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, 20202023


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, 2020,2023, the last business day of the registrant’s most recently completed second fiscal quarter, was $6,720,805.$7,887,231. 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 March 10, 2021February 29, 2024, there were 20,415,24320,402,288 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 20212024 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
PART I
Item 1.
1
The Company
1
Marketing
2
Underwriting
3
Policyholder and Claims Services
3
Reserves
4
Reinsurance
5
Competition
6
Ratings
6
Regulation
7
NAIC Ratios
7
Risk-Based Capital
7
Information Technology and Cybersecurity
8
Investments
8
Employees
9
Financial Information by Industry Segment
9
Available Information
9
Executive Officers of the Registrant
9
Forward-Looking Statements
10
Item 1A.
10
Item 1B.
10
Item 2.
10
Item 3.
11
Item 4.
11
   
PART II3
  
PART I

Item 1.
4

4

5

6

6

7

8

9

9

10

10

11

11

12

12

12

12
Item 1A.
13
Item 1B.
13
Item 1C.
13
Item 2.
14
Item 3.
14
Item 4.
14
PART II
Item 5.
12
15
Item 6.
12
15
Item 7.
13
16
Item 7A.
21
23
Item 8.
22
24
Item 9.
5358
Item 9A.
5358
Item 9B.
5359
Item 9C.
59
   
PART III
  
Item 10.
54
60
Item 11.
54
60
Item 12.
5460
Item 13.
54
60
Item 14.
5460
   
PART IV
  
Item 15.
5561
Item 16.
5662
63
64
67
69
70



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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, such as COVID-19; 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.

3
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, and 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:


BusinessCommercial 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 andand/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 businesscommercial 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 and general liability coverages.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, 
  2020  2019 
  (In thousands) 
Automobile liability 
$
30,312
  
$
30,649
 
Automobile physical damage  
18,730
   
15,309
 
General liability  
3,891
   
3,309
 
Surety  
5,857
   
6,319
 
Other lines  
3,582
   
3,094
 
Total 
$
62,372
  
$
58,680
 
  
Year Ended December 31,
 
  
2023
  
2022
 
  
(In thousands)
 
Automobile liability
 
$
38,821
  
$
33,981
 
Automobile physical damage
  
15,046
   
21,069
 
General liability
  
5,758
   
5,871
 
Surety
  
6,303
   
6,039
 
Other lines
  
2,515
   
3,316
 
Total
 
$
68,443
  
$
70,276
 


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 and term life insurance, Medicare supplement and other accident and health insurance products.


14
Life Insurance products include non-participating, term, individual and group whole life insurance policies with a variety of riders and options. Policy premiums are dependent upon a number of factors, including issue age, level of coverage and selected riders or options.


Medicare Supplement Insurance includes 8 of the 10 standardized Medicare supplement policies created under the Medicare Improvements for Patients and Providers Act of 2008 (“MIPPA”), which are designed to provide insurance coverage for certain expenses not covered by the Medicare program, including copayments and deductibles.


Other Accident and Health Insurance coverages include several individual and group policies providing for the payment of standard benefits in connection with the treatment of diagnosed cancer and other critical illnesses, as well as a number of other policies providing short-term nursing facility care, accident expense,only, hospital indemnity and disability coverages.


Health insurance products, primarily Medicare supplement insurance, accounted for 92%83% of Bankers Fidelity’s net earned premiums in 20202023 while life insurance, including both whole and term life insurance policies, accounted for the balance. In terms of the number of policies written in 2020, 83%2023, 63% were health insurance policies and 17%37% 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 followed by a brief description of the principal products:lines:


 Year Ended December 31, 
 2020  2019 
 (In thousands) 
Life insurance 
$
9,270
  
$
8,427
 
Medicare supplement  
102,680
   
107,001
 
Other accident and health  
9,217
   
7,817
 
Total health insurance  
111,897
   
114,818
 
Total 
$
121,167
  
$
123,245
 
  
Year Ended December 31,
 
  
2023
  
2022
 
  
(In thousands)
 
Life insurance
 
$
18,584
  
$
15,805
 
Medicare supplement
  
77,425
   
86,970
 
Other accident and health
  
14,373
   
12,389
 
Total health insurance
  
91,798
   
99,359
 
Total
 
$
110,382
  
$
115,164
 


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. American Southern solicits business through multiple channels.  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 arena of BankersWorksite,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 4,198approximately 4,639 licensed agents contracted in both senior marketthe individual and worksitegroup divisions as of December 31, 2020.2023. During 2020,2023, approximately 786454 of these licensed agents wrote policies on behalf of Bankers Fidelity.


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.


25
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 worksitegroup markets to the seniorindividual 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 worksitegroup 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 majority of theindividual 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.

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.


6
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 claims department customer service group or through Bankers Fidelity’s website.  Insureds covered underAll of these claims are entered into the system immediately upon receipt and put into a group policy may also file apending status until the claim directly on the Company’s website.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. With respect to life policies, the claim is entered into Bankers Fidelity’s claims system when the proper documentation is received. 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.


ReservesReserves


Reserves are set by line of business within each of the subsidiaries. At December 31, 2020,2023, approximately 69%73% of the losses and claims reserves related to property and casualty and approximately 31%27% 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.

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 incurred but not reported (“IBNR”) reservesIBNR 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.


7
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, 2023 actuarial review indicated that reserves could be as much as 16.9% lower or as much as 18.3% 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.

The Company’s policy is to record reserves for losses and claims in amounts which approximate 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, 2020 actuarial review indicated that reserves could be as much as 10.9% lower or as much as 2.0% 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 loss adjustment expense (“LAE”), and 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.

American Southern 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 IBNR claims based on past experience, and (c) estimates of LAE. If no value is determined to be more probable in estimating a loss after considering all factors, the Company’s general practice is to reserve at the higher end of the determined reasonable range of loss. 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.


Life and Health Operations


Bankers Fidelity establishes liabilitiesreserves for future policy benefits to meet projected future obligations under outstanding policies.policies that are in force as of the statement date. These reserves are calculated to satisfy policy and contract obligations as they mature. The amount of reservesare projected to come due.  Reserves for insurance policies isare calculated using assumptions for interest rates, mortality rates, disablement rates, benefit utilization rates, and morbidity rates, expenses,lapse rates. These assumptions vary by the product type, the year the policy was issued, and withdrawals. Reserves are adjusted periodically based on published actuarial tables with modificationscertain policyholder demographic information.  Changes in assumptions may be made from one issue year to another to reflect actual experience.  The use ofActual future experience that deviates significantly differentfrom the assumptions, or actual results that differ significantly from our estimates, could have a materially adversely affectadverse effect on our liquidity, results of operations, or financial condition.


See Note 56 of Notes to Consolidated Financial Statements for more information on insurance reserves and policyholder funds.


ReinsuranceReinsurance


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.


8
Property and Casualty Operations


American Southern’s basic reinsurance treaties generally cover all claims in excess of specified per occurrence limitations. LimitsCurrent limits per occurrence within the reinsurance treaties are as follows: Inland marine and commercial automobile physical damage - $250,000$225,000 excess of $100,000$125,000 retention; and automobile liability and general liability - excess coverage of $2.0 million less retentions that may vary from $100,000$150,000 to $300,000$500,000 depending on the account. American Southern maintains a property catastrophe treaty with a $5.7$5.5 million limit excess of $300,000$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 in the case of life insurance policiespolicyholder is $100,000. At$200,000. As of December 31, 2020, $11.02023, $8.3 million of the $294.4$814.2 million of life insurance in force at Bankers Fidelity was reinsured under a mixcombination 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 supplementSupplement business to General Re Life Corporation. Ceding thresholds are set annually. During 2020,2023, the liability of the reinsurer was 50% of all new Medicare supplementSupplement business issued by the Company on amounts up to a maximum retention of $15.0 million of annualized premium. Accordingly, $3.3$0.8 million of the Company’s $6.7$1.5 million of new annualized Medicare supplementSupplement premium was ceded.


CompetitionCompetition


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 nearlyover 65 years.


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 BankersWorksite,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.


9
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 subsidiary, Bankers Fidelity 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, 2020,2023, the Company was in compliance with all such requirements, and securities with an amortized cost of $10.7$14.6 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.


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, 2020, Bankers Fidelity Life Insurance Company had no IRIS ratios outside the usual ranges. However,2023, Bankers Fidelity Assurance Company had three ratios outside the usual range, primarily as a result of net loss for the year, certain surplus ratios and nonadmitted assetsNon-admitted Assets to admitted assets.Admitted Assets. The net loss at Bankers Fidelity Assurance Company is primarily related to federal income taxes incurred which resulted in a corresponding decrease in surplus levels for the year as well as a growing deferred tax assetDeferred Tax Asset which is reduced by admissibility limitations.a Non-admitted.  Atlantic Capital Life Assurance Company had one ratio outside the normal range, Change in Asset Mix.  The Change in Asset Mix was the result of Atlantic Capital Life Assurance Company investing its cash and cash equivalents from prior year into bonds.  Bankers Fidelity Life Insurance Company, American Southern Insurance Company and American Safety Insurance Company had no IRIS ratios outside the usual ranges. Management does not anticipate regulatory action as a result of the 20202023 IRIS ratio results for the insurance subsidiaries.


10
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, 2020,2023, the Company’s insurance subsidiaries’ RBC levels exceeded the required regulatory levels.

Information Technology and Cybersecurity
Investments

The Company’s operations rely on the secure processing, storage, and transmission of confidential and personal identifiable information within technology platforms. Cybersecurity is a high priority and the Company has made significant investments in order to prevent, detect, and respond to cyber threats. In recent years, the Company has enhanced 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.

The Company has a sophisticated technology environment that supports the replication of data across multiple secure data centers. It also includes a comprehensive disaster recovery plan that is continually tested to ensure capabilities to resume business in the event of a disaster. The Company’s technology environment is managed by an experienced team of professionals who follow an extensive set of policies and procedures related to data security. Through recurring internal and external audits, controls are regularly reviewed, tested, and enhanced to ensure best practices. The Company has augmented the information security program through a partnership with a leading global cybersecurity 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.

The information security program also includes a cybersecurity Incident Response Plan (“IRP”) that was established 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. Additionally, the IRP specifies the notification to directors, officers, and other corporate insiders to not trade the Company’s securities while in possession of potentially material nonpublic information about the incident.

The Audit Committee of the Board of Directors has oversight of the Company’s information security program. 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.

The Company also maintains dedicated cyber liability insurance for breach event costs, including: post breach event remediation costs; cyber crime 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.

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.


  December 31, 
  2020  2019 
  Amount  Percent  Amount  Percent 
  (Dollars in thousands) 
Fixed maturities:            
U.S. Treasury securities and obligations of U.S. Government agencies and authorities 
$
30,762
   
11.0
%
 
$
20,259
   
7.5
%
States, municipalities and political subdivisions  
11,802
   
4.2
   
11,940
   
4.5
 
Public utilities  
13,651
   
4.9
   
11,449
   
4.3
 
All other corporate bonds  
197,641
   
70.8
   
188,574
   
70.2
 
Redeemable preferred stock  
250
   
0.1
   
250
   
0.1
 
Total fixed maturities(1)
  
254,106
   
91.0
   
232,472
   
86.6
 
Common and non-redeemable preferred stocks(2)
  
18,716
   
6.7
   
22,922
   
8.5
 
Policy loans(3)
  
1,975
   
0.7
   
2,007
   
0.7
 
Other invested assets(4)
  
3,238
   
1.2
   
9,960
   
3.7
 
Real estate  
38
   
0.0
   
38
   
0.0
 
Investments in unconsolidated trusts  
1,238
   
0.4
   
1,238
   
0.5
 
Total investments 
$
279,311
   
100.0
%
 
$
268,637
   
100.0
%
  
December 31,
 
  
2023
  
2022
 
  
Amount
  
Percent
  
Amount
  
Percent
 
  
(Dollars in thousands)
 
Fixed maturities:
            
U.S. Treasury securities and obligations of U.S. Government agencies and authorities
 
$
50,059
   
21.1
%
 
$
44,412
   
19.4
%
States, municipalities and political subdivisions
  
8,106
   
3.4
   
9,187
   
4.1
 
Public utilities
  
9,530
   
4.0
   
10,284
   
4.5
 
All other corporate bonds
  
150,319
   
63.4
   
144,623
   
63.2
 
Redeemable preferred stock
  
205
   
0.1
   
223
   
0.1
 
Total fixed maturities(1)
  
218,219
   
92.0
   
208,729
   
91.3
 
Equity securities(2)
  
9,413
   
4.0
   
11,562
   
5.0
 
Other invested assets(3)
  
6,381
   
2.8
   
5,386
   
2.4
 
Policy loans(4)
  
1,778
   
0.7
   
1,759
   
0.8
 
Real estate
  
38
   
0.0
   
38
   
0.0
 
Investments in unconsolidated trusts
  
1,238
   
0.5
   
1,238
   
0.5
 
Total investments
 
$
237,067
   
100.0
%
 
$
228,712
   
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 $222.5$238.6 million as of December 31, 20202023 and $219.2$236.8 million as of December 31, 2019.2022.
(2)
Equity securities are carried on the balance sheet at estimated fair value. Total cost of equity securities was $6.4$4.9 million as of December 31, 20202023 and $7.2 million as of December 31, 2019.2022.
(3)
Policy loans are valued at unpaid principal balances.
(4)
Other invested assets are accounted for using the equity method. Total cost of other invested assets was $3.8$7.0 million as of December 31, 20202023 and $9.9$5.6 million as of December 31, 2019.2022.

(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, 
 2020  2019 
 (Dollars in thousands) 
Average investments(1)
 
$
252,141
  
$
253,467
 
Net investment income  
7,744
   
8,979
 
Average yield on investments  
3.1
%
  
3.5
%
Realized investment gains, net  
7,420
   
1,574
 
  
Year Ended December 31,
 
  
2023
  
2022
 
  
(Dollars in thousands)
 
Average investments(1)
 
$
275,995
  
$
270,636
 
Net investment income
  
10,058
   
9,932
 
Average yield on investments
  
3.6
%
  
3.7
%
Realized investment gains, net
  
70
   
30
 


(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.

During 2019, the

11
The Company engagedengages 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 CapitalEmployees


The Company and its subsidiaries employed 153155 people at December 31, 2020.2023. Of the 153155 people, employed154 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 December 31, 2020, 152 were full-time.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.

Financial Information by Industry Segment


Each of American Southern and Bankers Fidelity each operate with relative autonomy and each company is evaluated 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. Substantially all revenue other than that in the corporate and other segment is from external sources. SeeFor more information on segments, see Note 1516 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, as of December 31, 2020, his name, age (as of March 1, 2024), 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.
 58 
Chairman of the Board, President & CEO
 1992
J. Ross Franklin
 43 
Vice President, CFO and Corporate Secretary
 2017

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Name
 
Age
 
Positions with the Company
 
Director or Officer Since
Hilton H. Howell, Jr.
 
61
 
Chairman of the Board, President & CEO
 
1992
J. Ross Franklin
 
46
 
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 Television, Inc.


12
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.


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. 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 Exchange Act of 1933, and Section 21E of the Securities Act of 1934, and include estimates and assumptions related to, among other things, general economic, competitive, operational and legislative developments. Forward-looking statements are subject to changes 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 expected by the Company, depending on the occurrence or outcome of various factors. These factors include, among others: significant changes in general economic conditions; 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; 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 impact of COVID-19 or other 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; and risks related to cybersecurity matters, such as breaches of our computer network or the loss of unauthorized access to the data we maintain. Many of such factors are beyond the Company’s ability to control or predict. As a result, the Company’s actual financial condition and results of operations could differ materially from those expressed in any forward-looking statements made by the Company. Undue reliance should not be placed upon forward-looking statements. The Company does not intend to publicly update any forward-looking statements that may be made from time to time by, or on behalf of, the Company.

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.


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.

13
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.

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 from Delta Life Insurance Company under a lease which continues until either party provides written notice of cancellation at least twelve months in advance of the actual termination date. 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. In December 2022, Delta Life Insurance Company, the owner of the building, transferred title to the building to 4370 Peachtree LLC. Each of Delta Life Insurance Company and 4370 Peachtree LLC is controlled by an affiliate of the Company.

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.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.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 litigationmatters could be material to the consolidated results of operations for any given period.


Item 4.Mine Safety Disclosures


Not applicable.


1114
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 10, 2021,13, 2024, there were 6,4281,286 shareholders of record.


On March 23, 2021,April 1, 2024, the Company’sCompany 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 as ofat the close of business on April 13, 2021. Payment12, 2024. On August 8, 2023, the Company announced that the board of directors declared an annual cash dividend of $0.02 per share, which was paidon September 12, 2023 to shareholders of record as of August 22, 2023.

The declaration and payment of any future dividends in the future 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, 2020,2023, the Parent held unrestricted cash and investment balances of approximately $4.7 million. Under the insurance code of the state in which each insurance subsidiary is domiciled, dividend payments to the CompanyParent 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 2021,2024, dividend payments to the Parent by the insurance subsidiaries in excess of $9.6$8.8 million would require prior approval.


Issuer Purchases of Equity Securities


On October 31, 2016, the Boardboard of Directorsdirectors of the Company approved a plan that allows for the repurchase of up to 750,000 shares of the Company’sCompany's common stock (the “Repurchase Plan”"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, 2020.2023.


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, 2020
—2023
  
—
$
—
   
—
   
325,129
 
November 1 – November 30, 20202023
  
—
   
—
   
—
   
325,129
 
December 1 – December 31, 20202023
  
—
   
—
   
—
   
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.Selected Financial DataReserved

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.

12
15
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���American” or the “Parent”) and its subsidiaries (collectively with the Parent, the “Company”) for the years ended December 31, 20202023 and 2019.2022. This discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere herein.


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, and 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 74%70% of the Company’s total assets at December 31, 2020.2023. 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, as available for sale and, accordingly, at their estimated fair values. On occasion, the value of a fixed maturity investment may decline

Prior to a value below its amortized purchase price and remain at such value for an extended period of time. When a fixed maturity investment’s indicated fair value has declined below its cost basis for a period of time,January 1, 2023, the Company evaluates such investment for an other than temporary impairment. The evaluation for anapplied other than temporary impairment (“OTTI”) guidance for securities in an unrealized loss position. An OTTI was recognized in earnings within realized investment gains (losses) when it was anticipated that the amortized cost would not be recovered. When either: (i) the Company had the intent to sell the security, or (ii) it was more likely than not that the Company would be required to sell the security before recovery, the reduction of amortized cost and the OTTI recognized in earnings was the entire difference between the security’s amortized cost and estimated fair value. If neither of these conditions existed, the difference between the amortized cost of the security and the present value of projected future cash flows expected to be collected was recognized as a reduction of amortized cost and an OTTI in earnings. If the estimated fair value was 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 was recorded in OCI.

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 quantitative and qualitative process, whichcredit loss by establishing an ACL with a corresponding charge to earnings in realized investment gains (losses). However, the ACL is subject to risks and uncertainties inlimited by the determination of whether declines inamount 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 investments are other than temporary. Potential risks and uncertainties include, among other things, changes in general economic conditions, an issuer’s financial condition or near term recovery prospects and the effects of changes in interest rates. In evaluating a potential impairment, the Company considers, among other factors, management’s intent and abilityprojected future cash flows expected to hold the securities until price recovery, the naturebe collected, this portion of the investment and the expectation of prospects for the issuer and its industry, the status of an issuer’s continued satisfaction of its obligationsdecline in accordance with their contractual terms, and management’s expectation asvalue related to the issuer’s ability and intent to continue to do so, as well as ratings actions that may affect the issuer’s credit status. If an other than temporary impairmentother-than-credit factors (“noncredit loss”) is deemed to exist, then the Company will write down the amortized cost basis of the investment to its estimated fair value. While any such write down does not impact the reported value of the investmentrecorded in the Company’s balance sheet, it is reflected as a realized investment loss in the Company’s net income or other comprehensive income, depending upon the nature of the loss, in the period incurred.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 35%34% of the Company’s total liabilities at December 31, 2020.2023. These liabilities relate primarily to life insurance products and are based upon assumed future investment yields, mortality rates, withdrawaland lapse rates and expenses after giving effect to possible risks of adverse deviation. The assumed mortality and withdrawallapse 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.


1316
Unpaid loss and loss adjustment expenses comprised 30%32% of the Company’s total liabilities at December 31, 2020.2023. This liability includes estimates for: 1)(1) unpaid losses on claims reported prior to December 31, 2020, 2)2023, (2) future development on those reported claims, 3)(3) unpaid ultimate losses on claims incurred prior to December 31, 20202023 but not yet reported and 4)(4) unpaid loss adjustment expenses for reported and unreported claims incurred prior to December 31, 2020.2023. 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, 20202023 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 14%12% of the Company’s total assets at December 31, 2020.2023. Insured and agent balances are evaluated periodically for collectibility. 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 10%12% of the Company’s total assets at December 31, 2020.2023. 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.

