Atlantic American Corp.
Annual Report 2015

Plain-text annual report

TABLE OF CONTENTSUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-K☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2015orooTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Commission file number 0-3722ATLANTIC AMERICAN CORPORATION(Exact name of registrant as specified in its charter)Georgia58-1027114(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.) 4370 Peachtree Road, N.E.,Atlanta, Georgia30319(Address of principal executive offices)(Zip Code)(Registrant’s telephone number, including area code) (404) 266-5500Securities registered pursuant to section 12(b) of the Act:Title of each className of exchangeCommon Stock, par value$1.00 per shareNASDAQ Global MarketSecurities registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes o No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes o No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Actof 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.Yes ☒ No oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive DataFile required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or forsuch shorter period that the registrant was required to submit and post such files).Yes ☒ No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not containedherein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in PartIII of this Form 10-K or any amendment to this Form 10-K. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Checkone):Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company ☒Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No ☒The aggregate market value of voting and nonvoting common stock held by non-affiliates of the registrant as of June 30, 2015, the last businessday of the registrant’s most recently completed second fiscal quarter, was $16,176,502. For purposes hereof, beneficial ownership is determinedunder rules adopted pursuant to Section 13 of the Securities Exchange Act of 1934, and the foregoing excludes value ascribed to common stock thatmay be deemed beneficially owned by the directors and executive officers, and 10% or greater stockholders, of the registrant, some of whom may notbe deemed to be affiliates upon judicial determination. On March 15, 2016 there were 20,394,007 shares of the registrant’s common stock, par value$1.00 per share, outstanding.DOCUMENTS INCORPORATED BY REFERENCE1. Portions of the registrant’s Proxy Statement for the 2016 Annual Meeting of Shareholders, to be filed with the Securities and ExchangeCommission within 120 days of the registrant’s fiscal year end, have been incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III of thisForm 10-K.TABLE OF CONTENTSTABLE OF CONTENTS PagePART I Item 1.Business 1 The Company 1 Marketing 2 Underwriting 4 Policyholder and Claims Services 4 Reserves 5 Reinsurance 8 Competition 9 Ratings 9 Regulation 10 NAIC Ratios 10 Risk-Based Capital 11 Investments 11 Employees 12 Financial Information by Industry Segment 12 Available Information 12 Executive Officers of the Registrant 12 Forward-Looking Statements 13 Item 1A.Risk Factors 13 Item 1B.Unresolved Staff Comments 13 Item 2.Properties 13 Item 3.Legal Proceedings 14 Item 4.Mine Safety Disclosures 14 PART II Item 5.Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of EquitySecurities 15 Item 6.Selected Financial Data 16 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations 16 Item 7A.Quantitative and Qualitative Disclosures About Market Risk 25 Item 8.Financial Statements and Supplementary Data 26 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 52 Item 9A.Controls and Procedures 52 Item 9B.Other Information 52 PART III Item 10.Directors, Executive Officers and Corporate Governance 53 Item 11.Executive Compensation 53 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 53 Item 13.Certain Relationships and Related Transactions, and Director Independence 53 Item 14.Principal Accountant Fees and Services 53 PART IV Item 15.Exhibits, Financial Statement Schedules 54 TABLE OF CONTENTSPART IItem 1.BusinessThe CompanyAtlantic American Corporation, a Georgia corporation incorporated in 1968 (the “Parent” or “Company”), is a holdingcompany that operates through its subsidiaries in well-defined specialty markets within the life and health and property andcasualty insurance industries. The Parent’s principal operating subsidiaries are American Southern Insurance Company andAmerican Safety Insurance Company (together known as “American Southern”) within the property and casualty insuranceindustry and Bankers Fidelity Life Insurance Company and Bankers Fidelity Assurance Company (together known as “BankersFidelity”) within the life and health insurance industry. Each of American Southern and Bankers Fidelity is managed separatelybased upon the type of products it offers, and is evaluated on its individual performance. The Company’s strategy is to focus onwell-defined geographic, demographic and/or product niches within the insurance marketplace. Each of American Southern andBankers Fidelity operates with relative autonomy, which structure is designed to allow for quick reaction to market opportunities.The Parent has no significant business operations of its own and relies on fees, dividends and other distributions from itsoperating subsidiaries as the principal source of cash flow to meet its obligations. Additional information regarding the cash flowand liquidity needs of the Parent can be found in the Liquidity and Capital Resources section of Management’s Discussion andAnalysis of Financial Condition and Results of Operations.Property and Casualty OperationsAmerican Southern comprises the Company’s property and casualty operations and its primary product lines are as follows:Business Automobile Insurance policies provide bodily injury and/or property damage liability coverage, uninsuredmotorist coverage and physical damage coverage for commercial accounts.General Liability Insurance policies cover bodily injury and property damage liability for both premises and completedoperations exposures for general classes of business.Surety Bonds are contracts under which one party, the insurance company issuing the surety bond, guarantees to a thirdparty that the primary party will fulfill an obligation in accordance with a contractual agreement. This obligation may involvemeeting a contractual commitment, paying a debt or performing certain duties.American Southern provides tailored business automobile insurance coverage, on a multi-year contract basis, to stategovernments, local municipalities and other large motor pools and fleets (“block accounts”) that can be specifically rated andunderwritten. The size of the block accounts insured by American Southern are generally such that individual class experience canbe determined, which allows for customized policy terms and rates. American Southern is licensed to do business in 32 states andthe District of Columbia. While the majority of American Southern’s premiums are derived from its automobile lines of business,American Southern also offers business personal property, inland marine and general liability coverages. Additionally, AmericanSouthern directly provides surety bond coverage for school bus transportation and subdivision construction, as well asperformance and payment bonds.1 Year Ended December 31, 20152014 (In thousands)Automobile liability$24,786 $26,438 Automobile physical damage 13,290 11,633 General liability 3,152 3,577 Surety 9,192 7,309 Other lines 4,088 3,697 Total$54,508 $52,654 Year Ended December 31, 20152014 (In thousands)Life insurance$10,454 $10,887 Medicare supplement 81,068 85,197 Other accident and health 4,862 4,750 Total health insurance 85,930 89,947 Total$96,384 $100,834 TABLE OF CONTENTSThe following table summarizes, for the periods indicated, the allocation of American Southern’s net earned premiums fromeach of its principal product lines:Life and Health OperationsBankers Fidelity comprises the life and health operations of the Company and offers a variety of life and supplemental healthproducts with a focus on the senior markets. Products offered by Bankers Fidelity include ordinary and term life insurance,Medicare supplement and other accident and health insurance products. Health insurance products, primarily Medicare supplementinsurance, accounted for 89.2% of Bankers Fidelity’s net earned premiums in 2015 while life insurance, including both whole andterm life insurance policies, accounted for the balance. In terms of the number of policies written in 2015, 77.4% were healthinsurance policies and 22.6% were life insurance policies.The following table summarizes, for the periods indicated, the allocation of Bankers Fidelity’s net earned premiums from eachof its principal product lines followed by a brief description of the principal products:Life Insurance products include non-participating individual term and whole life insurance policies with a variety ofriders and options. Policy premiums are dependent upon a number of factors, including issue age, level of coverage andselected riders or options.Medicare Supplement Insurance includes 8 of the 11 standardized Medicare supplement policies created under theMedicare Improvements for Patients and Providers Act of 2008 (“MIPPA”), which are designed to provide insurance coveragefor certain expenses not covered by the Medicare program, including copayments and deductibles.Other Accident and Health Insurance coverages include several policies providing for the payment of standard benefitsin connection with the treatment of diagnosed cancer and other critical illnesses, as well as a number of other policiesproviding nursing facility care, accident expense, hospital indemnity and disability coverages.MarketingProperty and Casualty OperationsA portion of American Southern’s business is marketed through a small number of specialized, experienced independentagents. American Southern’s agent selection process is actively managed by internal marketing personnel with oversight frommanagement. Senior management carefully reviews all new programs prior to acceptance. Most of American Southern’s agents arepaid an up-front commission with the potential for2TABLE OF CONTENTSadditional commissions by participating in a profit sharing arrangement that is directly linked to the profitability of the underlyingbusiness. American Southern also solicits business from governmental entities. As an experienced writer of insurance policies forcertain governmental programs, the company actively pursues this market on a direct basis. Much of this business is priced bymeans of competitive bid situations and there can be no assurance with respect to ultimate profitability or that the company canobtain or retain such business at the time of a specific contract renewal.Life and Health OperationsBankers Fidelity markets its policies through three distribution channels all of which utilize commissioned, independentagents. The three channels utilized include traditional independent agents, broker-agents typically interested in a specific productof Bankers Fidelity and special market agents who promote workplace, association and/or branded products.Bankers Fidelity has implemented an agent qualification process and had 3,447 licensed agents as of December 31, 2015. Theagents generally concentrate their sales activities in both the accident and health or life insurance product lines. During 2015,approximately 872 of the licensed agents wrote policies on behalf of Bankers Fidelity.Bankers Fidelity, in an effort to motivate all of its licensed agents to market its products, offers the following: competitiveproducts and commission structures, efficient claims service, prompt payment of commissions that vest immediately, simplifiedpolicy issuance procedures, periodic sales incentive programs and, as described below, for traditional independent agents,protected sales territories determined based on specific counties and/or zip codes.In the traditional independent agent arrangement, Bankers Fidelity enters into contractual arrangements with various regionalsales directors and general agents responsible for marketing and other sales activities, who may also, in turn, recommendappointment of other independent agents. The standard agreements set forth the commission arrangements and are terminablewithout cause by either party upon notice. Regional sales directors and general agents receive an override commission on salesmade by their sponsored agents. Management believes utilizing experienced agents, as well as independent general agents whorecruit and train their own agents, is cost effective. All independent agents are compensated primarily on a commission basis. Usingindependent agents also enables Bankers Fidelity to effectively expand or contract its sales force without incurring significantexpense.With the traditional independent agents, the company utilizes a lead generation system that rewards qualified agents withleads in accordance with certain production criteria. In addition, a protected territory is established for qualified agents, whichentitles them to all leads produced within that territory. The territories are zip code or county based and encompass sufficientgeographic territory designed to produce an economically serviceable senior population. The Company believes that offering alead generation system solves an agent’s most important dilemma -- prospecting -- and allows Bankers Fidelity to build long-termrelationships with agents who view Bankers Fidelity as their primary company. In addition, management believes that BankersFidelity’s product line is less sensitive to competitor pricing and commissions because of the perceived value of the protectedterritory and the lead generation system. In protected geographical areas, production per agent has historically compared favorablyto unprotected areas served by the general brokerage division.Products of Bankers Fidelity compete directly with products offered by other insurance companies, and agents may representmultiple insurance companies. Broker-agents generally are not interested in developing relationships with any one particularinsurance company but are more interested in matching a specific product with the specific needs of their clients. These agents,while a source of business, do not participate in the company’s lead generation system, but can qualify for other incentives thatBankers Fidelity offers to its traditional independent agents.Bankers Fidelity also has a number of agents, some of whom belong to marketing organizations that solicit business fromvarious groups including employers, trade associations and/or other organizations. Depending on the group’s needs, these agentsmay target one specific product or a group of Bankers Fidelity’s products to market to a group’s members. These agents also do notparticipate in the company’s lead generation system, but can also qualify for other incentives that Bankers Fidelity offers to itstraditional independent agents.3TABLE OF CONTENTSUnderwritingProperty and Casualty OperationsAmerican Southern specializes in underwriting various risks that are sufficiently large enough to establish separate classexperience, relying upon the underwriting expertise of its agents.During the course of the policy life, extensive use is made of risk management representatives to assist commercialunderwriters in identifying and correcting potential loss exposures and to physically inspect new accounts. The underwritingresults from each insured are reviewed on an individual basis periodically. When results are below expectations, management takescorrective action which may include adjusting rates, revising underwriting standards, adjusting commissions paid to agents, and/oraltering or declining to renew accounts at expiration.Life and Health OperationsBankers Fidelity issues a variety of products for both life and health insurance markets, with a focus on senior life insuranceproducts typically with small face amounts of between $3,000 and $50,000, and Medicare supplement insurance. The majority ofits products utilize “Yes” or “No” applications that are underwritten on a non-medical basis. Bankers Fidelity offers products to allage groups; however, its primary marketing focus is the senior market which is generally defined as individuals 65 years of age orolder. For life products offered to other than the senior market, Bankers Fidelity may require medical information, such as medicalexaminations, subject to published age guidelines and coverage limits. Approximately 89% of the annualized premiums for bothlife and health insurance sold during 2015 were derived from insurance written on a non-medical basis. For the senior market,Bankers Fidelity offers life products primarily on a simplified policy issue basis with coverage amounts up to $50,000 for preferredrates, up to $35,000 for standard rates and up to $20,000 for graded death benefits and modified rates. Bankers Fidelity retains amaximum coverage amount of $100,000 with respect to any individual life policy (see “Reinsurance”).Applications for insurance are reviewed to determine the face amount, age, medical history and any other necessaryinformation. Bankers Fidelity utilizes information obtained directly from the insured, the Medical Information Bureau (“M.I.B.”),paramedical testing, and/or medical records. Bankers Fidelity may also utilize investigative services to supplement andsubstantiate information. For certain limited coverages, Bankers Fidelity has adopted simplified policy issuance procedures bywhich an application containing a variety of health related questions is submitted. For these plans, Bankers Fidelity obtains M.I.B.and prescription drug utilization reports and conducts a telephone interview, however, will generally not request paramedicaltesting or medical records.Policyholder and Claims ServicesThe Company believes that prompt, efficient policyholder and claims services are essential to its continued success inmarketing its insurance products (see “Competition”). Additionally, the Company believes that its insureds are particularlysensitive to claims processing time and to the accessibility of qualified staff to answer inquiries. Accordingly, the Company’spolicyholder and claims services seek to offer expeditious disposition of service requests by providing toll-free access for allcustomers, 24-hour claim reporting services, and direct computer links with some of its largest accounts. The Company also utilizesan automatic call distribution system to ensure that inbound calls to customer service support groups are processed efficiently.Operational data generated from this system allows management to further refine ongoing client service programs and servicerepresentative training modules.Property and Casualty OperationsAmerican Southern controls its claims costs by utilizing an in-house staff of claims supervisors to investigate, verify, negotiateand settle claims. Upon notification of an occurrence purportedly giving rise to a claim, a claim file is established. The claimsdepartment then conducts a preliminary investigation, determines whether an insurable event has occurred and, if so, updates thefile for the findings and any required reserve adjustments. Frequently, independent adjusters and appraisers are utilized to serviceclaims which require on-site inspections.Life and Health OperationsInsureds may obtain claim forms by calling the claims department customer service group or through Bankers Fidelity’swebsite. To shorten claim processing time, a letter detailing all supporting documents that are4TABLE OF CONTENTSrequired to complete a claim for a particular policy is sent to the customer along with the correct claim form. With respect to lifepolicies, the claim is entered into Bankers Fidelity’s claims system when the proper documentation is received. Properlydocumented claims are generally paid within five business days of receipt. With regard to Medicare supplement policies, the claimis either directly billed to Bankers Fidelity by the provider or sent electronically through a Medicare clearing house.ReservesThe following table sets forth information concerning the Company’s reserves for losses and claims and reserves for lossadjustment expenses (“LAE”) for the periods indicated: 20152014 (In thousands)Balance at January 1$66,625 $63,018 Less: Reinsurance receivable on unpaid losses (14,302) (14,314)Net balance at January 1 52,323 48,704 Incurred related to: Current year 99,447 104,225 Prior years (1) (701) (483)Total incurred 98,746 103,742 Paid related to: Current year 68,159 72,443 Prior years 30,781 27,680 Total paid 98,940 100,123 Net balance at December 31 52,129 52,323 Plus: Reinsurance receivable on unpaid losses 11,741 14,302 Balance at December 31$63,870 $66,625 (1)Favorable loss development from life and health operations for the years ended December 31, 2015 and 2014 was $0.7million and $0.3 million, respectively. See Note 3 of Notes to Consolidated Financial Statements.Reserves are set by line of business within each of the subsidiaries. At December 31, 2015, approximately 80% of the reservesrelated to property and casualty losses and approximately 20% related to life and health losses. The Company’s property andcasualty operations incur losses which may take extended periods of time to evaluate and settle. Issues with respect to legalliability, actual loss quantification, legal discovery and ultimate subrogation, among other factors, may influence the initial andsubsequent estimates of loss. In the property and casualty operations, the Company’s general practice is to reserve at the higher endof the determined reasonable range of loss if no other value within the range is determined to be more probable. The Company’slife and health operations generally incur losses which are more readily quantified. Medical claims received are recorded in casereserves based on contractual terms using the submitted billings as a basis for determination. Life claims are recorded based oncontract value at the time of notification to the Company; although policy reserves related to such contracts have been previouslyestablished. Individual case reserves are established by a claims processor on each individual claim and are periodically reviewedand adjusted as new information becomes known during the course of handling a claim. Regular internal periodic reviews are alsoperformed by management to ensure that loss reserves