1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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|X| Quarterly Report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2001
OR
|_| Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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Commission File Number 0-3722
ATLANTIC AMERICAN CORPORATION
Incorporated pursuant to the laws of the State of Georgia
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Internal Revenue Service-- Employer Identification No.
58-1027114
Address of Principal Executive Offices:
4370 Peachtree Road, N.E., Atlanta, Georgia 30319
(404) 266-5500
Indicate by check mark whether 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 |X| ___ NO |_|
The total number of shares of the registrant's Common Stock, $1 par value,
outstanding on November 8, 2001, was 21,235,705.
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ATLANTIC AMERICAN CORPORATION
INDEX
Part 1. Financial Information Page No.
- ------------------------------ --------
Item 1. Financial Statements:
Consolidated Balance Sheets -
September 30, 2001 and December 31, 2000 2
Consolidated Statements of Operations -
Three months and nine months ended September 30, 2001 and 2000 3
Consolidated Statements of Shareholders' Equity -
Nine months ended September 30, 2001 and 2000 4
Consolidated Statements of Cash Flows -
Nine months ended September 30, 2001 and 2000 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
Part II. Other Information
- --------------------------
Item 6. Exhibits and reports on Form 8-K 18
Signature 19
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- -----------------------------
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; In thousands, except share and per share data)
ASSETS
<table>
<caption>
September 30, December 31,
2001 2000
----------------------
Cash, including short-term investments of $8,448 and $15,013 $ 60,646 $ 31,914
--------- ---------
Investments:
Bonds (cost: $131,056 and $160,574) 133,620 159,404
Common and preferred stocks (cost: $33,892 and $32,109) 47,387 43,945
Other invested assets (cost: $5,886 and $6,036) 5,604 5,862
Mortgage loans 3,500 3,538
Policy and student loans 2,599 3,098
Real estate 46 46
--------- ---------
Total investments 192,756 215,893
--------- ---------
Receivables:
Reinsurance 47,891 39,088
Other (net of allowance for bad debts: $1,338 and $1,269) 51,450 37,261
Deferred income taxes, net 1,511 3,839
Deferred acquisition costs 24,824 23,398
Other assets 8,721 4,886
Goodwill 18,969 19,498
--------- ---------
Total assets $406,768 $375,777
========= =========
</table>
<table>
<caption>
LIABILITIES AND SHAREHOLDERS' EQUITY
Insurance reserves and policy funds:
Future policy benefits $44,093 $42,106
Unearned premiums 53,370 45,421
Losses and claims 142,353 133,220
Other policy liabilities 4,276 4,417
--------- ---------
Total policy liabilities 244,092 225,164
Accounts payable and accrued expenses 29,596 20,873
Debt payable 44,000 46,500
--------- ---------
Total liabilities 317,688 292,537
--------- ---------
Commitments and contingencies (Note 8)
Shareholders' equity:
Preferred stock, $1 par, 4,000,000 shares authorized;
Series B preferred, 134,000 shares issued and outstanding,
$13,400 redemption value 134 134
Series C preferred, 25,000 shares issued and outstanding,
$2,500 redemption value 25 25
Common stock, $1 par, 30,000,000 shares authorized; 21,412,138 shares
issued in 2001 and 2000 and 21,216,582 outstanding in 2001 and
21,157,250 shares outstanding in 2000 21,412 21,412
Additional paid-in capital 56,596 56,997
Retained earnings (deficit) 1,671 (1,248)
Accumulated other comprehensive income 9,865 6,820
Treasury stock, at cost, 195,556 shares in 2001 and 254,888 shares in 2000 (623) (900)
--------- ---------
Total shareholders' equity 89,080 83,240
--------- ---------
Total liabilities and shareholders' equity $406,768 $ 375,777
========= =========
</table>
The accompanying notes are an integral part of these
consolidated financial statements.
-2-
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<table>
<caption>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
(Unaudited; In thousands, except per share data)
2001 2000 2001 2000
------------- ------------- ------------- -------------
Revenue:
Insurance premiums $ 36,321 $ 34,737 $ 108,176 $ 99,427
Investment income 3,634 3,642 11,211 11,488
Realized investment gains, net 312 15 1,460 542
Other income 273 264 974 937
------------- ------------- ------------- -------------
Total revenue 40,540 38,658 121,821 112,394
------------- ------------- ------------- -------------
Benefits and expenses:
Insurance benefits and losses incurred 24,867 24,909 78,460 71,480
Commissions and underwriting expenses 10,156 9,375 27,893 27,204
Interest expense 784 1,030 2,607 3,131
Other 2,847 1,897 8,347 6,331
------------- ------------- ------------- -------------
Total benefits and expenses 38,654 37,211 117,307 108,146
------------- ------------- ------------- -------------
Income before income tax expense 1,886 1,447 4,514 4,248
Income tax (benefit) expense (215) (48) 783 890
------------- ------------- ------------- -------------
Net income before preferred stock dividends 2,101 1,495 3,731 3,358
Preferred stock dividends (358) (301) (1,073) (904)
------------- ------------- ------------- -------------
Net income applicable to common stock $ 1,743 $ 1,194 $ 2,658 $ 2,454
============= ============ ============= =============
Net income per common share (basic and diluted) $ .08 $ .06 $ .12 $ .12
============= ============ ============= =============
The accompanying notes are an integral part of these consolidated financial statements.