14
17
Overall Corporate Results


  Year Ended December 31, 
  2020  2019 
  (In thousands) 
Revenue      
Property and Casualty:      
American Southern 
$
69,179
  
$
62,402
 
Life and Health:        
Bankers Fidelity  
127,144
   
131,611
 
Corporate and Other  
(975
)
  
4,166
 
Total revenue 
$
195,348
  
$
198,179
 
Income (loss) before income taxes        
Property and Casualty:        
American Southern 
$
10,436
  
$
5,729
 
Life and Health:        
Bankers Fidelity  
12,430
   
(3,646
)
Corporate and Other  
(7,363
)
  
(2,490
)
Income (loss) before income taxes 
$
15,503
  
$
(407
)
Net income (loss) 
$
12,169
  
$
(386
)
  
Year Ended December 31,
 
  
2023
  
2022
 
  
(In thousands)
 
Revenue
      
Property and Casualty:
      
American Southern
 
$
72,846
  
$
73,949
 
Life and Health:
        
Bankers Fidelity
  
114,199
   
114,015
 
Corporate and Other
  
(252
)
  
(113
)
Total revenue
 
$
186,793
  
$
187,851
 
Income (loss) before income taxes
        
Property and Casualty:
        
American Southern
 
$
5,085
  
$
6,613
 
Life and Health:
        
Bankers Fidelity
  
4,722
   
3,812
 
Corporate and Other
  
(10,372
)
  
(8,329
)
Income (loss) before income taxes
 
$
(565
)
 
$
2,096
 
Net income (loss)
 
$
(171
)
 
$
1,525
 


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 income, (loss)the most directly comparable GAAP measure, to operating income (loss) is as follows:


 Year Ended December 31, 
 2020 2019 
 (In thousands) 
Reconciliation of Non-GAAP Financial Measure    
     
Net income (loss) 
$
12,169
  
$
(386
)
Income tax expense (benefit)  
3,334
   
(21
)
Realized investment gains, net  
(7,420
)
  
(1,574
)
Unrealized (gains) losses on equity securities, net  
3,431
   
(5,511
)
Non-GAAP operating income (loss) 
$
11,514
  
$
(7,492
)
  
Year Ended December 31,
 
  
2023
  
2022
 
  
(In thousands)
 
Reconciliation of Non-GAAP Financial Measure
      
       
Net income (loss)
 
$
(171
)
 
$
1,525
 
Income tax expense (benefit)
  
(394
)
  
571
 
Realized investment gains, net
  
(70
)
  
(30
)
Unrealized losses on equity securities, net
  
2,177
   
7,562
 
Non-GAAP operating income
 
$
1,542
  
$
9,628
 


On a consolidated basis, the Company had net incomeloss of $12.2$0.2 million, or $0.56$0.03 per diluted share, in 2020,2023, compared to net lossincome of $0.4$1.5 million, or $0.04$0.06 per diluted share, in 2019. 2022. The decrease in net income was primarily due to a decrease in earned premiums, as well as an increase in losses and expenses as a percentage of premiums.  Also contributing to the decrease in net income is an increase in debt service costs due to rising interest rates.  Partially offsetting this decrease was a decline in unrealized losses on equity securities.

Total revenue was $186.8 million in 2023 as compared to $187.9 million in 2022. Premium revenue decreased to $178.8 million in 2023 from $185.4 million in 2022. The decrease in premium revenue was primarily attributable to a decrease in Medicare supplement insurance premiums within the life and health operations.  Also contributing to the decrease in premium revenue was a decrease in earned premiums in the automobile physical damage line of business due to a reduction in the number of programs.  Partially offsetting the decrease in premium revenue was an increase in earned premiums in the automobile liability line of business due mainly to rate increases and a retrospective premium adjustment in a governmental program.

Operating income was $11.5$1.5 million in 20202023 as compared to an operating loss of $7.5$9.6 million in 2019.2022. The increasedecrease in operating income was primarily due to a decline in premium revenue and an increase in losses and expenses as a percentage of premiums, as discussed above.  Partially offsetting the decline in operating income was more favorable loss experience in the life and health operations, resulting from improved rate adequacy and a significant decrease in the number of incurred claims within the Medicare supplement line of business.  This decrease in the number of incurred claims was primarily attributable to the Company’s individual policy holders being subject to varying degrees of shelter in place orders instituted throughout the United States during 2020 as a result of COVID-19.

Total revenue was $195.3 million in 2020 as compared to $198.2 million in 2019. Premium revenue increased to $183.5 million in 2020 from $181.9 million in 2019. The increase in premium revenue was primarily due to an increase in the automobile physical damage line of business within the property and casualty operations in addition to life and other health lines in the life and health operations.  Partially offsetting the increase in premium revenue was a decrease in the Medicare supplement line of business in the life and health operations.


A more detailed analysis of the operating companies and other corporate activities follows.


1518
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, 
  2020  2019 
  (Dollars in thousands) 
Gross written premiums 
$
70,256
  
$
65,848
 
Ceded premiums  
(5,890
)
  
(5,520
)
Net written premiums 
$
64,366
  
$
60,328
 
Net earned premiums 
$
62,372
  
$
58,680
 
Insurance benefits and losses incurred  
39,339
   
39,541
 
Commissions and underwriting expenses  
19,404
   
17,132
 
Underwriting income 
$
3,629
  
$
2,007
 
Loss ratio  
63.1
%
  
67.4
%
Expense ratio  
31.1
   
29.2
 
Combined ratio  
94.2
%
  
96.6
%
  
Year Ended December 31,
 
  
2023
  
2022
 
  
(Dollars in thousands)
 
Gross written premiums
 
$
77,567
  
$
79,218
 
Ceded premiums
  
(5,902
)
  
(6,547
)
Net written premiums
 
$
71,665
  
$
72,671
 
Net earned premiums
 
$
68,443
  
$
70,276
 
Insurance benefits and losses incurred
  
51,015
   
47,175
 
Commissions and underwriting expenses
  
16,746
   
20,161
 
Underwriting income
 
$
682
  
$
2,940
 
Loss ratio
  
74.5
%
  
67.1
%
Expense ratio
  
24.5
   
28.7
 
Combined ratio
  
99.0
%
  
95.8
%


Gross written premiums at American Southern increased $4.4decreased $1.7 million, or 6.7%2.1%, during 20202023 as compared to 2019.2022. The increasedecrease in gross written premiums was primarily attributable to an increasethe decrease in premiums written in the automobile physical damage line of business due to a new agency that startedreduction in the second halfnumber of 2019, as well as increased writings from certain existing agencies. Also contributing toPartially offsetting the increasedecrease in gross written premiums was an increase in premiums written in the general liability line of business related to new and existing programs. Partially offsetting the increase in gross written premiums was a decline in premiums written in the automobile liability line of business primarily attributable to the cancellation of certain programsresulting from new business, rate increases, and a return ofretrospective premium to one account as a result of a decline of usage due to the impact of the COVID-19 pandemic.adjustments.


Ceded premiums increased $0.4decreased $0.6 million, or 6.7%9.9%, during 20202023 as compared to 2019.2022. 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.  Also contributing to the increaseThe decrease in ceded premiums was an increaseprimarily attributable to the decrease in earned premiums in certain accounts within the automobile physical damage and general liability linesline of business, which are subjectas well as decreased ceding rates due to reinsurance.increased retention.


The following table summarizes, for the periods indicated, American Southern’s net earned premiums by line of business:


  Year Ended December 31, 
  2020  2019 
  (In thousands) 
Automobile liability 
$
30,312
  
$
30,649
 
Automobile physical damage  
18,730
   
15,309
 
General liability  
3,891
   
3,309
 
Surety  
5,857
   
6,319
 
Other lines  
3,582
   
3,094
 
Total 
$
62,372
  
$
58,680
 
  
Year Ended December 31,
 
  
2023
  
2022
 
  
(In thousands)
 
Automobile liability
 
$
38,821
  
$
33,981
 
Automobile physical damage
  
15,046
   
21,069
 
General liability
  
5,758
   
5,871
 
Surety
  
6,303
   
6,039
 
Other lines
  
2,515
   
3,316
 
Total
 
$
68,443
  
$
70,276
 


Net earned premiums increased $3.7decreased $1.8 million, or 6.3%2.6%, during 20202023 as compared to 2019.2022. The increasedecrease in net earned premiums was primarily attributable to a decrease in earned premiums in the automobile physical damage line of business due to a reduction in the number of agencies as previously mentioned. Also contributing to the decrease was a decline in earned premiums in the inland marine line of business resulting from reduced cargo production. Partially offsetting the decrease in net earned premiums was an increase in earned premiums in the automobile physical damage coverage resulting from the new agency as previously mentioned.liability line of business due mainly to rate increases and a retrospective premium adjustment in a governmental program. 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 an a property and casualtyinsurance 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).


19
Insurance benefits and losses incurred at American Southern decreased $0.2increased $3.8 million, or 0.5%8.1%, during 20202023 as compared to 2019.2022. As a percentage of premiums, insurance benefits and losses incurred were 63.1%74.5% in 20202023 as compared to 67.4%67.1% in 2019.2022. The decreaseincrease in the loss ratio was primarilymainly due to a decline in the numberoverall inflation on claims and increased severity of claims inlosses reported from certain governmental programs within the automobile liability line of business. Also contributing to the increase in the loss ratio were increased losses in the general liability line of business as a result of the impact of the COVID-19 pandemic.from artisan contractor business. Partially offsetting the decreaseincrease in the loss ratio was less favorable loss experiencea decrease in losses related to the automobile physical damage line of business due to an increasea decrease in frequency of claims from the new agency.exposure.

Commissions and underwriting expenses increased $2.3decreased $3.4 million, or 13.3%16.9%, during 20202023 as compared to 2019.2022. As a percentage of premiums, these expenses were 31.1%24.5% in 20202023 as compared to 29.2%28.7% in 2019.2022. The increasedecrease in the expense ratio was primarily due to an increasethe decrease in fixed costs related to new business related toand variable commissions.  Fixed commissions decreased as a result of the new agency as previously mentioned.decline in written premiums during 2023.  Also contributing to the increasedecrease in the expense ratio iswas 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 2020,2023, variable commissions at American Southern increased $0.1decreased $1.4 million as compared to 20192022 due to improvedan increase in loss ratios from certain accounts subject to variable commissions.


In establishing reserves, American Southern initially reserves for losses at the higher end of the reasonable range if no other value within the range is determined to be more probable. Selection of such an initial loss estimate is an attempt by management to give recognition that initial claims information received generally is not conclusive with respect to legal liability, is generally not comprehensive with respect to magnitude of loss and generally, based on historical experience, will develop more adversely as time passes and more information becomes available. However, as a result, American Southern generally experiences reserve redundancies when analyzing the development of prior year losses in the current period. At December 31, 2020, the range of estimates developed in connection with the loss reserves for American Southern indicated that reserves could be as much as 13.5% lower or as much as 0.8% higher. Development from prior years’ reserves has historically reduced the current year loss ratio; however, such reduction in the current year loss ratio is generally offset by the reserves established in the current year for current period losses. Management believes that such differences will continue in future periods, but is unable to determine if or when incremental redundancies will increase or decrease until the underlying losses are ultimately settled.

Contingent commissions, if contractually applicable, are ultimately payable to participating 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 2020, approximately 47% of American Southern’s earned premium provides for contractual commission arrangements which compensate the company’s agents in relation to the loss ratios of the business they write, compared to 44% in 2019. By structuring its business in this manner, American Southern provides its agents with an economic incentive to place profitable business with American Southern. In periods in which loss reserves reflect favorable development from prior years’ reserves, there is generally a highly correlated increase in commission expense also related to the prior year business. Accordingly, favorable loss development from prior years, while anticipated to continue in future periods, is not an indicator of significant additional profitability in the current year.

Bankers Fidelity


The following summarizes, for the periods indicated, Bankers Fidelity’s premiums, losses and expenses:

  Year Ended December 31, 
  2020  2019 
  (Dollars in thousands) 
Medicare supplement 
$
174,525
  
$
179,180
 
Other health products  
9,218
   
7,817
 
Life insurance  
9,348
   
8,509
 
Gross earned premiums  
193,091
   
195,506
 
Ceded premiums  
(71,924
)
  
(72,261
)
Net earned premiums  
121,167
   
123,245
 
Insurance benefits and losses incurred  
80,537
   
99,684
 
Commissions and underwriting expenses  
34,177
   
35,573
 
Total expenses  
114,714
   
135,257
 
Underwriting income (loss) 
$
6,453
  
$
(12,012
)
Loss ratio  
66.5
%
  
80.9
%
Expense ratio  
28.2
   
28.9
 
Combined ratio  
94.7
%
  
109.8
%

17
  
Year Ended December 31,
 
  
2023
  
2022
 
  
(Dollars in thousands)
 
Medicare supplement
 
$
133,343
  
$
148,747
 
Other health products
  
14,373
   
12,389
 
Life insurance
  
18,659
   
15,867
 
Gross earned premiums
  
166,375
   
177,003
 
Ceded premiums
  
(55,993
)
  
(61,839
)
Net earned premiums
  
110,382
   
115,164
 
Insurance benefits and losses incurred
  
71,485
   
76,281
 
Commissions and underwriting expenses
  
37,992
   
33,922
 
Total expenses
  
109,477
   
110,203
 
Underwriting income
 
$
905
  
$
4,961
 
Loss ratio
  
64.8
%
  
66.2
%
Expense ratio
  
34.4
   
29.5
 
Combined ratio
  
99.2
%
  
95.7
%

Net earned premium revenue at Bankers Fidelity decreased $2.1$4.8 million, or 1.7%4.2%, during 20202023 as compared to 2019.2022. Gross earned premiums from the Medicare supplement line of business decreased $4.7$15.4 million, or 2.6%,10.4 %, in 20202023 as compared to 2019,2022, due primarily to non-renewals exceeding the level of new business writings.writings as the existing block of business has incurred rate increases. Other health product premiums increased $1.4$2.0 million, or 17.9%16.0%, during 20202023 as compared to 2019,2022, primarily as a result of new sales of the company’s group health and individual cancer products. Gross earned premiums from the life insurance line of business increased $0.8$2.8 million, or 9.9%17.6%, in 20202023 from 20192022 due to an increase in the group life products premium.product premiums. Partially offsetting thethis increase in gross earned premiums from the life insurance line was a decrease in individual life products premium, resulting from the redemption and settlement of existing individual life policy obligations exceeding the level of new individual life sales. Premiums ceded decreased $0.3$5.8 million, or 0.5%9.5%, in 20202023 from 2019.2022. The decrease in ceded premiums was due to a decrease in Medicare supplement premiums subject to the reinsurance agreement.reinsurance.


Insurance benefits and losses incurred decreased $19.1$4.8 million, or 19.2%6.3%, during 20202023 as compared to 2019.2022. As a percentage of premiums, benefits and losses were 66.5%64.8% in 20202023 as compared to 80.9%66.2% in 2019.2022. The decrease in the loss ratio was primarily due to improved rate adequacy and a significantly lowerdecrease in the number of incurred claims incurred inwithin the Medicare supplement line of business due to the Company’s individual policy holders being subject to varying degrees of shelter in place orders instituted throughout the United States during 2020 as a result of COVID-19.business. Also contributing to the decrease in the loss ratio was an improvement in rate adequacy in the Medicare supplement lineother health lines profitability.  These decreases were offset by higher incurred claims on our life lines of business as a result of implementation of rate increases on existing business.


Commissions and underwriting expenses decreased $1.4increased $4.1 million, or 3.9%12.0%, during 20202023 as compared to 2019.2022. As a percentage of earned premiums, these expenses were 28.2%34.4% in 20202023 as compared to 28.9%29.5% in 2019.2022. The decreaseincrease in the expense ratio was primarily due to a decreasean increase in agent incentiveadministrative costs and realization of costs saving initiatives, predominantly related to postage costs.  Also contributing to the decreasegrowth in the expense ratio was a decrease in expenses related to servicing thegroup and individual health lines of business, coupled with increased Medicare supplement lineservicing costs.

20

Net Investment Income and Realized Gains


Investment income decreased $1.2increased $0.1 million, or 13.8%1.3%, in 20202023 as compared to 2019.2022.  The decreaseincrease in investment income was primarily attributable to an increase in investment income related to fixed maturities and equity securities.  Partially offsetting this increase was a decrease in the equity in earnings from investments in the Company’sCompany's limited partnerships and limited liability companies of $0.9$0.6 million.


The Company had net realized investment gains of $7.4$0.1 million in 20202023 as compared to net realized investment gains of $1.6$0.03 million in 2019.2022. The net realized investment gains in 20202023 and 2022 were primarily attributable to gains of $6.9 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 2019 resulted from the disposition of certain of the Company’s investments in equity and 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 Gains (Losses)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 $3.4$2.2 million and unrealized gains of $5.5$7.6 million during the years ended December 20202023 and 2019,2022, respectively. Changes in unrealized gains 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 decreased $0.5increased $1.3 million, or 24.4%67.5%, in 20202023 as compared to 20192022. Changes in interest expense were primarily due to a decreasechanges in the average London Interbank OfferedTerm Secured Overnight Financing Rate (“LIBOR”SOFR”) during the years ending 2020 and 2019, respectively,published by CME Group Benchmark Administration Limited (“CME”), as the interest rates on the Company’s outstanding junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) and the revolving credit facility are directly related to LIBOR.SOFR. As expected, discontinuation of London Interbank Offered Rate (“LIBOR”) occurred on June 30, 2023 and affected the rates used in the Company’s credit arrangements after that date. The U.S. Congress enacted the Adjustable Interest Rate LIBOR Act (the "LIBOR Act") to address LIBOR’s cessation and the Board of Governors of the Federal Reserve System issued regulations, 12 C.F.R. Part 253, “Regulations Implementing the Adjustable Interest Rate LIBOR Act (Regulation ZZ),” which relate to the LIBOR transition.


Income Taxes


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.

The primary differences between the effective tax rate and the federal statutory income tax rate for 20202022 resulted from a permanent differencesdifference related to meals & entertainmentpenalties and vested stock grants.fines incurred of $0.1 million.  Also contributing to differences between the effective tax rate and the federal statutory income tax rate were provision-to-filed return adjustmentsthe adjustment for prior years’ estimates to actual that are generally updated at the completion of the third quarter of each fiscal year and were $0.02 $0.1million in the year ended December 31, 2020.

The primary2022. Other contributing factors to the differences between the effective tax rate and the federal statutory income tax rate for 2019 resulted fromwere permanent differences related to meals &and entertainment and vested stock grants. Also contributing to differences between the effective tax rate and the federal statutory income tax rate was the 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.


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.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, 2020,2023, the Parent had approximately $4.7 million of unrestricted cash and investments.


21
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, 2020,2023, the Parent’s insurance subsidiaries had an aggregate statutory surplus of $92.5$90.1 million. Dividends were paid to Atlantic American by its subsidiaries totaling $3.9$8.4 million and $4.8$7.2 million in 20202023 and 2019,2022, 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 $6.7$8.7 million and $7.2$7.6 million in 20202023 and 2019,2022, respectively. In addition, the Parent has a formal tax-sharing agreement with each of its insurance subsidiaries. A net total of $1.8$4.0 million and $3.3$3.9 million were paid to the Parent under the tax sharing agreement in 20202023 and 2019,2022, 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 three-month LIBOR3-month CME Term SOFR plus applicable tenor spread of 0.26161 percent plus an applicable margin. The margin ranges from 4.00% to 4.10%. At December 31, 2020,2023, the effective interest rate was 4.28%9.69%. 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, 2020,2023, 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 $17,722$17.7 thousand at December 31, 20202023 and 2019.2022. During each of 20202023 and 2019,2022, the Company paid Series D Preferred Stock dividends of $0.4 million.


During 2020, Bankers Fidelity Life Insurance Company (‘‘BFLIC”(''BFLIC") becameis a member of the Federal Home Loan Bank of Atlanta (“FHLB”("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 established initialprovides for credit availability of five percent of statutory admitted assets, or approximately $8 million.$8.0 million, as of December 31, 2023. Additional FHLB stock purchases may be required based upon the amount of funds borrowed from the FHLB.  As of December 31, 2023, BFLIC wouldhas pledged bonds having an amortized cost of $9.6 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, 2020,2023, BFLIC had bonds with an amortized cost of $2.0 million pledged as collateral to FHLB.  To date, BFLIC hasdoes not madehave any outstanding borrowings from the FHLB.


On May 12, 2021, the Company entered into a Revolving Credit Agreement (the “Credit Agreement”) with Truist Bank as the lender (the “Lender”). The Credit Agreement provides for an unsecured $10.0 million revolving credit facility that matures on April 12, 2024. Under the Credit Agreement, the Company paid interest on the unpaid principal balance of outstanding revolving loans at 1-month SOFR plus a spread adjustment of 0.11448% plus 2.00%, subject to a SOFR floor rate of 1.00%.

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. 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, 2023, the Company had outstanding borrowings of $3.0 million under the Credit Agreement.

Cash and cash equivalents increaseddecreased from $12.9$28.9 million at December 31, 20192022 to $19.3$28.3 million at December 31, 2020.2023. The increasedecrease in cash and cash equivalents during 20202023 was primarily attributable to a decrease in  net cash used in investing activities of $3.4 million primarily as a result of investment purchases exceeding investment sales and maturity of securities. Partially offsetting the decrease in cash and cash equivalents was an increase in net cash provided by operating activities of $9.0 million.  Partially offsetting the increase was $1.8 million in net investment purchases of securities exceeding sales and maturity of securities. Also partially offsetting the increase were dividends paid on the Company’s Series D Preferred Stock of $0.4$2.6 million.


1922
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.

