UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-3722
ATLANTIC AMERICAN CORPORATION
(Exact name of registrant as specified in its charter)
Georgia
58-1027114
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
4370 Peachtree Road, N.E.,
Atlanta, Georgia
30319
(Address of principal executive offices)
(Zip Code)
(Registrant’s telephone number, including area code) (404) 266-5500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $1.00 per share
AAME
NASDAQ Global Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ 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 ☐ 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 Act of 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 to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit such files). Yes
☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See definitions of “large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of
the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15
U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period
pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2024, the last business day of the registrant’s most recently completed second fiscal
quarter, was $6,854,118. For purposes hereof,
beneficial ownership is determined under rules adopted pursuant to Section 13 of the
Securities Exchange Act of 1934, and the foregoing excludes value ascribed to common stock that may be deemed beneficially owned by the
directors and executive officers, and 10% or greater stockholders, of the registrant, some of whom may not be
deemed to be affiliates upon judicial determination. On February 28, 2025, there were 20,399,758 shares of the registrant’s
common
stock, par value $1.00 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive
Proxy Statement for the 2025 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission 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 this Form 10-K.
TABLE OF CONTENTS
Page
Forward-Looking Statements
1
PART I
Item 1.
Business
2
The Company
2
Marketing
3
Underwriting
4
Policyholder and Claims Services
5
Reserves
5
Reinsurance
7
Competition
7
Ratings
8
Regulation
8
NAIC Ratios
9
Risk-Based Capital
9
Investments
9
Human Capital
10
Financial Information by Industry Segment
11
Available Information
11
Executive Officers of the Registrant
11
Item 1A.
Risk Factors
11
Item 1B.
Unresolved Staff Comments
11
Item 1C.
Cybersecurity
12
Item 2.
Properties
13
Item 3.
Legal Proceedings
13
Item 4.
Mine Safety Disclosures
13
PART II
Item 5.
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
14
Item 6.
Reserved
14
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
15
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
22
Item 8.
Financial Statements and Supplementary Data
23
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
58
Item 9A.
Controls and Procedures
58
Item 9B.
Other Information
59
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
59
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
60
Item 11.
Executive Compensation
60
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
60
Item 13.
Certain Relationships and Related Transactions, and Director Independence
60
Item 14.
Principal Accountant Fees and Services
60
PART IV
Item 15.
Exhibits and Financial Statement Schedules
61
Item 16.
Form 10-K Summary
62
Signatures
63
Schedule II
64
Schedule III
67
Schedule IV
69
Schedule VI
70
Table of Contents
FORWARD-LOOKING STATEMENTS
Certain of the statements contained or incorporated by reference herein are forward-looking statements within the meaning of the federal securities laws. Forward-looking
statements are all statements other than those of
historical fact. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933,
and Section 21E of the Securities
Exchange Act of 1934, and include estimates and assumptions related to, among other things, general economic, competitive, operational and legislative developments, expectations and trends. Forward-looking statements
are
inherently subject to risks and uncertainties which are, in many instances, beyond the Company’s control and have been made based upon management’s current expectations and beliefs concerning future developments and their
potential effect upon
the Company. There can be no assurance that future developments will be in accordance with management’s expectations or that the effect of future developments on the Company will be those anticipated by
management. Actual results could differ
materially from those expressed by forward-looking statements, depending on the occurrence or outcome of various factors. These factors include, among others: the effects of macroeconomic
conditions and general economic uncertainty; unexpected
developments in the health care or insurance industries affecting providers or individuals, including the cost or availability of services, or the tax consequences related thereto;
disruption to the financial markets; unanticipated increases in the
rate, number and amounts of claims outstanding; our ability to remediate the identified material weakness in our internal control over financial reporting; the level of
performance of reinsurance companies under reinsurance contracts and the
availability, pricing and adequacy of reinsurance to protect the Company against losses; changes in the stock markets, interest rates or other financial markets,
including the potential effect on the Company’s statutory capital levels; the uncertain
effect on the Company of regulatory and market-driven changes in practices relating to the payment of incentive compensation to brokers, agents and
other producers; the potential impact of public health emergencies; the incidence and severity of
catastrophes, both natural and man-made; the possible occurrence of terrorist attacks; stronger than anticipated competitive activity;
unfavorable judicial or legislative developments; the potential effect of regulatory developments, including those
which could increase the Company’s business costs and required capital levels; the Company’s ability to distribute its
products through distribution channels, both current and future; the uncertain effect of emerging claim and coverage issues; the
effect of assessments and other surcharges for guaranty funds and other mandatory pooling arrangements;
information technology system failures or network disruptions; and risks related to cybersecurity matters, such as breaches of our computer
network or those of other parties or the loss of or unauthorized access to the data we maintain.
As a result, undue reliance should not be placed upon forward-looking statements, which speak only as of the date they are made. The Company undertakes
no obligation to publicly update any forward-looking statements as a result of
subsequent developments, changes in underlying assumptions or facts or otherwise, except as may be required by law.
1
Table of Contents
PART I
Item 1.
Business
The Company
Atlantic American Corporation, a Georgia corporation incorporated in 1968 (the “Parent” or “Company”), is a holding company that operates through its subsidiaries in
well-defined specialty markets within the life and health
and property and casualty insurance industries. The Parent’s principal operating subsidiaries are American Southern Insurance Company and American Safety Insurance Company (together known as
“American Southern”) within the
property and casualty insurance industry and Bankers Fidelity Life Insurance Company, Bankers Fidelity Assurance Company and Atlantic Capital Life Assurance Company (together known as “Bankers Fidelity”) within the
life and
health insurance industry. Each of American Southern and Bankers Fidelity is managed separately based upon the type of products it offers and is evaluated on its individual performance. The Company’s strategy is to focus on well-
defined
geographic, demographic and/or product niches within the insurance marketplace. Each of American Southern and Bankers 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 its operating subsidiaries as the principal source of
cash flow to meet its obligations. Additional information
regarding the cash flow and liquidity needs of the Parent can be found in the Liquidity and Capital Resources section of Management’s Discussion and Analysis of Financial Condition and Results
of Operations.
Property and Casualty Operations
American Southern comprises the Company’s property and casualty operations and its primary product lines are as follows:
Commercial Automobile Insurance policies provide bodily injury and/or property damage liability coverage, uninsured motorist
coverage and physical damage coverage for commercial accounts.
General Liability Insurance policies cover bodily injury and/or property damage liability for both premises and completed
operations exposures for general classes of business.
Surety Bonds are contracts under which one party, the insurance company issuing the surety bond, guarantees to a third party
that the primary party will fulfill an obligation in accordance with a contractual agreement. This
obligation may involve meeting a contractual commitment, paying a debt or performing certain duties.
American Southern provides tailored commercial automobile insurance coverage, on a multi-year contract basis, to state governments, local municipalities and other large motor
pools and fleets (“block accounts”) that can be
specifically rated and underwritten. The size of the block accounts insured by American Southern are generally such that individual class experience can be determined, which allows for customized policy
terms and rates. American
Southern is licensed to do business in 32 states and the District of Columbia. While the majority of American Southern’s premiums are derived from its automobile lines of business, American Southern also offers general
liability and
other lines such as inland marine coverage. Additionally, American Southern directly provides surety bond coverage for subdivision construction, school bus contracts, as well as performance and payment bonds.
The following table summarizes, for the periods indicated, the allocation of American Southern’s net earned premiums from each of its principal product lines:
Year Ended December 31,
2024
2023
(In thousands)
Automobile liability
$
39,788 $
38,821
Automobile physical damage
13,464
15,046
General liability
5,990
5,758
Surety
5,809
6,303
Other lines
2,638
2,515
Total
$
67,689 $
68,443
Life and Health Operations
Bankers Fidelity comprises the life and health operations of the Company and offers a variety of life and supplemental health products. Products offered by Bankers Fidelity
include ordinary life insurance, Medicare
supplement and other accident and health insurance products.
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Table of Contents
Life Insurance products include non-participating, individual and group whole life insurance policies with a variety of riders
and options. Policy premiums depend on a number of factors, including but not limited to issue age,
level of coverage and any selected riders or options.
Medicare Supplement Insurance includes 8 of the 10 standardized Medicare supplement plans that were developed in response to
the requirements of the Omnibus Budget Reconciliation Act of 1990 (“OBRA 1990”). These
policies provide insurance coverage for certain expenses not covered by the Medicare program, including but not limited to copayments and deductibles.
Other Accident and Health Insurance coverages include several individual and group policies providing for the payment of
benefits that help defray the health care and other costs associated with the treatment of cancer and
other critical illnesses. In addition, Bankers Fidelity offers policies that reimburse the costs associated with short-term nursing facility care,
policies that provide monthly benefits in the event of a covered disability, and policies that
provide cash benefits in the event of a covered accident or a covered hospital stay.
Health insurance products, primarily Medicare supplement insurance, accounted for 82% of Bankers Fidelity’s net earned premiums in 2024 while life insurance, including both
whole and term life insurance policies,
accounted for the balance. In terms of the number of policies written in 2024, 69% were health insurance policies and 31% were life insurance policies.
The following table summarizes, for the periods indicated, the allocation of Bankers Fidelity’s net earned premiums from each of its principal product lines:
Year Ended December 31,
2024
2023
(In thousands)
Group life
$
14,700 $
12,431
Individual life
5,594
6,153
Total life
20,294
18,584
Medicare supplement
71,867
77,424
Group accident and health
11,390
7,583
Other individual health
7,491
6,791
Total health
90,748
91,798
Total
$
111,042 $
110,382
Marketing
Property and Casualty Operations
A portion of American Southern’s business is marketed through a small number of specialized, experienced independent agents. American Southern’s agent selection process is
actively managed by internal marketing
personnel with oversight from management. Senior management carefully reviews all new programs prior to acceptance. Most of American Southern’s agents are paid an up-front commission with the potential for
additional
commissions by participating in a profit sharing arrangement that is directly linked to the profitability of the underlying business. American Southern also solicits business from governmental entities. As an experienced writer of
insurance policies for certain governmental programs, the company actively pursues this market on a direct basis. Much of this business is priced by means of competitive bid situations. As a result, there can be no assurance with
respect to the
ultimate profitability or ability of the Company to obtain or retain such business at the time of a specific contract renewal.
Life and Health Operations
Bankers Fidelity acquires its clientele through three distribution channels spread across 46 different states and two business divisions, all of which utilize commissioned,
independent agents. The three distribution channels
include traditional independent agents, brokers typically interested in a specific product of Bankers Fidelity and brokers who focus on sales within the group/employer benefits division, Atlantic
American Employee Benefits, all of
which are responsible for their own marketing and sales activities. Contracting as independent agents enables Bankers Fidelity to effectively expand or contract its sales force without incurring significant expense.
Bankers Fidelity had approximately 6,243 licensed agents contracted in both the individual and group divisions as of December 31, 2024. During 2024, approximately 1,429 of
these licensed agents wrote policies on behalf of
Bankers Fidelity.
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Table of Contents
Bankers Fidelity’s marketing and distribution strategy revolves around five pillars: Diversification, Differentiation, Quality, Retention and Profitability.
Diversification. Through unique product offerings such as the Vantage Flex Plus®, a hospital indemnity plan, and Vantage Recovery®,
short-term care product and a group whole life product featuring a chronic illness rider,
the Company is able to offer its distributors an array of products to sell that stand out from the competition. As the Company continues to expand its
geographical footprint with agents and products, one of its main objectives is to have
a healthy mix of all of its product lines nationwide.
Differentiation. Bankers Fidelity prides itself on the quality of customer service it offers to policyholders and agents. A dedicated
agent support team is available to the field to support them on administration, underwriting,
sales training, product questions and a plethora of other services which differentiates the Company from other carriers. Additionally, a customer loyalty
team is available solely to serve insureds for any of their insurance needs. Bankers
Fidelity prides itself on being agile, which we believe differentiates us from larger carriers and helps the Company to quickly execute senior management’s
initiatives.
Quality. Bankers Fidelity is focused on being a niche carrier that delivers superior service, quality products and innovative
solutions. Sophisticated technology and reporting allows the home office teams to work with the sales
force to deliver a tailored experience and phenomenal customer service.
Retention. Through seasonal campaigns and customer outreach, the Company is focused on client retention and servicing its policyholders
through all stages in their lives. By providing its agents with an innovative product
portfolio, the Company further promotes client retention by empowering its agents to continually meet the needs of our policyholders.
Profitability. In an effort to be sustainable in the marketplace as a long-term partner, senior management is focused on
diversification, differentiation, quality and retention to achieve profitability.
Underwriting
Property and Casualty Operations
American Southern specializes in underwriting various risks that are sufficiently large enough to establish separate class experience, 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 commercial underwriters in identifying and correcting potential loss
exposures and to physically inspect new accounts.
The underwriting results from each insured are reviewed on an individual basis periodically. If results are below expectations, management takes corrective action, which may include adjusting rates,
revising underwriting standards,
adjusting commissions paid to agents, and/or altering or declining to renew accounts at expiration.
Life and Health Operations
Bankers Fidelity issues a variety of products that span from the group markets to the individual markets for both life and health insurance. Products offered by Bankers
Fidelity include life insurance, typically with small face
amounts, Medicare supplement and other accident and health insurance. Bankers Fidelity also provides an array of group products such as accident, cancer, critical illness, hospital indemnity
and life insurance that is offered to
employers who are looking to provide coverage for their employees and have the related premiums deducted through payroll deductions.
The individual products are underwritten on a non-medical basis using a simplified issue approach by which an application containing a variety of health related questions is
submitted. Applications for insurance are reviewed
to determine the face amount, age, medical history and any other necessary information. Bankers Fidelity utilizes information obtained directly from the insured, the medical claims data, prescription
utilization reports as well as
telephone interviews to determine whether an applicant meets the Company’s underwriting criteria. Bankers Fidelity may also utilize medical records and investigative services to supplement and substantiate information,
as necessary.
The group products are underwritten and assessed at the group level for financial risk. The underwriting will utilize several factors to determine this risk such as the industry, demographics,
enrollment strategies, employee
access, locations of offices and any regulatory or legislative changes that could impact the decisions. The spread of risk is also reviewed which analyzes the content of the employees within the group which includes
the spread of
gender, ages, salaries and occupations. This information is used to quote an appropriate benefits package, pricing, waiting periods and rates for the group entity.
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Table of Contents
Policyholder and Claims Services
The Company believes that prompt, efficient policyholder and claims services are essential to its continued success in marketing its insurance products (see “Competition”).
Additionally, the Company believes that its insureds
are particularly sensitive to claims processing time and to the accessibility of qualified staff to answer inquiries. Accordingly, the Company’s policyholder and claims services seek to offer
expeditious disposition of service requests by
providing toll-free access for all customers, 24-hour claim reporting services, and direct computer links with some of its largest accounts. The Company also utilizes an automatic call distribution
system designed 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 service representative
training modules.
Property and Casualty Operations
American Southern controls its claims costs by utilizing an in-house staff of claims supervisors to investigate, verify, negotiate and settle claims. Upon notification of an
occurrence purportedly giving rise to a claim, a claim
file is established. The claims department then conducts a preliminary investigation, determines whether an insurable event has occurred and, if so, updates the file for the findings and any
required reserve adjustments. Independent
adjusters and appraisers are frequently utilized to service claims which require on-site inspections.
Life and Health Operations
The majority of life and health claims are filed electronically while insureds also have the ability to download claims forms and file directly. Insureds may also obtain claim
forms by calling the customer service group or
through Bankers Fidelity’s website. All of these claims are entered into the system immediately upon receipt and put into a pending status until the claim can be fully processed. To shorten claim
processing time, a letter detailing all
supporting documents that are required to complete a claim for a particular policy is sent to the customer along with the correct claim form. Properly documented claims are generally paid within five business
days of receipt. With
regard to Medicare supplement policies, the claim is either directly billed to Bankers Fidelity by the provider or sent electronically through a Medicare clearing house.
Reserves
Reserves are set by line of business within each of the subsidiaries. At December 31, 2024, approximately 72% of the losses and claims reserves related to property and
casualty and approximately 28% related to life and
health. The Company’s property and casualty operations incur losses which may take extended periods of time to evaluate and settle. Issues with respect to legal liability, actual loss quantification,
legal discovery and ultimate
subrogation, among other factors, may influence the initial and subsequent estimates of loss. In the property and casualty operations, the Company’s general practice is to reserve at the higher end of the determined
reasonable range of
loss if no other value within the range is determined to be more probable. The Company’s life and health operations generally incur losses which are more readily quantified. Medical claims received are recorded in case reserves
based
on contractual terms using the submitted billings as a basis for determination. Life claims are recorded based on contract value at the time of notification to the Company; offset by policy reserves related to such contracts previously
established. Individual case reserves are established by a claims processor on each individual claim and are periodically reviewed and adjusted as new information becomes known during the course of handling a claim. Regular internal
periodic reviews
are also performed by management to ensure that loss reserves are established and revised timely relative to the receipt of new or additional information. Lines of business for which loss data (e.g., paid losses and case
reserves) emerge over a long
period of time are referred to as long-tail lines of business. Lines of business for which loss data emerge more quickly are referred to as short-tail lines of business. The Company’s long-tail line of business
generally consists of its general
liability coverage while the short-tail lines of business 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 claims data. These reviews incorporate a variety of
actuarial methods (discussed in Critical Accounting
Policies) and judgments and involve a disciplined analysis. For most lines of business, certain actuarial methods and specific assumptions are deemed more appropriate based on the current
circumstances affecting that line of business.
These selections incorporate input from claims personnel and operating management on reported loss cost trends and other factors that could affect the reserve estimates.
The Company establishes reserves for claims based upon: (a) management’s estimate of ultimate liability and claims adjusters’ evaluations of 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 losses and loss adjustment expense (“LAE”). The estimated liability is periodically reviewed and updated,
and changes to the estimated liability
are recorded in the statement of operations in the period in which such changes become known.
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Table of Contents
For long-tail lines of business, the emergence of paid losses and case reserves is less credible in the early periods, and accordingly may not be indicative of ultimate
losses. For these lines, methods which incorporate a
development pattern assumption are given less weight in calculating IBNR for the early periods of loss emergence because such a low percentage of ultimate losses are reported in that time frame.
Accordingly, for any given accident
year, the rate at which losses on long-tail lines of business emerge in the early periods is generally not as reliable an indication of ultimate losses as it would be for shorter-tail lines of business. The
estimation of reserves for these lines
of business in the early periods of loss emergence is therefore largely influenced by statistical analyses and application of prior accident years’ loss ratios, after considering changes to earned pricing, loss
costs, mix of business, ceded
reinsurance and other factors that are expected to affect the estimated ultimate losses. For later periods of loss emergence, methods which incorporate a development pattern assumption are given more weight in estimating
ultimate
losses. For short-tail lines of business, the emergence of paid loss and case reserves is more credible in the early periods and is more likely to be indicative of ultimate losses. The method used to set reserves for these lines of business
is
based upon utilization of a historical development pattern for reported losses. IBNR reserves for the current year are set as the difference between the estimated fully developed ultimate losses for each year, less the established, related
case
reserves and cumulative related payments. IBNR reserves for prior accident years are similarly determined, again relying on an indicated, historical development pattern for reported losses.
Based on the results of regular reserve estimate reviews, the Company determines the appropriate reserve adjustment, if any, to record in each period. If necessary, recorded
reserve estimates are changed after consideration of
numerous factors, including, but not limited to, the magnitude of the difference between the actuarial indication and the recorded reserves, improvement or deterioration of actuarial indication in
the period, the maturity of the accident
year, trends observed over the recent past and the level of volatility within a particular line of business. In general, changes are made more quickly to recognize changes in estimates to ultimate losses in
mature accident years and less
volatile lines of business.
The Company’s policy is to record reserves for losses and claims in amounts that represent actuarial best estimates of ultimate values. Actuarial best estimates do not
necessarily represent the midpoint value determined using
the various actuarial methods; however, such estimates will fall between the estimated low and high end reserve values. The range of estimates developed in connection with the December 31,
2024 actuarial review indicated that
reserves could be as much as 5.2% lower or as much as 25.0% 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 be made in future periods. Any such revisions could be material, and may materially adversely affect the Company’s financial condition and results of operations in any
future period.
Property and Casualty Operations
American Southern maintains loss reserves representing estimates of amounts necessary for payment of losses and LAE, which are not discounted. IBNR reserves are also
maintained for future development. These loss
reserves are estimates, based on known facts and circumstances at a given date, of amounts the Company expects to pay on incurred claims. All balances are reviewed periodically by the Company’s
independent consulting actuary.
Reserves for LAE are intended to cover the ultimate costs of settling claims, including investigation and defense of any lawsuits resulting from such claims. Loss reserves for reported claims are based on a
case-by-case evaluation of the
type of claim involved, the circumstances surrounding the claim, and the policy provisions relating to the type of loss along with anticipated future development. The LAE for claims reported and claims not reported is
based on
historical statistical data and anticipated future development. Inflation and other factors which may affect claim payments are implicitly reflected in the reserving process through analysis and consideration of cost trends and reviews of
historical reserve results.
Estimating case reserves and ultimate losses involves various considerations which differ according to the line of business. In addition, changes in legislative and regulatory
environments may impact loss estimates. General
liability claims may have a long pattern of loss emergence. Given the broad nature of potential general liability coverages, investigative time periods may be extended and questions of coverage may
exist. Such uncertainties create
greater imprecision in estimating required levels of loss reserves. The property and automobile lines of business generally have less variable reserve estimates than other lines. This is largely due to the coverages
having relatively
shorter periods of loss emergence. Estimates, however, can still vary due to a number of factors, including interpretations of frequency and severity trends. Severity trends can be impacted by changes in internal claim handling and
reserving practices in addition to changes in the external environment. These changes in claim practices increase the uncertainty in the interpretation of case reserve data, which increases the uncertainty in recorded reserve levels.
Life and Health Operations
Bankers Fidelity establishes reserves for future policy benefits to meet projected obligations under policies that are in force as of the statement date. These reserves are
calculated to satisfy policy and contract obligations as
they are projected to come due. Reserves for insurance policies are calculated using assumptions for interest rates, mortality rates, disablement rates, benefit utilization rates, and lapse
rates. These assumptions vary by the product type,
the year the policy was issued, and policyholder demographic information. Changes in assumptions may be made from one issue year to another to reflect actual experience. Actual future experience
that deviates significantly from the
assumptions, or actual results that differ significantly from our estimates, could have a materially adverse effect on our liquidity, results of operations, or financial condition.
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Table of Contents
Liabilities for future benefits on life insurance policies and accident and health insurance policies are based on assumed investment yields, mortality rates, disablement
rates, benefit utilization rates, and lapse rates after giving
effect to possible risks of unexpected adverse claim experience. The mortality, morbidity, and lapse assumptions are based upon the Company’s experience and incorporate a margin for
adverse experience development. These
assumptions are modified as necessary to reflect anticipated trends and are generally established at contract inception.
See Note 7 of Notes to Consolidated Financial Statements for more information on insurance reserves and policyholder funds.
Reinsurance
The Company’s insurance subsidiaries from time-to-time purchase reinsurance from unaffiliated insurers and reinsurers to reduce their potential liability on individual risks
and to protect against catastrophic losses. In a
reinsurance transaction, an insurance company transfers, or “cedes,” a portion or all of its exposure on insurance policies to a reinsurer. The reinsurer assumes the exposure in return for a portion of
the premiums. The ceding of
insurance does not legally discharge the insurer from primary liability for the full amount of the policies written by it, and the ceding company will incur a loss if the reinsurer fails to meet its obligations under the
reinsurance
agreement.
Property and Casualty Operations
American 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: Inland marine and commercial
automobile physical damage - $225,000 excess of $125,000 retention; and automobile liability and general liability - excess coverage of $2.0 million less retentions that may vary from $150,000 to
$500,000 depending on the account.
American Southern maintains a property catastrophe treaty with a $5.5 million limit excess of $500,000 retention. American Southern also issues individual surety bonds with face amounts generally up to $1.5 million,
and limited to
$5.0 million in aggregate per account, that are not reinsured.
Life and Health Operations
Bankers Fidelity has entered into reinsurance contracts ceding the excess of its life retention. Maximum retention by Bankers Fidelity on any one individual life insurance
policyholder is $200,000. As of December 31, 2024,
$7.2 million of the $975.8 million of life insurance in force at Bankers Fidelity was reinsured under a combination of coinsurance and yearly renewable term agreements. Certain prior year reinsurance
agreements also remain in force
although they no longer provide reinsurance for new business.
Bankers Fidelity has also entered into a reinsurance contract ceding excess new Medicare Supplement business to General Re Life Corporation. Ceding thresholds are set
annually. During 2024, the liability of the reinsurer was
50% of all new Medicare Supplement business issued by the Company on amounts up to a maximum retention of $15.0 million of annualized premium. Accordingly, $5.1 million of the Company’s $10.1
million of new annualized
Medicare Supplement premium was ceded.
Competition
Competition for insurance products is based on many factors including premiums charged, terms and conditions of coverage, customer service, financial ratings assigned by
independent rating agencies, claims handling,
consumer recognition and reputation, perceived financial strength and the experience of the organization in the line of business being written.
Property and Casualty Operations
The businesses in which American Southern engages are highly competitive. The principal areas of competition are pricing and service. Many competing property and casualty
companies have been in business longer than
American Southern, offer more diversified lines of insurance and have substantially greater financial resources. Management believes, however, that the policies it sells are competitive with those providing
similar benefits offered by
other insurers doing business in the states in which American Southern operates. American Southern strives to develop strong relationships with its agents and, consequently, believes it is well positioned for new
opportunities and
programs with those agents.
