1
- --------------------------------------------------------------------------------


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   -----------

                                    FORM 10-Q

                                   -----------

             [X] Quarterly Report pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

                                       OR

             [ ] Transition report pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                                   -----------

                          Commission File Number 0-3722


                          ATLANTIC AMERICAN CORPORATION
            Incorporated pursuant to the laws of the State of Georgia

                                   -----------

             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 May 11, 2001, was 21,185,987


- --------------------------------------------------------------------------------
   2

                          ATLANTIC AMERICAN CORPORATION

                                      INDEX



                                                                               Page No.
                                                                               --------
                                                                            
Part 1.  Financial Information

Item 1.  Financial Statements:

         Consolidated Balance Sheets -
         March 31, 2001 and December 31, 2000                                       2

         Consolidated Statements of Operations -
         Three months ended March 31, 2001 and 2000                                 3

         Consolidated Statements of Shareholders' Equity -
         Three months ended March 31, 2001 and 2000                                 4

         Consolidated Statements of Cash Flows -
         Three months ended March 31, 2001 and 2000                                 5

         Notes to Consolidated Financial Statements                                 6

Item 2.  Management's Discussion and Analysis of  Financial Condition
         and Results of Operations                                                  9

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                16

Part II. Other Information

Item 6.  Exhibits and reports on Form 8-K                                          17

Signature                                                                          18


   3

                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

                 ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS




                                                      ASSETS

(Unaudited; In thousands, except share and  per share data)

                                                                                          March 31,       December 31,
                                                                                            2001             2000
                                                                                       -------------------------------
                                                                                                    
Cash, including short-term investments of $5,238 and $15,013                              $ 22,971          $ 31,914
                                                                                          --------------------------
Investments:
   Bonds (cost: $173,722 and $160,574)                                                     174,372           159,404
   Common and preferred stocks (cost: $30,109 and $32,109)                                  44,169            43,945
   Other invested assets (cost: $5,986 and $6,036)                                           5,860             5,862
   Mortgage loans                                                                            3,528             3,538
   Policy and student loans                                                                  2,892             3,098
   Real estate                                                                                  46                46
                                                                                          --------------------------
      Total investments                                                                    230,867           215,893
                                                                                          --------------------------
Receivables:
   Reinsurance                                                                              43,127            39,088
   Other (net of allowance for bad debts: $1,411 and $1,269)                                32,328            37,261
Deferred income taxes, net                                                                   1,829             3,839
Deferred acquisition costs                                                                  23,154            23,398
Other assets                                                                                 7,023             4,886
Goodwill                                                                                    19,339            19,498
                                                                                          --------------------------
      Total assets                                                                        $380,638          $375,777
                                                                                          ==========================

                                          LIABILITIES AND SHAREHOLDERS' EQUITY

 Insurance reserves and policy funds:
    Future policy benefits                                                                $ 42,561          $ 42,106
    Unearned premiums                                                                       42,071            45,421
    Losses and claims                                                                      136,021           133,220
    Other policy liabilities                                                                 4,301             4,417
                                                                                          --------------------------
       Total policy liabilities                                                            224,954           225,164
 Accounts payable and accrued expenses                                                      22,652            20,873
 Debt payable                                                                               46,500            46,500
                                                                                          --------------------------
        Total liabilities                                                                  294,106           292,537
                                                                                          --------------------------
Commitments and contingencies (Note 7)
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 21,171,008 outstanding in 2001 and
      21,157,250 shares outstanding in 2000                                                 21,412            21,412
    Additional paid-in capital                                                              56,650            56,997
    Accumulated deficit                                                                       (302)           (1,248)
    Accumulated other comprehensive income                                                   9,445             6,820
    Treasury stock, at cost, 241,130 shares in 2001 and 254,888 shares in 2000                (832)             (900)
                                                                                          --------------------------
         Total shareholders' equity                                                         86,532            83,240
                                                                                          --------------------------
                 Total liabilities and shareholders' equity                               $380,638          $375,777
                                                                                          ==========================


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


                                       -2-
   4

                 ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                 Three Months Ended
                                                                      March 31,
                                                            ---------------------------

(Unaudited; In thousands, except per share data)              2001                2000
                                                            --------           --------
                                                                         
Revenue:
  Insurance premiums                                        $ 35,850           $ 31,879
  Investment income                                            3,768              3,974
  Realized investment gains, net                                 154                547
  Other income                                                   449                463
                                                            ---------------------------
      Total revenue                                           40,221             36,863
                                                            ---------------------------

Benefits and expenses:
  Insurance benefits and losses incurred                      25,552             22,877
  Commissions and underwriting expenses                        9,443              8,952
  Interest expense                                               954                992
  Other                                                        2,673              2,316
                                                            ---------------------------
      Total benefits and expenses                             38,622             35,137
                                                            ---------------------------

Income before income tax expense                               1,599              1,726
Income tax expense                                               609                574
                                                            ---------------------------

Net income before preferred stock dividends                      990              1,152
Preferred stock dividends                                       (358)              (302)
                                                            ---------------------------

Net income applicable to common stock                       $    632           $    850
                                                            ===========================
Net income per common share (basic and diluted)             $    .03           $    .04
                                                            ===========================


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


                                       -3-
   5

                          ATLANTIC AMERICAN CORPORATION
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                        (Unaudited; Amounts in thousands)



