Atlantic American 10K 2016 Annual report

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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, 2016

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	Name of exchange
Common Stock, par value $1.00 per share	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.
Yeso 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.
Yeso 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 ☒ Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒ Noo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero

Accelerated filero

Non-accelerated filero
(Do not check if a smaller reporting company)

Smaller reporting company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yeso No ☒

The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2016, the last business day of the registrant’s most recently completed second fiscal quarter, was $17,132,500. 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 20, 2017 there were 20,422,924 shares of the registrant’s common stock, par value $1.00 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of the registrant’s Proxy Statement for the 2017 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.

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		Page
PART I
Item 1.	Business		1
	The Company		1
	Marketing		2
	Underwriting		4
	Policyholder and Claims Services		4
	Reserves		5
	Reinsurance		9
	Competition		9
	Ratings		10
	Regulation		10
	NAIC Ratios		11
	Risk-Based Capital		11
	Investments		11
	Employees		12
	Financial Information by Industry Segment		12
	Available Information		12
	Executive Officers of the Registrant		13
	Forward-Looking Statements		13
Item 1A.	Risk Factors		14
Item 1B.	Unresolved Staff Comments		14
Item 2.	Properties		14
Item 3.	Legal Proceedings		14
Item 4.	Mine Safety Disclosures		14

PART II
Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities		15
Item 6.	Selected Financial Data		16
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		25
Item 8.	Financial Statements and Supplementary Data		26
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		58
Item 9A.	Controls and Procedures		58
Item 9B.	Other Information		59

PART III
Item 10.	Directors, Executive Officers and Corporate Governance		60
Item 11.	Executive Compensation		60
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		60
Item 13.	Certain Relationships and Related Transactions, and Director Independence		60
Item 14.	Principal Accountant Fees and Services		60

PART IV
Item 15.	Exhibits, Financial Statement Schedules		61
Item 16.	Form 10-K Summary		62

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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 (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:

Business Automobile Insurance policies provide bodily injury and/or property damage liability coverage, uninsured motorist coverage and physical damage coverage for commercial accounts.

General Liability Insurance policies cover bodily injury and 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 business 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 inland marine and general liability coverages. Additionally, American Southern directly provides surety bond coverage for school bus transportation and subdivision construction, as well as performance and payment bonds.

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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,
	2016		2015
	(In thousands)
Automobile liability	$	28,219	$	24,786
Automobile physical damage		10,192		13,290
General liability		3,009		3,152
Surety		8,999		9,192
Other lines		3,344		4,088
Total	$	53,763	$	54,508

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. Health insurance products, primarily Medicare supplement insurance, accounted for 90% of Bankers Fidelity’s net earned premiums in 2016 while life insurance, including both whole and term life insurance policies, accounted for the balance. In terms of the number of policies written in 2016, 92% were health insurance policies and 8% 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:

	Year Ended December 31,
	2016		2015
	(In thousands)
Life insurance	$	9,974	$	10,454
Medicare supplement		84,107		81,068
Other accident and health		5,621		4,862
Total health insurance		89,728		85,930
Total	$	99,702	$	96,384

Life Insurance products include non-participating individual term and 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 11 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 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 nursing facility care, accident expense, hospital indemnity and disability coverages.

Marketing

Property and Casualty Operations

A portion of American Southern’s business is marketed through a small number of specialized, experienced independent agents. American Southern’s agent selection process is actively managed by internal marketing personnel with oversight from management. Senior management carefully reviews all new programs prior to acceptance. Most of American Southern’s agents are paid an up-front commission with the potential for additional commissions by participating in a profit sharing arrangement that is directly linked to the profitability

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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 and there can be no assurance with respect to ultimate profitability or that the company can obtain or retain such business at the time of a specific contract renewal.

Life and Health Operations

Bankers Fidelity markets its policies through three distribution channels all of which utilize commissioned, independent agents. The three channels utilized include traditional independent agents, broker-agents typically interested in a specific product of Bankers Fidelity and special market agents who promote workplace, association and/or branded products.

Bankers Fidelity utilizes an agent qualification process and had 5,661 licensed agents as of December 31, 2016. The agents generally concentrate their sales activities in both the accident and health or life insurance product lines. During 2016, approximately 1,527 of the licensed agents wrote policies on behalf of Bankers Fidelity.

Bankers Fidelity, in an effort to motivate all of its licensed agents to market its products, offers the following: competitive products and commission structures, efficient claims service, prompt payment of commissions that vest immediately, simplified policy issuance procedures, periodic sales incentive programs and, as described below, for traditional independent agents, protected sales territories determined based on specific counties and/or zip codes.

In the traditional independent agent arrangement, Bankers Fidelity enters into contractual arrangements with various regional sales directors and general agents responsible for marketing and other sales activities, who may also, in turn, recommend appointment of other independent agents. The standard agreements set forth the commission arrangements and are terminable without cause by either party upon notice. Regional sales directors and general agents receive an override commission on sales made by their sponsored agents. Management believes utilizing experienced agents, as well as independent general agents who recruit and train their own agents, is cost effective. All independent agents are compensated primarily on a commission basis. Using independent agents also enables Bankers Fidelity to effectively expand or contract its sales force without incurring significant expense.

With the traditional independent agents, the company utilizes a lead generation system that rewards qualified agents with leads in accordance with certain production criteria. In addition, a protected territory is established for qualified agents, which entitles them to all leads produced within that territory. The territories are zip code or county based and encompass sufficient geographic territory designed to produce an economically serviceable senior population. The Company believes that offering a lead generation system solves an agent’s most important dilemma — prospecting — and allows Bankers Fidelity to build long-term relationships with agents who view Bankers Fidelity as their primary company. In addition, management believes that Bankers Fidelity’s product line is less sensitive to competitor pricing and commissions because of the perceived value of the protected territory and the lead generation system. In protected geographical areas, production per agent has historically compared favorably to unprotected areas served by the general brokerage division.

Products of Bankers Fidelity compete directly with products offered by other insurance companies, and agents may represent multiple insurance companies. Broker-agents generally are not interested in developing relationships with any one particular insurance company but are more interested in matching a specific product with the specific needs of their clients. These agents, while a source of business, do not participate in the company’s lead generation system, but can qualify for other incentives that Bankers Fidelity offers to its traditional independent agents.

Bankers Fidelity also has a number of agents, some of whom belong to marketing organizations that solicit business from various groups including employers, trade associations and/or other organizations. Depending on the group’s needs, these agents may target one specific product or a group of Bankers Fidelity’s products to market to a group’s members. These agents also do not participate in the company’s lead generation system, but can also qualify for other incentives that Bankers Fidelity offers to its traditional independent agents.

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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. When 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 worksite markets to the senior 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 worksite 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 the 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 Information Bureau, 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.

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 to ensure that inbound calls to customer service support groups are processed efficiently. Operational data generated from this system allows management to further refine ongoing client service programs and service representative training modules.

Property and Casualty Operations

American Southern controls its claims costs by utilizing an in-house staff of claims supervisors to investigate, verify, negotiate and settle claims. Upon notification of an occurrence purportedly giving rise to a claim, a claim file is established. The claims department then conducts a preliminary investigation, determines whether an insurable event has occurred and, if so, updates the file for the findings and any required reserve adjustments. Frequently, independent adjusters and appraisers are utilized to service claims which require on-site inspections.

Life and Health Operations

Insureds may obtain claim forms by calling the claims department customer service group or through Bankers Fidelity’s website. 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.

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Reserves

The following table sets forth information concerning the Company’s reserves for losses and claims and reserves for loss adjustment expenses (“LAE”) for the periods indicated:

	2016			2015
	(In thousands)
Balance at January 1	$	63,870		$	66,625
Less: Reinsurance recoverable on unpaid losses		(11,741	)		(14,302	)
Net balance at January 1		52,129			52,323

Incurred related to:
Current year		103,252			99,447
Prior years⁽¹⁾		(3,377	)		(701	)
Total incurred		99,875			98,746

Paid related to:
Current year		71,980			68,159
Prior years		28,258			30,781
Total paid		100,238			98,940
Net balance at December 31		51,766			52,129
Plus: Reinsurance recoverable on unpaid losses		10,796			11,741
Balance at December 31	$	62,562		$	63,870

⁽¹⁾

Prior years’ development was primarily the result of better than expected development on prior years reserves for certain lines of business in both the property and casualty and life and health operations. See Note 3 of Notes to Consolidated Financial Statements.

Reserves are set by line of business within each of the subsidiaries. At December 31, 2016, approximately 79% of the reserves related to property and casualty losses and approximately 21% related to life and health losses. 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; although policy reserves related to such contracts have been 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.

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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”) reserves for the early periods of loss emergence because such a low percentage of ultimate losses are reported in that time frame. Accordingly, for any given accident year, the rate at which losses on long-tail lines of business emerge in the early periods is generally not as reliable an indication of ultimate losses as it would be for shorter-tail lines of business. The estimation of reserves for these lines of business in the early periods of loss emergence is therefore largely influenced by statistical analyses and application of prior accident years’ loss ratios, after considering changes to earned pricing, loss costs, mix of business, ceded reinsurance and other factors that are expected to affect the estimated ultimate losses. For later periods of loss emergence, methods which incorporate a development pattern assumption are given more weight in estimating ultimate losses. For short-tail lines of business, the emergence of paid loss and case reserves is more credible in the early periods and is more likely to be indicative of ultimate losses. The method used to set reserves for these lines of business is based upon utilization of a historical development pattern for reported losses. IBNR reserves for the current year are set as the difference between the estimated fully developed ultimate losses for each year, less the established, related case reserves and cumulative related payments. IBNR reserves for prior accident years are similarly determined, again relying on an indicated, historical development pattern for reported losses.

Based on the results of regular reserve estimate reviews, the Company determines the appropriate reserve adjustment, if any, to record in each period. If necessary, recorded reserve estimates are changed after consideration of numerous factors, including, but not limited to, the magnitude of the difference between the actuarial indication and the recorded reserves, improvement or deterioration of actuarial indication in the period, the maturity of the accident year, trends observed over the recent past and the level of volatility within a particular line of business. In general, changes are made more quickly to recognize changes in estimates to ultimate losses in mature accident years and less volatile lines of business.

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, 2016 actuarial review indicated that reserves could be as much as 16.5% lower or as much as 4.4% 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.

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Property and Casualty Operations

American Southern maintains loss reserves representing estimates of amounts necessary for payment of losses and 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.

The following table sets forth the development of reserves for unpaid losses and claims determined using generally accepted accounting principles of American Southern’s insurance lines from 2006 through 2016. Specifically excluded from the table are the life and health division’s claims reserves, which are included in the consolidated loss and claims reserves. The top line of the table represents the estimated cumulative amount of losses and LAE for claims arising in all prior years that were unpaid at the balance sheet date for each of the indicated periods, including an estimate of IBNR losses at the applicable date. The amounts represent initial reserve estimates at the respective balance sheet dates for the current and all prior years. The next portion of the table shows the cumulative amounts paid with respect to claims in each succeeding year. The lower portion of the table shows the re-estimated amounts of previously recorded reserves based on experience as of the end of each succeeding year.

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The reserve estimates are modified as more information becomes known about the frequency and severity of claims for individual years. The “cumulative redundancy (deficiency)” for each year represents the aggregate change in such year’s estimates through the end of 2016. Furthermore, the amount of the redundancy (deficiency) for any year represents the cumulative amount of the changes from initial reserve estimates for such year. Operations for any year may be affected, favorably or unfavorably, by the amount of the change in the estimate for such years; however, because such analysis is based on the reserves for unpaid losses and claims, before consideration of reinsurance, the total indicated redundancies (deficiencies) may not ultimately be reflected in the Company’s net income. Further, conditions and trends that have affected development of reserves in the past may not necessarily occur in the future and there could be future events or actions that impact future development which have not existed in the past. Accordingly, the accurate prediction of future redundancies (deficiencies) based on the data in the following table is not possible.

	Year Ended December 31,
	2016		2015			2014			2013			2012			2011			2010			2009			2008			2007			2006
	(Dollars In thousands)
Reserve for Losses and LAE	$	49,556	$	51,200		$	55,017		$	51,200		$	52,764		$	49,478		$	46,092		$	42,248		$	44,928		$	43,994		$	45,655

Cumulative paid as of:
One year later				22,555			26,289			21,577			25,352			18,959			15,183			10,486			13,627			11,630			18,010
Two years later							40,440			37,022			37,128			34,805			25,333			17,462			19,003			21,187			24,793
Three years later										45,659			44,473			41,967			34,266			23,231			22,197			23,993			29,338
Four years later													48,338			46,715			37,720			29,254			24,016			25,733			30,853
Five years later																49,129			40,241			31,125			28,898			27,160			31,486
Six years later																			41,787			32,488			30,286			31,659			32,415
Seven years later																						33,847			31,462			32,489			35,695
Eight years later																									31,858			33,616			36,277
Nine years later																												33,953			37,001
Ten years later																															37,275

Ultimate losses and LAE reestimated as of:
End of year	$	49,556	$	51,200		$	55,017		$	51,200		$	52,764		$	49,478		$	46,092		$	42,248		$	44,928		$	43,994		$	45,655
One year later				44,638			50,729			47,169			47,639			44,180			39,999			32,563			31,649			33,663			35,590
Two years later							51,853			49,927			49,966			46,109			38,859			30,562			28,386			29,903			34,163
Three years later										50,163			50,142			48,386			39,153			30,288			27,570			29,077			33,499
Four years later													49,692			49,361			41,339			31,798			28,169			29,162			32,753
Five years later																50,254			42,273			33,508			30,883			30,156			33,049
Six years later																			42,393			34,331			31,696			33,091			33,933
Seven years later																						34,286			32,073			33,804			36,262
Eight years later																									32,269			34,184			36,817
Nine years later																												34,278			37,426
Ten years later																															37,521

Cumulative redundancy (deficiency)			$	6,562		$	3,164		$	1,037		$	3,072		$	(776	)	$	3,699		$	7,962		$	12,659		$	9,716		$	8,134
				12.8	%		5.8	%		2.0	%		5.8	%		-1.6	%		8.0	%		18.8	%		28.2	%		22.1	%		17.8	%

Note: This analysis is based on reserves for unpaid losses and claims, before consideration of reinsurance; therefore the total indicated redundancy (deficiency) may not ultimately be reflected in the Company’s net income.