Life and Health Operations
The life and health insurance business remains highly competitive and includes a large number of insurance companies, many of which are new entrants to the business of
providing Medicare supplement and other accident and
health insurance products. Bankers Fidelity has established itself as a trusted carrier of choice for its customers providing quality and sustainability for over 65 years.
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In order to compete, Bankers Fidelity actively seeks opportunities in niche markets, developing long-term relationships with a select number of independent marketing
organizations. Additionally, Bankers Fidelity actively
promotes Atlantic American Employee Benefits, the group benefits division, as well as selective association partnerships. It competes with other insurers to attract and retain the allegiance of
its independent agents through commission
and sales incentive arrangements, accessibility and marketing assistance, lead programs, reputation and market expertise. Bankers Fidelity successfully competes in its chosen markets by establishing
relationships with independent
agents and providing proprietary marketing initiatives as well as providing outstanding service to policyholders.
Ratings
Ratings are important measures within the insurance industry, and higher ratings are expected to have a favorable impact on the ability of a company to compete in the
marketplace. Ratings of insurance companies are not
designed for investors and do not constitute recommendations to buy, sell, or hold any security.
Each year A.M. Best Company, Inc. (“A.M. Best”) publishes Best’s Insurance Reports, which includes assessments and ratings of all insurance companies. A.M. Best’s financial
strength ratings, which may be revised or
revoked at any time, follow a graduated scale of rating categories and notches ranging from A++ (Superior) to F (in liquidation). A.M. Best’s ratings are based on a detailed analysis of the statutory
financial condition and operations of
an insurance company compared to the industry in general.
American Southern. American Southern Insurance Company and its wholly-owned subsidiary, American Safety Insurance Company, 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 subsidiaries, Bankers Fidelity Assurance Company and
Atlantic Capital Life Assurance Company, are each, as of the date of this report, rated
“A-” (Excellent) by A.M. Best.
Regulation
Like all domestic insurance companies, the Company’s insurance subsidiaries are subject to regulation and supervision in the jurisdictions in which they do business. Statutes
typically delegate regulatory, supervisory, and
administrative powers to state insurance commissioners. The method of such regulation varies, but regulation relates generally to the licensing of insurers and their agents, the nature of and
limitations on investments, approval of policy
forms, reserve requirements, the standards of solvency to be met and maintained, deposits of securities for the benefit of policyholders, and periodic examinations of insurers and trade practices, among
other things. The Company’s
products generally are subject to rate regulation by state insurance commissions, which require that certain minimum loss ratios be maintained. Certain states also have insurance holding company laws which require
registration and
periodic reporting by insurance companies controlled by other corporations licensed to transact business within their respective jurisdictions. The Company’s insurance subsidiaries are subject to such legislation and are registered
as
controlled insurers in those jurisdictions in which such registration is required. Such laws vary from state to state, but typically require periodic disclosure concerning the corporation which controls the registered insurers and all
subsidiaries
of such corporations, 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 company system. The Company believes it is in compliance with all such requirements.
Most states require that rate schedules and other information be filed with the state’s insurance regulatory authority, either directly or through a ratings organization with
which the insurer is affiliated. The regulatory authority
may disapprove a rate filing if it determines that the rates are inadequate, excessive, or discriminatory. The Company has historically experienced no significant regulatory resistance to its
applications for rate adjustments; however, the
Company cannot provide any assurance that it will not receive 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 or of all policyholders. As of December 31,
2024, the Company was in compliance with all such
requirements, and securities with an amortized cost of $15.1 million were on deposit either directly with various state authorities or with third parties pursuant to various custodial agreements on
behalf of the Company’s insurance
subsidiaries.
Virtually all of the states in which the Company’s insurance subsidiaries are licensed to transact business require participation in their respective guaranty funds designed
to cover claims against insolvent insurers. Insurers
authorized to transact business in these jurisdictions are generally subject to assessments of up to 4% of annual direct premiums written in that jurisdiction to pay such claims, if any. The
likelihood and amount of any future assessments
cannot be estimated until an insolvency has occurred.
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NAIC Ratios
The National Association of Insurance Commissioners (the “NAIC”) was established to, among other things, provide guidelines to assess the financial strength of insurance
companies for state regulatory purposes. The NAIC
conducts annual reviews of the financial data of insurance companies primarily through the application of financial ratios prepared on a statutory basis. Annual statements are required to be submitted
to state insurance departments to
assist them in monitoring insurance companies in their state and to allow such states to determine a desirable range for each such ratio with which companies should comply.
The NAIC developed the Insurance Regulatory Information System (“IRIS”) to help state regulators identify companies that may require regulatory attention. Financial examiners
review annual financial statements and the
results of key financial ratios based on year-end data with the goal of identifying insurers that appear to require immediate regulatory attention. Each ratio has an established “usual range” of results. A
ratio result falling outside the
usual range, however, is not necessarily considered adverse; rather, unusual values are used as part of the regulatory early monitoring system. Furthermore, in some years, it may not be unusual for financially sound
companies to have
several ratios with results outside the usual ranges. Generally, an insurance company may become subject to regulatory scrutiny or, depending on the company’s financial condition, regulatory action if certain of its key IRIS ratios
fall
outside the usual ranges and the insurer’s financial condition is trending downward.
For the year ended December 31, 2024, American Southern Insurance Company had one ratio that was outside the usual range, the two-year reserve development to policyholders’
surplus, which was primarily due to adverse
reserve developments on prior year claims in the commercial automobile liability line of business.
Bankers Fidelity Assurance Company (“BFAC”) had three ratios outside the normal range, primarily the result of a net loss for the year, certain surplus ratios and non-admitted
assets to admitted assets. The net loss is
primarily related to federal income taxes incurred which resulted in a corresponding decrease in surplus levels for the year as well as a deferred tax asset which is non-admitted. The surplus relief ratio
for BFAC triggered because the
ratio of commission & expense allowances to capital exceeds 100%. BFAC writes only Medicare supplement insurance and cedes 100% of its written business to its parent, therefore the change in product mix ratio will
always produce
no result.
Bankers Fidelity Life Insurance Company had two ratios outside the normal range. Both the first and second ratios were unusual because capital and surplus fell greater than
10% from 2023 to 2024. The decrease in capital
was due primarily to the extraordinary dividend paid to its parent. Other contributing factors are a lower net income in 2024 versus 2023 and an increase in unrealized loss on our invested bond
portfolio.
Atlantic Capital Life Assurance Company (“ACLAC”) had one ratio outside the normal range, ratio 8 Surplus Relief. The surplus relief ratio for ACLAC triggered because the
ratio of commission & expense allowances to
capital exceeds 100%. ACLAC writes only Medicare supplement insurance and cedes 100% of its written business to its parent, therefore the change in product mix ratio will always produce no result.
American Safety Insurance Company had no IRIS ratios outside the usual ranges. Management does not anticipate regulatory action as a result of the 2024 IRIS ratio results for
the insurance subsidiaries.
Risk-Based Capital
Risk-based capital (“RBC”) is a metric used by ratings agencies and regulators as an early warning tool to identify weakly capitalized companies for the purpose of initiating
further regulatory action. The RBC calculation
determines the amount of adjusted capital needed by a company to avoid regulatory action. “Authorized Control Level Risk-Based Capital” (“ACL”) is calculated, and if a company’s adjusted capital is 200%
or lower than ACL, it is
subject to regulatory action. At December 31, 2024, the Company’s insurance subsidiaries’ RBC levels exceeded the required regulatory levels.
Investments
Investment income represents a significant portion of the Company’s operating and total income. Insurance company investments are subject to state insurance laws and
regulations which limit the concentration and types of
investments. The following table provides information on the Company’s investments as of the dates indicated.
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December 31,
2024
2023
Amount
Percent
Amount
Percent
(Dollars in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. Government agencies and authorities
$
22,251
9.7% $
22,849
9.6%
Loan backed and structured securities
22,290
9.7
27,210
11.5
States, municipalities and political subdivisions
7,623
3.3
8,106
3.4
All other corporate bonds
160,261
69.6
159,849
67.4
Redeemable preferred stock
187
0.1
205
0.1
Total fixed maturities(1)
212,612
92.4
218,219
92.0
Equity securities(2)
7,900
3.4
9,413
4.0
Other invested assets(3)
6,616
3.0
6,381
2.8
Policy loans(4)
1,722
0.7
1,778
0.7
Real estate
38
0.0
38
0.0
Investments in unconsolidated trusts
1,238
0.5
1,238
0.5
Total investments
$
230,126
100.0% $
237,067
100.0%
(1) Fixed maturities are carried on the balance sheet at estimated fair value. Certain fixed maturities do not have publicly quoted prices, and are carried at estimated fair value as determined by management.
Total amortized cost of
fixed maturities was $236.3 million as of December 31, 2024 and $238.6 million as of December 31, 2023.
(2) Equity securities are carried on the balance sheet at estimated fair value. Total cost of equity securities was $4.9 million as of December 31, 2024 and 2023.
(3) Other invested assets are accounted for using the equity method. Total cost of other invested assets was $7.9 million as of December 31, 2024 and $7.0 million as of December 31, 2023.
(4) Policy loans are valued at unpaid principal balances.
Estimated fair values are determined as discussed in Note 1 of Notes to Consolidated Financial Statements.
Results of the Company’s investment portfolio for periods shown were as follows:
Year Ended December 31,
2024
2023
(Dollars in thousands)
Average investments(1)
$
280,420 $
275,995
Net investment income
9,791
10,058
Average yield on investments
3.5%
3.6%
Realized investment gains, net
1,210
70
(1) Calculated as the average of cash and investment balances (at amortized cost) at the beginning of the year and at the end of each of the succeeding four quarters.
The Company engages a global investment management firm serving the insurance industry to manage the Company’s investment portfolios. Management’s recent investment strategy
has been a continued focus on quality and
diversification, while improving the overall risk versus return profile of the portfolio.
Human Capital
The Company and its subsidiaries employed 156 people at December 31, 2024. Of the 156 people, 153 were full-time. We believe that our ability to attract and retain highly
motivated and skilled employees with diverse
backgrounds and experiences is critical to our continued success. We also believe the structure of our compensation program is aligned with the interests of our shareholders and serves to reward the
performance of our employees. We
monitor and evaluate the effectiveness of our human capital management efforts by seeking formal and informal feedback from our employees, including periodic surveys to obtain opinions on key topics.
We sponsor health and wellness programs in an effort to promote a healthier employee base. We also offer competitive health and wellbeing benefits to include health, dental,
vision, health and flexible savings accounts,
disability, life, supplemental and telemedicine. An Employee Assistance Program (“EAP”) is provided to all full-time employees and their family members at no cost. The EAP offers confidential telephonic
counseling, referral
services, legal and financial services and additional tools that offer support and solutions. Additionally, we offer a 401(k) retirement savings plan with an employer match as well as an annual Safe Harbor Non-Elective
contribution.
We strive to provide a work environment that encourages work/life balance. Options depend on job responsibilities and may include flexible work schedules, paid time off, paid holidays and
part-time employment.
We offer tuition reimbursement along with budgeted professional development opportunities in order to foster professional growth and to increase skillsets.
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Financial Information by Industry Segment
The Parent’s primary insurance subsidiaries operate with relative autonomy with the oversight of the Chief Operating Decision Maker (“CODM”) and each company is evaluated
based on its individual performance. Our
CODM is the Company’s Chairman, President and Chief Executive Officer. American Southern operates in the property and casualty insurance market, while Bankers Fidelity operates in the life and health insurance
market. Each
segment derives revenue from the collection of premiums, as well as from investment income. Substantially all revenue other than that in the corporate and other segment is from external sources. For more information on segments, see
Note
17 of Notes to Consolidated Financial Statements.
Available Information
The Company files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports and other information with the
Securities and Exchange Commission (the “SEC”).
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, including the Company.
In addition, as soon as
reasonably practicable after such materials are filed with or furnished to the SEC by the Company, the Company makes copies available to the public, free of charge, on or through its web site at www.atlam.com. Neither the
Company’s
website, nor the information appearing on the website, is included, incorporated into, or a part of, this report.
Executive Officers of the Registrant
The table and information below set forth, for each current executive officer of the Company, his name, age (as of March 1, 2025), positions with the Company and business
experience for the past five years, as well as any
prior service to the Company.
Name
Age
Positions with the Company
Director or Officer Since
Hilton H. Howell, Jr.
62
Chairman of the Board, President & CEO
1992
J. Ross Franklin
47
Vice President, CFO and Corporate Secretary
2017
Officers 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 as Executive Vice
President of the Company from October 1992 to May 1995. He has been a Director of
the Company since October 1992 and effective February 24, 2009, began serving as Chairman of the board of directors. He is also Executive Chairman and Chief Executive
Officer of Gray Media, Inc.
Mr. Franklin has been Vice President, Chief Financial Officer and Corporate Secretary of the Company since November 2017, and prior
thereto served as Interim Chief Financial Officer from August 2017 to November 2017.
Since 2000 he has held various roles of increasing responsibility with Atlantic American and its subsidiaries, previously serving as Vice President, Accounting and
Treasurer of Bankers Fidelity since 2009.
Item 1A. Risk Factors
As 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 are not providing the information required by this Item.
Item 1B.
Unresolved Staff Comments
Not applicable.
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Item 1C.
Cybersecurity
Risk Management and Strategy
The Company’s operations rely on the secure processing, storage, and transmission of confidential and personal identifiable
information within various technology platforms. Cybersecurity is a high priority and the Company
has made significant investments in its processes and programs designed to prevent, detect, and respond to and recover from cybersecurity threats. We also have processes in place to help ensure compliance with our information
security program with respect to our use of third-party service providers.
Such processes and programs are a part of the Company’s overall risk management and compliance programs. The Company continues to enhance
its intrusion
protection and detection technology, infrastructure and application firewalls, and network monitoring. The Company has also installed advanced endpoint threat protection technology and implemented a mandatory security awareness
training program for all employees. This training is reinforced through periodic simulated phishing tests to assess our employees’ responses to suspicious emails.
The Company uses a sophisticated backup and recovery methodology that supports the replication of data across multiple secure data
centers. It also includes a comprehensive disaster recovery plan that is continually tested
and designed to help enable us to resume business in the event of a disaster or cybersecurity incident. Through recurring internal and external audits,
controls are regularly reviewed, tested, and enhanced to promote best practices. The
Company has augmented our information security program through a partnership with a leading global cybersecurity service provider to review and implement additional services such as Security Event Monitoring, Advanced Endpoint
Threat Detection, Incident Management Retainer Services, and
Strategic Advisory Services focused on Chief Information Security Officer (CISO) duties such as counter-threat intelligence.
Our information security program also includes a cybersecurity Incident Response Plan (“IRP”) that is designed to help protect the integrity, availability and confidentiality of information, prevent loss of service, and comply
with legal requirements. The IRP specifies the process for identifying and reporting an incident, initial investigation, risk classification, documentation and communication of incidents, responder procedures, incident reporting, and
ongoing training. The IRP also includes processes for determining the materiality of the incident, including the assessment of relevant qualitative and quantitative factors. In the event we identify a potential cybersecurity, privacy or
other data security issue, we have defined procedures for responding to such issues, including procedures that address when and how to engage with Company management, our board of directors, third-party advisors and other
stakeholders.
The Company also maintains dedicated cyber liability insurance for breach event costs including: post breach event remediation costs;
cybercrime coverage (including financial fraud, telecommunications fraud, and phishing
attacks); and coverage for system failure, bricking loss, and physical damage. The policy also provides coverage for lost revenue due to a damaged reputation
from a cyber breach.
We do not believe any risks from cybersecurity threats have materially affected or are reasonably likely to materially affect the Company or our business strategy, results of operations, or financial condition.
Governance
Our board of directors recognizes the important role of information security and mitigating cybersecurity and other data security
threats. Although our full board of directors maintains ultimate responsibility with respect to risk
management oversight, our board has delegated oversight of the Company’s information
security program and matters of cybersecurity to the Audit Committee of the board of directors. The Company’s senior officers, including its
Chief Information Officer, are responsible for the operation of the information security program and regularly communicate with the Audit Committee on the state of the program, risks faced by the Company and the Company’s risk
mitigation efforts
related thereto.
In addition, the Company’s information technology environment is managed by an experienced team of professionals who follow an
extensive set of policies and procedures related to data security. Our data security employees
have backgrounds in cybersecurity and data protection, including prior relevant experience in the industry and industry standard certifications.
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Item 2.
Properties
Leased Properties. The Company leases space for its principal offices and for some of its insurance operations in an office building
located in Atlanta, Georgia under a lease which continues until either party provides written
notice of cancellation at least twelve months in advance of the actual termination date (“Lease Agreement”). The lease, which commenced on November 1,
2007, provides for rent adjustments on every fifth anniversary of the
commencement date. Under the current terms of the lease, the Company occupies approximately 49,586 square feet of office space. The owner of the building, 4370 Peachtree LLC, is
controlled by an affiliate of the Company.
On December 26, 2024, the Company, and its subsidiary, Bankers Fidelity Life Insurance Company, entered into a Second Amendment to Lease Agreement (the “Second Amendment”)
with 4370 Peachtree LLC. The Second
Amendment amends the Lease Agreement, dated November 1, 2007, by and among the same parties (as previously amended, the “Lease Agreement”), pursuant to which the Company leases space for its principal offices and
for some
of its insurance operations in an office building located in Atlanta, Georgia. Pursuant to the Second Amendment, the Lease Agreement was modified to increase the base rent payable by the Company, beginning January 1, 2025. The
Second
Amendment also provides for rent adjustment on January 1, 2027, January 1, 2030 and each five years thereafter.
American Southern leases space for its office in a building located in Atlanta, Georgia. The lease term expires September 30, 2026. 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 Proceedings
From time to time, the Company and its subsidiaries are, and expect to continue to be, involved in various claims and lawsuits arising in the ordinary course of business,
both as a liability insurer defending third-party claims
brought against insureds and as an insurer defending coverage claims brought against it, and in various regulatory proceedings in the states in which we do business. The Company accounts for
such exposures through the establishment
of loss and loss adjustment expense reserves and accrued expenses. We currently do not expect that the ultimate liability, if any, with respect to such ordinary-course claims litigation or regulatory
proceedings, after consideration of
provisions made for probable losses and costs of defense, will be material to the Company’s consolidated financial condition, although the results of such matters could be material to the consolidated results of
operations for any given
period.
Item 4.
Mine Safety Disclosures
Not applicable.
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PART II
Item 5.
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
The Company’s common stock is listed on the Nasdaq Global Market (Symbol: AAME). As of March 12, 2025, there were 1,214 shareholders of record.
On March 25, 2025, the Company announced that the board of directors declared an annual cash dividend of $0.02 per share of common stock that is payable to shareholders of
record at the close of business on April 9, 2025.
On April 1, 2024, the Company announced that the board of directors declared an annual cash dividend of $0.02 per share, which was paid on April 26, 2024 to
shareholders of record as of April 12, 2024.
The declaration and payment of any future dividends will be at the discretion of the Company’s board of directors and will depend upon the financial condition, capital
requirements, and earnings of the Company, as well as any
restrictions contained in any agreements by which the Company is bound and other factors as the board of directors may deem relevant. The Company’s primary recurring source of cash for the
payment of dividends is dividends from
its subsidiaries; although as of December 31, 2024, the Parent held unrestricted cash and investment balances of approximately $5.6 million. Under the insurance code of the state in which each insurance
subsidiary is domiciled,
dividend payments to the Parent by its insurance subsidiaries are subject to certain limitations, including prior notice to, or approval by, the state insurance commissioners if such dividends are in excess of specified
amounts. In 2024,
dividend payments to the Parent by the insurance subsidiaries in excess of $8.8 million would require prior approval.
Issuer Purchases of Equity Securities
On October 31, 2016, the board of directors of the Company approved a plan that allows for the repurchase of up to 750,000 shares of the Company's common stock (the
"Repurchase Plan") on the open market or in privately
negotiated transactions, as determined by an authorized officer of the Company. Any such repurchases can be made from time to time in accordance with applicable securities laws and other
requirements.
Other than pursuant to the Repurchase Plan, no purchases of common stock of the Company were made by or on behalf of the Company during the periods described below.
The table below sets forth information regarding repurchases by the Company of shares of its common stock on a monthly basis during the three month period ended December 31,
2024.
Period
Total
Number
of Shares
Purchased
Average
Price Paid
per Share
Total
Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Maximum
Number of Shares
that May Yet be
Purchased Under the
Plans or Programs
October 1 – October 31, 2024
— $
—
—
325,129
November 1 – November 30, 2024
—
—
—
325,129
December 1 – December 31, 2024
—
—
—
325,129
Total
— $
—
—
Stock Performance Graph
As a smaller reporting company, we have elected to comply with certain scaled disclosure reporting obligations, and therefore are not providing the information required by
this Item.
Item 6.
Reserved
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Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is management’s discussion and analysis of the financial condition and results of operations of Atlantic American Corporation (“Atlantic American” or the
“Parent”) and its subsidiaries (collectively with the
Parent, the “Company”) for the years ended December 31, 2024 and 2023. This discussion should be read in conjunction with the consolidated financial statements and notes thereto included
elsewhere herein. Operating results
achieved in any historical period are not necessarily indicative of results to be expected in any future period.
Atlantic American is an insurance holding company whose operations are conducted primarily through its insurance subsidiaries: American Southern Insurance Company and
American Safety Insurance Company (together
known as “American Southern”) in the property and casualty insurance industry, and Bankers Fidelity Life Insurance Company, Bankers Fidelity Assurance Company and Atlantic Capital Life Assurance Company
(together known as
“Bankers Fidelity”) in the life and health insurance industry. Each operating company is managed separately, offers different products and is evaluated on its individual performance.
Critical Accounting Policies
The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and, in
management’s belief, conform to general practices
within the insurance industry. The following is an explanation of the Company’s accounting policies and the resultant estimates considered most significant by management. These accounting policies
inherently require significant
judgment and assumptions and actual operating results could differ significantly from management’s estimates determined using these policies. Atlantic American does not expect that changes in the estimates determined
using these
policies will have a material effect on the Company’s financial condition or liquidity, although changes could have a material effect on its consolidated results of operations.
Cash and investments comprised 68% of the Company’s total assets at December 31, 2024. Substantially all of the Company’s
investments are in bonds and common and preferred stocks, the values of which are subject to
significant market fluctuations. The Company carries all fixed maturities, which includes bonds and redeemable preferred stocks, as available for sale, and
equity securities, which includes common and non-redeemable preferred stocks,
at their estimated fair values.
On January 1, 2023, the Company adopted accounting standards update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326) Measurement of Credit Losses on
Financial Instruments (“ASU 2016-13”), using a
modified retrospective approach. Under ASU 2016-13, for securities in an unrealized loss position, a credit loss is recognized in earnings within realized investment gains (losses) when it is
anticipated that the amortized cost will not be
recovered. When either: (i) the Company has the intent to sell the security; or (ii) it is more likely than not that the Company will be required to sell the security before recovery, the reduction of
amortized cost and the loss recognized in
earnings is the entire difference between the security’s amortized cost and estimated fair value. If neither of these conditions exists, the difference between the amortized cost of the security and the
present value of projected future cash
flows expected to be collected is recognized as a credit loss by establishing an ACL with a corresponding charge to earnings in realized investment gains (losses). However, the ACL is limited by the amount
that the fair value is less
than the amortized cost. This limitation is known as the “fair value floor.” If the estimated fair value is less than the present value of projected future cash flows expected to be collected, this portion of the decline
in value related to
other-than-credit factors (“noncredit loss”) is recorded in OCI.
The Company determines the fair values of certain financial instruments based on the fair value hierarchy established in Accounting Standards Codification (“ASC”) 820-10-20,
Fair Value Measurements and Disclosures
(“ASC 820-10-20”). The fair values of fixed maturities and equity securities are largely determined by nationally quoted market prices, when available, or independent
broker quotations. See Note 2 and Note 3 of Notes to Consolidated
Financial Statements with respect to assets and liabilities carried at fair value and information about the inputs used to value those financial instruments, by hierarchy level, in
accordance with ASC 820-10-20.
Future policy benefits comprised 34% of the Company’s total liabilities at December 31, 2024. These liabilities relate primarily to
life insurance products and are based upon assumed future investment yields, mortality rates,
and lapse rates after giving effect to possible risks of adverse deviation. The assumed mortality and lapse rates are based upon the Company’s experience
modified as necessary to reflect anticipated trends and are generally established
at contract inception. If actual results differ from the initial assumptions, the amount of the Company’s recorded liability could require adjustment.
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Unpaid loss and loss adjustment expenses comprised 32% of the Company’s total liabilities at December 31, 2024. This liability
includes estimates for: (1) unpaid losses on claims reported prior to December 31, 2024, (2)
future development on those reported claims, (3) unpaid ultimate losses on claims incurred prior to December 31, 2024 but not yet reported and (4) unpaid
loss adjustment expenses for reported and unreported claims incurred prior to
December 31, 2024. Quantification of loss estimates for each 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, 2024
but not yet reported, and estimates of
unpaid loss adjustment expenses are developed based on the Company’s historical experience, using actuarial methods to assist in the analysis. The Company’s actuaries develop ranges of estimated development on
reported and
unreported claims as well as loss adjustment expenses using various methods, including the paid-loss development method, the reported-loss development method, the paid Bornhuetter-Ferguson method and the reported Bornhuetter-
Ferguson
method. Any single method used to estimate ultimate losses has inherent advantages and disadvantages due to the trends and changes affecting the business environment and the Company’s administrative policies. Further,
external factors, such as
legislative changes, medical cost inflation, and others may directly or indirectly impact the relative adequacy of liabilities for unpaid losses and loss adjustment expenses. The Company’s approach is to select an
estimate of ultimate losses based
on comparing results of a variety of reserving methods, as opposed to total reliance on any single method. Unpaid loss and loss adjustment expenses are reviewed periodically for significant lines of
business, and when current results differ from
the original assumptions used to develop such estimates, the amount of the Company’s recorded liability for unpaid loss and loss adjustment expenses is adjusted. In the event the
Company’s actual reported losses in any period are materially in
excess of the previously estimated amounts, such losses, to the extent reinsurance coverage does not exist, could have a material adverse effect on the Company’s results
of operations.