are established and revised timely relative to the receipt of new or additionalinformation. Lines of business for which loss data (e.g. paid losses and case reserves) emerge over a long period of time are referredto as long-tail lines of business. Lines of business for which loss data emerge more quickly are referred to as short-tail lines ofbusiness. The Company’s long-tail line of business generally consists of its general liability coverage while the short-tail lines ofbusiness generally consist of property and automobile coverages.The Company’s actuaries regularly review reserves for both current and prior accident years using the most current claimsdata. These reviews incorporate a variety of actuarial methods (discussed in Critical Accounting5TABLE OF CONTENTSPolicies) and judgments and involve a disciplined analysis. For most lines of business, certain actuarial methods and specificassumptions are deemed more appropriate based on the current circumstances affecting that line of business. These selectionsincorporate input from claims personnel and operating management on reported loss cost trends and other factors that could affectthe reserve estimates.For long-tail lines of business, the emergence of paid losses and case reserves is less credible in the early periods, andaccordingly may not be indicative of ultimate losses. For these lines, methods which incorporate a development patternassumption are given less weight in calculating incurred but not reported (“IBNR”) reserves for the early periods of loss emergencebecause such a low percentage of ultimate losses are reported in that time frame. Accordingly, for any given accident year, the rateat which losses on long-tail lines of business emerge in the early periods is generally not as reliable an indication of ultimate lossesas it would be for shorter-tail lines of business. The estimation of reserves for these lines of business in the early periods of lossemergence is therefore largely influenced by statistical analyses and application of prior accident years’ loss ratios, afterconsidering changes to earned pricing, loss costs, mix of business, ceded reinsurance and other factors that are expected to affectthe estimated ultimate losses. For later periods of loss emergence, methods which incorporate a development pattern assumptionare given more weight in estimating ultimate losses. For short-tail lines of business, the emergence of paid loss and case reserves ismore credible in the early periods and is more likely to be indicative of ultimate losses. The method used to set reserves for theselines of business is based upon utilization of a historical development pattern for reported losses. IBNR reserves for the current yearare set as the difference between the estimated fully developed ultimate losses for each year, less the established, related casereserves and cumulative related payments. IBNR reserves for prior accident years are similarly determined, again relying on anindicated, historical development pattern for reported losses.Based on the results of regular reserve estimate reviews, the Company determines the appropriate reserve adjustment, if any, torecord in each period. If necessary, recorded reserve estimates are changed after consideration of numerous factors, including, butnot limited to, the magnitude of the difference between the actuarial indication and the recorded reserves, improvement ordeterioration of actuarial indication in the period, the maturity of the accident year, trends observed over the recent past and thelevel of volatility within a particular line of business. In general, changes are made more quickly to recognize changes in estimatesto ultimate losses in mature accident years and less volatile lines of business.Estimating case reserves and ultimate losses involves various considerations which differ according to the line of business. Inaddition, changes in legislative and regulatory environments may impact loss estimates. General liability claims may have a longpattern of loss emergence. Given the broad nature of potential general liability coverages, investigative time periods may beextended and questions of coverage may exist. Such uncertainties create greater imprecision in estimating required levels of lossreserves. The property and automobile lines of business generally have less variable reserve estimates than other lines. This islargely due to the coverages having relatively shorter periods of loss emergence. Estimates, however, can still vary due to a numberof factors, including interpretations of frequency and severity trends. Severity trends can be impacted by changes in internal claimhandling and reserving practices in addition to changes in the external environment. These changes in claim practices increase theuncertainty in the interpretation of case reserve data, which increases the uncertainty in recorded reserve levels.Components of the Company’s reserves for losses and claims by product line at December 31, 2015 were as follows: CaseIBNRTotal (In thousands)Business automobile$18,801 $13,934 $32,735 Personal automobile/physical damage 1,546 215 1,761 General & other liability 1,533 7,793 9,326 Other lines (including life) 3,847 4,520 8,367 Medicare supplement 149 9,543 9,692 Unallocated loss adjustment reserves — 1,989 1,989 Total reserves for losses and claims$25,876 $37,994 $63,870 6TABLE OF CONTENTSThe Company’s policy is to record reserves for losses and claims in amounts which approximate actuarial best estimates ofultimate values. Actuarial best estimates do not necessarily represent the midpoint value determined using the various actuarialmethods; however, such estimates will fall between the estimated low and high end reserve values. The range of estimatesdeveloped in connection with the December 31, 2015 actuarial review indicated that reserves could be as much as 13.8% lower oras much as 6.0% higher. In the opinion of management, recorded reserves represent the best estimate of outstanding losses,although significant judgments are made in the derivation of reserve estimates and revisions to such estimates are expected to bemade in future periods. Any such revisions could be material, and may materially adversely affect the Company’s financialcondition and results of operations in any future period.Property and Casualty OperationsAmerican Southern maintains loss reserves representing estimates of amounts necessary for payment of losses and LAE, andwhich are not discounted. IBNR reserves are also maintained for future development. These loss reserves are estimates, based onknown facts and circumstances at a given date, of amounts the Company expects to pay on incurred claims. All balances arereviewed periodically by the Company’s independent consulting actuary. Reserves for LAE are intended to cover the ultimatecosts of settling claims, including investigation and defense of any lawsuits resulting from such claims. Loss reserves for reportedclaims are based on a case-by-case evaluation of the type of claim involved, the circumstances surrounding the claim, and thepolicy provisions relating to the type of loss along with anticipated future development. The LAE for claims reported and claimsnot reported is based on historical statistical data and anticipated future development. Inflation and other factors which may affectclaim payments are implicitly reflected in the reserving process through analysis and consideration of cost trends and reviews ofhistorical reserve results.American Southern establishes reserves for claims based upon: (a) management’s estimate of ultimate liability and claimsadjusters’ evaluations of unpaid claims reported prior to the close of the accounting period, (b) estimates of IBNR claims based onpast experience, and (c) estimates of LAE. If no value is determined to be more probable in estimating a loss after considering allfactors, the Company’s general practice is to reserve at the higher end of the determined reasonable range of loss. The estimatedliability is periodically reviewed and updated, and changes to the estimated liability are recorded in the statement of operations inthe period in which such changes become known.The following table sets forth the development of reserves for unpaid losses and claims determined using generally acceptedaccounting principles of American Southern’s insurance lines from 2005 through 2015. Specifically excluded from the table arethe life and health division’s claims reserves, which are included in the consolidated loss and claims reserves. The top line of thetable represents the estimated cumulative amount of losses and LAE for claims arising in all prior years that were unpaid at thebalance sheet date for each of the indicated periods, including an estimate of IBNR losses at the applicable date. The amountsrepresent initial reserve estimates at the respective balance sheet dates for the current and all prior years. The next portion of thetable shows the cumulative amounts paid with respect to claims in each succeeding year. The lower portion of the table shows there-estimated amounts of previously recorded reserves based on experience as of the end of each succeeding year.The reserve estimates are modified as more information becomes known about the frequency and severity of claims forindividual years. The “cumulative redundancy” for each year represents the aggregate change in such year’s estimates through theend of 2015. Furthermore, the amount of the redundancy for any year represents the cumulative amount of the changes from initialreserve estimates for such year. Operations for any year may be affected, favorably or unfavorably, by the amount of the change inthe estimate for such years; however, because such analysis is based on the reserves for unpaid losses and claims, beforeconsideration of reinsurance, the total indicated redundancies may not ultimately be reflected in the Company’s net income.Further, conditions and7TABLE OF CONTENTStrends that have affected development of reserves in the past may not necessarily occur in the future and there could be futureevents or actions that impact future development which have not existed in the past. Accordingly, the accurate prediction of futureredundancies based on the data in the following table is not possible. Year Ended December 31, 20152014201320122011201020092008200720062005 (Dollars In thousands)Reserve forLosses andLAE$51,200 $55,017 $51,200 $52,764 $49,478 $46,092 $42,248 $44,928 $43,994 $45,655 $43,593 Cumulative paidas of: One year later 26,289 21,577 25,352 18,959 15,183 10,486 13,627 11,630 18,010 14,254 Two years later 37,022 37,128 34,805 25,333 17,462 19,003 21,187 24,793 23,967 Three years later 44,473 41,967 34,266 23,231 22,197 23,993 29,338 27,235 Four years later 46,715 37,720 29,254 24,016 25,733 30,853 29,179 Five years later 40,241 31,125 28,898 27,160 31,486 30,629 Six years later 32,488 30,286 31,659 32,415 30,961 Seven years later 31,462 32,489 35,695 31,346 Eight years later 33,616 36,277 33,776 Nine years later 37,001 33,874 Ten years later 34,498 Ultimate lossesand LAEreestimated asof: End of year$51,200 $55,017 $51,200 $52,764 $49,478 $46,092 $42,248 $44,928 $43,994 $45,655 $43,593 One year later 50,729 47,169 47,639 44,180 39,999 32,563 31,649 33,663 35,590 34,897 Two years later 49,927 49,966 46,109 38,859 30,562 28,386 29,903 34,163 32,929 Three years later 50,142 48,386 39,153 30,288 27,570 29,077 33,499 31,560 Four years later 49,361 41,339 31,798 28,169 29,162 32,753 32,043 Five years later 42,273 33,508 30,883 30,156 33,049 32,085 Six years later 34,331 31,696 33,091 33,933 32,192 Seven years later 32,073 33,804 36,262 31,836 Eight years later 34,184 36,817 34,167 Nine years later 37,426 34,384 Ten years later 34,905 Cumulativeredundancy $4,288 $1,273 $2,622 $117 $3,819 $7,917 $12,855 $9,810 $8,229 $8,688 7.8% 2.5% 5.0% 0.2% 8.3% 18.7% 28.6% 22.3% 18.0% 19.9%Note: This analysis is based on reserves for unpaid losses and claims, before consideration of reinsurance; therefore the totalindicated redundancies may not ultimately be reflected in the Company’s net income.Life and Health OperationsBankers Fidelity establishes liabilities for future policy benefits to meet projected future obligations under outstandingpolicies. These reserves are calculated to satisfy policy and contract obligations as they mature. The amount of reserves forinsurance policies is calculated using assumptions for interest rates, mortality and morbidity rates, expenses, and withdrawals.Reserves are adjusted periodically based on published actuarial tables with modifications to reflect actual experience. The use ofsignificantly different assumptions, or actual results that differ significantly from our estimates, could materially adversely affectour liquidity, results of operations or financial condition. See Note 3 of Notes to Consolidated Financial Statements.ReinsuranceThe Company’s insurance subsidiaries from time to time purchase reinsurance from unaffiliated insurers and reinsurers toreduce their potential liability on individual risks and to protect against catastrophic losses. In a reinsurance transaction, aninsurance company transfers, or “cedes,” a portion or all of its exposure on insurance policies to a reinsurer. The reinsurer assumesthe exposure in return for a portion of the premiums. The ceding of insurance does not legally discharge the insurer from primaryliability for the full amount of the policies written by it, and the ceding company will incur a loss if the reinsurer fails to meet itsobligations under the reinsurance agreement.8TABLE OF CONTENTSProperty and Casualty OperationsAmerican Southern’s basic reinsurance treaties generally cover all claims in excess of specified per occurrence limitations.Limits per occurrence within the reinsurance treaties are as follows: Fire - $125,000 excess of $50,000 retention; Inland marine andcommercial automobile physical damage - $125,000 excess of $75,000 retention; and automobile liability and general liability -excess coverage of $2.0 million less retentions that may vary from $100,000 to $150,000 depending on the account. AmericanSouthern maintains a property catastrophe treaty with a $5.7 million limit excess of $300,000 retention. American Southern alsoissues individual surety bonds with face amounts generally up to $1.5 million, and limited to $5.0 million in aggregate peraccount, that are not reinsured.Life and Health OperationsBankers Fidelity has entered into reinsurance contracts ceding the excess of its retention to several primary reinsurers.Maximum retention by Bankers Fidelity on any one individual in the case of life insurance policies is $100,000. At December 31,2015, $16.8 million of the $267.2 million of life insurance in force at Bankers Fidelity was reinsured under a mix of coinsuranceand yearly renewable term agreements. Certain prior year reinsurance agreements also remain in force although they no longerprovide reinsurance for new business.CompetitionCompetition for insurance products is based on many factors including premiums charged, terms and conditions of coverage,service provided, financial ratings assigned by independent rating agencies, claims services, reputation, perceived financialstrength and the experience of the organization in the line of business being written.Property and Casualty OperationsThe businesses in which American Southern engages are highly competitive. The principal areas of competition are pricingand service. Many competing property and casualty companies, which have been in business longer than American Southern, offermore diversified lines of insurance and have substantially greater financial resources. Management believes, however, that thepolicies it sells are competitive with those providing similar benefits offered by other insurers doing business in the states in whichAmerican Southern operates. American Southern attempts to develop strong relationships with its agents and, consequently,believes it is better positioned for new opportunities and programs with those agents.Life and Health OperationsThe life and health insurance business also remains highly competitive and includes a large number of insurance companies,many of which have substantially greater financial resources than Bankers Fidelity or the Company. Bankers Fidelity offers lifeinsurance products, Medicare supplement and other accident and health insurance products with a focus on the senior market.Bankers Fidelity believes that its primary competitors are Americo Life, GTL, Lincoln Heritage, Medico, Monumental, Mutual ofOmaha, New Era, Standard Life, Transamerica and United Healthcare. Bankers Fidelity competes with these as well as other insurerson the basis of premium rates, policy benefits and service to policyholders. Bankers Fidelity also competes with other insurers toattract and retain the allegiance of its independent agents through commission and sales incentive arrangements, accessibility andmarketing assistance, lead programs, reputation, and market expertise. In order to better compete, Bankers Fidelity actively seeksopportunities in niche markets, developing long-term relationships with a select number of independent marketing organizationspromoting worksite marketing and selective association endorsements. Bankers Fidelity has a track record of successfullycompeting in its chosen markets by establishing relationships with independent agents and providing proprietary marketinginitiatives as well as providing outstanding service to policyholders. Bankers Fidelity believes that it competes effectively on thebases of policy benefits, services and market segmentation.RatingsRatings of insurance companies are not designed for investors and do not constitute recommendations to buy, sell, or hold anysecurity. Ratings are important measures within the insurance industry, and higher ratings should have a favorable impact on theability of a company to compete in the marketplace.9TABLE OF CONTENTSEach year A.M. Best Company, Inc. (“A.M. Best”) publishes Best’s Insurance Reports, which includes assessments and ratingsof all insurance companies. A.M. Best’s ratings, which may be revised quarterly, fall into fifteen categories ranging from A++(Superior) to F (in liquidation). A.M. Best’s ratings are based on a detailed analysis of the statutory financial condition andoperations of an insurance company compared to the industry in general.American Southern. American Southern Insurance Company and its wholly-owned subsidiary, American Safety InsuranceCompany, are each, as of the date of this report, rated “A” (Excellent) by A.M. Best.Bankers Fidelity. Bankers Fidelity Life Insurance Company and its wholly-owned subsidiary, Bankers Fidelity AssuranceCompany, are each, as of the date of this report, rated “A-” (Excellent) by A.M. Best.RegulationIn common with all domestic insurance companies, the Company’s insurance subsidiaries are subject to regulation andsupervision in the jurisdictions in which they do business. Statutes typically delegate regulatory, supervisory, and administrativepowers to state insurance commissioners. The method of such regulation varies, but regulation relates generally to the licensing ofinsurers and their agents, the nature of and limitations on investments, approval of policy forms, reserve requirements, the standardsof solvency to be met and maintained, deposits of securities for the benefit of policyholders, and periodic examinations of insurersand trade practices, among other things. The Company’s products generally are subject to rate regulation by state insurancecommissions, which require that certain minimum loss ratios be maintained. Certain states also have insurance holding companylaws which require registration and periodic reporting by insurance companies controlled by other corporations licensed to transactbusiness within their respective jurisdictions. The Company’s insurance subsidiaries are subject to such legislation and areregistered as controlled insurers in those jurisdictions in which such registration is required. Such laws vary from state to state, buttypically require periodic disclosure concerning the corporation which controls the registered insurers and all subsidiaries of suchcorporations, as well as prior notice to, or approval by, the state insurance commissioners of intercorporate transfers of assets(including payments of dividends by the insurance subsidiaries in excess of specified amounts) within the holding companysystem.Most states require that rate schedules and other information be filed with the state’s insurance regulatory authority, eitherdirectly or through a ratings organization with which the insurer is affiliated. The regulatory authority may disapprove a rate filingif it determines that the rates are inadequate, excessive, or discriminatory. The Company has historically experienced no significantregulatory resistance to its applications for rate adjustments; however, the Company cannot provide any assurance that it will notreceive any objections to any applications in the future.A state may require that acceptable securities be deposited for the protection either of policyholders located in those states orof all policyholders. As of December 31, 2015, securities with an amortized cost of $11.3 million were on deposit either directlywith various state authorities or with third parties pursuant to various custodial agreements on behalf of the Company’s insurancesubsidiaries.Virtually all of the states in which the Company’s insurance subsidiaries are licensed to transact business require participationin their respective guaranty funds designed to cover claims against insolvent insurers. Insurers authorized to transact business inthese jurisdictions are generally subject to assessments of up to 4% of annual direct premiums written in that jurisdiction to paysuch claims, if any. The likelihood and amount of any future assessments cannot be estimated until an insolvency has occurred.NAIC RatiosThe National Association of Insurance Commissioners (the “NAIC”) was established to, among other things, provideguidelines to assess the financial strength of insurance companies for state regulatory purposes. The NAIC conducts annual reviewsof the financial data of insurance companies primarily through the application of 13 financial ratios prepared on a statutory basis.The annual statements are submitted to state insurance departments to assist them in monitoring insurance companies in their stateand to set forth a desirable range in which companies should fall in each such ratio.The NAIC suggests that insurance companies which fall outside of the “usual” range in four or more financial ratios are thosemost likely to require analysis by state regulators. However, according to the NAIC, it may not be unusual for a financially soundcompany to have several ratios outside the “usual” range.10TABLE OF CONTENTSFor the year ended December 31, 2015, American Southern and Bankers Fidelity Life Insurance Company were bothindividually within the NAIC “usual” range for all 13 financial ratios.Risk-Based CapitalRisk-based capital (“RBC”) is a metric used by ratings agencies and regulators as an early warning tool to identify weaklycapitalized companies for the purpose of initiating further regulatory action. The RBC calculation determines the amount ofadjusted capital needed by a company to avoid regulatory action. “Authorized Control Level Risk-Based Capital” (“ACL”) iscalculated, and if a company’s adjusted capital is 200% or lower than ACL, it is subject to regulatory action. At December 31,2015, the Company’s insurance subsidiaries exceeded the RBC regulatory levels.InvestmentsInvestment income represents a significant portion of the Company’s operating and total income. Insurance companyinvestments are subject to state insurance laws and regulations which limit the concentration and types of investments. Thefollowing table provides information on the Company’s investments as of the dates indicated. December 31, 20152014 AmountPercentAmountPercent (Dollars in thousands)Fixed maturities: U.S. Treasury securities and obligations of U.S. Government agencies andauthorities$22,234 9.4%$33,898 14.1%States, municipalities and political subdivisions 25,479 10.7 11,459 4.8 Public utilities 8,602 3.6 8,101 3.4 All other corporate bonds 148,563 62.3 160,630 66.8 Redeemable preferred stock 446 0.2 800 0.3 Total fixed maturities(1) 205,324 86.2 214,888 89.4 Common and non-redeemable preferred stocks(2) 23,131 9.7 18,924 7.9 Policy loans(3) 2,200 0.9 2,202 0.9 Other invested assets(4) 6,454 2.7 2,995 1.3 Real estate 38 0.0 38 0.0 Investments in unconsolidated trusts 1,238 0.5 1,238 0.5 Total investments$238,385 100.0%$240,285 100.0%(1)Fixed maturities are carried on the balance sheet at estimated fair value. Certain fixed maturities do not have publiclyquoted prices, and are carried at estimated fair value as determined by management. Total adjusted cost of fixedmaturities was $210.5 million as of December 31, 2015 and $207.6 million as of December 31, 2014.