See Note 3 of Notes to Consolidated Financial Statements for historical loss development data on significant lines of business.

Life and Health Operations

Bankers Fidelity establishes liabilities for future policy benefits to meet projected future obligations under outstanding policies. These reserves are calculated to satisfy policy and contract obligations as they mature. The amount of reserves for insurance policies is calculated using assumptions for interest rates, mortality and

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morbidity rates, expenses, and withdrawals. Reserves are adjusted periodically based on published actuarial tables with modifications to reflect actual experience. The use of significantly different assumptions, or actual results that differ significantly from our estimates, could materially adversely affect our liquidity, results of operations or financial condition. See Note 3 of Notes to Consolidated Financial Statements.

Reinsurance

The Company’s insurance subsidiaries from time to time purchase reinsurance from unaffiliated insurers and reinsurers to reduce their potential liability on individual risks and to protect against catastrophic losses. In a reinsurance transaction, an insurance company transfers, or “cedes,” a portion or all of its exposure on insurance policies to a reinsurer. The reinsurer assumes the exposure in return for a portion of the premiums. The ceding of insurance does not legally discharge the insurer from primary liability for the full amount of the policies written by it, and the ceding company will incur a loss if the reinsurer fails to meet its obligations under the reinsurance agreement.

Property and Casualty Operations

American Southern’s basic reinsurance treaties generally cover all claims in excess of specified per occurrence limitations. Limits per occurrence within the reinsurance treaties are as follows: Inland marine and commercial automobile physical damage - $175,000 excess of $75,000 retention; and automobile liability and general liability - excess coverage of $2.0 million less retentions that may vary from $100,000 to $150,000 depending on the account. American Southern maintains a property catastrophe treaty with a $5.7 million limit excess of $300,000 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 to several primary reinsurers. Maximum retention by Bankers Fidelity on any one individual in the case of life insurance policies is $100,000. At December 31, 2016, $16.1 million of the $263.6 million of life insurance in force at Bankers Fidelity was reinsured under a mix 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. At December 31, 2016, the 2016 retention threshold was $15.0 million of annualized premium; accordingly $11.8 million of the company’s $26.8 million of new annualized Medicare supplement premium was ceded to a reinsurer.

Competition

Competition for insurance products is based on many factors including premiums charged, terms and conditions of coverage, service provided, financial ratings assigned by independent rating agencies, claims services, reputation, perceived 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, which 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 attempts to develop strong relationships with its agents and, consequently, believes it is better positioned for new opportunities and programs with those agents.

Life and Health Operations

The life and health insurance business also remains highly competitive and includes a large number of insurance companies, many of which have substantially greater financial resources than Bankers Fidelity or the Company. Bankers Fidelity offers life insurance products, Medicare supplement and other accident and health

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insurance products. Bankers Fidelity believes that its primary competitors are Americo Life, GTL, Lincoln Heritage, Medico, Monumental, Mutual of Omaha, New Era, Standard Life, Transamerica and United Healthcare. Bankers Fidelity competes with these as well as other insurers on the basis of premium rates, policy benefits and service to policyholders. Bankers Fidelity also 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. In order to better compete, Bankers Fidelity actively seeks opportunities in niche markets, developing long-term relationships with a select number of independent marketing organizations promoting worksite marketing and selective association endorsements. Bankers Fidelity has a track record of successfully competing in its chosen markets by establishing relationships with independent agents and providing proprietary marketing initiatives as well as providing outstanding service to policyholders. Bankers Fidelity believes that it competes effectively on the bases of policy benefits, services and market segmentation.

Ratings

Ratings of insurance companies are not designed for investors and do not constitute recommendations to buy, sell, or hold any security. Ratings are important measures within the insurance industry, and higher ratings should have a favorable impact on the ability of a company to compete in the marketplace.

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 ratings, which may be revised quarterly, fall into fifteen categories ranging from A++ (Superior) to F (in liquidation). A.M. Best’s ratings are based on a detailed analysis of the statutory financial condition and operations of an insurance company compared to the industry in general.

American Southern. American Southern Insurance Company and its wholly-owned subsidiary, American Safety Insurance Company, are each, as of the date of this report, rated “A” (Excellent) by A.M. Best.

Bankers Fidelity. Bankers Fidelity Life Insurance Company and its wholly-owned subsidiary, Bankers Fidelity Assurance Company, are each, as of the date of this report, rated “A-” (Excellent) by A.M. Best.

Regulation

In common with 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.

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, 2016, securities with an amortized cost of

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$11.4 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 13 financial ratios prepared on a statutory basis. The annual statements are submitted to state insurance departments to assist them in monitoring insurance companies in their state and to set forth a desirable range in which companies should fall in each such ratio.

The NAIC suggests that insurance companies which fall outside of the “usual” range in four or more financial ratios are those most likely to require analysis by state regulators. However, according to the NAIC, it may not be unusual for a financially sound company to have several ratios outside the “usual” range.

For the year ended December 31, 2016, American Southern and Bankers Fidelity Life Insurance Company were both individually within the NAIC “usual” range for all 13 financial ratios.

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, 2016, the Company’s insurance subsidiaries exceeded the RBC regulatory levels.

Investments

Investment income represents a significant portion of the Company’s operating and total income. Insurance company investments are subject to state insurance laws and regulations which limit the concentration and types of investments. The following table provides information on the Company’s investments as of the dates indicated.

	December 31,
	2016					2015
	Amount		Percent			Amount		Percent
	(Dollars in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	31,102		12.7	%	$	22,234		9.4	%
States, municipalities and political subdivisions		17,572		7.2			25,479		10.7
Public utilities		11,216		4.6			8,602		3.6
All other corporate bonds		150,588		61.7			148,563		62.3
Redeemable preferred stock		192		0.1			446		0.2
Total fixed maturities⁽¹⁾		210,670		86.3			205,324		86.2
Common and non-redeemable preferred stocks⁽²⁾		20,257		8.3			23,131		9.7
Policy loans⁽³⁾		2,265		0.9			2,200		0.9
Other invested assets⁽⁴⁾		9,709		4.0			6,454		2.7
Real estate		38		0.0			38		0.0
Investments in unconsolidated trusts		1,238		0.5			1,238		0.5
Total investments	$	244,177		100.0	%	$	238,385		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 adjusted cost of fixed maturities was $210.5 million as of December 31, 2016 and December 31, 2015.

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⁽²⁾

Equity securities are carried on the balance sheet at estimated fair value. Total adjusted cost of equity securities was $11.5 million as of December 31, 2016 and $11.0 million as of December 31, 2015.

⁽³⁾

Policy loans are valued at historical cost.

⁽⁴⁾

Other invested assets are accounted for using the equity method. Total adjusted cost of other invested assets was $9.7 million as of December 31, 2016 and $6.5 million as of December 31, 2015.

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,
	2016			2015
	(Dollars in thousands)
Average investments⁽¹⁾	$	243,174		$	244,316
Net investment income		9,307			9,533
Average yield on investments		3.8	%		3.9	%
Realized investment gains, net		2,595			4,857

⁽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.

Management’s recent investment strategy has been a continued focus on quality, diversification and higher yielding corporate bonds and preferred stocks; but at the same time shortening up on maturities to give recognition to the rise and potential future increases in longer-term interest rates.

Employees

The Company and its subsidiaries employed 164 people at December 31, 2016. Of the 164 people employed at December 31, 2016, 159 were full-time.

Financial Information by Industry Segment

Each of American Southern and Bankers Fidelity 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. See Note 13 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 public can read and obtain copies of those materials by visiting the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements and other information regarding issuers like the Company that file electronically with the SEC. The address of the SEC’s web site is www.sec.gov. 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.

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Executive Officers of the Registrant

The table below and the information following the table set forth, for each executive officer of the Company as of December 31, 2016, his name, age, 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.	54	Chairman of the Board, President & CEO	1992
John G. Sample, Jr.	60	Senior Vice President, CFO and Secretary	2002

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 a director, and serves as chief executive officer, of Gray Television, Inc.

Mr. Sample has served as Senior Vice President and Chief Financial Officer of the Company since July 2002 and Secretary since May 2010. Prior to joining the Company in July 2002, he had been a partner of Arthur Andersen LLP since 1990. Mr. Sample is also a director of 1st Franklin Financial Corporation and Capital City Bank Group, Inc.

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 possible occurrence of terrorist attacks; 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 incidence and severity of catastrophes, both natural and man-made; stronger than anticipated competitive activity; unfavorable judicial or legislative developments; the potential effect of regulatory developments, including those which 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.

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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 do not have to provide the information required by this Item.

Item 1B.

Unresolved Staff Comments

Not applicable.

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. Delta Life Insurance Company, the owner of the building, is controlled by an affiliate of the Company. The terms of the lease are believed by Company management to be comparable to terms which could be obtained by the Company from unrelated parties for comparable rental property.

American Southern leases space for its office in a building located in Atlanta, Georgia. The lease term expires May 31, 2019. Under the terms of the lease, American Southern occupies approximately 17,014 square feet.

The Company believes that its current properties are in good condition, and are sufficient for the operations of its business.

Item 3.

Legal 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. The Company accounts for such exposures through the establishment of loss and loss adjustment expense reserves. We do not expect that the ultimate liability, if any, with respect to such ordinary-course claims litigation, 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 litigation could be material to the consolidated results of operations for any given period.

Item 4.

Mine Safety Disclosures

Not applicable.

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PART II

Item 5.

Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

The Company’s common stock is quoted on the Nasdaq Global Market (Symbol: AAME). As of March 20, 2017, there were 2,805 shareholders of record. The following table sets forth, for the periods indicated, the high and low sales prices of the Company’s common stock as reported on the Nasdaq Global Market.

Year Ended December 31,	High		Low
2016
1^st quarter	$	4.99	$	3.39
2^nd quarter		5.00		3.21
3^rd quarter		4.30		3.06
4^th quarter		4.65		3.21
2015
1^st quarter	$	4.08	$	3.75
2^nd quarter		4.00		3.09
3^rd quarter		4.05		3.30
4^th quarter		5.00		3.76

During each of 2016 and 2015, the Company paid an annual cash dividend of $0.02 per share. In addition, on March 14, 2017, the Company’s board of directors declared an annual cash dividend of $0.02 per share that is payable to shareholders of record as of the close of business on April 14, 2017. Payment of 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, earnings of the Company, any restrictions contained in any agreements by which the Company is bound, as well as 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, 2016, the Parent held unrestricted cash and investment balances of approximately $20.5 million. Under the insurance code of the state in which each insurance subsidiary is domiciled, dividend payments to the Company by its insurance subsidiaries are subject to certain limitations without the prior approval of the applicable state’s Insurance Commissioner. In 2017, dividend payments to the Parent by the insurance subsidiaries in excess of $5.7 million would require prior approval.

Issuer Purchases of Equity Securities

On May 6, 2014, the board of directors of the Company approved a plan that allowed for the repurchase of up to an aggregate of 750,000 shares of the Company’s common stock (the “Prior Repurchase Plan”) on the open market or in privately negotiated transactions, as determined by an authorized officer of the Company. Such purchases were eligible to be made from time to time in accordance with applicable securities laws and other requirements.

On October 31, 2016, the board of directors of the Company terminated the Prior Repurchase Plan and approved a new plan that allows for the repurchase of up to 750,000 shares of the Company’s common stock (the “Replacement 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.

The table below sets forth information regarding repurchases by the Company of shares of its common stock under the Prior Repurchase Plan for the period October 1, 2016 through October 30, 2016.

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 30, 2016		16,450		$	3.78			16,450			—

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The table below sets forth information regarding repurchases by the Company of shares of its common stock under the Replacement Repurchase Plan for the period October 31, 2016 through December 31, 2016.

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 31, 2016		1,000	$	4.11		1,000		749,000
November 1 – November 30, 2016		5,114		4.04		5,114		743,886
December 1 – December 31, 2016		11,378		4.02		11,378		732,508
Total		17,492	$	4.03		17,492

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 above.

Stock Performance Graph

As a smaller reporting company, we have elected to comply with certain scaled disclosure reporting obligations, and therefore do not have to provide the information required by this Item.

Item 6.

Selected Financial Data

As a smaller reporting company, we have elected to comply with certain scaled disclosure reporting obligations, and therefore do not have to provide the information required by this Item.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is management’s discussion and analysis of the financial condition and results of operations of Atlantic American Corporation (“Atlantic American” or the “Parent”) and its subsidiaries (collectively with the Parent, the “Company”) for the years ended December 31, 2016 and 2015. 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 (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.

Unpaid loss and loss adjustment expenses comprised 29% of the Company’s total liabilities at December 31, 2016. This liability includes estimates for: 1) unpaid losses on claims reported prior to December 31, 2016, 2) future development on those reported claims, 3) unpaid ultimate losses on claims incurred prior to December 31, 2016 but not yet reported and 4) unpaid loss adjustment expenses for reported and unreported claims incurred prior to December 31, 2016. Quantification of loss estimates for each of these components

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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, 2016 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.