Receivables are amounts due from reinsurers, insureds and agents, and any sales of investment securities not yet settled, and
comprised 13% of the Company’s total assets at December 31, 2024. Insured and agent balances are
evaluated periodically for collectability. Annually, the Company performs an analysis of the creditworthiness of the reinsurers with whom the Company
contracts using various data sources. Failure of reinsurers to meet their obligations
due to insolvencies, disputes or otherwise could result in uncollectible amounts and losses to the Company. Allowances for uncollectible amounts are established,
as and when a loss has been determined probable, against the related
receivable. Losses are recognized by the Company when determined on a specific account basis and a general provision for loss is made based on the Company’s historical experience.
Deferred acquisition costs comprised 11% of the Company’s total assets at December 31, 2024. Deferred acquisition costs are
commissions, premium taxes, and other incremental direct costs of contract acquisition that results
directly from and are essential to the contract transaction(s) and would not have been incurred by the Company had the contract transaction(s) not
occurred. The deferred amounts are recorded as an asset on the balance sheet and
amortized to expense in a systematic manner. Traditional life insurance and long-duration health insurance deferred policy acquisition costs are amortized over the
estimated premium-paying period of the related policies using
assumptions consistent with those used in computing the related liability for policy benefit reserves. Deferred acquisition costs for property and casualty insurance and short-duration
health insurance are amortized over the effective
period of the related insurance policies. Deferred policy acquisition costs are expensed when such costs are deemed not to be recoverable from future premiums (for traditional life and long-duration
health insurance) and from the
related unearned premiums and investment income (for property and casualty and short-duration health insurance). Assessments of recoverability for property and casualty and short-duration health insurance are
extremely sensitive to
the estimates of a subsequent year’s projected losses related to the unearned premiums. Projected loss estimates for a current block of business for which unearned premiums remain to be earned may vary significantly from the
indicated losses incurred in any previous calendar year.
Deferred income taxes reflect the effect of temporary differences between assets and liabilities that are recognized for financial
reporting purposes and the amounts that are recognized for tax purposes. These deferred income
taxes are measured by applying currently enacted tax laws and rates. Valuation allowances are recognized to reduce the deferred tax asset to the amount
that is deemed more likely than not to be realized. In assessing the likelihood of
realization, management considers estimates of future taxable income and tax planning strategies.
Share-based transactions include employee and director share-based compensation awards.
The Company determines a grant date fair value based on the price of our publicly-traded common stock and recognize the related
compensation expense, adjusted for actual forfeitures, in the consolidated statement of operations on a straight-line
basis over the requisite service period for the entire award. For non-employee share-based compensation awards, the
Company recognizes the impact during the period of performance, and the fair value of the award is measured as of the date
performance is complete, which is the vesting date.
Refer to Note 1 of Notes to Consolidated Financial Statements for details regarding the Company’s significant accounting policies.
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Overall Corporate Results
Year Ended December 31,
2024
2023
(In thousands)
Revenue
Property and Casualty:
American Southern
$
72,220 $
72,846
Life and Health:
Bankers Fidelity
116,097
114,199
Corporate and Other
(90)
(252)
Total revenue
$
188,227 $
186,793
Income (loss) before income taxes
Property and Casualty:
American Southern
$
888 $
5,085
Life and Health:
Bankers Fidelity
4,155
4,722
Corporate and Other
(10,307)
(10,372)
Loss before income taxes
$
(5,264) $
(565)
Net loss
$
(4,268) $
(171)
Management also considers and evaluates performance by analyzing the non-GAAP measure operating income or loss, and believes it is a useful metric for investors, potential
investors, securities analysts and others because it
isolates the “core” operating results of the Company before considering certain items that are either beyond the control of management (such as income tax expense, which is subject to timing,
regulatory and rate changes depending on
the timing of the associated revenues and expenses) or are not expected to regularly impact the Company’s operational results (such as any realized or unrealized investment gains or losses, which are not a
part of the Company’s
primary operations and are, to a limited extent, subject to discretion in terms of timing of realization).
A reconciliation of net loss, the most directly comparable GAAP measure, to operating income (loss) is as follows:
Year Ended December 31,
2024
2023
(In thousands)
Reconciliation of Non-GAAP Financial Measure
Net loss
$
(4,268) $
(171)
Income tax benefit
(996)
(394)
Realized investment gains, net
(1,210)
(70)
Unrealized losses on equity securities, net
1,516
2,177
Non-GAAP operating income (loss)
$
(4,958) $
1,542
On a consolidated basis, the Company had net loss of $4.3 million, or $(0.23) per diluted share, in 2024, compared to net loss of $0.2 million, or $(0.03) per diluted share,
in 2023. The increase in net loss was primarily due to
an unfavorable loss experience in the property and casualty operations due to the frequency and severity of claims in the automobile liability line of business as well as an increase in claims
costs in the automobile physical damage line
of business. Also contributing to the increase in net loss was an increase in administrative costs related to the growth in the group lines of business within the life and health operations. Partially
offsetting this decrease was an increase
in net realized investment gains mainly due to gains of $1.2 million from the sale of the Company's interest in a certain limited liability company as well as gains from the sale of a number of the Company's
investments in fixed
maturities.
Total revenue was $188.2 million in 2024 as compared to $186.8 million in 2023. Premium revenue decreased slightly to $178.7 million in 2024 from $178.8 million in 2023. The
decrease in premium revenue was primarily
attributable to a decrease in earned premiums in the automobile physical damage line of business due to a decline in demand within the trucking industry within the property and casualty operations.
Partially offsetting the decrease in
premium revenue was an increase in earned premiums in the group accident and health, group life and the other individual health lines of business due to new sales within the life and health operations.
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Table of Contents
Operating loss was $5.0 million in 2024 as compared to operating income of $1.5 million in 2023. The decrease in operating income was primarily due to an unfavorable loss
experience in the property and casualty operations
due to the frequency and severity of claims in the automobile liability line of business as well as an increase in claims costs in the automobile physical damage line of business as discussed
above. Also contributing to the decrease in
operating income was an increase in administrative costs related to the growth in the group lines of business within the life and health operations.
A more detailed analysis of the operating companies and other corporate activities follows.
UNDERWRITING RESULTS
American Southern
The following table summarizes, for the periods indicated, American Southern’s premiums, losses, expenses and underwriting ratios:
Year Ended December 31,
2024
2023
(Dollars in thousands)
Gross written premiums
$
73,671 $
77,567
Ceded premiums
(5,979)
(5,902)
Net written premiums
$
67,692 $
71,665
Net earned premiums
$
67,689 $
68,443
Insurance benefits and losses incurred
55,767
51,015
Commissions and underwriting expenses
15,565
16,746
Underwriting income (loss)
$
(3,643) $
682
Loss ratio
82.4%
74.5%
Expense ratio
23.0
24.5
Combined ratio
105.4%
99.0%
Gross written premiums at American Southern decreased $3.9 million, or 5.0%, during 2024 as compared to 2023. The decrease in gross written premiums was primarily
attributable to the decrease in premiums written in the
automobile liability line of business due to the non-renewal of a program, as well as a decrease in premiums written in the automobile physical damage line of business due to a decline in
demand within the trucking industry. Also
contributing to the decrease in gross written premiums was a decrease in premiums written in the surety line of business due to construction slowdowns in certain regions.
Ceded premiums increased $0.1 million, or 1.3%, during 2024 as compared to 2023. American Southern’s ceded premiums are typically determined as a percentage of earned
premiums and generally increase or decrease as
earned premiums increase or decrease or retentions levels change. The increase in ceded premiums was primarily attributable to an increase in lines of business with higher ceding rates.
The following table summarizes, for the periods indicated, American Southern’s net earned premiums by line of business:
Year Ended December 31,
2024
2023
(In thousands)
Automobile liability
$
39,788 $
38,821
Automobile physical damage
13,464
15,046
General liability
5,990
5,758
Surety
5,809
6,303
Other lines
2,638
2,515
Total
$
67,689 $
68,443
Net earned premiums decreased $0.8 million, or 1.1%, during 2024 as compared to 2023. The decrease in net earned premiums was primarily attributable to a decrease in earned
premiums in the automobile physical damage
line of business due to a decline in demand within the trucking industry as previously mentioned. Partially offsetting the decrease in net earned premiums was an increase in earned premiums in the
automobile liability line of business
due mainly to a new government program which began in the fourth quarter of 2023. Premiums are earned ratably over their respective policy terms and therefore premiums earned in the current year are related to
policies written
during both the current year and immediately preceding year.
The performance of a property and casualty insurance company is often measured by its combined ratio. The combined ratio represents the percentage of losses, loss adjustment
expenses and other expenses that are incurred for
each dollar of premium earned by the company. A combined ratio of under 100% represents an underwriting profit while a combined ratio of over 100% indicates an underwriting loss. The combined ratio
is divided into two
components, the loss ratio (the ratio of losses and loss adjustment expenses incurred to premiums earned) and the expense ratio (the ratio of expenses incurred to premiums earned).
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Table of Contents
Insurance benefits incurred at American Southern increased $4.8 million, or 9.3%, during 2024 as compared to 2023. As a percentage of premiums, insurance benefits and losses
incurred were 82.4% in 2024 as compared to
74.5% in 2023. The increase in the loss ratio was mainly due to an increase in the frequency and severity of claims in the automobile liability line of business. Also contributing to the increase in the
loss ratio was an increase in the
automobile physical damage line of business due to an increase in claims costs. Partially offsetting the increase in the loss ratio was a decrease in the general liability line of business due to favorable claim
reserve development.
Commissions and underwriting expenses decreased $1.2 million, or 7.1%, during 2024 as compared to 2023. As a percentage of premiums, these expenses were 23.0% in 2024 as
compared to 24.5% in 2023. The decrease in
the expense ratio was primarily due to American Southern’s use of a variable commission structure with certain agents, which compensates the participating agents in relation to the loss ratios of the
business they write. During periods
in which the loss ratio decreases, commissions and underwriting expenses will generally increase, and conversely, during periods in which the loss ratio increases, commissions and underwriting expenses will
generally decrease. In
2024, variable commissions at American Southern decreased $1.1 million as compared to 2023 due to an unfavorable loss experience from accounts subject to variable commissions.
Bankers Fidelity
The following summarizes, for the periods indicated, Bankers Fidelity’s premiums, losses and expenses:
Year Ended December 31,
2024
2023
(Dollars in thousands)
Gross earned premiums
$
164,291 $
166,375
Ceded premiums
(53,249)
(55,993)
Net earned premiums
111,042
110,382
Insurance benefits and losses incurred
70,064
71,485
Commissions and underwriting expenses
41,878
37,992
Total expenses
111,942
109,477
Underwriting income
$
(900) $
905
Loss ratio
63.1%
64.8%
Expense ratio
37.7
34.4
Combined ratio
100.8%
99.2%
Gross earned premiums at Bankers Fidelity decreased $2.1 million, or 1.3%, during 2024 as compared to 2023. The decrease in gross earned premiums was primarily attributable
to the decrease in gross earned premiums from
the Medicare supplement line of business due primarily to non-renewals exceeding the level of new business writings as the existing block of business has incurred rate increases. Also contributing to
the decrease in gross earned
premiums was a decrease in gross earned premiums in the individual life line of business, resulting from the redemption and settlement of existing individual life policy obligations exceeding the level of new individual
life sales.
Partially offsetting the decrease were increases in the group accident and health, group life and other individual health lines of business due to new sales.
Ceded premiums decreased $2.7 million, or 4.9%, during 2024 as compared to 2023. The decrease in ceded premiums was due to a decrease in Medicare supplement premiums subject
to reinsurance.
The following table summarizes, for the periods indicated, Bankers Fidelity’s net earned premiums by line of business:
Year Ended December 31,
2024
2023
(In thousands)
Medicare supplement
$
71,867 $
77,424
Group life
14,700
12,431
Individual life
5,594
6,153
Group accident and health
11,390
7,583
Other individual health
7,491
6,791
Total
$
111,042 $
110,382
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Net earned premium revenue at Bankers Fidelity increased $0.7 million, or 0.6%, during 2024 as compared to 2023. The increase in net earned premiums was primarily
attributable to increases in the group accident and health,
group life and other individual health lines of business due to new sales as previously mentioned. Partially offsetting the increase in net earned premiums was a decrease in the Medicare
supplement line of business primarily to non-
renewals exceeding the level of new business writings as the existing block of business has incurred rate increases.
Insurance benefits incurred decreased $1.4 million, or 2.0%, during 2024 as compared to 2023. As a percentage of premiums, benefits and losses were 63.1% in 2024 as compared
to 64.8% in 2023. The decrease in the loss
ratio was primarily due to improved loss experience within the group life line of business as well as the other individual health line of business. These decreases were partially offset by higher incurred
claims in the other health line of
business.
Commissions and underwriting expenses increased $3.9 million, or 10.2%, during 2024 as compared to 2023. As a percentage of earned premiums, these expenses were 37.7% in
2024 as compared to 34.4% in 2023. The
increase in the expense ratio was primarily due to an increase in administrative costs related to the growth in the group lines of business. Partially offsetting the increase in the expense ratio was a
decrease in commission expenses
primarily attributable to a decrease in the Medicare supplement line of business as a result of non-renewals exceeding the level of new business writings, as previously mentioned.
Net Investment Income and Realized Gains
Investment income decreased $0.3 million, or 2.7%, in 2024 as compared to 2023. The decrease in investment income was primarily attributable to a net loss in a certain
investment within the Company's limited liability
companies of $0.4 million.
The Company had net realized investment gains of $1.2 million in 2024 as compared to net realized investment gains of $0.1 million in 2023. The net realized investment gains
in 2024 were mainly due to gains of $1.2 million
from the sale of the Company's interest in a certain limited liability company as well as gains from the sale of a number of the Company's investments in fixed maturities. The net realized investment
gains in 2023 were primarily
attributable to gains from the sale of fixed maturities. Management continually evaluates the Company’s investment portfolio and, as may be determined to be appropriate, makes adjustments for impairments and/or will
divest
investments. See Note 2 of Notes to Consolidated Financial Statements.
Unrealized Losses on Equity Securities, Net
Investments in equity securities are measured at fair value at the end of the reporting period, with any changes in fair value reported in net income during the period. The
Company recognized net unrealized losses on equity
securities of $1.5 million and net unrealized losses of $2.2 million during the years ended December 2024 and 2023, respectively. Changes in unrealized losses on equity securities for the
applicable periods are primarily the result of
fluctuations in the market value of certain of the Company’s equity securities.
Interest Expense
Interest expense increased $0.2 million, or 4.6%, in 2024 as compared to 2023. Changes in interest expense were primarily due to changes in the Secured Overnight Financing
Rate (“SOFR”) published by CME Group
Benchmark Administration Limited, as the interest rates on the Company’s outstanding junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) and the revolving credit facility
utilize SOFR as the
reference rate.
Income Taxes
The primary difference between the effective tax rate and the federal statutory income tax rate for 2024 resulted from a permanent difference related to meals and
entertainment. Also contributing to differences between the
effective tax rate and the federal statutory income tax rate was the adjustment for prior years’ estimates to actual that are generally updated at the completion of the third quarter of
each fiscal year and were $35 thousand in the year
ended December 31, 2024. Another contributing factor to the differences between the effective tax rate and the federal statutory income tax rate was a permanent difference related to
dividends-received deduction (“DRD”). The current
estimated DRD is adjusted as underlying factors change and can vary from estimates based on, but not limited to, actual distributions from investments as well as the amount of the Company’s taxable
income. 2024
The primary difference between the effective tax rate and the federal statutory income tax rate for 2023 resulted from the adjustment for prior years’ estimates to actual of
$0.3 million in the year ended December 31, 2023,
which included the return to provision adjustment that is generally updated at the completion of the third quarter of each fiscal year and an adjustment for partnership valuation. Also contributing
to the differences between the effective
tax rate and the federal statutory income tax rate was a permanent difference related to meals and entertainment.
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Table of Contents
Liquidity and Capital Resources
The primary cash needs of the Company are for the payment of claims and operating expenses, maintaining adequate statutory capital and surplus levels, and meeting debt
service requirements. Current and expected patterns of
claim frequency and severity may change from period to period, but generally are expected to continue within historical ranges. The Company’s primary sources of cash are written premiums,
investment income and proceeds from the
sale and maturity of its invested assets, as well as borrowings from time to time under our revolving credit facility. The Company believes that, within each operating company, total invested assets will be
sufficient to satisfy all policy
liabilities and that cash inflows from investment earnings, future premium receipts and reinsurance collections will be adequate to fund the payment of claims and operating expenses as needed.
Cash flows at the Parent are derived from dividends, management fees, and tax-sharing payments, as described below, from the subsidiaries. The principal cash needs of the
Parent are for the payment of operating expenses, the
acquisition of capital assets and debt service requirements, as well as the repurchase of shares and payments of any dividends as may be authorized and approved by the Company’s board of
directors from time to time. At December 31,
2024, the Parent had approximately $5.6 million of unrestricted cash and investments.
Dividend payments to a parent corporation by its wholly owned insurance subsidiaries are subject to annual limitations and are restricted to 10% of statutory surplus or
statutory earnings before recognizing realized investment
gains of the individual insurance subsidiaries. At December 31, 2024, the Parent’s insurance subsidiaries had an aggregate statutory surplus of $80.1 million. Dividends were paid to Atlantic
American by its subsidiaries totaling $9.0
million and $8.4 million in 2024 and 2023, respectively.
The Parent provides certain administrative, purchasing and other services to each of its subsidiaries. The amount charged to and paid by the subsidiaries for these services
was $9.4 million and $8.7 million in 2024 and 2023,
respectively. In addition, the Parent has a formal tax-sharing agreement with each of its insurance subsidiaries. A net total of $4.4 million and $4.0 million were paid to the Parent under the tax
sharing agreement in 2024 and 2023,
respectively.
The Company has two statutory trusts which exist for the exclusive purpose of issuing trust preferred securities representing undivided beneficial interests in the assets of
the trusts and investing the gross proceeds of the trust
preferred securities in Junior Subordinated Debentures. The outstanding $18.0 million and $15.7 million of Junior Subordinated Debentures mature on December 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 3-month CME Term SOFR plus applicable tenor spread of 0.26161% plus an applicable margin. The margin ranges from 4.00% to
4.10%. At December 31,
2024, the effective interest rate was 8.82%. The obligations of the Company with respect to the issuances of the trust preferred securities represent a full and unconditional guarantee by the Parent of each trust’s
obligations with respect
to the trust preferred securities. Subject to certain exceptions and limitations, the Company may elect from time to time to defer Junior Subordinated Debenture interest payments, which would result in a deferral of
distribution
payments on the related trust preferred securities. The Company has not made such an election.
The Company intends to pay its obligations under the Junior Subordinated Debentures using existing cash balances, dividend and tax-sharing payments from the operating
subsidiaries, or from existing or potential future
financing arrangements.
At December 31, 2024, 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 outstanding shares of Series D Preferred Stock have a redemption 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 are cumulative. In certain circumstances, the shares of the Series D Preferred Stock may be convertible into an aggregate of approximately 1,378,000 shares of the
Company’s common
stock, subject to certain adjustments and provided that such adjustments do not result in the Company issuing more than approximately 2,703,000 shares of common stock without obtaining prior shareholder approval; and are
redeemable
solely at the Company’s option. The Series D Preferred Stock is not currently convertible. The Company had accrued, but unpaid, dividends on the Series D Preferred Stock of $17.7 thousand at December 31, 2024 and
2023. During each of 2024 and 2023,
the Company paid Series D Preferred Stock dividends of $0.4 million.
Bankers Fidelity Life Insurance Company (''BFLIC") is a member of the Federal Home Loan Bank of Atlanta ("FHLB"), for the primary purpose of enhancing financial flexibility.
As a member, BFLIC can obtain access to
low-cost funding and also receive dividends on FHLB stock. The membership arrangement provides for credit availability of five percent of statutory admitted assets, or approximately $8.2 million, as of
December 31, 2024. Additional
FHLB stock purchases may be required based upon the amount of funds borrowed from the FHLB. As of December 31, 2024, BFLIC has pledged bonds having an amortized cost of $9.2 million to the FHLB. BFLIC may be required
to post additional acceptable forms of collateral for any borrowings that it makes in the future from the FHLB. As of December 31, 2024, BFLIC does not have any outstanding borrowings from the FHLB.
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Table of Contents
On May 12, 2021, the Company entered into a revolving credit agreement (“Revolving Credit Agreement”) with Truist Bank as the lender (the “Lender”). The Revolving Credit
Agreement provides for an unsecured $10.0
million revolving credit facility that originally matured on April 12, 2024. On March 22, 2024, the Company entered into a First Amendment (the "Amendment") to its Revolving Credit Agreement (as amended,
the “Credit
Agreement”) with the Lender. The Amendment, among other things, (a) updates the interest rate provisions to memorialize that the Company pays interest on the unpaid principal balance of outstanding revolving loans at the Adjusted
Term
SOFR rate (as defined in the Credit Agreement), plus 2.00%, (b) extends the maturity date of the revolving credit facility to March 22, 2027, (c) requires the monthly payment of an unused commitment fee of 0.2% of the unused
facility amount, and
(d) requires that the Company maintain a consolidated net worth of not less than $64.2 million. Except as modified by the Amendment, the existing terms of the original Credit Agreement remain in effect.
The Credit Agreement requires the Company to comply with certain covenants, including a debt to capital ratio that restricts the Company from incurring consolidated
indebtedness that exceeds 35% of the Company’s
consolidated capitalization at any time and maintaining a minimum consolidated net worth, as previously mentioned. The Credit Agreement also contains customary representations and warranties and events
of default. Events of
default include, among others, (a) the failure by the Company to pay any amounts owed under the Credit Agreement when due, (b) the failure to perform and not timely remedy certain covenants, (c) a change in control of the
Company
and (d) the occurrence of bankruptcy or insolvency events. Upon an event of default, the Lender may, among other things, declare all obligations under the Credit Agreement immediately due and payable and terminate the revolving
commitments. As of December 31, 2024 and 2023, the Company had outstanding borrowings of $4.0 million and $3.0 million under the Credit Agreement.
Cash and cash equivalents increased from $28.3 million at December 31, 2023 to $35.6 million at December 31, 2024. The increase in cash and cash equivalents during 2024 was
primarily attributable to net cash provided by
operating activities of $4.8 million. Also contributing to the increase in cash and cash equivalents was net cash provided by investing activities of $2.3 million primarily as a result of investment
sales and maturity of securities
exceeding investment purchases.
The Company believes that existing cash balances as well as the dividends, fees, and tax-sharing payments it expects to receive from its subsidiaries and, if needed,
additional borrowings from financial institutions, will enable
the Company to meet its liquidity requirements for the next 12 months and thereafter for the foreseeable future. Management is not aware of any current recommendations by regulatory
authorities, which, if implemented, would have a
material adverse effect on the Company’s liquidity, capital resources or operations.
New Accounting Pronouncements
See “Recently Issued Accounting Standards” in Note 1 of Notes to Consolidated Financial Statements.
Impact of Inflation
Insurance premiums are established before the amount of losses and loss adjustment expenses, or the extent to which inflation may affect such losses and expenses, are known.
Consequently, in establishing its premiums, the
Company attempts to anticipate the potential impact of inflation. If, for competitive reasons, premiums cannot be increased to anticipate inflation, this cost would be absorbed by the Company.
Inflation also affects the rate of investment
return on the Company’s investment portfolio with a corresponding effect on investment income. During 2024, inflation was a factor in increased loss experience within the Company’s automobile liability
line of business.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we have elected to comply with certain scaled disclosure reporting obligations, and therefore are not providing the information required by
this Item.
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Item 8.
Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Page
ATLANTIC AMERICAN CORPORATION
Report of Independent Registered Public Accounting Firm (Forvis Mazars, LLP), Atlanta, Georgia, PCAOB Firm ID No. 686)
24
Consolidated Balance Sheets as of December 31, 2024 and 2023
27
Consolidated Statements of Operations for the years ended December 31, 2024 and 2023
28
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024 and 2023
29
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2024 and 2023
30
Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023
31
Notes to Consolidated Financial Statements
32
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Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Atlantic American Corporation
Atlanta, Georgia
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Atlantic American Corporation (the Company) as of December 31, 2024 and 2023, the
related consolidated statements of operations, comprehensive loss, shareholders’
equity, and cash flows for each of the two years in the period ended December 31, 2024 and the related notes (collectively referred to as the consolidated financial
statements). In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended
December 31, 2024, in conformity with accounting principles generally accepted in the United
States of America (US GAAP).
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s consolidated financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures
include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were
communicated or required to be communicated to the audit committee and that: (1)
relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex
judgments. The communication of critical audit matters does not alter in any
way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the
critical audit matters or on the accounts or disclosures to which they
relate.
