying consolidated financial statements include the accounts of The National Security Group, Inc. (the Company) and its wholly-owned subsidiaries: National Security Insurance Company (NSIC), National Security Fire and Casualty Company (NSFC) and NATSCO, Inc. (NATSCO). NSFC includes a wholly-owned subsidiary, Omega One Insurance Company (Omega). The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the consolidated financial statements have been included. All significant intercompany transactions and accounts have been eliminated in the consolidated financial statements. The financial information presented herein should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, which includes information and disclosures not presented herein. |
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Use of Estimates | The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Among the more significant estimates included in these consolidated financial statements are reserves for future life insurance policy benefits, liabilities for losses and loss adjustment expenses, reinsurance recoverable associated with loss and loss adjustment expense liabilities, deferred policy acquisition costs, deferred income tax assets and liabilities, assessments of other-than-temporary impairments on investments and accruals for contingencies. Actual results could differ from the estimates used in preparing these consolidated financial statements. |
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Concentration of Risk | The Company's property and casualty subsidiaries, composing 90% of consolidated direct written premium, produced business during 2018 in eight states. However, 53% of property and casualty segment direct written premium is generated in the states of Alabama, Mississippi and Louisiana, subjecting the Company to significant geographic concentration. Consequently, adverse weather conditions or changes in the legal, regulatory or economic environment could adversely impact the Company. The Company's life, accident and health insurance subsidiary, composing approximately 10% of consolidated direct written premium, is licensed in seven states. However, over 79% of life segment direct premium is generated in the states of Alabama and Georgia. Consequently, changes in the legal, regulatory or economic environment in these states could adversely impact the Company. For the year ended December 31, 2018, one agency individually produced greater than 5% of the Company's direct written premium. |
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Investments | The Company's investment securities are classified as follows:
Changes in fair value of trading securities are reported in the statement of operations. Changes in fair value of fixed maturity securities available-for-sale are reported as net unrealized gains or losses as a component of other comprehensive income. Changes in fair value of equity securities available-for-sale are reported as investment gains/losses in the statement of operations. Prior to January 1, 2018, changes in fair value of equity securities available-for-sale were reported as net unrealized gains or losses as a component of other comprehensive income. Gains and losses were recorded in the statement of operations only when equity securities were sold or were other-than-temporarily impaired. Investment gains and losses on fixed maturity securities arise when the investments are sold. Investment gains and losses on the sale of fixed maturity investments available-for-sale are determined using the specific-identification method and include write downs for fixed maturity securities considered to be other-than-temporarily impaired. When a fixed maturity security has a decline in value, where fair value is below amortized cost, an other-than-temporary impairment (OTTI) is triggered in circumstances where:
If the Company intends to sell the security or if it is more-likely-than-not the Company will be required to sell the security before recovery, an OTTI is recognized as a realized loss in the statement of operations equal to the difference between the security's amortized cost and its fair value. If the Company does not intend to sell the security or it is not more-likely-than-not that the Company will be required to sell the security before recovery, the OTTI is separated into an amount representing the credit loss, which is recognized as a investment loss in the statement of operations, and the amount related to all other factors, which is recognized in other comprehensive income. Interest on fixed income securities is credited to income as it accrues on the principal amounts outstanding adjusted for amortization of premiums and accretion of discounts computed utilizing the interest method. Premiums and discounts on mortgage backed securities amortize or accrete using anticipated prepayments with changes in anticipated prepayments accounted for prospectively. The model used to determine anticipated prepayment assumptions for mortgage backed securities uses separate home sale, refinancing, curtailment and pay-off assumptions derived from a variety of industry sources. Mortgage backed security valuations are subject to prospective adjustments in yield due to changes in prepayment assumptions. The utilization of the prospective method will result in a recalculated effective yield that will equate the carrying amount of the investment to the present value of the projected future cash flows. The recalculated yield is used to accrue income on investments for subsequent periods. Mortgage loans and policy loans are stated at the unpaid principal balance of such loans, net of any related allowance for loan losses. Investment real estate is reported at cost, less allowances for depreciation computed on the straight-line basis. Investment real estate consists primarily of undeveloped commercial real estate. Other investments consist primarily of investments in notes and equity investments in limited liability companies. The Company has no influence or control over the operating or financial policies of the limited liability companies, and consequently, these investments are accounted for using the cost method. The Company owns life insurance (COLI) contracts on certain management and supervisory employees each having a face amount of approximately $2,000,000 (including cash surrender value at the time of payment). The Company's original investment in currently in-force company owned life insurance is $4,315,000. The primary purpose of the program is to offset future employee benefit expenses through earnings on the cash value of the policies. The Company is the owner and principal beneficiary of these policies. The life insurance contracts are carried at their current cash surrender value. Cash surrender value at December 31, 2018 and December 31, 2017 was $4,600,000 and $4,974,000, respectively. Changes in cash surrender values are included in the statement of operations. The change in surrender value included in the statement of operations for the years ended December 31, 2018 and 2017 was a decrease of $374,000 and an increase of $110,000, respectively. Proceeds from the COLI contracts are recorded when the benefits become payable under the terms of the policy and proceeds in excess of cash surrender value are recognized as a gain on company owned life insurance. Cash and cash equivalents consist of demand deposit and money market accounts and investments with maturities of three months or less when purchased. Cash and cash equivalents are carried at cost, which approximates fair value. Investments with other-than-temporary impairment in value are written down to estimated realizable values and losses recognized as a component of investments gains and losses in the Consolidated Statements of Operations. The fair value of the investment becomes its new cost basis. |
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Fair Values of Financial Instruments | The Company uses the following methods and assumptions to estimate fair values: Investments