Future policy benefits comprised 35% of the Company’s total liabilities at December 31, 2016. These liabilities relate primarily to life insurance products and are based upon assumed future investment yields, mortality rates, and withdrawal rates after giving effect to possible risks of adverse deviation. The assumed mortality and withdrawal rates are based upon the Company’s experience. If actual results differ from the initial assumptions, the amount of the Company’s recorded liability could require adjustment.

Deferred acquisition costs comprised 9% of the Company’s total assets at December 31, 2016. Deferred acquisition costs are commissions, premium taxes, and other costs that vary with and are primarily related to the acquisition of new and renewal business and are generally deferred and amortized. 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.

Receivables are amounts due from reinsurers, insureds and agents, and any sales of investment securities not yet settled, and comprised 8% of the Company’s total assets at December 31, 2016. 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.

Cash and investments comprised 81% of the Company’s total assets at December 31, 2016. 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, and equity securities, which includes common and non-redeemable preferred stocks, as available for sale and, accordingly, at their estimated fair values. The Company owns certain fixed maturities that do not have publicly quoted values, but had an estimated fair value as determined by management of $1.3 million at

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December 31, 2016. Such values inherently involve a greater degree of judgment and uncertainty and therefore ultimately greater price volatility than the value of securities with publicly quoted market values. On occasion, the value of an investment may decline to a value below its amortized purchase price and remain at such value for an extended period of time. When an investment’s indicated fair value has declined below its cost basis for a period of time, the Company evaluates such investment for an other than temporary impairment. The evaluation for an other than temporary impairment is a quantitative and qualitative process, which is subject to risks and uncertainties 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. If an other than temporary impairment 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 investment in the Company’s balance sheet, it is reflected as a realized investment loss in the Company’s consolidated statements of operations in the period incurred.

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 either independent methods prescribed by the National Association of Insurance Commissioners, which do not differ materially from nationally quoted market prices, when available, or independent broker quotations. See Note 2 and Note 14 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.

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.

Refer to Note 1 of “Notes to Consolidated Financial Statements” for details regarding the Company’s significant accounting policies.

Overall Corporate Results

	Year Ended December 31,
	2016			2015
	(In thousands)
Revenue
Property and Casualty:
American Southern	$	58,159		$	59,497
Life and Health:
Bankers Fidelity		107,505			105,869
Corporate and Other		413			571
Total revenue	$	166,077		$	165,937
Income (loss) before income taxes
Property and Casualty:
American Southern	$	7,314		$	6,642
Life and Health:
Bankers Fidelity		2,950			6,746
Corporate and Other		(6,740	)		(7,680	)
Income before income taxes	$	3,524		$	5,708
Net income	$	2,636		$	4,388

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Management also considers and evaluates performance by analyzing the non-GAAP measure operating income, 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 taxes, which are 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 investment gains, 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 to operating income is as follows:

	Year Ended December 31,
	2016			2015
	(In thousands)
Reconciliation of Non-GAAP Financial Measure

Net income	$	2,636		$	4,388
Income tax expense		888			1,320
Realized investment gains, net		(2,595	)		(4,857	)
Operating income	$	929		$	851

On a consolidated basis, the Company had net income of $2.6 million, or $0.11 per diluted share, in 2016, compared to $4.4 million, or $0.19 per diluted share, in 2015. Operating income increased slightly in 2016 as compared to 2015. The increase in operating income was primarily attributable to increased profitability in the property and casualty operations as well as a decrease in legal and consulting fees of $1.3 million. Offsetting the increase in operating income were higher expenses in the life and health operations associated with the increased level of new business.

Total revenue was $166.1 million in 2016 as compared to $165.9 million in 2015. Premium revenue increased to $153.5 million in 2016 from $150.9 million in 2015. The increase in premium revenue was primarily due to an increase in Medicare supplement business in the life and health operations. Also included in total revenue were net realized investment gains of $2.6 million in 2016 compared to net realized investment gains of $4.9 million in 2015. The magnitude of realized investment gains and losses in any year is a function of the timing of trades of investments relative to the markets themselves as well as the recognition of any other than temporary impairments on investments.

Total expenses were $162.6 million in 2016 as compared to $160.2 million in 2015. As a percentage of premiums, insurance benefits and losses incurred and commissions and underwriting expenses were 96.4% in 2016 and 95.8% in 2015.

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

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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,
	2016			2015
	(Dollars in thousands)
Gross written premiums	$	56,131		$	60,562
Ceded premiums		(4,654	)		(4,951	)
Net written premiums	$	51,477		$	55,611
Net earned premiums	$	53,763		$	54,508
Net losses and loss adjustment expenses		34,408			35,046
Underwriting expenses		16,437			17,809
Underwriting income	$	2,918		$	1,653
Loss ratio		64.0	%		64.3	%
Expense ratio		30.6			32.7
Combined ratio		94.6	%		97.0	%

Gross written premiums at American Southern decreased $4.4 million, or 7.3%, during 2016 as compared to 2015. The decrease in gross written premiums was primarily attributable to the cancellation of an agency in the fourth quarter of 2015, a decrease in business from another agency which moved certain business because of geographical coverage limitation imposed by the company and the loss of business due to the inability to obtain adequate pricing relative to the risks. The largest decrease in gross written premiums was in the automobile physical damage line of business. In 2016, automobile physical damage written premiums decreased $4.0 million and property and surety written premiums decreased $2.9 million as compared to 2015. Partially offsetting the decreases in gross written premiums in these lines of business was an increase of $2.6 million in automobile liability business due primarily to premium rate increases on renewal business and a new automobile program. In both 2016 and 2015, American Southern’s five principal states in terms of written premiums were Alabama, Florida, Georgia, South Carolina, and Tennessee, which accounted for approximately 80% and 72% of total written premiums for 2016 and 2015, respectively.

Ceded premiums decreased $0.3 million, or 6.0%, during 2016 as compared to 2015. The decrease in ceded premiums was primarily due to the cancellation of a reinsurance agreement specifically reinsuring certain of the company’s automobile liability business in one state insurance contract.

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

	Year Ended December 31,
	2016		2015
	(In thousands)
Automobile liability	$	28,219	$	24,786
Automobile physical damage		10,192		13,290
General liability		3,009		3,152
Surety		8,999		9,192
Other lines		3,344		4,088
Total	$	53,763	$	54,508

Net earned premiums decreased $0.7 million, or 1.4%, during 2016 as compared to 2015. The decrease in net earned premiums was primarily attributable to the decrease in automobile physical damage earned premiums due to an agency cancellation and decreased business writings from existing agencies discussed previously. 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 insurance company is often measured by its combined ratio. The combined ratio represents the percentage of losses, loss adjustment expenses and other expenses that are incurred for each dollar

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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).

Net losses and loss adjustment expenses at American Southern decreased $0.6 million, or 1.8%, during 2016 as compared to 2015. As a percentage of premiums, net losses and loss adjustment expenses were 64.0% in 2016 compared to 64.3% in 2015. The slight decrease in the loss ratio was primarily due to more favorable loss experience in the general liability line of business and a $0.5 million loss recovery in the surety line of business. Partially offsetting the decrease in the loss ratio was an increase in automobile liability claims from two of the company’s governmental programs.

Underwriting expenses decreased $1.4 million, or 7.7%, during 2016 as compared to 2015. As a percentage of premiums, underwriting expenses were 30.6% in 2016 compared to 32.7% in 2015. The decrease in the expense ratio was primarily due to American Southern’s use of a variable commission structure with certain agents, which compensates the participating agents in relation to the loss ratios of the business they write. In 2016, variable commissions at American Southern decreased $1.2 million as compared to 2015 due to decreased premiums, decreased variable commission program participation and unfavorable loss experience 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 a current period. At December 31, 2016, the range of estimates developed in connection with the loss reserves for American Southern indicated that reserves could be as much as 19.6% lower or as much as 4.4% 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. American Southern’s estimated net reserve redundancies for the years ended December 31, 2016 and 2015 were $2.1 million and less than $0.1 million, respectively. To the extent reserve redundancies vary between years, there is an incremental impact on the results of operations of American Southern and the Company. The indicated redundancy in 2016 was $2.1 million more than that in 2015. After considering the impact on contingent commissions and other related accruals, the $2.1 million increase in the redundancy resulted in an estimated increase in income from operations before tax of approximately $1.3 million in 2016 as compared to 2015. 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 2016, approximately 52% 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 60% in 2015. 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.

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Bankers Fidelity

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

	Year Ended December 31,
	2016			2015
	(Dollars in thousands)
Medicare supplement	$	84,107		$	81,068
Other health products		5,621			4,862
Life insurance		9,974			10,454
Total earned premiums		99,702			96,384

Insurance benefits and losses		68,789			66,318
Underwriting expenses		35,766			32,805
Total expenses		104,555			99,123
Underwriting loss	$	(4,853	)	$	(2,739	)
Loss ratio		69.0	%		68.8	%
Expense ratio		35.9			34.0
Combined ratio		104.9	%		102.8	%

Premium revenue at Bankers Fidelity increased $3.3 million, or 3.4%, during 2016 as compared to 2015. Premiums from the Medicare supplement line of business increased $3.0 million, or 3.7%, in 2016 as compared to 2015, due primarily to new business generated from both new and existing producers. Other health product premiums increased $0.8 million, or 15.6%, during 2016 as compared to 2015, primarily as a result of new sales of the company’s group health products. Premiums from the life insurance line of business decreased $0.5 million, or 4.6%, in 2016 from 2015 due to the redemption and settlement of existing policy obligations exceeding the level of new sales activity. In both 2016 and 2015, the company’s five principal states in terms of premium revenue were Georgia, Indiana, Ohio, Pennsylvania, and Tennessee, which accounted for approximately 42% and 43% of total premiums for 2016 and 2015, respectively. Effective January 1, 2016, Bankers Fidelity entered into a reinsurance agreement to moderate statutory capital requirements related to premium growth in the Medicare supplement line of business. Medicare supplement premiums ceded were approximately $5.3 million in the year ended December 31, 2016.

Benefits and losses increased $2.5 million, or 3.7%, during 2016 as compared to 2015. As a percentage of premiums, benefits and losses were 69.0% in 2016 compared to 68.8% in 2015. The slight increase in the loss ratio was primarily attributable to less favorable loss experience in the Medicare supplement line of business.

Underwriting expenses increased $3.0 million, or 9.0%, during 2016 as compared to 2015. As a percentage of earned premiums, these expenses were 35.9% in 2016 compared to 34.0% in 2015. The increase in the expense ratio was primarily due to increases in compensation expenses including higher utilization of temporary staffing, increased printing costs associated with the new business activity as well as an increase in agency related expenses.

Investment Income and Realized Gains

Investment income decreased $0.2 million, or 2.0%, in 2016 as compared to 2015. The decrease in investment income was primarily attributable to a decrease in the average yield on the Company’s investments in fixed maturities.

The Company had net realized investment gains of $2.6 million in 2016 compared to net realized investment gains of $4.9 million in 2015. The net realized investment gains in 2016 and 2015 were attributable to gains of $1.6 million and $3.2 million, respectively, from the sale of property held within the Company’s real estate partnership investments as well as gains from the sale of a number of the Company’s investments in 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.

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Interest Expense

Interest expense increased $0.1 million, or 9.3%, in 2016 as compared to 2015 due to an increase during the year in the London Interbank Offered Rate (“LIBOR”), as the interest rates on the Company’s outstanding junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) are directly related to LIBOR.

Other Expenses

Other expenses (commissions, underwriting expenses, and other expenses) increased $0.4 million, or 0.6%, in 2016 as compared to 2015. The increase in other expenses was primarily attributable to an increase in commissions, underwriting costs and other agency related expenses in the life and health operations associated with the increased level of new business. Partially offsetting the increase in other expenses was the $1.2 million decrease in variable commission accruals at American Southern due to decreased premiums, decreased variable commission program participation and unfavorable loss experience from certain accounts subject to variable commissions. American Southern’s variable commission structure compensates the participating agents in relation to the loss ratios of the business they write. Additionally, legal and consulting fees decreased $1.3 million during 2016. As a percentage of earned premiums, other expenses were 37.7% in 2016 as compared with 38.1% in 2015. The slight decrease in the expense ratio was primarily due to the increase in earned premiums coupled with the decrease in legal and consulting fees.

Income Taxes

The primary differences between the effective tax rate and the federal statutory income tax rate for 2016 and 2015 resulted from the dividends-received deduction (“DRD”) and the small life insurance company deduction (“SLD”). The current estimated DRD is adjusted as underlying factors change and can vary from estimates based on, but not limited to, actual distributions from investments as well as the amount of the Company’s taxable income. The SLD varies in amount and is determined at a rate of 60 percent of the tentative life insurance company taxable income (“LICTI”). The SLD for any taxable year is reduced (but not below zero) by 15 percent of the tentative LICTI for such taxable year as it exceeds $3.0 million and is ultimately phased out at $15.0 million.

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. 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 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, 2016, the Parent had approximately $20.5 million of unrestricted cash and investments.

Dividend payments to a parent corporation by its wholly owned insurance subsidiaries are subject to annual limitations and are restricted to 10% of statutory surplus or statutory earnings before recognizing realized investment gains of the individual insurance subsidiaries. At December 31, 2016, the Parent’s insurance subsidiaries had an aggregate statutory surplus of $74.9 million. Dividends were paid to Atlantic American by its subsidiaries totaling $5.5 million and $6.8 million in 2016 and 2015, 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 $7.4 million in each of 2016 and 2015. In addition, the Parent has a formal tax-sharing agreement with each of its insurance subsidiaries. A net total of $2.8 million and $2.4 million were paid to the Parent under the tax sharing agreement in 2016 and 2015, respectively. As a result of the Parent’s tax loss, it is anticipated that the tax-sharing agreement will continue to provide the Parent with additional funds from profitable subsidiaries to assist in meeting its cash flow obligations.