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Shareholders and Board of Directors
Atlantic American Corporation
Valuation of Insurance Reserves for Losses and Claims (Claim Reserves)
As reflected on the consolidated balance sheet and discussed in Note 7 to the consolidated financial statements, the Company’s insurance reserves for
losses and claims (claim reserves), were $93.7 million as of December 31, 2024. The
Company’s claim reserves relate primarily to its property casualty lines of business and Medicare supplement business. The process of establishing claim reserves
requires the use of estimates and judgments based on circumstances
underlying the insured loss at the date of accrual. Management’s judgments include claims adjusters’ evaluations for unpaid claims reported prior to the close of the accounting
period, estimates of incurred but not reported (IBNR)
claims based on past experience and estimates of loss adjustment expenses.
The principal considerations for our determination that the valuation of claim reserves is a critical audit matter are the high degree of judgment and
subjectivity in auditing the actuarial methods and assumptions used in the valuation
process, including assumptions around expected loss ratios and reported and paid loss emergence patterns.
Addressing the matter involved performing the following audit procedures, among others:
•
Involving our actuarial specialists to assist in our procedures in:
o
Evaluating the appropriateness of management’s actuarial reserving methodologies and assumptions;
o
Evaluating management’s hindsight analyses;
o
Comparing management’s carried reserve to the range calculated by management’s specialist for property casualty claim reserves;
•
Testing the completeness and accuracy of data provided by management that served as the basis for the actuarial analyses on a sample basis; and
•
Evaluating movement of the Company’s recorded property casualty claim reserves within the Company’s estimated reserve range year over year.
Valuation of Insurance Reserves for Future Policy Benefits (Policy Reserves)
As reflected on the consolidated balance sheet and discussed in Note 7 to the consolidated financial statements, the Company’s insurance reserves for
future policy benefits (policy reserves) were $98.5 million as of December 31, 2024.
Policy reserves are related to life and health insurance policies and are based upon significant assumptions including future investment yields, mortality rates,
withdrawal rates and expenses after giving effect to possible risks of
unexpected claim experience. These assumptions are based on historical experience modified as necessary to reflect anticipated trends and are generally established at contract
inception.
The principal considerations for our determination that the valuation of policy reserves is a critical audit matter are the high degree of judgment
required to assess certain assumptions that impact policy reserves and the complexity of
the actuarial calculations.
Addressing the matter involved performing the following audit procedures, among others:
•
Involving our actuarial specialists to assist in our procedures in:
o
Evaluating whether the methodology applied by management is consistent in the aggregate with the methodology compliant with US GAAP;
o
Assessing the significant assumptions used by management for new insurance contracts issued during the current year by comparing the significant assumptions noted
above to historical experience, observable market
data or management’s estimates of prospective changes to these assumptions;
o
Reviewing benefit reserve replication workbooks prepared by management for a sample of contracts; and
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Shareholders and Board of Directors
Atlantic American Corporation
o
Evaluating management’s loss recognition testing of aggregate reserve sufficiency.
•
Testing the completeness and accuracy of data used by management in developing assumptions on a sample basis.
/s/ Forvis Mazars, LLP
We have served as the Company’s auditor since 2018.
Atlanta, Georgia
March 25, 2025
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ATLANTIC AMERICAN CORPORATION
CONSOLIDATED
BALANCE SHEETS
December 31,
2024
2023
(In thousands,
except share and per
share data)
ASSETS
Cash and cash equivalents
$
35,570
$
28,301
Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost: $236,299
and $238,626; no allowance for credit losses)
212,612
218,219
Equity securities, at fair value (cost: $4,939 and $4,936)
7,900
9,413
Other invested assets (cost: $7,946 and $6,982)
6,616
6,381
Policy loans
1,722
1,778
Real estate
38
38
Investment in unconsolidated trusts
1,238
1,238
Total investments
230,126
237,067
Receivables:
Reinsurance (net of allowance for uncollectible reinsurance of $51 and $61)
22,942
21,103
Insurance premiums and other (net of allowance for expected credit losses $201
and $217)
27,458
23,690
Deferred income taxes, net
18,118
15,682
Deferred acquisition costs
44,842
43,850
Other assets
11,828
9,028
Intangibles
2,544
2,544
Total assets
$
393,428
$
381,265
LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance reserves and policyholder funds
Future policy benefits
$
98,464
$
92,495
Unearned premiums
31,178
31,317
Losses and claims
93,707
87,478
Other policy liabilities
1,757
1,132
Total insurance reserves and policyholder funds
225,106
212,422
Accounts payable and accrued expenses
30,948
24,811
Revolving credit facility
4,023
3,019
Junior subordinated debenture obligations, net
33,738
33,738
Total liabilities
293,815
273,990
Commitments and contingencies (Note 18)
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; 20,399,758 and 20,402,288
shares outstanding as of 2024 and 2023, respectively
22,401
22,401
Additional paid-in capital
57,425
57,425
Retained earnings
45,854
50,929
Accumulated other comprehensive loss
(18,712)
(16,121)
Unearned stock grant compensation
(2)
(13)
Treasury stock, at cost, 2,001,136 and 1,998,606 shares as of 2024 and 2023, respectively
(7,408)
(7,401)
Total shareholders’ equity
99,613
107,275
Total liabilities and shareholders’ equity
$
393,428
$
381,265
See the accompanying notes to the consolidated financial statements.
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ATLANTIC AMERICAN CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
Year Ended December 31,
2024
2023
(In thousands,
except per share data)
Revenue:
Insurance premiums, net
$
178,731
$
178,825
Net investment income
9,791
10,058
Realized investment gains, net
1,210
70
Unrealized losses on equity securities, net
(1,516)
(2,177)
Other income
11
17
Total revenue
188,227
186,793
Benefits and expenses:
Insurance benefits and losses incurred
125,831
122,500
Commissions and underwriting expenses
48,030
46,124
Interest expense
3,419
3,269
Other expense
16,211
15,465
Total benefits and expenses
193,491
187,358
Loss before income taxes
(5,264)
(565)
Income tax benefit
(996)
(394)
Net loss
(4,268)
(171)
Preferred stock dividends
(399)
(399)
Net loss applicable to common shareholders
$
(4,667)
$
(570)
Loss per common share (basic and diluted)
(0.23)
(0.03)
See the accompanying notes to the consolidated financial statements.
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ATLANTIC AMERICAN CORPORATION
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
Year Ended December 31,
2024
2023
(In thousands)
Net loss
$
(4,268)
$
(171)
Other comprehensive gain (loss):
Available-for-sale fixed maturity securities:
Gross unrealized holding gain (loss) arising in the period
(3,263)
7,700
Related income tax effect
685
(1,617)
Subtotal
(2,578)
6,083
Less: reclassification adjustment for net realized gains included in net income
(17)
(70)
Related income tax effect
4
15
Subtotal
(13)
(55)
Total other comprehensive income (loss), net of tax
(2,591)
6,028
Total comprehensive income (loss)
$
(6,859)
$
5,857
See the accompanying notes to the consolidated financial statements.
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ATLANTIC AMERICAN CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Year Ended December 31,
(In thousands, except share and per share data)
2024
2023
Preferred stock:
Balance, beginning of year
$
55
$
55
Balance, end of year
55
55
Common stock:
Balance, beginning of year
22,401
22,401
Balance, end of year
22,401
22,401
Additional paid-in capital:
Balance, beginning of year
57,425
57,425
Balance, end of year
57,425
57,425
Retained earnings:
Balance, beginning of year
50,929
51,982
Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2023
—
(75)
Net loss
(4,268)
(171)
Dividends on common stock
(408)
(408)
Dividends accrued on preferred stock
(399)
(399)
Balance, end of year
45,854
50,929
Accumulated other comprehensive loss:
Balance, beginning of year
(16,121)
(22,149)
Other comprehensive income (loss), net of tax
(2,591)
6,028
Balance, end of year
(18,712)
(16,121)
Unearned stock grant compensation:
Balance, beginning of year
(13)
(132)
Amortization of unearned compensation
11
119
Balance, end of year
(2)
(13)
Treasury stock:
Balance, beginning of year
(7,401)
(7,389)
Net shares acquired related to employee share-based compensation plans
(7)
(12)
Balance, end of year
(7,408)
(7,401)
Total shareholders’ equity
$
99,613
$
107,275
Dividends declared on common stock per share
$
0.02
$
0.02
Common shares outstanding:
Balance, beginning of year
20,402,288
20,407,229
Net shares acquired under employee share-based compensation plans
(2,530)
(4,941)
Balance, end of year
20,399,758
20,402,288
See the accompanying notes to the consolidated financial statements.
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ATLANTIC AMERICAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2024
2023
(In thousands)
Cash flows from operating activities:
Net loss
$
(4,268)
$
(171)
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred acquisition costs
16,645
16,440
Acquisition costs deferred
(17,637)
(18,009)
Realized investment gains, net
(1,210)
(70)
Unrealized losses on equity securities, net
1,516
2,177
Losses from equity method investees
766
360
Compensation expense related to share awards
11
119
(Benefit) provision for credit losses
(26)
26
Depreciation and amortization
366
652
Deferred income tax benefit
(1,747)
(3,121)
Increase in receivables, net
(5,581)
(3,520)
Increase in insurance reserves and policyholder funds
12,684
9,771
Increase (decrease) in accounts payable and accrued expenses
6,137
(1,662)
Other, net
(2,856)
(370)
Net cash provided by operating activities
4,800
2,622
Cash flows from investing activities:
Proceeds from investments sold and policy loans redeemed
2,567
5,044
Proceeds from investments matured, called or redeemed
13,791
9,744
Investments purchased
(13,850)
(18,073)
Additions to property and equipment
(225)
(80)
Net cash provided by (used in) investing activities
2,283
(3,365)
Cash flows from financing activities:
Payment of dividends on Series D preferred stock
(399)
(399)
Payment of dividends on common stock
(408)
(408)
Treasury stock acquired — net employee share-based compensation
(7)
(12)
Proceeds from revolving credit facility, net
1,000
1,000
Net cash provided by financing activities
186
181
Net increase (decrease) in cash
7,269
(562)
Cash and cash equivalents at beginning of year
28,301
28,863
Cash and cash equivalents at end of year
$
35,570
$
28,301
Supplemental cash flow information:
Cash paid for interest
$
3,445
$
3,227
Cash paid for income taxes
$
580
$
2,582
See the accompanying notes to the consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
Note 1.
Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United
States of America (“GAAP”) which, for insurance companies, differ in some
respects from the statutory accounting practices prescribed or permitted by regulatory authorities. These financial statements include the accounts of Atlantic American
Corporation (“Atlantic American” or the “Parent”) and its
subsidiaries (collectively with the Parent, the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation. Operating results achieved in any
historical period are not necessarily indicative
of results to be expected in any future period.
At December 31, 2024, the Parent owned five
insurance subsidiaries, Bankers Fidelity Life Insurance Company and its wholly-owned subsidiaries, Bankers Fidelity Assurance Company and Atlantic Capital Life Assurance
Company (together known as “Bankers Fidelity”), and American Southern
Insurance Company and its wholly-owned subsidiary, American Safety Insurance Company. American Southern Insurance Company also wholly-owned three
non-insurance subsidiaries, Premier Adjusting and Claim Services, Inc., Automobile Safety Management, Inc. and Automated Systems of Georgia, Inc. (together with American Southern Insurance Company and American Safety
Insurance Company known as
“American Southern”). In addition, the Parent owned one non-insurance subsidiary, xCalibre Risk Services, Inc. The Parent has issued a
guarantee of all liabilities of Bankers Fidelity.
Premium Revenue and Cost Recognition
Life insurance premiums are recognized as revenue when due; accident and health insurance premiums are recognized as revenue over the premium paying
period and property and casualty insurance premiums are recognized
as revenue over the period of the contract in proportion to the amount of insurance protection provided. Losses, benefits and expenses are accrued as incurred and are associated
with premiums as they are earned so as to result in
recognition of profits over the lives of the contracts. For traditional life insurance and long-duration health insurance, this association is accomplished by the provision of a future policy
benefits reserve and the deferral and subsequent
amortization of the costs of acquiring business, which are referred to as “deferred policy acquisition costs” (principally commissions, premium taxes, and other incremental direct costs of issuing
policies). Deferred policy acquisition
costs (“DAC”) are amortized over the estimated premium-paying period of the related policies using assumptions consistent with those used in computing the future 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. DAC for property and casualty insurance and short-duration health insurance is amortized over the effective
period of the
related insurance policies. Contingent commissions, if contractually applicable, are ultimately payable to agents based on the underlying profitability of a particular insurance contract or a group of insurance contracts, and are
periodically evaluated and accrued as earned. In periods in which revisions are made to the estimated loss reserves related to the particular insurance contract or group of insurance contracts subject to such commissions, corresponding
adjustments
are also made to the related accruals. DAC is expensed when such costs are deemed not to be recoverable from future premiums (for traditional life and long-duration health insurance) and from the related unearned
premiums and investment income (for
property and casualty and short-duration health insurance).
Insurance Premiums and Other Receivables
Receivables amounts due from reinsurers, insureds and agents are evaluated
periodically for collectability. Allowances for expected credit losses are established, as and when a loss has been determined probable, against the
related receivable. An allowance for expected credit loss is recognized by the Company when
determined on a specific account basis and a general provision for loss is made based on the Company’s historical and expected experience.
Intangibles
Intangibles consist of goodwill and other indefinite-lived intangible assets. Goodwill represents the excess of cost over the fair value of net
assets acquired and is not amortized. Other indefinite-lived intangibles represent the
value of licenses and are not amortized. The Company periodically reviews its goodwill and other indefinite-lived intangibles to determine if any adverse
conditions exist that could indicate impairment. Conditions that could trigger
impairment include, but are not limited to, a significant change in business climate that could affect the value of the related asset, an adverse action, or an
assessment by a regulator. No impairment of the Company’s recorded intangibles
was identified during any of the periods presented.
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Investments
The Company’s investments in fixed maturities, which include bonds and redeemable preferred stocks, are classified as “available-for-sale” and,
accordingly, are carried at fair value with the after-tax difference from amortized
cost, less allowance for credit losses (“ACL”), as adjusted if applicable, reflected in shareholders’ equity as a component of accumulated other comprehensive
income or loss. The Company’s equity securities, which include common
and non-redeemable preferred stocks, are carried at fair value with changes in fair value reported in net income. The fair values of fixed maturities and equity securities are
largely determined from publicly quoted market prices, when
available, or independent broker quotations. Values that are not determined using quoted market prices inherently involve a greater degree of judgment and uncertainty and therefore
ultimately greater price volatility than the value of
securities with publicly quoted market prices.
Policy
loans are carried at unpaid principal balance and are fully collateralized by the cash surrender value of the underlying insurance contract. Real estate is carried at historical cost and is evaluated for impairment when
circumstances would
indicate that fair value may be less than carrying value.
The
Company holds passive interests in a number of entities that are considered to be variable interest entities (“VIEs”) under GAAP guidance. The Company’s VIE interests principally consist of interests in limited
partnerships and limited
liability companies formed for the purpose of achieving diversified equity returns, which are included in other invested assets on the balance sheet and are accounted for using the equity method. The Company
does not have power over the
activities that most significantly impact the economic performance of these VIEs and thus is not the primary beneficiary. Therefore, the Company has not consolidated these VIEs. Also included in the
Company’s VIEs are investments in
unconsolidated trusts, which are presented on the balance sheet and carried at cost. The Company’s involvement with each VIE is limited to its direct ownership interest in the VIE. The Company has
no arrangements with any of the VIEs to provide
other financial support to or on behalf of the VIE. The Company reviews its investments in other invested assets for impairment no less frequently than quarterly and monitors the
performance throughout the year. If the Company becomes aware of
an impairment of an other invested asset at the balance sheet date, it will recognize an impairment by recording a reduction in the carrying value of the other invested
asset with a corresponding charge to net investment income.
Premiums and discounts related to investments are amortized or accreted over the life of the related investment as an adjustment to yield using the
effective interest method. Dividends and interest income are recognized when
earned or declared. The cost of securities sold is based on specific identification. Unrealized gains (losses) in the value of fixed maturities are accounted for as a
direct increase (decrease) in accumulated other comprehensive income in
shareholders’ equity, net of deferred tax and, accordingly, have no effect on net income.
Income Taxes
Deferred income taxes represent the expected future tax consequences when the reported amounts of assets and liabilities are recovered or paid. They
arise from differences between the financial reporting and tax basis of assets
and liabilities and are adjusted for changes in tax laws and tax rates as those changes are enacted. The provision for income taxes represents the total amount of income
taxes due related to the current year, plus the change in deferred
income taxes during the year. A valuation allowance is recognized if, based on management’s assessment of the relevant facts, it is more likely than not that some portion of a
deferred tax asset will not be realized.
Earnings Per Common Share
Basic earnings per common share are based on the weighted average number of common and participating shares outstanding during the relevant period.
Diluted earnings per common share are based on the weighted average
number of common and participating shares outstanding during the relevant period, plus options outstanding, if applicable, using the treasury stock method and the assumed
conversion of the Series D preferred stock, if dilutive. Unless
otherwise indicated, earnings per common share amounts are presented on a diluted basis.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and investments in short-term, highly liquid securities with original maturities of three months
or less from date of purchase.
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Reinsurance
The Company’s insurance subsidiaries from time to time purchase reinsurance from unaffiliated insurers and reinsurers to reduce their potential liability on individual risks and to protect against catastrophic losses. In
a
reinsurance transaction, an insurance company transfers, or “cedes,” a portion or all of its exposure on insurance policies to a reinsurer. The reinsurer assumes the exposure in return for a portion of the premiums. The ceding of
insurance
does not legally discharge the insurer from primary liability for the full amount of the policies written by it, and the ceding company will incur a loss if the reinsurer fails to meet its obligations under the reinsurance
agreement.
Amounts currently recoverable under reinsurance agreements are included in reinsurance receivables and amounts currently payable are included in other liabilities. Assets and liabilities
relating to reinsurance agreements with
the same reinsurer may be recorded net on the balance sheet, if a right of offset exists within the reinsurance agreement. In the event that reinsurers do not meet their obligations to the Company under
the terms of the reinsurance
agreements, reinsurance recoverable balances could become uncollectible. In such instances, reinsurance recoverable balances are stated net of allowances for uncollectible reinsurance.
Share-Based Transactions
For employee and director share-based compensation awards, the Company determines a grant date fair value based on the price of our publicly-traded
common stock and recognize the related compensation expense, adjusted
for actual forfeitures, in the consolidated statement of operations on a straight-line basis over the requisite service period for the entire award. For non-employee share-based
compensation awards, the Company recognizes the impact
during the period of performance, and the fair value of the award is measured as of the date performance is complete, which is the vesting date.
Treasury Stock
Treasury stock is reflected as a reduction of shareholders’ equity at cost. The Company uses the first-in-first-out (“FIFO”) purchase cost to
determine the cost of treasury stock that is reissued. The Company includes any gains
and losses in additional paid-in capital when treasury stock is reissued.
Recently Issued Accounting Standards
Adoption of New Accounting Standards
Reference Rate Reform. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform
on Financial Reporting (“ASU 2020-04”). This guidance
provides optional expedients and exceptions for applying GAAP to investments, derivatives, or other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference
rate expected to be discontinued
because of reference rate reform. Along with the optional expedients, the amendments include a general principle that permits an entity to consider contract modifications due to reference reform to be an event
that does not require
contract re-measurement at the modification date or reassessment of a previous accounting determination. Additionally, a company may make a one-time election to sell, transfer, or both sell and transfer debt securities
classified as held
to maturity that reference a rate affected by reference rate reform and that were classified as held to maturity before January 1, 2020. The Company adopted the guidance as of June 30, 2023. The adoption of the guidance had
no
significant impact on the Company’s financial condition and results of operations.
Financial Instruments – Credit Losses. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The
updated guidance
applies a new credit loss model (current expected credit losses or CECL) for determining credit-related impairments for financial instruments measured at amortized cost (including reinsurance recoverables, premium
and other receivables) and
requires an entity to estimate the credit losses expected over the life of an exposure or pool of exposures. The estimate of expected credit losses should consider historical information, current information, as
well as reasonable and supportable
forecasts, including estimates of prepayments. The expected credit losses, and subsequent adjustments to such losses, are recorded through an allowance account that is deducted from the amortized
cost basis of the financial asset, with the net
carrying value of the financial asset presented on the consolidated balance sheet at the amount expected to be collected.
The updated guidance also amends the previous other-than-temporary impairment model for available-for-sale debt securities by requiring the
recognition of impairments relating to credit losses through an allowance account
and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has
been in an unrealized loss position will no longer impact the determination of
whether a credit loss exists.
The Company adopted the updated guidance as of January 1, 2023. The updated guidance was applied by a cumulative effect adjustment to the opening
balance of retained earnings as of January 1, 2023, the beginning of the
period of adoption. The adoption of this guidance resulted in the recognition of an after-tax cumulative effect adjustment of $0.1 million to reflect the impact of recognizing expected credit losses, as compared to incurred credit losses
recognized under the previous guidance. This adjustment is
primarily associated with reinsurance recoverables, premium and other receivables. The cumulative effect adjustment decreased retained earnings as of January 1, 2023 and
increased the allowance for estimated uncollectible reinsurance.
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Segment Reporting.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting- An Amendment for Improvements to Reportable Segment Disclosures (Topic 280) (“ASU 2023-07”). The
amendments in
ASU 2023-07 improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. The amendment; introduces a new requirement to disclose significant segment expenses regularly
provided to the chief operating decision maker (CODM); extends certain annual disclosures to interim periods; clarifies single reportable segment entities must apply Topic 280 in its entirety, permits more than one measure of segment
profit
or loss to be reported under certain conditions, and requires disclosure of the title and position of the CODM. The amendments in this update do not change or remove existing disclosure requirements. The Update is effective for
fiscal years
beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, although early adoption is permitted. The company adopted ASU No. 2023-07 on December 31, 2024. Refer
to Note 17 of Notes to
Consolidated Financial Statements for details regarding the Company’s Segment Information.
Future Adoption of New Accounting Standards
Accounting for Long-Duration Contracts. In August
2018, the FASB issued ASU No. 2018-12, Financial Services —Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (“ASU
2018-12”). This guidance (1) improves the timeliness of recognizing changes in the
liability for future policy benefits and modifies the rate used to discount future cash flows, (2) simplifies and improves the accounting for certain
market-based options or guarantees associated with deposit (or account balance) contracts,
(3) simplifies the amortization of deferred acquisition costs, and (4) improves the effectiveness of the required disclosures. ASU 2018-12 is
effective for annual reporting periods beginning after December 15, 2024 and interim periods
beginning after December 15, 2025, although earlier adoption is permitted. The Company is currently evaluating the new guidance and
considering appropriate cohorts to be reported, such as lines of business and both premium paying and
nonpremium paying policies. The Company expects to use the modified retrospective method upon adoption. Although the
financial impact on the financial statements has not been determined, it is presumed to be material.
Income Taxes. In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The amendment requires that all entities disclose on an annual basis the following information
about income
taxes paid; the amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes; and the amount of income taxes paid (net of refunds received) disaggregated by individual
jurisdictions in
which income taxes paid (net of refunds received) is equal to or greater than 5% of total income taxes paid (net of refunds received). All entities also are required to disclose; income (or loss) from continuing operations
before income tax
expense (or benefit) disaggregated between domestic and foreign; and income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. The ASU, which also includes
certain other amendments to
improve the effectiveness of income tax disclosures, is effective for public business entities for annual periods beginning after December 15, 2024. The Company is evaluating the new guidance and any
effect it will have on the Company’s
financials.
Expense Disaggregation Disclosures. In
November 2024, the FASB issued ASU No. 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (“ASU 2024-03”). This Update
requires disaggregated disclosure of income statement expenses for public
business entities (“PBE”). The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires
disaggregation of certain expense captions into specified categories in disclosures within
the footnotes to the financial statements. ASU 2024-03 adds ASC 220-40 to require a footnote disclosure about specific expenses by requiring
companies to disaggregate, in a tabular presentation, each relevant expense caption on the face of
the income statement that includes employee compensation, depreciation, and intangible asset amortization. The tabular disclosure would
also include certain other expenses, which do not apply to the Company. The ASU does not change or
remove existing expense disclosure requirements; however, it may affect where that information appears in the footnotes to the
financial statements. ASU 2024-03 is effective for all PBEs for fiscal years beginning after December 15, 2026,
and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is
currently evaluating the new guidance and any effect it will have on the Company’s financials.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Significant estimates and assumptions 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.
Note 2.
Investments
The following tables set forth the estimated fair value, gross unrealized gains, gross unrealized losses, allowance for credit losses and cost or
amortized cost of the Company’s investments in fixed maturities and equity
securities, aggregated by type and industry, as of December 31, 2024 and December 31, 2023.