Receivables and reinsurance recoverable - The carrying amounts reported approximate fair value. Interest rate swaps - The estimated fair value of the interest rate swaps is based on valuations received from financial institution counterparties. Trust preferred securities obligations and line of credit obligations - The carrying amounts reported for these instruments are equal to the principal balance outstanding and approximate fair value. Our available-for-sale securities consists of fixed maturity and equity securities which are recorded at fair value in the accompanying consolidated balance sheets. We are permitted to elect to measure financial instruments and certain other items at fair value, with the change in fair value recorded in earnings. We elected not to measure any eligible items using the fair value option. Accounting standards define fair value as the price that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework to make the measurement of fair value more consistent and comparable. In determining fair value, we primarily use prices and other relevant information generated by market transactions involving identical or comparable assets. The Company categorizes assets and liabilities carried at their fair value based upon a fair value hierarchy: Level 1 – Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 1 assets and liabilities consist of money market fund deposits and certain of our marketable debt and equity instruments, including equity instruments offsetting deferred compensation, that are traded in an active market with sufficient volume and frequency of transactions. Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets include certain of our marketable debt and equity instruments with quoted market prices that are traded in less active markets or priced using a quoted market price for similar instruments. Level 2 assets also include marketable equity instruments with security-specific restrictions that would transfer to the buyer, marketable debt instruments priced using indicator prices which represent non-binding market consensus prices that can be corroborated by observable market quotes, as well as derivative contracts and debt instruments priced using inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Marketable debt instruments in this category generally include commercial paper, bank time deposits, repurchase agreements for fixed-income instruments, and a majority of floating-rate notes, corporate bonds, and municipal bonds. Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. Level 3 assets and liabilities include marketable debt instruments, non-marketable equity investments, derivative contracts, and company issued debt with values are determined using inputs that are both unobservable and significant to the values of the instruments being measured. Level 3 assets also include marketable debt instruments that are priced using indicator prices that we were unable to corroborate with observable market quotes. Marketable debt instruments in this category generally include asset-backed securities and certain floating-rate notes, corporate bonds, and municipal bonds. The following methods and assumptions were used to estimate fair value of each class of financial instrument for which it is practical to estimate that value: Cash and cash equivalents — the carrying amount is a reasonable estimate of fair value. Fixed maturities held-to-maturity — the carrying amount is amortized cost; the fair values of the Company’s public fixed maturity securities that are classified as held-to-maturity are generally based on prices obtained from independent pricing services. Mortgage loans — the carrying amount is a reasonable estimate of fair value due to the restrictive nature and limited marketability of the mortgage notes. Policy loans — the carrying amount is a reasonable estimate of fair value. Company owned life insurance — the carrying amount is a reasonable estimate of fair value. Other invested assets — the carrying amount is a reasonable estimate of fair value. Other policyholder funds — the carrying amount is a reasonable estimate of fair value. Debt — the carrying amount is a reasonable estimate of fair value. Fixed maturities available-for-sale — The fair values of the Company’s public fixed maturity securities are generally based on prices obtained from independent pricing services. Consistent with the fair value hierarchy described above, securities with validated quotes from pricing services are generally reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs. Trading securities — Trading securities consist primarily of mutual funds whose fair values are determined consistent with similar instruments described above under “Fixed Maturities” and below under “Equity Securities.” Equity securities — Equity securities consist principally of investments in common and preferred stock of publicly traded companies and privately traded securities. The fair values of our publicly traded equity securities are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the fair value hierarchy. Estimated fair values for our privately traded equity securities require a substantial level of judgment. Privately traded equity securities are classified within Level 3. Interest rate swaps — Interest rate swaps are recorded at fair value either as assets, within other assets or as liabilities, within other liabilities. The fair values of our interest rate swaps are provided by a third-party broker and are classified within Level 3. |
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Policy Receivables | Receivable balances are reported at unpaid balances, less a provision for credit losses. |
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Accounts Receivable | Accounts receivable are reported at net realizable value. Management determines the allowance for doubtful accounts based on historical losses and current economic conditions. On a continuing basis, management analyzes delinquent receivables, and once these receivables are determined to be uncollectible, they are written off through a charge against an existing allowance account or against earnings. |
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Property and Equipment | Property and equipment is carried at cost less accumulated depreciation and includes expenditures that substantially increase the useful lives of existing property and equipment. Significant costs incurred for internally developed software are capitalized and amortized over estimated useful lives of 3 years. Maintenance, repairs, and minor renovations are charged to expense as incurred. Upon sale or retirement of property and equipment, the costs and related accumulated depreciation are eliminated from the respective account and the resulting gain or loss is included in the statement of operations. The Company provides for depreciation of property and equipment using the straight-line method designed to amortize costs over estimated useful lives. Estimated useful lives range up to 40 years for buildings and from 3-10 years for equipment, furniture and fixtures. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. |
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Statement of Cash Flows | For purposes of reporting cash flows, cash includes cash-on-hand, demand deposits with banks and overnight investments consisting primarily of repurchase agreements. |
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Premium Revenue | Life insurance premiums are recognized as revenues when due. Property and casualty insurance premiums include direct writings plus reinsurance assumed less reinsurance ceded and are recognized on a pro-rata basis over the terms of the policies. Unearned premiums represent that portion of direct premiums written that are applicable to the unexpired terms of policy contracts in force and is reported as a liability. Prepaid reinsurance premiums represent the unexpired portion of premiums ceded to reinsurers and are reported as an asset. |