Expected Impact of COVID-19 on the Company’s Financial Condition and Results of Operations

The duration and ultimate impact of the COVID-19 pandemic is unknown at this time and it is not possible for us to reliably estimate the impact on the financial condition, operating results or liquidity of the Company and its operating subsidiaries in future periods.  However, we do not currently expect a significant decline in liquidity or operating results as a result of the disruption caused by the ongoing COVID-19 pandemic.  To date, the most significant impact of COVID-19 on the Company’s financial position has been volatility in the fair value of the Company’s fixed maturity and equity investments due to disruption in the financial markets, as well as a reduction in the frequency of medical claims.

We expect that earned premiums could be adversely impacted by a weakened economy leading to a slowdown in new sales and reduced retention of insureds.  Additionally, a number of states have issued bulletins that either encourage or require premium leniency such as extension of grace periods or moratoriums on cancellation of policies for non-payment.  The Company does not expect a significant reduction or delay in payments and continues to monitor state required actions as they develop.

For the Company’s property and casualty operations, the majority of premium revenue is derived from automobile liability and automobile physical damage lines of business written on a multi-year contract basis with state and local governments.  Although we cannot predict with any certainty at this time, we do not expect a significant level of cancellations or non-renewals of our property and casualty contracts in the short term but recognize that a prolonged economic slowdown could adversely affect future results.  During 2020, a certain automobile program was granted a partial premium refund as a result of a decline in usage.  However, the Company expects the aforementioned decline in usage to be temporary in nature.

Benefits and losses in our property and casualty operations could be adversely impacted as a result of disruption caused by the COVID-19 pandemic.  However, due to the nature of our primary product lines, the impact is not currently expected to be material.   As a result, we do not currently expect a material adverse effect on operating results or liquidity in the property and casualty operations.

The majority of premium revenue in our life and health operations are derived from the senior market segment of the population, or those individuals age sixty-five and up, who maintain Medicare supplement and to a lesser extent, whole life insurance policies with the Company.  We expect that earned premiums could be adversely impacted by the rise in unemployment and economic slowdown related to the COVID-19 pandemic and individual, business and government responses thereto, which could lead to a decline in new sales and reduced retention of insureds.  As a result, we currently anticipate that the life and health operations may experience a marginal decline in earned premiums although the actual impact cannot be predicted with certainty at this time.

Unforeseen infectious diseases that impact large portions of a population can have an adverse impact on mortality and morbidity, and resultant benefits and losses incurred by the Company’s life and health operations.  Accordingly, the Company does anticipate incurring higher costs, potentially similar to prior influenza seasons, as it relates to life insurance claims.  However, with much of the country sheltering in place over an extended period, the Company has experienced lower utilization of certain accident and health benefits, particularly in the Medicare supplement line of business.  As a result, and although the actual impact cannot be predicted with certainty at this time, the Company does not expect significant adverse development in total benefits and losses incurred in its life and health operations.

In addition to the information set forth in this report, you should carefully consider the discussions of the COVID-19 pandemic and related economic developments presented in our Annual Report on Form 10-K for the year ended 2019, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020 and in other reports we file with the SEC from time to time, all of which could materially affect our business, financial condition or future results.


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. To date,During 2023, inflation has not hadwas a material effect onfactor in increased loss experience within the Company’s resultsautomobile liability line of operations in any of the periods presented.business.


Off-Balance Sheet Arrangements

In the normal course of business, the Company has structured borrowings that, in accordance with accounting principles generally accepted in the United States of America, are recorded on the Company’s balance sheet at an amount that differs from the ultimate contractual obligation. See Note 8 of Notes to Consolidated Financial Statements.

Contractual Obligations

As a smaller reporting company, we have elected to comply with certain scaled disclosure reporting obligations, and therefore are not providing the table of contractual obligations required by this Item.

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.

21
23

Item 8.Financial Statements and Supplementary Data


INDEX TO FINANCIAL STATEMENTS


 Page
ATLANTIC AMERICAN CORPORATION 
  
Report of Independent Registered Public Accounting Firm (FORVIS, LLP), Atlanta, Georgia, PCAOB Firm ID No. 686)
2325
 

2528



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2224
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Shareholders
Atlantic American Corporation
Atlanta, GeorgiaGA


Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Atlantic American Corporation and subsidiaries (the Company)“Company”) as of December 31, 20202023, and 2019,2022, and the related consolidated statements of operations, comprehensive income,loss, shareholders’ equity and cash flows for each of the two years in the two-year period ended December 31, 20202023, and the related notes and schedules (collectively, referred to as the financial statements)“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20202023, and 2019,2022, and the results of its operations and its cash flows for each of the two years in the two-year period ended December 31, 2020,2023, in conformity with U.S.accounting principles generally accepted accounting principles (GAAP)in the United States of America (US GAAP).

Basis for Opinion
These financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company’sCompany's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)(“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 audits to obtain reasonable assurance about whether the 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 internal control over financial reporting. As part of our auditaudits, 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 financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.

25
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and thatthat: (1) relate to accounts or disclosures that are material to the 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.
 
Valuation of Insurance Reserves for Losses and Claims (Claim Reserves)
As reflected on the consolidated balance sheet and discussed in Note 56 to the financial statements, the Company’s insurance reserves for losses and claims (claim reserves), were $79.1$87.5 million as of December 31, 2020.2023. 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.
 
23
Addressing the matter involved performing the following audit procedures, among others:
 
Involving our actuarial specialists to assist in our procedures in:


oEvaluating the appropriateness of management’s actuarial reserving methodologies and assumptions;


oEvaluating 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 56 to the financial statements, the Company’s insurance reserves for future policy benefits (policy reserves) were $90.9$92.5 million as of December 31, 2020.2023. 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.

26
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:


oEvaluating whether the methodology applied by management is consistent in the aggregate with the methodology compliant with US GAAP;


oAssessing 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;


oPerforming an independent recalculation of policy reservesReviewing benefit reserve replication workbooks prepared by management for a sample of contracts for comparison to management’s estimate;contracts; and


oEvaluating 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/ Dixon Hughes Goodman LLP
We have served as the Company’s auditor since 2018.

/s/ FORVIS, LLP

Atlanta, GeorgiaGA
March 23, 2021April 1, 2024


2427

ATLANTIC AMERICAN CORPORATION
CONSOLIDATED BALANCE SHEETS


 December 31,  December 31, 
 2020  2019  2023
  2022
 
 
(Dollars in thousands,
except share data)
  
(In thousands,
except share and per
share data)
 
ASSETS            
Cash and cash equivalents 
$
19,319
  
$
12,893
  
$
28,301
  
$
28,863
 
Investments:              
Fixed maturities, available-for-sale, at fair value (amortized cost: $222,461 and $219,233) 
254,106
  
232,472
 
Equity securities, at fair value (cost: $6,393 and $7,168) 
18,716
  
22,922
 
Other invested assets (cost: $3,765 and $9,908) 
3,238
  
9,960
 
Fixed maturities, available-for-sale, at fair value (amortized cost: $238,626 and $236,766; no allowance for credit losses)
  
218,219
   
208,729
 
Equity securities, at fair value (cost: $4,936 and $4,907)
  
9,413
   
11,562
 
Other invested assets (cost: $6,982 and $5,628)
  
6,381
   
5,386
 
Policy loans 
1,975
  
2,007
   
1,778
   
1,759
 
Real estate 
38
  
38
   
38
   
38
 
Investment in unconsolidated trusts  
1,238
   
1,238
   
1,238
   
1,238
 
Total investments  
279,311
   
268,637
   
237,067
   
228,712
 
Receivables:              
Reinsurance 
29,086
  
32,135
 
Insurance premiums and other, net of allowance for doubtful accounts of $198 and $183 as of 2020 and 2019, respectively 
27,512
  
13,134
 
Reinsurance (net of allowance for uncollectible reinsurance of $61 and $0)
  
21,103
   
25,913
 
Insurance premiums and other (net of allowance for expected credit losses $217 and net of allowance for doubtful accounts $177)
  
23,690
   
15,386
 
Deferred income taxes, net 
—
  
314
   
15,682
   
14,163
 
Deferred acquisition costs 
39,611
  
38,861
   
43,850
   
42,281
 
Other assets 
7,804
  
9,108
   
9,028
   
9,202
 
Intangibles  
2,544
   
2,544
   
2,544
   
2,544
 
Total assets 
$
405,187
  
$
377,626
  
$
381,265
  
$
367,064
 
              
LIABILITIES AND SHAREHOLDERS’ EQUITY              
Insurance reserves and policyholder funds              
Future policy benefits 
$
90,872
  
$
92,490
  
$
92,495
  
$
85,564
 
Unearned premiums 
27,131
  
26,035
   
31,317
   
28,348
 
Losses and claims 
79,147
  
81,448
   
87,478
   
87,484
 
Other policy liabilities  
1,526
   
1,933
   
1,132
   
1,255
 
Total insurance reserves and policyholder funds 
198,676
  
201,906
   
212,422
   
202,651
 
Accounts payable and accrued expenses 
26,412
  
23,588
   
24,811
   
26,473
 
Deferred income taxes, net 
1,301
  
—
 
Revolving credit facility  3,019   2,009 
Junior subordinated debenture obligations, net  
33,738
   
33,738
   
33,738
   
33,738
 
Total liabilities  
260,127
   
259,232
   
273,990
   
264,871
 
Commitments and contingencies (Note 16)      
Commitments and contingencies (Note 17)  
   
 
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; 20,415,243 and 20,472,162 shares outstanding as of 2020 and 2019, respectively 
22,401
  
22,401
 
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; 20,402,288 and 20,407,229 shares outstanding as of 2023 and 2022, respectively
  
22,401
   
22,401
 
Additional paid-in capital 
57,437
  
57,820
   
57,425
   
57,425
 
Retained earnings 
47,790
  
36,020
   
50,929
   
51,982
 
Accumulated other comprehensive income 
25,000
  
10,459
 
Accumulated other comprehensive loss
  
(16,121
)
  
(22,149
)
Unearned stock grant compensation 
(284
)
 
(781
)
  
(13
)
  
(132
)
Treasury stock, at cost, 1,985,651 and 1,928,732 shares as of 2020 and 2019, respectively  
(7,339
)
  
(7,580
)
Treasury stock, at cost, 1,998,606 and 1,993,665 shares as of 2023 and 2022, respectively
  
(7,401
)
  
(7,389
)
Total shareholders’ equity  
145,060
   
118,394
   
107,275
   
102,193
 
Total liabilities and shareholders’ equity 
$
405,187
  
$
377,626
  
$
381,265
  
$
367,064
 


See the accompanying notes to the consolidated financial statements.


2528
ATLANTIC AMERICAN CORPORATION
CONSOLIDATED CONSOLIDATED STATEMENTS OF OPERATIONS


 Year Ended December 31,  Year Ended December 31, 
 2020  2019  2023
  2022
 
 
(Dollars in thousands,
except per share data)
  
(In thousands,
except per share data)
 
Revenue:            
Insurance premiums, net 
$
183,539
  
$
181,925
  
$
178,825
  
$
185,440
 
Net investment income 
7,744
  
8,979
   
10,058
   
9,932
 
Realized investment gains, net 
7,420
  
1,574
   
70
   
30
 
Unrealized gains (losses) on equity securities, net 
(3,431
)
 
5,511
 
Unrealized losses on equity securities, net
  
(2,177
)
  
(7,562
)
Other income  
76
   
190
   
17
   
11
 
Total revenue  
195,348
   
198,179
   
186,793
   
187,851
 
              
Benefits and expenses:              
Insurance benefits and losses incurred 
119,876
  
139,225
   
122,500
   
123,456
 
Commissions and underwriting expenses 
46,811
  
45,477
   
46,124
   
46,713
 
Interest expense 
1,610
  
2,130
   
3,269
   
1,952
 
Other expense  
11,548
   
11,754
   
15,465
   
13,634
 
Total benefits and expenses  
179,845
   
198,586
   
187,358
   
185,755
 
              
Income (loss) before income taxes 
15,503
  
(407
)
  
(565
)
  
2,096
 
Income tax expense (benefit)  
3,334
   
(21
)
  
(394
)
  
571
 
Net Income (loss) 
12,169
  
(386
)
Net income (loss)
  
(171
)
  
1,525
 
Preferred stock dividends  
(399
)
  
(399
)
  
(399
)
  
(399
)
Net Income (loss) applicable to common shareholders 
$
11,770
  
$
(785
)
Earnings (loss) per common share (basic)  
0.58
   
(0.04
)
Earnings (loss) per common share (diluted) 
$
0.56
  
$
(0.04
)
Net income (loss) applicable to common shareholders 
$
(570
)
 
$
1,126
 
Earnings (loss) per common share (basic and diluted)  
(0.03
)
  
0.06
 


See the accompanying notes to the consolidated financial statements.


2629
ATLANTIC AMERICAN CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


 Year Ended December 31,  Year Ended December 31, 
 2020  2019  2023
  2022
 
 (Dollars in thousands)  (In thousands) 
Net income (loss) 
$
12,169
  
$
(386
)
 
$
(171
)
 
$
1,525
 
Other comprehensive income:      
Other comprehensive gain (loss):        
Available-for-sale fixed maturity securities:
              
Gross unrealized holding gain arising in the period 
18,791
  
23,130
 
Gross unrealized holding gain (loss) arising in the period  
7,700
   
(50,377
)
Related income tax effect  
(3,946
)
  
(4,857
)
  
(1,617
)
  
10,579
 
Subtotal  
14,845
   
18,273
   
6,083
   
(39,798
)
              
Less: reclassification adjustment for net realized gains included in net income (loss) 
(385
)
 
(353
)
Less: reclassification adjustment for net realized gains included in net income
  
(70
)
  
(49
)
Related income tax effect  
81
   
74
   
15
   
10
 
Subtotal  
(304
)
  
(279
)
  
(55
)
  
(39
)
              
Total other comprehensive income, net of tax  
14,541
   
17,994
 
Total comprehensive income 
$
26,710
  
$
17,608
 
Total other comprehensive income (loss), net of tax  
6,028
   
(39,837
)
Total comprehensive income (loss)
 
$
5,857
  
$
(38,312
)


See the accompanying notes to the consolidated financial statements.


2730
ATLANTIC AMERICAN CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


 Year Ended December 31,  Year Ended December 31, 
(Dollars in thousands, except per share data) 2020  2019 
(In thousands, except share and per share data) 2023
  2022
 
Preferred stock:            
Balance, beginning of year 
$
55
  
$
55
  
$
55
  
$
55
 
Balance, end of year 
55
  
55
   
55
   
55
 
Common stock:              
Balance, beginning of year 
22,401
  
22,401
   
22,401
   
22,401
 
Balance, end of year 
22,401
  
22,401
   
22,401
   
22,401
 
Additional paid-in capital:              
Balance, beginning of year 
57,820
  
57,414
   
57,425
   
57,441
 
Restricted stock grants, net of forfeitures; 20,000 and 355,000 restricted shares issued, as of 2020 and 2019, respectively 
(376
)
 
396
 
Issuance of 4,701 and 10,862 shares, as of 2020 and 2019, respectively, under stock plans  
(7
)
  
10
 
Restricted stock grants, net of forfeitures
  
—
   
(16
)
Balance, end of year 
57,437
  
57,820
   
57,425
   
57,425
 
Retained earnings:              
Balance, beginning of year 
36,020
  
37,208
   
51,982
   
51,264
 
Net Income (loss) 
12,169
  
(386
)
Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2023
  (75)  — 
Net income (loss)
  
(171
)
  
1,525
 
Dividends on common stock 
—
  
(403
)
  
(408
)
  
(408
)
Dividends accrued on preferred stock  
(399
)
  
(399
)
  
(399
)
  
(399
)
Balance, end of year 
47,790
  
36,020
   
50,929
   
51,982
 
Accumulated other comprehensive income (loss):              
Balance, beginning of year 
10,459
  
(7,535
)
  
(22,149
)
  
17,688
 
Other comprehensive income, net of tax  
14,541
   
17,994
 
Other comprehensive income (loss), net of tax  
6,028
   
(39,837
)
Balance, end of year 
25,000
  
10,459
   
(16,121
)
  
(22,149
)
Unearned Stock Grant Compensation:      
Unearned stock grant compensation:        
Balance, beginning of year 
(781
)
 
(186
)
  
(132
)
  
(73
)
Restricted stock grants, net of forfeitures; 20,000 and 355,000 restricted shares issued, as of 2020 and 2019, respectively 
60
  
(948
)
Restricted stock grants, net of forfeitures
  
—
   
(193
)
Amortization of unearned compensation  
437
   
353
   
119
   
134
 
Balance, end of year 
(284
)
 
(781
)
  
(13
)
  
(132
)
Treasury Stock:      
Treasury stock:        
Balance, beginning of year 
(7,580
)
 
(7,985
)
  
(7,389
)
  
(7,490
)
Restricted stock grants, net of forfeitures; 20,000 and 355,000 restricted shares issued, as of 2020 and 2019, respectively 
316
  
552
 
Purchase of 0 and 26,210 shares, as of 2020 and 2019, respectively, for treasury 
—
  
(71
)
Restricted stock grants, net of forfeitures  
—
   
209
 
Net shares acquired related to employee share-based compensation plans 
(91
)
 
(92
)
  
(12
)
  
(108
)
Issuance of 4,701 and 10,862 shares, as of 2020 and 2019, respectively, shares under stock plans  
16
   
16
 
Balance, end of year  
(7,339
)
  
(7,580
)
  
(7,401
)
  
(7,389
)
              
Total shareholders’ equity 
$
145,060
  
$
118,394
  
$
107,275
  
$
102,193
 
Dividends declared on common stock per share 
$
—
  
$
(.02
)
 
$
0.02
  
$
0.02
 
        
Common shares outstanding:        
Balance, beginning of year  20,407,229   20,378,576 
Net shares acquired under employee share-based compensation plans  (4,941)  (36,347)
Restricted stock grants, net of forfeitures  —   65,000 
Balance, end of year  20,402,288   20,407,229 


See the accompanying notes to the consolidated financial statements.


2831
ATLANTIC AMERICAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS


 Year Ended December 31,  Year Ended December 31, 
 2020  2019  2023
  2022
 
 (Dollars in thousands)  (In thousands) 
Cash flows from operating activities:            
Net Income (loss) 
$
12,169
  
$
(386
)
 
$
(171
)
 
$
1,525
 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:      
Adjustments to reconcile net income to net cash provided by operating activities:        
Amortization of deferred acquisition costs 
19,393
  
17,288
   
16,440
   
19,445
 
Acquisition costs deferred 
(20,143
)
 
(19,055
)
  
(18,009
)
  
(23,028
)
Realized investment gains, net 
(7,420
)
 
(1,574
)
  
(70
)
  
(30
)
Unrealized (gains) losses on equity securities, net 
3,431
  
(5,511
)
Distributions received from equity method investees 
—
  
379
 
Unrealized losses on equity securities, net  
2,177
   
7,562
 
Losses (earnings) from equity method investees  360   (241)
Compensation expense related to share awards 
437
  
353
   
119
   
134
 
Provision for credit losses
  26   — 
Depreciation and amortization 
980
  
996
   
652
   
890
 
Deferred income tax benefit 
(2,250
)
 
(913
)
  
(3,121
)
  
(1,819
)
(Increase) decrease in receivables, net 
1,349

 
(4,709
)
  
(3,520
)
  
1,076
 
Increase (decrease) in insurance reserves and policyholder funds 
(3,230
)
 
12,858
 
Increase in accounts payable and accrued expenses 
2,324
  
3,472
 
Increase in insurance reserves and policyholder funds
  
9,771
   
854
 
(Decrease) increase in accounts payable and accrued expenses
  
(1,662
)
  
1,008
 
Other, net  
1,931
   
(5,005
)
  
(370
)
  
(923
)
Net cash provided by (used in) operating activities  
8,971

  
(1,807
)
Net cash provided by operating activities  
2,622
   
6,453
 
              
Cash flows from investing activities:              
Proceeds from investments sold 
18,541
  
120,950
   
5,044
   
3,902
 
Proceeds from investments matured, called or redeemed 
7,117
  
6,157
   
9,744
   
9,806
 
Investments purchased 
(27,489
)
 
(124,029
)
  
(18,073
)
  
(17,010
)
Additions to property and equipment  
(233
)
  
(69
)
  
(80
)
  
(126
)
Net cash (used in) provided by investing activities  
(2,064
)
  
3,009
 
Net cash used in investing activities
  
(3,365
)
  
(3,428
)
              
Cash flows from financing activities:              
Payment of dividends on Series D preferred stock 
(399
)
 
(399
)
  
(399
)
  
(399
)
Payment of dividends on common stock 
—
  
(403
)
  
(408
)
  
(408
)
Proceeds from shares issued under stock plans 
9
  
26
 
Treasury stock acquired — share repurchase authorization 
—
  
(71
)
Treasury stock acquired — net employee share-based compensation  
(91
)
  
(92
)
  
(12
)
  
(108
)
Net cash used in financing activities  
(481
)
  
(939
)
Proceeds from revolving credit facility, net  1,000   2,000 
Net cash provided by financing activities
  
181
   
1,085
 
              
Net increase in cash 
6,426
  
263
 
Net (decrease) increase in cash  
(562
)
  
4,110
 
Cash and cash equivalents at beginning of year  
12,893
   
12,630
   
28,863
   
24,753
 
Cash and cash equivalents at end of year 
$
19,319
  
$
12,893
  
$
28,301
  
$
28,863
 
              
Supplemental cash flow information:              
Cash paid for interest 
$
1,665
  
$
2,155
  
$
3,227
  
$
1,794
 
Cash paid for income taxes 
$
3,883
  
$
1,662
  
$
2,582
  
$
2,764
 
Non-cash investing activities:
      
Receivable from sale of other invested assets
 $12,678
  $-
 


See the accompanying notes to the consolidated financial statements.