-3-
</table>
ATLANTIC AMERICAN CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited; Amounts in thousands)
<table>
<caption>
Additional Retained Accumulated other
Preferred Common Paid-in Earnings Comprehensive Treasury
Nine Months Ended September 30, 2001 Stock Stock Capital (Deficit) Income Stock Total
- ------------------------------------------ ----------- ------------ ------------ ------------ --------------- ---------- -----------
Balance, December 31, 2000 $ 159 $ 21,412 $ 56,997 $ (1,248) $ 6,820 $ (900) $ 83,240
Comprehensive income:
Net income 3,731 3,731
Increase in unrealized investment gains 5,284 5,284
Deferred income tax attributable to other
comprehensive income (1,639) (1,639)
Fair value adjustment to interest rate swap (600) (600)
-----------
Total comprehensive income 6,776
-----------
Dividends accrued on preferred stock (437) (636) (1,073)
Compensation expense related to stock grants 36 36
Purchase of shares for treasury (9) (9)
Issuance of shares for employee benefit plans
and stock options (176) 286 110
---------- ------------ ------------ ------------ --------------- ---------- -----------
Balance, September 30, 2001 $ 159 $ 21,412 $ 56,596 $ 1,671 $ 9,865 $ (623) $ 89,080
=========== ============ ============ ============ =============== ========== ===========
Nine Months Ended September 30, 2000
- -------------------------------------------
Balance, December 31, 1999 $ 134 $ 21,412 $ 55,677 $ (4,558) $ 7,836 $ (1,553) $ 78,948
Comprehensive income (loss):
Net income 3,358 3,358
Decrease in unrealized investment gains (5,491) (5,491)
Deferred income tax benefit attributable
to other comprehensive loss 1,922 1,922
-----------
Total comprehensive loss (211)
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Dividends accrued on preferred stock (904) (904)
Purchase of shares for treasury (76) (76)
Issuance of shares for employee benefit plans
and stock options (105) 215 110
----------- ------------ ------------ ------------ --------------- ---------- -----------
Balance, September 30, 2000 $ 134 $ 21,412 $ 54,773 $ (1,305) $ 4,267 $ (1,414) $ 77,867
=========== ============ ============ ============ =============== ========== ===========
</table>
<table>
The accompanying notes are an integral part of these consolidated financial statements.
-4-
</table>
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<table>
<caption>
Nine Months Ended
September 30,
---------------------------------------
2001 2000
------------------- -------------------
(Unaudited; In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,731 $ 3,358
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred acquisition costs 13,359 11,885
Acquisition costs deferred (14,785) (15,066)
Realized investment gains (1,460) (542)
Increase in insurance reserves 18,928 21,629
Compensation expense related to stock grants 36 -
Depreciation and amortization 1,252 1,270
Deferred income tax expense 688 820
Increase in receivables, net (17,693) (14,333)
Increase in other liabilities 6,294 1,859
Other, net (4,291) (976)
-------------------- ------------------
Net cash provided by operating activities 6,059 9,904
-------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investments sold or matured 93,617 8,382
Investments purchased (68,639) (27,065)
Additions to property and equipment (585) (274)
Acquisition of Association Casualty (71) (93)
-------------------- ------------------
Net cash provided (used) by investing activities 24,322 (19,050)
-------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 110 110
Purchase of treasury shares (9) (76)
Proceeds from the issuance of Series C Preferred Stock 750 -
Repayments of debt (2,500) (1,000)
-------------------- ------------------
Net cash used by financing activities (1,649) (966)
-------------------- ------------------
Net increase (decrease) in cash and cash equivalents 28,732 (10,112)
Cash and cash equivalents at beginning of period 31,914 34,306
-------------------- ------------------
Cash and cash equivalents at end of period $60,646 $24,194
==================== ==================
Supplemental cash flow information:
Cash paid for interest $ 2,722 $ 3,141
==================== ==================
Cash paid (received) for income taxes $ 18 $ (509)
==================== ==================
</table>
The accompanying notes are an integral part of these consolidated financial
statements.
-5-
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(Unaudited; In thousands)
Note 1. Basis of presentation
- -------
The accompanying unaudited condensed consolidated financial statements include
the accounts of Atlantic American Corporation and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The accompanying statements have been prepared in accordance with
U.S. generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the nine month period ended September 30, 2001, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001.
Note 2. Impact of recently issued accounting standards
- -------
On June 30, 2001, the Financial Accounting Standards Board issued Statement 141,
"Business Combinations" ("SFAS 141") and Statement 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 141 requires all business combinations
initiated after June 30, 2001, to be accounted for using the purchase method.
SFAS 142 will require that goodwill and intangible assets with indefinite useful
lives no longer be amortized, but instead tested for impairment annually, and
more frequently if circumstances indicate a possible impairment. In addition, a
fair-value-based goodwill impairment test will be required rather than the more
commonly used undiscounted cash flow approach. Existing goodwill and intangible
assets with indefinite lives will continue to be amortized over their estimated
useful lives until January 1, 2002. Goodwill and intangible assets with
indefinite lives acquired after June 30, 2001 are no longer amortized. The
Company will adopt SFAS 142 on January 1, 2002. The impact of adopting SFAS 142
on the Company's financial statements has not yet been determined; however, it
could have a material impact on the Company's results of operations in 2002.
Goodwill amortization expense for the nine months ended September 30, 2001 was
$599. Annualized goodwill amortization expense will be approximately $800.
Note 3. Segment Information
- -------
The Company has four principal insurance subsidiaries that each focus on a
specific geographic region and/or specific products. Each company is managed
independently and is evaluated on its individual performance. The following
summary sets forth each company's revenue and pretax income (loss) for the three
months and nine months ended September 30, 2001 and 2000.
<table>
<caption>
Revenues
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2001 2000 2001 2000
---------- --------- ---------- ----------
American Southern $ 10,393 $ 10,763 $ 32,380 $ 32,013
Association Casualty 7,863 6,311 22,181 16,828
Georgia Casualty 6,958 8,228 21,543 23,494
Bankers Fidelity 15,218 13,285 45,077 39,586
Corporate and Other 1,993 1,264 5,825 4,991
Adjustments and eliminations (1,885) (1,193) (5,185) (4,518)
---------------------- ----------------------
Consolidated results $ 40,540 $ 38,658 $ 121,821 $ 112,394
==============================================
</table>
-6-
<table>
<caption>
Income (loss) before income tax
provision
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -----------------------
2001 2000 2001 2000
-------- -------- -------- --------
American Southern $ 2,509 $ 1,587 $ 5,434 $ 4,290
Association Casualty (328) 782 (473) 1,173
Georgia Casualty 463 (593) 1,694 (78)
Bankers Fidelity 721 1,271 2,421 2,930
Corporate and Other (1,479) (1,600) (4,562) (4,067)
---------------------- -----------------------
Consolidated results $ 1,886 $ 1,447 $ 4,514 $ 4,248
====================== =======================
</table>
Note 4. Credit Arrangements
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The Company is a party to a five-year revolving credit facility with Wachovia
Bank, N.A. ("Wachovia") that provides for borrowings up to $30,000. The interest
rate on the borrowings under the facility is based upon the London Interbank
Offered Rate ("LIBOR") plus an applicable margin, 2.50% at September 30, 2001.