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Deferred Policy Acquisition Costs | The costs of acquiring new insurance business are deferred and amortized over the lives of the policies. Deferred costs include commissions, premium taxes, other agency compensation and expenses, and other underwriting expenses directly related to the level of new business produced. Acquisition costs relating to life contracts are amortized over the premium paying period 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 limits the amount deferred to a percentage of related unearned premiums. |
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Policy Liabilities | The liability for future life insurance policy benefits is computed using a net level premium method including the following assumptions:
Mortality assumptions include various percentages of the 1955-60 and 1965-70 Select and Ultimate Basic Male Mortality Table. Withdrawal assumptions are based on the Company's experience. |
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Policyholder Benefit and Claim Settlement Expenses | The liability for unpaid claims represents the estimated liability for unpaid loss and loss adjustment expenses incurred but not yet reported under insurance contracts for loss events that have occurred on or before the balance sheet date. The liability for claims and related adjustment expenses are determined using case-basis evaluations and statistical analysis and represent estimates of the ultimate net cost of all losses incurred through December 31 of each year. Liability estimates are continually reviewed and adjusted as necessary; such adjustments are included in the period in which they are determined. Liability estimates are based on reports of losses from policyholders, individual case loss estimates, and estimates of losses incurred but not yet reported. Policyholder benefit and settlement expenses in the consolidated statement of operations include paid claims, settlement cost and changes in claim liability estimates. Loss and adjustment expenses charged to earnings are net of amounts recovered and estimates of recoverable amounts under ceded reinsurance contracts. |
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Earnings Per Share | Earnings per share of common stock is based on the weighted average number of shares outstanding during each year. The adjusted weighted average shares outstanding were 2,525,325 at December 31, 2018 and 2,520,431 at December 31, 2017. The Company did not have any dilutive securities as of December 31, 2018 and 2017. |
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Reinsurance | The Company's insurance operations re-insure certain risks in order to limit losses, minimize exposure to large risks, provide additional capacity for future growth and effect business-sharing arrangements. Amounts recoverable from re-insurers are estimated in a manner consistent with the claim liability associated with the underlying insurance policies. Amounts paid for prospective reinsurance contracts are reported as prepaid reinsurance premiums and amortized over the remaining contract period. In the normal course of business, NSIC seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to reinsurance companies under excess coverage contracts. NSIC retains a maximum of $50,000 of coverage per individual life. Cost is amortized over the reinsurance contract period. The Company's insurance operations utilize reinsurance in the risk management process in order to limit losses, minimize exposure to large risks, provide additional capacity for future growth and effect business-sharing arrangements. Life reinsurance is placed through yearly renewable term coverage. Property and casualty reinsurance is placed on an excess of loss basis to cover losses from catastrophe events. Reinsurance contracts do not relieve the insurance subsidiaries of the obligation indemnify policyholders with respect to the underlying insurance contracts. Failure of re-insurers to honor their obligations could result in credit related losses to the insurance subsidiaries. The insurance subsidiaries evaluate the financial conditions of their reinsurance companies and monitor concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the companies to minimize their exposure to significant losses from reinsurance insolvencies. In the normal course of business, NSFC seeks to reduce the loss that may arise from catastrophes or other individually significant large loss events that cause unfavorable underwriting results or have adverse impacts on regulatory capital levels by re-insuring certain levels of risk in various areas of exposure with reinsurance companies. NSFC maintains a catastrophe reinsurance agreement to cover losses from catastrophic events, primarily hurricanes and tropical storms |
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Income Taxes | The Company files a consolidated United States federal income tax return that includes the holding company and its subsidiaries. The Company is currently subject to a statutory rate of 21%. Tax related interest and penalties are reported as components of income tax expense. The Company uses the asset and liability method of accounting for income taxes. Deferred income taxes arise from the recognition of temporary differences between financial statement carrying amounts and the tax basis of the Company's assets and liabilities and capital or operating loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. The effect of a change in tax rates is recognized in the period the new rate is enacted. Changes in deferred tax assets and liabilities are included as a component of income tax expense, with the exception of changes impacting other comprehensive income. Changes in deferred tax assets and liabilities associated with components of other comprehensive income are charged or credited to other comprehensive income. The Company evaluates all tax positions taken on its U.S. federal income tax return. No material uncertainties exist for any tax positions taken by the Company. |
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Contingencies | Liabilities for loss contingencies arising from, but not limited to, litigation, claims, assessments, fines and penalties are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Significant attorney fees are estimated and recorded when incurred. |
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Reclassifications | Certain 2017 amounts have been reclassified from the prior year consolidated financial statements to conform to the 2018 presentation. |
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Advertising | The Company expenses advertising costs as incurred. |
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Concentration of Credit Risk | The Company maintains cash balances which are generally held in non-interest bearing demand deposit accounts subject to FDIC insured limits of $250,000 per entity. At December 31, 2018, the net amount exceeding FDIC insured limits was $3,897,000 at three financial institutions. The Company has not experienced any losses in such accounts. Management of the Company reviews financial information of financial institutions on a quarterly basis and believes the Company is not exposed to any significant credit risk on cash and cash equivalents. Policy receivables are reported at unpaid balances. Policy receivables are generally offset by associated unearned premium liabilities and are not subject to significant credit risk. Receivables from agents, less provision for credit losses, are composed of balances due from independent agents. At December 31, 2018, the single largest balance due from one agent totaled $516,000. Reinsurance contracts do not relieve the Company of its obligations to policyholders. A failure of a reinsurer to meet its obligation could result in losses to the insurance subsidiaries. Allowances for losses on reinsurance recoverables are established if amounts are believed to be uncollectible. At December 31, 2018 and December 31, 2017, no amounts were deemed uncollectible. The Company, at least annually, evaluates the financial condition of all reinsurers and evaluates any potential concentrations of credit risk. At December 31, 2018, management does not believe the Company is exposed to any significant credit risk related to its reinsurance program. |