2932
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)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, 2020,2023, the Parent owned fourfive insurance subsidiaries, Bankers Fidelity Life Insurance Company and its wholly-owned subsidiary,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. In addition, tothe 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 collectibility. 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.


33
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. As of December 31, 2020, the Company owned a certain equity security in the amount of $143, with a valuation that was derived from techniques in which one or more of the significant inputs are unobservable. As of December 31, 2020, all fixed maturities were valued using publicly quoted market prices or techniques with observable inputs. 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.


Prior to January 1, 2023, the Company applied other than temporary impairment (“OTTI”) guidance for securities in an unrealized loss position. An OTTI was recognized in earnings within realized investment gains (losses) when it was anticipated that the amortized cost would not be recovered. When either: (i) the Company had the intent to sell the security, or (ii) it was more likely than not that the Company would be required to sell the security before recovery, the reduction of amortized cost and the OTTI recognized in earnings was the entire difference between the security’s amortized cost and estimated fair value. If neither of these conditions existed, the difference between the amortized cost of the security and the present value of projected future cash flows expected to be collected was recognized as a reduction of amortized cost and an OTTI in earnings. If the estimated fair value was 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 was recorded in OCI.


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.


Policy loans are carried at unpaid principal balance and realare fully collateralized by the cash surrender value of the underlying insurance contract.  Real estate is carried at historical cost. Other invested assetscost 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 comprisedconsidered to be variable interest entities (“VIEs”) under GAAP guidance. The Company’s VIE interests principally consist of investmentsinterests in limited partnerships and limited liability companies and real estate joint ventures,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 valueCompany becomes aware of a fixed maturity security oran impairment of an other invested asset declines below its cost or amortized cost, as applicable, andat the decline is considered to be other than temporary,balance sheet date, it will recognize an impairment by recording a realized loss is recorded to reducereduction in the carrying value of the other invested asset with a corresponding charge to net investment to its estimated fair value, which becomes the new cost basis.income.


30

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.


34
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.


Reinsurance



The Company enters intoCompany’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 other companies in the normal coursesame reinsurer may be recorded net on the balance sheet, if a right of business. For eachoffset exists within the reinsurance agreement,agreement. In the event that reinsurers do not meet their obligations to the Company determines if the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. Reinsurance premiums and benefits paid or provided are accounted for on bases consistent with those used in accounting for the original policies issued andunder the terms of the reinsurance contracts. Premiums, benefits and DACagreements, reinsurance recoverable balances could become uncollectible. In such instances, reinsurance recoverable balances are reportedstated net of insurance ceded. Reinsurance premiums from assumed business are estimated based on information received from ceding companies and reinsureds.  Any subsequent differences that arise regarding such estimates are recorded in the period in which they are determined.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


Fair Value Measurement – Changes to the Disclosure Requirements for Fair Value Measurement. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This guidance removes the following disclosure requirements from Topic 820: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels, and (3) the valuation processes for Level 3 fair value measurements. This disclosure also includes the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.  The Company adopted ASU 2018-13 as of January 1, 2020. The adoption of this ASU did not have an impact on the Company’s consolidated financial statements.

Goodwill. In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).  ASU 2017-04 is intended to simplify the evaluation of goodwill.  The updated guidance requires recognition and measurement of goodwill impairment based on the excess of the carrying value of the reporting unit compared to its estimated fair value, with the amount of the impairment not to exceed the carrying value of the reporting unit’s goodwill. Under the prior accounting guidance, if the reporting unit’s carrying value exceeds its estimated fair value, the Company allocates the fair value of the reporting unit to all of the assets and liabilities of the reporting unit to determine an implied goodwill value. An impairment loss is then recognized for the excess, if any, of the carrying value of the reporting unit’s goodwill compared to the implied goodwill value. The Company adopted ASU 2017-04 as of January 1, 2020. The adoption of this ASU did not have an impact on the Company’s consolidated financial statements.

Future 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. This standard may be elected over time through December 31, 2022 as reference rate reform activities occur. The Company is currently assessingadopted the effectguidance as of adopting thisJune 30, 2023. The adoption of the guidance had no significant impact on itsthe Company’s financial condition and results of operations.operations.


Investments
35

Financial Instruments – Equity Securities.Credit Losses. In January 2020,June 2016, the FASB issued ASU No. 2020-012016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2020-01”) Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. This update, among others, clarifies the interaction of the accounting for equity securities under Topic 321 and investments under the equity method of accounting in Topic 323 when there is a change in level of ownership or degree of influence. ASU 2020-01 is effective for the Company beginning with the first quarter of 2021 and will be applied prospectively. Early adoption is permitted. This guidance is not expected to have a material impact on the Company’s consolidated financial statements.

Income Taxes – Simplifying the Accounting for Income Taxes. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”2016-13”). This updated guidance is intended to simplify the accounting for income taxes by removing several exceptions contained in existing guidance and amending other existing guidance to simplify several other income tax accounting matters. 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 effectivededucted 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 interimavailable-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and annual reporting periods beginning after December 15, 2020, although earlier adoption is permitted. 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 expects to adoptadopted the updated guidance as of January 1, 2021, and does not expect2023. 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 ASUguidance resulted in the recognition of an after-tax cumulative effect adjustment of $0.1 million to have a materialreflect 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.



Impact of Adoption on its consolidated financial statements.Condensed Consolidated Balance Sheet




Reinsurance Recoverables



The following table presents the balances of reinsurance recoverables, net of the allowance for estimated uncollectible reinsurance, at January 1, 2023 and December 31, 2023, and the changes in the allowance for estimated uncollectible reinsurance for the year ended December 31, 2023.


  Year ended December 31, 2023 
(in thousands) 
Reinsurance Recoverables,
Net of Allowance for Estimated
Uncollectible Reinsurance
  
Allowance for Estimated
Uncollectible Reinsurance
 
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 January 1, 2023 and December 31, 2023, and the changes in the allowance for doubtful accounts/expected credit losses for the year ended December 31, 2023.


  Year ended December 31, 2023 
(in thousands) 
Insurance Premiums and
Other, Net of Expected Credit
Losses
  
Allowance for Doubtful
Accounts/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 


36

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 interim and 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, but has not yet determined the method or timing for adoption or estimated the impactmethod. The Company will adopt on the Company’s consolidated financial statements.January 1, 2025.


Financial Instruments – Credit Losses.

Segment Reporting. In June 2016,November 2023, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses2023-07, Segment Reporting- An Amendment for Improvements to Reportable Segment Disclosures (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”)280). ASU 2016-13 requires entities to measure all expected credit losses for financial instruments (including reinsurance recoverable and policy loans) held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Under current GAAP, entities generally recognize credit losses when it is probable that the loss has been incurred. ASU 2016-13 will remove all recognition thresholds and will require entities to recognize an allowance for credit losses equal to the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the entity expects to collect over the instrument’s contractual life. ASU 2016-13 also amends the credit loss measurement guidance for available-for-sale (“AFS”) debt securities and beneficial interests in securitized financial assets. Credit losses on AFS debt securities carried at fair value will continue to be measured as an other than temporary impairment (“OTTI”) when incurred; however, the losses will be recognized through an allowance and no longer as an adjustment to the cost basis. Recoveries of OTTI will be recognized as reversals of valuation allowances and no longer accreted as investment income through an adjustment to the investment yield. The allowance on AFS debt securities cannot cause the net carrying value to be below fair value and, therefore, it is possible that increases in fair value due to decreases in market interest rates could cause the reversal of a valuation allowance and increase net income. The new guidance will also require purchased financial assets with a more-than-insignificant amount of credit deterioration since original issuance to be recorded based on contractual amounts due and an initial allowance recorded at the date of purchase. For the Company, the amendments in ASU 2016-13 will2023-07 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 ASC 280 in its entirety, permits more than one measure of segment profit or loss to be effective for interimreported under certain conditions, and annual reporting periods beginning after December 15, 2022. Early adoptionrequires 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 permittedeffective for fiscal years beginning after December 15, 2018, including2023, and interim periods within those fiscal years.years beginning after December 15, 2024, although early adoption is permitted. The Company has not yet determinedis evaluating the timing of adoption. Implementation matters yet to be addressed include determining the impact of valuation allowances on the effective interest method for recognizing interest income from AFS debt securities as well as updating our investment accounting system functionality to adjust valuation allowances based on changes in fair value. The estimatednew guidance and any effect it will have on the Company’s consolidated financial statements can only be estimated basedfinancials.



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 Dec. 15, 2024. The Company is evaluating the new guidance and any effect it will have on the current investment portfolio at any given point in time, and accordingly, has not currently been determined.Company’s financials.

32

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, 20202023 and December 31, 2019.2022.



Fixed maturities were comprised of the following:


 2020  2023
 
Estimated
Fair Value
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Amortized
Cost
  
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 
$
30,762
  
$
1,381
  
$
26
  
$
29,407
  
$
50,059
  
$
63
  
$
4,944
  $—  
$
54,940
 
Obligations of states and political subdivisions  
11,802
   
898
   
—
   
10,904
   
8,106
   
15
   
1,424
   —   
9,515
 
Corporate securities:                                
Utilities and telecom 
30,359
  
4,423
  
—
  
25,936
   
21,309
   
143
   
2,582
   —   
23,748
 
Financial services 
78,258
  
9,811
  
6
  
68,453
   
59,584
   
560
   
4,931
   —   
63,955
 
Other business – diversified 
41,145
  
5,689
  
15
  
35,471
   
34,386
   
403
   
2,940
   —   
36,923
 
Other consumer – diversified  
61,530
   
9,479
   
47
   
52,098
   
44,570
   
87
   
4,870
   —   
49,353
 
Total corporate securities  
211,292
   
29,402
   
68
   
181,958
   
159,849
   
1,193
   
15,323
   —   
173,979
 
Redeemable preferred stocks:                                
Other consumer – diversified  
250
   
58
   
—
   
192
   
205
   
13
   
—
   —   
192
 
Total redeemable preferred stocks  
250
   
58
   
—
   
192
   
205
   
13
   
—
   —   
192
 
Total fixed maturities 
$
254,106
  
$
31,739
  
$
94
  
$
222,461
  
$
218,219
  
$
1,284
  
$
21,691
  $
—  
$
238,626
 


3337
 2019  2022
 
 
Estimated
Fair Value
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Amortized
Cost
  
Estimated
Fair Value
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Amortized
Cost
 
Fixed maturities:                        
Bonds:                        
U.S. Treasury securities and obligations of U.S. Government agencies and authorities 
$
20,259
  
$
467
  
$
53
  
$
19,845
  
$
44,412
  
$
5
  
$
5,926
  
$
50,333
 
Obligations of states and political subdivisions  
11,940
   
371
   
53
   
11,622
   
9,187
   
4
   
1,702
   
10,885
 
Corporate securities:                        
Utilities and telecom 
26,648
  
2,404
  
32
  
24,276
  
22,090
  
120
  
3,299
  
25,269
 
Financial services 
73,917
  
4,249
  
57
  
69,725
  
59,054
  
397
  
7,085
  
65,742
 
Other business – diversified 
41,706
  
2,335
  
98
  
39,469
  
31,058
  
161
  
4,689
  
35,586
 
Other consumer – diversified  
57,752
   
3,702
   
54
   
54,104
   
42,705
   
35
   
6,089
   
48,759
 
Total corporate securities  
200,023
   
12,690
   
241
   
187,574
   
154,907
   
713
   
21,162
   
175,356
 
Redeemable preferred stocks:                        
Other consumer – diversified  
250
   
58
   
—
   
192
   
223
   
31
   
—
   
192
 
Total redeemable preferred stocks  
250
   
58
   
—
   
192
   
223
   
31
   
—
   
192
 
Total fixed maturities 
$
232,472
  
$
13,586
  
$
347
  
$
219,233
  
$
208,729
  
$
753
  
$
28,790
  
$
236,766
 



Bonds having an amortized cost of $10,670$14,647 and $10,669$12,333 and included in the tables above were on deposit with insurance regulatory authorities at December 31, 20202023 and 2019,2022, respectively, in accordance with statutory requirements. Additionally, bonds having an amortized cost of $1,997$9,584 and $0$7,221 and included in the tables above were pledged as collateral to FHLB at December 31, 20202023 and 2019,2022, respectively.



 2020  2023
 
 
Estimated
Fair Value
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Cost or
Amortized
Cost
  
Estimated
Fair Value
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Cost
 
Equity securities:                        
Common and non-redeemable preferred stocks:                        
Financial services 
2,111
  
351
  
—
  
1,760
  
924
  
621
  
—
  
303
 
Other business – diversified  
16,605
   
11,972
   
—
   
4,633
 
Communications  
8,489
   
3,856
   
—
   
4,633
 
Total equity securities 
$
18,716
  
$
12,323
  
$
—
  
$
6,393
  
$
9,413
  
$
4,477
  
$
—
  
$
4,936
 


 2019  2022
 
 
Estimated
Fair Value
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Cost or
Amortized
Cost
  
Estimated
Fair Value
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Cost
 
Equity securities:                        
Common and non-redeemable preferred stocks:                        
Financial services 
3,159
  
624
  
—
  
2,535
  
790
  
516
  
—
  
274
 
Other business – diversified  
19,763
   
15,130
   
—
   
4,633
 
Communications  
10,772
   
6,139
   
—
   
4,633
 
Total equity securities 
$
22,922
  
$
15,754
  
$
—
  
$
7,168
  
$
11,562
  
$
6,655
  
$
—
  
$
4,907
 


The carrying value and amortized cost of the Company’s investments in fixed maturities at December 31, 20202023 and 20192022 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.


 2020  2019  2023
  2022
 
 
Carrying
Value
  
Amortized
Cost
  
Carrying
Value
  
Amortized
Cost
  
Carrying
Value
  
Amortized
Cost
  
Carrying
Value
  
Amortized
Cost
 
Due in one year or less 
$
2,041
  
$
2,015
  
$
—
  
$
—
  
$
1,715
  
$
1,750
  
$
3,776
  
$
3,797
 
Due after one year through five years 
18,373
  
17,039
  
14,664
  
14,280
  
60,423
  
62,423
  
40,150
  
42,174
 
Due after five years through ten years 
89,892
  
79,993
  
77,934
  
73,521
  
33,596
  
36,752
  
44,044
  
49,711
 
Due after ten years 
124,609
  
104,527
  
130,680
  
122,321
  
86,857
  
97,984
  
87,719
  
103,095
 
Asset backed securities  
19,191
   
18,887
   
9,194
   
9,111
   
35,628
   
39,717
   
33,040
   
37,989
 
Totals 
$
254,106
  
$
222,461
  
$
232,472
  
$
219,233
  
$
218,219
  
$
238,626
  
$
208,729
  
$
236,766
 


3438

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, 20202023 and 2019.2022.


 2020  2023
 
 Less than 12 months  12 months or longer  Total  Less than 12 months  12 months or longer  Total 
 
Fair
Value
  
Unrealized
Losses
  
Fair
Value
  
Unrealized
Losses
  
Fair
Value
  
Unrealized
Losses
  
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 
$
7,045
  
$
26
  
$
—
  
$
—
  
$
7,045
  
$
26
  
$
5,194
  
$
37
  
$
39,476
  
$
4,907
  
$
44,670
  
$
4,944
 
Obligations of states and political subdivisions
 1,145  3  5,936  1,421  7,081  1,424 
Corporate securities  
4,602
   
68
   
—
   
—
   
4,602
   
68
   
539
   
13
   
138,283
   
15,310
   
138,822
   
15,323
 
Total temporarily impaired securities 
$
11,647
  
$
94
  
$
—
  
$
—
  
$
11,647
  
$
94
  
$
6,878
  
$
53
  
$
183,695
  
$
21,638
  
$
190,573
  
$
21,691
 


  2019 
  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 
$
3,432
  
$
22
  
$
3,533
  
$
31
  
$
6,965
  
$
53
 
Obligations of states and political subdivisions  
3,106
   
53
   
—
   
—
   
3,106
   
53
 
Corporate securities  
23,245
   
145
   
2,504
   
96
   
25,749
   
241
 
Total temporarily impaired securities 
$
29,783
  
$
220
  
$
6,037
  
$
127
  
$
35,820
  
$
347
 
  2022
 
  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 
$
23,763
  
$
2,410
  
$
19,259
  
$
3,516
  
$
43,022
  
$
5,926
 
Obligations of states and political subdivisions
  8,183   1,702   —   —   8,183   1,702 
Corporate securities  
127,928
   
16,214
   
14,514
   
4,948
   
142,442
   
21,162
 
Total temporarily impaired securities 
$
159,874
  
$
20,326
  
$
33,773
  
$
8,464
  
$
193,647
  
$
28,790
 


The evaluation for an OTTI is a quantitative and qualitative process, which is subject to risks and uncertainties

Analysis of Securities in the determination of whether declines in the fair value of investments are other than temporary. Potential risks and uncertainties include, among other things, changes in general economic conditions, an issuer’s financial condition or near term recovery prospects and the effects of changes in interest rates. In evaluating a potential impairment, the Company considers, among other factors, management’s intent and ability to hold the securities until price recovery, the nature of the investment and the expectation of prospects for the issuer and its industry, the status of an issuer’s continued satisfaction of its obligations in accordance with their contractual terms, and management’s expectation as to the issuer’s ability and intent to continue to do so, as well as ratings actions that may affect the issuer’s credit status.Unrealized Loss Positions


There were no OTTI charges recorded during the years ended December 31, 2020 and  2019.


As of December 31, 20202023 and 2019,2022, there were twenty311 and thirty237 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 decrease in the number and value of securities in an unrealized loss position during the year ended December 31, 2020, was primarily attributable to improvement in market values in certain oflosses 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 resultmore focused review of a decliningthe 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 (NRSROs), 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 rate environment.  Theand 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 currently intend to sell nor doesthe investments and it expect tois not more likely than not that the Company will be required to sell anythe investments before recovery of their amortized cost bases, which may be at maturity.

39

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 securities in an unrealized loss position. Based upon the Company’scash flows expected continuation of receipt of contractually required principal and interest payments and its intent and ability to retain the securities until price recovery, as well as the Company’s evaluation of other relevant factors, including those described above, the Company has deemed these securities to be temporarily impairedcollected 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, 2020.2023. The Company did not record any other than temporary impairments as of December 31, 2022.



Investment income was earned from the following sources:


 2020  2019  2023
  2022
 
Fixed maturities 
$
8,646
  
$
8,485
  
$
9,333
  
$
9,141
 
Equity securities 
141
  
282
   
332
   
327
 
Other  
(788
)
  
319
   
646
  
729
 
7,999
  
9,086
   
10,311
   
10,197
 
Investment expenses  
255
   
107
   
253
   
265
 
Net investment income 
$
7,744
  
$
8,979
  
$
10,058
  
$
9,932
 


35

A summary of realized investment gains (losses) follows:


 2020  2023 
 
Fixed
Maturities
  
Equity
Securities
  
Other
Invested Assets
  Total 
Fixed
Maturities
  
Equity
Securities
  
Other
Invested Assets
  Total 
Gains 
$
835
  
$
88
  
$
6,948
  
$
7,871
  
$
70
  
$
—
  
$
—
  
$
70
 
Losses  
(450
)
  
(1
)
  
—
   
(451
)
  
—
  
—
   
—
  
—
Realized investment gains, net 
$
385
  
$
87
  
$
6,948
  
$
7,420
  
$
70
  
$
—
  
$
—
 
$
70
 


 2019  2022 
 
Fixed
Maturities
  
Equity
Securities
  
Other
Invested Assets
  Total  
Fixed
Maturities
  
Equity
Securities
  
Other
Invested Assets
  Total 
Gains 
$
2,003
  
$
1,221
  
$
—
  
$
3,224
  
$
101
  
$
—
  
$
1
  
$
102
 
Losses  
(1,650
)
  
—
   
—
   
(1,650
)
  
(52
)
  
—
   
(20
)
  
(72
)
Realized investment gains, net 
$
353
  
$
1,221
  
$
—
  
$
1,574
 
Realized investment gains (losses), net 
$
49
  
$
—
  
$
(19
)
 
$
30
 



Proceeds from the sales of available-for-sale fixed maturities were as follows:


 2020  2019  2023
  2022
 
Sales proceeds 
$
18,504
  
$
117,530
  
$
5,035
  
$
3,649
 
Gross gains 
835
  
2,003
   
70
   
101
 
Gross losses 
(450
)
 
(1,650
)
  
—
  
—



Proceeds from the sales of available-for-sale equity securities were as follows:


 2020  2019  2023
  2022
 
Sales proceeds 
$
5
  
$
2,568
  
$
2
  
$
1
 
Gross gains 
—
  
1,113
   
—
   
—
 
Gross losses 
(1
)
 
—
   
—
   
—



Proceeds from the sales of other invested assets were as follows:

  2023
  2022
 
Sales proceeds $—  $161 
Gross gains  —   1 
Gross losses  —   (20)


Sales of available-for-sale securities in 20202023 and 20192022 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.  The transaction closed prior to December 31, 2020.  The Company recorded gross realized gains on this salethird-party in 2022.