35
Table of Contents
Fixed maturities were comprised of the following:
2024
Estimated
Fair Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance
for
Credit
Losses
Amortized
Cost
Fixed maturities:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies and authorities
$
22,251
$
24
$
2,144
$
—
$
24,371
Loan backed and structured securities
22,290
17
2,457
—
24,730
Obligations of states and political subdivisions
7,623
9
1,517
—
9,131
Corporate securities:
Utilities and telecom
24,623
108
3,206
—
27,721
Financial services
59,564
563
4,768
—
63,769
Other business – diversified
34,117
160
3,919
—
37,876
Other consumer – diversified
41,957
33
6,585
—
48,509
Total corporate securities
160,261
864
18,478
—
177,875
Redeemable preferred stocks:
Other consumer – diversified
187
—
5
—
192
Total redeemable preferred stocks
187
—
5
—
192
Total fixed maturities
$
212,612
$
914
$
24,601
$
—
$
236,299
2023
Estimated
Fair Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance
for
Credit
Losses
Amortized
Cost
Fixed maturities:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies and authorities
$
22,849
$
51
$
1,951
$
—
$
24,749
Loan backed and structures securities
27,210
12
2,993
—
30,191
Obligations of states and political subdivisions
8,106
15
1,424
—
9,515
Corporate securities:
Utilities and telecom
21,309
143
2,582
—
23,748
Financial services
59,584
560
4,931
—
63,955
Other business – diversified
34,386
403
2,940
—
36,923
Other consumer – diversified
44,570
87
4,870
—
49,353
Total corporate securities
159,849
1,193
15,323
—
173,979
Redeemable preferred stocks:
Other consumer – diversified
205
13
—
—
192
Total redeemable preferred stocks
205
13
—
—
192
Total fixed maturities
$
218,219
$
1,284
$
21,691
$
—
$
238,626
Bonds having an amortized cost of $15,065 and $14,647 and included in the tables above were on deposit with
insurance regulatory authorities at December 31, 2024 and 2023, respectively, in accordance with statutory
requirements. In addition, the Company maintains cash and cash equivalents on deposit with insurance regulatory authorities of $226 at December 31, 2024 and 2023. Additionally, bonds having an amortized cost of $9,209 and $9,584
and included in the tables above were pledged as collateral
to FHLB at December 31, 2024 and 2023, respectively.
2024
Estimated
Fair Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Cost
Equity securities:
Common and non-redeemable preferred stocks:
Financial services
1,149
843
—
306
Communications
6,751
2,118
—
4,633
Total equity securities
$
7,900 $
2,961 $
— $
4,939
36
Table of Contents
2023
Estimated
Fair Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Cost
Equity securities:
Common and non-redeemable preferred stocks:
Financial services
924
621
—
303
Communications
8,489
3,856
—
4,633
Total equity securities
$
9,413 $
4,477 $
— $
4,936
The carrying value and amortized cost of the Company’s investments in fixed maturities at December 31, 2024 and 2023 by contractual maturity were as follows. Actual maturities may differ from
contractual maturities
because issuers may call or prepay obligations with or without call or prepayment penalties.
2024
2023
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Due in one year or less
$
7,484
$
7,497
$
1,715
$
1,750
Due after one year through five years
62,722
64,703
60,423
62,423
Due after five years through ten years
32,820
35,552
33,596
36,752
Due after ten years
80,199
95,466
86,857
97,984
Asset backed securities
29,387
33,081
35,628
39,717
Totals
$
212,612
$
236,299
$
218,219
$
238,626
The following tables present the Company’s unrealized loss aging for securities by type and length of time the security was in a continuous
unrealized loss position as of December 31, 2024 and 2023.
2024
Less than 12 months
12 months or longer
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
U.S. Treasury securities and obligations of U.S. Government
agencies and authorities
$
3,753
$
33
$
16,136
$
2,111
$
19,889
$
2,144
Loan backed and structured securities
1,010
5
16,069
2,452
17,079
2,457
Obligations of states and political subdivisions
—
—
5,839
1,517
5,839
1,517
Corporate securities
18,510
755
125,930
17,723
144,440
18,478
Redeemable preferred stocks
188
5
—
—
188
5
Total temporarily impaired securities
$
23,461
$
798
$
163,974
$
23,803
$
187,435
$
24,601
2023
Less than 12 months
12 months or longer
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
U.S. Treasury securities and obligations of U.S. Government
agencies and authorities
$
4,197
$
17
$
15,639
$
1,934
$
19,836
$
1,951
Loan backed and structured securities
997
20
23,837
2,973
24,834
2,993
Obligations of states and political subdivisions
1,145
3
5,936
1,421
7,081
1,424
Corporate securities
539
13
138,283
15,310
138,822
15,323
Total temporarily impaired securities
$
6,878
$
53
$
183,695
$
21,638
$
190,573
$
21,691
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Analysis of Securities in Unrealized Loss Positions
As
of December 31, 2024 and 2023, there were 213 and 222 securities, respectively, in an unrealized loss position which primarily included certain of the Company’s investments in fixed maturities within the utilities and
telecom, financial services, other
diversified business and other diversified consumer sectors. The unrealized losses on the Company’s fixed maturity securities investments have been primarily related to general market changes in
interest rates and/or the levels of credit spreads
rather than specific concerns with the issuer’s ability to pay interest and repay principal.
For
any of its fixed maturity securities with significant declines in fair value, the Company performs detailed analyses to identify whether the drivers of the declines are due to general market drivers, such as the recent increases
in interest rates,
or due to credit-related factors. Identifying the drivers of the declines in fair value helps to align and allocate the Company’s resources to securities with real credit-related concerns that could impact the ultimate
collection of principal and
interest. For any significant declines in fair value determined to be non-interest rate or market related, the Company performs a more focused review of the related issuers’ specific credit profile.
For
corporate issuers, the Company evaluates their assets, business profile including industry dynamics and competitive positioning, financial statements and other available financial data. For non-corporate issuers, the
Company analyzes all reasonably
available sources of credit support, including issuer-specific factors. The Company utilizes information available in the public domain and, for certain private placement issuers, from consultations with
the issuers directly. The Company also
considers ratings from Nationally Recognized Statistical Rating Organizations, as well as the specific characteristics of the security it owns including seniority in the issuer’s capital structure,
covenant protections, or other relevant features.
From these reviews, the Company evaluates the issuers’ continued ability to service the Company’s investment through payment of interest and principal.
Assuming no credit-related factors develop, unrealized gains and losses on fixed maturity securities are expected to diminish as investments near maturity. Based on its credit
analysis, the Company believes that the issuers of
its fixed maturity investments in the sectors shown in the table above have the ability to service their obligations to the Company. In addition, the Company does not intend to sell the
investments and it is not more likely than not that
the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.
However, from time to time the Company identifies certain available-for-sale fixed maturity securities where the amortized cost basis exceeds the present value of the cash flows
expected to be collected due to credit related
factors and as a result, a credit allowance will be estimated. The Company had no
ACL on its available-for-sale fixed maturities as of December 31, 2024 and 2023.
Investment income was earned from the following sources:
2024
2023
Fixed maturities
$
9,520
$
9,333
Equity securities
335
332
Other
191
646
10,046
10,311
Investment expenses
255
253
Net investment income
$
9,791
$
10,058
A summary of realized investment gains (losses) follows:
2024
Fixed
Maturities
Equity
Securities
Other
Invested Assets
Total
Gains
$
19
$
—
$
1,193
$
1,212
Losses
(2)
—
—
(2)
Realized investment gains, net
$
17
$
—
$
1,193
$
1,210
2023
Fixed
Maturities
Equity
Securities
Other
Invested Assets
Total
Gains
$
70
$
—
$
—
$
70
Losses
—
—
—
—
Realized investment gains, net
$
70
$
—
$
—
$
70
38
Table of Contents
Proceeds from the sales of available-for-sale fixed maturities were as follows:
2024
2023
Sales proceeds
$
—
$
5,035
Gross gains
—
70
Gross losses
—
—
Proceeds from the sales of equity securities were as follows:
2024
2023
Sales proceeds
$
—
$
2
Gross gains
—
—
Gross losses
—
—
Proceeds from the sales of other invested assets were as follows:
2024
2023
Sales proceeds
$
2,510
$
—
Gross gains
1,193
—
Gross losses
—
—
Sales of available-for-sale securities in 2024 and 2023 were primarily a result of improving the
overall risk versus return profile of the portfolio. In addition, the Company sold its interest in a certain limited liability company
held as other invested assets to a third-party in 2024.
The following table presents the portion of unrealized gains (losses) related to equity securities still held for the years ended December 31, 2024
and 2023.
2024
2023
Net realized and unrealized losses recognized during the period on equity securities
$
(1,516)
$
(2,177)
Less: Net realized gains recognized during the period on equity securities sold during the period
—
—
Unrealized losses on equity securities, net
$
(1,516)
$
(2,177)
The Company’s bond portfolio included 99%
investment grade securities, as defined by the NAIC, at December 31, 2024 and 2023.
Variable Interest Entities
The Company holds passive interests in a number of entities that are considered to be variable interest entities (“VIEs”) under GAAP guidance. The
Company’s VIE interests principally consist of interests in limited
partnerships and limited liability companies formed for the purpose of achieving diversified equity returns. The Company’s VIE interests, carried as a part of other invested
assets, totaled $6,616 and $6,381
at December 31, 2024 and
2023, respectively. The Company’s VIE interests, carried as a part of investment in unconsolidated trusts, totaled $1,238
at December 31, 2024 and 2023.
The Company does not have power over the activities that most significantly impact the economic
performance of these VIEs and thus is not the primary beneficiary. Therefore, the Company has not consolidated these VIEs.
The Company’s involvement with each VIE is limited to its direct ownership interest in the VIE. The Company has no
arrangements with any of the VIEs to provide other financial support to or on behalf of the VIE. The Company’s
maximum loss exposure relative to these investments was limited to the carrying value of the Company’s investment in the VIEs, which
amount to $7,854 and $7,619,
at December 31, 2024 and 2023, respectively. As of December 31,
2024 and 2023, the Company had outstanding commitments totaling $2,200
and $4,518, respectively, whereby the Company is committed to fund these investments and may be called by the partnership during the
commitment period
to fund the purchase of new investments and partnership expenses. The reduction in the Company’s outstanding commitments was a result of an additional investment of $2,318 in
the partnership.
39
Table of Contents
Note 3.
Disclosures About Fair Value of Financial Instruments
The estimated fair values have been determined by the Company using available market information from various market sources and appropriate
valuation methodologies as of the respective dates. However, considerable
judgment is necessary to interpret market data and to develop the estimates of fair value. Although management is not aware of any factors that would significantly affect
the estimated fair value amounts, the estimates presented herein
are not necessarily indicative of the amounts which the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies
may have a material effect on the estimated fair
value amounts.
The following describes the fair value hierarchy and provides information as to the extent to which the Company uses fair value 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 1
Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. The Company’s financial instruments valued using
Level 1 criteria
include cash equivalents and exchange traded common stocks.
Level 2
Observable inputs, other than quoted prices included in Level 1, for an asset or liability or prices for similar assets or liabilities. The Company’s financial instruments valued using Level 2 criteria include
significantly most of its
fixed maturities, which consist of U.S. Treasury securities, U.S. Government securities, obligations of states and political subdivisions, and certain corporate fixed maturities, as well as its
non-redeemable preferred stocks. In
determining fair value measurements of its fixed maturities and non-redeemable preferred stocks using Level 2 criteria, the Company utilizes data from outside sources,
including nationally recognized pricing services and broker/dealers.
Prices for the majority of the Company’s Level 2 fixed maturities and non-redeemable preferred stocks were determined using unadjusted prices
received from pricing services that utilize models where the significant inputs are observable
(e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities) or can be corroborated by observable
market data.
Level 3
Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (including assumptions about risk). Fair value is based on criteria that use assumptions or other data that
are not readily
observable from objective sources. With little or no observable market, the determination of fair values uses considerable judgment and represents the Company’s best estimate of an amount that
could be realized in a market exchange for
the asset or liability. The Company’s financial instruments valued using Level 3 criteria consist of one equity security. As of December 31, 2024 and December 31, 2023,
the value of the equity security valued using Level 3 criteria was $189 and $185, respectively.
The equity security is not traded and is valued at cost. The use of different criteria or assumptions regarding data may
have yielded materially different valuations.
Recurring Fair Value Measurements
Cash Equivalents. The carrying amount approximates fair value
due to the short-term nature of the instruments.
Fixed Maturities and Common and Non-Redeemable Preferred Stocks. The
carrying amount is determined from publicly quoted market prices. Certain fixed maturities do not have publicly quoted values and consist solely of
issuances of pooled debt obligations of multiple, smaller financial services companies. They are
not actively traded and valuation techniques used to measure fair value are based on future estimated cash flows discounted at reasonable
estimated rates of interest. Other qualitative and quantitative information is also considered, as
applicable.
Nonrecurring Fair Value Measurements
Non-publicly Traded Invested Assets. The fair value of
investments in certain limited partnerships which are included in other invested assets on the consolidated balance sheet were determined by officers of those limited partnerships.
Policy Loans. Policy loans, which are categorized as Level 3
fair value measurements, are carried at the unpaid principal balances.
Junior Subordinated Debentures. The fair value is estimated
based on observable interest rates and yields for debt instruments having similar characteristics.
40
Table of Contents
As of December 31, 2024, financial instruments carried at fair value were measured on a recurring basis as summarized below:
Assets:
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant
Other Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Fixed maturities
$
— $
212,612 $
— $
212,612
Equity securities
7,711
—
189
7,900
Cash equivalents
14,948
—
—
14,948
Total
$
22,659 $
212,612 $
189 $
235,460
As of December 31, 2023, financial instruments carried at fair value were measured on a recurring basis as summarized below:
Assets:
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant
Other Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Fixed maturities
$
— $
218,219 $
— $
218,219
Equity securities
9,228
—
185
9,413
Cash equivalents
14,834
—
—
14,834
Total
$
24,062 $
218,219 $
185 $
242,466
The following table sets forth the carrying amount, estimated fair value and level within the fair value hierarchy of the Company’s financial
instruments as of December 31, 2024 and 2023.
Level in
2024
2023
Fair Value
Hierarchy(1)
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
Assets:
Cash and cash equivalents
Level 1
$
35,570
$
35,570
$
28,301
$
28,301
Fixed maturities
Level 2
212,612
212,612
218,219
218,219
Equity securities
(1)
7,900
7,900
9,413
9,413
Policy loans
Level 3
1,722
1,722
1,778
1,778
Liabilities:
Junior subordinated debentures, net
Level 2
33,738
35,443
33,738
33,670
Revolving credit facility
Level 2
4,023
4,023
3,019
3,019
(1) See the aforementioned information for a description of the fair value hierarchy as well
as a disclosure of levels for classes of these financial assets.
Note 4.
Allowance for Expected Credit Losses
Reinsurance Recoverables
The following table presents the balances of reinsurance recoverables, net of the allowance for expected credit losses, at December 31, 2024 and
2023, and the changes in the allowance for expected credit losses for the year
ended December 31, 2024 and 2023.
At and year ended December 31, 2024
Reinsurance Recoverables,
Net of Allowance for
Expected Credit Losses
Allowance for Expected
Credit Losses
Balance, beginning of period
$
21,103
$
61
Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2023
—
Current period change for estimated uncollectible reinsurance
(10)
Write-offs of uncollectible reinsurance recoverables
—
Balance, end of period
$
22,942
$
51
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Table of Contents
At and year ended December 31, 2023
Reinsurance Recoverables,
Net of Allowance for
Expected Credit Losses
Allowance for Expected
Credit Losses
Balance, beginning of period
$
25,913
$
—
Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2023
75
Current period change for estimated uncollectible reinsurance
(14)
Write-offs of uncollectible reinsurance recoverables
—
Balance, end of period
$
21,103
$
61
Insurance Premium and Other Receivables
The following table presents the balances of insurance premiums and other, net of the allowance for expected credit losses, at December 31, 2024 and
2023, and the changes in the allowance for expected credit losses for the
year ended December 31, 2024 and 2023.
At and year ended December 31, 2024
Insurance Premiums and
Other, Net of Expected
Credit Losses
Allowance for Expected
Credit Losses
Balance, beginning of period
$
23,690
$
217
Current period change for expected credit losses
(16)
Write-offs of uncollectible insurance premiums and other receivables
—
Balance, end of period
$
27,458
$
201
At and year ended December 31, 2023
Insurance Premiums and
Other, Net of Expected
Credit Losses
Allowance for Expected
Credit Losses
Balance, beginning of period
$
15,386 $
177
Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2023
—
Current period change for expected credit losses
40
Write-offs of uncollectible insurance premiums and other receivables
—
Balance, end of period
$
23,690 $
217
Note 5.
Deferred Policy Acquisition Costs
The following table presents a rollforward of deferred policy acquisition costs by segment for the years ended December 31.
2024
2023
American
Southern
Bankers
Fidelity
American
Southern
Bankers
Fidelity
Deferred policy acquisition costs:
Balance, beginning of year
$
2,700
$
41,150
$
2,401
$
39,880
Capitalization
8,498
9,139
8,689
9,320
Amortization
(8,332)
(8,313)
(8,390)
(8,050)
Balance, end of year
$
2,866
$
41,976
$
2,700
$
41,150
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Table of Contents
Note 6.
Internal-Use Software
On March 3, 2021, the Company entered into a hosting arrangement through a service contract with a third party software
solutions vendor to provide a suite of policy, billing, claim, and customer management services. The
software is managed, hosted, supported, and delivered as a cloud-based software service product offering (software-as-a-service). The initial
term of the arrangement, as amended, was three years. The arrangement was renewed in
March 2024 for an additional five years, with a subsequent renewal
term of five years.
Service fees related to the hosting arrangement are recorded as an expense in the Company’s condensed consolidated
statement of operations as incurred. Implementation expenses incurred related to third party professional
and consulting services have been capitalized. The Company will begin amortizing, on a straight-line basis over the expected remaining term
of the hosting arrangement, when the software is substantially ready for its intended use. The
Company incurred and capitalized implementation costs of $108
and $1,545 during the years ended December 31, 2024 and 2023, respectively. The Company has capitalized $4,675 and $4,567 in implementation costs
in other assets in
its condensed consolidated balance sheet as of December 31, 2024 and 2023, respectively. The Company expects the software will be substantially ready for its intended use during 2025. Accordingly, the Company has not recorded any
amortization expense related to software implementation costs for years ended December 31, 2024 and 2023.
Note 7.
Insurance Reserves and Policyholder Funds
The following table presents the Company’s reserves for life, accident and health, and property and casualty losses, claims and loss adjustment
expenses at December 31, 2024 and 2023.
Amount of
Insurance In Force, Net
2024
2023
2024
2023
Future policy benefits
Life insurance policies:
Ordinary life and annuities
$
49,467
$
50,040
$
165,856
$
172,907
Group life
19,129
11,917
809,896
633,017
68,596
61,957
$
975,752
$
805,924
Accident and health insurance policies
29,868
30,538
98,464
92,495
Unearned premiums
31,178
31,317
Losses, claims and loss adjustment expenses
93,707
87,478
Other policy liabilities
1,757
1,132
Total insurance reserves and policyholder funds
$
225,106
$
212,422
Annualized premiums for accident and health insurance policies were $82,730 and $84,127 at December 31, 2024 and 2023, respectively.
Future Policy Benefits
Liabilities for future benefits on life insurance policies and accident and health insurance policies are based on assumed investment yields,
mortality rates, disablement rates, benefit utilization rates, and lapse rates after giving
effect to possible risks of unexpected adverse claim experience. The mortality, morbidity, and lapse assumptions are based upon the Company’s experience
and incorporate a margin for adverse experience development. These
assumptions are modified as necessary to reflect anticipated trends and are generally established at contract inception. The interest rates assumed, which reflect future
investment yields at the time policies are issued, are generally: (i)
2.5% to 5.5% for issues prior to 1977, (ii) 5.5% to 7.0% for 1977 through 1979 issues, (iii) 9.0%
for 1980 through 1987 issues, (iv) 5.0%
to 7.0% for 1988 through 2009
issues, and (v) 3.0% to 4.0%
for 2010 through 2024 issues.
Loss and Claim Reserves
Loss and claim reserves represent estimates of projected ultimate losses and are based upon: (a) management’s estimate of ultimate 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. The
estimated liability is periodically reviewed by management and updated, with
changes to the estimated liability recorded in the statement of operations in the year in which such changes are known.
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Table of Contents
Activity in the liability for unpaid loss and claim reserves is summarized as follows:
2024
2023
Balance at January 1
$
87,478
$
87,484
Less: Reinsurance recoverable on unpaid losses
(14,678)
(17,647)
Net balance at January 1
72,800
69,837
Incurred related to:
Current year
112,393
113,246
Prior years
5,708(1)
1,418(2)
Total incurred
118,101
114,664
Paid related to:
Current year
64,300
67,484
Prior years
50,284
44,217
Total paid
114,584
111,701
Net balance at December 31
76,317
72,800
Plus: Reinsurance recoverable on unpaid losses
17,390
14,678
Balance at December 31
$
93,707
$
87,478
(1) Prior years’ development was primarily the result of unfavorable
development in the automobile liability line of business in the property and casualty operations due to frequency and severity in the inflationary factors, as well as
unfavorable development in the 2021 and 2022 accident years.
(2) Prior years’ development was primarily the result of unfavorable
development in the property and casualty operations predominately in the automobile liability line of business due to inflationary factors, partially offset by
favorable development in the Medicare supplement line of business in the
life and health operations.
Following is a reconciliation of total incurred losses to total insurance benefits and losses incurred:
2024
2023
Total incurred losses
$
118,101
$
114,664
Cash surrender value and matured endowments
1,225
1,323
Benefit reserve changes
6,505
6,513
Total insurance benefits and losses incurred
$
125,831
$
122,500
Liability for Unpaid Losses, Claims and Loss Adjustment Expenses
The following is information, by significant product lines, about incurred and paid claims development as of December 31, 2024, net of
reinsurance, as well as the cumulative number of reported claims and the total of IBNR
reserves plus expected development on reported claims included within the net incurred claims amounts. The information presented for the years ended December
31, 2015 and prior is presented as supplementary information and is
unaudited.
Medicare Supplement
For the Years Ended December 31,
As of December 31,
2024
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of
Reinsurance
IBNR
Reserves
Cumulative
Number of
Reported
Claims
Accident Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015
$
55,482
$
54,939
$
54,993
$
54,990
$
54,984
$
54,985
$
54,985
$
54,985
$
54,985
$
54,985
$
—
898
2016
58,849
59,851
63,226
63,225
63,221
63,221
63,221
63,221
63,221
—
1,037
2017
67,960
69,655
69,643
69,635
69,633
69,633
69,632
69,633
—
1,512
2018
79,140
80,404
80,361
80,357
80,351
80,348
80,348
—
2,052
2019
88,765
87,028
86,988
86,986
86,980
86,978
—
2,246
2020
75,857
75,715
75,730
75,730
75,708
—
1,853
2021
65,267
61,579
61,785
61,740
14
1,771
2022
58,777
56,047
55,970
50
2,107
2023
48,367
47,029
234
2,159
2024
43,708
12,208
1,769
$
639,320
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Table of Contents
Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015
$
45,430
$
54,876
$
54,993
$
54,990
$
54,984
$
54,985
$
54,985
$
54,985
$
54,985
$
54,985
2016
49,165
59,747
63,226
63,225
63,221
63,221
63,221
63,221
63,221
2017
57,696
69,517
69,643
69,635
69,633
69,633
69,633
69,633
2018
66,565
80,222
80,361
80,355
80,351
80,348
80,348
2019
72,333
86,856
86,978
86,985
86,980
86,978
2020
63,129
75,527
75,710
75,715
75,708
2021
50,197
61,350
61,733
61,726
2022
46,111
55,808
55,920
2023
36,388
46,795
2024
31,500
$
626,814
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance
$
12,506
The cumulative number of reported claims for the Medicare Supplement line of business is the number of distinct claims incurred and submitted to
the Centers for Medicare and Medicaid Services (or its designee) for payment
in the given year. Multiple payments on the same claim are not counted in the claim frequency data. For Medicare Supplement policies, the estimated ultimate claims
incurred, using claims data reported during each month of any given
year, are calculated using the chain ladder method. Because claim patterns vary significantly during the year, this method is modified to reflect claim experience over the
corresponding four-month period prior to the statement date
during the prior two calendar years, and recent claim experience during a twelve-month period from sixteen months prior to the valuation date through five months prior to the valuation
date. Additional adjustments to the estimated
ultimate claims incurred are then applied to account for seasonal changes in claim experience and changes in the rate of claim processing. The liability for Medicare Supplement claims that are
Incurred but Not Reported (the IBNR) is
calculated by subtracting both paid claims through the valuation date and claims in the course of settlement as of the valuation date from the estimated ultimate claims. Thirty-six months of loss data are used to develop the estimated
ultimate incurred claims. For other accident and health products and life products,
similar approaches are used and modified to reflect the unique aspects of the products.