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Accounting Changes Not Yet Adopted and Recently Adopted Accounting Standards | Changes to the Disclosure Requirements for Fair Value Measurement In August 2018, the FASB issued guidance to that removes, modifies and adds to the disclosure requirements related to fair value measurements. The guidance removes the requirements to disclose the amount and reasons for transfers between Level 1 and Level 2 assets, the policy for timing and transfers between levels and the valuation process for Level 3 fair value measurements. The guidance modifies disclosure requirements for investments in certain entities that calculate net asset value and clarifies the purpose of the measurement uncertainty disclosure. The guidance adds requirements to disclose changes in unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value measurements and to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company does not expect the adoption to have a material impact on its financial position or results of operations. Targeted Improvements to the Accounting for Long-Duration Contracts In August 2018, the FASB issued guidance to improve the existing recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity. The guidance improves timeliness of recognizing changes in the liability for future policy benefits and modifies the rate used to discount future cash flows. The guidance will simplify and improve accounting for certain market-based options or guarantees associated with deposit type contracts and simplify the amortization of deferred policy acquisition costs. The guidance also introduces certain financial statement presentation requirements, as well as significant additional quantitative and qualitative disclosures. The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this new guidance. Due to the nature and extent of the changes required to the Company’s life insurance operations, the adoption of this standard is expected to have a material impact on the consolidated financial statements. Contingent Put and Call Options in Debt Instruments In March 2016, the FASB issued guidance that clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those years. The Company does not expect the adoption to have a material impact on its financial position or results of operations. Financial Instruments - Credit Losses In June 2016, the FASB issued guidance that replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The FASB released additional guidance in November 2018 that provides scope clarification. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those years. The Company does not expect the adoption to have a material impact on its financial position or results of operations. Recently Adopted Accounting Standards Improvements to Nonemployee Share-Based Payment Accounting In June 2018, the FASB issued guidance to simplify the accounting for nonemployee share-based payment awards. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year The Company does not make any material share-based payments. The Company adopted this guidance on January 1, 2019. The adoption of this guidance did not have a material impact on its financial position or results of operations. Income Statement - Reporting Comprehensive Income In February 2018, the FASB issued guidance that allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The guidance eliminates the stranded tax effects resulting from the Tax Cuts and Jobs Act and improves the usefulness of information reported to financial statement users. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those periods. Early adoption is permitted. The Company adopted this guidance as of December 31, 2017. The adoption of this guidance resulted in a $435,000 reclassification to accumulated other comprehensive income from retained earnings related to stranded tax effects resulting from the Tax Cuts and Jobs Act. Receivables - Nonrefundable Fees and Other Costs In March 2017, the FASB issued guidance that shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. The guidance is effective for fiscal years beginning after December 15, 2018 and interim reporting periods within those fiscal years. The Company adopted this guidance on January 1, 2019. The adoption of this guidance did not have a significant impact on our financial position, results of operations or cash flows. Derivatives and Hedging In August 2017, the FASB issued guidance that amends and simplifies hedge accounting guidance in order to enable entities to better portray the economic results of their risk management activities. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those periods. Early adoption is permitted. The Company adopted this guidance on January 1, 2019. The Company has two swaps designated as cash flow hedges. One expires March 15, 2019 and one expires March 15, 2020. The adoption of this guidance did not have a significant impact on our financial position, results of operations, cash flows or related disclosures. Leases In February 2016, the FASB issued guidance that requires lessees (for capital and operating leases) to recognize the lease liability and right-of-use asset at the commencement date of the lease. Additional transition guidance was issued in 2018. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. The Company adopted this guidance on January 1, 2019. The Company leases automobiles and some office equipment. These leases are not considered material. The adoption of this guidance did not have a material impact on its financial position or results of operations. Revenue from Contracts with Customers In May 2014, FASB issued guidance on a comprehensive new revenue recognition standard. This standard will not impact accounting for insurance contracts, leases, financial instruments and guarantees. For those contracts that are impacted by the new guidance, the guidance will require an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to, in exchange for those goods or services. The guidance requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued a deferral of the effective date by one year. This guidance is effective retrospectively for fiscal years beginning after December 15, 2017 and interim periods within those years. Early adoption of this standard is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Insurance contracts are specifically scoped out of this new guidance. The Company does not have policy fees or any material services that may be subject to the new revenue recognition guidance. The Company adopted this guidance as of January 1, 2018. The adoption of this guidance did not have an impact on its consolidated financial statements. Recognition and Measurement of Financial Assets and Financial Liabilities In January 2016, the FASB issued guidance that requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. The guidance requires entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes and requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset. The guidance eliminates the requirement for public companies to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. This guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The Company adopted this guidance as of January 1, 2018. The adoption of this guidance resulted in a $2,107,000 reclassification to retained earnings from accumulated other comprehensive income related to accumulated unrealized gains on equity securities as well as recognition of a $160,000 loss, net of tax, related to the change in value of equity securities. Classification of Certain Cash Receipts and Cash Payments In August 2016, the FASB issued guidance that clarifies how certain cash receipts and cash payments shall be presented and classified in the statement of cash flows. This guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company adopted this guidance as of January 1, 2018. The adoption of this guidance did not have a significant impact on our financial position, results of operations or cash flows. Compensation - Stock Compensation In May 2017, the FASB issued guidance to provide clarity and reduce diversity in practice as well as cost and complexity when there is a change in the terms or conditions of a share-based payment award. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The Company adopted this guidance as of January 1, 2018. The adoption of this guidance did not have a significant impact on our financial position, results of operations or cash flows. |