(2)Equity securities are carried on the balance sheet at estimated fair value. Total adjusted cost of equity securities was$11.0 million as of December 31, 2015 and $12.0 million as of December 31, 2014.(3)Policy loans are valued at historical cost.(4)Other invested assets are accounted for using the equity method. Total adjusted cost of other invested assets was $6.5million as of December 31, 2015 and $3.0 million as of December 31, 2014.Estimated fair values are determined as discussed in Note 1 of Notes to Consolidated Financial Statements.11 Year Ended December 31, 20152014 (Dollars in thousands)Average investments(1)$244,316 $246,508 Net investment income 9,533 9,831 Average yield on investments 3.9% 4.0%Realized investment gains, net 4,857 1,571 TABLE OF CONTENTSResults of the Company’s investment portfolio for periods shown were as follows:(1)Calculated as the average of cash and investment balances (at amortized cost) at the beginning of the year and at the endof each of the succeeding four quarters.Management’s recent investment strategy has been a continued focus on quality, diversification and higher yielding corporatebonds and preferred stocks; but at the same time shortening up on maturities to give recognition to the rise and potential futureincreases in longer-term interest rates.EmployeesThe Company and its subsidiaries employed 147 people at December 31, 2015. Of the 147 people employed at December 31,2015, 142 were full-time.Financial Information by Industry SegmentEach of American Southern and Bankers Fidelity operate with relative autonomy and each company is evaluated on itsindividual performance. American Southern operates in the property and casualty insurance market, while Bankers Fidelityoperates in the life and health insurance market. Each segment derives revenue from the collection of premiums, as well as frominvestment income. Substantially all revenue other than that in the corporate and other segment is from external sources. See Note13 of Notes to Consolidated Financial Statements.Available InformationThe Company files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments tothose reports and other information with the Securities and Exchange Commission (the “SEC”). The public can read and obtaincopies of those materials by visiting the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The publicmay obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintainsa website that contains reports, proxy and information statements and other information regarding issuers like the Company thatfile electronically with the SEC. The address of the SEC’s web site is www.sec.gov. In addition, as soon as reasonably practicableafter such materials are filed with or furnished to the SEC by the Company, the Company makes copies available to the public, freeof charge, on or through its web site at www.atlam.com. Neither the Company’s website, nor the information appearing on thewebsite, is included, incorporated into, or a part of, this report.Executive Officers of the RegistrantThe table below and the information following the table set forth, for each executive officer of the Company as of December31, 2015, his name, age, positions with the Company and business experience for the past five years, as well as any prior service tothe Company.NameAgePositions with the CompanyDirector orOfficer SinceHilton H. Howell, Jr.53Chairman of the Board, President & CEO1992John G. Sample, Jr.59Senior Vice President, CFO and Secretary2002Officers are elected annually and serve at the discretion of the board of directors.Mr. Howell has been President and Chief Executive Officer of the Company since May 1995, and prior thereto served asExecutive Vice President of the Company from October 1992 to May 1995. He has been a Director of the Company since October1992 and effective February 24, 2009, began serving as Chairman of the board of directors. He is also a director, and serves as chiefexecutive officer, of Gray Television, Inc.12TABLE OF CONTENTSMr. Sample has served as Senior Vice President and Chief Financial Officer of the Company since July 2002 and Secretarysince May 2010. Prior to joining the Company in July 2002, he had been a partner of Arthur Andersen LLP since 1990. Mr. Sampleis also a director of 1st Franklin Financial Corporation and Capital City Bank Group, Inc.Forward-Looking StatementsCertain of the statements contained herein are forward-looking statements within the meaning of the federal securities laws.These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of1995, Section 27A of the Securities Exchange Act of 1933, and Section 21E of the Securities Exchange Act of 1934, and includeestimates and assumptions related to, among other things, general economic, competitive, operational and legislativedevelopments. The forward-looking statements are subject to changes and uncertainties which are, in many instances, beyond theCompany’s control and have been made based upon management’s current expectations and beliefs concerning futuredevelopments and their potential effect upon the Company. There can be no assurance that future developments will be inaccordance with management’s expectations or that the effect of future developments on the Company will be those anticipated bymanagement. Actual results could differ materially from those expected by the Company, depending on the occurrence or outcomeof various factors. These factors include, among others: significant changes in general economic conditions; disruption to thefinancial markets; unanticipated increases in the rate, number and amounts of claims outstanding; the possible occurrence ofterrorist attacks; the level of performance of reinsurance companies under reinsurance contracts and the availability, pricing andadequacy of reinsurance to protect the Company against losses; changes in the stock markets, interest rates or other financialmarkets, including the potential effect on the Company’s statutory capital levels; the uncertain effect on the Company ofregulatory and market-driven changes in practices relating to the payment of incentive compensation to brokers, agents and otherproducers; the incidence and severity of catastrophes, both natural and man-made; stronger than anticipated competitive activity;unfavorable judicial or legislative developments; the potential effect of regulatory developments, including those which couldincrease the Company’s business costs and required capital levels; the Company’s ability to distribute its products throughdistribution channels, both current and future; the uncertain effect of emerging claim and coverage issues; the effect of assessmentsand other surcharges for guaranty funds and other mandatory pooling arrangements; and risks related to cybersecurity matters, suchas breaches of our computer network or the loss of unauthorized access to the data we maintain. Many of such factors are beyondthe Company’s ability to control or predict. As a result, the Company’s actual financial condition and results of operations coulddiffer materially from those expressed in any forward-looking statements made by the Company. Undue reliance should not beplaced upon forward-looking statements contained herein. The Company does not intend to publicly update any forward-lookingstatements that may be made from time to time by, or on behalf of, the Company.Item 1A.Risk FactorsAs a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K (a“smaller reporting company”), we have elected to comply with certain scaled disclosure reporting obligations, and therefore do nothave to provide the information required by this Item.Item 1B.Unresolved Staff CommentsNot applicable.Item 2.PropertiesLeased Properties. The Company leases space for its principal offices and for some of its insurance operations in an officebuilding located in Atlanta, Georgia, from Delta Life Insurance Company under a lease which continues until either party provideswritten notice of cancellation at least twelve months in advance of the actual termination date. The lease, which commenced onNovember 1, 2007, provides for rent adjustments on every fifth anniversary of the commencement date. Under the current terms ofthe lease, the Company occupies approximately 49,586 square feet of office space. Delta Life Insurance Company, the owner of thebuilding, is controlled by an affiliate of the Company. The terms of the lease are believed by Company management to becomparable to terms which could be obtained by the Company from unrelated parties for comparable rental property.13TABLE OF CONTENTSAmerican Southern leases space for its office in a building located in Atlanta, Georgia. The lease term expires May 31, 2019.Under the terms of the lease, American Southern occupies approximately 17,014 square feet.The Company believes that its current properties are in good condition, and are sufficient for the operations of its business.Item 3.Legal ProceedingsFrom time to time, the Company and its subsidiaries are, and expect to continue to be, involved in various claims and lawsuitsarising in the ordinary course of business, both as a liability insurer defending third-party claims brought against insureds and as aninsurer defending coverage claims brought against it. The Company accounts for such exposures through the establishment of lossand loss adjustment expense reserves. We do not expect that the ultimate liability, if any, with respect to such ordinary-courseclaims litigation, after consideration of provisions made for probable losses and costs of defense, will be material to the Company’sconsolidated financial condition, although the results of such litigation could be material to the consolidated results of operationsfor any given period.Item 4.Mine Safety DisclosuresNot applicable. 14TABLE OF CONTENTSPART IIItem 5.Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity SecuritiesThe Company’s common stock is quoted on the Nasdaq Global Market (Symbol: AAME). As of March 15, 2016, there were3,083 shareholders of record. The following table sets forth, for the periods indicated, the high and low sales prices of theCompany’s common stock as reported on the Nasdaq Global Market.Year Ended December 31,HighLow2015 1st quarter$4.08 $3.75 2nd quarter 4.00 3.09 3rd quarter 4.05 3.30 4th quarter 5.00 3.76 2014 1st quarter$4.13 $3.50 2nd quarter 4.02 3.23 3rd quarter 4.38 3.63 4th quarter 4.05 3.50 During 2015, the Company paid an annual cash dividend of $0.02 per share. In addition, on March 1, 2016, the Company’sboard of directors declared an annual cash dividend of $0.02 per share that is payable to shareholders of record as of the close ofbusiness on April 11, 2016. Payment of dividends in the future will be at the discretion of the Company’s board of directors andwill depend upon the financial condition, capital requirements, earnings of the Company, any restrictions contained in anyagreements by which the Company is bound, as well as other factors as the board of directors may deem relevant. The Company’sprimary recurring source of cash for the payment of dividends is dividends from its subsidiaries; although as of December 31, 2015,the Parent held unrestricted cash and investment balances of approximately $23.5 million. Under the insurance code of the state inwhich each insurance subsidiary is domiciled, dividend payments to the Company by its insurance subsidiaries are subject tocertain limitations without the prior approval of the applicable state’s Insurance Commissioner. In 2016, dividend payments to theParent by the insurance subsidiaries in excess of $6.1 million would require prior approval.Issuer Purchases of Equity SecuritiesOn May 6, 2014, the board of directors of the Company approved a plan that allows for the repurchase of up to 750,000 sharesof the Company’s common stock (the “Repurchase Plan”) on the open market or in privately negotiated transactions, as determinedby an authorized officer of the Company. Any such repurchases can be made from time to time in accordance with applicablesecurities laws and other requirements.The table below sets forth information regarding repurchases by the Company of shares of its common stock on a monthlybasis during the three month period ended December 31, 2015.PeriodTotalNumber ofSharesPurchasedAveragePrice Paidper ShareTotalNumber ofSharesPurchasedas Part ofPubliclyAnnouncedPlans orProgramsMaximumNumber ofShares thatMay Yet bePurchasedUnder thePlans orProgramsOctober 1 – October 31, 2015 14,900 $4.35 14,900 326,493 November 1 – November 30, 2015 110,837 4.54 110,837 215,656 December 1 – December 31, 2015 14,373 4.84 14,373 201,283 Total 140,110 $4.55 140,110 Other than pursuant to the Repurchase Plan, no purchases of common stock of the Company were made by or on behalf of theCompany during the periods described above.15TABLE OF CONTENTSStock Performance GraphAs a smaller reporting company, we have elected to comply with certain scaled disclosure reporting obligations, and thereforedo not have to provide the information required by this Item.Item 6.Selected Financial DataAs a smaller reporting company, we have elected to comply with certain scaled disclosure reporting obligations, and thereforedo not have to provide the information required by this Item.Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following is management’s discussion and analysis of the financial condition and results of operations of AtlanticAmerican Corporation (“Atlantic American” or the “Parent”) and its subsidiaries (collectively with the Parent, the “Company”) forthe years ended December 31, 2015 and 2014. This discussion should be read in conjunction with the consolidated financialstatements and notes thereto included elsewhere herein.Atlantic American is an insurance holding company whose operations are conducted primarily through its insurancesubsidiaries: American Southern Insurance Company and American Safety Insurance Company (together known as “AmericanSouthern”) in the property and casualty insurance industry, and Bankers Fidelity Life Insurance Company and Bankers FidelityAssurance Company (together known as “Bankers Fidelity”) in the life and health insurance industry. Each operating company ismanaged separately, offers different products and is evaluated on its individual performance.Critical Accounting PoliciesThe accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in theUnited States of America (“GAAP”) and, in management’s belief, conform to general practices within the insurance industry. Thefollowing is an explanation of the Company’s accounting policies and the resultant estimates considered most significant bymanagement. These accounting policies inherently require significant judgment and assumptions and actual operating resultscould differ significantly from management’s estimates determined using these policies. Atlantic American does not expect thatchanges in the estimates determined using these policies will have a material effect on the Company’s financial condition orliquidity, although changes could have a material effect on its consolidated results of operations.Unpaid loss and loss adjustment expenses comprised 30% of the Company’s total liabilities at December 31, 2015. Thisliability includes estimates for: 1) unpaid losses on claims reported prior to December 31, 2015, 2) future development on thosereported claims, 3) unpaid ultimate losses on claims incurred prior to December 31, 2015 but not yet reported and 4) unpaid lossadjustment expenses for reported and unreported claims incurred prior to December 31, 2015. Quantification of loss estimates foreach of these components involves a significant degree of judgment and estimates may vary, materially, from period to period.Estimated unpaid losses on reported claims are developed based on historical experience with similar claims by the Company.Development on reported claims, estimates of unpaid ultimate losses on claims incurred prior to December 31, 2015 but not yetreported, and estimates of unpaid loss adjustment expenses are developed based on the Company’s historical experience, usingactuarial methods to assist in the analysis. The Company’s actuaries develop ranges of estimated development on reported andunreported claims as well as loss adjustment expenses using various methods, including the paid-loss development method, thereported-loss development method, the paid Bornhuetter-Ferguson method and the reported Bornhuetter-Ferguson method. Anysingle method used to estimate ultimate losses has inherent advantages and disadvantages due to the trends and changes affectingthe business environment and the Company’s administrative policies. Further, external factors, such as legislative changes, medicalcost inflation, and others may directly or indirectly impact the relative adequacy of liabilities for unpaid losses and loss adjustmentexpenses. The Company’s approach is to select an estimate of ultimate losses based on comparing results of a variety of reservingmethods, as opposed to total reliance on any single method. Unpaid loss and loss adjustment expenses are reviewed periodicallyfor significant lines of business, and when current results differ from the original assumptions used to develop such estimates, theamount of the Company’s recorded liability for unpaid loss and loss adjustment expenses is adjusted. In the event the Company’sactual reported losses in any period are materially in excess of the previously estimated amounts, such losses, to the extentreinsurance coverage does not exist, could have a material adverse effect on the Company’s results of operations.16TABLE OF CONTENTSFuture policy benefits comprised 34% of the Company’s total liabilities at December 31, 2015. These liabilities relateprimarily to life insurance products and are based upon assumed future investment yields, mortality rates, and withdrawal rates aftergiving effect to possible risks of adverse deviation. The assumed mortality and withdrawal rates are based upon the Company’sexperience. If actual results differ from the initial assumptions, the amount of the Company’s recorded liability could requireadjustment.Deferred acquisition costs comprised 9% of the Company’s total assets at December 31, 2015. Deferred acquisition costs arecommissions, premium taxes, and other costs that vary with and are primarily related to the acquisition of new and renewalbusiness and are generally deferred and amortized. The deferred amounts are recorded as an asset on the balance sheet andamortized to expense in a systematic manner. Traditional life insurance and long-duration health insurance deferred policyacquisition costs are amortized over the estimated premium-paying period of the related policies using assumptions consistent withthose used in computing the related liability for policy benefit reserves. Deferred acquisition costs for property and casualtyinsurance and short-duration health insurance are amortized over the effective period of the related insurance policies. Deferredpolicy acquisition costs are expensed when such costs are deemed not to be recoverable from future premiums (for traditional lifeand long-duration health insurance) and from the related unearned premiums and investment income (for property and casualty andshort-duration health insurance). Assessments of recoverability for property and casualty and short-duration health insurance areextremely sensitive to the estimates of a subsequent year’s projected losses related to the unearned premiums. Projected lossestimates for a current block of business for which unearned premiums remain to be earned may vary significantly from theindicated losses incurred in any previous calendar year.Receivables are amounts due from reinsurers, insureds and agents, and any sales of investment securities not yet settled, andcomprised 8% of the Company’s total assets at December 31, 2015. Insured and agent balances are evaluated