Beginning March 31, 2003, and each quarter thereafter, the commitment on the
revolving credit facility shall be permanently reduced in an amount equal to
$1,000. The credit facility provides for the payment of all of the outstanding
principal balance at June 30, 2004 with no required principal payments prior to
that time except to the extent that the loans exceed the amount of the
commitment after giving effect to each quarterly reduction.
The Company also has outstanding $25,000 of Series 1999, Variable Rate Demand
Bonds (the "Bonds") due July 1, 2009. The Bonds, which are redeemable at the
Company's option, pay a variable interest rate that approximates 30-day LIBOR.
The Bonds are backed by a letter of credit issued by Wachovia, which is
automatically renewable on a monthly basis until thirteen months after such time
as Wachovia gives the Company notice that it is exercising its option not to
renew the letter of credit. The Bonds are subject to mandatory redemption upon
termination of the letter of credit, if an alternative letter of credit facility
is not secured. The Company expects that it would be able to replace the letter
of credit within the prescribed period if Wachovia should give notice of its
intention not to renew the existing facility. The cost of the letter of credit
and its associated fees are 2.50%, making the effective rate on the Bonds LIBOR
plus 2.50% at September 30, 2001. The interest on the Bonds is payable monthly
and the letter of credit fees are payable quarterly. The Bonds do not require
the repayment of any principal prior to maturity, except as provided above.
The Company is required, under both instruments, to maintain certain covenants
including, among others, ratios that relate funded debt to total capitalization,
funded debt to earnings before interest, taxes, depreciation and amortization
("EBITDA"), and interest coverage to interest. The Company is in compliance with
all debt covenants at September 30, 2001 and expects to remain in compliance for
the remainder of 2001.
Note 5. Derivative Financial Instruments
- -------
The Company adopted the Statement of Financial Accounting Standards ("SFAS ")
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), and the corresponding amendments under SFAS 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities" ("SFAS 138"), on January
1, 2001. The impact of adopting SFAS 133, as amended by SFAS 138 did not have a
material effect on the Company's financial condition or results of operations.
On March 21, 2001, the Company entered into an interest rate swap agreement with
Wachovia to hedge its interest rate risk on a portion of the outstanding
borrowings under the revolving credit facility. The interest rate swap was
effective on April 2, 2001 and matures on June 30, 2004. The Company has agreed
to pay a fixed rate of 5.1% and receive 3-month LIBOR until maturity. The
settlement date and the reset date will occur every 90 days following April 2,
2001 until maturity.
The following table summarizes the notional amount, fair value and carrying
value of the Company's derivative financial instruments at September 30, 2001,
as follows:
Carrying
Notional Fair Value
Amount Value (Liability)
-------------------------------------------------
Interest rate swap agreement $ 15,000 $ (600) $ (600)
-7-
Note 6. Reconciliation of Other Comprehensive Income (Loss)
- -------
<table>
<caption>
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
------------------------------------------------
Gain on sale of securities included in net income $ 312 $ 15 $ 1,460 $ 542
============ =========== ============ ==========
Other comprehensive income (loss):
Net pre-tax unrealized gain (loss) arising during year $ 428 $4,402 $ 6,744 $ (4,949)
Reclassification adjustment (312) (15) (1,460) (542)
------------ ----------- ------------ ----------
Net pre-tax unrealized gain (loss) recognized in other
comprehensive income (loss) 116 4,387 5,284 (5,491)
Fair value adjustment to interest rate swap (621) - (600) -
Deferred income tax attributable to other
comprehensive income (loss) 177 (1,535) (1,639) 1,922
------------ ----------- ------------ ----------
Other comprehensive income (loss) $ (328) $2,852 $ 3,045 $ (3,569)
============ =========== =========== ==========
</table>
Note 7. Earnings per common share
- -------
A reconciliation of the numerator and denominator of the earnings per
common share calculations are as follows:
<table>
<caption>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------
(In thousands, except per share data) 2001 2000 2001 2000
------------ ----------- ----------- ----------
Basic Earnings Per Common Share
Net income $ 2,101 $ 1,495 $ 3,731 $ 3,358
Less preferred stock dividends (358) (301) (1,073) (904)
----------- ------------ ----------- -----------
Net income applicable to common shareholders $ 1,743 $ 1,194 $ 2,658 $ 2,454
=========== ============ =========== ===========
Weighted average common shares outstanding 21,207 21,035 21,186 21,024
=========== ============ =========== ===========
Net income per common share $ .08 $ .06 $ .12 $ .12
=========== ============ =========== ===========
Diluted Earnings Per Common Share:
Net income applicable to common shareholders $ 1,743 $ 1,194 $ 2,658 $ 2,454
=========== ============ =========== ===========
Weighted average common shares outstanding 21,207 21,035 21,186 21,024
Effect of dilutive stock options - - - 17
----------- ------------ ----------- -----------
Weighted average common shares outstanding
adjusted for dilutive stock options 21,207 21,035 21,186 21,041
=========== ============ =========== ===========
Net income per common share $ .08 $ .06 $ .12 $ .12
=========== ============ =========== ===========
</table>
-8-
Outstanding stock options of 761,500 for the three months and nine months ended
September 30, 2001 were excluded from the earnings per common share calculation
since their impact was antidilutive. Outstanding stock options of 1,146,000 for
the three months ended September 30, 2000 were excluded from the earnings per
common share calculation since their impact was antidilutive. Outstanding stock
options of 806,000 for the nine months ended September 30, 2000 were excluded
from the earnings per common share calculation since their impact was
antidilutive. The assumed conversion of the Series B and Series C Preferred
Stock was excluded from the earnings per common share calculation for 2001 since
its impact was antidilutive. The assumed conversion of the Series B Preferred
Stock was excluded from the earnings per share calculation for 2000 since its
impact was antidilutive.