Automobile Liability
For the Years Ended December 31,
As of December 31,
2024
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of
Reinsurance
IBNR
Reserves
Cumulative
Number of
Reported
Claims
Accident Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015
$
18,521
$
19,857
$
20,017
$
20,007
$
20,086
$
20,680
$
20,849
$
20,955
$
21,021
$
21,016
$
—
3,537
2016
20,549
21,275
21,846
22,388
22,245
22,310
22,448
22,448
22,448
—
3,863
2017
22,179
24,212
23,766
25,180
26,009
26,153
26,231
26,254
1
3,813
2018
24,284
25,682
27,338
30,013
30,464
31,135
31,170
109
3,651
2019
25,241
24,045
25,724
28,042
28,513
29,216
71
3,608
2020
22,416
16,442
20,137
21,164
21,459
163
2,523
2021
25,887
21,172
24,957
27,041
733
2,791
2022
28,860
27,293
31,633
2,446
2,918
2023
33,266
33,626
3,710
2,910
2024
34,105
15,837
2,450
$
277,968
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Table of Contents
Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015
$
6,226
$
11,878
$
14,938
$
17,612
$
19,557
$
20,234
$
20,726
$
20,904
$
21,021
$
21,016
2016
6,796
13,141
16,397
19,613
21,408
21,809
22,448
22,448
22,448
2017
7,401
16,317
20,221
22,778
25,023
25,712
26,222
26,249
2018
6,989
15,647
21,121
24,662
27,671
29,201
30,507
2019
7,305
14,694
19,384
22,868
26,126
28,778
2020
5,172
9,941
14,693
18,133
20,466
2021
6,242
13,918
19,230
24,798
2022
7,023
18,010
24,137
2023
9,068
22,232
2024
8,939
$
229,570
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance
$
48,398
Automobile Physical Damage
For the Years Ended December 31,
As of December 31, 2024
Incurred Losses, Claims and Allocated Loss Adjustment Expenses,
Net of Reinsurance
IBNR
Reserves
Cumulative
Number of
Reported
Claims
Accident Year
2020
2021
2022
2023
2024
2020
$
10,288
$
10,080
$
10,047
$
10,024
$
10,013
$
4
1,645
2021
14,296
13,385
13,305
13,329
2
1,913
2022
10,962
10,648
10,564
3
1,772
2023
6,460
6,485
13
1,591
2024
7,418
135
1,542
$
47,809
Cumulative Paid Losses, Claims and Allocated Loss Adjustment
Expenses, Net of Reinsurance
Accident Year
2020
2021
2022
2023
2024
2020
$
8,347 $
9,952 $
10,008 $
9,992 $
9,973
2021
11,993
13,277
13,257
13,302
2022
8,475
10,368
10,528
2023
5,397
6,340
2024
5,864
$
46,007
All outstanding liabilities before 2020, net of reinsurance
6
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance $
1,808
General Liability
For the Years Ended December 31,
As of December 31,
2024
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of
Reinsurance
IBNR
Reserves
Cumulative
Number of
Reported
Claims
Accident Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015
$
4,421
$
1,037
$
1,227
$
1,044
$
867
$
855
$
855
$
870
$
870
$
871
$
4
150
2016
3,119
1,148
736
608
621
619
620
620
620
—
94
2017
1,490
488
513
738
738
839
777
777
—
84
2018
1,656
333
198
128
183
183
193
2
77
2019
1,916
707
455
515
909
516
19
98
2020
2,223
670
657
363
793
45
91
2021
2,567
1,329
1,328
1,267
33
105
2022
2,770
2,380
2,530
408
135
2023
2,887
1,445
528
116
2024
3,139
1,834
86
$
12,151
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Table of Contents
Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015
$
98
$
259
$
464
$
664
$
863
$
855
$
855
$
854
$
854
$
855
2016
116
203
568
608
617
619
620
620
620
2017
75
136
365
556
696
741
777
777
2018
65
90
115
128
183
183
185
2019
41
209
242
354
404
433
2020
208
385
462
539
593
2021
364
646
813
1,178
2022
402
1,169
1,622
2023
125
399
2024
239
$
6,901
All outstanding liabilities before 2015, net of reinsurance
208
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance
$
5,458
Surety
For the Years Ended December 31,
As of December 31,
2024
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of
Reinsurance
IBNR
Reserves
Cumulative
Number of
Reported
Claims
Accident Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015
$
1,902
$
1,630
$
1,400
$
1,359
$
1,406
$
1,310
$
1,307
$
1,280
$
1,279
$
1,279
$
—
50
2016
3,314
1,812
1,865
1,876
1,865
1,678
1,670
1,666
1,660
—
47
2017
4,677
3,671
3,799
3,629
3,514
3,440
3,448
3,403
2
67
2018
3,528
1,938
1,381
956
767
750
750
—
64
2019
2,130
657
630
513
507
439
—
32
2020
2,263
574
465
460
402
—
23
2021
2,936
1,455
1,497
1,475
—
36
2022
3,202
2,339
2,296
32
51
2023
2,634
1,627
12
122
2024
2,324
1,402
33
$
15,655
Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015
$
641 $
856 $
1,127 $
1,125 $
1,128 $
1,271 $
1,273 $
1,279 $
1,279 $
1,279
2016
1,054
1,732
1,772
1,873
1,862
1,677
1,670
1,666
1,660
2017
1,971
3,255
3,523
3,545
3,442
3,402
3,400
3,394
2018
1,157
1,454
1,361
941
760
749
748
2019
259
395
568
446
444
439
2020
97
460
464
459
400
2021
156
803
1,496
1,475
2022
970
2,191
2,180
2023
98
1,602
2024
392
$
13,569
All outstanding liabilities before 2015, net of reinsurance
78
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance $
2,164
For the property and casualty lines of business, the number of claims presented above equals the number of occurrences by type of claim reported
to the Company. The number of claims reported during a given year
corresponds to the number of claims records opened during the year. Frequency information is maintained on a cumulative basis by accident year by line of business. For automobile
claims, a claim count is separately maintained for
bodily injury, property damage and physical damage claims. The Company has consistently monitored claim frequency on this basis, and believes this provides more meaningful information than using
claimant count which can change
over the course of settling a claim.
In general, when a claim is reported, claims representatives establish a “case reserve” for the estimated amount of the ultimate payment based on
the known information of the claim at that time. Claims managers review and
monitor all property and casualty claims in excess of $25,000.
As new information becomes available or payments are made on a claim, the case reserve is adjusted to reflect the revised estimate of the ultimate amount to be paid out.
Estimates and assumptions pertaining to individual claims are based on
complex and subjective judgments and subject to change at any time as new information becomes available.
47
Table of Contents
In addition to case reserves, IBNR reserves are established to provide for claims which have not been reported to the Company as of the reporting
date as well as potential adverse development on known case reserves. IBNR
reserve estimates are derived through a number of analytical techniques. Actuarial data is analyzed by line of business, coverage and accident year. Qualitative factors
are also considered in determining IBNR reserves and include such
factors as judicial decisions, general economic trends such as inflation, changes in policy forms, and underwriting changes. Reserves are reviewed quarterly and any indicated
adjustments are made.
Because of the inherent uncertainties in establishing both case and IBNR reserves, ultimate loss experience may prove better or worse than
indicated by the combined claim reserves. Adjustments to claim reserves are reflected
in the period recognized and could increase or decrease earnings for the period.
The following is supplementary information about average historical claims duration as of December 31, 2024.
Average Annual Percentage Payout of Incurred Claims by Age, Net of Subrogation and Reinsurance (Unaudited)
Reserve Line
1st Year
2nd Year
3rd Year
4th Year
5th Year
6th Year
7th Year
8th Year
9th Year
10th Year
Medicare Supplement
80.9%
17.8%
0.2%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Automobile Liability
25.8%
29.6%
17.3%
13.8%
9.6%
4.3%
2.8%
0.3%
0.3%
0.0%
Automobile Physical Damage
83.2%
14.5%
0.6%
0.1%
-0.2%
0.0%
0.0%
0.0%
0.0%
0.0%
General Liability
16.8%
20.0%
21.5%
17.3%
14.6%
2.2%
1.5%
0.0%
0.0%
0.1%
Surety
48.5%
49.5%
13.2%
11.4%
-7.1%
-0.7%
-0.1%
0.0%
-0.2%
0.0%
The reconciliation of the net incurred and paid claims development tables to the liability for losses, claims and loss adjustment expenses is as
follows:
December 31, 2024
Net outstanding liabilities
Medicare supplement
$
12,506
Automobile liability
48,398
Automobile physical damage
1,808
General liability
5,458
Surety
2,164
Other short-duration insurance lines
3,778
Liabilities for unpaid losses, claims and loss adjustment expenses, net of reinsurance
74,112
Reinsurance recoverable on unpaid losses:
Medicare supplement
8,788
Automobile liability
5,493
Automobile physical damage
—
General liability
3,109
Other short-duration insurance lines
—
Total reinsurance recoverable on unpaid losses
17,390
Unallocated claims adjustment expenses
2,205
Total gross liability for unpaid losses, claims and loss adjustment expenses
$
93,707
Note 8.
Reinsurance
In accordance with general practice in the insurance industry, portions of the life, property and casualty insurance written by the Company are
reinsured; however, the Company remains liable with respect to reinsurance ceded
should any reinsurer be unable or unwilling to meet its obligations. Approximately 99.8% of the Company’s reinsurance recoverables were due from a single reinsurer as of December 31, 2024. Reinsurance recoverables of $22,887
were due from General Re Corporation, rated “AA+” by Standard & Poor’s and “A++” (Superior) by A.M. Best. Allowances for uncollectible amounts are established against
reinsurance recoverables, if appropriate.
48
Table of Contents
Property and Casualty Operations
American 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: Inland marine and commercial
automobile physical damage - $225,000
excess of $125,000 retention; and automobile liability and general liability - excess coverage of $2.0 million less retentions that may vary from $150,000
to $500,000 depending on the account.
American Southern maintains a property catastrophe treaty with a $5.5 million limit excess of $500,000
retention. American Southern also issues individual surety bonds with face amounts generally up to $1.5 million, and limited to
$5.0 million in aggregate per account, that are not reinsured.
Life and Health Operations
Bankers Fidelity has entered into reinsurance contracts ceding the excess of its life retention. Maximum retention by Bankers
Fidelity on any one individual life insurance policyholder is $200,000. As of December 31, 2024,
$7.2 million of the $975.8 million of
life insurance in force at Bankers Fidelity was reinsured under a combination of coinsurance and yearly renewable term agreements. Certain prior year reinsurance agreements also remain in force
although they no longer provide reinsurance for
new business.
Bankers Fidelity has also entered into a reinsurance contract ceding excess new Medicare Supplement business to General Re Life
Corporation. Ceding thresholds are set annually. During 2024, the liability of the reinsurer was
50% of all new Medicare Supplement
business issued by the Company on amounts up to a maximum retention of $15.0 million of annualized premium. Accordingly, $5.1 million of the Company’s $10.1
million of new annualized
Medicare Supplement premium was ceded.
The
effects of reinsurance on premiums written, premiums earned and insurance benefits and losses incurred were as follows:
For the Year Ended December 31, 2024
American
Southern
Bankers
Fidelity
Total
Direct premiums written
$
45,837
$
164,141
$
209,978
Assumed premiums written
27,833
9
27,842
Ceded premiums written
(5,979)
(53,236)
(59,215)
Net premiums written
$
67,691
$
110,914
$
178,605
Direct premiums earned
$
46,149
$
164,282
$
210,431
Assumed premiums earned
27,519
9
27,528
Ceded premiums earned
(5,979)
(53,249)
(59,228)
Net premiums earned
$
67,689
$
111,042
$
178,731
Provision for benefits and losses incurred
$
58,024
$
109,349
$
167,373
Reinsurance loss recoveries
(2,257)
(39,285)
(41,542)
Insurance benefits and losses incurred
$
55,767
$
70,064
$
125,831
For the Year Ended December 31, 2023
American
Southern
Bankers
Fidelity
Total
Direct premiums written
$
49,580
$
166,093
$
215,673
Assumed premiums written
27,987
29
28,016
Ceded premiums written
(5,902)
(55,933)
(61,835)
Net premiums written
$
71,665
$
110,189
$
181,854
Direct premiums earned
$
46,349
$
166,368
$
212,717
Assumed premiums earned
27,996
7
28,003
Ceded premiums earned
(5,902)
(55,993)
(61,895)
Net premiums earned
$
68,443
$
110,382
$
178,825
Provision for benefits and losses incurred
$
52,899
$
110,995
$
163,894
Reinsurance loss recoveries
(1,884)
(39,510)
(41,394)
Insurance benefits and losses incurred
$
51,015
$
71,485
$
122,500
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Table of Contents
Components of reinsurance receivables at
December 31, 2024 and 2023 were as follows:
December 31, 2024
American
Southern
Bankers
Fidelity
Total
Recoverable on unpaid losses, net of allowance
$
8,602
$
8,788
$
17,390
Recoverable on unpaid benefits
—
4,607
4,607
Recoverable on paid losses
—
—
—
Ceded unearned premiums
—
608
608
Ceded advanced premiums
—
337
337
Total reinsurance receivables
$
8,602
$
14,340
$
22,942
December 31, 2023
American
Southern
Bankers
Fidelity
Total
Recoverable on unpaid losses, net of allowance
$
6,415
$
8,263
$
14,678
Recoverable on unpaid benefits
—
5,470
5,470
Recoverable on paid losses
—
108
108
Ceded unearned premiums
—
621
621
Ceded advanced premiums
—
226
226
Total reinsurance receivables
$
6,415
$
14,688
$
21,103
Note 9.
Income Taxes
Total income taxes were allocated as follows:
2024
2023
Total tax benefit on income
$
(996)
$
(394)
Tax expense (benefit) on components of shareholders’ equity:
Net unrealized income (losses) on investment securities
(689)
1,602
Total tax expense (benefit)
$
(1,685)
$
1,208
A reconciliation of the differences between income taxes computed at the federal statutory income tax rate and the income tax benefit is as
follows:
2024
2023
Federal income tax provision at the statutory rate
$
(1,105)
$
(119)
Statutory rate
21%
21%
Dividends-received deduction
(25)
(24)
Meals and entertainment
76
15
Vested stock and club dues
3
16
Parking disallowance
20
17
Adjustment for prior years’ estimates to actual
35
(299)
Income tax benefit
$
(996)
$
(394)
Effective tax rate
18.9%
69.7%
The primary difference between the effective tax rate and the federal statutory income tax rate for 2024 resulted from a permanent difference related to meals and entertainment.
Also contributing to differences between the
effective tax rate and the federal statutory income tax rate was the adjustment for prior years’ estimates to actual that are generally updated at the completion of the third quarter of each fiscal
year and were $35 in the year ended
December 31, 2024. Another contributing factor to the differences between the effective tax rate
and the federal statutory income tax rate was a permanent difference related to dividends-received deduction (“DRD”). The current
estimated DRD is adjusted as underlying factors change and can vary from estimates based on, but not limited to,
actual distributions from investments as well as the amount of the Company’s taxable income.
The primary difference between the effective tax rate and the federal statutory income tax rate for 2023 resulted from the adjustment for prior years’ estimates to actual of $299 in the year ended December 31, 2023, which
included the return to provision adjustment that is generally updated at the completion of the third
quarter of each fiscal year and an adjustment for partnership valuation. Also contributing to the differences between the effective tax rate
and the federal statutory income tax rate was a permanent difference related to meals and
entertainment.
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Table of Contents
Deferred tax assets and liabilities at December 31, 2024 and 2023 were comprised of the following:
2024
2023
Deferred tax assets:
Deferred acquisition costs
$
9,508
$
8,808
Net unrealized investment losses
4,350
3,342
Insurance reserves
3,139
2,898
Impaired assets
791
791
Bad debts and other
482
337
Net operating loss
1,940
559
Total deferred tax assets
20,210
16,735
Deferred tax liabilities:
Deferred and uncollected premiums
$
(2,092)
(1,053)
Total deferred tax liabilities
(2,092)
(1,053)
Net deferred tax asset
$
18,118
$
15,682
The components of income tax benefit were:
2024
2023
Current – Federal
$
751
$
2,727
Deferred – Federal
(1,747)
(3,121)
Total
$
(996)
$
(394)
The Company has formal tax-sharing agreements, and files a consolidated income tax return, with its subsidiaries. Tax years 2021, 2022 and 2023 are considered open tax years that remain subject to examination by the
Internal Revenue Service.
Note 10.
Credit Arrangements
Bank
Debt
On May 12, 2021, the Company entered into a Revolving Credit Agreement with Truist Bank as the lender (the “Lender”). The Revolving Credit Agreement provides for an unsecured $10,000 revolving credit facility that
originally matured on April 12, 2024. On March 22, 2024, the Company entered into a First Amendment (the “Amendment”) to its Revolving Credit Agreement (as amended, the “Credit Agreement”) with the Lender.
The Amendment,
among other things, (a) updates the interest rate provisions to memorialize that the Company pays interest on the unpaid principal balance of outstanding revolving loans at the Adjusted Term SOFR rate (as defined in the Credit
Agreement), plus 2.00%,
(b) extends the maturity date of the revolving credit facility to March 22, 2027, (c) requires the monthly payment of an unused
commitment fee of 0.2% of the unused facility amount, and (d) requires that the
Company maintain a consolidated net worth of not
less than $64,200. Except as modified by the Amendment, the existing terms of the original Credit Agreement remain in effect.
The Credit Agreement requires the Company to comply with certain covenants, including a debt-to-capital ratio that restricts the Company from incurring consolidated indebtedness
that exceeds 35% of the Company’s
consolidated capitalization at any time and maintaining a minimum consolidated net worth, as
previously mentioned. The Credit Agreement also contains customary representations and warranties and events of default. Events of
default include, among others, (a) the failure by the Company to pay any amounts owed under the Credit
Agreement when due, (b) the failure to perform and not timely remedy certain covenants, (c) a change in control of the Company
and (d) the occurrence of bankruptcy or insolvency events. Upon an event of default, the Lender may, among other
things, declare all obligations under the Credit Agreement immediately due and payable and terminate the revolving
commitments. As of December 31, 2024 and 2023, the Company had outstanding borrowings of $4,023 and $3,019, respectively,
under the Credit Agreement.
For the year ended 2024 and 2023, the Company incurred $283 and $200 in interest expense, respectively, on the revolving credit facility borrowing. During the year ended 2024 and 2023, the Company paid $9 and $0,
respectively, in fees on
the available unused amount of the revolving credit facility of $6,000. At December 31, 2024 and 2023, the effective interest rate
was 6.67% and 7.46%,
respectively.
Junior Subordinated Debentures
The 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 (“Junior Subordinated Debentures”) of the Company; and (iii) engaging in those
activities necessary or incidental thereto.
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Table of Contents
The outstanding $18,042 and $15,696 of Junior Subordinated Debentures mature on December 4, 2032
and May 15, 2033, respectively, are callable quarterly, in whole or in part, only at the option of the Company. Prior to July
1,
2023, the interest rate was based on 3-month LIBOR plus an applicable margin. Effective July 1, 2023, the interest rate is determined based on a reference rate of the 3-month SOFR plus applicable tenor spread of 0.26161% plus an
applicable margin, ranging from 4.00%
to 4.10%. At December 31, 2024, the effective interest rate was 8.82%.
The financial structure of each of Atlantic American Statutory Trust I and II, as of December 31, 2024 and 2023, was as follows:
Atlantic American
Statutory Trust I
Atlantic American
Statutory Trust II
JUNIOR SUBORDINATED DEBENTURES(1)(2)
Balance December 31, 2024
$
18,042 $
23,196
Less: Treasury debt(3)
—
(7,500)
Net balance December 31, 2024
$
18,042 $
15,696
Net balance December 31, 2023
$
18,042 $
15,696
Coupon rate
3-Month SOFR + 0.26161
spread adj + 4.00%
3-Month SOFR + 0.26161
spread adj + 4.10%
Interest payable
Quarterly
Quarterly
Maturity date
December 4, 2032
May 15, 2033
Redeemable by issuer
Yes
Yes
TRUST PREFERRED SECURITIES
Issuance date
December 4, 2002
May 15, 2003
Securities issued
17,500
22,500
Liquidation preference per security
$
1 $
1
Liquidation value
$
17,500 $
22,500
Coupon rate
3-Month SOFR + 0.26161
spread adj + 4.00%
3-Month SOFR + 0.26161
spread adj + 4.10%
Distribution payable
Quarterly
Quarterly
Distribution guaranteed by(4)
Atlantic American Corporation Atlantic American Corporation
(1) For each of the respective debentures, the Company has the right at any time, and from time to time, to defer
payments of interest 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 or pay any cash dividends or distributions on, or purchase, the Company’s common stock nor make
any principal,
interest or premium payments on or repurchase any debt securities that rank equally with or junior to the Junior Subordinated Debentures. The Company has the right at any time to dissolve each of the trusts and
cause the Junior
Subordinated Debentures 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 debt of the Parent and are effectively subordinated to all existing and future liabilities of its subsidiaries.
(3) In 2014, the Company acquired $7,500 of the Junior Subordinated Debentures.
(4) The Parent has guaranteed, on a subordinated basis, all of the obligations under the Trust Preferred Securities,
including payment of the redemption price and any accumulated and unpaid distributions to the extent of available
funds and upon dissolution, winding up or liquidation.
Note 11.
Leases
The Company has two operating
lease agreements, each for the use of office space in the ordinary course of business. The original term of the first lease was to automatically renew on an annual basis and was amended on
December 26, 2024, when the Company and its subsidiary,
Bankers Fidelity Life Insurance Company, entered into a Second Amendment to Lease Agreement (the “Second Amendment”) with 4370 Peachtree LLC. The Second
Amendment amends the Lease Agreement, dated November 1, 2007, by and among the same parties
(as previously amended, the “Lease Agreement”), pursuant to which the Company leases space for its principal offices and for some
of its insurance operations in an office building located in Atlanta, Georgia. Pursuant to the Second Amendment, the
Lease Agreement was modified to increase the base rent payable by the Company, beginning January 1, 2025. The
Second Amendment also provides for rent adjustment on January 1, 2027, January 1, 2030 and each five years thereafter.
The original term of the second lease was ten years
and amended in January 2017 to provide for an additional seven years, with a termination date on September 30, 2026. The rate used in
determining the present value of lease
payments is based upon an estimate of the Company’s incremental secured borrowing rate commensurate with the term of the underlying lease.
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Table of Contents
These leases are accounted for as operating leases, whereby lease expense is recognized on a straight-line basis over the term of the lease. Lease
expense reported for each of the years ended December 31, 2024 and 2023 was
$1,014.
Additional information regarding the Company’s real estate operating leases is as follows:
Year Ended
December 31, 2024
Year Ended
December 31, 2023
Other information on operating leases:
Cash payments included in the measurement of lease liabilities reported in operating cash flows
$
1,065
1,048
Right-of-use assets included in other assets on the consolidated
balance sheet
5,225
2,614
Weighted average discount rate
6.8%
6.8%
Weighted average remaining lease term in years
7.9 years
2.9 years
The following table presents maturities and present value of the Company’s lease liabilities:
Lease Liability
2025
$
1,207
2026
1,066
2027
645
2028
645
2029
645
Thereafter
3,595
Total undiscounted lease payments
7,803
Less: present value adjustment
2,445
Operating lease liability included in accounts payable and accrued expenses
on the consolidated balance sheet
$
5,358
Note 12.
Benefit Plans
Equity Incentive Plan
On May 24, 2022, the Company’s shareholders approved the 2022 Equity and Incentive Compensation Plan (the “2022 Plan”). The 2022 Plan authorizes the grant of up to 3,000,000 stock options, stock appreciation rights,
restricted shares, restricted stock units, performance shares, performance units and other awards, and succeeded the
2012 Plan for the purpose of providing the Company’s non-employee directors, consultants, officers and other
employees incentives and rewards for performance and service.
During the year ended 2024 and 2023, there were no restricted shares issued under the 2022 Plan. The
estimated fair value of the restricted shares issued are based on the common stock price at date of grant. Stock grants are
generally issued from treasury shares. Vesting of restricted shares generally occurs after a one to three year period following the
date of grant. The Company accounts for forfeitures as they occur. There were no stock options granted or
outstanding under the
2022 Plan in 2024 and 2023.
Shares available for future grant under the 2022 Plan at December 31, 2023 and 2022 were 2,960,000.
401(k) Plan
The Company initiated an employees’ savings plan (the “Plan”) qualified under Section 401(k) of the Internal Revenue Code in May 1995. The Plan
covers substantially all of the Company’s employees. Effective January 1,
2009, the Company modified the Plan such that the Plan would operate on a safe harbor basis. Under the Plan, employees may defer up to 50% of their compensation, not to exceed the annual deferral limit. The Company’s total
matching contribution for 2024 and 2023 was $306 and $283, respectively, and
consisted of a contribution equal to 35% of up to the first 6% of each participant’s contributions. In addition to the matching contribution, the Company
also provided a 3% safe harbor non-elective contribution in 2024 and 2023 of $682 and $629, respectively. All contributions were made in cash. Participants are 100% vested in their own contributions and the vested percentage
attributable
to certain employer contributions is based on a five-year graded schedule.
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Table of Contents
Agent Stock Purchase Plan
The Company initiated a nonqualified stock purchase plan (the “Agent Stock Purchase Plan”) in May 2012. The purpose of the Agent Stock Purchase
Plan is to promote and advance the interests of the Company and its
shareholders by providing independent agents who qualify as participants with an opportunity to purchase the common stock of the Company. Under the Agent Stock Purchase Plan,
payment for shares of common stock of the Company
is made by either deduction from an agent’s commission payment or a direct cash payment. Stock purchases are made at the end of each calendar quarter at the then current market value.
Note 13.
Preferred Stock
The Company had 55,000 shares
of Series D preferred stock (“Series D Preferred Stock”) outstanding at December 31, 2024 and 2023, respectively. All of the shares of Series D Preferred Stock are held by an affiliate of the
Company’s controlling shareholder. The outstanding
shares of Series D Preferred Stock have a par value of $1 per share and a redemption 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 are cumulative. In certain circumstances, the shares of the Series D
Preferred Stock may be convertible into an aggregate of
approximately 1,378,000 shares of the Company’s common stock, subject to
certain adjustments and provided that such adjustments do not result in the Company issuing more than approximately 2,703,000
shares of common stock
without obtaining prior shareholder approval; and are redeemable solely at the Company’s option. The Series D Preferred Stock is not currently convertible. The Company had accrued, but unpaid, dividends, on the Series D
Preferred
Stock of $18 at December 31, 2024 and 2023. During each of 2024 and 2023, the Company paid Series D Preferred Stock
dividends of $399.
Note 14.