periodically forcollectibility. Annually, the Company performs an analysis of the creditworthiness of the reinsurers with whom the Companycontracts using various data sources. Failure of reinsurers to meet their obligations due to insolvencies, disputes or otherwise couldresult in uncollectible amounts and losses to the Company. Allowances for uncollectible amounts are established, as and when aloss has been determined probable, against the related receivable. Losses are recognized by the Company when determined on aspecific account basis and a general provision for loss is made based on the Company’s historical experience.Cash and investments comprised 81% of the Company’s total assets at December 31, 2015. Substantially all of the Company’sinvestments are in bonds and common and preferred stocks, the values of which are subject to significant market fluctuations. TheCompany carries all fixed maturities, which includes bonds and redeemable preferred stocks, and equity securities, which includescommon and non-redeemable preferred stocks, as available for sale and, accordingly, at their estimated fair values. The Companyowns certain fixed maturities that do not have publicly quoted values, but had an estimated fair value as determined bymanagement of $2.2 million at December 31, 2015. Such values inherently involve a greater degree of judgment and uncertaintyand therefore ultimately greater price volatility than the value of securities with publicly quoted market values. On occasion, thevalue of an investment may decline to a value below its amortized purchase price and remain at such value for an extended periodof time. When an investment’s indicated fair value has declined below its cost basis for a period of time, the Company evaluatessuch investment for an other than temporary impairment. The evaluation for an other than temporary impairment is a quantitativeand qualitative process, which is subject to risks and uncertainties in the determination of whether declines in the fair value ofinvestments are other than temporary. Potential risks and uncertainties include, among other things, changes in general economicconditions, an issuer’s financial condition or near term recovery prospects and the effects of changes in interest rates. In evaluatinga potential impairment, the Company considers, among other factors, management’s intent and ability to hold the securities untilprice recovery, the nature of the investment and the expectation of prospects for the issuer and its industry, the status of an issuer’scontinued satisfaction of its obligations in accordance with their contractual terms, and management’s expectation as to theissuer’s ability and intent to continue to do so, as well as ratings actions that may affect the issuer’s credit status. If an other thantemporary impairment is deemed to exist, then the Company will write down the amortized cost basis of the investment to itsestimated fair value. While any such write down does not impact the reported value of the investment in the Company’s balancesheet, it is reflected as a realized investment loss in the Company’s consolidated statements of operations in the period incurred.17 Year Ended December 31, 20152014 (In thousands)Revenue Property and Casualty: American Southern$59,497 $57,636 Life and Health: Bankers Fidelity 105,869 107,046 Corporate and Other 571 1,639 Total revenue$165,937 $166,321 Income (loss) before income taxes Property and Casualty: American Southern$6,642 $5,012 Life and Health: Bankers Fidelity 6,746 5,153 Corporate and Other (7,680) (5,261)Income before income taxes$5,708 $4,904 Net income$4,388 $4,430 TABLE OF CONTENTSThe Company determines the fair values of certain financial instruments based on the fair value hierarchy established inAccounting Standards Codification (“ASC”) 820-10-20, Fair Value Measurements and Disclosures (“ASC 820-10-20”). The fairvalues of fixed maturities and equity securities are largely determined by either independent methods prescribed by the NationalAssociation of Insurance Commissioners, which do not differ materially from nationally quoted market prices, when available, orindependent broker quotations. See Note 2 and Note 14 of the accompanying notes to consolidated financial statements withrespect to assets and liabilities carried at fair value and information about the inputs used to value those financial instruments, byhierarchy level, in accordance with ASC 820-10-20.Deferred income taxes reflect the effect of temporary differences between assets and liabilities that are recognized for financialreporting purposes and the amounts that are recognized for tax purposes. These deferred income taxes are measured by applyingcurrently enacted tax laws and rates. Valuation allowances are recognized to reduce the deferred tax asset to the amount that isdeemed more likely than not to be realized. In assessing the likelihood of realization, management considers estimates of futuretaxable income and tax planning strategies.Refer to Note 1 of “Notes to Consolidated Financial Statements” for details regarding the Company’s significant accountingpolicies.Overall Corporate ResultsManagement also considers and evaluates performance by analyzing the non-GAAP measure operating income, and believesit is a useful metric for investors, potential investors, securities analysts and others because it isolates the “core” operating results ofthe Company before considering certain items that are either beyond the control of management (such as taxes, which are subjectto timing, regulatory and rate changes depending on the timing of the associated revenues and expenses) or are not expected toregularly impact the Company’s operational results (such as any realized investment and other gains, which are not a part of theCompany’s primary operations and are, to an extent, subject to discretion in terms of timing of realization).18 Year Ended December 31, 20152014 (In thousands)Reconciliation of Net Income to non-GAAP Measurement Net income$4,388 $4,430 Income tax expense 1,320 474 Realized investment gains, net (4,857) (1,571)Gain on purchase of debt securities(1) — (750)Operating income$851 $2,583 TABLE OF CONTENTSA reconciliation of net income to operating income is as follows:(1)Gain from the purchase of $7.5 million of the Company’s junior subordinated deferrable interest debentures (“JuniorSubordinated Debentures”). See Note 6 of Notes to Consolidated Financial Statements.On a consolidated basis, the Company had net income of $4.4 million, or $0.19 per diluted share, in each of 2015 and 2014.Operating income was $0.9 million in 2015 compared to $2.6 million in 2014. The decrease in operating income during 2015 wasprimarily attributable to less favorable loss experience and a decrease in premium revenue in the life and health operations coupledwith a decline in investment income from lower average yields on the Company’s investments in fixed maturities. Alsocontributing to the decrease in operating income was an increase in other expense of $1.4 million due to increased legal andconsulting fees. Partially offsetting the decrease in operating income during 2015 was the reduction in interest expense from thedecrease in the outstanding balance of the Company’s Junior Subordinated Debentures as well as increased profitability in theproperty and casualty operations.Total revenue was $165.9 million in 2015 as compared to $166.3 million in 2014. Premium revenue decreased to $150.9million in 2015 from $153.5 million in 2014. The decrease in premium revenue was primarily attributable to a decrease inMedicare supplement business in the life and health operations resulting from a decline in both first year and renewal premiums.Also included in total revenue were net realized investment gains of $4.9 million in 2015 compared to net realized investmentgains of $1.6 million in 2014. The magnitude of realized investment gains and losses in any year is a function of the timing oftrades of investments relative to the markets themselves as well as the recognition of any other than temporary impairments oninvestments.Total expenses were $160.2 million in 2015 as compared to $161.4 million in 2014. As a percentage of premiums, insurancebenefits and losses incurred and commissions and underwriting expenses were 95.8% in both 2015 and 2014.A more detailed analysis of the operating companies and other corporate activities follows.19 Year Ended December 31, 20152014 (Dollars in thousands)Gross written premiums$60,562 $56,165 Ceded premiums (4,951) (5,847)Net written premiums$55,611 $50,318 Net earned premiums$54,508 $52,654 Net losses and loss adjustment expenses 35,046 38,179 Underwriting expenses 17,809 14,445 Underwriting income$1,653 $30 Loss ratio 64.3% 72.5%Expense ratio 32.7 27.4 Combined ratio 97.0% 99.9% Year Ended December 31, 20152014 (In thousands)Automobile liability$24,786 $26,438 Automobile physical damage 13,290 11,633 General liability 3,152 3,577 Surety 9,192 7,309 Other lines 4,088 3,697 Total$54,508 $52,654 TABLE OF CONTENTSUNDERWRITING RESULTSAmerican SouthernThe following table summarizes, for the periods indicated, American Southern’s premiums, losses, expenses and underwritingratios:Gross written premiums at American Southern increased $4.4 million, or 7.8%, during 2015 as compared to 2014. The increasein gross written premiums was primarily attributable to an increase of $2.3 million in automobile physical damage writtenpremiums resulting from two programs as well as an increase in surety business of $2.5 million from an existing agency. Alsocontributing to the increase in gross written premiums was a $0.7 million increase from a new private passenger automobileliability program which began in 2015. Offsetting the increases in gross written premiums in 2015 was a decrease of $1.0 million inthe commercial automobile liability line of business due primarily to the cancellation of an agency in 2014. In 2015, AmericanSouthern’s five principal states in terms of written premiums were Alabama, Florida, Georgia, South Carolina, and Tennessee,which accounted for approximately 72% of total written premiums for 2015. American Southern’s five principal states in terms ofwritten premiums in 2014 were Alabama, Florida, Georgia, South Carolina, and Texas, which then accounted for approximately70% of the total written premiums.Ceded premiums decreased $0.9 million, or 15.3%, during 2015 as compared to 2014. American Southern’s ceded premiumsare determined as a percentage of earned premiums and generally increase or decrease as earned premiums increase or decrease.However, the change in ceded premiums was disproportionate to the increase in earned premiums due primarily to a decrease inearned premiums from certain commercial automobile liability accounts cancelled in 2014, which had been subject to reinsurance.Commercial automobile liability business, when reinsured, generally has higher contractual reinsurance cession rates than otherlines of business and therefore changes in earned premiums in this line of business, when reinsured and significant, may impact theoverall ratio of premiums ceded to premiums earned as in the 2014 period.The following table summarizes, for the periods indicated, American Southern’s net earned premiums by line of business:20TABLE OF CONTENTSNet earned premiums increased $1.9 million, or 3.5%, during 2015 as compared to 2014. The increase in net earned premiumswas primarily attributable to increases in automobile physical damage and surety earned premiums from both new and existingprograms. Partially offsetting the increase in net earned premiums was the decrease in commercial automobile liability earnedpremiums due primarily to an agency cancellation. Premiums are earned ratably over their respective policy terms, and thereforepremiums earned in the current year are related to policies written during both the current year and immediately preceding year.The performance of an insurance company is often measured by its combined ratio. The combined ratio represents thepercentage of losses, loss adjustment expenses and other expenses that are incurred for each dollar of premium earned by thecompany. A combined ratio of under 100% represents an underwriting profit while a combined ratio of over 100% indicates anunderwriting loss. The combined ratio is divided into two components, the loss ratio (the ratio of losses and loss adjustmentexpenses incurred to premiums earned) and the expense ratio (the ratio of expenses incurred to premiums earned).Net losses and loss adjustment expenses at American Southern decreased $3.1 million, or 8.2%, during 2015 as compared to2014. As a percentage of premiums, net losses and loss adjustment expenses were 64.3% in 2015 compared to 72.5% in 2014. Thedecrease in the loss ratio was due to more favorable loss experience in the automobile and surety lines of business and wasprimarily attributable to actions taken in prior years to better rationalize American Southern’s book of business and to strengthenguidelines with respect to new and renewal business.Underwriting expenses increased $3.4 million, or 23.3%, during 2015 as compared to 2014. As a percentage of premiums,underwriting expenses were 32.7% in 2015 compared to 27.4% in 2014. The increase in the expense ratio was primarily due toAmerican Southern’s variable commission structure, which compensates the company’s agents in relation to the loss ratios of thebusiness they write. During periods in which the loss ratio decreases, commissions and underwriting expenses will generallyincrease, and conversely, during periods in which the loss ratio increases, commissions and underwriting expenses will generallydecrease. In 2015, these commission accruals at American Southern increased $2.7 million as compared to 2014 due to morefavorable loss experience.In establishing reserves, American Southern initially reserves for losses at the higher end of the reasonable range if no othervalue within the range is determined to be more probable. Selection of such an initial loss estimate is an attempt by management togive recognition that initial claims information received generally is not conclusive with respect to legal liability, is generally notcomprehensive with respect to magnitude of loss and generally, based on historical experience, will develop more adversely astime passes and more information becomes available. However, as a result, American Southern generally experiences reserveredundancies when analyzing the development of prior year losses in a current period. At December 31, 2015, the range ofestimates developed in connection with the loss reserves for American Southern indicated that reserves could be as much as 16.0%lower or as much as 6.3% higher. Development from prior years’ reserves has historically reduced the current year loss ratio;however, such reduction in the current year loss ratio is generally offset by the reserves established in the current year for currentperiod losses. American Southern’s estimated net reserve redundancies for the years ended December 31, 2015 and 2014 were lessthan $0.1 million and $0.2 million, respectively. To the extent reserve redundancies vary between years, there is an incrementalimpact on the results of operations of American Southern and the Company. The indicated redundancy in 2015 was $0.1 millionless than that in 2014. After considering the impact on contingent commissions and other related accruals, the $0.1 milliondecrease in the redundancy resulted in a decrease in income from operations before tax of approximately $0.1 million in 2015 ascompared to 2014. Management believes that such differences will continue in future periods but is unable to determine if or whenincremental redundancies will increase or decrease, until the underlying losses are ultimately settled.Contingent commissions, if contractually applicable, are ultimately payable to agents based on the underlying profitability ofa particular insurance contract or a group of insurance contracts, and are periodically evaluated and accrued as earned.Approximately 60% of American Southern’s earned premium provides for contractual commission arrangements which compensatethe company’s agents in relation to the loss ratios of the business they write. By structuring its business in this manner, AmericanSouthern provides its agents with an economic incentive to place profitable business with American Southern. In periods in whichloss reserves reflect21 Year Ended December 31, 20152014 (Dollars in thousands)Medicare supplement$81,068 $85,197 Other health products 4,862 4,750 Life insurance 10,454 10,887 Total earned premiums 96,384 100,834 Insurance benefits and losses 66,318 68,016 Underwriting expenses 32,805 33,877 Total expenses 99,123 101,893 Underwriting loss$(2,739)$(1,059)Loss ratio 68.8% 67.5%Expense ratio 34.0 33.6 Combined ratio 102.8% 101.1%TABLE OF CONTENTSfavorable development from prior years’ reserves, there is generally a highly correlated increase in commission expense also relatedto the prior year business. Accordingly, favorable loss development from prior years, while anticipated to continue in futureperiods, is not an indicator of significant additional profitability in the current year.Bankers FidelityThe following summarizes, for the periods indicated, Bankers Fidelity’s premiums, losses and expenses:Premium revenue at Bankers Fidelity decreased $4.5 million, or 4.4%, during 2015 as compared to 2014. Premiums from theMedicare supplement line of business decreased $4.1 million, or 4.8%, in 2015 as compared to 2014, due primarily to a decline inboth first year and renewal premiums. Other health product premiums increased $0.1 million, or 2.4%, during 2015 as compared to2014, primarily as a result of new sales of the company’s group health products. Premiums from the life insurance line of businessdecreased $0.4 million, or 4.0%, in 2015 from 2014 due to the redemption and settlement of existing policy obligations exceedingthe level of new sales activity. In both 2015 and 2014, the company’s five principal states in terms of premium revenue wereGeorgia, Indiana, Ohio, Pennsylvania, and Tennessee, which accounted for approximately 43% and 44% of total premiums for2015 and 2014, respectively.Benefits and losses decreased $1.7 million, or 2.5%, during 2015 as compared to 2014. As a percentage of premiums, benefitsand losses were 68.8% in 2015 compared to 67.5% in 2014. The increase in the loss ratio was primarily attributable to thecompany’s initiative to moderate price increases in Medicare supplement product offerings in certain competitive markets.Underwriting expenses decreased $1.1 million, or 3.2%, during 2015 as compared to 2014. As a percentage of earnedpremiums, these expenses were 34.0% in 2015 compared to 33.6% in 2014. The slight increase in the expense ratio was primarilydue to earned premiums decreasing at a higher rate than the decrease in underwriting expenses.Investment Income and Realized GainsInvestment income decreased $0.3 million, or 2.7%, in 2015 as compared to 2014. The decrease in investment income wasprimarily attributable to a decrease in the average yield on the Company’s investments in fixed maturities.The Company had net realized investment gains of $4.9 million in 2015 compared to net realized investment gains of $1.6million in 2014. The net realized investment gains in 2015 were primarily attributable to a $3.2 million gain from the sale ofproperty held within two of the Company’s real estate partnership investments as well as gains from the sale of a number of theCompany’s investments in fixed maturities. The net realized investment gains in 2014 resulted from the disposition of several ofthe Company’s investments in22TABLE OF CONTENTSfixed maturities. During 2014, the Company recorded investment impairments due to other than temporary declines in values of$0.2 million on certain of its investments in non-redeemable preferred stocks. While the impairments did not impact the carryingvalue of the investments, they resulted in realized losses which reduced reported realized investment gains. There were noimpairments recorded in 2015. Management continually evaluates the Company’s investment portfolio and, as may be determinedto be appropriate, makes adjustments for impairments and/or will divest investments. See Note 2 of Notes to ConsolidatedFinancial Statements.Interest ExpenseInterest expense decreased $0.2 million, or 11.1%, in 2015 as compared to 2014 due to a decrease in the outstanding amountof Junior Subordinated Debentures. On August 4, 2014, the Company acquired $7.5 million of its then outstanding JuniorSubordinated Debentures, which decreased the outstanding balance to $33.7 million and resulted in lower prospective interestexpense.Other ExpensesOther expenses (commissions, underwriting expenses, and other expenses) increased $3.8 million, or 7.1%, in 2015 ascompared to 2014. The increase in other expenses was primarily attributable to an increase of $2.7 million in commission accrualsat American Southern due to more favorable loss experience. The majority of American Southern’s business is structured in a waythat agents are compensated based upon the loss ratios of the business they place with the company. During periods in which theloss ratio decreases, commissions and underwriting expenses will generally increase, and conversely, during periods in which theloss ratio increases, commissions and underwriting expenses will generally decrease. Also contributing to the increase in otherexpense during 2015 was an increase in legal and consulting fees of $1.4 million. Further, agent lead expense in the life and healthoperations increased $1.1 million resulting from increased lead investment. Partially offsetting the increases in other expenses wasa decrease in general advertising and other agency related expenses as well as a decrease in actuarial consulting fees in the life andhealth operations. As a percentage of earned premiums, other expenses were 38.1% in 2015 as compared with 34.9% in 2014. Theincrease in the expense ratio was primarily due to the increase in commission accruals at American Southern as well as theincreased legal and consulting fees both discussed previously.Income TaxesThe primary differences between the effective tax rate and the federal statutory income tax rate for 2015 resulted from thedividends-received deduction (“DRD”) and the small life insurance company deduction (“SLD”). The current estimated DRD