40

The following table presents the portion of unrealized gains (losses) related to equity securities still held for the years ended December 31, 20202023 and 2019.2022.


 2020  2019  2023
  2022
 
Net realized and unrealized gains (losses) recognized during the period on equity securities 
$
(3,344
)
 
$
6,732
  
$
(2,177
)
 
$
(7,562
)
Less: Net realized gains (losses) recognized during the period on equity securities sold during the period  
87
   
1,221
 
Less: Net realized gains recognized during the period on equity securities sold during the period  
—
   
—
 
Unrealized gains (losses) on equity securities, net 
$
(3,431
)
 
$
5,511
  
$
(2,177
)
 
$
(7,562
)



The Company’s bond portfolio included 97%99% investment grade securities, as defined by the NAIC, at December 31, 2020.2023 and 2022.


Variable Interest Entities



The Company holds passive interests in a number of entities that are considered to be variable interest entities ("VIEs"(“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 $3,238$6,381 and $9,960$5,386 at December 31, 20202023 and 2019,2022, respectively. The Company’s VIE interests, carried as a part of investment in unconsolidated subsidiaries,trusts, totaled $1,238 at December 31, 20202023 and 2019.2022.


36

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 $4,476$7,619 and $11,198,$6,624, at December 31, 20202023 and 2019,2022, respectively. As of December 31, 20202023 and 2019,2022, the Company had outstanding commitments totaling $1,997,$4,518 and $5,872, respectively, whereby the Company is committed to fund these investments and may be called by such VIEsthe 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 $1,354 in the partnership.



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 fixed maturity security and one equity security.  As of December 31, 20202023 and December 31, 2019, the value of the fixed maturity valued using Level 3 criteria was $0 for both years. As of December 31, 2020 and December 31, 2019,2022, the value of the equity security valued using Level 3 criteria was $143$185 and $0,$156, 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.


41
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 23 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.



As of December 31, 2020,2023, 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
 
38
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 
$
—
  
$
254,106
  
$
—
  
$
254,106
 
Equity securities  
18,573
   
—
   
143
   
18,716
 
Cash equivalents  
12,010
   
—
   
—
   
12,010
 
Total 
$
30,583
  
$
254,106
  
$
143
  
$
284,832
 


As of December 31, 2019,2022, 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  
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
  
Significant
Other Observable
Inputs
(Level 2)
  
Significant
Unobservable
Inputs
(Level 3)
  Total 
Fixed maturities 
$
—
  
$
232,472
  
$
—
  
$
232,472
  
$
—
  
$
208,729
  
$
—
  
$
208,729
 
Equity securities 
22,922
  
—
  
—
  
22,922
  
11,406
  
—
  
156
  
11,562
 
Cash equivalents  
7,173
   
—
   
—
   
7,173
   
18,861
   
—
   
—
   
18,861
 
Total 
$
30,095
  
$
232,472
  
$
—
  
$
262,567
  
$
30,267
  
$
208,729
  
$
156
  
$
239,152
 


The Company does not have any fixed maturities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of years ended December 31, 2020 and 2019.


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, 20202023 and 2019.2022.


 Level in  2020  2019  Level in  2023
  2022
 
 
Fair Value
Hierarchy(1)
  
Carrying
Amount
  
Estimated
Fair Value
  
Carrying
Amount
  
Estimated
Fair Value
  
Fair Value
Hierarchy(1)
  
Carrying
Amount
  
Estimated
Fair Value
  
Carrying
Amount
  
Estimated
Fair Value
 
Assets:                              
Cash and cash equivalents Level 1  
$
19,319
  
$
19,319
  
$
12,893
  
$
12,893
  Level 1  
$
28,301
  
$
28,301
  
$
28,863
  
$
28,863
 
Fixed maturities 
(1)
 
254,106
  
254,106
  
232,472
  
232,472
  
Level 2

 
218,219
  
218,219
  
208,729
  
208,729
 
Equity securities 
(1)
 
18,716
  
18,716
  
22,922
  
22,922
  
(1) 

 
9,413
  
9,413
  
11,562
  
11,562
 
Other invested assets Level 3  
3,238
  
3,238
  
9,960
  
9,960
 
Policy loans Level 2  
1,975
  
1,975
  
2,007
  
2,007
  Level 3
  
1,778
  
1,778
  
1,759
  
1,759
 
Investments in unconsolidated trusts Level 2  
1,238
  
1,238
  
1,238
  
1,238
 
                              
Liabilities:                              
Junior Subordinated Debentures, net Level 2  
33,738
  
32,297
  
33,738
  
35,977
 
Junior subordinated debentures, net Level 2  
33,738
  
33,670
  
33,738
  
33,810
 
Revolving credit facility
 Level 2  3,019  3,019  2,009  2,009 


(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.



42

Note 4.Deferred Policy Acquisition Costs



The following table presents a rollforward of deferred policy acquisition costs by segment for the years ended December 31.


 2020  2019  2023  2022
 
 
American
Southern
  
Bankers
Fidelity
  
American
Southern
  
Bankers
Fidelity
  
American
Southern
  
Bankers
Fidelity
  
American
Southern
  
Bankers
Fidelity
 
Deferred policy acquisition costs:                        
Balance, beginning of year 
$
1,979
  
$
36,882
  
$
2,047
  
$
35,047
  
$
2,401
  
$
39,880
  
$
2,390
  
$
36,308
 
Capitalization 
9,910
  
10,233
  
8,761
  
10,294
   
8,689
   
9,320
   
10,161
   
12,867
 
Amortization  
(9,590
)
  
(9,803
)
  
(8,829
)
  
(8,459
)
  
(8,390
)
  
(8,050
)
  
(10,150
)
  
(9,295
)
Balance, end of year 
$
2,299
  
$
37,312
  
$
1,979
  
$
36,882
  
$
2,700
  
$
41,150
  
$
2,401
  
$
39,880
 
Note 5.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 is five years from the effective date with a renewal term of an additional 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 ten year term of the hosting arrangement, when the software is substantially ready for its intended use. The Company incurred and capitalized implementation costs of $1,545 and $2,522 during the years ended December 31, 2023 and 2022, respectively. The Company has capitalized $4,567 and $3,022 in implementation costs in other assets in its condensed consolidated balance sheet as of December 31, 2023 and 2022, respectively.  The Company expects the software will be substantially ready for its intended use during 2024. Accordingly, the Company has not recorded any amortization expense related to software implementation costs for years ended December 31, 2023 and 2022.

Note 5.6.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, 20202023 and 2019.2022.


       
Amount of
Insurance In Force, Net
        
Amount of
Insurance In Force, Net
 
 2020  2019  2020  2019  2023
  2022
  2023
  2022
 
Future policy benefits                        
Life insurance policies:                        
Ordinary life and annuities 
$
54,442
  
$
55,403
  
$
199,827
  
$
212,774
  
$
50,040
  
$
50,660
  
$
172,907
  
$
186,863
 
Group life  
91
   
93
   
83,533
(1) 
  
33,508
   
11,917
   
2,533
   
633,017
   
474,150
 
 
54,533
  
55,496
  
$
283,360
  
$
246,282
   
61,957
   
53,193
  
$
805,924
  
$
661,013
 
Accident and health insurance policies  
36,339
   
36,994
         
30,538
   
32,371
         
 
90,872
  
92,490
         
92,495
   
85,564
         
Unearned premiums 
27,131
  
26,035
         
31,317
   
28,348
         
Losses, claims and loss adjustment expenses 
79,147
  
81,448
         
87,478
   
87,484
         
Other policy liabilities  
1,526
   
1,933
         
1,132
   
1,255
         
Total insurance reserves and policyholder funds 
$
198,676
  
$
201,906
        
$
212,422
  
$
202,651
         


(1)
The group life in force amounts increased significantly during 2020. However, the impact on future policy benefits is not significant due to the deferred premium offset to the gross benefit reserve.


Annualized premiums for accident and health insurance policies were $109,430$84,127 and $112,734$89,471 at December 31, 20202023 and 2019,2022, respectively.


43
Future Policy Benefits



Liabilities for future benefits on life insurance future policy benefitspolicies and accident and health insurance policies are based uponon assumed future investment yields, mortality rates, disablement rates, benefit utilization rates, and withdrawallapse rates after giving effect to possible risks of unexpected adverse claim experience. The assumed mortality, withdrawaldisablement rates, benefit utilization rates, and expenseslapse 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, for life, accident and healthwhich reflect future policy benefitsinvestment yields at the time policies are issued, are generally: (i) 2.5% to 5.5% for issues prior to 1977, (ii) 7% graded5.5% to 5.5%7.0% for 1977 through 1979 issues, (iii) 9%9.0% for 1980 through 1987 issues, (iv) 5%5.0% to 7%7.0% for 1988 through 2009 issues, and (v) 4%3.0% to 4.0% for 2010 through 2012 issues, and (vi) 3.5% to 4.0% for 2013 through 20202023 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 IBNRincurred 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.



Activity in the liability for unpaid loss and claim reserves is summarized as follows:


 2020  2019  2023
  2022
 
Balance at January 1 
$
81,448
  
$
72,612
  
$
87,484
  
$
85,620
 
Less: Reinsurance recoverable on unpaid losses  
(18,339
)
  
(14,354
)
  
(17,647
)
  
(17,690
)
Net balance at January 1 
63,109
  
58,258
   
69,837
   
67,930
 
              
Incurred related to:              
Current year 
122,626
  
137,305
   
113,246
   
125,754
 
Prior years  
(3,480
)(1)
  
(80
)(2)
  
1,418
(1)
  
(4,228
)(2)
Total incurred  
119,146
   
137,225
   
114,664
   
121,526
 
              
Paid related to:              
Current year 
84,518
  
95,489
   
67,484
   
82,002
 
Prior years  
36,190
   
36,885
   
44,217
   
37,617
 
Total paid  
120,708
   
132,374
   
111,701
   
119,619
 
Net balance at December 31 
61,547
  
63,109
   
72,800
   
69,837
 
Plus: Reinsurance recoverable on unpaid losses  
17,600
   
18,339
   
14,678
   
17,647
 
Balance at December 31 
$
79,147
  
$
81,448
  
$
87,478
  
$
87,484
 



(1)
Prior years’ development was primarily the result of favorableunfavorable development in the lossautomobile liability line of business in the property and claim reserves forcasualty operations due to inflationary factors.

(2)
Prior years’ development was primarily the result of favorable development in the Medicare supplement line of business in Bankers Fidelity.  Rate increases on existing businessthe life and the resultant improvement in rate adequacy was more favorable than expected.  Additionally, the Company experiencedhealth operations, as well as favorable development in the surety line of business in American Southern due to a reduction in exposure coupled with recoveries on certain prior year losses.

(2)
Prior years’ development was primarily the result of better than expected development on prior years lossproperty and claim reserves for certain lines of business in American Southern, somewhat offset by unfavorable development on prior years loss and claim reserves for the Medicare Supplement line of business in Bankers Fidelity.casualty operations.


40

Following is a reconciliation of total incurred losses to total insurance benefits and losses incurred:


 2020  2019  2023
  2022
 
Total incurred losses 
$
119,146
  
$
137,225
  
$
114,664
  
$
121,526
 
Cash surrender value and matured endowments 
1,198
  
1,362
   
1,323
   
1,598
 
Benefit reserve changes  
(468
)
  
638
   
6,513
   
332
Total insurance benefits and losses incurred 
$
119,876
  
$
139,225
  
$
122,500
  
$
123,456
 


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, 2020,2023, 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, 2020 
  
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of
Reinsurance
  
IBNR
Reserves
  
Cumulative
Number of
Reported Claims
 
Accident Year 2011  2012  2013  2014  2015  2016  2017  2018  2019  2020 
2011 
$
38,188
  
$
38,296
  
$
38,360
  
$
38,327
  
$
38,316
  
$
38,302
  
$
38,299
  
$
38,297
  
$
38,297
  
$
38,297
  
$
—
   
664,056
 
2012      
50,021
   
50,996
   
51,021
   
50,998
   
50,989
   
50,987
   
50,985
   
50,984
   
50,984
   
—
   
867,050
 
2013          
56,974
   
56,970
   
57,034
   
57,023
   
57,021
   
57,016
   
57,015
   
57,014
   
—
   
957,363
 
2014              
57,179
   
56,938
   
56,981
   
56,981
   
56,976
   
56,977
   
56,976
   
—
   
939,478
 
2015                  
55,482
   
54,939
   
54,993
   
54,990
   
54,984
   
54,985
   
—
   
898,374
 
2016                      
58,849
   
59,851
   
63,226
   
63,225
   
63,221
   
—
   
1,036,769
 
2017                          
67,960
   
69,655
   
69,643
   
69,635
   
—
   
1,510,654
 
2018                              
79,140
   
80,404
   
80,361
   
—
   
1,782,982
 
2019                                  
88,765
   
87,028
   
172
   
2,242,156
 
2020                                      
75,857
   
12,728
   
1,620,697
 
                                      
$
634,358
         


4144
  Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance 
Accident Year 2011  2012  2013  2014  2015  2016  2017  2018  2019  2020 
2011 
$
31,720
  
$
38,296
  
$
38,360
  
$
38,327
  
$
38,316
  
$
38,302
  
$
38,299
  
$
38,297
  
$
38,297
  
$
38,297
 
2012      
42,267
   
50,996
   
51,021
   
50,998
   
50,989
   
50,987
   
50,985
   
50,984
   
50,984
 
2013          
47,770
   
56,970
   
57,034
   
57,023
   
57,021
   
57,016
   
57,015
   
57,014
 
2014              
48,024
   
56,938
   
56,981
   
56,981
   
56,976
   
56,977
   
56,976
 
2015                  
45,430
   
54,876
   
54,993
   
54,990
   
54,984
   
54,985
 
2016                      
49,165
   
59,747
   
63,226
   
63,225
   
63,221
 
2017                          
57,696
   
69,517
   
69,643
   
69,635
 
2018                              
66,565
   
80,222
   
80,361
 
2019                                  
72,333
   
86,856
 
2020                                      
63,129
 
                                      
$
621,458
 
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance  
$
12,900
 

Medicare Supplement

  For the Years Ended December 31,  
As of December 31,
2023
 
  
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of
Reinsurance
  
IBNR
Reserves
  
Cumulative
Number of
Reported Claims
 
Accident Year 2014  2015  2016  2017  2018  2019  2020  2021  2022  2023 
2014 
$
57,179
  
$
56,938
  
$
56,981
  
$
56,981
  
$
56,976
  
$
56,977
  
$
56,976
  
$
56,976
  
$
56,976
  
$
56,976
  
$
—
   
940
 
2015      
55,482
   
54,939
   
54,993
   
54,990
   
54,984
   
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
   
—
   
1,037
 
2017              
67,960
   
69,655
   
69,643
   
69,635
   
69,633
   
69,633
   
69,632
   
—
   
1,512
 
2018                  
79,140
   
80,404
   
80,361
   
80,357
   
80,351
   
80,348
   
—
   
2,052
 
2019                      
88,765
   
87,028
   
86,988
   
86,986
   
86,980
   
—
   
2,246
 
2020                          
75,857
   
75,715
   
75,730
   
75,730
   
14
   
1,853
 
2021                              65,267
   
61,579
   
61,785
   
52
   
1,771
 
2022                                  
58,777
   
56,047
   
239
   
2,103
 
2023                                      
48,367
   
11,979
   
1,864
 
                                      
$
654,071
         

  Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance 
Accident Year 2014  2015  2016  2017  2018  2019  2020  2021  2022  2023 
2014 
$
48,024
  
$
56,938
  
$
56,981
  
$
56,981
  
$
56,976
  
$
56,977
  
$
56,976
  
$
56,976
  
$
56,976
  
$
56,976
 
2015      
45,430
   
54,876
   
54,993
   
54,990
   
54,984
   
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
 
2017              
57,696
   
69,517
   
69,643
   
69,635
   
69,633
   
69,633
   
69,633
 
2018                  
66,565
   
80,222
   
80,361
   
80,355
   
80,351
   
80,348
 
2019                      
72,333
   
86,856
   
86,978
   
86,985
   
86,980
 
2020                          
63,129
   
75,527
   
75,710
   
75,715
 
2021                              
50,197
   
61,350
   
61,733
 
2022                                  
46,111
   
55,808
 
2023                                      
36,388
 
                                      
$
641,787
 
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance  
$
12,284
 


The cumulative number of reported claims for the Medicare supplementSupplement 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 information.data. Estimated ultimate claims incurred, using claims data reported during each month of any given year, are calculated using the chain ladder method modified to usereflect seasonality and trend-adjustedby trend-adjusting expected claims for the final four months.most recent four-month period prior to the statement date. Additional adjustments to the estimated ultimate claims incurred are then applied to account for seasonal changes in billingclaim experience and payment frequencies.changes in the rate of claim processing. The IBNR reserve is calculated as the estimated ultimate claims less the total of paid claims through the valuation date and claims in the course of settlement. settlement as of the valuation date. Thirty-six months of loss data are used to develop the estimated ultimate incurred claims. SimilarFor other accident and health products that have very small claim volumes, similar approaches are used for other less significant health products, subjectand modified to modifications to account forreflect the unique aspects of the product.

Automobile Liability

  For the Years Ended December 31,  
As of December 31,
2020
 
  
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of
Reinsurance
  
IBNR
Reserves
  
Cumulative
Number of
Reported Claims
 
Accident Year 2011  2012  2013  2014  2015  2016  2017  2018  2019  2020 
2011 
$
12,263
  
$
13,802
  
$
13,235
  
$
13,289
  
$
13,281
  
$
13,495
  
$
13,385
  
$
13,330
  
$
13,329
  
$
13,328
  
$
—
   
2,134
 
2012      
12,980
   
15,007
   
14,108
   
13,707
   
13,313
   
13,343
   
13,357
   
13,373
   
13,373
   
—
   
2,343
 
2013          
18,664
   
20,702
   
21,096
   
21,823
   
21,352
   
21,020
   
20,972
   
20,972
   
—
   
3,267
 
2014              
20,812
   
21,881
   
22,041
   
22,353
   
21,682
   
22,080
   
22,100
   
48
   
3,544
 
2015                  
18,521
   
19,857
   
20,017
   
20,007
   
20,086
   
20,680
   
75
   
3,525
 
2016                      
20,549
   
21,275
   
21,846
   
22,388
   
22,245
   
140
   
3,842
 
2017                          
22,179
   
24,212
   
23,766
   
25,180
   
801
   
3,772
 
2018                              
24,284
   
25,682
   
27,338
   
2,072
   
3,578
 
2019                                  
25,241
   
24,045
   
3,117
   
3,479
 
2020                                      
22,416
   
12,187
   
2,183
 
                                      
$
211,677
         

  Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance 
Accident Year 2011  2012  2013  2014  2015  2016  2017  2018  2019  2020 
2011 
$
4,205
  
$
7,934
  
$
9,858
  
$
12,071
  
$
13,039
  
$
13,106
  
$
13,199
  
$
13,330
  
$
13,329
  
$
13,328
 
2012      
4,627
   
8,791
   
11,507
   
12,932
   
13,197
   
13,211
   
13,288
   
13,373
   
13,373
 
2013          
5,144
   
12,193
   
16,782
   
19,407
   
20,382
   
20,982
   
20,972
   
20,972
 
2014              
6,822
   
13,807
   
17,554
   
20,177
   
20,878
   
21,735
   
21,813
 
2015                  
6,226
   
11,878
   
14,938
   
17,612
   
19,557
   
20,234
 
2016                      
6,796
   
13,141
   
16,397
   
19,613
   
21,408
 
2017                          
7,401
   
16,317
   
20,221
   
22,778
 
2018                              
6,989
   
15,647
   
21,121
 
2019                                  
7,305
   
14,694
 
2020                                      
5,172
 
                                      
$
174,893
 
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance  
$
36,784
 

products.
42
45

Automobile Liability

  For the Years Ended December 31,  
As of December 31,
2023
 
  
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of
Reinsurance
  
IBNR
Reserves
  
Cumulative
Number of
Reported
Claims
 
Accident Year 2014  2015  2016  2017  2018  2019  2020  2021  2022  2023 
2014 
$
20,812
  
$
21,881
  
$
22,041
  
$
22,353
  
$
21,682
  
$
22,080
  
$
22,100
  
$
22,125
  
$
22,165
  
$
22,095
  
$
—
   
3,560
 
2015      
18,521
   
19,857
   
20,017
   
20,007
   
20,086
   
20,680
   
20,849
   
20,955
   
21,021
   
—
   
3,537
 
2016          
20,549
   
21,275
   
21,846
   
22,388
   
22,245
   
22,310
   
22,448
   
22,448
   
—
   
3,862
 
2017              
22,179
   
24,212
   
23,766
   
25,180
   
26,009
   
26,153
   
26,231
   
1
   
3,813
 
2018                  
24,284
   
25,682
   
27,338
   
30,013
   
30,464
   
31,135
   
323
   
3,651
 
2019                      
25,241
   
24,045
   
25,724
   
28,042
   
28,513
   
397
   
3,606
 
2020                          
22,416
   
16,442
   
20,137
   
21,164
   
1,010
   
2,517
 
2021                              
25,887
   
21,172
   
24,957
   
1,899
   
2,774
 
2022                                  
28,860
   
27,293
   
3,093
   
2,845
 
2023                                      
33,266
   
16,714
   
2,558
 
                                      
$
258,123
         

  Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance 
Accident Year 2014  2015  2016  2017  2018  2019  2020  2021  2022  2023 
2014 
$
6,822
  