Note 8. Commitments and Contingencies
- -------
During 2000, American Southern renewed one of its larger accounts. Although this
contract was renewed through a competitive bidding process, one of the parties
bidding for this particular contract contested the award of this business to
American Southern and filed a claim to obtain nullification of the contract.
During the fourth quarter of 2000, American Southern received an unfavorable
judgment relating to this litigation and has appealed the ruling. The contract
accounts for approximately 12% of annualized premium revenue and is to remain in
effect pending appeal. While management at this time cannot predict the
potential outcome in this case, or quantify the actual impact of an adverse
decision, it may have a material impact on the future results of operations of
the Company.
From time to time the Company and its subsidiaries are parties to litigation
occurring in the normal course of business. In the opinion of management, such
litigation will not have a material adverse effect on the Company's financial
position or results of operations.
Note 9. Prior year Reclassifications
- -------
Certain reclassifications have been made to the 2000 balances to conform with
the 2001 presentation.
Note 10. Related Party Transactions
- --------
During the first nine months of 2001, the Company purchased 350 shares of Gray
Communications Systems, Inc. ("Gray") Series A Preferred Stock and 2,000 shares
of Bull Run Corporation ("Bull Run") Series A Preferred Stock for $3,500 and
$2,000, respectively. In addition, on October 12, 2001 the Company purchased 255
shares of Gray Series C Preferred Stock for $2,550. These investments are
related party transactions because certain members of the Company's executive
team are on the Board of Directors of Bull Run and Gray.
-9-
ITEM 2.
-------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overall Corporate Results
- -------------------------
On a consolidated basis, the Company earned $2.1 million, or $0.08 per diluted
share, for the third quarter ended September 30, 2001 compared to net income of
$1.5 million, or $0.06 per diluted share, for the third quarter ended September
30, 2000. Net income was $3.7 million or $0.12 per share for the nine months
ended September 30, 2001, compared to net income of $3.4 million or $0.12 per
share for the nine months ended September 30, 2000. Premium revenue for the
quarter ended September 30, 2001 increased 4.6% to $36.3 million. For the nine
months ended September 30, 2001, premium revenue increased 8.8% to $108.2
million. The increase in premiums for the third quarter of 2001 and the first
nine months of 2001 is primarily attributable to rate increases and overall
market expansion. In addition, during the third quarter of 2001 results were
favorably impacted by a $ 0.8 million deferred tax benefit related to the
reduction of the Company's valuation allowance compared to a $0.5 million
deferred tax benefit in the third quarter of 2000. The reduction of the
valuation allowance is the result of the utilization of the net operating loss
carryforwards.
A more detailed analysis of the individual operating entities and other
corporate activities is provided below.
UNDERWRITING RESULTS
- --------------------
American Southern
The following is a summary of American Southern's premiums for the third quarter
and first nine months of 2001 and the comparable periods in 2000 (in thousands):
<table>
<caption>
Three months ended Nine months ended
September 30, September 30,
--------------------------------------------------------
2001 2000 2001 2000
------------ -------------- -------------- -------------
Gross written premiums $ 9,190 $ 19,650 $ 37,506 $ 40,922
Ceded premiums (1,745) (1,312) (4,110) (3,867)
------------ -------------- -------------- -------------
Net written premiums $ 7,445 $ 18,338 $ 33,396 $ 37,055
============ ============== ============== =============
Net earned premiums $ 9,199 $ 9,557 $ 28,688 $ 28,241
============ ============== ============== =============
</table>
Gross written premiums at American Southern decreased 53.2% or $10.5 million
during the third quarter of 2001 and 8.3% or $3.4 million for the year to date
period. During 2000, American Southern renewed one of its larger accounts.
Although this contract was renewed through a competitive bidding process, one of
the parties bidding for this particular contract contested the award of this
business to American Southern and filed a claim to obtain nullification of the
contract. During the fourth quarter of 2000, American Southern received an
unfavorable judgment relating to this litigation and has appealed the ruling.
The contract, which accounts for approximately 12% of annualized premium
revenue, is to remain in effect pending appeal. While management at this time
cannot predict the potential outcome in this case, or quantify the actual impact
of an adverse decision, an adverse outcome may have a material adverse affect on
the company's financial position or results of operations. In the first half of
2000, as a conservative measure, American Southern had been recognizing the
premium of this contract on a monthly basis instead of recording the entire
premium and offsetting it with unearned premium on its effective date in May. In
the third quarter of 2000, the company recognized, as written premium, the
remaining premium balance on this contract. American Southern recognized the
entire premium on this contract during the second quarter of 2001, instead of in
the third quarter as was done in 2000, which is the primary reason for the
quarter to quarter decrease in written premiums. The year to date decline in
written premiums is primarily attributable to the loss of one of the company's
state contracts that resulted in a reduction in annualized premium revenue of
approximately $4.0 million and was effective July 2001.
Ceded premiums increased 33.0% in the third quarter of 2001 and 6.3% for the
year to date period. During the third quarter of 2001, the company collected
$0.4 million in penalty premiums and remitted to the reinsurer. For the third
quarter and the first nine months of 2000, there were no penalty premiums
collected and as a result, caused the quarter to quarter and year to date
increase.
-10-
Net earned premiums decreased by 3.7 % or $0.4 million during the third quarter
of 2001 and increased slightly by 1.6% or $0.4 for the year to date. The quarter
to date decline in earned premiums is primarily attributable to the loss of one
of the company's state contracts discussed previously. The increase in net
earned premiums for the year to date period is primarily due to an increase in
commercial auto physical damage through rate increases, increased premium
writings by established agents and new agency appointments.