isadjusted as underlying factors change and can vary from estimates based on, but not limited to, actual distributions frominvestments as well as the amount of the Company’s taxable income. The SLD varies in amount and is determined at a rate of 60percent of the tentative life insurance company taxable income (“LICTI”). The SLD for any taxable year is reduced (but not belowzero) by 15 percent of the tentative LICTI for such taxable year as it exceeds $3.0 million and is ultimately phased out at $15.0million.The primary differences between the effective tax rate and the federal statutory income tax rate for 2014 resulted from theDRD, the SLD and the change in deferred tax asset valuation allowance. The change in deferred tax asset valuation allowance wasdue to the utilization of certain capital loss carryforward benefits that had been previously reduced to zero through an existingvaluation allowance reserve. All unused capital loss carryforwards expired at the end of 2014.Liquidity and Capital ResourcesThe primary cash needs of the Company are for the payment of claims and operating expenses, maintaining adequate statutorycapital and surplus levels, and meeting debt service requirements. Current and expected patterns of claim frequency and severitymay change from period to period but generally are expected to continue within historical ranges. The Company’s primary sourcesof cash are written premiums, investment income and proceeds from the sale and maturity of its invested assets. The Companybelieves that, within each operating company, total invested assets will be sufficient to satisfy all policy liabilities and that cashinflows from investment earnings, future premium receipts and reinsurance collections will be adequate to fund the payment ofclaims and expenses as needed.23TABLE OF CONTENTSCash flows at the Parent are derived from dividends, management fees, and tax-sharing payments, as described below, from thesubsidiaries. The cash needs of the Parent are for the payment of operating expenses, the acquisition of capital assets and debtservice requirements, as well as the repurchase of shares and payments of any dividends as may be authorized and approved by theCompany’s board of directors from time to time. At December 31, 2015, the Parent had approximately $23.5 million of unrestrictedcash and investments.Dividend payments to a parent corporation by its wholly owned insurance subsidiaries are subject to annual limitations andare restricted to 10% of statutory surplus or statutory earnings before recognizing realized investment gains of the individualinsurance subsidiaries. At December 31, 2015, the Parent’s insurance subsidiaries had an aggregate statutory surplus of $73.6million. Dividends were paid to Atlantic American by its subsidiaries totaling $6.8 million and $6.5 million in 2015 and 2014,respectively.The Parent provides certain administrative, purchasing and other services to each of its subsidiaries. The amounts charged toand paid by the subsidiaries for these services were $7.4 million and $7.5 million in 2015 and 2014, respectively. In addition, theParent has a formal tax-sharing agreement with each of its insurance subsidiaries. A net total of $2.4 million and $4.7 million werepaid to the Parent under the tax sharing agreement in 2015 and 2014, respectively. As a result of the Parent’s tax loss, it isanticipated that the tax-sharing agreement will continue to provide the Parent with additional funds from profitable subsidiaries toassist in meeting its cash flow obligations.The Company has two statutory trusts which exist for the exclusive purpose of issuing trust preferred securities representingundivided beneficial interests in the assets of the trusts and investing the gross proceeds of the trust preferred securities in JuniorSubordinated Debentures. The outstanding $18.0 million and $15.7 million of Junior Subordinated Debentures mature onDecember 4, 2032 and May 15, 2033, respectively, are callable quarterly, in whole or in part, only at the option of the Company,and have an interest rate of three-month LIBOR plus an applicable margin. The margin ranges from 4.00% to 4.10%. At December31, 2015, the effective interest rate was 4.45%. The obligations of the Company with respect to the issuances of the trust preferredsecurities represent a full and unconditional guarantee by the Parent of each trust’s obligations with respect to the trust preferredsecurities. Subject to certain exceptions and limitations, the Company may elect from time to time to defer Junior SubordinatedDebenture interest payments, which would result in a deferral of distribution payments on the related trust preferred securities. TheCompany has not made such an election.The Company intends to pay its obligations under the Junior Subordinated Debentures using existing cash balances, dividendand tax-sharing payments from the operating subsidiaries, or from potential future financing arrangements.At December 31, 2015, the Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding.All of the shares of Series D Preferred Stock are held by an affiliate of the Company’s controlling shareholder. The outstandingshares of Series D Preferred Stock have a stated value of $100 per share; accrue annual dividends at a rate of $7.25 per share(payable in cash or shares of the Company’s common stock at the option of the board of directors of the Company) and arecumulative. In certain circumstances, the shares of the Series D Preferred Stock may be convertible into an aggregate ofapproximately 1,378,000 shares of the Company’s common stock, subject to certain adjustments and provided that suchadjustments do not result in the Company issuing more than approximately 2,703,000 shares of common stock without obtainingprior shareholder approval; and are redeemable solely at the Company’s option. The Series D Preferred Stock is not currentlyconvertible. The Company had accrued, but unpaid, dividends, on the Series D Preferred Stock of $17,722 at December 31, 2015and 2014. During 2015 and 2014, the Company paid Series D Preferred Stock dividends of $0.4 million and $0.5 million,respectively.Cash and cash equivalents decreased from $16.4 million at December 31, 2014 to $15.6 million at December 31, 2015. Thedecrease in cash and cash equivalents during 2015 was primarily attributable to an increased level of investing exceeding normalsales and maturities, additions to property and equipment of $0.3 million, dividends paid on the Company’s common stock andSeries D Preferred Stock of $0.8 million, and the purchase of shares for treasury for $1.0 million. Partially offsetting the decreasewas the net cash provided by operations of $2.2 million during 2015.The Company believes that existing cash balances as well as the dividends, fees, and tax-sharing payments it expects toreceive from its subsidiaries and, if needed, additional borrowings from financial institutions, will24TABLE OF CONTENTSenable the Company to meet its liquidity requirements for the foreseeable future. Management is not aware of any currentrecommendations by regulatory authorities, which, if implemented, would have a material adverse effect on the Company’sliquidity, capital resources or operations.New Accounting PronouncementsSee “Recently Issued Accounting Standards” in Note 1 of Notes to Consolidated Financial Statements.Impact of InflationInsurance premiums are established before the amount of losses and loss adjustment expenses, or the extent to which inflationmay affect such losses and expenses, are known. Consequently, the Company attempts, in establishing its premiums, to anticipatethe potential impact of inflation. If, for competitive reasons, premiums cannot be increased to anticipate inflation, this cost wouldbe absorbed by the Company. Inflation also affects the rate of investment return on the Company’s investment portfolio with acorresponding effect on investment income. To date, inflation has not had a material effect on the Company’s results of operationsin any of the periods presented.Off-Balance Sheet ArrangementsIn the normal course of business, the Company has structured borrowings that, in accordance with accounting principlesgenerally accepted in the United States of America, are recorded on the Company’s balance sheet at an amount that differs from theultimate contractual obligation. See Note 6 of Notes to Consolidated Financial Statements.Contractual ObligationsAs a smaller reporting company, we have elected to comply with certain scaled disclosure reporting obligations, and thereforedo not have to provide the table of contractual obligations required by this Item.Item 7A.Quantitative and Qualitative Disclosures About Market RiskAs a smaller reporting company, we have elected to comply with certain scaled disclosure reporting obligations, and thereforedo not have to provide the information required by this Item.25TABLE OF CONTENTSItem 8.Financial Statements and Supplementary DataINDEX TO FINANCIAL STATEMENTS PageATLANTIC AMERICAN CORPORATION Report of Independent Registered Public Accounting Firm 27 Consolidated Balance Sheets as of December 31, 2015 and 2014 28 Consolidated Statements of Operations for the years ended December 31, 2015 and 2014 29 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2015 and 2014 30 Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2015 and 2014 31 Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014 32 Notes to Consolidated Financial Statements 33 26TABLE OF CONTENTSREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBoard of Directors and ShareholdersAtlantic American CorporationAtlanta, GeorgiaWe have audited the accompanying consolidated balance sheets of Atlantic American Corporation as of December 31, 2015and 2014 and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flowsfor the years then ended. In connection with our audits of the financial statements, we have also audited financial statementSchedules II, III, IV and VI. These financial statements and schedules are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements and schedules based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of itsinternal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis fordesigning audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit alsoincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financialposition of Atlantic American Corporation at December 31, 2015 and 2014, and the results of its operations and its cash flows forthe years then ended, in conformity with accounting principles generally accepted in the United States of America.Also, in our opinion, the financial statement schedules, when considered in relation to the basic consolidated financialstatements taken as a whole, present fairly, in all material respects, the information set forth therein.BDO USA, LLP Atlanta, GeorgiaMarch 29, 201627TABLE OF CONTENTSATLANTIC AMERICAN CORPORATIONCONSOLIDATED BALANCE SHEETS December 31, 20152014 (Dollars in thousands,except per share data)ASSETS Cash and cash equivalents$15,622 $16,375 Investments 238,385 240,285 Receivables: Reinsurance 11,759 14,348 Insurance premiums and other, net of allowance for doubtful accounts of $528 and $439 in 2015 and2014, respectively 11,988 10,728 Deferred income taxes, net 829 — Deferred acquisition costs 27,866 26,981 Other assets 5,610 5,747 Intangibles 2,544 2,544 Total assets$314,603 $317,008 LIABILITIES AND SHAREHOLDERS’ EQUITY Insurance reserves and policyholder funds$163,345 $164,094 Accounts payable and accrued expenses 15,028 13,586 Deferred income taxes, net — 1,395 Junior subordinated debenture obligations, net 33,738 33,738 Total liabilities 212,111 212,813 Commitments and contingencies (Note 7) Shareholders’ equity: Preferred stock, $1 par, 4,000,000 shares authorized; Series D preferred, 55,000 shares issued and outstanding; $5,500 redemption value 55 55 Common stock, $1 par, 50,000,000 shares authorized; 22,400,894 shares issued; 20,426,536 and 20,600,039 shares outstanding in 2015 and 2014,respectively 22,401 22,401 Additional paid-in capital 56,623 56,491 Retained earnings 25,443 21,866 Accumulated other comprehensive income 4,584 9,279 Unearned stock grant compensation (273) (460)Treasury stock, at cost, 1,974,358 and 1,800,855 shares in 2015 and 2014, respectively (6,341) (5,437)Total shareholders’ equity 102,492 104,195 Total liabilities and shareholders’ equity$314,603 $317,008 The accompanying notes are an integral part of these consolidated financial statements.28TABLE OF CONTENTSATLANTIC AMERICAN CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 20152014 (Dollars in thousands,except per share data)Revenue: Insurance premiums$150,892 $153,488 Investment income 10,085 10,367 Realized investment gains, net 4,857 1,571 Other income 103 895 Total revenue 165,937 166,321 Benefits and expenses: Insurance benefits and losses incurred 101,364 106,195 Commissions and underwriting expenses 43,235 40,923 Interest expense 1,429 1,607 Other expense 14,201 12,692 Total benefits and expenses 160,229 161,417 Income before income taxes 5,708 4,904 Income tax expense 1,320 474 Net income 4,388 4,430 Preferred stock dividends (399) (468)Net income applicable to common shareholders$3,989 $3,962 Earnings per common share (basic and diluted)$.19 $.19 The accompanying notes are an integral part of these consolidated financial statements.29TABLE OF CONTENTSATLANTIC AMERICAN CORPORATIONCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Year Ended December 31, 20152014 (Dollars in thousands) Net income$4,388 $4,430 Other comprehensive income (loss): Available-for-sale securities: Gross unrealized holding gain (loss) arising in the period (2,366) 6,302 Related income tax effect 828 (2,206)Less: reclassification adjustment for net realized gains included in net income (1) (4,857) (1,571)Related income tax effect (2) 1,700 550 Total other comprehensive income (loss), net of tax (4,695) 3,075 Total comprehensive income (loss)$(307)$7,505 (1)Realized gains on available-for-sale securities recognized in realized investment gains, net on the accompanyingconsolidated statements of operations.(2)Income tax effect on reclassification adjustment for net realized gains included in income tax expense on theaccompanying consolidated statements of operations.The accompanying notes are an integral part of these consolidated financial statements.30TABLE OF CONTENTSATLANTIC AMERICAN CORPORATIONCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY PreferredStockCommonStockAdditionalPaid-InCapitalRetainedEarningsAccumulatedOtherComprehensiveIncomeUnearnedStockGrantCompensationTreasuryStockTotal (Dollars in thousands)Balance, December 31, 2013$65 $22,401 $57,103 $18,738 $6,204 $(485)$(3,099)$100,927 Net income — — — 4,430 — — — 4,430 Other comprehensive income, netof tax — — — — 3,075 — — 3,075 Preferred stock redeemed (10) — (990) — — — — (1,000)Dividends on common stock — — — (834) — — — (834)Dividends on preferred stock — — — (468) — — — (468)Restricted stock grants — — 328 — — (559) 231 — Amortization of unearnedcompensation — — — — — 584 — 584 Purchase of 687,964 shares fortreasury — — — — — — (2,603) (2,603)Issuance of 21,629 shares understock plans — — 50 — — — 34 84 Balance, December 31, 2014 55 22,401 56,491 21,866 9,279 (460) (5,437) 104,195 Net income — — — 4,388 — — — 4,388 Other comprehensive loss, net oftax — — — — (4,695) — — (4,695)Dividends on common stock — — — (412) — — — (412)Dividends on preferred stock — — — (399) — — — (399)Restricted stock grants — — 103 — — (178) 75 — Amortization of unearnedcompensation — — — — — 365 — 365 Purchase of 233,368 shares fortreasury — — — — — — (997) (997)Issuance of 11,565 shares understock plans — — 29 — — — 18 47 Balance, December 31, 2015$55 $22,401 $56,623 $25,443 $4,584 $(273)$(6,341)$102,492 The accompanying notes are an integral part of these consolidated financial statements.31TABLE OF CONTENTSATLANTIC AMERICAN CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 20152014 (Dollars in thousands)Cash flows from operating activities: Net income$4,388 $4,430 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of deferred acquisition costs 10,320 10,678 Acquisition costs deferred (11,205) (10,150)Realized investment gains, net (4,857) (1,571)Gain on purchase of debt securities — (750)(Decrease) increase in insurance reserves and policyholder funds (749) 1,721 Compensation expense related to share awards 365 584 Depreciation and amortization 1,117 932 Deferred income tax expense 304 102 Decrease (increase) in receivables, net 1,329 (1,419)Increase (decrease) in other liabilities 1,442 (47)Other, net (245) (57)Net cash provided by operating activities 2,209 4,453 Cash flows from investing activities: Proceeds from investments sold 84,873 75,441 Proceeds from investments matured, called or redeemed 5,924 1,916 Investments purchased (91,676) (82,836)Additions to property and equipment (322) (4,127)Net cash used in investing activities (1,201) (9,606) Cash flows from financing activities: Payment for debt securities — (6,750)Redemption of Series D preferred stock — (1,000)Payment of dividends on Series D preferred stock (399) (471)Payment of dividends on common stock (412) (834)Proceeds from shares issued under stock plans 47 84 Purchase of shares for treasury (997) (2,603)Net cash used in financing activities (1,761) (11,574) Net decrease in cash (753) (16,727)Cash and cash equivalents at beginning of year 16,375 33,102 Cash and cash equivalents at end of year$15,622 $16,375 Supplemental cash flow information: Cash paid for interest$1,424 $1,649 Cash paid for income taxes$1,465 $445 The accompanying notes are an integral part of these consolidated financial statements.32TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share amounts)Note 1. Summary of Significant Accounting PoliciesPrinciples of ConsolidationThe accompanying consolidated financial statements have been prepared in conformity with accounting principles generallyaccepted in the United States of America (“GAAP”) which, for insurance companies, differ in some respects from the statutoryaccounting practices prescribed or permitted by regulatory authorities. These financial statements include the accounts of AtlanticAmerican Corporation (“Atlantic American” or the “Parent”) and its subsidiaries (collectively with the Parent, the “Company”). Allsignificant intercompany accounts and transactions have been eliminated in consolidation. Operating results achieved in anyhistorical period are not necessarily indicative of results to be expected in any future period.At December 31, 2015, the Parent owned four insurance subsidiaries, Bankers Fidelity Life Insurance Company and itswholly-owned subsidiary, Bankers Fidelity Assurance Company (together known as “Bankers Fidelity”), and American SouthernInsurance Company and its wholly-owned subsidiary, American Safety Insurance Company (together known as “AmericanSouthern”), in addition to one non-insurance subsidiary, xCalibre Risk Services, Inc. The Parent has issued a guarantee of allliabilities of Bankers Fidelity.Premium Revenue and Cost RecognitionLife insurance premiums are recognized as revenue when due; accident and health insurance premiums are recognized asrevenue over the premium paying period and property and casualty insurance premiums are recognized as revenue over the periodof the contract in proportion to the amount of insurance protection provided. Benefits and expenses are accrued as incurred and areassociated with premiums as they are earned so as to result in recognition of profits over the lives of the contracts. For traditionallife insurance and long-duration health insurance, this association is accomplished by the provision of a future policy benefitsreserve and the deferral and subsequent amortization of the costs of acquiring business, “deferred policy acquisition costs”(principally commissions, premium taxes, and other incremental direct costs of issuing policies). Deferred policy acquisition costsare amortized over the estimated premium-paying period of the related policies using assumptions consistent with those used incomputing the policy benefits reserve. The Company provides for insurance benefits and losses on accident, health, and property-casualty claims based upon estimates of projected ultimate losses. Deferred policy acquisition costs for property and casualtyinsurance and short-duration health insurance are amortized over the effective period of the related insurance policies. Contingentcommissions, if contractually applicable, are ultimately payable to agents based on the underlying profitability of a particularinsurance contract or a group of insurance contracts, and are periodically evaluated and accrued as earned. In periods in whichrevisions are made to the estimated loss reserves related to the particular insurance contract or group of insurance contracts subjectto such commissions, corresponding adjustments are also made to the related accruals. Deferred policy acquisition costs areexpensed when such costs are deemed not to be recoverable from future premiums (for traditional life and long-duration healthinsurance) and from the related unearned premiums and investment income (for property and casualty and short-duration healthinsurance).IntangiblesIntangibles consist of goodwill and other indefinite-lived intangibles. Goodwill represents the excess of cost over the fairvalue of net assets acquired and is not amortized. Other indefinite-lived intangibles represent the value of licenses and are notamortized. The Company periodically reviews its goodwill and other indefinite-lived intangibles to determine if any adverseconditions exist that could indicate impairment. Conditions that could trigger impairment include, but are not limited to, asignificant change in business climate that could affect the value of the related asset, an adverse action, or an assessment by aregulator. No impairment of the Company’s recorded intangibles was identified during the periods presented.InvestmentsThe Company’s investments in both fixed maturities, which include bonds and redeemable preferred stocks, and equitysecurities, which include common and non-redeemable preferred stocks, are classified as “available-for-sale” and, accordingly, arecarried at fair value with the after-tax difference from amortized cost,33TABLE OF CONTENTSas adjusted if applicable, reflected in shareholders’ equity as a component of accumulated other comprehensive income or loss. Thefair