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Consolidation, Variable Interest Entities | The Company holds a passive interest in a limited partnership that is considered to be a Variable Interest Entity (VIE) under the provisions of ASC 810 Consolidation. The Company is not the primary beneficiary of the entity and is not required to consolidate under ASC 810. The entity is a private placement investment fund formed for the purpose of investing in private equity investments. The Company owns less than 1% of the limited partnership. The carrying value of the investment totals $116,000 and is included as a component of Other Invested Assets in the accompanying consolidated balance sheets. |
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Marketable Securities | For securities in an unrealized loss position, the Company assesses whether the Company has the intent to sell the security or more-likely-than-not will be required to sell the security before the anticipated recovery. If either of these conditions is met, the Company is required to recognize an other-than-temporary impairment with the entire unrealized loss reported in earnings. For securities in an unrealized loss position that do not meet these conditions, the Company assesses whether the impairment of a security is other-than-temporary. If the impairment is determined to be other-than-temporary, the Company is required to separate the other-than-temporary impairments into two components: the amount representing the credit loss and the amount related to all other factors. The credit loss is the portion of the amortized book value in excess of the net present value of the projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment. The credit loss component of other-than-temporary impairments is reported in earnings, whereas the amount relating to factors other than credit losses are recorded in other comprehensive income, net of taxes. |
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Derivatives | The Company is exposed to certain risks in the normal course of its business operations. The primary risk that is managed through the use of derivatives is interest rate risk on floating rate borrowings. This risk is managed through the use of interest rate swap agreements which are designated as cash flow hedges. For cash flow hedges, the effective portion of the gain or loss on the interest rate swap is included as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction is recognized in earnings. The Company does not hold or issue derivatives that are not designated as hedging instruments. The swap liability is reported as a component of other liabilities on the consolidated balance sheets. We use dollar offset at the hedge's inception and for each reporting period thereafter to assess whether the derivative used in a hedging transaction is expected to be, and has been, effective in offsetting changes in the fair value of the hedged item. Since inception, no portion of the hedged item has been deemed ineffective. For all hedges, we discontinue hedge accounting if it is determined that a derivative is not expected to be, or has ceased to be, effective as a hedge. |
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Business Segment | 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 supplemental accident and health insurance. The Company’s property and casualty insurance operations comprise one business segment. The property and casualty insurance segment primarily underwrites home insurance coverage with primary lines of business consisting of dwelling fire and extended coverage, homeowners (including mobile homeowners) and other liability. |
SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Schedule of Liability for Future Policy Benefits | The liability for future life insurance policy benefits is computed using a net level premium method including the following assumptions:
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STATUTORY ACCOUNTING PRACTICES (Tables) |
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Statutory Accounting Practices Disclosure | Statutory net income (loss) and capital and surplus, excluding intercompany transactions, are summarized as follows:
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INVESTMENTS (Tables) |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Amortized Cost and Aggregate Fair Values of Investments in Available-for-Sale Securities | The amortized cost and aggregate fair values of investments in available-for-sale securities as of December 31, 2017 are as follows (dollars in thousands):
The amortized cost and aggregate fair values of investments in available-for-sale securities as of December 31, 2018 are as follows (dollars in thousands):
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Schedule of Held-to-Maturity Securities | The amortized cost and aggregate fair values of investments in held-to-maturity securities as of December 31, 2018 are as follows (dollars in thousands):
The amortized cost and aggregate fair values of investments in held-to-maturity securities as of December 31, 2017 are as follows (dollars in thousands):
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Schedule of Amortized Cost and Aggregate Fair Value of Debt Securities, by Contractual Maturity | The amortized cost and aggregate fair value of debt securities at December 31, 2018, by contractual maturity, are presented in the following table (dollars in thousands). Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
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Schedule of Securities with Unrealized Losses | A summary of securities available-for-sale with unrealized losses as of December 31, 2018, along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows (dollars in thousands):
A summary of securities held-to-maturity with unrealized losses as of December 31, 2018 along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows:
A summary of securities available-for-sale with unrealized losses as of December 31, 2017, along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows (dollars in thousands):
There were no equity securities or securities held-to-maturity with unrealized losses as of December 31, 2017. |
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Summary of Major Categories of Investment Income | Major categories of investment income are summarized as follows (dollars in thousands):
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Schedule of Realized Investments Gains (Losses) | Major categories of investment gains and losses are summarized as follows (dollars in thousands):
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Schedule of Net Change in Unrealized Appreciation | An analysis of the net change in unrealized gains and losses on available-for-sale securities follows (dollars in thousands):
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FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2017 are summarized in the following table by the type of inputs applicable to the fair value measurements (in thousands):
Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 are summarized in the following table by the type of inputs applicable to the fair value measurements (in thousands):
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Schedule of Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation | The table below presents a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2018 (in thousands):
The table below presents a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2017 (in thousands):