The following is American Southern's earned premium by line of business for the
third quarter and first nine months of 2001 and the comparable periods in 2000
(in thousands):
<table>
<caption>
Three months ended Nine months ended
September 30, September 30,
-------------------------- ---------------------------
2001 2000 2001 2000
------------- ------------ ------------- -------------
Commercial automobile $ 6,708 $ 7,060 $21,487 $20,587
Private passenger auto 791 815 2,280 2,455
General liability 788 836 2,353 2,627
Property 897 828 2,518 2,526
Other 15 18 50 46
------------- ------------ ------------- -------------
$ 9,199 $ 9,557 $28,688 $28,241
============= ============ ============= =============
</table>
American Southern produces much of its business through contracts with various
states and municipalities, some of which represent significant amounts of
revenue for the company. These contracts, which last from one to three years,
are periodically subject to competitive renewal quotes and the loss of a
significant contract could have a material adverse effect on the business or
financial condition of American Southern and the Company. In an effort to
increase the number of programs underwritten by American Southern and to
insulate it from the loss of any one program, the company is continually
evaluating new underwriting programs. There can be no assurance, however, that
new programs or new accounts will offset lost business resulting from
non-renewals of accounts.
The following is the loss and expense ratios of American Southern for the third
quarter and first nine months of 2001 and for the comparable periods in 2000:
<table>
<caption>
Three months ended Nine months ended
September 30, September 30,
-------------------------- ---------------------------
2001 2000 2001 2000
-------------- ----------- -------------- ------------
Loss ratio 52.2% 72.8% 65.6% 69.4%
Expense ratio* 33.1% 22.8% 27.9 28.4%
-------------- ----------- -------------- ------------
Combined ratio 85.3% 95.6% 93.5% 97.8%
============== =========== ============== ============
</table>
*Excludes the amortization of goodwill associated with the acquisition of
American Southern.
The loss ratio for the third quarter decreased to 52.2% compared to 72.8% in the
third quarter of 2000. For the year to date period the loss ratio decreased to
65.6% from 69.4% in the same comparable period in 2000. During the third quarter
of 2001, American Southern released approximately $1.4 million of redundant
reserves related to certain program business that favorably impacted the loss
ratios for the quarter and nine months ended September 30, 2001 as compared to
the same periods in 2000. The increase in the expense ratio for the quarter is a
function of American Southern's profit sharing arrangements that compensate the
company's agents based upon the profitability of the business they write. The
decline in the expense ratio for the year to date period is primarily
attributable to a significant reduction in commission expense the company pays
on one of its larger contracts which is no longer written through an agency.
-11-
Association Casualty
The results of both Association Casualty Insurance Company and Association Risk
Management General Agency (together referred to as "Association Casualty") are
presented for the third quarter and first nine months of 2001 and the comparable
periods in 2000.
The following is a summary of Association Casualty's premiums for the third
quarter and first nine months of 2001 and the comparable periods in 2000 (in
thousands):
<table>
<caption>
Three months ended Nine months ended
September 30, September 30,
-------------------------- ---------------------------
2001 2000 2001 2000
------------ ------------- ------------ --------------
Gross written premiums $ 6,748 $ 6,475 $ 27,325 $ 17,239
Ceded premiums (803) (594) (2,708) (1,620)
------------ ------------- ------------ --------------
Net written premiums $ 5,945 $ 5,881 $ 24,617 $ 15,619
============ ============= ============ ==============
Net earned premiums $ 6,688 $ 5,493 $ 19,176 $ 14,479
============ ============= ============ ==============
</table>
Gross written premiums at Association Casualty increased $0.3 million or 4.2%
during the third quarter of 2001 and $10.1 million or 58.5% during the first
nine months of 2001. During the fourth quarter of 2000, the company began
recognizing written premiums on an annualized basis instead of using the
installment method resulting in a significant increase in written premiums for
the year to date period. The impact to earned premiums was not significant. In
addition, Association Casualty is aggressively increasing rates on renewal
business, in some cases up to 30%. The company has also added premium related to
commercial lines other than workers' compensation such as general liability,
property, and other commercial coverage to complement its existing book of
business. During the third quarter of 2001, written premiums began to normalize
and should continue this trend except for the rate increases and other premium
writings discussed previously. While Association Casualty currently writes
predominately workers' compensation insurance in the state of Texas (91% of net
earned premiums), the company intends to market itself as a complete commercial
lines carrier.
The following is the loss and expense ratio for Association Casualty for the
third quarter and first nine months of 2001 and the comparable periods in 2000:
<table>
<caption>
Three months ended Nine months ended
September 30, September 30,
-------------------------- ---------------------------
2001 2000 2001 2000
------------- ------------ ------------- -------------
Loss ratio 88.2% 70.6% 87.2% 77.5%
Expense ratio* 32.6% 28.2% 29.3% 28.5%
------------- ------------ ------------- -------------
Combined ratio 120.8% 98.8% 116.5% 106.0%
============= ============ ============= =============
</table>
*Excludes the amortization of goodwill and interest on an intercompany surplus
note associated with the acquisition of Association Casualty.
The loss ratio increased to 88.2% in the third quarter of 2001 from 70.6% in the
third quarter of 2000 and from 77.5% for the first nine months of 2000 to 87.2%
for the comparable period in 2001. The primary reason for the increase can be
attributable to adverse development on prior year losses. Additionally, current
year losses were reviewed and increased to levels deemed more appropriate by
management. The company continues to be adversely impacted by the liberal
interpretation of the worker's compensation laws in the state of Texas. As the
law has matured, factors such as "life time medical" and the "impairment rating"
structure have become significant in contributing to the increased medical
costs. To help to mitigate these costs and achieve an underwriting profit,
Association Casualty continues to increase pricing and improve underwriting
criteria.
-12-
The expense ratio in the third quarter of 2001 increased to 32.6% from 28.2% in
the third quarter of 2000, and to 29.3% from 28.5% for the year to date period
primarily as a result of an increase in operating expense associated with the
company diversifying its book of business and repositioning itself as a complete
commercial lines carrier. In addition, during the fourth quarter of 2000,
Association Casualty began recognizing written premiums on an annualized basis
instead of using the installment method thus increasing commissions and premium
taxes in conjunction with written premiums.