$
13,807
  
$
17,554
  
$
20,177
  
$
20,878
  
$
21,735
  
$
21,813
  
$
21,786
  
$
21,958
  
$
22,095
 
2015      
6,226
   
11,878
   
14,938
   
17,612
   
19,557
   
20,234
   
20,726
   
20,904
   
21,021
 
2016          
6,796
   
13,141
   
16,397
   
19,613
   
21,408
   
21,809
   
22,448
   
22,448
 
2017              
7,401
   
16,317
   
20,221
   
22,778
   
25,023
   
25,712
   
26,222
 
2018                  
6,989
   
15,647
   
21,121
   
24,662
   
27,671
   
29,201
 
2019                      
7,305
   
14,694
   
19,384
   
22,868
   
26,126
 
2020                          
5,172
   
9,941
   
14,693
   
18,133
 
2021                              
6,242
   
13,918
   
19,230
 
2022                                  
7,023
   
18,010
 
2023                                      
9,068
 
                                      
$
211,554
 
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance  
$
46,569
 

Automobile Physical Damage


 For the Years Ended December 31,  As of December 31, 2020  For the Years Ended December 31,  As of December 31, 2023 
 
Incurred Losses, Claims and Allocated Loss Adjustment Expenses,
Net of Reinsurance
  
IBNR
Reserves
  
Cumulative
Number of
Reported
Claims
  
Incurred Losses, Claims and Allocated Loss Adjustment Expenses,
Net of Reinsurance
  
IBNR
Reserves
  
Cumulative
Number of
Reported
Claims
 
Accident Year 2016  2017  2018  2019  2020  2019  2020  2021  2022  2023 
2016 
$
6,877
  
$
6,386
  
$
6,352
  
$
6,289
  
$
6,289
  
$
—
  
1,269
 
2017    
6,257
  
5,933
  
5,857
  
5,860
  
—
  
1,324
 
2018       
7,805
  
7,530
  
7,447
  
—
  
1,452
 
2019          
8,526
  
8,026
  
2
  
1,485
  
$
8,526
  
$
8,026
  
$
7,914
  
$
7,881
  
$
7,873
  
$
1
   
1,495
 
2020              
10,288
  
177
  
1,526
       
10,288
   
10,080
   
10,047
   
10,024
   
3
   
1,642
 
2021          
14,296
   
13,385
   
13,305
   
4
   
1,900
 
2022              
10,962
   
10,648
   
33
   
1,756
 
2023                  
6,460
   
96
   
1,401
 
             
$
37,910
                        
$
48,310
         


 
Cumulative Paid Losses, Claims and Allocated Loss Adjustment
Expenses, Net of Reinsurance
  
Cumulative Paid Losses, Claims and Allocated Loss Adjustment
Expenses, Net of Reinsurance
 
Accident Year 2016  2017  2018  2019  2020  2019  2020  2021  2022  2023 
2016 
$
5,804
  
$
6,353
  
$
6,349
  
$
6,289
  
$
6,289
 
2017    
5,215
  
5,914
  
5,856
  
5,860
 
2018       
6,344
  
7,510
  
7,446
 
2019          
6,360
  
8,005
  
$
6,360
  
$
8,005
  
$
7,906
  
$
7,867
  
$
7,866
 
2020              
8,347
     
8,347
  
9,952
  
10,008
  
9,992
 
2021       
11,993
  
13,277
  
13,257
 
2022          
8,475
  
10,368
 
2023              
5,397
 
             
$
35,947
              
$
46,880
 
All outstanding liabilities before 2016, net of reinsurance   
1
 
Liabilities for losses, claims and loss adjustment expenses, net of reinsuranceLiabilities for losses, claims and loss adjustment expenses, net of reinsurance  
$
1,964
 Liabilities for losses, claims and loss adjustment expenses, net of reinsurance  
$
1,430
 

General Liability

  For the Years Ended December 31,  
As of December 31,
2020
 
  
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of
Reinsurance
  
IBNR
Reserves
  
Cumulative
Number of
Reported Claims
 
Accident Year 2011  2012  2013  2014  2015  2016  2017  2018  2019  2020 
2011 
$
3,022
  
$
1,723
  
$
1,452
  
$
1,338
  
$
1,174
  
$
1,242
  
$
1,327
  
$
1,335
  
$
1,400
  
$
1,534
  
$
20
   
210
 
2012      
4,055
   
1,305
   
1,269
   
1,270
   
1,214
   
1,333
   
1,344
   
1,377
   
1,388
   
25
   
161
 
2013          
3,461
   
728
   
926
   
817
   
865
   
820
   
945
   
904
   
11
   
197
 
2014              
3,744
   
501
   
557
   
476
   
406
   
497
   
523
   
6
   
194
 
2015                  
4,421
   
1,037
   
1,227
   
1,044
   
867
   
855
   
—
   
146
 
2016                      
3,119
   
1,148
   
736
   
608
   
621
   
1
   
92
 
2017                          
1,490
   
488
   
513
   
738
   
68
   
82
 
2018                              
1,656
   
333
   
198
   
40
   
75
 
2019                                  
1,916
   
707
   
261
   
82
 
2020                                      
2,223
   
1,749
   
62
 
                                      
$
9,691
         


43
46
  Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance 
Accident Year 2011  2012  2013  2014  2015  2016  2017  2018  2019  2020 
2011 
$
295
  
$
412
  
$
582
  
$
835
  
$
1,161
  
$
1,169
  
$
1,278
  
$
1,285
  
$
1,325
  
$
1,426
 
2012      
371
   
707
   
847
   
1,034
   
1,113
   
1,219
   
1,260
   
1,269
   
1,280
 
2013          
104
   
339
   
579
   
811
   
791
   
803
   
805
   
855
 
2014              
171
   
299
   
331
   
369
   
373
   
493
   
498
 
2015                  
98
   
259
   
464
   
664
   
863
   
855
 
2016                      
116
   
203
   
568
   
608
   
617
 
2017                          
75
   
136
   
365
   
556
 
2018                              
65
   
90
   
115
 
2019                                  
41
   
209
 
2020                                      
208
 
                                      
$
6,619
 
All outstanding liabilities before 2011, net of reinsurance   
343
 
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance  
$
3,415
 

SuretyGeneral Liability


 For the Years Ended December 31,  As of December 31, 2020  For the Years Ended December 31,  
As of December 31,
2023
 
 
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of
Reinsurance
  
IBNR
Reserves
  
Cumulative
Number of
Reported Claims
  
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of
Reinsurance
  
IBNR
Reserves
  
Cumulative
Number of
Reported
Claims
 
Accident Year 2011  2012  2013  2014  2015  2016  2017  2018  2019  2020  2014  2015  2016  2017  2018  2019  2020  2021  2022  2023 
2011 
$
4,422
  
$
4,786
  
$
5,080
  
$
5,092
  
$
4,966
  
$
5,031
  
$
5,112
  
$
5,111
  
$
5,112
  
$
5,163
  
$
7
  
128
 
2012    
4,979
  
4,767
  
5,396
  
5,345
  
4,869
  
4,880
  
4,892
  
4,925
  
4,944
  
2
  
89
 
2013       
3,060
  
2,007
  
2,743
  
2,947
  
2,866
  
2,809
  
2,765
  
2,757
  
—
  
58
 
2014          
3,214
  
3,130
  
2,990
  
2,760
  
2,685
  
2,617
  
2,818
  
43
  
54
  
$
3,744
  
$
501
  
$
557
  
$
476
  
$
406
  
$
497
  
$
523
  
$
519
  
$
511
  
$
514
  
$
2
   
207
 
2015             
1,902
  
1,630
  
1,400
  
1,359
  
1,406
  
1,310
  
6
  
50
       
4,421
   
1,037
   
1,227
   
1,044
   
867
   
855
   
855
   
870
   
870
   
—
   
149
 
2016                
3,314
  
1,812
  
1,865
  
1,876
  
1,865
  
—
  
46
           
3,119
   
1,148
   
736
   
608
   
621
   
619
   
620
   
620
   
—
   
94
 
2017                   
4,677
  
3,671
  
3,799
  
3,629
  
13
  
58
               
1,490
   
488
   
513
   
738
   
738
   
839
   
777
   
—
   
84
 
2018                      
3,528
  
1,938
  
1,381
  
6
  
62
                   
1,656
   
333
   
198
   
128
   
183
   
183
   
—
   
76
 
2019                         
2,130
  
657
  
128
  
30
                       
1,916
   
707
   
455
   
515
   
909
   
117
   
95
 
2020                             
2,263
  
1,887
  
20
                           
2,223
   
670
   
657
   
363
   
(66
)
  
89
 
2021                              
2,567
   
1,329
   
1,328
   
215
   
102
 
2022                                  
2,770
   
2,380
   
634
   
122
 
2023                                      
2,887
   
1,906
   
87
 
                            
$
26,787
                                            
$
10,831
         


 Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance  Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance 
Accident Year 2011  2012  2013  2014  2015  2016  2017  2018  2019  2020  2014  2015  2016  2017  2018  2019  2020  2021  2022  2023 
2011 
$
1,031
  
$
3,207
  
$
4,622
  
$
4,748
  
$
4,939
  
$
5,022
  
$
5,109
  
$
5,111
  
$
5,112
  
$
5,117
 
2012    
2,257
  
4,581
  
4,856
  
5,331
  
4,869
  
4,880
  
4,878
  
4,916
  
4,934
 
2013       
323
  
1,010
  
1,369
  
2,763
  
2,789
  
2,749
  
2,765
  
2,757
 
2014          
1,331
  
2,327
  
2,727
  
2,739
  
2,664
  
2,593
  
2,562
  
$
171
  
$
299
  
$
331
  
$
369
  
$
373
  
$
493
  
$
498
  
$
502
  
$
502
  
$
505
 
2015             
641
  
856
  
1,127
  
1,125
  
1,128
  
1,271
       
98
   
259
   
464
   
664
   
863
   
855
   
855
   
854
   
854
 
2016                
1,054
  
1,732
  
1,772
  
1,873
  
1,862
           
116
   
203
   
568
   
608
   
617
   
619
   
620
   
620
 
2017                   
1,971
  
3,255
  
3,523
  
3,545
               
75
   
136
   
365
   
556
   
696
   
741
   
777
 
2018                      
1,157
  
1,454
  
1,361
                   
65
   
90
   
115
   
128
   
183
   
183
 
2019                         
259
  
395
                       
41
   
209
   
242
   
354
   
404
 
2020                             
97
                           
208
   
385
   
462
   
539
 
2021                              
364
   
646
   
813
 
2022                                  
402
   
1,169
 
2023                                      
125
 
                            
$
23,901
                                      
$
5,989
 
All outstanding liabilities before 2011, net of reinsurance   
54
 
All outstanding liabilities before 2014, net of reinsuranceAll outstanding liabilities before 2014, net of reinsurance   
341
 
Liabilities for losses, claims and loss adjustment expenses, net of reinsuranceLiabilities for losses, claims and loss adjustment expenses, net of reinsurance  
$
2,940
 Liabilities for losses, claims and loss adjustment expenses, net of reinsurance  
$
5,183
 


Surety

  For the Years Ended December 31,  
As of December 31,
2023
 
  
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of
Reinsurance
  
IBNR
Reserves
  
Cumulative
Number of
Reported
Claims
 
Accident Year 2014  2015  2016  2017  2018  2019  2020  2021  2022  2023 
2014 
$
3,214
  
$
3,130
  
$
2,990
  
$
2,760
  
$
2,685
  
$
2,617
  
$
2,818
  
$
2,782
  
$
2,852
  
$
2,592
  
$
4
   
54
 
2015      
1,902
   
1,630
   
1,400
   
1,359
   
1,406
   
1,310
   
1,307
   
1,280
   
1,279
   
—
   
50
 
2016          3,314
   
1,812
   
1,865
   
1,876
   
1,865
   
1,678
   
1,670
   
1,666
   
—
   
47
 
2017              
4,677
   
3,671
   
3,799
   
3,629
   
3,514
   
3,440
   
3,448
   
8
   
67
 
2018                  
3,528
   
1,938
   
1,381
   
956
   
767
   
750
   
—
   
64
 
2019                      
2,130
   
657
   
630
   
513
   
507
   
11
   
32
 
2020                          
2,263
   
574
   
465
   
460
   
—
   
23
 
2021                              
2,936
   
1,455
   
1,497
   
—
   
35
 
2022                                  
3,202
   
2,339
   
72
   
50
 
2023                                      
2,634
   
1,590
   
108
 
                                      
$
17,172
         

  Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance 
Accident Year 2014  2015  2016  2017  2018  2019  2020  2021  2022  2023 
2014 
$
1,331
  
$
2,327
  
$
2,727
  
$
2,739
  
$
2,664
  
$
2,593
  
$
2,562
  
$
2,562
  
$
2,568
  
$
2,570
 
2015      
641
   
856
   
1,127
   
1,125
   
1,128
   
1,271
   
1,273
   
1,279
   
1,279
 
2016          
1,054
   
1,732
   
1,772
   
1,873
   
1,862
   
1,677
   
1,670
   
1,666
 
2017              
1,971
   
3,255
   
3,523
   
3,545
   
3,442
   
3,402
   
3,400
 
2018                  
1,157
   
1,454
   
1,361
   
941
   
760
   
749
 
2019                      
259
   
395
   
568
   
446
   
444
 
2020                          
97
   
460
   
464
   
459
 
2021                              
156
   
803
   
1,496
 
2022                                  
970
   
2,191
 
2023                                      
98
 
                                      
$
14,352
 
All outstanding liabilities before 2014, net of reinsurance   
33
 
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance  
$
2,853
 

47

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.


44

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.



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, 2020.2023.


 Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited)  Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited) 
Reserve Line 
1st Year
 
2nd Year
 
3rd Year
 
4th Year
 
5th Year
 
6th Year
 
7th Year
 
8th Year
 
9th Year
 
10th Year
  
1st Year
  
2nd Year
  
3rd Year
  
4th Year
  
5th Year
  
6th Year
  
7th Year
  
8th Year
  
9th Year
  
10th Year
 
Medicare Supplement 
83.0
%
 
16.9
%
 
0.1
%
 
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
  
81.9
%
  
17.1
%
  
0.2
%
  
0.0
%
  
0.0
%
  
0.0
%
  
0.0
%
  
0.0
%
  
0.0
%
  
0.0
%
Automobile Liability 
29.1
%
 
30.9
%
 
17.3
%
 
12.7
%
 
5.8
%
 
2.1
%
 
0.4
%
 
0.5
%
 
0.0
%
 
0.0
%
  
26.9
%
  
29.8
%
  
17.3
%
  
12.6
%
  
8.3
%
  
3.3
%
  
1.9
%
  
0.2
%
  
0.7
%
  
0.6
%
Automobile Physical Damage 
85.4
%
 
14.2
%
 
-0.6
%
 
-0.4
%
 
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
  
83.5
%
  
16.1
%
  
-0.3
%
  
-0.3
%
  
0.0
%
  
0.0
%
  
0.0
%
  
0.0
%
  
0.0
%
  
0.0
%
General Liability 
17.8
%
 
17.8
%
 
22.5
%
 
16.9
%
 
8.4
%
 
6.3
%
 
2.8
%
 
2.2
%
 
1.7
%
 
6.6
%
  
21.9
%
  
22.2
%
  
21.2
%
  
14.6
%
  
13.1
%
  
5.7
%
  
1.4
%
  
0.2
%
  
0.0
%
  
0.6
%
Surety 
41.2
%
 
31.1
%
 
10.5
%
 
9.8
%
 
-1.3
%
 
1.8
%
 
0.3
%
 
0.2
%
 
0.2
%
 
0.1
%
  
50.4
%
  
41.5
%
  
14.5
%
  
-10.6
%
  
-5.1
%
  
-1.1
%
  
-0.4
%
  
0.1
%
  
0.1
%
  
0.1
%



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, 2020  December 31, 2023
 
Net outstanding liabilities      
Medicare Supplement 
$
12,900
  
$
12,284
 
Automobile Liability 
36,784
  
46,569
 
Automobile Physical Damage 
1,964
  
1,430
 
General Liability 
3,415
  
5,183
 
Surety 
2,940
  
2,853
 
Other short-duration insurance lines  
1,666
   
2,391
 
Liabilities for unpaid losses, claims and loss adjustment expenses, net of reinsurance  
59,669
   
70,710
 
      
Reinsurance recoverable on unpaid losses:      
Medicare Supplement 
8,975
  
8,263
 
Automobile Liability 
6,260
  
3,870
 
Automobile Physical Damage 
3
  
303
 
General Liability  
2,362
  
2,242
 
Other short-duration insurance lines  — 
Total reinsurance recoverable on unpaid losses  
17,600
   
14,678
 
      
Unallocated claims adjustment expenses  
1,878
   
2,090
 
      
Total gross liability for unpaid losses, claims and loss adjustment expenses 
$
79,147
  
$
87,478
 
Note 6.7.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 99.6%99.7% of the Company’s reinsurance recoverables were due from a single reinsurer as of December 31, 2020.2023. Reinsurance recoverables of $28,980$21,041 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.



45
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, 2023, $8.3 million of the $814.2 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 2023, 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, $0.8 million of the Company’s $1.5 million of new annualized Medicare Supplement premium was ceded.


Table of Contents

The effects of reinsurance on premiums written, premiums earned and insurance benefits and losses incurred were as follows:


 For the Year Ended December 31, 2023 
 2020  2019  American
Southern		  
Bankers
Fidelity
  Total 
Direct premiums written 
$
239,687
  
$
237,973
  
$
49,580
  
$
166,093
  
$
215,673
 
Assumed premiums written 
23,253
  
23,275
   
27,987
   
29
   
28,016
 
Ceded premiums written  
(77,622
)
  
(77,750
)
  
(5,902
)
  
(55,933
)
  
(61,835
)
Net premiums written 
$
185,318
  
$
183,498
  
$
71,665
  
$
110,189
  
$
181,854
 
                  
Direct premiums earned 
$
238,209
  
$
237,361
  
$
46,349
  
$
166,368
  
$
212,717
 
Assumed premiums earned 
23,144
  
22,345
   
27,996
   
7
   
28,003
 
Ceded premiums earned  
(77,814
)
  
(77,781
)
  
(5,902
)
  
(55,993
)
  
(61,895
)
Net premiums earned 
$
183,539
  
$
181,925
  
$
68,443
  
$
110,382
  
$
178,825
 
                  
Provision for benefits and losses incurred 
$
175,825
  
$
206,390
  
$
52,899
  
$
110,995
  
$
163,894
 
Reinsurance loss recoveries  
(55,949
)
  
(67,165
)
  
(1,884
)
  
(39,510
)
  
(41,394
)
Insurance benefits and losses incurred 
$
119,876
  
$
139,225
  
$
51,015
  
$
71,485
  
$
122,500
 
  For the Year Ended December 31, 2022 
  
American
Southern
  
Bankers
Fidelity
  Total 
Direct premiums written 
$
52,404
  
$
176,119
  
$
228,523
 
Assumed premiums written  
26,814
   
9
   
26,823
 
Ceded premiums written  
(6,547
)
  
(61,701
)
  
(68,248
)
Net premiums written 
$
72,671
  
$
114,427
  
$
187,098
 
             
Direct premiums earned 
$
51,844
  
$
176,995
  
$
228,839
 
Assumed premiums earned  
24,978
   
8
   
24,986
 
Ceded premiums earned  
(6,546
)
  
(61,839
)
  
(68,385
)
Net premiums earned 
$
70,276
  
$
115,164
  
$
185,440
 
             
Provision for benefits and losses incurred 
$
49,568
  
$
124,478
  
$
174,046
 
Reinsurance loss recoveries  
(2,393
)
  
(48,197
)
  
(50,590
)
Insurance benefits and losses incurred 
$
47,175
  
$
76,281
  
$
123,456
 


Components of reinsurance receivables at December 31, 20202023 and 20192022 were as follows:

  2020  2019 
Recoverable on unpaid losses 
$
17,600
  
$
18,339
 
Recoverable on unpaid benefits  
9,832
   
10,772
 
Recoverable on paid losses  
447
   
1,538
 
Ceded unearned premiums  
963
   
1,155
 
Ceded advanced premiums  
244
   
331
 
Total reinsurance receivables 
$
29,086
  
$
32,135
 


  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
 

  December 31, 2022 
  
American
Southern
  
Bankers
Fidelity
  Total 
Recoverable on unpaid losses 
$
8,265
  
$
9,382
  
$
17,647
 
Recoverable on unpaid benefits  
—
   
6,788
   
6,788
 
Recoverable on paid losses  
—
   
618
   
618
 
Ceded unearned premiums  
—
   
681
   
681
 
Ceded advanced premiums  
—
   
179
   
179
 
Total reinsurance receivables 
$
8,265
  
$
17,648
  
$
25,913
 

Note 7.8.Income Taxes



Total income taxes were allocated as follows:


  2020  2019 
Total tax expense (benefit) on income 
$
3,334
  
$
(21
)
         
Tax expense on components of shareholders’ equity:        
Net unrealized gains on investment securities  
3,865
   
4,783
 
Total tax expense 
$
7,199
  
$
4,762
 
  2023
  2022
 
Total tax expense (benefit) on income 
$
(394
)
 
$
571
 
         
Tax expense (benefit) on components of shareholders’ equity:        
Net unrealized income (losses) on investment securities
  
1,602
   
(10,589
)
Total tax expense (benefit)
 
$
1,208
  
$
(10,018
)


50

A reconciliation of the differences between income taxes computed at the federal statutory income tax rate and the income tax benefitexpense (benefit) is as follows:


 2020  2019  2023
  2022
 
Federal income tax provision 
$
3,256
  
$
(86
)
Federal income tax provision at the statutory rate
 
$
(119
)
 
$
440
 
Statutory rate  
21
%
  
21
%
  
21
%
  
21
%
Dividends-received deduction 
(12
)
 
(23
)
  
(24
)
  
(24
)
Meals & entertainment 
20
  
55
 
Vested stock & club dues 
36
  
37
 
Meals and entertainment  
15
   
61
 
Vested stock and club dues  
16
   
14
 
Parking disallowance 
16
  
17
   
17
   
17
 
Penalties and fines  —   149 
Adjustment for prior years’ estimates to actual  
18
   
(21
)
  
(299
)
  
(86
)
Income tax expense (benefit) 
$
3,334
  
$
(21
)
 
$
(394
)
 
$
571
 
Effective tax rate  
21.5
%
  
5.2
%
  
69.7
%
  
27.2
%



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.