values for fixed maturities and equity securities are largely determined by either independent methods prescribed by theNational Association of Insurance Commissioners (“NAIC”), which do not differ materially from publicly quoted market prices,when available, or independent broker quotations. The Company owns certain fixed maturities that do not have publicly quotedmarket values, but had an estimated fair value as determined by management of $2,237 at December 31, 2015. Such valuesinherently involve a greater degree of judgment and uncertainty and therefore ultimately greater price volatility than the value ofsecurities with publicly quoted market values. Policy loans and real estate are carried at historical cost. Other invested assets arecomprised of investments in limited partnerships, limited liability companies, and real estate joint ventures, and are accounted forusing the equity method. If the value of a common stock, preferred stock, other invested asset, or publicly traded bond declinesbelow its cost or amortized cost, if applicable, and the decline is considered to be other than temporary, a realized loss is recordedto reduce the carrying value of the investment to its estimated fair value, which becomes the new cost basis. The evaluation for another than temporary impairment is a quantitative and qualitative process, which is subject to risks and uncertainties in thedetermination of whether declines in the fair value of investments are other than temporary. Potential risks and uncertaintiesinclude, among other things, changes in general economic conditions, an issuer’s financial condition or near term recoveryprospects and the effects of changes in interest rates. In evaluating a potential impairment, the Company considers, among otherfactors, management’s intent and ability to hold the securities until price recovery, the nature of the investment and theexpectation of prospects for the issuer and its industry, the status of an issuer’s continued satisfaction of its obligations inaccordance with their contractual terms, and management’s expectation as to the issuer’s ability and intent to continue to do so, aswell as ratings actions that may affect the issuer’s credit status. Premiums and discounts related to investments are amortized oraccreted over the life of the related investment as an adjustment to yield using the effective interest method. Dividends and interestincome are recognized when earned or declared. The cost of securities sold is based on specific identification. Unrealized gains(losses) in the value of invested assets are accounted for as a direct increase (decrease) in accumulated other comprehensive incomein shareholders’ equity, net of deferred tax and, accordingly, have no effect on net income.Income TaxesDeferred income taxes represent the expected future tax consequences when the reported amounts of assets and liabilities arerecovered or paid. They arise from differences between the financial reporting and tax basis of assets and liabilities and are adjustedfor changes in tax laws and tax rates as those changes are enacted. The provision for income taxes represents the total amount ofincome taxes due related to the current year, plus the change in deferred income taxes during the year. A valuation allowance isrecognized if, based on management’s assessment of the relevant facts, it is more likely than not that some portion of a deferred taxasset will not be realized.Earnings Per Common ShareBasic earnings per common share are based on the weighted average number of common and participating shares outstandingduring the relevant period. Diluted earnings per common share are based on the weighted average number of common andparticipating shares outstanding during the relevant period, plus options outstanding, if applicable, using the treasury stockmethod and the assumed conversion of the Series D preferred stock, if dilutive. Unless otherwise indicated, earnings per commonshare amounts are presented on a diluted basis.Cash and Cash EquivalentsCash and cash equivalents consist of cash on hand and investments in short-term, highly liquid securities with originalmaturities of three months or less from date of purchase.Recently Issued Accounting StandardsIn February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.2016-02, Leases (Topic 842) (“ASU 2016-02”). Under this guidance, an entity is required to recognize right-of-use assets and leaseliabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accountingguidance for a lessee, a lessor and sale and34TABLE OF CONTENTSleaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasingarrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising fromleases. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018 and requires a modifiedretrospective adoption, with early adoption permitted. The Company is currently evaluating the impact on our consolidatedfinancial statements upon the adoption of this guidance.In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10) (“ASU 2016-01”).ASU 2016-01 provides updated guidance for the recognition and measurement of financial instruments. The new guidance willrequire investments in equity securities to be measured at fair value with changes in fair value reported in net income except forthose equity securities that result in consolidation or are accounted for under the equity method of accounting. Under existingguidance, the Company measures investments in equity securities, available-for-sale, at fair value with changes in fair valuereported in accumulated other comprehensive income. The Company is required to adopt the guidance effective January 1, 2018through a cumulative effect adjustment to retained earnings. Early adoption is not allowed. The impact on the Company’sconsolidated financial statements will depend on the composition of the Company’s investment portfolio on the date of adoption.As of December 31, 2015, equity securities available-for-sale totaled $23,131, with unrealized gains of $12,178 in accumulatedother comprehensive income that would have been classified in retained earnings.In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of theEffective Date. This amendment defers the effective date of the previously issued ASU No. 2014-09, Revenue from Contracts withCustomers (Topic 606) (“ASU 2014-09”), until the interim and annual reporting periods beginning after December 15, 2017.Earlier adoption is permitted for interim and annual reporting periods beginning after December 15, 2016. ASU 2014-09 providesupdated guidance for recognizing revenue. The guidance excludes insurance contracts and financial instruments. Revenue is to berecognized when, or as, goods or services are transferred to customers in an amount that reflects the consideration that an entity isexpected to be entitled in exchange for those goods or services. The Company is currently evaluating the impact on ourconsolidated financial statements upon the adoption of this guidance.In May 2015, the FASB issued ASU No. 2015-09, Financial Services – Insurance (Topic 944): Disclosures about Short-Duration Contracts (“ASU 2015-09”). The main objective of ASU 2015-09 is to enhance disclosures about the liability for unpaidclaims and claim adjustment expenses, specifically the development of claims, the frequency and severity of claims, and expandeddisclosures about reserves that are discounted. ASU 2015-09 will also require insurance entities to disclose information aboutsignificant changes in methodologies and assumptions used to calculate the liability for unpaid claims and claim adjustmentexpenses, including reasons for the change and effects on the financial statements. The amendments in ASU 2015-09 are effectivefor annual reporting periods beginning after December 15, 2015, and interim reporting periods within annual reporting periodsbeginning after December 15, 2016. Since ASU 2015-09 is a disclosure only update, the Company does not expect its adoption tohave an impact on the Company’s financial condition or results of operations.Use of Estimates in the Preparation of Financial StatementsThe preparation of financial statements and related disclosures in conformity with GAAP requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and revenues and expenses during the reporting period. Significant estimates andassumptions are used in developing and evaluating deferred income taxes, deferred acquisition costs, insurance reserves,investments, and receivables, among others, and actual results could differ materially from management’s estimates.35TABLE OF CONTENTSNote 2. InvestmentsThe following tables set forth the carrying value, gross unrealized gains, gross unrealized losses and amortized cost of theCompany’s investments, aggregated by type and industry, as of December 31, 2015 and December 31, 2014.Investments were comprised of the following: 2015 CarryingValueGrossUnrealizedGainsGrossUnrealizedLossesAmortizedCostFixed maturities: Bonds: U.S. Treasury securities and obligations of U.S. Governmentagencies and authorities$22,234 $290 $175 $22,119 Obligations of states and political subdivisions 25,479 621 552 25,410 Corporate securities: Utilities and telecom 17,589 1,357 692 16,924 Financial services 54,035 1,797 1,351 53,589 Other business – diversified 60,960 729 5,898 66,129 Other consumer – diversified 24,581 136 1,391 25,836 Total corporate securities 157,165 4,019 9,332 162,478 Redeemable preferred stocks: Financial services 253 3 — 250 Other consumer – diversified 193 — — 193 Total redeemable preferred stocks 446 3 — 443 Total fixed maturities 205,324 4,933 10,059 210,450 Equity securities: Common and non-redeemable preferred stocks: Utilities and telecom 1,386 422 — 964 Financial services 5,175 847 — 4,328 Other business – diversified 198 151 — 47 Other consumer – diversified 16,372 10,758 — 5,614 Total equity securities 23,131 12,178 — 10,953 Other invested assets 6,454 — — 6,454 Policy loans 2,200 — — 2,200 Real estate 38 — — 38 Investments in unconsolidated trusts 1,238 — — 1,238 Total investments$238,385 $17,111 $10,059 $231,333 36TABLE OF CONTENTS 2014 CarryingValueGrossUnrealizedGainsGrossUnrealizedLossesAmortizedCostFixed maturities: Bonds: U.S. Treasury securities and obligations of U.S. Governmentagencies and authorities$33,898 $1,459 $30 $32,469 Obligations of states and political subdivisions 11,459 681 — 10,778 Corporate securities: Utilities and telecom 13,980 2,355 — 11,625 Financial services 59,224 3,404 588 56,408 Other business – diversified 70,139 2,076 1,830 69,893 Other consumer – diversified 25,388 332 547 25,603 Total corporate securities 168,731 8,167 2,965 163,529 Redeemable preferred stocks: Financial services 608 8 — 600 Other consumer – diversified 192 — — 192 Total redeemable preferred stocks 800 8 — 792 Total fixed maturities 214,888 10,315 2,995 207,568 Equity securities: Common and non-redeemable preferred stocks: Utilities and telecom 1,403 439 — 964 Financial services 6,083 739 — 5,344 Other business – diversified 226 179 — 47 Other consumer – diversified 11,212 5,598 — 5,614 Total equity securities 18,924 6,955 — 11,969 Other invested assets 2,995 — — 2,995 Policy loans 2,202 — — 2,202 Real estate 38 — — 38 Investments in unconsolidated trusts 1,238 — — 1,238 Total investments$240,285 $17,270 $2,995 $226,010 Bonds having an amortized cost of $11,259 and $10,615 and included in the tables above were on deposit with insuranceregulatory authorities at December 31, 2015 and 2014, respectively, in accordance with statutory requirements.37TABLE OF CONTENTSThe following table sets forth the carrying value, amortized cost, and net unrealized gains (losses) of the Company’sinvestments aggregated by industry as of December 31, 2015 and 2014. 20152014 CarryingValueAmortizedCostUnrealizedGains (Losses)CarryingValueAmortizedCostUnrealizedGainsU.S. Treasury securities and obligations ofU.S. Government agencies and authorities$22,234 $22,119 $115 $33,898 $32,469 $1,429 Obligations of states and politicalsubdivisions 25,479 25,410 69 11,459 10,778 681 Utilities and telecom 18,975 17,888 1,087 15,383 12,589 2,794 Financial services 59,463 58,167 1,296 65,915 62,352 3,563 Other business – diversified 61,158 66,176 (5,018) 70,365 69,940 425 Other consumer – diversified 41,146 31,643 9,503 36,792 31,409 5,383 Other investments 9,930 9,930 — 6,473 6,473 — Investments$238,385 $231,333 $7,052 $240,285 $226,010 $14,275 The following tables present the Company’s unrealized loss aging for securities by type and length of time the security was ina continuous unrealized loss position as of December 31, 2015 and 2014. 2015 Less than 12 months12 months or longerTotal Fair ValueUnrealizedLossesFair ValueUnrealizedLossesFair ValueUnrealizedLossesU.S. Treasury securities and obligations ofU.S. Government agencies and authorities$9,209 $120 $2,243 $55 $11,452 $175 Obligations of states and politicalsubdivisions 16,079 552 — — 16,079 552 Corporate securities 79,482 4,284 16,131 5,048 95,613 9,332 Total temporarily impaired securities$104,770 $4,956 $18,374 $5,103 $123,144 $10,059 2014 Less than 12 months12 months or longerTotal Fair ValueUnrealizedLossesFair ValueUnrealizedLossesFair ValueUnrealizedLossesU.S. Treasury securities and obligations ofU.S. Government agencies andauthorities$3,695 $7 $2,692 $23 $6,387 $30 Corporate securities 43,996 1,604 9,293 1,361 53,289 2,965 Total temporarily impaired securities$47,691 $1,611 $11,985 $1,384 $59,676 $2,995 The evaluation for an other than temporary impairment is a quantitative and qualitative process, which is subject to risks anduncertainties in the determination of whether declines in the fair value of investments are other than temporary. Potential risks anduncertainties include, among other things, changes in general economic conditions, an issuer’s financial condition or near termrecovery prospects and the effects of changes in interest rates. In evaluating a potential impairment, the Company considers, amongother factors, management’s intent and ability to hold the securities until price recovery, the nature of the investment and theexpectation of prospects for the issuer and its industry, the status of an issuer’s continued satisfaction of its obligations inaccordance with their contractual terms, and management’s expectation as to the issuer’s ability and intent to continue to do so, aswell as ratings actions that may affect the issuer’s credit status.38 20152014Common and non-redeemable preferred stocks$— $196 TABLE OF CONTENTSDuring the years ended December 31, 2015 and 2014, the Company recorded other than temporary impairments related to thefollowing investments.As of December 31, 2015, there were ninety-seven securities in an unrealized loss position which primarily included certain ofthe Company’s investments in fixed maturities within the other diversified business, other diversified consumer, utilities andtelecom and financial services sectors. Securities in an unrealized loss position reported in the other diversified business sectorincluded gross unrealized losses of $4,250 related to investments in fixed maturities of thirteen different issuers, all related to theoil and gas industry. The oil and gas investee companies represent a diversified group of businesses which include, among others,refiners, pipeline owners and operators, deep water offshore rig owners and operators, all of which are in continuing stages ofrationalizing their current investments, future capital expenditures and assessing capital and liquidity requirements. Thecompanies are continuing to assess and revise short-term, intermediate and long-term business plans in response to the currenttrends in oil and gas markets. While these companies have generally experienced credit downgrades or may be currently underreview, the Company believes that many of the downgrades are in response to external market forces and not necessarily specificcredit events of any obligor which would currently indicate that an other than temporary impairment need be recorded. All of theinvestees have continued to make regular interest payments on their debt when and as due and the Company continues to performin-depth analysis of the financial disclosures of each of the investees on a regular basis. The Company does not currently intend tosell nor does it expect to be required to sell any of the securities in an unrealized loss position. Based upon the Company’sexpected continuation of receipt of contractually required principal and interest payments and its intent and ability to retain thesecurities until price recovery, as well as the Company’s evaluation of other relevant factors, including those described above, theCompany has deemed these securities to be temporarily impaired as of December 31, 2015.The following describes the fair value hierarchy and provides information as to the extent to which the Company uses fairvalue to measure the value of its financial instruments and information about the inputs used to value those financial instruments.The fair value hierarchy prioritizes the inputs in the valuation techniques used to measure fair value into three broad levels.Level 1Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Company hasthe ability to access at the measurement date. The Company’s financial instruments valued using Level 1 criteriainclude cash equivalents and exchange traded common stocks.Level 2Observable inputs, other than quoted prices included in Level 1, for an asset or liability or prices for similar assets orliabilities. The Company’s financial instruments valued using Level 2 criteria include significantly all of its fixedmaturities, which consist of U.S. Treasury securities and U.S. Government securities, obligations of states and politicalsubdivisions, and certain corporate fixed maturities, as well as its non-redeemable preferred stocks. In determining fairvalue measurements using Level 2 criteria, the Company utilizes data from outside sources, including nationallyrecognized pricing services and broker/dealers, in establishing the fair value of its fixed maturities and non-redeemablepreferred stocks. Prices for the majority of the Company’s Level 2 fixed maturities and non-redeemable preferred stockswere determined using unadjusted prices received from pricing services that utilize a matrix pricing concept, which is amathematical technique used widely in the industry to value debt securities based on various relationships to otherbenchmark quoted prices.Level 3Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (includingassumptions about risk). Fair value is based on criteria that use assumptions or other data that are not readilyobservable from objective sources. The Company’s financial instruments valued using Level 3 criteria consist of alimited number of fixed maturities. As of December 31, 2015 and 2014, the value of the Company’s fixed maturitiesvalued using Level 3 criteria was $2,237 and $2,214, respectively. The use of different criteria or assumptionsregarding data may have yielded materially different valuations.39TABLE OF CONTENTSAs of December 31, 2015, financial instruments carried at fair value were measured on a recurring basis as summarized below:Assets:QuotedPrices inActiveMarketsforIdenticalAssets(Level 1)SignificantOtherObservableInputs(Level 2)SignificantUnobservableInputs(Level 3)TotalFixed maturities$— $203,087 $2,237(1)$205,324 Equity securities 18,245 4,886(1) — 23,131 Cash equivalents 13,772 — — 13,772 Total$32,017 $207,973 $2,237 $242,227 (1)All underlying securities are financial service industry related.As of December 31, 2014, financial instruments carried at fair value were measured on a recurring basis as summarized below:Assets:QuotedPrices inActiveMarketsforIdenticalAssets(Level 1)SignificantOtherObservableInputs(Level 2)SignificantUnobservableInputs(Level 3)TotalFixed maturities$— $212,674 $2,214(1)$214,888 Equity securities 13,148 5,776(1) — 18,924 Cash equivalents 15,009 — — 15,009 Total$28,157 $218,450 $2,214 $248,821 (1)All underlying securities are financial service industry related.The following is a roll-forward of the Company’s financial instruments measured at fair value on a recurring basis usingsignificant unobservable inputs (Level 3) from January 1, 2014 to December 31, 2015. FixedMaturitiesBalance, January 1, 2014$1,991 Total unrealized gains included in other comprehensive income 223 Balance, December 31, 2014 2,214 Total unrealized gains included in other comprehensive loss 23 Balance, December 31, 2015$2,237 The Company’s fixed maturities valued using Level 3 inputs consist solely of issuances of pooled debt obligations ofmultiple, smaller financial services companies. They are not actively traded and valuation techniques used to measure fair valueare based on future estimated cash flows (based on current cash flows) discounted at reasonable estimated rates of interest. There areno assumed prepayments and/or default probability assumptions as a majority of these instruments contain certain U.S. governmentagency strips to support repayment of the principal. Other qualitative and quantitative information received from the originalunderwriter of the pooled offerings is also considered, as applicable.40TABLE OF CONTENTSThe amortized cost and carrying value of fixed maturities at December 31, 2015 and 2014 by contractual maturity were asfollows. Actual maturities may differ from contractual maturities because issuers may call or prepay obligations with or without callor prepayment penalties. 