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Schedule of Fair Value, by Balance Sheet Grouping | The carrying amount and estimated fair value of the Company’s financial instruments as of December 31, 2018 and December 31, 2017 are as follows (in thousands):
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PROPERTY AND EQUIPMENT (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property and Equipment | Major categories of property and equipment are summarized as follows (dollars in thousands):
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INCOME TAXES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Deferred Tax Assets and Liabilities | The tax effect of significant differences representing deferred tax assets and liabilities are as follows (dollars in thousands):
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Changes in Temporary Differences in Federal Income Tax | The appropriate income tax effects of changes in temporary differences are as follows (dollars in thousands):
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Schedule of Effective Income Tax Rate Reconciliation | Total income tax expense (benefit) varies from amounts computed by applying current federal income tax rates to income or loss before income taxes. The reasons for these differences and the approximate tax effects are as follows:
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NOTES PAYABLE AND LONG-TERM DEBT (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Short-term Debt | Short-term debt and current portion of long-term debt consisted of the following as of December 31, 2018 and December 31, 2017 (dollars in thousands):
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Schedule of Long-term Debt Instruments | Long-term debt consisted of the following as of December 31, 2018 and December 31, 2017 (dollars in thousands):
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Schedule of Maturities of Long-term Debt | Annual maturities of all outstanding debt for the next five years and beyond are as follows (dollars in thousands):
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POLICY AND CLAIM RESERVES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Policy and Claim Reserves | The following table is a reconciliation of beginning and ending property and casualty reserve balances for claims and claim adjustment expense (dollars in thousands):
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Short-duration Insurance Contracts, Claims Development | Cumulative incurred and paid claims over the last three years, along with annual percentage payouts related to accident and health claims, is as follows (dollars in thousands):
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Short-duration Insurance Contracts, Schedule of Historical Claims Duration | The cumulative number of reported claims presented above is reported on a per claimant basis.
The tables presented above represent homeowners, dwelling fire and other liability lines of business. |
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Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability |
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REINSURANCE (Tables) |
12 Months Ended | ||||||||||||
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Dec. 31, 2018 | |||||||||||||
Reinsurance Disclosures [Abstract] | |||||||||||||
Schedule of Reinsurance | Catastrophe reinsurance coverage is maintained in three layers as follows:
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SHAREHOLDERS' EQUITY (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock by Class | The table below provides information regarding the Company's preferred and common stock as of December 31, 2018 and December 31, 2017:
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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | The following table presents changes in AOCI balances (dollars in thousands):
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Reclassification out of Accumulated Other Comprehensive Income | The following table presents the amounts reclassified out of AOCI for the year ended December 31, 2018 (dollars in thousands):
The following table presents the amounts reclassified out of AOCI for the year ended December 31, 2017 (dollars in thousands):
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SEGMENTS (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting, Disclosure of Entity's Reportable Segments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | Total assets by industry segment at December 31, 2018 and December 31, 2017 are summarized below (dollars in thousands):
Premium revenues and operating income by business segment for the years ended December 31, 2018 and 2017 are summarized below (dollars in thousands):
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Schedule of Gross and Net Premiums Written | 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 years ended December 31, 2018 and 2017, respectively:
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Schedule of Gross and Net Premiums Earned | 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 years ended December 31, 2018 and 2017, respectively:
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SIGNIFICANT ACCOUNTING POLICIES (Investments) (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Accounting Policies [Abstract] | ||
Company owned life insurance policy face amount | $ 2,000,000 | |
Payments to acquire life insurance policies | 4,315,000 | |
Cash surrender value of life insurance | 4,600,000 | $ 4,974,000 |
Increase (decrease) in cash surrender value of company owned life insurance | $ (374,000) | $ 110,000 |
SIGNIFICANT ACCOUNTING POLICIES (Fair Value) (Details) |
Dec. 31, 2018 |
---|---|
Private Equity Funds | Maximum | |
Investment [Line Items] | |
Percent of net assets | 1.00% |
SIGNIFICANT ACCOUNTING POLICIES (Property and Equipment) (Details) |
12 Months Ended |
---|---|
Dec. 31, 2018 | |
Software and Software Development Costs | |
Property, Plant and Equipment [Line Items] | |
Useful life | 3 years |
Building | Maximum | |
Property, Plant and Equipment [Line Items] | |
Useful life | 40 years |
Equipment, Furniture and Fixtures | Maximum | |
Property, Plant and Equipment [Line Items] | |
Useful life | 10 years |
Equipment, Furniture and Fixtures | Minimum | |
Property, Plant and Equipment [Line Items] | |
Useful life | 3 years |
SIGNIFICANT ACCOUNTING POLICIES (Earnings Per Share) (Details) - shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Accounting Policies [Abstract] | ||
Weighted average number of shares outstanding | 2,525,325 | 2,520,431 |
SIGNIFICANT ACCOUNTING POLICIES (Income Taxes) (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Accounting Policies [Abstract] | ||
Federal income tax rate applied to pre-tax income/loss | 21.00% | 34.00% |
SIGNIFICANT ACCOUNTING POLICIES (Concentration of Credit Risk) (Details) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Accounting Policies [Abstract] | ||
Cash, uninsured amount | $ 3,897,000 | |
Concentration Risk [Line Items] | ||
Policy receivables and agents' balances, net | 11,185,000 | $ 11,653,000 |
Single Largest Agent Balance Due | ||
Concentration Risk [Line Items] | ||
Policy receivables and agents' balances, net | $ 516,000 |
SIGNIFICANT ACCOUNTING POLICIES (Recently Adopted Accounting Standards) (Details) |
12 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
| |
Accounting Policies [Abstract] | |
Reclassification from AOCI to retained earnings | $ 435,000 |
Equity securities, unrealized loss | (160,000) |
Accounting Standards Update 2016-01 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Reclassification adjustment - gains on equity securities | $ 2,107,000 |
VARIABLE INTEREST ENTITIES (Details) - USD ($) $ in Thousands |
1 Months Ended | 12 Months Ended | |
---|---|---|---|
Jun. 30, 2007 |
Dec. 31, 2005 |
Dec. 31, 2018 |
|
Variable Interest Entity [Line Items] | |||
Carrying amount of investments | $ 116 | ||
Trust Preferred Security Offering, 2005 | |||
Variable Interest Entity [Line Items] | |||