The primary differences between the effective tax rate and the federal statutory income tax rate for 20202022 resulted from a permanent differencesdifference related to meals & entertainmentpenalties and vested stock grants.fines incurred of $149.  Also contributing to differences between the effective tax rate and the federal statutory income tax rate were provision-to-filed return adjustmentsthe adjustment for prior years’ estimates to actual that are generally updated at the completion of the third quarter of each fiscal year and were $18$86 in the year ended December 31, 2020.

The primary2022. Other contributing factors to the differences between the effective tax rate and the federal statutory income tax rate for 2019 resulted fromwere permanent differences related to meals &and entertainment and vested stock grants. Also contributing to differences between the effective tax rate and the federal statutory income tax rate was the 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.




Deferred tax assets and liabilities at December 31, 20202023 and 20192022 were comprised of the following:


 2020  2019  2023
  2022
 
Deferred tax assets:            
Deferred acquisition costs 
$
4,666
  
$
2,540
  
$
8,808
  
$
7,953
 
Net unrealized investment losses
  3,342   4,489 
Insurance reserves 
2,682
  
3,323
   
2,898
   
1,597
 
Impaired assets 
822
  
822
   
791
   
791
 
Bad debts and other  
326
   
319
   
337
   
252
 
Net operating loss
  559   — 
Total deferred tax assets  
8,496
   
7,004
   
16,735
   
15,082
 
Deferred tax liabilities:              
Deferred and uncollected premiums 
$
(409
)
 
$
(328
)
 
$
(1,053
)
 
$
(835
)
Net unrealized investment gains 
(9,235
)
 
(6,090
)
  —   — 
Other  
(153
)
  
(272
)
  
—
  
(84
)
Total deferred tax liabilities  
(9,797
)
  
(6,690
)
  
(1,053
)
  
(919
)
Net deferred tax (liability) asset 
$
(1,301
)
 
$
314
 
Net deferred tax asset
 
$
15,682
  
$
14,163
 



The components of income tax expense (benefit) were:


 2020  2019  2023
  2022
 
Current – Federal 
$
5,584
  
$
892
  
$
2,727
  
$
2,390
 
Deferred – Federal  
(2,250
)
  
(913
)
  
(3,121
)
  
(1,819
)
Total 
$
3,334
  
$
(21
)
 
$
(394
)
 
$
571
 



The Company has formal tax-sharing agreements, and files a consolidated income tax return, with its subsidiaries. Tax years 2017, 20182020, 2021 and 20192022 are considered open tax years that remain subject to examination by the Internal Revenue Service.

Note 8.9.Junior Subordinated DebenturesCredit Arrangements



As expected, discontinuation of London Interbank Offered Rate (“LIBOR”) occurred on June 30, 2023 (“LIBOR Cessation Date”) and affected the rates used in the Company’s credit arrangements after that date. On March 15, 2022, the U.S. Congress enacted the Adjustable Interest Rate LIBOR Act (the “LIBOR Act”) to address LIBOR’s cessation and to establish a clear and uniform process for replacing the overnight and one-, three-, six- and 12-month tenors of USD LIBOR in existing contracts that do not provide for the use of a clearly defined or practicable replacement benchmark rate (“tough legacy contracts”).  Further, the Board of Governors of the Federal Reserve System issued regulations, 12 C.F.R. Part 253, “Regulations Implementing the Adjustable Interest Rate LIBOR Act (Regulation ZZ),” which relate to the LIBOR transition.


Bank Debt


On May 12, 2021, the Company entered into a Revolving Credit Agreement (the “Credit Agreement”) with Truist Bank as the lender (the “Lender”). The Credit Agreement provides for an unsecured $10,000 revolving credit facility that matures on April 12, 2024. Prior to July 1, 2023, the Company paid interest on the unpaid principal balance of outstanding revolving loans at the 1-month LIBOR Rate (as defined in the Credit Agreement) plus 2.00%, subject to a LIBOR floor rate of 1.00%. Effective July 1, 2023, the interest rate on the unpaid principal balance of outstanding revolving loans is determined based on a reference rate of the 1-month Term Secured Overnight Financing Rate (“SOFR”) published by Chicago Mercantile Exchange Group Benchmark Administration Limited (“CME”) (as defined in the Credit Agreement) plus a spread adjustment of 0.11448% plus 2.00%, subject to a SOFR floor rate of 1.00%.


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. 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, 2023 and 2022, the Company had outstanding borrowings of $3,019 and $2,009, respectively, under the Credit Agreement.


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 Atlantic American;the Company; and (iii) engaging in those activities necessary or incidental thereto. At December 31, 2020,2023, the effective interest rate was 4.28%9.69%.




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. Prior to July 1, 2023, the interest rate was based on 3-month LIBOR plus an applicable margin. The margin ranges from 4.00% to 4.10%. 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 percent plus an applicable margin, ranging from 4.00% to 4.10%.



The financial structure of each of Atlantic American Statutory Trust I and II, as of December 31, 20202023 and 2019,2022, was as follows:


 
Atlantic American
Statutory Trust I
 
Atlantic American
Statutory Trust II
 
Atlantic American
Statutory Trust I
 
Atlantic American
Statutory Trust II
 
JUNIOR SUBORDINATED DEBENTURES(1)(2)
          
Balance December 31, 2020 
$
18,042
 
$
23,196
 
Balance December 31, 2023
 
$
18,042
 $23,196 
Less: Treasury debt(3)
  
—
  
(7,500
)
  
—
  (7,500)
Net balance December 31, 2020 
$
18,042
 
$
15,696
 
Net balance December 31, 2019 
$
18,042
 
$
15,696
 
Net balance December 31, 2023
 
$
18,042
 
$
15,696
 
Net balance December 31, 2022
 
$
18,042
 
$
15,696
 
Coupon rate LIBOR + 4.00% LIBOR + 4.10%  3-Month SOFR + 0.26161 spread adj + 4.00% 3-Month SOFR + 0.26161 spread adj + 4.10% 
Interest payable Quarterly Quarterly  Quarterly Quarterly 
Maturity date December 4, 2032 May 15, 2033  December 4, 2032 May 15, 2033 
Redeemable by issuer Yes Yes  Yes Yes 
TRUST PREFERRED SECURITIES           
Issuance date December 4, 2002 May 15, 2003  December 4, 2002 May 15, 2003 
Securities issued 
17,500
 
22,500
   
17,500
 22,500 
Liquidation preference per security 
$
1
 
$
1
  
$
1
 
$
1
 
Liquidation value 
$
17,500
 
$
22,500
  
$
17,500
 
$
22,500
 
Coupon rate LIBOR + 4.00% LIBOR + 4.10%  3-Month SOFR + 0.26161 spread adj + 4.00% 3-Month SOFR + 0.26161 spread adj + 4.10% 
Distribution payable Quarterly Quarterly  Quarterly Quarterly 
Distribution guaranteed by(4)
 Atlantic American Corporation Atlantic American Corporation  Atlantic American Corporation Atlantic American Corporation


52
(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.


47
Note 9.10.
Leases



The Company has two operating lease agreements, each for the use of office space in the ordinary course of business. The first lease renews annually on an automatic basis and based on original assumptions, management is reasonably certain to exercise the renewal option through 2026. 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.



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, 20202023 and 20192022 was $1,014.



Additional information regarding the Company’s real estate operating leases is as follows:


 
Year Ended
December 31, 2020
  Year Ended December 31, 2019  
Year Ended
December 31, 2023
  
Year Ended
December 31, 2022
 
Other information on operating leases:            
Cash payments included in the measurement of lease liabilities reported in operating cash flows 
$
978
  
815
  
$
1,048
   
1,031
 
Right-of-use assets included in other assets on the consolidated balance sheet 
4,832
  
5,476
   
2,614
   
3,405
 
Weighted average discount rate 
6.8
%
 
6.8
%
  
6.8
%
  
6.8
%
Weighted average remaining lease term in years 5.9 years  6.9 years  2.9 years  3.9 years 



The following table presents maturities and present value of the Company’s lease liabilities:


 Lease Liability  Lease Liability 
2021 
$
1,015
 
2022 
1,031
 
2023 
1,048
 
2024 
1,065
  
$
1,065
 
2025 
1,083
   
1,083
 
2026
  
942
 
Thereafter  
942
   
—
 
Total undiscounted lease payments 
6,184
   
3,090
 
Less: present value adjustment  
1,116
   
293
 
Operating lease liability included in accounts payable and accrued expenses on the consolidated balance sheet 
$
5,068
  
$
2,797
 



As of December 31, 2020,2023, the Company has no operating leases that have not yet commenced.


 Note 10.11.Benefit Plans


Equity Incentive Plan



On May 1, 2012, the Company’s shareholders approved the 2012 Equity Incentive Plan (the “2012 Plan”). The 2012 Plan authorizesauthorized the grant of up to 2,000,000 stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares, performance units and other awards for the purpose of providing the Company’s non-employee directors, consultants, officers and other employees incentives and rewards for superior performance. In 2020,performance and service. The 2012 Plan expired on April 30, 2022, ten years after its effective date.  As such, no grants have been or will be made under the 2012 Plan on or after its expiration, but outstanding awards granted thereunder will continue in accordance with their terms.


53

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 2023, there were no restricted shares issued under the 2022 Plan. During the year ended 2022, a total of 20,00040,000 restricted shares, with an estimated fair value of $38,$122 were issued under the 20122022 Plan, and 35,000a total of 25,000 restricted shares, with an estimated fair value of $98, were forfeited under such plan. In 2019, a total of 355,000 restricted shares, with an estimated fair value of $948,$71 were issued under the 2012 Plan. The estimated fair value of the restricted shares issued under the 2012 Plan for 2020 and 2019 was 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.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 2023 or 2022. There were no stock options granted or outstanding under the 2012 Plan in 2020 or 2019. 2022.



Shares available for future grant under the 2022 Plan at December 31, 20202023 and 20192022 were 935,200 and 920,200, respectively.2,960,000.


48

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 20202023 and 20192022 was $231$283 and $230,$255, 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 20202023 and 20192022 of $520$629 and $524,$569, 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.


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 11.12.Preferred Stock



The Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding at December 31, 20202023 and 2019,2022, 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, 20202023 and 2019.2022. During each of 20202023 and 2019,2022, the Company paid Series D Preferred Stock dividends of $399.


Note 12.13.Earnings (Loss) Per Common Share



Basic earnings per share was computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. The computation of diluted earnings per share reflected the effect of potentially dilutive securities.


4954

A reconciliation of the numerator and denominator of the income (loss) per common share calculations is as follows:


  For the Year Ended December 31, 2020 
  Income  
Weighted
Average Shares
Outstanding
(In thousands)
  
Per Share
Amount
 
Basic Earnings Per Common Share         
Net income before preferred stock dividends 
$
12,169
   
20,441
   - 
Less preferred stock dividends  
(399
)
  
—
     
   Net income applicable to common shareholders  
11,770
   
20,441
   
0.58
 
Diluted Earnings Per Common Share:            
Effect of Series D preferred stock
  
399
   
1,378
     
Net income applicable to common shareholders 
$
12,169
   
21,819
  
$
0.56
 

  For the Year Ended December 31, 2023 
  Income
  
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
)
  For the Year Ended December 31, 2019 
  Loss  
Weighted
Average Shares
Outstanding
(In thousands)
  
Per Share
Amount
 
Basic and Diluted Loss Per Common Share         
Net loss before preferred stock dividends 
$
(386
)
  
20,258
   - 
Less preferred stock dividends  
(399
)
  
—
     
Net loss applicable to common shareholders 
$
(785
)
  
20,258
  
$
(.04
)


  For the Year Ended December 31, 2022 
  Income  
Weighted
Average Shares
Outstanding
(In thousands)
  
Per Share
Amount
 
Basic and Diluted Earnings Per Common Share         
Net income before preferred stock dividends 
$
1,525
   
20,390
   - 
Less preferred stock dividends  
(399
)
  
—
     
Net income applicable to common shareholders 
$
1,126
   
20,390
  
$
0.06
 


The assumed conversion of the Company’s Series D Preferred Stock was excluded from the earnings per common share calculation for 20192023 and 2022 since its impact would have been antidilutive.


 Note 13.14.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; (ii)(iii) acquisition costs for policies are expensed as incurred, while they are deferred and amortized over the estimated life of the policies under GAAP; (iii)(iv) the provision that is made for deferred income taxes is different than under GAAP; (iv)(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 (v)(vii) certain valuation allowances attributable to certain investments are different.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:


  2020  2019 
Bankers Fidelity, net income (loss) 
$
7,712
  
$
(9,509
)
American Southern, net income  
8,575
   
4,778
 
Statutory net income (loss) 
$
16,287
  
$
(4,731
)
         
Bankers Fidelity, surplus 
$
42,326
  
$
35,546
 
American Southern, surplus  
50,194
   
45,827
 
Statutory surplus 
$
92,520
  
$
81,373
 
  2023
  2022
 
Bankers Fidelity, net income
 
$
7,017
  
$
3,865
 
American Southern, net income  
3,964
   
5,743
 
Statutory net income
 
$
10,981
  
$
9,608
 
         
Bankers Fidelity, capital and surplus 
$
38,299
  
$
36,672
 
American Southern, capital and surplus  
51,774
   
53,023
 
Statutory capital and surplus 
$
90,073
  
$
89,695
 



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 $3,900$8,400 and $4,800$7,200 in the years ended 20202023 and 2019,2022, respectively, from its subsidiaries. In 2020,2024, dividend payments to the Parent by the insurance subsidiaries in excess of $9,589$8,757 would require prior approval.

50
55
Note 14.15.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, as well as certain investing and financing activities.activities, as well as inconsequential administrative and consulting services. At December 31, 2020,2023, two members of the Company’s board of directors, including the Company’s chairman, presidentChairman, President and chief executive officer,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. During the years ended December 31, 20202023 and 2019,2022, the Company paid $939$1,199 and $908,$880, respectively, under this lease.   In December 2022, Delta Life Insurance Company, the owner of the building, transferred title to the building to 4370 Peachtree LLC. Each of Delta Life Insurance Company and 4370 Peachtree LLC is controlled by an affiliate of the Company.




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 11)12). During the years ended December 31, 20202023 and 2019,2022, 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 Television, Inc. (“Gray”). As of December 31, 20202023 and 2019,2022, 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, 20202023 and 20192022 was $16,606$8,490 and $19,764,$10,772, respectively.


During
In each of the years ended December 31, 20202023 and 2019,2022, Gray paid the Company approximately $1,038$2,050 and $1,022, respectively,$1,708 in insurance premiums related to certain voluntary employee benefit plans.


During the year ended December 31, 2019, the Company transferred its remaining fractional interest in an aircraft arrangement to Gray for $151.

Note 15.16.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. Substantially all revenue other than that in the corporate and other segment is from external sources.


 For the Year Ended December 31, 2020  For the Year Ended December 31, 2023 
 
American
Southern
 
Bankers
Fidelity
 
Corporate
& Other
 
Adjustments
& Eliminations
 Consolidated  
American
Southern
  
Bankers
Fidelity
  
Corporate
& Other
  
Adjustments
& Eliminations
  Consolidated 
Insurance premiums, net 
$
62,372
  
$
121,167
  
$
—
  
$
—
  
$
183,539
  
$
68,443
  
$
110,382
  
$
—
  
$
—
  
$
178,825
 
Insurance benefits and losses incurred 
39,339
  
80,537
  
—
  
—
  
119,876
   
51,015
   
71,485
   
—
   
—
   
122,500
 
Expenses deferred 
(9,910
)
 
(10,233
)
 
—
  
—
  
(20,143
)
  
(8,689
)
  
(9,320
)
  
—
   
—
   
(18,009
)
Amortization and depreciation expense 
9,772
  
10,007
  
594
  
—
  
20,373
   
8,389
   
8,050
   
509
   
—
   
16,948
 
Other expenses  
19,542
   
34,403
   
14,526
   
(8,732
)
  
59,739
   
17,046
   
39,262
   
21,875
   
(12,264
)
  
65,919
 
Total expenses  
58,743
   
114,714
   
15,120
   
(8,732
)
  
179,845
   
67,761
   
109,477
   
22,384
   
(12,264
)
  
187,358
 
Underwriting income 
3,629
  
6,453
  
-

 -
  10,082
   
682
   
905
   
—
   —   1,587 
Net investment income 
3,586
  
4,971
  
1,174
  
(1,987
)
 
7,744
 
Other income  
37
   
11
   
6,773
   
(6,745
)
  
76
 
Operating income (loss) 
7,252
  
11,435
  
(7,173
)
 
—
  
11,514
 
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 
3,389
  
4,031
  
—
  
—
  
7,420
   
—
   
70
   
—
   
—
   
70
 
Unrealized losses on equity securities  
(205
)
  
(3,036
)
  
(190
)
  
—
   
(3,431
)
  
(111
)
  
(2,015
)
  
(51
)
  
—
   
(2,177
)
Income (loss) before income taxes 
$
10,436
  
$
12,430
  
$
(7,363
)
 
$
—
  
$
15,503
  
$
5,085
  
$
4,722
  
$
(10,372
)
 
$
—
  
$
(565
)
Total revenues 
$
69,179
  
$
127,144
  
$
7,757
  
$
(8,732
)
 
$
195,348
  
$
72,846
  
$
114,199
  
$
12,012
  
$
(12,264
)
 
$
186,793
 
Intangibles 
$
1,350
  
$
1,194
  
$
—
  
$
—
  
$
2,544
  
$
1,350
  
$
1,194
  
$
—
  
$
—
  
$
2,544
 
Total assets 
$
158,808
  
$
236,197
  
$
183,178
  
$
(172,996
)
 
$
405,187
  
$
149,236
  
$
203,079
  
$
146,585
  
$
(117,635
)
 
$
381,265
 


5156
Table of Contents

 For the Year Ended December 31, 2019  For the Year Ended December 31, 2022 
 
American
Southern
 
Bankers
Fidelity
 
Corporate
& Other
 
Adjustments
& Eliminations
 Consolidated  
American
Southern
  
Bankers
Fidelity
  
Corporate
& Other
  
Adjustments
& Eliminations
  Consolidated 
Insurance premiums, net 
$
58,680
  
$
123,245
  
$
—
  
$
—
  
$
181,925
  
$
70,276
  
$
115,164
  
$
—
  
$
—
  
$
185,440
 
Insurance benefits and losses incurred 
39,541
  
99,684
  
—
  
—
  
139,225
   
47,175
   
76,281
   
—
   
—
   
123,456
 
Expenses deferred 
(8,761
)
 
(10,294
)
 
—
  
—
  
(19,055
)
  
(10,161
)
  
(12,867
)
  
—
   
—
   
(23,028
)
Amortization and depreciation expense 
9,024
  
8,709
  
551
  
—
  
18,284
   
10,240
   
9,452
   
498
   
—
   
20,190
 
Other expenses  
16,869
   
37,158
   
15,939
   
(9,834
)
  
60,132
   
20,082
   
37,337
   
17,432
   
(9,714
)
  
65,137
 
Total expenses  
56,673
   
135,257
   
16,490
   
(9,834
)
  
198,586
   
67,336
   
110,203
   
17,930
   
(9,714
)
  
185,755
 
Underwriting income (loss) 
2,007
  
(12,012
)
 
-

 -
  (10,005
)
Net investment income 
3,689
  
5,317
  
2,597
  
(2,624
)
 
8,979
 
Other income  
75
   
18
   
7,307
   
(7,210
)
  
190
 
Operating income (loss) 
5,771
  
(6,677
)
 
(6,586
)
 
—
  
(7,492
)
Underwriting income
  
2,940
   
4,961
   
—
   —   7,901 
Net investment income (loss)
  
4,147
   
5,414
   
2,461
   
(2,090
)
  
9,932
 
Other income (loss)
  
3
   
8
   
7,624
   
(7,624
)
  
11
 
Subtotal
  
7,090
   
10,383
   
(7,845
)
  
—
   
9,628
 
Net realized gains (losses) 
(386
)
 
840
  
1,120
  
—
  
1,574
   
(28
)
  
58
   
—
   
—
   
30
 
Unrealized gains on equity securities  
344
   
2,191
   
2,976
   
—
   
5,511
 
Unrealized losses on equity securities  
(449
)
  
(6,629
)
  
(484
)
  
—
   
(7,562
)
Income (loss) before income taxes 
$
5,729
  
$
(3,646
)
 
$
(2,490
)
 
$
—
  
$
(407
)
 
$
6,613
  
$
3,812
  
$
(8,329
)
 
$
—
  
$
2,096
 
Total revenues 
$
62,402
  
$
131,611
  
$
14,000
  
$
(9,834
)
 
$
198,179
  
$
73,949
  
$
114,015
  
$
9,601
  
$
(9,714
)
 
$
187,851
 
Intangibles 
$
1,350
  
$
1,194
  
$
—
  
$
—
  
$
2,544
  
$
1,350
  
$
1,194
  
$
—
  
$
—
  
$
2,544
 
Total assets 
$
141,524
  
$
224,122
  
$
154,687
  
$
(142,707
)
 
$
377,626
  
$
144,455
  
$
195,028
  
$
140,661
  
$
(113,080
)
 
$
367,064
 

Note 16.17.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 17.18.Subsequent Events



On March 23, 2021,April 1, 2024, the Company’sCompany 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 as ofat the close of business on April 13, 2021.12, 2024.