Georgia Casualty
The following is a summary of Georgia Casualty's premiums for the third quarter
and first nine months of 2001 and the comparable periods in 2000 (in thousands):
<table>
<caption>
Three months ended Nine months ended
September 30, September 30,
-------------------------- ---------------------------
2001 2000 2001 2000
------------- ------------ ------------- -------------
Gross written premiums $ 9,178 $ 6,407 $ 29,793 $ 27,030
Ceded premiums (3,523) (1,021) (11,506) (2,860)
------------- ------------ ------------- -------------
Net written premiums $ 5,655 $ 5,386 $ 18,287 $ 24,170
============= ============ ============= =============
Net earned premiums $ 6,380 $ 7,573 $ 19,263 $ 21,362
============= ============ ============= =============
</table>
Gross written premiums at Georgia Casualty increased $2.8 million or 43.2%
during the third quarter of 2001 and $2.8 million or 10.2% for the first nine
months of 2001. The increase in premiums for the quarter and year to date
periods is mostly attributable to significant rate increases, new business with
established agents in addition to the added premiums provided by new agency
appointments.
The increase in ceded premiums is the result of a 40% quota share reinsurance
agreement that the company put into place in the first quarter of 2001 to allow
for premium growth and surplus protection.
The following is Georgia Casualty's earned premium by line of business for the
third quarter and first nine months of 2001 and the comparable periods in 2000
(in thousands):
<table>
<caption>
Three months ended Nine months ended
September 30, September 30,
-------------------------- ---------------------------
2001 2000 2001 2000
------------- ------------ ------------- -------------
Workers' compensation $ 2,456 $ 4,281 $ 8,227 $ 12,766
General Liability 899 687 2,188 1,926
Commercial multi-peril 1,664 1,231 4,829 3,079
Commercial automobile 1,361 1,374 4,019 3,591
------------- ------------ ------------- -------------
$ 6,380 $ 7,573 $19,263 $ 21,362
============= ============ ============= =============
</table>
Net earned premiums declined $1.2 million or 15.8% during the quarter and $2.1
million or 9.8% in the first nine months of 2001 primarily due to the quota
share reinsurance agreement discussed previously. As presented in the table
above, Georgia Casualty continues to diversify its book of business into
commercial lines other than workers' compensation, repositioning the company as
a one-stop commercial lines carrier. Furthermore, the company is spreading its
geographical exposure by reducing its concentration in Georgia and expanding in
its other key southeastern states.
-13-
The following is Georgia Casualty's loss and expense ratios for the third
quarter and first nine months of 2001 and the comparable periods in 2000:
<table>
<caption>
Three months ended Nine months ended
September 30, September 30,
-------------------------- ---------------------------
2001 2000 2001 2000
------------- ------------ ------------- -------------
Loss ratio 65.9% 76.5% 67.2% 72.5%
Expense ratio 35.9% 40.0% 35.8% 37.8%
------------- ------------ ------------- -------------
Combined ratio 101.8% 116.5% 103.0% 110.3%
============= ============ ============= =============
</table>
The loss ratio declined to 65.9% in the third quarter of 2001 from 76.5% in the
third quarter of 2000 and from 72.5% for the first nine months of 2000 to 67.2%
for the comparable period in 2001. The primary reason for the decline is
attributable to the company's strict adherence to underwriting discipline and
premium rate increases. Also, the mix of business that Georgia Casualty
underwrites has changed from one of higher hazards (e.g., logging and
habitational contractors) to low and moderate hazards (e.g., retail and light
manufacturing).
The expense ratio declined to 35.9% in the third quarter of 2001 from 40.0% in
the third quarter of 2000 and from 37.8% for the first nine months of 2000 to
35.8% for the comparable period in 2001 primarily as a result of the ceding
commission the company is receiving from the quota share contract put into place
during the first quarter of 2001.
Bankers Fidelity
The following summarizes Bankers Fidelity's premiums for the third quarter and
first nine months of 2001 and the comparable periods in 2000 (in thousands):
<table>
<caption>
Three months ended Nine months ended
September 30, September 30,
-------------------------- ---------------------------
2001 2000 2001 2000
------------- ------------ ------------- -------------
Medicare supplement $ 9,650 $ 8,006 $ 28,155 $ 22,998
Other health 736 693 2,181 2,209
Life 3,667 3,415 10,713 10,138
------------- ------------ ------------- -------------
Total $ 14,053 $ 12,114 $ 41,049 $ 35,345
============= ============ ============= =============
</table>
Premium revenue at Bankers Fidelity increased $1.9 million or 16.0% during the
third quarter of 2001 and $5.7 million or 16.1% for the year to date period. The
most significant increase in premium arose in the Medicare supplement line of
business, which increased 20.5% for the quarter and 22.4% for the year. Bankers
Fidelity has continued to expand its market presence throughout the Southeast,
Mid-Atlantic Region, especially in Pennsylvania, and in the Western Region.
During the third quarter of 2001 and the first nine months of 2001, the company
added additional Medicare supplemental premium for Pennsylvania of approximately
$0.8 million and $2.7 million, respectively, as compared to the same periods in
2000. In addition, during 2000 and 2001 Bankers Fidelity implemented rate
increases on the Medicare supplemental product, in some cases up to 30%, which
are reflected in the current year increases for premium revenues.
-14-
The following summarizes Bankers Fidelity's operating expenses for the third
quarter and first nine months of 2001 and the comparable periods in 2000 (in
thousands):
<table>
<caption>
Three months ended Nine months ended
September 30, September 30,
-------------------------- ---------------------------
2001 2000 2001 2000
------------- ------------ ------------- -------------
Benefits and losses $ 9,962 $ 8,273 $ 29,966 $ 25,181
Commission and other
expenses 4,536 3,741 12,690 11,476
------------- ------------ ------------- -------------
Total expenses $ 14,498 $ 12,014 $ 42,656 $ 36,657
============= ============ ============= =============
</table>
The increase in both "benefits and losses" and "commission and other expenses"
is primarily attributable to the increase in new business. Benefits and losses
are up 20.4% for the quarter and 19.0% for the year. As a percentage of
premiums, benefits and losses were 70.9% for the quarter and 73.0% for the year
compared to 68.3% in the third quarter of 2000 and 71.2% for the first nine
months of 2000. The increase is primarily attributable to continued aging of the
life business and higher medical trends than expected for the health business.