Payments to acquire trust preferred securities | $ 9,000 | ||
Subordinated debt | 9,279 | ||
Proceeds from issuance of trust preferred securities | 9,005 | ||
Equity investment | $ 279 | ||
Trust Preferred Security Offering, 2007 | |||
Variable Interest Entity [Line Items] | |||
Payments to acquire trust preferred securities | $ 3,000 | ||
Proceeds from issuance of trust preferred securities | 2,995 | ||
Equity investment | 93 | ||
Trust Preferred Security Offering, 2007 | Unsecured Debt | |||
Variable Interest Entity [Line Items] | |||
Subordinated debt | $ 3,093 | ||
Maximum | |||
Variable Interest Entity [Line Items] | |||
Limited partnership, percent owned | 1.00% |
STATUTORY ACCOUNTING PRACTICES (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Statutory Accounting Practices [Line Items] | ||
Net investment gains (losses) | $ (178,000) | $ 234,000 |
NSIC | ||
Statutory Accounting Practices [Line Items] | ||
Statutory Accounting Practices, Statutory Net Income Amount | 1,558,000 | 1,554,000 |
Tier One Risk Based Capital | 16,043,000 | 15,689,000 |
Net investment gains (losses) | 71,000 | 71,000 |
Asset Valuation Reserve | 766,000 | 841,000 |
NSFC | ||
Statutory Accounting Practices [Line Items] | ||
Statutory Accounting Practices, Statutory Net Income Amount | 786,000 | (921,000) |
Tier One Risk Based Capital | 34,645,000 | 34,188,000 |
Net investment gains (losses) | 39,000 | 114,000 |
Investment in Omega One | 7,280 | 7,482 |
Omega | ||
Statutory Accounting Practices [Line Items] | ||
Statutory Accounting Practices, Statutory Net Income Amount | (64,000) | 34,000 |
Tier One Risk Based Capital | 10,783,000 | 10,983,000 |
Net investment gains (losses) | $ 7,000 | $ 49,000 |
INVESTMENTS (Narrative) (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Gain (Loss) on Investments [Line Items] | ||
Held-to-maturity securities, unrecognized holding loss | $ 0 | |
Other-than-temporary impairments, available-for-sale securities | $ 16,000 | 0 |
Single largest loss position | 145,000 | 75,000 |
Second largest loss position | 99,000 | 60,000 |
Third largest loss position | $ 94,000 | $ 53,000 |
Maximum | ||
Gain (Loss) on Investments [Line Items] | ||
Percent of investment portfolio below investment grade | 4.69% |
INVESTMENTS (Held-to-Maturity Securities) (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Schedule of Held-to-maturity Securities [Line Items] | ||
Amortized Cost | $ 1,449 | $ 1,616 |
Held-to-maturity securities, unrealized gains | 16 | 29 |
Held-to-maturity securities, unrealized losses | 22 | 0 |
Fair Value | 1,443 | 1,645 |
Agency mortgage backed securities | ||
Schedule of Held-to-maturity Securities [Line Items] | ||
Amortized Cost | 1,449 | 1,616 |
Held-to-maturity securities, unrealized gains | 16 | 29 |
Held-to-maturity securities, unrealized losses | 22 | 0 |
Fair Value | $ 1,443 | $ 1,645 |
INVESTMENTS (Held-to-Maturity, Unrealized Losses) (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Schedule of Held-to-maturity Securities [Line Items] | |
Less than 12 Months, Fair Value | $ 1,026 |
Less than 12 Months, Gross Unrealized Losses | 22 |
12 Months or Longer, Fair Value | 0 |
12 Months or Longer, Gross Unrealized Losses | 0 |
Total Fair Value | 1,026 |
Total Gross Unrealized Losses | $ 22 |
Total Securities in a Loss Position | 2 |
Agency mortgage backed securities | |
Schedule of Held-to-maturity Securities [Line Items] | |
Less than 12 Months, Fair Value | $ 1,026 |
Less than 12 Months, Gross Unrealized Losses | 22 |
12 Months or Longer, Fair Value | 0 |
12 Months or Longer, Gross Unrealized Losses | 0 |
Total Fair Value | 1,026 |
Total Gross Unrealized Losses | $ 22 |
Total Securities in a Loss Position | 2 |
INVESTMENTS (Major Categories of Investment Gains and Losses) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Gain (Loss) on Investments [Line Items] | ||
Other-than-temporary impairments | $ (16) | $ 0 |
Net investment gains (losses) | (178) | 234 |
Fixed maturities | ||
Gain (Loss) on Investments [Line Items] | ||
Net investment gains (losses) | 128 | 58 |
Equity securities | ||
Gain (Loss) on Investments [Line Items] | ||
Net investment gains (losses) | 0 | 174 |
Change in fair value of equity securities | ||
Gain (Loss) on Investments [Line Items] | ||
Net investment gains (losses) | (203) | 0 |
Other, principally real estate | ||
Gain (Loss) on Investments [Line Items] | ||
Net investment gains (losses) | $ (87) | $ 2 |
INVESTMENTS (Schedule of Unrealized Appreciation) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Investments [Abstract] | ||
Net change in unrealized gains (losses) on available-for-sale securities before deferred tax | $ (3,042) | $ 1,402 |
Deferred income tax | 638 | (476) |
Net change in unrealized gains (losses) on available-for-sale securities | $ (2,404) | $ 926 |
FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (Narrative) (Details) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
Fair value measurements of assets | $ 1,125,000 | |
Fair value measurements of liabilities | (234,000) | |
Assets measured at fair values on a nonrecurring basis | 0 | $ 0 |
Liabilities measured at fair values on a nonrecurring basis | $ 0 | $ 0 |
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 5,359 | $ 5,376 |
Less accumulated depreciation | 3,710 | 3,595 |
Property and equipment, net | 1,649 | 1,781 |
Depreciation expense | 161 | 121 |
Building and improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 3,378 | 3,378 |
Electronic data processing equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 1,504 | 1,512 |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 477 | $ 486 |
INCOME TAXES (Narrative) (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Tax Disclosure [Abstract] | ||
AMT Credit | $ 0 | $ 1,575,000 |
Anticipated recoveries | 1,077,000 | |
Net deferred tax asset position | $ 716,000 | $ 1,487,000 |
INCOME TAXES (Deferred Tax Assets and Liabilities) (Details) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
General expenses | $ 1,067,000 | $ 1,069,000 |
Unearned premiums | 1,265,000 | 1,269,000 |
Claims liabilities | 552,000 | 484,000 |
AMT Credit | 0 | 1,575,000 |
Impairment on real estate owned | 119,000 | 116,000 |
Unrealized losses on securities available-for-sale | 368,000 | 0 |
Unrealized loss on interest rate swaps | 49,000 | 128,000 |
Deferred tax assets | 3,420,000 | 4,641,000 |
Depreciation | (79,000) | (88,000) |
Deferred policy acquisition costs | (1,645,000) | (1,706,000) |
Pre-1984 policyholder surplus account | (463,000) | (529,000) |
Unrealized gains on securities available-for-sale | 0 | (831,000) |
Unrealized gains on equity securities | (517,000) | 0 |
Deferred tax liabilities | (2,704,000) | (3,154,000) |
Net deferred tax asset | $ 716,000 | $ 1,487,000 |
INCOME TAXES (Schedule of Income Tax Effects of Changes in Temporary Differences) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Tax Disclosure [Abstract] | ||
Deferred policy acquisition costs | $ (61) | $ (77) |
Other-than-temporary impairments | (3) | 0 |
Unearned premiums | 4 | (10) |
General expenses | 2 | (45) |
Depreciation | (9) | 7 |
Claims liabilities | (68) | (38) |
AMT credit | 1,575 | (345) |
Impact of repeal of special provision on pre-1984 policyholder surplus | (66) | 857 |
Unrealized gains on equity securities | (43) | 0 |
Impact of TCJA change in corporate tax rate | 0 | (54) |
Deferred income tax expense (benefit) | $ 1,331 | $ 295 |
INCOME TAXES (Schedule of Effective Income Tax Rate Reconciliation) (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Tax Disclosure [Abstract] | ||
Federal income tax rate applied to pre-tax income/loss | 21.00% | 34.00% |
Dividends received deduction and tax-exempt interest | (2.40%) | 5.80% |
Company owned life insurance | 7.40% | 3.40% |
Small life deduction | (0.00%) | 30.70% |
Pre-1984 policyholder surplus account at current statutory rate | (0.00%) | (76.90%) |
Other, net | 0.90% | (5.00%) |
Effective federal income tax rate | 26.90% | (8.00%) |
NOTES PAYABLE AND LONG-TERM DEBT (Short-Term Debt) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Short-term Debt [Line Items] | ||