20152014 CarryingValueAmortizedCostCarryingValueAmortizedCostDue in one year or less$4,143 $4,113 $1,000 $1,000 Due after one year through five years 20,557 20,591 16,523 15,891 Due after five years through ten years 99,614 103,066 114,620 112,381 Due after ten years 79,882 81,684 64,990 61,704 Varying maturities 1,128 996 17,755 16,592 Totals$205,324 $210,450 $214,888 $207,568 Investment income was earned from the following sources: 20152014Fixed maturities$9,327 $9,720 Equity securities 488 510 Other 270 137 Total investment income 10,085 10,367 Less investment expenses, included in other expenses (552) (536)Net investment income$9,533 $9,831 A summary of realized investment gains (losses) follows: 2015 FixedMaturitiesEquitySecuritiesOtherInvestedAssetsTotalGains$2,347 $— $3,154 $5,501 Losses (628) (16) — (644)Realized investment gains, net$1,719 $(16)$3,154 $4,857 2014 FixedMaturitiesEquitySecuritiesOtherInvestedAssetsTotalGains$2,449 $— $— $2,449 Losses (665) (213) — (878)Realized investment gains, net$1,784 $(213)$— $1,571 Proceeds from the sales of investments were as follows: 20152014Fixed maturities$80,995 $75,244 Other investments 3,878 197 Total proceeds$84,873 $75,441 The Company’s bond portfolio included 82% investment grade securities, as defined by the NAIC, at December 31, 2015.41TABLE OF CONTENTSNote 3. Insurance Reserves and Policyholder FundsThe following table presents the Company’s reserves for life, accident and health, and property and casualty losses, claims andloss adjustment expenses. Amount of InsuranceIn Force, Net 2015201420152014Future policy benefits Life insurance policies: Ordinary$54,130 $53,555 $247,590 $235,856 Mass market 2,205 2,475 2,758 3,148 Individual annuities 103 130 — — 56,438 56,160 $250,348 $239,004 Accident and health insurance policies 15,698 14,685 72,136 70,845 Unearned premiums 25,348 24,544 Losses, claims and loss adjustment expenses 63,870 66,625 Other policy liabilities 1,991 2,080 Total insurance reserves and policyholder funds$163,345 $164,094 Annualized premiums for accident and health insurance policies were $87,480 and $88,956 at December 31, 2015 and 2014,respectively.Future Policy BenefitsLiabilities for life insurance future policy benefits are based upon assumed future investment yields, mortality rates, andwithdrawal rates after giving effect to possible risks of unexpected claim experience. The assumed mortality and withdrawal ratesare based upon the Company’s experience. The interest rates assumed for life, accident and health future policy benefits aregenerally: (i) 2.5% to 5.5% for issues prior to 1977, (ii) 7% graded to 5.5% for 1977 through 1979 issues, (iii) 9% for 1980 through1987 issues, (iv) 5% to 7% for 1988 through 2009 issues, (v) 4% for 2010 through 2012 issues, and (vi) 3.5% for 2013 through2015 issues.Loss and Claim ReservesLoss and claim reserves represent estimates of projected ultimate losses and are based upon: (a) management’s estimate ofultimate liability and claims adjusters’ evaluations for unpaid claims reported prior to the close of the accounting period, (b)estimates of incurred but not reported (“IBNR”) claims based on past experience, and (c) estimates of loss adjustment expenses. Theestimated liability is periodically reviewed by management and updated, with changes to the estimated liability recorded in thestatement of operations in the year in which such changes are known.42TABLE OF CONTENTSActivity in the liability for unpaid loss and claim reserves is summarized as follows: 20152014Balance at January 1$66,625 $63,018 Less: Reinsurance receivable on unpaid losses (14,302) (14,314)Net balance at January 1 52,323 48,704 Incurred related to: Current year 99,447 104,225 Prior years (701) (483)Total incurred 98,746 103,742 Paid related to: Current year 68,159 72,443 Prior years 30,781 27,680 Total paid 98,940 100,123 Net balance at December 31 52,129 52,323 Plus: Reinsurance receivable on unpaid losses 11,741 14,302 Balance at December 31$63,870 $66,625 Prior years’ development was primarily the result of better than expected development on prior years IBNR reserves for certainlines of business.Following is a reconciliation of total incurred claims to total insurance benefits and losses incurred: 20152014Total incurred claims$98,746 $103,742 Cash surrender value and matured endowments 1,390 1,574 Benefit reserve changes 1,228 879 Total insurance benefits and losses incurred$101,364 $106,195 Note 4. ReinsuranceIn accordance with general practice in the insurance industry, portions of the life, property and casualty insurance written bythe Company are reinsured; however, the Company remains liable with respect to reinsurance ceded should any reinsurer be unableor unwilling to meet its obligations. Approximately 99% of the Company’s reinsurance receivables were due from two reinsurers asof December 31, 2015. Reinsurance receivables of $300 were due from Swiss Reinsurance Corporation, rated “AA-” by Standard &Poor’s and “A+” (Superior) by A.M. Best and $11,339 were due from General Reinsurance Corporation, rated “AA+” by Standard &Poor’s and “A++” (Superior) by A.M. Best. Allowances for uncollectible amounts are established against reinsurance receivables, ifappropriate.43TABLE OF CONTENTSThe effects of reinsurance on premiums written, premiums earned and insurance benefits and losses incurred were as follows: 20152014Direct premiums written$138,035 $138,276 Assumed premiums written 18,656 18,231 Ceded premiums written (4,995) (5,890)Net premiums written$151,696 $150,617 Direct premiums earned$137,436 $141,212 Assumed premiums earned 18,451 18,166 Ceded premiums earned (4,995) (5,890)Net premiums earned$150,892 $153,488 Provision for benefits and losses incurred$104,286 $110,912 Reinsurance loss recoveries (2,922) (4,717)Insurance benefits and losses incurred$101,364 $106,195 Components of reinsurance receivables were as follows: 20152014Receivable on unpaid losses$11,741 $14,302 Receivable on paid losses 18 46 Total reinsurance receivables$11,759 $14,348 Note 5. Income TaxesTotal income taxes were allocated as follows: 20152014Total tax expense on income$1,320 $474 Tax expense (benefit) on components of shareholders’ equity: Net unrealized gains (losses) on investment securities (2,528) 1,656 Total tax expense (benefit)$(1,208)$2,130 A reconciliation of the differences between income taxes computed at the federal statutory income tax rate and the income taxexpense is as follows: 20152014Federal income tax provision at statutory rate of 35%$1,998 $1,717 Dividends-received deduction (99) (115)Small life insurance company deduction (582) (600)Other 42 53 Change in asset valuation allowance due to change in judgment relating to realizability of deferredtax assets — (651)Adjustment for prior years’ estimates to actual (39) 70 Income tax expense$1,320 $474 The primary differences between the effective tax rate and the federal statutory income tax rate for 2015 resulted from thedividends-received deduction (“DRD”) and the small life insurance company deduction (“SLD”). The current estimated DRD isadjusted as underlying factors change and can vary from estimates based on, but not limited to, actual distributions frominvestments as well as the amount of the Company’s44TABLE OF CONTENTStaxable income. The SLD varies in amount and is determined at a rate of 60 percent of the tentative life insurance company taxableincome (“LICTI”). The SLD for any taxable year is reduced (but not below zero) by 15 percent of the tentative LICTI for suchtaxable year as it exceeds $3,000 and is ultimately phased out at $15,000.The primary differences between the effective tax rate and the federal statutory income tax rate for 2014 resulted from theDRD, the SLD and the change in deferred tax asset valuation allowance. The change in deferred tax asset valuation allowance wasdue to the utilization of certain capital loss carryforward benefits that had been previously reduced to zero through an existingvaluation allowance reserve. All unused capital loss carryforwards expired at the end of 2014.Deferred tax liabilities and assets at December 31, 2015 and 2014 were comprised of the following: 20152014Deferred tax liabilities: Deferred acquisition costs$(2,623)$(2,832)Deferred and uncollected premiums (677) (704)Net unrealized investment gains (2,469) (4,997)Other (642) (37)Total deferred tax liabilities (6,411) (8,570)Deferred tax assets: Net operating loss carryforwards — 20 Insurance reserves 4,522 4,676 Impaired assets 1,474 1,474 Alternative minimum tax credit 504 239 Bad debts and other 740 766 Total deferred tax assets 7,240 7,175 Net deferred tax asset (liability)$829 $(1,395)The components of income tax expense were: 20152014Current - Federal$1,016 $372 Deferred - Federal 304 753 Change in deferred tax asset valuation allowance — (651)Total$1,320 $474 The Company has formal tax-sharing agreements, and files a consolidated income tax return, with its subsidiaries. Tax yearsprior to 2012 have been audited by the Internal Revenue Service and are closed.45TABLE OF CONTENTSNote 6. Junior Subordinated DebenturesThe Company has two unconsolidated Connecticut statutory business trusts, which exist for the exclusive purposes of: (i)issuing trust preferred securities (“Trust Preferred Securities”) representing undivided beneficial interests in the assets of the trusts;(ii) investing the gross proceeds of the Trust Preferred Securities in junior subordinated deferrable interest debentures (“JuniorSubordinated Debentures”) of Atlantic American; and (iii) engaging in those activities necessary or incidental thereto.The financial structure of each of Atlantic American Statutory Trust I and II, as of December 31, 2015 and 2014, was asfollows: Atlantic AmericanStatutory Trust IAtlantic AmericanStatutory Trust IIJUNIOR SUBORDINATED DEBENTURES(1)(2) Principal amount owed$18,042$23,196Balance December 31, 2015$18,042$23,196Less: Treasury debt(3)   — (7,500)Net balance December 31, 2015$18,042$15,696Net balance December 31, 2014$18,042$15,696Coupon rateLIBOR + 4.00%LIBOR + 4.10%Interest payableQuarterlyQuarterlyMaturity dateDecember 4, 2032May 15, 2033Redeemable by issuerYesYesTRUST PREFERRED SECURITIES Issuance dateDecember 4, 2002May 15, 2003Securities issued17,50022,500Liquidation preference per security$   1$   1Liquidation value$17,500$22,500Coupon rateLIBOR + 4.00%LIBOR + 4.10%Distribution payableQuarterlyQuarterlyDistribution guaranteed by(4)AtlanticAmericanCorporationAtlanticAmericanCorporation(1)For each of the respective debentures, the Company has the right at any time, and from time to time, to defer payments ofinterest on the Junior Subordinated Debentures for a period not exceeding 20 consecutive quarters up to the debentures’respective maturity dates. During any such period, interest will continue to accrue and the Company may not declare orpay any cash dividends or distributions on, or purchase, the Company’s common stock nor make any principal, interest orpremium payments on or repurchase any debt securities that rank equally with or junior to the Junior SubordinatedDebentures. The Company has the right at any time to dissolve each of the trusts and cause the Junior SubordinatedDebentures to be distributed to the holders of the Trust Preferred Securities.(2)The Junior Subordinated Debentures are unsecured and rank junior and subordinate in right of payment to all senior debtof the Parent and are effectively subordinated to all existing and future liabilities of its subsidiaries.(3)On August 4, 2014, the Company acquired $7,500 of the Junior Subordinated Debentures. Consideration tendered, uponsettlement, was $6,750 plus accrued interest resulting in a gain of $750 recognized in other income on the accompanyingconsolidated statements of operations in 2014.(4)The Parent has guaranteed, on a subordinated basis, all of the obligations under the Trust Preferred Securities, includingpayment of the redemption price and any accumulated and unpaid distributions to the extent of available funds and upondissolution, winding up or liquidation.46TABLE OF CONTENTSNote 7. Commitments and ContingenciesLitigationFrom time to time, the Company is, and expects to continue to be, involved in various claims and lawsuits incidental to and inthe ordinary course of its business. In the opinion of management, any such known claims are not expected to have a material effecton the financial condition or results of operations of the Company.Operating Lease CommitmentsThe Company’s rental expense, including common area charges, for operating leases was $1,261 and $1,229 in 2015 and2014, respectively. The Company’s future minimum base lease obligations under non-cancelable operating leases are as follows:Year Ending December 31, 2016$907 2017 446 2018 457 2019 193 Thereafter — Total$2,003 Note 8. Benefit PlansEquity Incentive PlanOn May 1, 2012, the Company’s shareholders approved the 2012 Equity Incentive Plan (the “2012 Plan”). The 2012 Planauthorizes the grant of up to 2,000,000 stock options, stock appreciation rights, restricted shares, restricted stock units,performance shares, performance units and other awards for the purpose of providing the Company’s non-employee directors,consultants, officers and other employees incentives and rewards for superior performance. In 2015, a total of 48,300 restrictedshares, with an estimated fair value of $178, were issued under the 2012 Plan. In 2014, a total of 148,500 restricted shares, with anestimated fair value of $559, were issued under the 2012 Plan. The estimated fair value of the restricted shares issued under the2012 Plan for 2015 and 2014 was based on the common stock price at date of grant. Vesting of restricted shares generally occursafter a one to three year period. There were no stock options outstanding under the 2012 Plan in 2015 or 2014. Shares available forfuture grants at December 31, 2015 and 2014 were 1,603,200 and 1,651,500, respectively.401(k) PlanThe Company initiated an employees’ savings plan (the “Plan”) qualified under Section 401(k) of the Internal Revenue Codein May 1995. The Plan covers substantially all of the Company’s employees. Effective January 1, 2009, the Company modified thePlan such that the Plan would operate on a safe harbor basis. Under the Plan, employees may defer up to 50% of theircompensation, not to exceed the annual deferral limit. The Company’s total matching contribution for 2015 and 2014 was $212and $186, respectively, and consisted of a contribution equal to 35% of up to the first 6% of each participant’s contributions for2015 and 50% of up to the first 4% of each participant’s contributions for 2014. In addition to the matching contribution, theCompany also provided a 3% safe harbor non-elective contribution in 2015 and 2014 of $416 and $391, respectively. Allcontributions were made in cash.Agent Stock Purchase PlanThe Company initiated a nonqualified stock purchase plan (the “Agent Stock Purchase Plan”) in May 2012. The purpose ofthe Agent Stock Purchase Plan is to promote and advance the interests of the Company and its stockholders by providingindependent agents who qualify as participants with an opportunity to purchase the common stock of the Company. Under theAgent Stock Purchase Plan, payment for shares of common stock of the Company is made by either deduction from an agent’scommission payment or a direct cash payment. Stock purchases are made at the end of each calendar quarter at the then currentmarket value.Note 9. Preferred StockThe Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding at December 31, 2015and 2014, respectively. All of the shares of Series D Preferred Stock are held by an affiliate47TABLE OF CONTENTSof the Company’s controlling shareholder. The outstanding shares of Series D Preferred Stock have a stated value of $100 pershare; accrue annual dividends at a rate of $7.25 per share (payable in cash or shares of the Company’s common stock at the optionof the board of directors of the Company) and are cumulative. In certain circumstances, the shares of the Series D Preferred Stockmay be convertible into an aggregate of approximately 1,378,000 shares of the Company’s common stock, subject to certainadjustments and provided that such adjustments do not result in the Company issuing more than approximately 2,703,000 sharesof common stock without obtaining prior shareholder approval; and are redeemable solely at the Company’s option. The Series DPreferred Stock is not currently convertible. The Company redeemed 10,000 shares of the Series D Preferred Stock in 2014 at thestated value of $100 per share, for an aggregate payment of $1,000. The Company had accrued, but unpaid, dividends, on theSeries D Preferred Stock of $18 at December 31, 2015 and 2014. During 2015 and 2014, the Company paid Series D PreferredStock dividends of $399 and $471, respectively.Note 10. Earnings Per Common ShareA reconciliation of the numerator and denominator of the earnings per common share calculations is as follows: For the Year Ended December 31, 2015 IncomeShares(In thousands)Per ShareAmountBasic and Diluted Earnings Per Common Share Net income before preferred stock dividends$4,388 20,566 Less preferred stock dividends (399) — Net income applicable to common shareholders$3,989 20,566 $.19 For the Year Ended December 31, 2014 IncomeShares(In thousands)Per ShareAmountBasic and Diluted Earnings Per Common Share Net income before preferred stock dividends$4,430 20,818 Less preferred stock dividends (468) — Net income applicable to common shareholders$3,962 20,818 $.19 The assumed conversion of the Company’s Series D Preferred Stock was excluded from the earnings per common sharecalculation for 2015 and 2014 since its impact would have been antidilutive.Note 11. Statutory ReportingThe assets, liabilities and results of operations have been reported on the basis of GAAP, which varies in some respects fromstatutory accounting practices (“SAP”) prescribed or permitted by insurance regulatory authorities. The principal differencesbetween SAP and GAAP are that under SAP: (i) certain assets that are non-admitted assets are eliminated from the balance sheet; (ii)acquisition costs for policies are expensed as incurred, while they are deferred and amortized over the estimated life of the policiesunder GAAP; (iii) the provision that is made for deferred income taxes is different than under GAAP; (iv) the timing of establishingcertain reserves is different than under GAAP; and (v) certain valuation allowances attributable to certain investments are different.48TABLE OF CONTENTSThe amount of reported statutory net income and surplus (shareholders’ equity) for the Parent’s insurance subsidiaries for theyears ended December 31 was as follows: 20152014Life and Health, net income$4,147 $2,738 Property and Casualty, net income 5,290 4,813 Statutory net income$9,437 $7,551 Life and Health, surplus$35,322 $34,004 Property and Casualty, surplus 38,308 39,012 Statutory surplus$73,630 $73,016 Under the insurance code of the state in which each insurance subsidiary is domiciled, dividend payments to the Parent by itsinsurance subsidiaries are subject to certain limitations without the prior approval of the applicable state’s InsuranceCommissioner. The Parent received dividends of $6,750 and $6,468 in 2015 and 2014, respectively, from its subsidiaries. In 2016,dividend payments to the Parent by the insurance subsidiaries in excess of $6,095 would require prior approval.Note 12. Related Party TransactionsIn the normal course of business the Company has engaged in transactions with entities affiliated with the controllingshareholder of the Company. These transactions include the leasing of office space as well as certain investing and financingactivities. At December 31, 2015, two members of the Company’s board of directors, including our chairman, president and chiefexecutive officer, were considered to be affiliates of the majority shareholder, who is also a member of the Company’s board ofdirectors.The Company leases approximately 49,586 square feet of office and covered garage space from one such controlled entity.During the years ended December 31, 2015 and 2014, the Company paid $875 and $852, respectively, under this lease.Certain financing for the Company has also been provided by this entity in the form of an investment in the Series D PreferredStock (See Note 9). During the years ended December 31, 2015 and 2014, the Company paid this entity $399 and $471,respectively, in dividends on the Series D Preferred Stock. During 2014, the Company redeemed $1,000 of the Series D PreferredStock.Certain members of the Company’s management and board of directors are shareholders and on the board of directors of GrayTelevision, Inc. (“Gray”). As of December 31, 2015 and 2014, the Company owned 880,272 shares of Gray Class A common stockand 106,000 shares of Gray common stock. The aggregate carrying value of these investments in Gray at December 31, 2015 and2014 was $14,043 and $9,242, respectively.Note 13. Segment InformationThe Parent’s primary insurance subsidiaries operate with relative autonomy and each company is evaluated based on itsindividual performance. American Southern operates in the property and casualty insurance market, while Bankers Fidelityoperates in the life and health insurance market. Each segment derives revenue from the collection of premiums, as well as frominvestment income. Substantially all revenue other than that in the corporate and other segment is from external sources.49TABLE OF CONTENTS 2015 AmericanSouthernBankersFidelityCorporate& OtherAdjustments& EliminationsConsolidatedInsurance premiums$54,508 $96,384 $— $— $150,892 Insurance benefits and losses incurred 35,046 66,318 — — 101,364 Expenses deferred (9,093) (2,112) — — (11,205)Amortization and depreciation expense 9,057 1,707 673 — 11,437 Other expenses 17,845 33,210 16,789 (9,211) 58,633 Total expenses 52,855 99,123 17,462 (9,211) 160,229 Underwriting income (loss) 1,653 (2,739) Investment income 4,107 5,680 2,060 (1,762) 10,085 Other income 10 10 7,532 (7,449) 103 Operating income (loss) 5,770 2,951 (7,870) — 851 Net realized gains 872 3,795 190 — 4,857 Income (loss) before income taxes$6,642 $6,746 $(7,680)$— $5,708 Total revenues$59,497 $105,869 $9,782 $(9,211)$165,937 Intangibles$1,350 $1,194 $— $— $2,544 Total assets$123,445 $160,964 $136,869 $(106,675)$314,603 2014 AmericanSouthernBankersFidelityCorporate& OtherAdjustments& EliminationsConsolidatedInsurance premiums$52,654 $100,834 $— $— $153,488 Insurance benefits and losses incurred 38,179 68,016 — — 106,195 Expenses deferred (7,845) (2,305) — — (10,150)Amortization and depreciation expense 8,646 2,457 507 — 11,610 Other expenses 13,644 33,725 15,601 (9,208) 53,762 Total expenses 52,624 101,893 16,108 (9,208) 161,417 Underwriting income (loss) 30 (1,059) Investment income 4,447 5,507 2,152 (1,739) 10,367 Other income 8 11 7,595 (7,469) 145 Operating income (loss) 4,485 4,459 (6,361) — 2,583 Net realized gains 527 694 350 — 1,571 Gain on purchase of debt securities — — 750 — 750 Income (loss) before income taxes$5,012 $5,153 $(5,261)$— $4,904 Total revenues$57,636 $107,046 $10,847 $(9,208)$166,321 Intangibles$1,350 $1,194 $— $— $2,544 Total assets$129,517 $161,729 $139,271 $(113,509)$317,008 Note 14. Disclosures About Fair Value of Financial InstrumentsThe estimated fair values have been determined by the Company using available market information from various marketsources and appropriate