Additionally, the company continues to implement rate increases on the Medicare
supplement line of business to mitigate the impact of higher medical costs.
The company has been successful in keeping operating costs lower, while
continuing to add new business. As a percentage of premiums, these expenses were
32.3% for the quarter and 30.9% for the year compared to 30.9% in the third
quarter of 2000 and 32.5% for the first nine months of 2000.
INVESTMENT INCOME AND REALIZED GAINS
- ------------------------------------
Investment income for the quarter decreased slightly over the first quarter of
2000. The decrease is primarily due to the decline in interest rates. Falling
interest rates have caused higher yielding fixed income securities to be called
and reinvested at a lower yield. Investment income for the year decreased $0.3
million or 2.4% over the comparable period in 2000. During the first quarter of
2000, the Company benefited from a significant gain in a real estate
partnership. The investment, which is accounted for under the equity method,
sold several pieces of property resulting in income of approximately $ 0.4
million. This real estate gain was non-recurring and is the primary cause for
the year to date decline in investment income.
The Company recognized a $0.3 million realized gain for the third quarter of
2001 and $1.5 million for the first nine months of 2001. Management continually
evaluates the Company's investment portfolio and when opportunities arise will
divest appreciated investments.
INTEREST EXPENSE
- ----------------
Interest expense for the third quarter and first nine months of 2001 decreased
slightly compared to the same periods in 2000. In conjunction with the
acquisition of Association Casualty in 1999, the Company entered into a $30.0
million revolving credit facility with Wachovia Bank, N.A. During 2000, and in
the first nine months of 2001, the Company paid down $7.0 million on the
revolver, leaving $19.0 million outstanding under the facility. This debt,
coupled with the $25 million variable rate demand bonds issued during the second
quarter of 1999, the proceeds of which were used to pay down the Company's prior
credit facility, bring the total debt at September 30, 2001 to $44.0 million,
down from $50.0 million in the first quarter of 2000. In addition, the base
interest rate, LIBOR, decreased over the prior quarter and year to date period.
The interest rate on a portion of the revolver and the bonds is variable and is
tied to 30-day LIBOR. The reduction in debt along with decreasing interest rates
accounts for the quarter and year to date decrease. On March 21, 2001, the
Company entered into an interest rate swap agreement for a notional principal
amount of $15.0 million with Wachovia to hedge its interest rate risk on a
portion of the outstanding borrowings under the revolving credit facility. The
interest rate swap was effective on April 2, 2001 and matures on June 30, 2004.
The Company has agreed to pay a fixed rate of 5.1% and receive 3-month LIBOR
until maturity.
-15-
OTHER EXPENSES AND TAXES
- ------------------------
Other expenses (commissions, underwriting expenses, and other expenses)
increased $1.7 million or 15.4% for the quarter and $2.7 million or 8.1% for the
year. The increase in other expenses for the third quarter of 2001 and the first
nine months of 2001 is the result of several factors. First, during the fourth
quarter of 2000, Association Casualty began recognizing written premiums on an
annualized basis instead of using the installment method thus increasing
commissions and premium taxes in conjunction with written premiums. Association
Casualty is also experiencing an increase in overall operating expenses as the
company diversifies into commercial lines of business other than workers
compensation. In addition, Bankers Fidelity's commissions have increased
significantly as a result of additional new business. Lastly, during the third
quarter of 2000, the bad debt reserve was reduced by $0.5 million due to
improvements as to the collectibility of certain receivables. Partially
offsetting this increase in other expense was a significant reduction in
commission expense American Southern pays on one of its larger accounts in
addition to the ceding commission Georgia Casualty is receiving from the quota
share contract. On a consolidated basis, as a percentage of earned premiums,
other expenses increased to 35.8% in the third quarter of 2001 from 32.5% in the
third quarter of 2000. For the year to date period, this ratio was 33.5% in 2001
and 33.7% in 2000.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The major cash needs of the Company are for the payment of claims and expenses
as they come due and the maintenance of adequate statutory capital and surplus
to satisfy state regulatory requirements and meet debt service requirements of
the Company. The Company's primary source of cash is written premiums and
investment income. Cash payments consist of current claim payments to insureds
and operating expenses such as salaries, employee benefits, commissions, taxes,
and shareholder dividends from the subsidiaries, when earnings warrant such
dividend payments. By statute, the state regulatory authorities establish
minimum liquidity standards primarily to protect policyholders.
The Company's insurance subsidiaries reported a combined statutory income of
$5.3 million for the first nine months of 2001 compared to statutory net income
of $3.5 million for the first nine months of 2000. The reasons for the increase
in statutory earnings in the first nine months of 2001 are the same as those
discussed in "Results of Operations" above. Statutory results are further
impacted by the recognition of 100% of the costs of acquiring business. In a
growth environment this can cause statutory results to appear deflated.
Statutory results differ from the results of operations under generally accepted
accounting principles ("GAAP") for the Casualty Division due to the deferral of
acquisition costs. The Life and Health Division's statutory results differ from
GAAP primarily due to deferral of acquisition costs, as well as different
reserving methods.
The Company has two series of preferred stock outstanding, substantially all of
which is held by affiliates of the Company's chairman and principal
shareholders. The outstanding shares of Series B Preferred Stock ("Series B
Stock") have a stated value of $100 per share, accrue annual dividends at a rate
of $9.00 per share and are cumulative, in certain circumstances may be
convertible into an aggregate of approximately 3,358,000 shares of common stock,
and are redeemable at the Company's option. The Series B Stock is not currently
convertible. At September 30, 2001, the Company had accrued, but unpaid,
dividends on the Series B Stock totaling $6.9 million. The outstanding shares of
Series C Preferred Stock ("Series C Stock") have a stated value of $100 per
share, accrue annual dividends at a rate of $9.00 per share and are cumulative,
in certain circumstances may be convertible into an aggregate of approximately
627,000 shares of common stock, and are redeemable at the Company's option. The
Series C Stock is not currently convertible. At September 30, 2001, the Company
had accrued, but unpaid, dividends on the Series C Stock totaling $0.2 million.