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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 LIBOR plus an applicable margin. The margin ranges from 4.00% to 4.10%. At December 31, 2016, the effective interest rate was 4.98%. 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 potential future financing arrangements.

At December 31, 2016, 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 stated value of $100 per share; accrue annual dividends at a rate of $7.25 per share (payable in cash or shares of the Company’s common stock at the option of the board of directors of the Company) and 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 at December 31, 2016 and 2015. During each of 2016 and 2015, the Company paid Series D Preferred Stock dividends of $0.4 million.

Cash and cash equivalents decreased from $15.6 million at December 31, 2015 to $13.3 million at December 31, 2016. The decrease in cash and cash equivalents during 2016 was primarily attributable to an increased level of investing exceeding normal sales and maturities, additions to property and equipment of $0.4 million, dividends paid on the Company’s common stock and Series D Preferred Stock of $0.8 million, and the purchase of shares for treasury for $0.7 million. Partially offsetting the decrease was the net cash provided by operations of $1.3 million during 2016.

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 foreseeable future. Management is not aware of any current recommendations by regulatory authorities, which, if implemented, would have a material adverse effect on the Company’s liquidity, capital resources or operations.

New Accounting Pronouncements

See “Recently Issued Accounting Standards” in Note 1 of Notes to Consolidated Financial Statements.

Impact of Inflation

Insurance premiums are established before the amount of losses and loss adjustment expenses, or the extent to which inflation may affect such losses and expenses, are known. Consequently, the Company attempts, in establishing its premiums, 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, inflation has not had a material effect on the Company’s results of operations in any of the periods presented.

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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 6 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 do not have to provide 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 do not have to provide the information required by this Item.

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Item 8.

Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

	Page
ATLANTIC AMERICAN CORPORATION

Report of Independent Registered Public Accounting Firm		27

Consolidated Balance Sheets as of December 31, 2016 and 2015		28

Consolidated Statements of Operations for the years ended December 31, 2016 and 2015		29

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2016 and 2015		30

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2016 and 2015		31

Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2015		32

Notes to Consolidated Financial Statements		33

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Atlantic American Corporation
Atlanta, Georgia

We have audited the accompanying consolidated balance sheets of Atlantic American Corporation as of December 31, 2016 and 2015 and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for the years then ended. In connection with our audits of the financial statements, we have also audited financial statement schedules II, III, IV and VI. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Atlantic American Corporation at December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ BDO USA, LLP

Atlanta, Georgia
March 24, 2017

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ATLANTIC AMERICAN CORPORATION
CONSOLIDATED BALANCE SHEETS

	December 31,
	2016			2015
	(Dollars in thousands, except per share data)
ASSETS
Cash and cash equivalents	$	13,252		$	15,622
Investments		244,177			238,385
Receivables:
Reinsurance		11,703			11,759
Insurance premiums and other, net of allowance for doubtful accounts of $280 and $528 in 2016 and 2015, respectively		12,581			11,988
Deferred income taxes, net		160			829
Deferred acquisition costs		28,975			27,866
Other assets		5,208			5,610
Intangibles		2,544			2,544
Total assets	$	318,600		$	314,603

LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance reserves and policyholder funds	$	162,679		$	163,345
Accounts payable and accrued expenses		16,677			15,028
Junior subordinated debenture obligations, net		33,738			33,738
Total liabilities		213,094			212,111
Commitments and contingencies (Note 7)
Shareholders’ equity:
Preferred stock, $1 par, 4,000,000 shares authorized; Series D preferred, 55,000 shares issued and outstanding; $5,500 redemption value		55			55
Common stock, $1 par, 50,000,000 shares authorized; 22,400,894 shares issued; 20,446,705 and 20,426,536 shares outstanding in 2016 and 2015, respectively		22,401			22,401
Additional paid-in capital		57,114			56,623
Retained earnings		27,272			25,443
Accumulated other comprehensive income		5,830			4,584
Unearned stock grant compensation		(428	)		(273	)
Treasury stock, at cost, 1,954,189 and 1,974,358 shares in 2016 and 2015, respectively		(6,738	)		(6,341	)
Total shareholders’ equity		105,506			102,492
Total liabilities and shareholders’ equity	$	318,600		$	314,603

The accompanying notes are an integral part of these consolidated financial statements.

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ATLANTIC AMERICAN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2016			2015
	(Dollars in thousands, except per share data)
Revenue:
Insurance premiums	$	153,465		$	150,892
Investment income		9,884			10,085
Realized investment gains, net		2,595			4,857
Other income		133			103
Total revenue		166,077			165,937

Benefits and expenses:
Insurance benefits and losses incurred		103,197			101,364
Commissions and underwriting expenses		44,797			43,235
Interest expense		1,562			1,429
Other expense		12,997			14,201
Total benefits and expenses		162,553			160,229

Income before income taxes		3,524			5,708
Income tax expense		888			1,320
Net income		2,636			4,388
Preferred stock dividends		(399	)		(399	)
Net income applicable to common shareholders	$	2,237		$	3,989
Earnings per common share (basic and diluted)	$	.11		$	.19

The accompanying notes are an integral part of these consolidated financial statements.

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ATLANTIC AMERICAN CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Year Ended December 31,
	2016			2015
	(Dollars in thousands)
Net income	$	2,636		$	4,388
Other comprehensive income (loss):
Available-for-sale securities:
Gross unrealized holding gain (loss) arising in the period		4,512			(2,366	)
Related income tax effect		(1,579	)		828
Less: reclassification adjustment for net realized gains included in net income⁽¹⁾		(2,595	)		(4,857	)
Related income tax effect⁽²⁾		908			1,700
Total other comprehensive income (loss), net of tax		1,246			(4,695	)
Total comprehensive income (loss)	$	3,882		$	(307	)

⁽¹⁾

Realized gains on available-for-sale securities recognized in realized investment gains, net on the accompanying consolidated statements of operations.

⁽²⁾

Income tax effect on reclassification adjustment for net realized gains included in income tax expense on the accompanying consolidated statements of operations.

The accompanying notes are an integral part of these consolidated financial statements.

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ATLANTIC AMERICAN CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income			Unearned Stock Grant Compensation			Treasury Stock			Total
	(Dollars in thousands)
Balance, December 31, 2014	$	55	$	22,401	$	56,491	$	21,866		$	9,279		$	(460	)	$	(5,437	)	$	104,195
Net income		—		—		—		4,388			—			—			—			4,388
Other comprehensive loss, net of tax		—		—		—		—			(4,695	)		—			—			(4,695	)
Dividends on common stock		—		—		—		(412	)		—			—			—			(412	)
Dividends on preferred stock		—		—		—		(399	)		—			—			—			(399	)
Restricted stock grants		—		—		103		—			—			(178	)		75			—
Amortization of unearned compensation		—		—		—		—			—			365			—			365
Purchase of 233,368 shares for treasury		—		—		—		—			—			—			(997	)		(997	)
Issuance of 11,565 shares under stock plans		—		—		29		—			—			—			18			47
Balance, December 31, 2015		55		22,401		56,623		25,443			4,584			(273	)		(6,341	)		102,492
Net income		—		—		—		2,636			—			—			—			2,636
Other comprehensive income, net of tax		—		—		—		—			1,246			—			—			1,246
Dividends on common stock		—		—		—		(408	)		—			—			—			(408	)
Dividends on preferred stock		—		—		—		(399	)		—			—			—			(399	)
Restricted stock grants		—		—		461		—			—			(741	)		280			—
Amortization of unearned compensation		—		—		—		—			—			586			—			586
Purchase of 173,008 shares for treasury		—		—		—		—			—			—			(698	)		(698	)
Issuance of 13,177 shares under stock plans		—		—		30		—			—			—			21			51
Balance, December 31, 2016	$	55	$	22,401	$	57,114	$	27,272		$	5,830		$	(428	)	$	(6,738	)	$	105,506

The accompanying notes are an integral part of these consolidated financial statements.

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ATLANTIC AMERICAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2016			2015
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	2,636		$	4,388
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred acquisition costs		11,884			10,320
Acquisition costs deferred		(12,993	)		(11,205	)
Realized investment gains, net		(2,595	)		(4,857	)
Decrease in insurance reserves and policyholder funds		(666	)		(749	)
Compensation expense related to share awards		586			365
Depreciation and amortization		1,205			1,117
Deferred income tax (benefit) expense		(2	)		304
(Increase) decrease in receivables, net		(407	)		1,329
Increase in other liabilities		1,649			1,442
Other, net		19			(245	)
Net cash provided by operating activities		1,316			2,209

Cash flows from investing activities:
Proceeds from investments sold		62,361			84,873
Proceeds from investments matured, called or redeemed		10,874			5,924
Investments purchased		(75,071	)		(91,676	)
Additions to property and equipment		(396	)		(322	)
Net cash used in investing activities		(2,232	)		(1,201	)

Cash flows from financing activities:
Payment of dividends on Series D preferred stock		(399	)		(399	)
Payment of dividends on common stock		(408	)		(412	)
Proceeds from shares issued under stock plans		51			47
Purchase of shares for treasury		(698	)		(997	)
Net cash used in financing activities		(1,454	)		(1,761	)

Net decrease in cash		(2,370	)		(753	)
Cash and cash equivalents at beginning of year		15,622			16,375
Cash and cash equivalents at end of year	$	13,252		$	15,622

Supplemental cash flow information:
Cash paid for interest	$	1,544		$	1,424
Cash paid for income taxes	$	675		$	1,465

The accompanying notes are an integral part of these consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

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, 2016, the Parent owned four insurance subsidiaries, Bankers Fidelity Life Insurance Company and its wholly-owned subsidiary, Bankers Fidelity Assurance Company (together known as “Bankers Fidelity”), and American Southern Insurance Company and its wholly-owned subsidiary, American Safety Insurance Company (together known as “American Southern”), in addition to 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 are amortized over the estimated premium-paying period of the related policies using assumptions consistent with those used in computing the policy benefits reserve. The Company provides for insurance benefits and losses on accident, health, and property-casualty claims based upon estimates of projected ultimate losses. Deferred policy acquisition costs for property and casualty insurance and short-duration health insurance are 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. 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).

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 the periods presented.

Investments

The Company’s investments in both fixed maturities, which include bonds and redeemable preferred stocks, and equity securities, which include common and non-redeemable preferred stocks, are classified as “available-for-sale” and, accordingly, are carried at fair value with the after-tax difference from amortized cost,

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as adjusted if applicable, reflected in shareholders’ equity as a component of accumulated other comprehensive income or loss. The fair values of fixed maturities and equity securities are largely determined by either independent methods prescribed by the National Association of Insurance Commissioners (“NAIC”), which do not differ materially from publicly quoted market prices, when available, or independent broker quotations. The Company owns certain fixed maturities that do not have publicly quoted market values, but had an estimated fair value as determined by management of $1,264 and $2,237 at December 31, 2016 and 2015, respectively. Such values inherently involve a greater degree of judgment and uncertainty and therefore ultimately greater price volatility than the value of securities with publicly quoted market values. Policy loans and real estate are carried at historical cost. Other invested assets are comprised of investments in limited partnerships, limited liability companies, and real estate joint ventures, and are accounted for using the equity method. If the value of a common stock, preferred stock, other invested asset, or publicly traded bond declines below its cost or amortized cost, as applicable, and the decline is considered to be other than temporary, a realized loss is recorded to reduce the carrying value of the investment to its estimated fair value, which becomes the new cost basis. The evaluation for an other than temporary impairment is a quantitative and qualitative process, which is subject to risks and uncertainties 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. 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 invested assets are accounted for as a direct increase (decrease) in accumulated other comprehensive income in shareholders’ equity, net of deferred tax and, accordingly, have no effect on net income.

Income Taxes

Deferred income taxes represent the expected future tax consequences when the reported amounts of assets and liabilities are recovered or paid. They arise from differences between the financial reporting and tax basis of assets and liabilities and are adjusted for changes in tax laws and tax rates as those changes are enacted. The provision for income taxes represents the total amount of income taxes due related to the current year, plus the change in deferred income taxes during the year. A valuation allowance is recognized if, based on management’s assessment of the relevant facts, it is more likely than not that some portion of a deferred tax asset will not be realized.

Earnings Per Common Share

Basic earnings per common share are based on the weighted average number of common and participating shares outstanding during the relevant period. Diluted earnings per common share are based on the weighted average number of common and participating shares outstanding during the relevant period, plus options outstanding, if applicable, using the treasury stock method and the assumed conversion of the Series D preferred stock, if dilutive. Unless otherwise indicated, earnings per common share amounts are presented on a diluted basis.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and investments in short-term, highly liquid securities with original maturities of three months or less from date of purchase.

