The National Security Group, Inc. Releases Estimates of Catastrophe Losses from Hurricane Laura

The National Security Group, Inc. (NASDAQ:NSEC) releases preliminary estimates of insured catastrophe losses from Hurricane Laura incurred by property and casualty subsidiary National Security Fire & Casualty (NSFC).

On August 27, 2020, Hurricane Laura made landfall along the western Louisiana coast near Cameron. At landfall, Laura was a Category 4 hurricane with winds of approximately 150 mph with minimum pressure on the morning of landfall at 937 millibars. Based on data collected from the National Weather Service, Hurricane Laura was the strongest land-falling hurricane to hit Louisiana since the 1856 Last Island Hurricane and was the fifth strongest hurricane on record to make landfall in the continental United States. In a very active 2020 storm season, Hurricane Laura was the seventh named storm to make landfall in the U.S. setting a record as the earliest seventh named storm to make a U.S. landfall.

Our pre-tax loss, net of reinsurance, due to Hurricane Laura is expected to be $2,250,000. Net of tax, Hurricane Laura will reduce our 2020 earnings by $1,778,000 and will reduce earnings per share by $0.70. The impact of Hurricane Laura will be reflected in our third quarter results. To date, we have over 700 claims reported from this event with approximately 90% of these claims reported by our Louisiana policyholders.

Based on our analysis of historical reporting patterns, preliminary post event model output and assessment of early reports of claims to date, we estimate our ultimate gross losses from Hurricane Laura to be in the range of $5,500,000 to $6,500,000. Based on our estimate of gross losses, we expect losses from Hurricane Laura to remain well below the upper limits of our catastrophe reinsurance coverage.

The Company maintains catastrophe reinsurance coverage to mitigate loss exposure from catastrophic events. With our 2020 catastrophe contract placement, our single event catastrophe retention remained unchanged from the prior year at $4,000,000. In our 2020 contract, we placed an underlying second event layer of $2,000,000 in excess of $2,000,000. This additional coverage effectively lowers our second event retention to $2,000,000. Also unchanged from last year, we maintain catastrophe reinsurance covering incurred claims of a single catastrophe event up to $72,500,000. Our catastrophe reinsurance has a reinstatement provision for one event and covers the cost of a second event up to the same $72,500,000 upper limit. Because we were impacted by one catastrophe event, in the second quarter of 2020, that exceeded $2,000,000, Hurricane Laura losses fall within the underlying layer second event coverage and our retention will be $2,000,000. We will also pay a $250,000 reinstatement on this underlying layer.