Since December 31, 2020,

On March 22, 2024, the COVID-19 pandemic continuesCompany entered into a First Amendment (the "Amendment") to cause material disruptionits Revolving Credit Agreement (as amended, the “Credit Agreement”) with Truist Bank as the lender (the “Lender”). The Amendment, among other things, (a) updates the interest rate provisions to financial markets andmemorialize that the economy.  As a resultCompany 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 pandemic,revolving credit facility to March 22, 2027 and (c) requires that the Company could experience future lossesmaintain a consolidated net worth of not less than $64.2 million. Except as modified by the Amendment, the existing terms of the Credit Agreement remain in its investment portfolioeffect.


On February 21, 2024, a third-party service provider the Company utilizes for certain medical network claims data identified a cybersecurity incident, resulting in disruption of services.  In response to the incident the Company examined our data and systems thoroughly and has not detected any breach of our systems.  Subsequent to the incident, the Company transitioned to an alternative service provider as a result ofpermanent solution. We do not believe the weakened and volatile markets.  Additionally,cybersecurity incident at our third-party service provider materially affected or is reasonably likely to materially affect the Company can experience increased riskor our business strategy, results of loss any time unforeseen infectious diseases impact large portions of a population. Specifically, the Company’s life and health business could experience significant loss due to increased claims volume arising from COVID-19. The duration and impact of the COVID-19 pandemic is unknown at this time and it is not possible to reliably estimate the impact on theoperations, or financial condition, operating results or liquidity of the Company and its operating subsidiaries in future periods.condition.

52
57

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure


None.


Item 9A.
Controls and Procedures


AsEvaluation of the end of the period covered by this report, an evaluation was performed under the supervisionDisclosure Controls 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 effective as of that date.Procedures


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.


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 a material weakness in internal control over financial reporting described below.

58
Management’s Report on Internal Control Over Financial Reporting

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 20202023 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, 2020.

There were no changes2023, as a result of the material weakness described below.  A material weakness is a deficiency, or combination of deficiencies, in our internal control over financial reporting, such that occurred during the fourth quarterthere is a reasonable possibility that a material misstatement of 2020 that have materially affected,our annual or are reasonably likely to materially affect, ourinterim financial statements will not be prevented or detected on a timely basis.

As a result of management’s evaluation, we 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 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.reporting, the material weakness did not result in any identified material misstatements to our financial statements.  As a result, there were no changes to any of our historical financial statements.


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 smaller reporting companies,non-accelerated filers, including the Company, from such requirement.


Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company is currently in the process of remediating the material weakness as described above, which remediation efforts began in the quarter ended March 31, 2024 and include developing and implementing enhanced controls related to the review of values that are estimated using actuarial models.  The enhancements include implementing reviews at the product level where management evaluates, for each of the Company’s life and health products, the components of underwriting income and how they interrelate.  In addition, calculations that are independent from the actuarial models will, once fully developed, validate that the product parameters and actuarial assumptions are completely and accurately reflected within the actuarial models.

The Company has also initiated the development of an array of analytical reports that will help facilitate the timely detection of anomalous values within the Company’s life and health segment.  It is currently expected that these reports will be operational by September 30, 2024.  These reports will include reconciliations of actuarial values from quarter to quarter, utilizing values estimated via the actuarial models and values that are produced by accounting processes.

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.

Item 9B.
Other Information

None.

53
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, 2023, 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
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 Transactions”Person Transactions" and “Ratification of the Appointment of the Company’sCompany's Independent Registered Public Accounting Firm” to be contained in the Company’s definitive proxy statement in connection with the Company’s 2024 Annual Meeting of Shareholders, to be held on or around May 18, 2021, 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, 2020,2023, 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
—
  
—
$
—
   
935,200
2,960,000
 
Equity compensation plans not approved by security holders(1)
  
—
   
—
   
—
 
Total
—
  
—
$
—
   
935,200
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.


5460
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 *:


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].
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].
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].
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].
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].
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].
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].
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**
10.07
Employment
Assignment and Transition Agreement with Fixed Determination Date,Assumption of Leases and Contracts, dated as of June 14, 2017December 21, 2022, by and between John G. Sample, Jr.Delta Life Insurance Company and the registrant4370 Peachtree LLC.
10.09
Revolving Credit Agreement, dated as of May 12, 2021, by and between Atlantic American Corporation and Truist Bank [incorporated by reference to Exhibit 10.0710.1 to the registrant’s Form 10-K for8-K filed with the year ended December 31, 2017]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].
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].
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].
Consent of Dixon Hughes GoodmanFORVIS LLP, Independent Registered Public Accounting Firm.
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


5561
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
XBRL Instance Document.
101.SCH
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 required to be filed pursuant to Part IV, Item 15(c) of Form 10-K and Item 601 of Regulation S-K.arrangement.


Item 16.
Form 10-K Summary


None.


5662
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 23, 2021April 1, 2024


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 23, 2021
April 1, 2024
HILTON H. HOWELL, JR.
  
     
/s/ J. Ross Franklin
 
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
 
March 23, 2021
April 1, 2024
J. ROSS FRANKLIN
  
     
/s/ Robin R. Howell
Director
 
March 23, 2021
Director
April 1, 2024
ROBIN R. HOWELL
  
     
/s/ Mark E. Preisinger
Director
 
March 23, 2021
Director
April 1, 2024
MARK E. PREISINGER
  
     
/s/ Joseph M. Scheerer
Director
 
March 23, 2021
Director
April 1, 2024
JOSEPH M. SCHEERER
/s/ Scott G. Thompson
Director
March 23, 2021
SCOTT G. THOMPSON
  
     
/s/ Scott G. Thompson
Director
April 1, 2024
SCOTT G. THOMPSON
/s/ D. Keehln Wheeler
Director
 
March 23, 2021
Director
April 1, 2024
D. KEEHLN WHEELER
  


5763
Schedule II
Page 1 of 3

CONDENSED FINANCIAL INFORMATION OF REGISTRANT


ATLANTIC AMERICAN CORPORATION
(Parent Company Only)


BALANCE SHEETS


ASSETS


 December 31,  December 31, 
 2020  2019  2023
  2022
 
 (In thousands)  (In thousands) 
Cash and cash equivalents 
$
2,090
  
$
2,068
  
$
2,774
  
$
2,680
 
Investments 
2,598
  
3,267
   
1,930
   
2,278
 
Investment in subsidiaries 
172,996
  
142,707
   
117,637
   
113,079
 
Investments in unconsolidated trusts 
1,238
  
1,238
   
1,238
   
1,238
 
Deferred tax asset, net  15,682   14,163 
Income taxes receivable from subsidiaries 
1,683
  
2,304
   
1,988
   
1,951
 
Other assets  
4,311
   
5,126
   
6,733
   
6,681
 
Total assets 
$
184,916
  
$
156,710
  
$
147,982
  
$
142,070
 
              
LIABILITIES AND SHAREHOLDERS’ EQUITY      LIABILITIES AND SHAREHOLDERS’ EQUITY 
              
Deferred tax liability, net 
$
1,765
  
$
346
 
Other payables 
4,353
  
4,232
  $
3,949
  $
4,130
 
Revolving credit facility  3,019   2,009 
Junior subordinated debentures  
33,738
   
33,738
   
33,738
   
33,738
 
Total liabilities 
39,856
  
38,316
   
40,706
   
39,877
 
              
Shareholders’ equity  
145,060
   
118,394
   
107,276
   
102,193
 
Total liabilities and shareholders’ equity 
$
184,916
  
$
156,710
  
$
147,982
  
$
142,070
 


See accompanying report of independent registered public accounting firm.


5864

Schedule II
Page 2 of 3


CONDENSED FINANCIAL INFORMATION OF REGISTRANT


ATLANTIC AMERICAN CORPORATION
(Parent Company Only)


STATEMENTS OF OPERATIONS


  Year Ended December 31, 
  2020  2019 
  (In thousands) 
REVENUE      
Fee income from subsidiaries 
$
6,745
  
$
7,210
 
Distributed earnings from subsidiaries  
3,900
   
4,800
 
Unrealized gains (losses) on equity securities, net  
(191
)
  
2,976
 
Other  
(784
)
  
1,190
 
Total revenue  
9,670
   
16,176
 
         
GENERAL AND ADMINISTRATIVE EXPENSES  
11,521
   
11,731
 
         
INTEREST EXPENSE  
1,610
   
2,130
 
   
(3,461
)
  
2,315
 
INCOME TAX BENEFIT(1)
  
(3,623
)
  
(2,035
)
   
162
   
4,350
 
EQUITY IN UNDISTRIBUTED EARNINGS (LOSS) OF SUBSIDIARIES, NET  
12,007
   
(4,736
)
NET INCOME (LOSS) 
$
12,169
  
$
(386
)
  Year Ended December 31, 
  2023
  2022
 
  (In thousands) 
Revenue      
Fee income from subsidiaries
 
$
8,738
  
$
7,624
 
Distributed earnings from subsidiaries  
8,400
   
7,200
 
Unrealized losses on equity securities, net  
(51
)
  
(484
)
Other  
(455
)
  
93
 
Total revenue  
16,632
   
14,433
 
         
General and administrative expenses  
15,336
   
13,583
 
         
Interest expense  
3,269
   
1,952
 
   
(1,973
)
  
(1,102
)
Income tax benefit(1)
  
(4,802
)
  
(3,934
)
   
2,829
   
2,832
 
Equity in undistributed earnings of subsidiaries, net
  
(3,000
)
  
(1,307
)
Net income (loss)
 
$
(171
)
 
$
1,525
 


(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.


5965

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, 
  2020  2019 
  (In thousands) 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net Income (loss) 
$
12,169
  
$
(386
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
Realized investment gains, net  
—
   
(1,120
)
Unrealized losses  (gains) on equity securities, net  
191
   
(2,976
)
Depreciation and amortization  
594
   
552
 
Compensation expense related to share awards  
437
   
353
 
Distributions received from equity method investees  
—
   
51
 
Equity in undistributed (earnings) loss of subsidiaries, net  
(12,007
)
  
4,736
 
Decrease in intercompany taxes  
622
   
551
 
Deferred income tax benefit  
(2,446
)
  
(913
)
Increase in accounts payable and accrued expenses  
121
   
2,360
 
Other, net  
917
   
(2,314
)
Net cash provided by operating activities  
598
   
894
 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Proceeds from investments sold, called or matured  
—
   
3,574
 
Investments purchased  
—
   
(1,060
)
Capital contribution to subsidiaries  
—
   
(3,500
)
Additions to property and equipment  
(95
)
  
(44
)
Net cash used in investing activities  
(95
)
  
(1,030
)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Payment of dividends on Series D preferred stock  
(399
)
  
(399
)
Payment of dividends on common stock  
—
   
(403
)
Proceeds from shares issued under stock plans  
9
   
27
 
Treasury stock acquired — share repurchase authorization  
—
   
(71
)
Treasury stock acquired — net employee share-based compensation  
(91
)
  
(92
)
Net cash used in financing activities  
(481
)
  
(938
)
         
Net increase (decrease) in cash  
22
   
(1,074
)
Cash and cash equivalents at beginning of year  
2,068
   
3,142
 
Cash and cash equivalents at end of year 
$
2,090
  
$
2,068
 
         
Supplemental disclosure:        
Cash paid for interest 
$
1,665
  
$
2,155
 
Cash paid for income taxes 
$
3,883
  
$
1,662
 
Intercompany tax settlement from subsidiaries 
$
1,798
  
$
3,335
 
  Year Ended December 31, 
  2023
  2022
 
  (In thousands) 
Cash flows from operating activities:      
Net Income (loss)
 
$
(171
)
 
$
1,525
 
Adjustments to reconcile net income to net cash used in operating activities:        
Unrealized losses on equity securities, net  
51
   
484
 
Depreciation and amortization  
509
   
515
 
Compensation expense related to share awards  
119
   
134
 
Loss (earnings) from equity method investees
  294   (294)
Equity in undistributed earnings of subsidiaries, net  
3,000
   
1,307
 
(Increase) decrease in intercompany taxes  
(37
)
  
220
 
Deferred income tax benefit  
(3,123
)
  
(2,336
)
Decrease in accounts payable and accrued expenses  
(181
)
  
(285
)
Other, net  
(509
)
  
(1,348
)
Net cash used in operating activities  
(48
)
  
(78
)
         
Cash flows from investing activities:
        
Additions to property and equipment  
(39
)
  
(45
)
Net cash used in investing activities  
(39
)
  
(45
)
         
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   2,000 
Treasury stock acquired — net employee share-based compensation  
(12
)
  
(108
)
Net cash provided by financing activities  
181
   
1,085
 
         
Net increase in cash  
94
   
962
 
Cash and cash equivalents at beginning of year  
2,680
   
1,718
 
Cash and cash equivalents at end of year 
$
2,774
  
$
2,680
 
         
Supplemental disclosure:        
Cash paid for interest 
$
3,227
  
$
1,794
 
Cash paid for income taxes 
$
2,582
  
$
2,764
 
Intercompany tax settlement from subsidiaries 
$
4,031
  
$
3,946
 


See accompanying report of independent registered public accounting firm.


6066

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
  
Deferred
Acquisition
Costs
 
Future Policy
Benefits,
Losses,
Claims and
Loss
Reserves
 
Unearned
Premiums
 
Other Policy
Claims and
Benefits
Payable
 
 (In thousands)  (In thousands) 
December 31, 2020:            
December 31, 2023:
            
Bankers Fidelity 
$
37,312
  
$
115,136
  
$
4,199
  
$
1,526
  
$
41,150
  
$
116,141
  
$
2,561
  
$
1,132
 
American Southern  
2,299
   
54,883
   
22,932
   
—
   
2,700
   
63,832
   
28,756
   
—
 
 
$
39,611
  
$
170,019
(1) 
 
$
27,131
  
$
1,526
  
$
43,850
  
$
179,973
(1) 
 
$
31,317
  
$
1,132
 
                        
December 31, 2019:            
December 31, 2022:
            
Bankers Fidelity 
$
36,882
  
$
121,657
  
$
4,606
  
$
1,933
  
$
39,880
  
$
110,238
  
$
2,814
  
$
1,255
 
American Southern  
1,979
   
52,281
   
21,429
   
—
   
2,401
   
62,810
   
25,534
   
—
 
 
$
38,861
  
$
173,938
(2) 
 
$
26,035
  
$
1,933
  
$
42,281
  
$
173,048
(2) 
 
$
28,348
  
$
1,255
 


(1)
Includes future policy benefits of $90,872$92,495 and losses and claims of $79,147.$87,478.
(2)
Includes future policy benefits of $92,490$85,564 and losses and claims of $81,448.$87,484.


See accompanying report of independent registered public accounting firm.


6167
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
  
Premium
Revenue
  
Net
Investment
Income (Loss)
  
Benefits,
Claims,
Losses and
Settlement
Expenses
  
Amortization
of Deferred
Acquisition
Costs
  
Other
Operating
Expenses
  
Casualty
Premiums
Written
 
 (In thousands)     (In thousands) 
December 31, 2020:                  
December 31, 2023:
                  
Bankers Fidelity 
$
121,167
  
$
4,971
  
$
80,537
  
$
9,803
  
$
24,374
  
$
—
  
$
110,382
  
$
5,755
  
$
71,485
  
$
8,050
  
$
29,942
  
$
—
 
American Southern 
62,372
  
3,586
  
39,339
  
9,590
  
9,814
  
64,366
   
68,443
   
4,507
   
51,015
   
8,390
   
8,356
   
71,665
 
Corporate & other  
—
   
(813
)
  
—
   
—
   
6,388
   
—
   
—
   
(204
)
  
—
   
—
   
10,120
   
—
 
 
$
183,539
  
$
7,744
  
$
119,876
  
$
19,393
  
$
40,576
  
$
64,366
  
$
178,825
  
$
10,058
  
$
122,500
  
$
16,440
  
$
48,418
  
$
71,665
 
                                          
December 31, 2019:                  
December 31, 2022:
                        
Bankers Fidelity 
$
123,245
  
$
5,317
  
$
99,684
  
$
8,459
  
$
27,114
  
$
—
  
$
115,164
  
$
5,414
  
$
76,281
  
$
9,295
  
$
24,627
  
$
—
 
American Southern 
58,680
  
3,689
  
39,541
  
8,829
  
8,303
  
60,328
   
70,276
   
4,147
   
47,175
   
10,150
   
10,011
   
72,671
 
Corporate & other  
—
   
(27
)
  
—
   
—
   
6,656
   
—
   
—
   
371
  
—
   
—
   
8,216
   
—
 
 
$
181,925
  
$
8,979
  
$
139,225
  
$
17,288
  
$
42,073
  
$
60,328
  
$
185,440
  
$
9,932
  
$
123,456
  
$
19,445
  
$
42,854
  
$
72,671
 


See accompanying report of independent registered public accounting firm.


6268
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
  
Direct
Amount
  
Ceded to
Other
Companies
  
Assumed
From Other
Companies
  
Net
Amounts
 
Percentage
of Amount
Assumed
to Net
 
 (Dollars in thousands)  (Dollars in thousands) 
Year ended December 31, 2020:               
Year ended December 31, 2023:
              
Life insurance in force 
$
294,392
 
$
(11,032
)
 
$
—
  
$
283,360
     
$
814,241
  
$
(8,317
)
 
$
—
  
$
805,924
   
                                 
Premiums —                                 
Bankers Fidelity 
$
193,082
  
$
(71,924
)
 
$
9
  
$
121,167
  
0.0
%
 
$
166,368
  
$
(55,993
)
 
$
7
  
$
110,382
   
0.0
%
American Southern  
45,127
   
(5,890
)
  
23,135
   
62,372
   
37.1
%
  
46,349
   
(5,902
)
  
27,996
   
68,443
   
40.9
%
Total premiums 
$
238,209
  
$
(77,814
)
 
$
23,144
  
$
183,539
   
12.6
%
 
$
212,717
  
$
(61,895
)
 
$
28,003
  
$
178,825
   
15.7
%
                                   
Year ended December 31, 2019:               
Year ended December 31, 2022:
                    
Life insurance in force 
$
257,731
  
$
(11,449
)
 
$
—
  
$
246,282
     
$
670,610
  
$
(9,597
)
 
$
—
  
$
661,013
     
                                   
Premiums —                                   
Bankers Fidelity 
$
195,481
  
$
(72,261
)
 
$
25
  
$
123,245
  
0.0
%
 
$
176,995
  
$
(61,839
)
 
$
8
  
$
115,164
   
0.0
%
American Southern  
41,880
   
(5,520
)
  
22,320
   
58,680
   
39.6
%
  
51,844
   
(6,546
)
  
24,978
   
70,276
   
35.5
%
Total premiums 
$
237,361
  
$
(77,781
)
 
$
22,345
  
$
181,925
   
12.8
%
 
$
228,839
  
$
(68,385
)
 
$
24,986
  
$
185,440
   
13.5
%


See accompanying report of independent registered public accounting firm.

6369
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, 2020 
$
2,299
  
$
54,883
  
$
22,932
  
$
62,372
  
$
3,586
  
$
39,859
  
$
(520
)
 
$
9,590
  
$
37,645
  
$
64,366
 
                                         
December 31, 2019 
$
1,979
  
$
52,281
  
$
21,429
  
$
58,680
  
$
3,689
  
$
40,361
  
$
(820
)
 
$
8,829
  
$
37,905
  
$
60,328
 
                  
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, 2023
 
$
2,700
  
$
63,832
  
$
28,756
  
$
68,443
  
$
4,507
  
$
47,658
  
$
3,357
 
$
8,390
  
$
48,144
  
$
71,665
 
                                         
December 31, 2022
 
$
2,401
  
$
62,810
  
$
25,534
  
$
70,276
  
$
4,147
  
$
48,692
  
$
(1,517
)
 
$
10,150
  
$
42,948
  
$
72,671
 


See accompanying report of independent registered public accounting firm.



6470