Recently Issued Accounting Standards

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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

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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 existing 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 amendments in ASU 2017-04 are effective for interim and annual reporting periods beginning after December 15, 2019. The Company expects to adopt the updated guidance January 1, 2020 on a prospective basis as required, although earlier adoption is permitted. Based on current levels of reported intangibles, the Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The issues addressed in ASU 2016-15 are: 1) debt prepayment or debt extinguishment costs, 2) settlement of zero-coupon debt instruments, 3) contingent consideration payments made after a business combination, 4) proceeds from the settlement of insurance claims, 5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, 6) distributions received from equity method investees, 7) beneficial interests in securitization transactions and 8) separately identifiable cash flows and application of the predominance principle. The amendments in ASU 2016-15 are effective for interim and annual reporting periods beginning after December 15, 2017. The Company does not expect the adoption of this ASU to have an impact on its consolidated statements of cash flows.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires entities to measure all expected credit losses for financial instruments 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 other-than-temporary impairments (“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 will be effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has not yet determined 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 estimated effect on the Company’s financial statements can only be estimated based on the current investment portfolio at any given point in time, and accordingly, has not currently been determined.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). This guidance applies to all entities that issue share-based payment awards to their employees and is designed to simplify several areas of the accounting for share-based payment transactions, including income tax consequences, forfeitures, classification of awards as either equity or liabilities and related classification on the statement of cash flows. The updated guidance requires the excess tax benefit or deficiency on vesting or settlement of awards to be recognized in earnings as an income tax benefit or expense, respectively and is effective for interim and annual reporting periods beginning after December 15, 2016. The Company will adopt ASU 2016-09 as of January 1, 2017. The

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impact of the adoption will depend on the excess tax benefits or deficiencies realized on vesting or settlement of awards resulting from the difference between the market value of awards at vesting or settlement and the grant date fair value recognized through compensation expense. Such amounts have historically not been significant.

In March 2016, the FASB issued ASU No. 2016-07, Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting (“ASU 2016-07”). This guidance eliminates the requirement to retroactively adopt the equity method of accounting when an investment qualifies for the use of the equity method as a result of an increase in the level of ownership or degree of influence. Under ASU 2016-07, the equity method investor is required to add the cost of acquiring the additional interest in the investee to the current basis of the previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. ASU 2016-07 is effective for interim and annual reporting periods beginning after December 15, 2016. The Company does not expect the adoption of ASU 2016-07 to have a material impact on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Under ASU 2016-02, lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. Under the new guidance, lessees with operating leases will be required to recognize a liability for the present value of future minimum lease payments with a corresponding asset for the right of use of the property. Under existing guidance, future minimum lease payments on operating leases are commitments that are not recognized as liabilities on the balance sheet. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018 and requires a modified retrospective adoption, with early adoption permitted. The Company does not expect the adoption of ASU 2016-02 to have a material impact on its consolidated financial statements; however, it is expected that assets and liabilities will increase based on the present value of remaining lease payments for the minor number of leases which will be in place at the adoption date.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10) (“ASU 2016-01”). ASU 2016-01 provides updated guidance for the recognition and measurement of financial instruments. The guidance requires investments in equity securities to be measured at fair value with changes in fair value reported in net income except for those equity securities that result in consolidation or are accounted for under the equity method of accounting. Under existing guidance, the Company measures investments in equity securities, available-for-sale, at fair value with changes in fair value reported in accumulated other comprehensive income. The Company is required to adopt the guidance effective January 1, 2018 through a cumulative effect adjustment to retained earnings. Early adoption is not allowed. The impact to the Company will be increased volatility in net income beginning in 2018. As of December 31, 2016, equity securities, available-for-sale, totaled $20,257, with unrealized gains, net of tax, of $5,723 in accumulated other comprehensive income that would have been classified in retained earnings. Had the new accounting guidance been in place since the beginning of 2016, the Company would have recognized mark-to-market losses of $2,193 after-tax in net income for the year ended December 31, 2016.

In May 2015, the FASB issued ASU No. 2015-09, Financial Services – Insurance (Topic 944): Disclosures about Short-Duration Contracts (“ASU 2015-09”). The main objective of ASU 2015-09 is to enhance disclosures about the liability for unpaid claims and claim adjustment expenses, specifically the development of claims, the frequency and severity of claims, and expanded disclosures about reserves that are discounted. ASU 2015-09 also requires insurance entities, such as the Company, to disclose information about significant changes in methodologies and assumptions used to calculate the liability for unpaid claims and claim adjustment expenses, including reasons for the change and effects on the financial statements. The amendments in ASU 2015-09 are effective for annual reporting periods beginning after December 15, 2015, and interim reporting periods within annual reporting periods beginning after December 15, 2016. The Company adopted ASU 2015-09 effective January 1, 2016. Since ASU 2015-09 was a disclosure only update, its adoption did not have a material impact on the Company’s consolidated financial statements. See Note 3 for enhanced disclosures.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 as modified provides guidance for recognizing revenue. The guidance excludes insurance contracts and financial instruments. Revenue is to be recognized when, or as, goods or services are

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transferred to customers in an amount that reflects the consideration that an entity is expected to be entitled in exchange for those goods or services. This guidance is effective retrospectively on January 1, 2018, with a choice of restating prior periods or recognizing a cumulative effect for contracts in place as of adoption. Early adoption is permitted as of January 1, 2017. The Company will adopt this ASU on January 1, 2018. Given the nature of the Company’s insurance operations, the adoption is not expected to have a material impact on the Company’s consolidated financial statements.

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 carrying value, gross unrealized gains, gross unrealized losses and cost or amortized cost of the Company’s investments, aggregated by type and industry, as of December 31, 2016 and December 31, 2015.

Investments were comprised of the following:

	2016
	Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Cost or Amortized Cost
Fixed maturities:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	31,102	$	197	$	553	$	31,458
Obligations of states and political subdivisions		17,572		625		308		17,255
Corporate securities:
Utilities and telecom		18,034		1,462		88		16,660
Financial services		57,282		1,880		911		56,313
Other business – diversified		57,419		1,071		2,337		58,685
Other consumer – diversified		29,069		471		1,344		29,942
Total corporate securities		161,804		4,884		4,680		161,600
Redeemable preferred stocks:
Other consumer – diversified		192		—		—		192
Total redeemable preferred stocks		192		—		—		192
Total fixed maturities		210,670		5,706		5,541		210,505
Equity securities:
Common and non-redeemable preferred stocks:
Utilities and telecom		1,601		637		—		964
Financial services		5,402		574		—		4,828
Other business – diversified		244		197		—		47
Other consumer – diversified		13,010		7,396		—		5,614
Total equity securities		20,257		8,804		—		11,453
Other invested assets		9,709		—		—		9,709
Policy loans		2,265		—		—		2,265
Real estate		38		—		—		38
Investments in unconsolidated trusts		1,238		—		—		1,238
Total investments	$	244,177	$	14,510	$	5,541	$	235,208

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	2015
	Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Cost or Amortized Cost
Fixed maturities:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	22,234	$	290	$	175	$	22,119
Obligations of states and political subdivisions		25,479		621		552		25,410
Corporate securities:
Utilities and telecom		17,589		1,357		692		16,924
Financial services		54,035		1,797		1,351		53,589
Other business – diversified		60,960		729		5,898		66,129
Other consumer – diversified		24,581		136		1,391		25,836
Total corporate securities		157,165		4,019		9,332		162,478
Redeemable preferred stocks:
Financial services		253		3		—		250
Other consumer – diversified		193		—		—		193
Total redeemable preferred stocks		446		3		—		443
Total fixed maturities		205,324		4,933		10,059		210,450
Equity securities:
Common and non-redeemable preferred stocks:
Utilities and telecom		1,386		422		—		964
Financial services		5,175		847		—		4,328
Other business – diversified		198		151		—		47
Other consumer – diversified		16,372		10,758		—		5,614
Total equity securities		23,131		12,178		—		10,953
Other invested assets		6,454		—		—		6,454
Policy loans		2,200		—		—		2,200
Real estate		38		—		—		38
Investments in unconsolidated trusts		1,238		—		—		1,238
Total investments	$	238,385	$	17,111	$	10,059	$	231,333

Bonds having an amortized cost of $11,435 and $11,259 and included in the tables above were on deposit with insurance regulatory authorities at December 31, 2016 and 2015, respectively, in accordance with statutory requirements.

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The following table sets forth the carrying value, cost or amortized cost, and net unrealized gains (losses) of the Company’s investments aggregated by industry as of December 31, 2016 and 2015.

	2016							2015
	Carrying Value		Cost or Amortized Cost		Unrealized Gains (Losses)			Carrying Value		Cost or Amortized Cost		Unrealized Gains (Losses)
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	31,102	$	31,458	$	(356	)	$	22,234	$	22,119	$	115
Obligations of states and political subdivisions		17,572		17,255		317			25,479		25,410		69
Utilities and telecom		19,635		17,624		2,011			18,975		17,888		1,087
Financial services		62,684		61,141		1,543			59,463		58,167		1,296
Other business – diversified		57,663		58,732		(1,069	)		61,158		66,176		(5,018	)
Other consumer – diversified		42,271		35,748		6,523			41,146		31,643		9,503
Other investments		13,250		13,250		—			9,930		9,930		—
Total investments	$	244,177	$	235,208	$	8,969		$	238,385	$	231,333	$	7,052

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, 2016 and 2015.

	2016
	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	$	23,494	$	553	$	—	$	—	$	23,494	$	553
Obligations of states and political subdivisions		8,747		308		—		—		8,747		308
Corporate securities		59,404		2,124		20,587		2,556		79,991		4,680
Total temporarily impaired securities	$	91,645	$	2,985	$	20,587	$	2,556	$	112,232	$	5,541

	2015
	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	$	9,209	$	120	$	2,243	$	55	$	11,452	$	175
Obligations of states and political subdivisions		16,079		552		—		—		16,079		552
Corporate securities		79,482		4,284		16,131		5,048		95,613		9,332
Total temporarily impaired securities	$	104,770	$	4,956	$	18,374	$	5,103	$	123,144	$	10,059

The evaluation for an other than temporary impairment is a quantitative and qualitative process, which is subject to risks and uncertainties 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.

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As of December 31, 2016, there were seventy-seven securities in an unrealized loss position which primarily included certain of the Company’s investments in fixed maturities within the other diversified business, other diversified consumer and financial services sectors. Securities in an unrealized loss position reported in the other diversified business sector included gross unrealized losses of $1,194 related to investments in fixed maturities of seven different issuers, all related to the oil and gas industry. These oil and gas companies represent a diversified group of businesses which include, among others, refiners, pipeline owners and operators, deep water offshore rig owners and operators, all of which we believe are in continuing stages of rationalizing their current operations, investments, future capital expenditures and carefully managing their capital and liquidity positions. Based on publicly available information, the companies are continuing to assess and revise short-term, intermediate and long-term business plans in response to the current trends in oil and gas markets. While these companies have generally experienced credit downgrades or may be currently under credit rating review, the Company believes that many of the downgrades are in response to external market forces and not necessarily specific credit events of any obligor which would currently indicate that an other than temporary impairment need be recorded. All of the investees have continued to make regular interest payments on their debt when and as due and the Company continues to perform in-depth analysis of the publicly available financial disclosures of each of the investees on a regular basis. The Company does not currently intend to sell nor does it expect to be required to sell any of the securities in an unrealized loss position. Based upon the Company’s 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 impaired as of December 31, 2016.

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 all of its fixed maturities, which consist of U.S. Treasury securities and 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 a matrix pricing concept, which is a mathematical technique used widely in the industry to value debt securities based on various relationships to other benchmark quoted prices.

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. The Company’s financial instruments valued using Level 3 criteria consist of a limited number of fixed maturities. As of December 31, 2016 and December 31, 2015, the value of the Company’s fixed maturities valued using Level 3 criteria was $1,264 and $2,237, respectively. The use of different criteria or assumptions regarding data may have yielded materially different valuations.

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As of December 31, 2016, 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	$	—	$	209,406		$	1,264	⁽¹⁾	$	210,670
Equity securities		15,153		5,104	⁽¹⁾		—			20,257
Cash equivalents		9,811		—			—			9,811
Total	$	24,964	$	214,510		$	1,264		$	240,738

⁽¹⁾

All underlying securities are financial service industry related.

As of December 31, 2015, 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	$	—	$	203,087		$	2,237	⁽¹⁾	$	205,324
Equity securities		18,245		4,886	⁽¹⁾		—			23,131
Cash equivalents		13,772		—			—			13,772
Total	$	32,017	$	207,973		$	2,237		$	242,227

⁽¹⁾

All underlying securities are financial service industry related.

The following is a roll-forward of the Company’s financial instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) from January 1, 2015 to December 31, 2016.

	Fixed Maturities
Balance, January 1, 2015	$	2,214
Total unrealized gains included in other comprehensive loss		23
Balance, December 31, 2015		2,237
Total realized gains included in earnings		57
Total unrealized losses included in other comprehensive income		(30	)
Settlements		(1,000	)
Balance, December 31, 2016	$	1,264

The Company’s fixed maturities valued using Level 3 inputs 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 (based on current cash flows) discounted at reasonable estimated rates of interest. There are no assumed prepayments and/or default probability assumptions as a majority of these instruments contain certain U.S. government agency strips to support repayment of the principal. Other qualitative and quantitative information received from the original underwriter of the pooled offerings is also considered, as applicable.

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The carrying value and amortized cost of the Company’s investments in fixed maturities at December 31, 2016 and 2015 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.

	2016				2015
	Carrying Value		Amortized Cost		Carrying Value		Amortized Cost
Due in one year or less	$	2,544	$	2,507	$	4,143	$	4,113
Due after one year through five years		20,278		20,038		20,557		20,591
Due after five years through ten years		90,667		90,926		99,614		103,066
Due after ten years		80,099		79,627		79,882		81,684
Varying maturities		17,082		17,407		1,128		996
Totals	$	210,670	$	210,505	$	205,324	$	210,450

Investment income was earned from the following sources:

	2016			2015
Fixed maturities	$	9,122		$	9,327
Equity securities		491			488
Other		271			270
Total investment income		9,884			10,085
Less investment expenses, included in other expenses		(577	)		(552	)
Net investment income	$	9,307		$	9,533

A summary of realized investment gains (losses) follows:

	2016
	Fixed Maturities			Equity Securities		Other Invested Assets		Total
Gains	$	1,119		$	—	$	1,565	$	2,684
Losses		(89	)		—		—		(89	)
Realized investment gains, net	$	1,030		$	—	$	1,565	$	2,595

	2015
	Fixed Maturities			Equity Securities			Other Invested Assets		Total
Gains	$	2,347		$	—		$	3,154	$	5,501
Losses		(628	)		(16	)		—		(644	)
Realized investment gains, net	$	1,719		$	(16	)	$	3,154	$	4,857

Proceeds from the sales of investments were as follows:

	2016		2015
Fixed maturities	$	59,072	$	80,995
Other investments		3,289		3,878
Total proceeds	$	62,361	$	84,873

The Company’s bond portfolio included 88% investment grade securities, as defined by the NAIC, at December 31, 2016.