Short-term notes payable and current portion of long-term debt | $ 2,200 | $ 1,300 |
Notes Payable to Banks | Unsecured Debt | ||
Short-term Debt [Line Items] | ||
Short-term notes payable and current portion of long-term debt | $ 2,200 | 800 |
Interest rate description | WSJ | |
Basis spread on variable rate | 0.50% | |
Line of Credit | Unsecured Debt | ||
Short-term Debt [Line Items] | ||
Short-term notes payable and current portion of long-term debt | $ 0 | $ 500 |
Interest rate description | WSJ | |
Basis spread on variable rate | 0.50% |
NOTES PAYABLE AND LONG-TERM DEBT (Maturity of Outstanding Debt) (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2018 | $ 2,200 |
2019 | 0 |
2020 | 0 |
2021 | 0 |
2022 | 0 |
Thereafter | $ 12,152 |
NOTES PAYABLE AND LONG-TERM DEBT (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2010 |
May 26, 2010 |
Dec. 31, 2009 |
Mar. 19, 2009 |
|
Debt Instrument [Line Items] | ||||||
Derivative, notional amount | $ 9,000 | $ 3,000 | ||||
Derivative, fixed interest rate | 8.49% | 7.02% | ||||
Cash flow hedge, derivative instrument liabilities at fair value | $ 234 | $ 608 | ||||
Unrealized gain on interest rate swap | 295 | 278 | ||||
Securities on deposit | 932 | |||||
Available-for-sale securities pledged as collateral | $ 932 | $ 1,446 | ||||
Interest rate swap | ||||||
Debt Instrument [Line Items] | ||||||
Cash flow hedge, liability at fair value | $ 6 | |||||
Cash flow hedging | ||||||
Debt Instrument [Line Items] | ||||||
Cash flow hedge, liability at fair value | $ 228 |
REINSURANCE (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Reinsurance Maintained by Layers [Line Items] | ||
Catastrophe reinsurance retention | $ 4,000,000 | |
Life insurance policy reinsurance limit | 50,000 | |
Reinsurance recoverable | 1,772,000 | $ 366,000 |
Single Reinsurer | ||
Reinsurance Maintained by Layers [Line Items] | ||
Reinsurance recoverable | $ 125,000 | $ 322,000 |
First Layer | ||
Reinsurance Maintained by Layers [Line Items] | ||
Percent of reinsured losses covered by layer | 100.00% | |
Covered losses | $ 13,500,000 | |
Reinsurer's limit of liability | $ 17,500,000 | |
Second Layer | ||
Reinsurance Maintained by Layers [Line Items] | ||
Percent of reinsured losses covered by layer | 100.00% | |
Covered losses | $ 25,000,000 | |
Reinsurer's limit of liability | $ 42,500,000 | |
Third Layer | ||
Reinsurance Maintained by Layers [Line Items] | ||
Percent of reinsured losses covered by layer | 100.00% | |
Covered losses | $ 30,000,000 | |
Reinsurer's limit of liability | $ 72,500,000 |
EMPLOYEE BENEFIT PLANS (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018
USD ($)
hours
|
Dec. 31, 2017
USD ($)
|
|
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||
Minimum hours of service completed in year of contribution | hours | 1,000 | |
Matching contribution | $ 201,000 | $ 187,000 |
Employer matching contribution, percent | 5.00% | |
Cash contributions to ESOP | $ 232,000 | 268,000 |
ESOP debt structure | 0 | |
Non-Qualified Deferred Compensation Plans | ||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||
Deferred compensation arrangement | $ 128,000 | $ 215,000 |
Executive Officers | ||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||
Employer matching contribution, percent | 15.00% |
REGULATORY REQUIREMENTS AND DIVIDEND RESTRICTIONS (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Statutory Accounting Practices [Line Items] | ||
Assets held by insurance regulators | $ 3,031 | $ 2,928 |
Life Insurance Operations | ||
Statutory Accounting Practices [Line Items] | ||
Statutory amount available for dividend payments | 1,583 | |
P&C Insurance Operations | ||
Statutory Accounting Practices [Line Items] | ||
Statutory amount available for dividend payments | $ 3,464 |
SHAREHOLDERS' EQUITY (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
May 18, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Net income (loss) | $ 779 | $ (1,203) | |
Dividends paid | (505) | (504) | |
Other comprehensive income, net of tax | $ (2,109) | $ 1,204 | |
Common Stock | Directors | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Stock issued | 4,824 |
SHAREHOLDERS' EQUITY (Preferred and Common Stock) (Details) - $ / shares |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Class of Stock [Line Items] | ||
Preferred stock, par value | $ 1 | $ 1 |
Preferred stock, shares authorized | 500,000 | 500,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 1 | $ 1 |
Common stock, shares authorized | 3,000,000 | 3,000,000 |
Common stock, shares issued | 2,527,136 | 2,522,312 |
Common stock, shares outstanding | 2,527,136 | 2,522,312 |
Class A Common Stock | ||
Class of Stock [Line Items] | ||
Common stock, par value | $ 1 | $ 1 |
Common stock, shares authorized | 2,000,000 | 2,000,000 |
Common stock, shares issued | 0 | 0 |
Common stock, shares outstanding | 0 | 0 |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Amounts reclassified out of AOCI) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Reclassification out of Accumulated Other Comprehensive Income [Line Items] | ||
Net realized investment gains (losses) | $ (178) | $ 234 |
Tax (expense) or benefit | (286) | (89) |
Net Income (Loss) | 779 | (1,203) |
Amounts Reclassified from Accumulated Other Comprehensive Income | Unrealized Gains and Losses on Available-for-Sale Securities | ||
Reclassification out of Accumulated Other Comprehensive Income [Line Items] | ||
Net realized investment gains (losses) | 127 | 232 |
Total before tax | 127 | 232 |
Tax (expense) or benefit | (27) | (79) |
Net Income (Loss) | $ 100 | $ 153 |
SEGMENTS (Narrative) (Details) |
12 Months Ended |
---|---|
Dec. 31, 2018
Segments
| |
Segment Reporting [Abstract] | |
Number of operating segments | 1 |
CONTINGENCIES (Details) |
Dec. 31, 2018
claim
|
---|---|
Hurricane | |
Loss Contingencies [Line Items] | |
Pending claims, number | 1 |
SUPPLEMENTAL CASH FLOW INFORMATION (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Supplemental Cash Flow Elements [Abstract] | ||
Interest paid | $ 1,231,000 | $ 1,285,000 |
Income taxes paid | 25,000 | 0 |
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | ||
Common stock issued | 76,000 | 76,000 |
Common Stock | ||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | ||
Common stock issued | 5,000 | 5,000 |
Additional Paid-in Capital | ||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | ||
Common stock issued | $ 71,000 | $ 71,000 |
Schedule II. Condensed Financial Information of Registrant (Details 1) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income | ||
Other income | $ 612 | $ 596 |
Total Revenues | 64,857 | 65,640 |
Expenses | ||
Interest expense | 1,235 | 1,307 |
Income tax expense (benefit) | 286 | 89 |
Parent Company | ||
Income | ||
Dividends (eliminated upon consolidation) | 750 | 900 |
Holding company management service fees | 1,006 | 1,019 |
Other income | 55 | 65 |
Total Revenues | 1,811 | 1,984 |
Expenses | ||
State taxes | 43 | 43 |
Interest expense | 1,187 | 1,234 |
Other expenses | 266 | 792 |
Operating Expenses | 1,496 | 2,069 |
Income (loss) before income taxes and equity in undistributed earnings of subsidiaries | 315 | (85) |
Income tax expense (benefit) | 151 | 74 |
Income (loss) before equity in undistributed earnings of subsidiaries | 164 | (159) |
Equity in undistributed earnings of subsidiaries | 615 | (1,044) |
Net income (loss) | $ 779 | $ (1,203) |
Schedule II. Condensed Financial Information of Registrant (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Subsidiaries | ||
Condensed Financial Statements, Captions [Line Items] | ||
Cash dividends paid to parent company by consolidated subsidiaries | $ 750 | $ 900 |
Schedule V. Valuation and Qualifying Accounts (Details) - Allowance for Doubtful Accounts - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Movement in Valuation Allowances and Reserves [Roll Forward] | |||
Balance, January 1 Allowance for Doubtful Accounts | $ 4 | $ 4 | $ 7 |
Additions | 8 | 1 | |
Deletions | 8 | 4 | |
Balance, December 31 Allowance for Doubtful Accounts | $ 4 | $ 4 |
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