Loss Per Common Share
Basic loss per share was computed by dividing net loss available to common shareholders by the weighted average number of common shares
outstanding during the period. The computation of diluted loss per share reflected
the effect of potentially dilutive securities.
A reconciliation of the numerator and denominator of the loss per common share calculations is as follows:
For the Year Ended December 31, 2024
Loss
Weighted
Average Shares
Outstanding
(In thousands)
Per Share
Amount
Basic and Diluted Loss Per Common Share
Net loss before preferred stock dividends
$
(4,268)
20,400
-
Less preferred stock dividends
(399)
—
Net loss applicable to common shareholders
$
(4,667)
20,400
$
(0.23)
For the Year Ended December 31, 2023
Loss
Weighted
Average Shares
Outstanding
(In thousands)
Per Share
Amount
Basic and Diluted Loss Per Common Share
Net loss before preferred stock dividends
$
(171)
20,404
-
Less preferred stock dividends
(399)
—
Net loss applicable to common shareholders
$
(570)
20,404
$
(0.03)
The assumed conversion of the Company’s Series D Preferred Stock was excluded from the earnings per common share calculation for 2024 and 2023
since its impact would have been antidilutive.
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Table of Contents
Note 15.
Statutory Reporting
The assets, liabilities and results of operations have been reported on the basis of GAAP, which varies in some respects from statutory accounting
practices (“SAP”) prescribed or permitted by insurance regulatory authorities.
The principal differences between SAP and GAAP are that under SAP: (i) carrying value of certain investments differ on a GAAP versus SAP basis, such as fixed
maturities that are shown at amortized cost for SAP versus fair value for
GAAP (ii) certain assets that are non-admitted assets are eliminated from the balance sheet; (iii) acquisition costs for policies are expensed as incurred, while they are
deferred and amortized over the estimated life of the policies under
GAAP; (iv) the provision that is made for deferred income taxes is different than under GAAP; (v) the timing and methodology of establishing certain reserves is different than
under GAAP; (vi) reinsurance is shown net on balance
sheet for SAP and (vii) certain valuation allowances attributable to certain investments are required under SAP such as asset valuation reserve and interest maintenance reserve.
The Company meets the minimum capital requirements in the states in which it does business. The amount of reported statutory net income and
capital and surplus (shareholders’ equity) for the Parent’s insurance subsidiaries
for the years ended December 31 was as follows:
2024
2023
Bankers Fidelity, net income
$
1,359
$
7,017
American Southern, net income
1,442
3,964
Statutory net income
$
2,801
$
10,981
Bankers Fidelity, capital and surplus
$
32,443
$
38,299
American Southern, capital and surplus
47,670
51,774
Statutory capital and surplus
$
80,113
$
90,073
Under the insurance code of the state in which each insurance subsidiary is domiciled, dividend payments to the Parent by its insurance
subsidiaries are subject to certain limitations without the prior approval of the applicable
state’s Insurance Commissioner. The Parent received dividends of $9,000 and $8,400 in the years ended 2024 and 2023, respectively, from its subsidiaries. In 2025,
dividend payments to the Parent by the insurance subsidiaries in
excess of $6,347 would require prior approval.
Note 16.
Related Party Transactions
In the normal course of business the Company has engaged in transactions with entities affiliated with the controlling shareholder of the Company.
These transactions include the leasing of office space, certain investing and
financing activities, as well as inconsequential administrative and consulting services. At December 31, 2024, two members of the Company’s board of directors, including the Company’s Chairman, President and Chief Executive
Officer, were considered to be affiliates of the majority
shareholder.
The Company leases approximately 49,586
square feet of office and covered garage space from one such controlled entity, 4370 Peachtree LLC. During the years ended December 31, 2024 and 2023, the Company paid $1,153
and $1,199, respectively, under this lease.
On December 26, 2024, the Company and its subsidiary, Bankers Fidelity Life Insurance Company, entered into a Second Amendment to
Lease Agreement (the “Second Amendment”) with 4370 Peachtree LLC. The Second
Amendment amends the Lease Agreement, dated November 1, 2007, by and among the same parties (as previously amended, the “Lease Agreement”), pursuant to which the
Company leases space for its principal offices and for some
of its insurance operations in an office building located in Atlanta, Georgia. Pursuant to the Second Amendment, the Lease Agreement was modified to increase the base rent payable by
the Company, beginning January 1, 2025. The
Second Amendment also provides for rent adjustment on January 1, 2027, January 1, 2030 and each five years thereafter.
Certain financing for the Company has also been provided by this entity in the form of an investment in the Series D Preferred Stock (See Note
13). During the years ended December 31, 2024 and 2023, the Company paid this
entity $399 in dividends on the Series D Preferred
Stock.
Certain members of the Company’s management and board of directors are shareholders and on the board of directors of Gray Media, Inc., formerly
Gray Television, Inc. (“Gray”). As of December 31, 2024 and 2023, the
Company owned 880,272 shares of Gray Class A common stock
and 106,000 shares of Gray common stock. The aggregate carrying value of these investments in Gray at December 31, 2024 and 2023
was $6,751 and $8,490,
respectively.
In each of the years ended December 31, 2024 and 2023, Gray paid the Company approximately $2,173 and $2,050 in insurance premiums related to certain
voluntary employee benefit plans.
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Table of Contents
Note 17.
Segment Information
The Parent’s primary insurance subsidiaries operate with relative autonomy and each company is evaluated based
on its individual performance. American Southern operates in the property and casualty insurance market, while
Bankers Fidelity operates in the life and health insurance market. Each segment derives revenue from the collection of premiums, as
well as from investment income. The Company’s strategy is to focus on well-defined geographic,
demographic and/or product niches within the insurance marketplace. Substantially all revenue other than that in the corporate and other segment is
from external sources.
The Company adopted ASU No. 2023-07, Segment Reporting- An Amendment for Improvements to Reportable Segment
Disclosures (Topic 280) in December 2024. The most significant provision was for the Company to
disclose significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”). Our CODM is the Company’s
Chairman, President and Chief Executive Officer. The segment’s most significant
expenses include insurance benefits and losses incurred and other expenses, such as commissions and underwriting. Interest expense at the segment level is
insignificant. To assess profitability on a reportable segment basis, the CODM
reviews income (loss) before income taxes.
For the Year Ended December 31, 2024
American
Southern
Bankers
Fidelity
Corporate
& Other
Adjustments
& Eliminations
Consolidated
Insurance premiums, net
$
67,689
$
111,042
$
—
$
—
$
178,731
Insurance benefits and losses incurred
55,767
70,064
—
—
125,831
Expenses deferred
(8,498)
(9,139)
—
—
(17,637)
Amortization and depreciation expense
8,390
8,357
1
—
16,748
Other expenses
15,673
42,660
23,356
(13,140)
68,549
Total expenses
71,332
111,942
23,357
(13,140)
193,491
Underwriting income
(3,643)
(900)
—
—
(4,543)
Net investment income (loss)
4,151
5,544
3,705
(3,609)
9,791
Other income (loss)
5
6
9,531
(9,531)
11
Subtotal
513
4,650
(10,121)
—
(4,958)
Net realized gains
666
544
—
—
1,210
Unrealized losses on equity securities
(291)
(1,039)
(186)
—
(1,516)
Income (loss) before income taxes
$
888
$
4,155
$
(10,307)
$
—
$
(5,264)
Total revenues
$
72,220
$
116,097
$
13,050
$
(13,140)
$
188,227
Intangibles
$
1,350
$
1,194
$
—
$
—
$
2,544
Total assets
$
147,214
$
210,819
$
144,522
$
(109,127)
$
393,428
For the Year Ended December 31, 2023
American
Southern
Bankers
Fidelity
Corporate
& Other
Adjustments
& Eliminations
Consolidated
Insurance premiums, net
$
68,443
$
110,382
$
—
$
—
$
178,825
Insurance benefits and losses incurred
51,015
71,485
—
—
122,500
Expenses deferred
(8,689)
(9,320)
—
—
(18,009)
Amortization and depreciation expense
8,389
8,050
509
—
16,948
Other expenses
17,046
39,262
21,875
(12,264)
65,919
Total expenses
67,761
109,477
22,384
(12,264)
187,358
Underwriting income
682
905
—
—
1,587
Net investment income (loss)
4,507
5,755
3,325
(3,529)
10,058
Other income (loss)
7
7
8,738
(8,735)
17
Subtotal
5,196
6,667
(10,321)
—
1,542
Net realized gains (losses)
—
70
—
—
70
Unrealized losses on equity securities
(111)
(2,015)
(51)
—
(2,177)
Income (loss) before income taxes
$
5,085
$
4,722
$
(10,372)
$
—
$
(565)
Total revenues
$
72,846
$
114,199
$
12,012
$
(12,264)
$
186,793
Intangibles
$
1,350
$
1,194
$
—
$
—
$
2,544
Total assets
$
149,236
$
203,079
$
146,585
$
(117,635)
$
381,265
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Table of Contents
Note 18.
Commitments and Contingencies
Litigation
From time to time, the Company is, and expects to continue to be, involved in various claims and lawsuits incidental to and arising in the
ordinary course of its business. In the opinion of management, any such known claims
are not expected to have a material effect on the financial condition or results of operations of the Company.
Regulatory Matters
Like all domestic insurance companies, the Company’s insurance subsidiaries are subject to regulation and supervision in the jurisdictions in
which they do business. Statutes typically delegate regulatory, supervisory, and
administrative powers to state insurance commissioners. From time to time, and in the ordinary course of business, the Company receives notices and inquiries from
state insurance departments with respect to various matters. In the
opinion of management, any such known regulatory matters are not expected to have a material effect on the financial condition or results of operations of the Company.
Note 19.
Subsequent Events
On March 25, 2025, the Company announced that the board of directors declared an annual cash dividend of $0.02
per share of common stock that is payable to shareholders of record at the close of business on April 9,
2025.
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Table of Contents
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed
in our Securities Exchange Act of 1934 (the “Exchange Act”) reports is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is
accumulated and communicated to management, including the Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the
participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of
the Securities Exchange Act of 1934). Based on that evaluation, management, including the
Chief Executive Officer and Chief Financial Officer, concluded that disclosure controls and procedures were not effective as of that date due to the
previously identified and unremediated material weakness in internal control over
financial reporting described below.
Management’s Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting for the Company. The Company’s internal control over financial reporting system has been
designed to provide reasonable assurance regarding the reliability and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Management recognizes that there are
inherent limitations in the effectiveness of any internal control system. 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 become inadequate 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 statement preparation and presentation.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31,
2024 based upon the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in the updated 2013 Internal
Control – Integrated Framework. Based on that evaluation, management believes that internal control over financial reporting as such
term is defined in Exchange Act Rule 13a-15(f)
was not effective as of December 31, 2024, as a result of the previously identified and unremediated material weakness described below. A material weakness is a deficiency, or combination of
deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
As initially disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, we previously
identified certain deficiencies in internal control that we believe rise to the level of a material
weakness. Specifically, management determined that the design of the controls surrounding the process of reviewing insurance reserves and deferred
acquisition costs within the Company’s life and health segment was not effective.
This deficiency in design did not enable the timely detection of anomalies in these values at the level of precision necessary to detect misstated values that may be
material.
Notwithstanding these deficiencies, management believes that, because of the actions taken by management in
identifying, and the efforts that the Company has been taking to address and correct, these deficiencies prior to the
completion and filing of this Annual Report on Form 10-K, and the effective operation of other internal controls over financial
reporting, the material weakness did not result in any identified material misstatements to our financial
statements. Similarly, there were no changes to any of our historical financial statements.
Changes in Internal Control Over Financial Reporting
The Company’s remediation efforts of the previously identified material weakness, which began in the quarter ended
March 31, 2024, remained ongoing though the quarter ended December 31, 2024, and through the date
hereof. The Company has made significant progress in its remediation efforts, and during the quarter ended December 31, 2024, management conducted a
systematic review of the components of underwriting income for the Company’s
Life products. This review included independent calculations of actuarial values for these products using a comprehensive process that had been developed, tested, and
implemented during the quarter ended December 31, 2024. Based
on this review, management did not identify any material misstatement in the Company’s financial statements.
58
Table of Contents
In furtherance of the remediation efforts, the Company has continued the development of a system to perform
calculations independently of the actuarial models. This system is intended to verify that the product parameters
and actuarial assumptions are properly reflected in the reported values. The Company’s group whole life product has been implemented
on the system, which was used to validate the actuarial values for this product as of December 31,
2024. The Company currently expects that an extension of this system to accommodate other product lines the Company offers will be operational by
September 30, 2025. Full development and implementation of this system has
required more time than previously anticipated due to unforeseen complexities inherent in the actuarial software systems used to calculate and report the actuarial values.
These complexities have required additional effort to understand
and to replicate in this system, and to complete the remediation process
Inherent Limitations on Effectiveness of Controls
No system of controls, no matter how well designed and implemented, can provide absolute assurance that the objectives
of the system of controls are met. Furthermore, no evaluation of controls can provide absolute
assurance that all control issues and any instances of fraud within a company have been detected.
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of the Company’s independent registered public accounting
firm regarding internal control over financial reporting. Management’s report was not subject to attestation
by the Company’s independent registered public accounting firm pursuant to certain rules of the Securities and Exchange Commission that
exempt non-accelerated filers, including the Company, from such requirement.
Item 9B.
Other Information
None of the Company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended December 31, 2024, as such terms are
defined under
Item 408(a) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
59
Table of Contents
PART III
With the exception of certain information relating to the executive officers of the Company, which is provided in Part I hereof, the information relating to securities
authorized for issuance under equity compensation plans and
the information relating to the Company’s Code of Business Conduct and Ethics, each of which is included below, all information required by Part III (Items 10, 11, 12, 13 and 14 of Form
10-K) is incorporated by reference to the
sections entitled “Election of Directors,” “Security Ownership of Certain Beneficial Owners and Management,” “Delinquent Section 16(a) Reports” (if applicable), “Executive Compensation,” “Certain
Relationships and Related Person
Transactions" and “Ratification of the Appointment of the Company's Independent Registered Public Accounting Firm” to be contained in the Company’s definitive proxy statement in connection with the Company’s 2025
Annual
Meeting of Shareholders, to be filed with the SEC within 120 days of the Company’s fiscal year end.
Equity Compensation Plan Information
The following table sets forth, as of December 31, 2024, the number of securities issuable upon exercise of outstanding options, warrants and rights, the weighted average
exercise price thereof and the number of securities
remaining available for future issuance under the Company’s equity compensation plans:
Plan Category
Number of
Securities to Be
Issued Upon
Exercise of
Outstanding
Options,
Warrants
and Rights
Weighted-Average
Exercise Price
of Outstanding
Options,
Warrants
and Rights
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in the
First Column)
Equity compensation plans approved by security holders
— $
—
2,960,000
Equity compensation plans not approved by security holders(1)
—
—
—
Total
— $
—
2,960,000
(1)
All of the Company’s equity compensation plans have been approved by the Company’s shareholders.
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or
controller, or any persons performing similar functions,
as well as its directors and other employees. A copy of this Code of Business Conduct and Ethics has been filed as an exhibit to this annual report on Form 10-K.
60
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PART IV
Item 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 registrant
Schedule III - Supplementary insurance information of the registrant
Schedule IV - Reinsurance information for the registrant
Schedule VI - Supplemental information concerning property-casualty insurance operations of the registrant
Schedules other than those listed above are omitted as they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. Columns
omitted from schedules filed have been
omitted because the information is not applicable.
3.
Exhibits *:
3.1
Restated Articles of Incorporation of the registrant, as amended [incorporated by reference to Exhibit 3.1 to the registrant’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-K filed on March 4, 2016].
4.1
Description of the registrant’s common stock registered pursuant to section 12 of the Securities Exchange Act of 1934 [incorporated by reference to Exhibit 4.1 to the registrant’s Form
10-K filed on March 24,
2020].
10.01
Management Agreement, dated July 1, 1993, between the registrant and Atlantic American Life Insurance Company and Bankers Fidelity Life Insurance Company [incorporated by reference to
Exhibit 10.41 to
the registrant’s Form 10-Q for the quarter ended September 30, 1993].
10.02
Tax Allocation Agreement, dated as of January 4, 2016, between the registrant and the registrant’s subsidiaries [incorporated by reference to Exhibit 10.02 to the registrant’s Form
10-K for the year ended
December 31, 2017].
10.03**
Atlantic American Corporation 2012 Nonqualified Stock Purchase Plan [incorporated by reference to Exhibit 99.1 to 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 to the registrant’s Form 10-Q for the quarter ended March 31, 2013].
10.05
Lease Agreement, dated as of November 1, 2007, between Georgia Casualty & Surety Company, Bankers Fidelity Life Insurance Company, Atlantic American Corporation and Delta Life
Insurance Company
[incorporated by reference to Exhibit 10.10 to the registrant’s Form 10-K for the year ended December 31, 2007].
10.06
First Amendment to Lease Agreement, dated as of March 31, 2008, between Georgia Casualty & Surety Company, Bankers Fidelity Life Insurance Company, Atlantic American Corporation
and Delta Life
Insurance Company [incorporated by reference to Exhibit 10.2 to the registrant’s Form 10-Q for the quarter ended March 31, 2008].
10.07
Assignment and Assumption of Leases and Contracts, dated as of December 21, 2022, by and between Delta Life Insurance Company and 4370 Peachtree LLC [incorporated by reference to
Exhibit 10.07 to the
registrant’s Form 10-K filed on June 30, 2023].
10.09
Revolving Credit Agreement, dated as of May 12, 2021, as amended by that certain First Amendment to Revolving Credit Agreement, dated as of March 22, 2024, by and between Atlantic
American Corporation
and Truist Bank [incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K filed with the SEC on May 13, 2021].
10.10**
Atlantic American Corporation 2022 Equity and Incentive Compensation Plan [incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K filed on May 31, 2022].
10.11
Second Amendment to Lease Agreement, dated as of December 26, 2024, by and among 4370 Peachtree LLC, Atlantic American Corporation and Bankers Fidelity Life Insurance Company
[incorporated by
reference to Exhibit 10.1 to the registrant’s Form 8-K filed with the SEC on December 30, 2024].
14.1
Code of Business Conduct and Ethics [incorporated by reference to Exhibit 14.1 to the registrant’s Form 10-K for the year ended December 31, 2003].
19.1
Atlantic
American Corporation Insider Trading Policy
21.1
Subsidiaries of the registrant [incorporated by reference to Exhibit 21.1 to the registrant’s Form 10-K for the year ended December 31, 2015].
23.1
Consent of Forvis Mazars, 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.
61
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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.
97.1
Atlantic American Corporation Compensation Clawback Policy
101.INS
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH
Inline XBRL Taxonomy Extension Schema.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase.
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
*
The registrant agrees to furnish to the Commission upon request a copy of any instruments defining the rights of security holders of the registrant that may be omitted from filing in accordance with the
Commission’s rules and
regulations.
**
Management contract, compensatory plan or arrangement.
Item 16.
Form 10-K Summary
None.
62
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ATLANTIC AMERICAN CORPORATION
(Registrant)
By:
/s/ J. Ross Franklin
J. Ross Franklin
Vice President and Chief Financial Officer
Date: March 25, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature
Title
Date
/s/ Hilton H. Howell, Jr.
President, Chief Executive Officer and Chairman of the Board
(Principal Executive Officer)
March 25, 2025
HILTON H. HOWELL, JR.
/s/ J. Ross Franklin
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
March 25, 2025
J. ROSS FRANKLIN
/s/ Robin R. Howell
Director
March 25, 2025
ROBIN R. HOWELL
/s/ Mark E. Preisinger
Director
March 25, 2025
MARK E. PREISINGER
/s/ Joseph M. Scheerer
Director
March 25, 2025
JOSEPH M. SCHEERER
/s/ Scott G. Thompson
Director
March 25, 2025
SCOTT G. THOMPSON
/s/ D. Keehln Wheeler
Director
March 25, 2025
D. KEEHLN WHEELER
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Table of Contents
Schedule II
Page 1 of 3
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ATLANTIC AMERICAN CORPORATION
(Parent Company Only)
BALANCE SHEETS
ASSETS
December 31,
2024
2023
(In thousands)
Cash and cash equivalents
$
3,916
$
2,774
Investments
1,696
1,930
Investment in subsidiaries
109,127
117,637
Investments in unconsolidated trusts
1,238
1,238
Deferred tax asset, net
18,118
15,682
Income taxes receivable from subsidiaries
658
1,988
Other assets
9,874
6,733
Total assets
$
144,627
$
147,982
LIABILITIES AND SHAREHOLDERS’ EQUITY
Other payables
$
7,251
$
3,949
Revolving credit facility
4,023
3,019
Junior subordinated debentures obligations, net
33,738
33,738
Total liabilities
45,012
40,706
Shareholders’ equity
99,615
107,276
Total liabilities and shareholders’ equity
$
144,627
$
147,982
See accompanying report of independent registered public accounting firm.
64
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Schedule II
Page 2 of 3
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ATLANTIC AMERICAN CORPORATION
(Parent Company Only)
STATEMENTS OF OPERATIONS
Year Ended December 31,
2024
2023
(In thousands)
Revenue
Fee income from subsidiaries
$
9,531
$
8,738
Distributed earnings from subsidiaries
9,000
8,400
Unrealized losses on equity securities, net
(187)
(51)
Other
(159)
(455)
Total revenue
18,185
16,632
General and administrative expenses
16,073
15,336
Interest expense
3,419
3,269
(1,307)
(1,973)
Income tax benefit(1)
(2,314)
(4,802)
1,007
2,829
Equity in undistributed earnings of subsidiaries, net
(5,275)
(3,000)
Net loss
$
(4,268)
$
(171)
(1) Under the terms of a tax-sharing agreement, income tax provisions for the subsidiary companies are computed on a separate company
basis. Accordingly, the Company’s income tax benefit results from the utilization of the Parent’s
separate return loss to reduce the consolidated taxable income of the Company.
See accompanying report of independent registered public accounting firm.
65
Table of Contents
Schedule II
Page 3 of 3
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ATLANTIC AMERICAN CORPORATION
(Parent Company Only)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2024
2023
(In thousands)
Cash flows from operating activities:
Net loss
$
(4,268)
$
(171)
Adjustments to reconcile net income to net cash used in operating activities:
Unrealized losses on equity securities, net
187
51
Depreciation and amortization
190
509
Compensation expense related to share awards
11
119
Loss from equity method investees
—
294
Equity in undistributed earnings of subsidiaries, net
5,275
3,000
Decrease (increase) in intercompany taxes
1,330
(37)
Deferred income tax benefit
(1,748)
(3,123)
Increase (decrease) in accounts payable and accrued expenses
3,303
(181)
Other, net
(3,271)
(509)
Net cash provided by (used in) operating activities
1,009
(48)
Cash flows from investing activities:
Additions to property and equipment
(53)
(39)
Net cash used in investing activities
(53)
(39)
Cash flows from financing activities:
Payment of dividends on Series D preferred stock
(399)
(399)
Payment of dividends on common stock
(408)
(408)
Proceeds from revolving credit facility, net
1,000
1,000
Treasury stock acquired — net employee share-based compensation
(7)
(12)
Net cash provided by financing activities
186
181
Net increase in cash
1,142
94
Cash and cash equivalents at beginning of year
2,774
2,680
Cash and cash equivalents at end of year
$
3,916
$
2,774
Supplemental disclosure:
Cash paid for interest
$
3,445
$
3,227
Cash paid for income taxes
$
580
$
2,582
Intercompany tax settlement from subsidiaries
$
4,352
$
4,031
See accompanying report of independent registered public accounting firm.
66
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Schedule III
Page 1 of 2
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
Segment
Deferred
Acquisition
Costs
Future Policy
Benefits,
Losses,
Claims and
Loss
Reserves
Unearned
Premiums
Other Policy
Claims and
Benefits
Payable
(In thousands)
December 31, 2024:
Bankers Fidelity
$
41,976 $
124,357
$
2,420 $
1,757
American Southern
2,866
67,814
28,758
—
$
44,842 $
192,171(1) $
31,178 $
1,757
December 31, 2023:
Bankers Fidelity
$
41,150 $
116,141
$
2,561 $
1,132
American Southern
2,700
63,832
28,756
—
$
43,850 $
179,973(2) $
31,317 $
1,132
(1) Includes future policy benefits of $98,464
and losses and claims of $93,707.
(2) Includes future policy benefits of $92,495
and losses and claims of $87,478.
See accompanying report of independent registered public accounting firm.
67
Table of Contents
Schedule III
Page 2 of 2
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
Segment
Premium
Revenue
Net
Investment
Income
Benefits,
Claims,
Losses and
Settlement
Expenses
Amortization
of Deferred
Acquisition
Costs
Other
Operating
Expenses
Casualty
Premiums
Written
(In thousands)
December 31, 2024:
Bankers Fidelity
$
111,042
$
5,544
$
70,064
$
8,313
$
33,564
$
—
American Southern
67,689
4,151
55,767
8,332
7,234
67,692
Corporate & other
—
96
—
—
10,217
—
$
178,731
$
9,791
$
125,831
$
16,645
$
51,015
$
67,692
December 31, 2023:
Bankers Fidelity
$
110,382
$
5,755
$
71,485
$
8,050
$
29,942
$
—
American Southern
68,443
4,507
51,015
8,390
8,356
71,665
Corporate & other
—
(204)
—
—
10,120
—
$
178,825
$
10,058
$
122,500
$
16,440
$
48,418
$
71,665
See accompanying report of independent registered public accounting firm.