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Note 3. 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, 2016 and 2015.

					Amount of Insurance In Force, Net
	2016		2015		2016		2015
Future policy benefits
Life insurance policies:
Ordinary	$	54,554	$	54,130	$	245,017	$	247,590
Mass market		2,003		2,205		2,463		2,758
Individual annuities		84		103		—		—
		56,641		56,438	$	247,480	$	250,348
Accident and health insurance policies		18,202		15,698
		74,843		72,136
Unearned premiums		23,208		25,348
Losses, claims and loss adjustment expenses		62,562		63,870
Other policy liabilities		2,066		1,991
Total insurance reserves and policyholder funds	$	162,679	$	163,345

Annualized premiums for accident and health insurance policies were $95,956 and $87,480 at December 31, 2016 and 2015, respectively.

Future Policy Benefits

Liabilities for life insurance future policy benefits are based upon assumed future investment yields, mortality rates, and withdrawal rates after giving effect to possible risks of unexpected claim experience. The assumed mortality and withdrawal rates are based upon the Company’s experience. The interest rates assumed for life, accident and health future policy benefits are generally: (i) 2.5% to 5.5% for issues prior to 1977, (ii) 7% graded to 5.5% for 1977 through 1979 issues, (iii) 9% for 1980 through 1987 issues, (iv) 5% to 7% for 1988 through 2009 issues, (v) 4% for 2010 through 2012 issues, and (vi) 3.5% for 2013 through 2016 issues.

Loss and Claim Reserves

Loss and claim reserves represent estimates of projected ultimate losses and are based upon: (a) management’s estimate of ultimate liability and claims adjusters’ evaluations for unpaid claims reported prior to the close of the accounting period, (b) estimates of incurred but not reported (“IBNR”) claims based on past experience, and (c) estimates of loss adjustment expenses. The estimated liability is periodically reviewed by management and updated, with changes to the estimated liability recorded in the statement of operations in the year in which such changes are known.

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

	2016			2015
Balance at January 1	$	63,870		$	66,625
Less: Reinsurance recoverable on unpaid losses		(11,741	)		(14,302	)
Net balance at January 1		52,129			52,323

Incurred related to:
Current year		103,252			99,447
Prior years		(3,377	)		(701	)
Total incurred		99,875			98,746

Paid related to:
Current year		71,980			68,159
Prior years		28,258			30,781
Total paid		100,238			98,940
Net balance at December 31		51,766			52,129
Plus: Reinsurance recoverable on unpaid losses		10,796			11,741
Balance at December 31	$	62,562		$	63,870

Prior years’ development was primarily the result of better than expected development on prior years loss and claim reserves for certain lines of business in both American Southern and Bankers Fidelity.

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

	2016		2015
Total incurred losses	$	99,875	$	98,746
Cash surrender value and matured endowments		1,278		1,390
Benefit reserve changes		2,044		1,228
Total insurance benefits and losses incurred	$	103,197	$	101,364

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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, 2016, 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 about incurred and paid claims development for the years ended December 31, 2007 to 2016 is presented as supplementary information.

Medicare Supplement

	For the Years Ended December 31,
	(Unaudited)																				As of December 31, 2016
	Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance																				IBNR Reserves		Cumulative Number of Reported Claims
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016		IBNR Reserves		Cumulative Number of Reported Claims
2007	$	29,616	$	29,169	$	29,230	$	29,225	$	29,214	$	29,213	$	29,213	$	29,212	$	29,111	$	29,211	$	—		526,227
2008				29,344		28,698		28,721		28,712		28,688		28,687		28,683		28,683		28,682		—		528,104
2009						31,124		30,455		30,481		30,447		30,438		30,432		30,431		30,430		—		555,808
2010								34,849		34,328		34,323		34,303		34,282		34,272		34,268		—		620,799
2011										38,188		38,296		38,360		38,327		38,316		38,302		—		658,696
2012												50,021		50,996		51,021		50,998		50,989		—		860,258
2013														56,974		56,970		57,034		57,023		—		949,778
2014																57,179		56,938		56,981		—		933,020
2015																		55,482		54,939		62		890,878
2016																				58,849		9,520		879,603
																			$	439,674

	Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016
2007	$	24,324	$	29,169	$	29,230	$	29,255	$	29,214	$	29,213	$	29,213	$	29,212	$	29,211	$	29,211
2008				24,055		28,698		28,721		28,712		28,688		28,687		28,683		28,683		28,682
2009						29,866		30,455		30,481		30,447		30,438		30,432		30,431		30,430
2010								29,127		34,328		34,323		34,303		34,282		34,272		34,268
2011										31,720		38,296		38,360		38,327		38,316		38,302
2012												42,267		50,996		51,021		50,998		50,989
2013														47,770		56,970		57,034		57,023
2014																48,024		56,938		56,981
2015																		45,430		54,876
2016																				49,165
																			$	429,927
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance																			$	9,747

The cumulative number of reported claims for the Medicare Supplement line of business is the count of distinct claims incurred and submitted to Medicare for payment in the given year. Multiple payments on the same claim are not counted in the frequency information. Estimated ultimate claims incurred, using claims data reported during each month of any given year, are calculated using the chain ladder method modified to use seasonality and trend-adjusted expected claims for the final two months. Additional adjustments to the estimated ultimate claims incurred are then applied to account for seasonal changes in billing and payment frequencies. The IBNR reserve is calculated as estimated ultimate claims less paid claims and claims in course of settlement. Thirty-six months of loss data are used to develop the estimated ultimate incurred claims. Similar approaches are used for other less significant health products, subject to modifications to account for unique aspects of the product.

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Automobile Liability

	For the Years Ended December 31,
	(Unaudited)																				As of December 31, 2016
	Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance																				IBNR Reserves		Cumulative Number of Reported Claims
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016		IBNR Reserves		Cumulative Number of Reported Claims
2007	$	6,711	$	6,733	$	7,415	$	7,407	$	7,253	$	7,296	$	7,299	$	7,314	$	7,303	$	7,290	$	—		1,663
2008				9,723		7,011		6,627		6,374		6,124		6,112		6,106		6,104		6,105		—		1,534
2009						10,817		8,891		8,659		8,558		8,245		8,123		8,155		8,154		—		1,754
2010								10,752		10,818		10,547		9,937		10,068		10,185		10,202		18		1,946
2011										12,263		13,802		13,235		13,289		13,281		13,495		65		2,129
2012												12,980		15,007		14,108		13,707		13,313		19		2,338
2013														18,664		20,702		21,096		21,823		906		3,251
2014																20,812		21,881		22,041		1,683		3,522
2015																		18,521		19,857		2,992		3,431
2016																				20,549		7,421		3,374
																			$	142,829

	Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016
2007	$	2,631	$	4,792	$	5,957	$	6,519	$	6,824	$	7,008	$	7,230	$	7,247	$	7,249	$	7,290
2008				2,426		4,202		5,077		5,695		5,839		6,065		6,104		6,104		6,105
2009						3,250		5,208		6,353		7,502		7,995		8,123		8,155		8,154
2010								3,211		6,274		8,291		9,382		9,725		10,056		10,090
2011										4,205		7,934		9,858		12,071		13,039		13,106
2012												4,627		8,791		11,507		12,932		13,197
2013														5,144		12,193		16,782		19,407
2014																6,822		13,807		17,554
2015																		6,226		11,878
2016																				6,796
																			$	113,577
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance																			$	29,252

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Automobile Physical Damage

	For the Years Ended December 31,
	(Unaudited)										As of December 31, 2016
	Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance										IBNR Reserves		Cumulative Number of Reported Claims
Accident Year	2012		2013		2014		2015		2016		IBNR Reserves		Cumulative Number of Reported Claims
2012	$	5,478	$	5,114	$	5,113	$	5,070	$	5,070	$	—		1,129
2013				6,039		5,515		5,536		5,599		—		1,598
2014						8,079		7,657		7,583		1		1,633
2015								8,287		7,955		2		1,583
2016										6,877		196		1,187
									$	33,084

	Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident Year	2012		2013		2014		2015		2016
2012	$	4,610	$	5,075	$	5,089	$	5,067	$	5,067
2013				4,778		5,486		5,466		5,599
2014						6,437		7,619		7,570
2015								6,745		7,937
2016										5,804
									$	31,977
All outstanding liabilities before 2012, net of reinsurance										41
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance									$	1,148

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General Liability

	For the Years Ended December 31,
	(Unaudited)																				As of December 31, 2016
	Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance																				IBNR Reserves		Cumulative Number of Reported Claims
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016		IBNR Reserves		Cumulative Number of Reported Claims
2007	$	6,549	$	5,124	$	4,648	$	4,293	$	3,960	$	4,257	$	4,377	$	4,457	$	4,443	$	4,503	$	17		488
2008				5,386		4,359		2,858		2,685		2,479		2,489		2,507		2,548		2,647		20		387
2009						3,392		2,215		1,944		1,730		1,702		1,727		1,828		1,832		4		283
2010								4,114		2,699		2,269		2,337		2,258		2,400		2,423		10		288
2011										3,022		1,723		1,452		1,338		1,174		1,242		17		198
2012												4,055		1,305		1,269		1,270		1,214		23		155
2013														3,461		728		926		817		2		186
2014																3,744		501		557		128		189
2015																		4,421		1,037		467		136
2016																				3,119		2,660		63
																			$	19,391

	Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016
2007	$	901	$	1,825	$	2,566	$	2,993	$	3,387	$	3,595	$	3,966	$	4,214	$	4,371	$	4,426
2008				534		1,091		1,637		1,861		2,023		2,123		2,418		2,506		2,564
2009						476		941		1,082		1,410		1,629		1,662		1,796		1,816
2010								284		678		1,374		1,542		2,037		2,368		2,382
2011										295		412		582		835		1,161		1,169
2012												371		707		847		1,034		1,113
2013														104		339		579		811
2014																171		299		331
2015																		98		259
2016																				116
																			$	14,987
All outstanding liabilities before 2007, net of reinsurance																				238
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance																			$	4,642

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Surety

	For the Years Ended December 31,
	(Unaudited)																				As of December 31, 2016
	Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance																				IBNR Reserves		Cumulative Number of Reported Claims
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016		IBNR Reserves		Cumulative Number of Reported Claims
2007	$	3,287	$	1,953	$	893	$	983	$	1,084	$	868	$	856	$	818	$	814	$	769	$	—		37
2008				3,883		2,098		2,420		2,312		2,312		2,360		2,360		2,324		2,324		—		62
2009						4,920		5,025		4,239		3,951		3,616		4,636		4,916		4,664		—		83
2010								3,995		4,624		3,618		3,396		3,607		3,549		3,563		—		93
2011										4,422		4,786		5,080		5,092		4,966		5,031		1		124
2012												4,979		4,767		5,396		5,345		4,869		—		86
2013														3,060		2,007		2,743		2,947		31		56
2014																3,214		3,130		2,990		75		46
2015																		1,902		1,630		377		48
2016																				3,314		1,703		41
																			$	32,101

	Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016
2007	$	255	$	519	$	664	$	698	$	937	$	849	$	853	$	816	$	814	$	769
2008				503		1,369		2,261		2,232		2,311		2,359		2,360		2,324		2,324
2009						103		1,595		2,640		3,205		3,410		3,760		3,757		4,663
2010								928		2,193		2,780		2,943		3,252		3,545		3,560
2011										1,031		3,207		4,622		4,748		4,939		5,022
2012												2,257		4,581		4,856		5,331		4,869
2013														323		1,010		1,369		2,763
2014																1,331		2,327		2,727
2015																		641		856
2016																				1,054
																			$	28,607
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance																			$	3,494

For the property and casualty lines of business, the number of claims presented above equals the number of occurrences by type of claim reported to the Company. The number of claims reported during a given year corresponds to the number of claims records opened during the year. Frequency information is maintained on a cumulative basis by accident year by line of business. For automobile claims, a claim count is separately maintained for bodily injury, property damage and physical damage claims. The Company has consistently monitored claim frequency on this basis, and believes this provides more meaningful information than using claimant count which can change over the course of settling a claim.

In general, when a claim is reported, claims representatives establish a “case reserve” for the estimated amount of the ultimate payment based on the known information of the claim at that time. Claims managers review and monitor all property and casualty claims in excess of $25,000. As new information becomes available or payments are made on a claim, the case reserve is adjusted to reflect the revised estimate of the ultimate amount to be paid out. Estimates and assumptions pertaining to individual claims are based on complex and subjective judgments and subject to change at any time as new information becomes available.

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.

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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, 2016.