The Company is a party to a five-year revolving credit facility with Wachovia
Bank, N.A. ("Wachovia"), that provides for borrowings up to $30.0 million. The
interest rate on the borrowings under the facility is based upon the London
Interbank Offered Rate ("LIBOR") plus an applicable margin, 2.50% at September
30, 2001. Beginning March 31, 2003, and each quarter thereafter, the commitment
on the revolving credit facility shall be permanently reduced in an amount equal
to $1.0 million. The credit facility provides for the payment of all of the
outstanding principal balance at June 30, 2004 with no required principal
payments prior to that time except to the extent that the loans exceed the
amount of the commitment after giving effect to each quarterly reduction.
The Company also has outstanding $25.0 million of Series 1999, Variable Rate
Demand Bonds (the "Bonds") due July 1, 2009. The Bonds, which are redeemable at
the Company's option, pay a variable interest rate that approximates 30-day
LIBOR. The Bonds are backed by a letter of credit issued by Wachovia, which is
automatically renewable on a monthly basis until thirteen months after such time
as Wachovia gives the Company notice that it is exercising its option not to
renew the letter of credit. The Bonds are subject to mandatory redemption upon
termination of the letter of credit, if an alternative letter of credit facility
is not secured. The Company expects that it would be able to replace the letter
of credit within the prescribed period if Wachovia should give notice of its
intention not to renew the existing facility.
-16-
The cost of the letter of credit and its associated fees are 2.50%, making the
effective rate on the Bonds LIBOR plus 2.50% at September 30, 2001. The interest
on the Bonds is payable monthly and the letter of credit fees are payable
quarterly. The Bonds do not require the repayment of any principal prior to
maturity, except as provided above.
The Company is required, under both instruments, to maintain certain covenants
including, among others, ratios that relate funded debt to total capitalization,
funded debt to earnings before interest, taxes, depreciation and amortization
("EBITDA"), and interest coverage to interest. The Company is in compliance with
all debt covenants at September 30, 2001 and expects to remain in compliance for
the remainder of 2001.
The Company provides certain administrative and other services to each of its
insurance subsidiaries. The amounts charged to and paid by the subsidiaries in
the third quarter of 2001 increased over the third quarter of 2000. In addition,
the Company has a formal tax-sharing agreement between the Company and its
insurance subsidiaries. It is anticipated that this agreement will provide the
Company with additional funds from profitable subsidiaries due to the
subsidiaries' use of the Company's tax loss carryforwards, which totaled
approximately $29 million at September 30, 2001.
Over 90% of the investment assets of the insurance subsidiaries are in
marketable securities that can be converted into cash, if required; however, use
of such assets by the Company is limited by state insurance regulations.
Dividend payments to the Company by its insurance subsidiaries are subject to
annual limitations and are restricted to the greater of 10% of statutory surplus
or statutory earnings before recognizing realized investment gains of the
individual insurance subsidiaries. At September 30, 2001, Georgia Casualty had
$15.1 million statutory surplus, American Southern had $31.3 million of
statutory surplus, Association Casualty had $14.9 million of statutory surplus,
and Bankers Fidelity had $22.2 million of statutory surplus.
Net cash provided by operating activities was $6.1 million in the first nine
months of 2001 compared to net cash provided by operating activities of $9.9
million in the first nine months of 2000. Cash and short-term investments
increased from $31.9 million at December 31, 2000, to $60.6 million at September
30, 2001, mainly due to a decrease in longer-term investments. The decline in
interest rates has resulted in the call of higher yield fixed income securities.
Total investments (excluding short-term investments) decreased to $192.8 million
due to the shift from long-term investments to cash for the same reasons
discussed previously.
The Company believes that the dividends, fees, and tax-sharing payments it
receives from its subsidiaries and, if needed, borrowings from banks 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
- ---------------------------------------------------------------------
Due to the nature of the Company's business it is exposed to both interest rate
and market risk. Changes in interest rates, which represent the largest factor
affecting the Company, may result in changes in the fair market value of the
Company's investments, cash flows and interest income and expense. The Company
is also subject to risk from changes in equity prices.
On March 21, 2001, the Company entered into an interest rate swap agreement for
a notional principal amount of $15.0 million with Wachovia to hedge its interest
rate risk on a portion of the outstanding borrowings under the revolving credit
facility. The interest rate swap was effective on April 2, 2001 and matures on
June 30, 2004. The Company has agreed to pay a fixed rate of 5.1% and receive
3-month LIBOR until maturity. The settlement date and the reset date will occur
every 90 days following April 2, 2001 until maturity. With the exception of the
interest rate swap agreement discussed above, there were no material changes to
the Company's market risks since December 31, 2000.
FORWARD-LOOKING STATEMENTS
This report contains and references certain information that constitutes
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Those statements, to the extent they are not
historical facts, should be considered forward-looking and subject to various
risks and uncertainties. Such forward-looking statements are made based upon
management's assessments of various risks and uncertainties, as well as
assumptions made in accordance with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. The Company's actual results could
differ materially from the results anticipated in these forward-looking
statements as a result of such risks and uncertainties, including those
identified in the Company's Annual Report on Form 10-K for the fiscal year
ending December 31, 2000 and the other filings made by the Company from time to
time with the Securities and Exchange Commission.
-17-
PART II. OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K
- ----------------------------------------
(a) No reports on Form 8-K were filed with the Securities and Exchange
Commission during the third quarter of 2001.
-18-
SIGNATURE
---------
Pursuant to the requirements 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)
Date: November 8, 2001 By: /s/
----------------- -----------------------------------
Robert A. Renaud
Vice President and CFO
(Principal Financial and Accounting Officer)
-19-