valuation methodologies as of the respective dates. However, considerable judgment is necessary tointerpret market data and to develop the estimates of fair value. Although management is not aware of any factors that wouldsignificantly affect the estimated fair value amounts, the estimates presented herein are not necessarily indicative of the amountswhich the Company could realize in a current market exchange. The use of different market assumptions and/or estimationmethodologies may have a material effect on the estimated fair value amounts.50 UnrealizedGains onAvailable-for-Sale SecuritiesBalance, December 31, 2014$9,279 Other comprehensive loss before reclassifications (1,538)Amounts reclassified from accumulated other comprehensive income (3,157)Net current period other comprehensive loss (4,695)Balance, December 31, 2015$4,584 TABLE OF CONTENTS Level in FairValueHierarchy (1)20152014 CarryingAmountEstimatedFair ValueCarryingAmountEstimatedFair ValueAssets: Cash and cash equivalentsLevel 1$15,622 $15,622 $16,375 $16,375 Fixed maturities(1) 205,324 205,324 214,888 214,888 Equity securities(1) 23,131 23,131 18,924 18,924 Other invested assetsLevel 3 6,454 7,070 2,995 2,995 Policy loansLevel 2 2,200 2,200 2,202 2,202 Real estateLevel 2 38 38 38 38 Investments in unconsolidated trustsLevel 2 1,238 1,238 1,238 1,238 Liabilities: Junior Subordinated Debentures, netLevel 2 33,738 33,738 33,738 33,738 (1)See Note 2 for a description of the fair value hierarchy as well as a disclosure of levels for classes of these financial assets.The following describes the methods and assumptions used by the Company in estimating fair values:Cash and Cash EquivalentsThe carrying amount approximates fair value due to the short-term nature of the instruments.Fixed Maturities and Common and Non-Redeemable Preferred StocksThe carrying amount is determined in accordance with methods prescribed by the NAIC, which do not differ materially frompublicly quoted market prices. Certain fixed maturities do not have publicly quoted values and consist solely of issuances ofpooled debt obligations of multiple, smaller financial services companies. They are not actively traded and valuation techniquesused to measure fair value are based on future estimated cash flows discounted at a reasonably estimated rate of interest. Otherqualitative and quantitative information received from the original underwriter of the pooled offerings is also considered, asapplicable.Non-publicly Traded Invested AssetsThe fair value of investments in certain limited partnerships which are included in other invested assets on the consolidatedbalance sheet were determined by officers of those limited partnerships.Junior Subordinated DebenturesThe fair value is estimated based on the quoted market prices for similar issues and the current rates offered for debt havingsimilar returns and remaining maturities.Note 15. Accumulated Other Comprehensive IncomeThe following table sets forth the balance of each component of accumulated other comprehensive income as of December 31,2015 and 2014, and the changes in the balance of each component thereof during 2015.51TABLE OF CONTENTSItem 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone.Item 9A.Controls and ProceduresAs of the end of the period covered by this report, an evaluation was performed under the supervision and with theparticipation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of thedesign and operation of our disclosure controls and procedures (as defined in Rules 13a-25(e) and 15d-15(e) of the SecuritiesExchange Act of 1934). Based on that evaluation, our management, including the Chief Executive Officer and Chief FinancialOfficer, concluded that our disclosure controls and procedures were effective as of that date.Management of the Company is responsible for establishing and maintaining adequate internal control over financialreporting for the Company. Our internal control over financial reporting system has been designed to provide reasonable assuranceregarding the reliability and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles. Management recognizes that there are inherent limitations in the effectiveness of any internal controlsystem. Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements.Furthermore, the application of any evaluations of effectiveness on future periods are subject to the risk that controls may becomeinadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statementpreparation and presentation.Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015based upon the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in theupdated 2013 Internal Control – Integrated Framework. Based on that evaluation, management believes that internal control overfinancial reporting as such term is defined in Exchange Act Rule 13a-15(f) was effective as of December 31, 2015.There were no changes in our internal control over financial reporting that occurred during the fourth quarter of 2015 thathave materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.This Annual Report does not include an attestation report of the Company’s independent registered public accounting firmregarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’sindependent registered public accounting firm pursuant to certain rules of the Securities and Exchange Commission that exemptsmaller reporting companies, including the Company, from such requirement.Item 9B.Other InformationNone.52TABLE OF CONTENTSPART IIIWith the exception of certain information relating to the Executive Officers of the Company, which is provided in Part Ihereof, the information relating to securities authorized for issuance under equity compensation plans and the information relatingto the Company’s Code of Ethics, each of which is included below, all information required by Part III (Items 10, 11, 12, 13 and 14of Form 10-K) is incorporated by reference to the sections entitled “Election of Directors”, “Security Ownership of CertainBeneficial Owners and Management”, “Section 16(a) Beneficial Ownership Reporting Compliance”, “Executive Compensation”,“Certain Relationships and Related Transactions, and Director Independence” and “Ratification of Independent Registered PublicAccounting Firm” to be contained in the Company’s definitive proxy statement in connection with the Company’s AnnualMeeting of Shareholders to be held on May 3, 2016, to be filed with the SEC within 120 days of the Company’s fiscal year end.Equity Compensation Plan InformationThe following table sets forth, as of December 31, 2015, the number of securities issuable upon exercise of outstandingoptions, warrants and rights, the weighted average exercise price thereof and the number of securities remaining available for futureissuance under the Company’s equity compensation plans:Plan CategoryNumber ofSecurities to BeIssued UponExercise ofOutstandingOptions, Warrantsand RightsWeighted-AverageExercise Price ofOutstandingOptions, Warrantsand RightsNumber of SecuritiesRemaining Availablefor Future IssuanceUnder EquityCompensation Plans(Excluding SecuritiesReflected in the FirstColumn)Equity compensation plans approved by security holders — $ — 1,603,200 Equity compensation plans not approved by security holders (1) — — — Total — $— 1,603,200 (1)All the Company’s equity compensation plans have been approved by the Company’s shareholders.The Company has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer, principalaccounting officer or controller, or any persons performing similar functions, as well as its directors and other employees. A copy ofthis Code of Ethics has been filed as an exhibit to this annual report on Form 10-K.53TABLE OF CONTENTSPART IVItem 15.Exhibits and Financial Statement Schedules(a) List of documents filed as part of this report:1.Financial Statements:See Index to Financial Statements contained in Item 8 hereof.2.Financial Statement Schedules:Schedule II - Condensed financial information of the registrantSchedule III - Supplementary insurance information of the registrantSchedule IV - Reinsurance information for the registrantSchedule VI - Supplemental information concerning property-casualty insurance operations of the registrantSchedules other than those listed above are omitted as they are not required or are not applicable, or the required information isshown in the financial statements or notes thereto. Columns omitted from schedules filed have been omitted because theinformation is not applicable.3.Exhibits *:3.1-Restated Articles of Incorporation of the registrant, as amended [incorporated by reference to Exhibit 3.1 to theregistrant’s Form 10-K for the year ended December 31, 2008].3.2-Restated Bylaws of the registrant, as amended [incorporated by reference to Exhibit 3.1 to the registrant’s Form 8-Kfiled on March 4, 2016].10.01-Management Agreement between the registrant and Atlantic American Life Insurance Company and BankersFidelity Life Insurance Company dated July 1, 1993 [incorporated by reference to Exhibit 10.41 to the registrant’sForm 10-Q for the quarter ended September 30, 1993].10.02-Tax allocation agreement dated January 28, 1994, between registrant and registrant’s subsidiaries [incorporated byreference to Exhibit 10.44 to the registrant’s Form 10-K for the year ended December 31, 1993].10.03**-Atlantic American Corporation 2012 Nonqualified Stock Purchase Plan [incorporated by reference to Exhibit 99.1to the registrant’s Form S-8 (File No. 333-183207) filed on August 10, 2012].10.04**-Atlantic American Corporation 2012 Equity Incentive Plan [incorporated by reference to Exhibit 10.1 toregistrant’s Form 10-Q for the quarter ended March 31, 2013].10.05**-Summary Terms of Consulting Arrangement between Bankers Fidelity Life Insurance Company and William H.Whaley, M.D. [incorporated by reference to Exhibit 10.06 to the registrant’s Form 10-K for the year endedDecember 31, 2010].10.06-Lease Agreement between Georgia Casualty & Surety Company, Bankers Fidelity Life Insurance Company,Atlantic American Corporation and Delta Life Insurance Company dated as of November 1, 2007 [incorporated byreference to Exhibit 10.10 to the registrant’s Form 10-K for the year ended December 31, 2007].10.07-First Amendment to Lease Agreement between Georgia Casualty & Surety Company, Bankers Fidelity LifeInsurance Company, Atlantic American Corporation and Delta Life Insurance Company dated as of March 31, 2008[incorporated by reference to Exhibit 10.2 to the registrant’s Form 10-Q for the quarter ended March 31, 2008].14.1-Code of Ethics [incorporated by reference to Exhibit 14.1 to the registrant’s Form 10-K for the year ended December31, 2003].21.1-Subsidiaries of the registrant.23.1-Consent of BDO USA, LLP, Independent Registered Public Accounting Firm.31.1-Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2-Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1-Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101.INS-XBRL Instance Document.54TABLE OF CONTENTS101.SCH-XBRL Taxonomy Extension Schema.101.CAL-XBRL Taxonomy Extension Calculation Linkbase.101.DEF-XBRL Taxonomy Extension Definition Linkbase.101.LAB-XBRL Taxonomy Extension Label Linkbase.101.PRE-XBRL Taxonomy Extension Presentation Linkbase.*The registrant agrees to furnish to the Commission upon request a copy of any instruments defining the rights of securityholders of the registrant that may be omitted from filing in accordance with the Commission’s rules and regulations.**Management contract, compensatory plan or arrangement required to be filed pursuant to Part IV, Item 15(c) of Form 10-K and Item 601 of Regulation S-K.55TABLE OF CONTENTSSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized. ATLANTIC AMERICAN CORPORATION (Registrant) By:/s/ John G. Sample, Jr. John G. Sample, Jr. Senior Vice President and Chief Financial Officer Date: March 29, 2016Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Hilton H. Howell, Jr.President, Chief Executive Officerand Chairman of the Board (Principal Executive Officer)March 29, 2016HILTON H. HOWELL, JR. /s/ John G. Sample, Jr.Senior Vice President and Chief Financial Officer(Principal Financial and Accounting Officer)March 29, 2016JOHN G. SAMPLE, JR. /s/ Robin R. HowellDirectorMarch 29, 2016ROBIN R. HOWELL /s/ Harriett J. RobinsonDirectorMarch 29, 2016HARRIETT J. ROBINSON /s/ Joseph M. ScheererDirectorMarch 29, 2016JOSEPH M. SCHEERER /s/ Scott G. ThompsonDirectorMarch 29, 2016SCOTT G. THOMPSON /s/ D. Keehln WheelerDirectorMarch 29, 2016D. KEEHLN WHEELER /s/ Dom H. WyantDirectorMarch 29, 2016DOM H. WYANT56TABLE OF CONTENTSSchedule IIPage 1 of 3CONDENSED FINANCIAL INFORMATION OF REGISTRANTATLANTIC AMERICAN CORPORATION(Parent Company Only)BALANCE SHEETSASSETS December 31, 20152014 (In thousands) Cash and cash equivalents$4,463 $5,947 Investments 19,035 13,766 Investment in subsidiaries 106,675 113,509 Investments in unconsolidated trusts 1,238 1,238 Deferred tax asset, net 169 — Income taxes receivable from subsidiaries 2,146 2,271 Other assets 4,677 5,113 Total assets$138,403 $141,844 LIABILITIES AND SHAREHOLDERS’ EQUITY Deferred tax liability, net$— $2,055 Other payables 2,173 1,856 Junior subordinated debentures 33,738 33,738 Total liabilities 35,911 37,649 Shareholders’ equity 102,492 104,195 Total liabilities and shareholders’ equity$138,403 $141,844 See accompanying report of independent registered public accounting firm.II-1TABLE OF CONTENTSSchedule IIPage 2 of 3CONDENSED FINANCIAL INFORMATION OF REGISTRANTATLANTIC AMERICAN CORPORATION(Parent Company Only)STATEMENTS OF OPERATIONS Year Ended December 31, 20152014 (In thousands)REVENUE Fee income from subsidiaries$7,449 $7,469 Distributed earnings from subsidiaries 6,750 6,468 Other 571 1,622 Total revenue 14,770 15,559 GENERAL AND ADMINISTRATIVE EXPENSES 13,984 12,478 INTEREST EXPENSE 1,429 1,607 (643) 1,474 INCOME TAX BENEFIT(1) (1,514) (2,040) 871 3,514 EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES, NET 3,517 916 NET INCOME$4,388 $4,430 (1)Under the terms of a tax-sharing agreement, income tax provisions for the subsidiary companies are computed on aseparate company basis. Accordingly, the Company’s income tax benefit results from the utilization of the Parent’sseparate return loss to reduce the consolidated taxable income of the Company.See accompanying report of independent registered public accounting firm.II-2TABLE OF CONTENTSSchedule IIPage 3 of 3CONDENSED FINANCIAL INFORMATION OF REGISTRANTATLANTIC AMERICAN CORPORATION(Parent Company Only)STATEMENTS OF CASH FLOWS Year Ended December 31, 20152014 (In thousands)CASH FLOWS FROM OPERATING ACTIVITIES: Net income$4,388 $4,430 Adjustments to reconcile net income to net cash provided by operating activities: Realized investment gains, net (190) (350)Gain on purchase of debt securities — (750)Depreciation and amortization 673 507 Compensation expense related to share awards 365 584 Equity in undistributed earnings of consolidated subsidiaries (3,517) (916)Decrease in intercompany taxes 125 2,259 Deferred income tax expense 304 102 Increase (decrease) in other liabilities 317 (164)Other, net (12) 4 Net cash provided by operating activities 2,453 5,706 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from investments sold, called or matured 2,210 2,106 Investments purchased (3,956) — Capital contribution to subsidiaries (200) (100)Additions to property and equipment (230) (4,127)Net cash used in investing activities (2,176) (2,121) CASH FLOWS FROM FINANCING ACTIVITIES: Payment for debt securities — (6,750)Redemption of Series D preferred stock — (1,000)Payment of dividends on Series D preferred stock (399) (471)Payment of dividends on common stock (412) (834)Proceeds from shares issued under stock plans 47 84 Purchase of shares for treasury (997) (2,603)Net cash used in financing activities (1,761) (11,574) Net decrease in cash (1,484) (7,989)Cash and cash equivalents at beginning of year 5,947 13,936 Cash and cash equivalents at end of year$4,463 $5,947 Supplemental disclosure: Cash paid for interest$1,424 $1,649 Cash paid for income taxes$1,465 $445 Intercompany tax settlement from subsidiaries$2,409 $4,695 See accompanying report of independent registered public accounting firm.II-3TABLE OF CONTENTSSchedule IIIPage 1 of 2ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIESSUPPLEMENTARY INSURANCE INFORMATIONSegmentDeferredAcquisitionCostsFuture PolicyBenefits,Losses,Claims andLossReservesUnearnedPremiumsOther PolicyClaims andBenefitsPayable (In thousands)December 31, 2015: Bankers Fidelity$25,033 $84,806 $3,585 $1,991 American Southern 2,833 51,200 21,763 — $27,866 $136,006(1)$25,348 $1,991 December 31, 2014: Bankers Fidelity$24,360 $82,453 $3,884 $2,080 American Southern 2,621 55,017 20,660 — $26,981 $137,470(2)$24,544 $2,080 (1)Includes future policy benefits of $72,136 and losses and claims of $63,870.(2)Includes future policy benefits of $70,845 and losses and claims of $66,625.See accompanying report of independent registered public accounting firm.III-1TABLE OF CONTENTSSchedule IIIPage 2 of 2ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIESSUPPLEMENTARY INSURANCE INFORMATIONSegmentPremiumRevenueNetInvestmentIncomeBenefits,Claims,Losses andSettlementExpensesAmortizationof DeferredAcquisitionCostsOtherOperatingExpensesCasualtyPremiumsWritten (In thousands)December 31, 2015: Bankers Fidelity$96,384 $5,149 $66,318 $1,439 $31,366 $— American Southern 54,508 4,086 35,046 8,881 8,928 55,611 Other — 298 — — 8,251 — $150,892 $9,533 $101,364 $10,320 $48,545 $55,611 December 31, 2014: Bankers Fidelity$100,834 $4,989 $68,016 $2,220 $31,657 $— American Southern 52,654 4,429 38,179 8,458 5,987 50,318 Other — 413 — — 6,900 — $153,488 $9,831 $106,195 $10,678 $44,544 $50,318 See accompanying report of independent registered public accounting firm.III-2TABLE OF CONTENTSSchedule IVATLANTIC AMERICAN CORPORATION AND SUBSIDIARIESREINSURANCE DirectAmountCeded ToOtherCompaniesAssumedFrom OtherCompaniesNetAmountsPercentage ofAmountAssumedTo Net (Dollars in thousands)Year ended December 31, 2015: Life insurance in force$267,191 $(16,843)$— $250,348 Premiums — Bankers Fidelity$96,373 $(44)$55 $96,384 0.1%American Southern 41,063 (4,951) 18,396 54,508 33.7%Total premiums$137,436 $(4,995)$18,451 $150,892 12.2% Year ended December 31, 2014: Life insurance in force$257,988 $(18,984)$— $239,004 Premiums — Bankers Fidelity$100,799 $(43)$78 $100,834 0.1%American Southern 40,413 (5,847) 18,088 52,654 34.4%Total premiums$141,212 $(5,890)$18,166 $153,488 11.8%See accompanying report of independent registered public accounting firm.IV-1TABLE OF CONTENTSSchedule VIATLANTIC AMERICAN CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATION CONCERNINGPROPERTY-CASUALTY INSURANCE OPERATIONS DeferredPolicyAcquisitionCostsReservesUnearnedPremiumsEarnedPremiumsNetInvestmentIncomeClaims and ClaimAdjustmentExpenses IncurredRelated ToAmortizationof DeferredAcquisitionCostsPaid Claimsand ClaimAdjustmentExpensesPremiumsWrittenYear EndedCurrentYearPriorYears (In thousands)December 31,2015$2,833 $51,200 $21,763 $54,508 $4,086 $35,072 $(26)$8,881 $36,298 $55,611 December 31,2014$2,621 $55,017 $20,660 $52,654 $4,429 $38,337 $(158)$8,458 $34,336 $50,318 VI-1SubsidiaryState of Incorporation American Safety Insurance CompanyGeorgiaAmerican Southern Insurance CompanyKansasBankers Fidelity Life Insurance CompanyGeorgiaBankers Fidelity Assurance CompanyGeorgiaxCalibre Risk Services, Inc.GeorgiaEXHIBIT 21.1Subsidiaries of the RegistrantEXHIBIT 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-183207 and 333-183210) of Atlantic American Corporation of our report dated March 29, 2016, relating to the consolidated financial statementsand financial statement schedules of Atlantic American Corporation which appears in this Form 10-K./s/ BDO USA, LLPAtlanta, GeorgiaMarch 29, 2016Date: March 29, 2016 /s/ Hilton H. Howell, Jr. Hilton H. Howell, Jr. President and Chief Executive OfficerEXHIBIT 31.1CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Hilton H. Howell, Jr., certify that:1.I have reviewed this annual report on Form 10-K of Atlantic American Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present inall material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this reportis being prepared;b)designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting andthe preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples;c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered bythis report based on such evaluation; andd)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred duringthe registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize andreport financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting.Date: March 29, 2016 /s/ John G. Sample, Jr. John G. Sample, Jr. Senior Vice President and Chief Financial OfficerEXHIBIT 31.2CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, John G. Sample, Jr., certify that:1.I have reviewed this annual report on Form 10-K of Atlantic American Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present inall material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this reportis being prepared;b)designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting andthe preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples;c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered bythis report based on such evaluation; andd)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred duringthe registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize andreport financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting.Date: March 29, 2016 /s/ Hilton H. Howell, Jr. Hilton H. Howell, Jr. President and Chief Executive OfficerDate: March 29, 2016 /s/ John G. Sample, Jr. John G. Sample, Jr. Senior Vice President and Chief Financial OfficerEXHIBIT 32.1Certifications Pursuant to §906 of the Sarbanes-Oxley Act of 2002Pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, in connection with the filing ofthe Annual Report on Form 10-K of Atlantic American Corporation (the “Company”) for the year ended December 31, 2015, asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of theCompany certifies, that, to such officer’s knowledge:(1)The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of the dates and for the periods expressed in the Report.A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by theCompany and furnished to the Securities and Exchange Commission or its staff upon request.

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