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
Medicare Supplement		83.7	%		16.3	%		0.1	%		-0.1	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
Automobile Liability		33.2	%		29.3	%		17.1	%		11.7	%		4.2	%		2.3	%		1.1	%		0.1	%		0.0	%		0.6	%
Automobile Physical Damage		86.1	%		13.1	%		-0.2	%		1.0	%		0.0	%
General Liability		18.9	%		20.8	%		16.7	%		15.3	%		13.3	%		4.9	%		6.8	%		3.3	%		2.8	%		1.2	%
Surety		27.7	%		33.3	%		19.4	%		11.3	%		7.0	%		1.6	%		0.2	%		4.4	%		-0.1	%		-5.9	%

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, 2016
Net outstanding liabilities:
Medicare Supplement	$	9,747
Automobile Liability		29,252
Automobile Physical Damage		1,148
General Liability		4,642
Surety		3,494
Other short-duration insurance lines		2,060
Liabilities for unpaid losses, claims and loss adjustment expenses, net of reinsurance		50,343

Reinsurance recoverable on unpaid losses:
Medicare Supplement		990
Automobile Liability		5,556
Automobile Physical Damage		106
General Liability		4,135
Other insurance lines		9
Total reinsurance recoverable on unpaid losses		10,796

Unallocated claims adjustment expenses		1,423

Total gross liability for unpaid losses, claims and loss adjustment expenses	$	62,562

Note 4. 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% of the Company’s reinsurance recoverables were due from two reinsurers as of December 31, 2016. Reinsurance recoverables of $280 were due from Swiss Reinsurance Corporation, rated “AA-” by Standard & Poor’s and “A+” (Superior) by A.M. Best and $11,326 were due from General Reinsurance Corporation, rated “AA+” by Standard & Poor’s and “A++” (Superior) by A.M. Best. Allowances for uncollectible amounts are established against reinsurance recoverables, if appropriate.

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

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	2016			2015
Direct premiums written	$	142,200		$	138,035
Assumed premiums written		19,123			18,656
Ceded premiums written		(10,225	)		(4,995	)
Net premiums written	$	151,098		$	151,696

Direct premiums earned	$	144,339		$	137,436
Assumed premiums earned		19,124			18,451
Ceded premiums earned		(9,998	)		(4,995	)
Net premiums earned	$	153,465		$	150,892

Provision for benefits and losses incurred	$	109,616		$	104,286
Reinsurance loss recoveries		(6,419	)		(2,922	)
Insurance benefits and losses incurred	$	103,197		$	101,364

Components of reinsurance recoverables at December 31, 2016 and 2015 were as follows:

	2016		2015
Recoverable on unpaid losses	$	10,796	$	11,741
Recoverable on unpaid benefits		655		—
Recoverable on paid losses		—		18
Ceded unearned premiums		227		—
Ceded advanced premiums		25		—
Total reinsurance recoverables	$	11,703	$	11,759

Note 5. Income Taxes

Total income taxes were allocated as follows:

	2016		2015
Total tax expense on income	$	888	$	1,320

Tax expense (benefit) on components of shareholders’ equity:
Net unrealized gains (losses) on investment securities		671		(2,528	)
Total tax expense (benefit)	$	1,559	$	(1,208	)

A reconciliation of the differences between income taxes computed at the federal statutory income tax rate and the income tax expense is as follows:

	2016			2015
Federal income tax provision at statutory rate of 35%	$	1,233		$	1,998
Dividends-received deduction		(95	)		(99	)
Small life insurance company deduction		(376	)		(582	)
Other		55			42
Adjustment for prior years’ estimates to actual		71			(39	)
Income tax expense	$	888		$	1,320
Effective tax rate		25.2	%		23.1	%

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taxable income. The SLD varies in amount and is determined at a rate of 60 percent of the tentative life insurance company taxable income (“LICTI”). The SLD for any taxable year is reduced (but not below zero) by 15 percent of the tentative LICTI for such taxable year as it exceeds $3,000 and is ultimately phased out at $15,000.

Deferred tax liabilities and assets at December 31, 2016 and 2015 were comprised of the following:

	2016			2015
Deferred tax liabilities:
Deferred acquisition costs	$	(2,345	)	$	(2,623	)
Deferred and uncollected premiums		(654	)		(677	)
Net unrealized investment gains		(3,140	)		(2,469	)
Other		(666	)		(642	)
Total deferred tax liabilities		(6,805	)		(6,411	)
Deferred tax assets:
Insurance reserves		4,589			4,522
Impaired assets		1,454			1,474
Alternative minimum tax credit		282			504
Bad debts and other		640			740
Total deferred tax assets		6,965			7,240
Net deferred tax asset	$	160		$	829

The components of income tax expense were:

	2016			2015
Current - Federal	$	890		$	1,016
Deferred - Federal		(2	)		304
Total	$	888		$	1,320

The Company has formal tax-sharing agreements, and files a consolidated income tax return, with its subsidiaries. Tax years prior to 2012 have been audited by the Internal Revenue Service and are closed.

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Note 6. 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; and (iii) engaging in those activities necessary or incidental thereto.

The financial structure of each of Atlantic American Statutory Trust I and II, as of December 31, 2016 and 2015, was as follows:

	Atlantic American Statutory Trust I	Atlantic American Statutory Trust II
JUNIOR SUBORDINATED DEBENTURES⁽¹⁾⁽²⁾
Principal amount owed	$18,042	$23,196
Balance December 31, 2016	$18,042	$23,196
Less: Treasury debt⁽³⁾	—	(7,500)
Net balance December 31, 2016	$18,042	$15,696
Net balance December 31, 2015	$18,042	$15,696
Coupon rate	LIBOR + 4.00%	LIBOR + 4.10%
Interest payable	Quarterly	Quarterly
Maturity date	December 4, 2032	May 15, 2033
Redeemable by issuer	Yes	Yes
TRUST PREFERRED SECURITIES
Issuance date	December 4, 2002	May 15, 2003
Securities issued	17,500	22,500
Liquidation preference per security	$ 1	$ 1
Liquidation value	$17,500	$22,500
Coupon rate	LIBOR + 4.00%	LIBOR + 4.10%
Distribution payable	Quarterly	Quarterly
Distribution guaranteed by⁽⁴⁾	Atlantic American Corporation	Atlantic American Corporation

⁽¹⁾

For each of the respective debentures, the Company has the right at any time, and from time to time, to defer payments of interest on the Junior Subordinated Debentures for a period not exceeding 20 consecutive quarters up to the debentures’ respective maturity dates. During any such period, interest will continue to accrue and the Company may not declare or pay any cash dividends or distributions on, or purchase, the Company’s common stock nor make any principal, interest or premium payments on or repurchase any debt securities that rank equally with or junior to the Junior Subordinated Debentures. The Company has the right at any time to dissolve each of the trusts and cause the Junior Subordinated Debentures to be distributed to the holders of the Trust Preferred Securities.

⁽²⁾

The Junior Subordinated Debentures are unsecured and rank junior and subordinate in right of payment to all senior debt of the Parent and are effectively subordinated to all existing and future liabilities of its subsidiaries.

⁽³⁾

On August 4, 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.

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Note 7. 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 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.

Operating Lease Commitments

The Company’s rental expense, including common area charges, for operating leases was $1,277 and $1,261 in 2016 and 2015, respectively. The Company’s future minimum base lease obligations under non-cancelable operating leases are as follows:

Year Ending December 31,
2017	$	917
2018		457
2019		193
Thereafter		—
Total	$	1,567

Note 8. 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 authorizes 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 2016, a total of 180,000 restricted shares, with an estimated fair value of $741, were issued under the 2012 Plan. In 2015, a total of 48,300 restricted shares, with an estimated fair value of $178, were issued under the 2012 Plan. The estimated fair value of the restricted shares issued under the 2012 Plan for 2016 and 2015 was based on the common stock price at date of grant. Vesting of restricted shares generally occurs after a one to three year period. There were no stock options granted or outstanding under the 2012 Plan in 2016 or 2015. Shares available for future grants at December 31, 2016 and 2015 were 1,423,200 and 1,603,200, respectively.

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 2016 and 2015 was $223 and $212, 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 2016 and 2015 of $433 and $416, respectively. All contributions were made in cash.

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 stockholders 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 9. Preferred Stock

The Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding at December 31, 2016 and 2015, 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 stated value

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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, 2016 and 2015. During each of 2016 and 2015, the Company paid Series D Preferred Stock dividends of $399.

Note 10. Earnings Per Common Share

A reconciliation of the numerator and denominator of the earnings per common share calculations is as follows:

	For the Year Ended December 31, 2016
	Income			Shares (In thousands)		Per Share Amount
Basic and Diluted Earnings Per Common Share
Net income before preferred stock dividends	$	2,636			20,445
Less preferred stock dividends		(399	)		—
Net income applicable to common shareholders	$	2,237			20,445	$	.11

	For the Year Ended December 31, 2015
	Income			Shares (In thousands)		Per Share Amount
Basic and Diluted Earnings Per Common Share
Net income before preferred stock dividends	$	4,388			20,566
Less preferred stock dividends		(399	)		—
Net income applicable to common shareholders	$	3,989			20,566	$	.19

The assumed conversion of the Company’s Series D Preferred Stock was excluded from the earnings per common share calculation for 2016 and 2015 since its impact would have been antidilutive.

Note 11. 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) certain assets that are non-admitted assets are eliminated from the balance sheet; (ii) acquisition costs for policies are expensed as incurred, while they are deferred and amortized over the estimated life of the policies under GAAP; (iii) the provision that is made for deferred income taxes is different than under GAAP; (iv) the timing of establishing certain reserves is different than under GAAP; and (v) certain valuation allowances attributable to certain investments are different.

The amount of reported statutory net income and surplus (shareholders’ equity) for the Parent’s insurance subsidiaries for the years ended December 31 was as follows:

	2016		2015
Life and Health, net income	$	1,133	$	4,147
Property and Casualty, net income		6,470		5,290
Statutory net income	$	7,603	$	9,437

Life and Health, surplus	$	33,430	$	35,322
Property and Casualty, surplus		41,489		38,308
Statutory surplus	$	74,919	$	73,630

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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 $5,508 and $6,750 in 2016 and 2015, respectively, from its subsidiaries. In 2017, dividend payments to the Parent by the insurance subsidiaries in excess of $5,650 would require prior approval.

Note 12. 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. At December 31, 2016, two members of the Company’s board of directors, including our chairman, president and chief executive officer, were considered to be affiliates of the majority shareholder, who is also a member of the Company’s board of directors.

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, 2016 and 2015, the Company paid $882 and $875, respectively, under this lease.

Certain financing for the Company has also been provided by this entity in the form of an investment in the Series D Preferred Stock (See Note 9). During the years ended December 31, 2016 and 2015, 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, 2016 and 2015, 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, 2016 and 2015 was $10,305 and $14,043, respectively.

During 2016, the Company paid approximately $215 to a digital marketing services organization, which is an affiliate of Gray. Services purchased primarily include assistance with website marketing initiatives on behalf of the Company’s life and health operations.

During 2016, Gray paid the Company approximately $478 in premiums related to a group accident plan.

Note 13. 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, 2016
	American Southern			Bankers Fidelity			Corporate & Other			Adjustments & Eliminations			Consolidated
Insurance premiums	$	53,763		$	99,702		$	—		$	—		$	153,465
Insurance benefits and losses incurred		34,408			68,789			—			—			103,197
Expenses deferred		(7,834	)		(5,159	)		—			—			(12,993	)
Amortization and depreciation expense		8,709			3,667			713			—			13,089
Other expenses		15,562			37,258			15,761			(9,321	)		59,260
Total expenses		50,845			104,555			16,474			(9,321	)		162,553
Underwriting income (loss)		2,918			(4,853	)
Investment income		3,868			5,725			2,217			(1,926	)		9,884
Other income		—			10			7,518			(7,395	)		133
Operating income (loss)		6,786			882			(6,739	)		—			929
Net realized gains (losses)		528			2,068			(1	)		—			2,595
Income (loss) before income taxes	$	7,314		$	2,950		$	(6,740	)	$	—		$	3,524
Total revenues	$	58,159		$	107,505		$	9,734		$	(9,321	)	$	166,077
Intangibles	$	1,350		$	1,194		$	—		$	—		$	2,544
Total assets	$	123,721		$	168,657		$	138,694		$	(112,472	)	$	318,600

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	For the Year Ended December 31, 2015
	American Southern			Bankers Fidelity			Corporate & Other			Adjustments & Eliminations			Consolidated
Insurance premiums	$	54,508		$	96,384		$	—		$	—		$	150,892
Insurance benefits and losses incurred		35,046			66,318			—			—			101,364
Expenses deferred		(9,093	)		(2,112	)		—			—			(11,205	)
Amortization and depreciation expense		9,057			1,707			673			—			11,437
Other expenses		17,845			33,210			16,789			(9,211	)		58,633
Total expenses		52,855			99,123			17,462			(9,211	)		160,229
Underwriting income (loss)		1,653			(2,739	)
Investment income		4,107			5,680			2,060			(1,762	)		10,085
Other income		10			10			7,532			(7,449	)		103
Operating income (loss)		5,770			2,951			(7,870	)		—			851
Net realized gains		872			3,795			190			—			4,857
Income (loss) before income taxes	$	6,642		$	6,746		$	(7,680	)	$	—		$	5,708
Total revenues	$	59,497		$	105,869		$	9,782		$	(9,211	)	$	165,937
Intangibles	$	1,350		$	1,194		$	—		$	—		$	2,544
Total assets	$	123,445		$	160,964		$	136,869		$	(106,675	)	$	314,603

Note 14. 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 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, 2016 and 2015.

	Level in Fair Value Hierarchy⁽¹⁾	2016				2015
	Level in Fair Value Hierarchy⁽¹⁾	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:
Cash and cash equivalents	Level 1	$	13,252	$	13,252	$	15,622	$	15,622
Fixed maturities	⁽¹⁾		210,670		210,670		205,324		205,324
Equity securities	⁽¹⁾		20,257		20,257		23,131		23,131
Other invested assets	Level 3		9,709		9,709		6,454		7,070
Policy loans	Level 2		2,265		2,265		2,200		2,200
Real estate	Level 2		38		38		38		38
Investments in unconsolidated trusts	Level 2		1,238		1,238		1,238		1,238

Liabilities:
Junior Subordinated Debentures, net	Level 2		33,738		33,738		33,738		33,738

⁽¹⁾

See Note 2 for a description of the fair value hierarchy as well as a disclosure of levels for classes of these financial assets.