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Table of Contents
Schedule IV
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
REINSURANCE INFORMATION
Direct
Amount
Ceded to
Other
Companies
Assumed
From Other
Companies
Net
Amounts
Percentage
of Amount
Assumed
to Net
(Dollars in thousands)
Year ended December 31, 2024:
Life insurance in force
$
982,997
$
(7,245)
$
—
$
975,752
Premiums —
Bankers Fidelity
$
164,282
$
(53,249)
$
9
$
111,042
0.0%
American Southern
46,149
(5,979)
27,519
67,689
40.7%
Total premiums
$
210,431
$
(59,228)
$
27,528
$
178,731
15.4%
Year ended December 31, 2023:
Life insurance in force
$
814,241
$
(8,317)
$
—
$
805,924
Premiums —
Bankers Fidelity
$
166,368
$
(55,993)
$
7
$
110,382
0.0%
American Southern
46,349
(5,902)
27,996
68,443
40.9%
Total premiums
$
212,717
$
(61,895)
$
28,003
$
178,825
15.7%
See accompanying report of independent registered public accounting firm.
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Table of Contents
Schedule VI
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY-CASUALTY INSURANCE OPERATIONS
Claims and Claim
Adjustment
Expenses Incurred
Related To
Year Ended
Deferred
Policy
Acquisition
Costs
Reserves
Unearned
Premiums
Earned
Premiums
Net
Investment
Income
Current
Year
Prior
Years
Amortization
of Deferred
Acquisition
Costs
Paid Claims
and Claim
Adjustment
Expenses
Premiums
Written
(In thousands)
December 31, 2024
$
2,866
$
67,814
$
28,758
$
67,689
$
4,151
$
49,904
$
5,863
$
8,332
$
53,972
$
67,692
December 31, 2023
$
2,700
$
63,832
$
28,756
$
68,443
$
4,507
$
47,658
$
3,357
$
8,390
$
48,144
$
71,665
See accompanying report of independent registered public accounting firm.
70
Exhibit 10.11
SECOND AMENDMENT TO LEASE AGREEMENT
This amendment (“Second Amendment”) made and entered into as of this December 26, 2024 by and between
ATLANTIC AMERICAN CORPORATION AND BANKERS FIDELITY LIFE INSURANCE COMPANY-
(“Lessee”) and 4370 Peachtree LLC (assignee of Delta Life Insurance Co.) (“Lessor”).
WHEREAS, on November 1, 2007, Lessee and Lessor entered into a lease (“Lease”) for space (“Premises”) on the 3rd floor of the
building located at 4370 Peachtree Road, NE, Atlanta, Georgia, 30319.
NOW, THEREFORE, the parties hereto agree as follows:
1.
The following sentence is added after the first sentence in Section 3 (entitled Rent) of the Lease:
“Beginning January 1, 2025, the Rent will be adjusted to $12 per annum per square foot ($595,032 per year or $49,586 per month) for the
Retained Space of 49,586 square feet per Exhibit 10.2 of the First Amendment
to Lease Agreement dated the 31st of March 2008 .”
2.
Section 4 (entitled Rent Adjustment) in the Lease is deleted and replaced with the following:
“The Rent will be adjusted on January 1, 2027 in accordance with terms the parties find mutually agreeable. The Rent will be adjusted again
on January 1, 2030, and then each 5th year thereafter, in accordance with
terms the parties find mutually agreeable. In the absence of such an agreement, Rent shall continue at the then current rate until an agreeable Rent is negotiated”.
3.
The terms and provisions of the Lease, as amended hereby, shall be construed, and enforced in accordance with the laws of the State of Georgia. Signatures transmitted by email or digital signatures will be deemed, and will
have the same
legal force and effect as, an original. A photographic copy of the Lease and any amendments thereto (which are signed by the parties) will be effective as an original. Except as set forth in this Second
Amendment, the Lease will continue
in full force and effect. In the event of a conflict between this Second Amendment and the Lease, this Second Amendment will prevail.
Accepted & Agreed:
Lessor: 4370 PEACHTREE LLC
Lessee: ATLANTIC AMERICAN CORPORATION
By: /s/ Julie M. Myrick
By: /s/ J. Ross Franklin
Name: Julie M Wyrick
Name: J. Ross Franklin
Title: Manager
Title: Chief Financial Officer
Lessee: BANKERS FIDELITY LIFE INSURANCE COMPANY
By: /s/ C. McClure King
Name: C. McClure King
Title: President
Exhibit 19.1
Atlantic American Corporation
Insider Trading Policy
In order to take an active role in the prevention of insider trading violations by its directors, officers and
employees, Atlantic American Corporation and its subsidiaries (collectively, the “Company” or “Atlantic American”)
have adopted this
Insider Trading Policy (this “Policy”) and the procedures described herein.
1. Statement of Policy
Prohibition Against
Insider Trading. The Company welcomes its employees to be long term investors in the Company’s securities. Employees who do trade in the Company’s securities should do so on an occasional basis
consistent with an investment strategy that is
not intended, nor appears, to be speculating in the Company’s securities or engaging in day trading.
On occasion, certain employees will possess information that is not readily available to the public. Such information
may constitute material nonpublic information. In general, information is “material” if it would likely be
considered important by an investor who is deciding whether to buy or sell a security, or if the information is likely to have a significant
effect on the market price of the security. Both positive and negative information may be material.
“Materiality” is different for different companies. Information that is not material to Atlantic American may be material to another company.
“Nonpublic” information means information that has not been previously disclosed to the
general public and is otherwise not available to the general public.
No director, officer or employee of the Company shall buy or sell securities of the Company, any of its affiliates or
any other company, such as competitors, suppliers or business partners, based on or while in possession of
material nonpublic information about such entity.
Twenty-Twenty
Hindsight. Remember, if your securities transactions become the subject of scrutiny, they will be viewed after-the-fact with the benefit of hindsight. As a result, before engaging in any transaction, you should
carefully consider how
regulators and others might view your transaction in hindsight.
Tipping Information to
Others. Whether the information is proprietary information about Atlantic American or information that could have an impact on Atlantic American’s stock price, you must not pass the information on to
others or recommend the purchase or sale
of securities about which you have material nonpublic information.
Policy Applies to all
Employees. Insider trading restrictions are not limited to directors and officers; they apply to anyone who comes into possession of material nonpublic information about Atlantic American, our subsidiaries,
or other companies, such as our
customers, current and potential business partners and parties with which we may enter into potential transactions.
Atlantic American Corporation
Insider Trading Policy
Transactions by Family
Members. The very same restrictions apply to your family members and others living in your household. You are responsible for the compliance of your family members and others who live in your
household, or other individuals (who may live
elsewhere) or entities whose transactions in Atlantic American securities are under your control or influence.
2. Preclearance Group
For certain individuals within the Company, additional restrictions on trading will apply. These individuals,
collectively referred to in this Policy as the “Preclearance Group,” consist of:
(a)
Members of Atlantic American’s Board of Directors (the “Board”);
(b)
“Executive Officers” of Atlantic American as designated by the Board for purposes of Rule 3b-7 under the Securities Exchange Act of 1934 (the “Exchange
Act”) and identified under Item 401(b) of Regulation S-K
and any other officers from time to time determined to be subject to the reporting requirements of Section 16 (“Section 16”) of the Exchange Act;
(c)
Designated Atlantic American employees as may be identified from time to time by Atlantic American’s executive officers; and
(d)
All family members of the Preclearance Group. The general definition of family members includes any child, step-child, grandchild, parent, step-parent,
grandparent, spouse, sibling, father-in-law, mother-in-law, son-
in-law, daughter-in-law, brother-in-law, sister-in-law, and any adoptive relationships, where such family member is living in the same household with a member of the Preclearance
Group or a member of the
Preclearance Group has voting power or dispositive power over company stock held in the name of or for the benefit of the family member.
3. Trading Rules/Blackout Periods for Preclearance Group
(a)
The Preclearance Group may not trade in Atlantic American’s securities (other than as specified by this Policy) (i) during the period beginning on the
day that is fourteen (14) calendar days prior to the end of any fiscal
quarter or fiscal year end and ending at the start of the second full trading day following the public announcement of the Company’s earnings for that fiscal period by
Atlantic American or (ii) during any other
“blackout period” as designated by the Company’s Vice President, Chief Financial Officer and Secretary.
(b)
The blackout period trading prohibition applies to all transactions involving Atlantic American securities.
(c)
Note that at all times, the Preclearance Group remains subject to the prohibition against trading on the basis of material nonpublic information during
periods outside of the blackout periods.
(d)
The Preclearance Group may only trade in Atlantic American securities on an occasional basis consistent with an investment strategy such as not to
appear to be speculating in the Company’s securities or engaging in
day trading.
2
Atlantic American Corporation
Insider Trading Policy
(e)
The Preclearance Group must not engage in short selling of or trading in puts and calls in respect of Atlantic American securities or any other hedging
strategies.
4. Preclearance Procedure
The Preclearance Group must preclear all securities transactions involving Atlantic American common stock pursuant to
the Company’s preclearance process. This process requires the following:
(a)
Prior to commencing any transaction in the Company’s securities, each member of the Preclearance Group must contact the Vice President, Chief Financial
Officer and Secretary (or such other officer of the Company
as may be designated by the Board of Directors, the “Clearance Agent”) to seek authorization to proceed. Such authorization request to the Clearance Agent must be in writing and must
include the date of the proposed
transaction, the nature of the transaction (purchase, sale, gift or other stock related transaction), the number of shares of the Company’s securities to be involved or the approximate value of the
transaction.
(b)
The Clearance Agent will consider the request and respond in writing to the requesting party within two business days of receiving the request. Such
response shall be a written authorization or denial of the requesting
party’s proposed transaction.
Additionally, any Rule 10b5-1 plan (as defined below) that is intended to be entered into for the purpose of executing a
securities transaction must be submitted to the Clearance Agent for approval prior to the entry into such
Rule 10b5-1 plan.
5. Exceptions to the Prohibitions on Trading
The only exceptions to this Policy’s prohibitions on trading in the Company’s securities as outlined above are the
following:
(a)
Restricted Stock Awards – The acquisition of
shares of common stock upon vesting or granting of restricted stock or other stock awards or the exercise of a tax withholding right pursuant to which the Company
withholds shares of stock to satisfy tax withholding requirements upon the
vesting of any restricted stock or other stock awards; however, this exception does not include the subsequent sale of the shares acquired upon
vesting of restricted stock or other stock awards;
(b)
Stock Option Exercises – Exercises of stock
options for cash granted under the Company’s equity compensation plans; however, this exception does not include the subsequent sale of the shares acquired pursuant to
the exercise of a stock option;
(c)
Bona Fide Gifts – Bona fide gifts of securities
shall be deemed to be an exempt transaction for the purposes of this Policy. However, during any blackout period, the Preclearance Group must preclear all bona fide gifts
of securities with the Clearance Agent. Whether a gift is truly bona
fide will depend on the circumstances surrounding the specific gift. The more unrelated the donee is to the donor, the more likely the gift would be
considered “bona fide” and not a “transaction.” For example, gifts to charities, churches or
non-profit organizations generally are not deemed to be “transactions.” However, gifts to dependent children followed by the
sale of the gifted stock in close proximity to the time of the gift may imply some economic benefit to the donor and,
therefore, may be deemed to be a non-exempt transaction and not a bona fide gift;
3
Atlantic American Corporation
Insider Trading Policy
(d)
10b5-1 Plan Transactions – Transactions pursuant
to a previously established contract, plan or instruction to trade in Atlantic American’s securities (a “10b5-1 Plan”) entered in accordance with Rule 10b5-1 under the
Exchange Act, and approved by the Clearance Agent;
(e)
Domestic Relations Order – Any acquisition or
disposition of Atlantic American securities pursuant to a domestic relations order, as defined in the Internal Revenue Code or Title I of the Employee Retirement Income
Security Act, shall be deemed to be an exempt transaction for the
purposes of this Policy; and
(f)
Other Transactions – Any other purchase of
Company Securities from the Company or sales of Company Securities to the Company.
While these types of transactions are exceptions to this Policy’s prohibitions on trading in the Company’s securities, a
person subject to the reporting requirements of Section 16, or member of such person’s immediate family or
household contemplating such a transaction must preclear the proposed transaction with the Clearance Agent.
6. Certification of Policy by Preclearance Group
After reading this Policy, all members of the Preclearance Group must sign the certification attached to this Policy to
indicate you have read this Policy and agree to comply with the rules set forth herein.
7. Other Securities Matters
Officers, directors, and holders of 10 percent or more of the Company’s securities will be liable for “short-swing”
profits from purchases and sales of the Company’s securities under Section 16(b) of the Exchange Act. That
provision of the securities laws provides that any such person who makes both a purchase and sale or a sale and purchase of a company’s
securities within a period of six months must pay to that company the excess of the sale price
over the purchase price even if no real profits were made.
If an employee holds restricted securities, i.e., securities that cannot be resold by that employee unless registered under the Securities Act of 1933 (the “Securities Act”), sold pursuant to Rule 144 under the Securities Act, or
disposed of pursuant to
another exception from the registration requirements of the Securities Act, or if the person is an officer, director, or the owner of 10 percent or more of the company’s equity securities, he or she should consult
with the Vice President, Chief
Financial Officer and Secretary prior to effecting a purchase or sale of the Company’s securities.
8. Company Matters
From time to time, Atlantic American may engage in transactions in Atlantic American securities. It is Atlantic
American’s policy to comply with all applicable federal and state securities laws when engaging in transactions in
Atlantic American securities.
9. Policy Violations
The failure of any employee, or any Preclearance Group member, to comply with this Insider Trading Policy may result in
disciplinary action up to and including termination of employment with the Company. Such failures
may also subject the individual to significant civil or criminal penalties assessed by governmental agencies or courts of law for violations of federal,
state or local law.
4
Atlantic American Corporation
Insider Trading Policy
10. Post Service or Employment Transactions
The portions of this Policy relating to trading while in possession of
material non-public information and the use or disclosure of that information will continue to apply to transactions in Atlantic American securities even
after termination of employment or association with Atlantic American.
However, notwithstanding the preceding sentence, if you are a member of the Preclearance Group who is not a director or
officer subject to the reporting requirements of Section 16, the procedures set forth in this Policy related
to the Preclearance Group will cease to apply to your transactions in Atlantic American securities at the time your employment or other
relationship with Atlantic American ends. Directors will remain subject to procedures of the
Preclearance Group for a period of six months following the last day of service as a director of Atlantic American, and officers subject to the reporting
requirements of Section 16 will remain subject to procedures of the Preclearance
Group for a period of six months following the last day of employment with Atlantic American.
Any questions regarding this Policy should be directed to the Vice President, Chief Financial Officer and Secretary.
Adopted on March 25, 2025
5
Atlantic American Corporation
Certification of Insider Trading Policy
I, __________________________________________ have read and understand the Atlantic American Corporation Insider Trading
Policy. I agree to limit my securities trading activities to comply with the rules outlined in
that policy. I further understand that violations of that policy may result in civil or criminal liability and/or disciplinary action up to and including
the termination of employment.
Employee Signature
Print Employee Name
Job Title
Date
EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements on Form S‑8 (Nos. 333‑183207, 333‑183210, and 333‑265315)
of Atlantic American Corporation of our reports dated March 25, 2025, with respect to the
consolidated financial statements of Atlantic American Corporation, included in this Annual Report on Form 10‑K for the year ended December 31, 2024.
/s/ Forvis Mazars, LLP
Atlanta, Georgia
March 25, 2025
EXHIBIT 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, 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 material fact necessary to make the statements made, in
light of the circumstances under which such statements
were made, not misleading 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 in all material respects the financial
condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined 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 designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of registrant’s board of directors
(or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize
and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Date: March 25, 2025
/s/ Hilton H. Howell, Jr.
Hilton H. Howell, Jr.
President and Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, J. Ross Franklin, 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 material fact necessary to make the statements made, in
light of the circumstances under which such statements
were made, not misleading 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 in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined 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 designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of registrant’s board of directors
(or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Date: March 25, 2025
/s/ J. Ross Franklin
J. Ross Franklin
Vice President and
Chief Financial Officer
EXHIBIT 32.1
Certifications Pursuant to §906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of the
Annual Report on Form 10-K of Atlantic American Corporation (the “Company”) for the year
ended December 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the
Company 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 of operations of the Company as of the dates
and for the periods expressed in the Report.
Date: March 25, 2025
/s/ Hilton H. Howell, Jr.
Hilton H. Howell, Jr.
President and Chief Executive Officer
Date: March 25, 2025
/s/ J. Ross Franklin
J. Ross Franklin
Vice President and Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 97.1
ATLANTIC AMERICAN CORPORATION
Compensation Clawback Policy
Effective November 15, 2023
Purpose
As required pursuant to the listing standards of The Nasdaq Stock Market (the “Stock Exchange”), Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10D-1 under the Exchange
Act, the Board of Directors (the “Board”) of Atlantic American Corporation (the “Company”) has adopted this Compensation
Clawback Policy (the “Policy”) to empower the Company to recover Covered Compensation (as defined
below) erroneously awarded
to a Covered Officer (as defined below) in the event of an Accounting Restatement (as defined below).
Notwithstanding anything in this Policy to the contrary, at all times, this Policy remains subject to interpretation and operation in
accordance with the final rules and regulations promulgated by the U.S. Securities and Exchange
Commission (the “SEC”), the
final listing standards adopted by the Stock Exchange, and any applicable SEC or Stock Exchange guidance or interpretations issued from time to time regarding such Covered Compensation recovery
requirements (collectively, the “Final Guidance”). Questions regarding this Policy should be directed to the Company’s Chief Financial Officer.
Policy Statement
Unless a Clawback Exception (as defined below) applies, the Company will recover reasonably promptly from each Covered Officer the
Covered Compensation Received (as defined below) by such Covered Officer in the
event that the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under
the securities laws, including any required accounting
restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the
error were corrected in the current period or left
uncorrected in the current period (each, an “Accounting Restatement”). If
a Clawback Exception applies with respect to a Covered Officer, the Company may forgo such recovery under this Policy from such Covered Officer.
Covered Officers
For purposes of this Policy, “Covered Officer” is defined as any current or former “Section 16 officer” of the Company within the meaning of Rule 16a-1(f) under the Exchange Act, as determined by the Board or the
Compensation Committee of the Board
(the “Committee”). Covered Officers include, at a minimum, “executive officers” as defined in Rule 3b-7 under the Exchange
Act and identified under Item 401(b) of Regulation S-K.
Covered Compensation
For purposes of this Policy:
•
“Covered Compensation” is defined as the
amount of Incentive-Based Compensation (as defined below) Received during the applicable Recovery Period (as defined below) that exceeds the amount of Incentive-Based
Compensation that otherwise would have been Received during such Recovery
Period had it been determined based on the relevant restated amounts, and computed without regard to any taxes paid.
Incentive-Based Compensation Received by a Covered Officer will only qualify as Covered Compensation if: (i) it is Received on or
after October 2, 2023; (ii) it is Received after such Covered Officer begins service as a
Covered Officer; (iii) such Covered Officer served as a Covered Officer at any time during the performance period for such Incentive-Based Compensation; and
(iv) it is Received while the Company has a class of
securities listed on a national securities exchange or a national securities association.
For Incentive-Based Compensation based on stock price or total shareholder return, where the amount of erroneously awarded Covered
Compensation is not subject to mathematical recalculation directly from the
information in an Accounting Restatement, the amount of such Incentive-Based Compensation that is deemed to be Covered Compensation will be based on a reasonable estimate
of the effect of the Accounting
Restatement on the stock price or total shareholder return upon which the Incentive-Based Compensation was Received, and the Company will maintain and provide to the Stock Exchange documentation of the
determination
of such reasonable estimate.
•
“Incentive-Based Compensation” is defined
as any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a Financial Reporting Measure (as defined below). For purposes of clarity,
Incentive-Based Compensation includes compensation that is in
any plan, other than tax-qualified retirement plans, including long term disability, life insurance, and supplemental executive retirement plans, and any other
compensation that is based on such Incentive-Based Compensation, such as
earnings accrued on notional amounts of Incentive-Based Compensation contributed to such plans.
•
“Financial Reporting Measure” is defined as
a measure that is determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and any measures that are
derived wholly or in part from such measures. Stock price and total
shareholder return are also Financial Reporting Measures.
2
•
Incentive-Based Compensation is deemed “Received”
in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment or
grant of the Incentive-Based Compensation occurs after the end of that
period.
Recovery Period
For purposes of this Policy, the applicable “Recovery Period” is defined as the three completed fiscal years immediately preceding the Trigger Date (as defined below) and, if applicable, any transition period resulting from a
change in the Company’s fiscal
year within or immediately following those three completed fiscal years (provided, however, that if a transition period between the last day of the Company’s previous fiscal year end and the first day of
its new fiscal year comprises a period of
nine to 12 months, such period would be deemed to be a completed fiscal year).
For purposes of this Policy, the “Trigger Date” as of which the Company is required to prepare an Accounting Restatement is the earlier to occur of: (i) the date that the Board, applicable Board committee, or officers
authorized to take action if Board
action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare the Accounting Restatement or (ii) the date a court, regulator, or other legally authorized
body directs the Company to prepare the
Accounting Restatement.
Clawback Exceptions
The Company is required to recover all Covered Compensation Received by a Covered Officer in the event of an Accounting Restatement
unless (i) one of the following conditions are met and (ii) the Committee has made a
determination that recovery would be impracticable in accordance with Rule 10D-1 under the Exchange Act (under such circumstances, a “Clawback Exception” applies):
•
the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recovered (and the Company has already made a reasonable
attempt to recover such erroneously awarded Covered
Compensation from such Covered Officer, has documented such reasonable attempt(s) to recover, and has provided such documentation to the Stock Exchange);
•
recovery would violate home country law that was adopted prior to November 28, 2022 (and the Company has already obtained an opinion of home country counsel,
acceptable to the Stock Exchange, that recovery would
result in such a violation, and provided such opinion to the Stock Exchange); or
3
•
recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the
requirements of Section 401(a)(13) or Section 411(a) of
the Internal Revenue Code and regulations thereunder. For purposes of clarity, this Clawback Exception only applies to tax-qualified retirement plans and does not apply to other plans,
including long term disability, life
insurance, and supplemental executive retirement plans, or any other compensation that is based on Incentive-Based Compensation in such plans, such as earnings accrued on notional amounts of
Incentive-Based
Compensation contributed to such plans.
Prohibitions
The Company is prohibited from paying or reimbursing the cost of insurance for, or indemnifying, any Covered Officer against the loss
of erroneously awarded Covered Compensation.
Administration and Interpretation
The Committee will administer this Policy in accordance with the Final Guidance, and will have full and exclusive authority and
discretion to supplement, amend, repeal, interpret, terminate, construe, modify, replace and/or
enforce (in whole or in part) this Policy, including the authority to correct any defect, supply any omission or reconcile any ambiguity, inconsistency
or conflict in the Policy, subject to the Final Guidance. The Committee will review the
Policy from time to time and will have full and exclusive authority to take any action it deems appropriate.
The Committee will have the authority to offset any compensation or benefit amounts that become due to the applicable Covered Officers
to the extent permissible under Section 409A of the Internal Revenue Code of 1986, as
amended, and as it deems necessary or desirable to recover any Covered Compensation.
This Policy shall not preclude any other compensation recoupment or clawback policies, arrangements or provisions of the Company
(“Other Recovery Provisions”); to the extent recovery of compensation is achieved by the
Company under this Policy, there shall be no duplication of recovery under Other Recovery Provisions, except as may be required by law.
Each Covered Officer, upon being so designated or assuming such position, is required to execute and deliver to the Company’s Chief
Financial Officer an acknowledgment of and consent to this Policy, in a form reasonably
acceptable to and provided by the Company from time to time, (i) acknowledging and consenting to be bound by the terms of this Policy, (ii) agreeing to fully
cooperate with the Company in connection with any of such Covered
Officer’s obligations to the Company pursuant to this Policy, and (iii) agreeing that the Company may enforce its rights under this Policy through any and all reasonable means
permitted under applicable law as it deems necessary or
desirable under this Policy. For the avoidance of doubt, each Covered Officer will be fully bound by, and must comply with, this Policy, whether or not such Covered Officer has executed and
returned such acknowledgment and consent
form to the Company.
4
Disclosure
This Policy, and any recovery of Covered Compensation by the Company pursuant to this Policy that is required to be disclosed in the
Company’s filings with the SEC, will be disclosed as required by the Securities Act of
1933, as amended, the Exchange Act, and related rules and regulations, including the Final Guidance.
5
ATLANTIC AMERICAN CORPORATION
Compensation Clawback Policy Acknowledgment and Consent
The undersigned hereby acknowledges that he or she has received and reviewed a copy of the Compensation Clawback Policy (the “Policy”) of Atlantic American Corporation (the “Company”), effective as of November 15,
2023, as adopted by the Company’s Board of Directors.
Pursuant to such Policy, the undersigned hereby:
•
acknowledges that he or she has been designated as (or assumed the position of) a “Covered Officer” as defined in the Policy;
•
acknowledges and consents to the Policy;
•
acknowledges and consents to be bound by the terms of the Policy;
•
agrees to fully cooperate with the Company in connection with any of the undersigned’s obligations to the Company pursuant to the Policy; and
•
agrees that the Company may enforce its rights under the Policy through any and all reasonable means permitted under applicable law as the Company deems necessary or
desirable under the Policy.
ACKNOWLEDGED AND AGREED:
________________________________
Name: [NAME]
________________________________
Date: [DATE]
[Compensation Clawback Policy Acknowledgment and Consent]