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The following describes the methods and assumptions used by the Company in estimating fair values:

Cash and 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 in accordance with methods prescribed by the NAIC, which do not differ materially 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 received from the original underwriter of the pooled offerings is also considered, as applicable.

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.

Junior Subordinated Debentures

The fair value is estimated based on the quoted market prices for similar issues and the current rates offered for debt having similar returns and remaining maturities.

Note 15. Accumulated Other Comprehensive Income

The following table sets forth the balance of the only component of accumulated other comprehensive income as of December 31, 2016 and 2015, and the changes in the balance of that component during 2016.

	Unrealized Gains on Available-for- Sale Securities
Balance, December 31, 2015	$	4,584
Other comprehensive income before reclassifications		2,933
Amounts reclassified from accumulated other comprehensive income		(1,687	)
Net current period other comprehensive income		1,246
Balance, December 31, 2016	$	5,830

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

None.

Item 9A. Controls and Procedures

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 our disclosure controls and procedures (as defined in Rules 13a-25(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of that date.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our 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

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of any evaluations of effectiveness on future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016 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 effective as of December 31, 2016.

There were no changes in our internal control over financial reporting that occurred during the fourth quarter of 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

This Annual Report does not include an attestation report of the Company’s independent registered public accounting 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, including the Company, from such requirement.

Item 9B. Other Information

None.

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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 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,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Executive Compensation,” “Certain Relationships and Related Transactions, and Director Independence” and “Ratification of Independent Registered Public Accounting Firm” to be contained in the Company’s definitive proxy statement in connection with the Company’s Annual Meeting of Shareholders to be held on May 9, 2017, 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, 2016, 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		—	$	—		1,423,200
Equity compensation plans not approved by security holders⁽¹⁾		—		—		—
Total		—	$	—		1,423,200

⁽¹⁾

All the Company’s equity compensation plans have been approved by the Company’s shareholders.

The Company has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer, 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 Ethics has been filed as an exhibit to this annual report on Form 10-K.

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PART IV

Item 15.

Exhibits and Financial Statement Schedules

(a) List of documents filed as part of this report:

Financial Statements:

See Index to Financial Statements contained in Item 8 hereof.

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.

Exhibits *:

3.1	-	Restated Articles of Incorporation of the registrant, as amended [incorporated by reference to Exhibit 3.1 to the registrant’s Form 10-K for the year ended December 31, 2008].
3.2	-	Restated Bylaws of the registrant, as amended [incorporated by reference to Exhibit 3.1 to the registrant’s Form 8-K filed on March 4, 2016].
10.01	-	Management Agreement between the registrant and Atlantic American Life Insurance Company and Bankers Fidelity Life Insurance Company dated July 1, 1993 [incorporated by reference to Exhibit 10.41 to the registrant’s Form 10-Q for the quarter ended September 30, 1993].
10.02	-	Tax allocation agreement dated January 28, 1994, between registrant and registrant’s subsidiaries [incorporated by reference to Exhibit 10.44 to the registrant’s Form 10-K for the year ended December 31, 1993].
10.03**	-	Atlantic American Corporation 2012 Nonqualified Stock Purchase Plan [incorporated by reference to Exhibit 99.1 to the registrant’s Form S-8 (File No. 333-183207) filed on August 10, 2012].
10.04**	-	Atlantic American Corporation 2012 Equity Incentive Plan [incorporated by reference to Exhibit 10.1 to registrant’s Form 10-Q for the quarter ended March 31, 2013].
10.05**	-	Summary Terms of Consulting Arrangement between Bankers Fidelity Life Insurance Company and William H. Whaley, M.D. [incorporated by reference to Exhibit 10.06 to the registrant’s Form 10-K for the year ended December 31, 2010].
10.06	-	Lease Agreement between Georgia Casualty & Surety Company, Bankers Fidelity Life Insurance Company, Atlantic American Corporation and Delta Life Insurance Company dated as of November 1, 2007 [incorporated by reference to Exhibit 10.10 to the registrant’s Form 10-K for the year ended December 31, 2007].
10.07	-	First Amendment to Lease Agreement between Georgia Casualty & Surety Company, Bankers Fidelity Life Insurance Company, Atlantic American Corporation and Delta Life Insurance Company dated as of March 31, 2008 [incorporated by reference to Exhibit 10.2 to the registrant’s Form 10-Q for the quarter ended March 31, 2008].
14.1	-	Code of Ethics [incorporated by reference to Exhibit 14.1 to the registrant’s Form 10-K for the year ended December 31, 2003].
21.1	-	Subsidiaries of the registrant [incorporated by reference to Exhibit 21.1 to the registrant’s Form 10-K for the year ended December 31, 2015].
23.1	-	Consent of BDO USA, LLP, Independent Registered Public Accounting Firm.
31.1	-	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	-	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	-	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

TABLE OF CONTENTS

101.INS	-	XBRL Instance Document.
101.SCH	-	XBRL Taxonomy Extension Schema.
101.CAL	-	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF	-	XBRL Taxonomy Extension Definition Linkbase.
101.LAB	-	XBRL Taxonomy Extension Label Linkbase.
101.PRE	-	XBRL Taxonomy Extension Presentation Linkbase.

The registrant agrees to furnish to the Commission upon request a copy of any instruments defining the rights of 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.

Item 16. Form 10-K Summary

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		ATLANTIC AMERICAN CORPORATION
		(Registrant)

	By:	/s/ John G. Sample, Jr.
		John G. Sample, Jr.
		Senior Vice President and Chief Financial Officer

		Date: March 24, 2017

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 24, 2017
HILTON H. HOWELL, JR.		March 24, 2017

/s/ John G. Sample, Jr.	Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	March 24, 2017
JOHN G. SAMPLE, JR.		March 24, 2017

/s/ Robin R. Howell	Director	March 24, 2017
ROBIN R. HOWELL	Director	March 24, 2017

/s/ Mark E. Preisinger	Director	March 24, 2017
MARK E. PREISINGER	Director	March 24, 2017

/s/ Harriett J. Robinson	Director	March 24, 2017
HARRIETT J. ROBINSON	Director	March 24, 2017

/s/ Joseph M. Scheerer	Director	March 24, 2017
JOSEPH M. SCHEERER	Director	March 24, 2017

/s/ Scott G. Thompson	Director	March 24, 2017
SCOTT G. THOMPSON	Director	March 24, 2017

/s/ D. Keehln Wheeler	Director	March 24, 2017
D. KEEHLN WHEELER	Director	March 24, 2017

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Schedule II
Page 1 of 3

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

ATLANTIC AMERICAN CORPORATION
(Parent Company Only)

BALANCE SHEETS

ASSETS

	December 31,
	2016		2015
	(In thousands)

Cash and cash equivalents	$	4,308	$	4,463
Investments		16,160		19,035
Investment in subsidiaries		112,472		106,675
Investments in unconsolidated trusts		1,238		1,238
Deferred tax asset, net		—		169
Income taxes receivable from subsidiaries		2,961		2,146
Other assets		4,554		4,677
Total assets	$	141,693	$	138,403

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deferred tax liability, net	$	500	$	—
Other payables		1,949		2,173
Junior subordinated debentures		33,738		33,738

Total liabilities		36,187		35,911

Shareholders’ equity		105,506		102,492
Total liabilities and shareholders’ equity	$	141,693	$	138,403

See accompanying report of independent registered public accounting firm.

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Schedule II
Page 2 of 3

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

ATLANTIC AMERICAN CORPORATION
(Parent Company Only)

STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2016			2015
	(In thousands)
REVENUE
Fee income from subsidiaries	$	7,395		$	7,449
Distributed earnings from subsidiaries		5,508			6,750
Other		408			571
Total revenue		13,311			14,770

GENERAL AND ADMINISTRATIVE EXPENSES		12,858			13,984

INTEREST EXPENSE		1,562			1,429
		(1,109	)		(643	)
INCOME TAX BENEFIT⁽¹⁾		(1,837	)		(1,514	)
		728			871
EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES, NET		1,908			3,517
NET INCOME	$	2,636		$	4,388

⁽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.

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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,
	2016			2015
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,636		$	4,388
Adjustments to reconcile net income to net cash provided by operating activities:
Realized investment losses (gains), net		1			(190	)
Depreciation and amortization		713			673
Compensation expense related to share awards		586			365
Equity in undistributed earnings of consolidated subsidiaries		(1,908	)		(3,517	)
(Increase) decrease in intercompany taxes		(815	)		125
Deferred income tax (benefit) expense		(2	)		304
(Decrease) increase in other liabilities		(224	)		317
Other, net		(221	)		(12	)
Net cash provided by operating activities		766			2,453

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investments sold, called or matured		1,979			2,210
Investments purchased		(1,000	)		(3,956	)
Capital contribution to subsidiaries		(75	)		(200	)
Additions to property and equipment		(371	)		(230	)
Net cash provided by (used in) investing activities		533			(2,176	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends on Series D preferred stock		(399	)		(399	)
Payment of dividends on common stock		(408	)		(412	)
Proceeds from shares issued under stock plans		51			47
Purchase of shares for treasury		(698	)		(997	)
Net cash used in financing activities		(1,454	)		(1,761	)

Net decrease in cash		(155	)		(1,484	)
Cash and cash equivalents at beginning of year		4,463			5,947
Cash and cash equivalents at end of year	$	4,308		$	4,463

Supplemental disclosure:
Cash paid for interest	$	1,544		$	1,424
Cash paid for income taxes	$	675		$	1,465
Intercompany tax settlement from subsidiaries	$	2,845		$	2,409

See accompanying report of independent registered public accounting firm.

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Schedule III
Page 1 of 2

ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION

Segment	Deferred Acquisition Costs		Future Policy Benefits, Losses, Claims and Loss Reserves			Unearned Premiums		Other Policy Claims and Benefits Payable
	(In thousands)
December 31, 2016:
Bankers Fidelity	$	26,791	$	87,849		$	3,731	$	2,066
American Southern		2,184		49,556			19,477		—
	$	28,975	$	137,405	⁽¹⁾	$	23,208	$	2,066

December 31, 2015:
Bankers Fidelity	$	25,033	$	84,806		$	3,585	$	1,991
American Southern		2,833		51,200			21,763		—
	$	27,866	$	136,006	⁽²⁾	$	25,348	$	1,991

⁽¹⁾

Includes future policy benefits of $74,843 and losses and claims of $62,562.

⁽²⁾

Includes future policy benefits of $72,136 and losses and claims of $63,870.

See accompanying report of independent registered public accounting firm.

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Schedule III
Page 2 of 2

ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION

Segment	Premium Revenue		Net Investment Income		Benefits, Claims, Losses and Settlement Expenses		Amortization of Deferred Acquisition Costs		Other Operating Expenses		Casualty Premiums Written
	(In thousands)
December 31, 2016:
Bankers Fidelity	$	99,702	$	5,172	$	68,789	$	3,401	$	32,365	$	—
American Southern		53,763		3,844		34,408		8,483		7,954		51,477
Other		—		291		—		—		7,153		—
	$	153,465	$	9,307	$	103,197	$	11,884	$	47,472	$	51,477

December 31, 2015:
Bankers Fidelity	$	96,384	$	5,149	$	66,318	$	1,439	$	31,366	$	—
American Southern		54,508		4,086		35,046		8,881		8,928		55,611
Other		—		298		—		—		8,251		—
	$	150,892	$	9,533	$	101,364	$	10,320	$	48,545	$	55,611

See accompanying report of independent registered public accounting firm.

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Schedule IV

ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
REINSURANCE

	Direct Amount		Ceded To Other Companies			Assumed From Other Companies		Net Amounts		Percentage of Amount Assumed To Net
	(Dollars in thousands)
Year ended December 31, 2016:
Life insurance in force	$	263,567	$	(16,087	)	$	—	$	247,480

Premiums —
Bankers Fidelity	$	104,996	$	(5,344	)	$	50	$	99,702		0.1	%
American Southern		39,343		(4,654	)		19,074		53,763		35.5	%
Total premiums	$	144,339	$	(9,998	)	$	19,124	$	153,465		12.5	%

Year ended December 31, 2015:
Life insurance in force	$	267,191	$	(16,843	)	$	—	$	250,348

Premiums —
Bankers Fidelity	$	96,373	$	(44	)	$	55	$	96,384		0.1	%
American Southern		41,063		(4,951	)		18,396		54,508		33.7	%
Total premiums	$	137,436	$	(4,995	)	$	18,451	$	150,892		12.2	%

See accompanying report of independent registered public accounting firm.

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Schedule VI

ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY-CASUALTY INSURANCE OPERATIONS

	Deferred Policy Acquisition Costs		Reserves		Unearned Premiums		Earned Premiums		Net Investment Income		Claims and Claim Adjustment Expenses Incurred Related To					Amortization of Deferred Acquisition Costs		Paid Claims and Claim Adjustment Expenses		Premiums Written
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, 2016	$	2,184	$	49,556	$	19,477	$	53,763	$	3,844	$	36,541	$	(2,133	)	$	8,483	$	34,219	$	51,477

December 31, 2015	$	2,833	$	51,200	$	21,763	$	54,508	$	4,086	$	35,072	$	(26	)	$	8,881	$	36,298	$	55,611

See accompanying report of independent registered public accounting firm.

IV-1

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. freshman Bad

Atlantic American (AAME) 10-K2016 FY Annual report

Content analysis