                                                                                                 Accumulated
                                                                     Additional                    other
                                                Preferred   Common     Paid-in    Accumulated   Comprehensive  Treasury
                                                  Stock     Stock      Capital     Deficit         Income        Stock     Total
                                                ---------  --------   ----------  -----------   -------------  --------  --------
                                                                                                    
Three Months Ended March 31, 2001

Balance, December 31, 2000                        $ 159    $ 21,412    $ 56,997    $ (1,248)         $ 6,820   $  (900)  $ 83,240
Comprehensive income:
 Net income                                                                             990                                   990
 Increase in unrealized investment gains                                                               4,091                4,091
 Deferred income tax attributable to other
 comprehensive income                                                                                 (1,432)              (1,432)
 Fair value adjustment to interest rate swap                                                             (34)                 (34)
                                                                                                                         --------
Total comprehensive income                                                                                                  3,615
                                                                                                                         --------
Dividends accrued on preferred stock                                       (358)                                             (358)
Compensation expense related to stock grants                                 11                                                11
Purchase of shares for treasury                                                                                     (3)        (3)
Issuance of shares for employee benefit plans
 and stock options                                                                      (44)                        71         27
                                                  -----    --------    --------    --------          -------   -------   --------

Balance, March 31, 2001                           $ 159    $ 21,412    $ 56,650    $   (302)         $ 9,445   $  (832)  $ 86,532
                                                  =====    ========    ========    ========          =======   =======   ========


Three Months Ended March 31, 2000
                                                                                                    
Balance, December 31, 1999                        $ 134    $ 21,412    $ 55,677    $ (4,558)         $ 7,836   $(1,553)  $ 78,948

Comprehensive loss:
 Net income                                                                           1,152                                 1,152
 Decrease in unrealized investment gains                                                              (4,842)              (4,842)
 Deferred income tax benefit attributable
 to other comprehensive loss                                                                           1,695                1,695
                                                                                                                         --------
Total comprehensive loss                                                                                                   (1,995)
                                                                                                                         --------

Dividends accrued on preferred stock                                       (302)                                             (302)
Purchase of shares for treasury                                                                                    (60)       (60)
Issuance of shares for employee benefit plans
 and stock options                                                                      (46)                        97         51
                                                  -----    --------    --------    --------          -------   -------   --------

Balance, March 31, 2000                           $ 134    $ 21,412    $ 55,375    $ (3,452)         $ 4,689   $(1,516)  $ 76,642
                                                  =====    ========    ========    ========          =======   =======   ========


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


                                       -4-
   6

                 ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                                Three Months Ended
                                                                                    March 31,
                                                                           -----------------------------
                                                                              2001                2000
                                                                           -----------------------------
(Unaudited; In thousands)
                                                                                         
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                              $     990           $   1,152
   Adjustments to reconcile net income to net cash
      provided by operating activities:
      Amortization of deferred acquisition costs                               4,712               2,119
      Acquisition costs deferred                                              (4,468)             (3,185)
      Realized investment gains                                                 (154)               (547)
      (Decrease) increase in insurance reserves                                 (210)              4,875
      Compensation expense related to stock grants                                11                  --
      Depreciation and amortization                                              409                 451
      Deferred income tax expense                                                578                 567
      Decrease (increase) in receivables, net                                    894              (3,086)
      Increase in other liabilities                                            1,387                 355
      Other, net                                                              (3,143)               (496)
                                                                           -----------------------------
         Net cash provided by operating activities                             1,006               2,205
                                                                           -----------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from investments sold or matured                                  16,885               2,841
   Investments purchased                                                     (27,306)            (15,450)
   Additions to property and equipment                                          (262)               (108)
   Acquisition of Association Casualty                                           (40)                (80)
                                                                           -----------------------------
       Net cash used by investing activities                                 (10,723)            (12,797)
                                                                           -----------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from exercise of stock options                                        27                  51
   Purchase of treasury shares                                                    (3)                (60)
   Proceeds from the issuance of Series C Preferred Stock                        750                  --
   Repayments of debt                                                             --              (1,000)
                                                                           -----------------------------
       Net cash provided (used) by financing activities                          774              (1,009)
                                                                           -----------------------------

Net decrease in cash and cash equivalents                                     (8,943)            (11,601)
Cash and cash equivalents at beginning of period                              31,914              34,306
                                                                           -----------------------------
Cash and cash equivalents at end of period                                 $  22,971           $  22,705
                                                                           =============================

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest                                                     $   1,263           $   1,015
                                                                           =============================
Cash paid for income taxes                                                 $      --           $      --
                                                                           =============================


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


                                       -5-
   7

                 ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 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
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 2001, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001.

NOTE 2.  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 ended March 31, 2001 and 2000.

         REVENUES



                                                   Three Months Ended
                                                        March 31,
                                             -----------------------------
                                                2001                2000
                                             -----------------------------
                                                           
American Southern                            $  11,296           $  10,950
Association Casualty                             6,840               5,127
Georgia Casualty                                 7,111               7,223
Bankers Fidelity                                14,645              13,244
Corporate and Other                              1,850               2,005
Adjustments and eliminations                    (1,521)             (1,686)
                                             -----------------------------

Consolidated results                         $  40,221           $  36,863
==========================================================================


         INCOME (LOSS) BEFORE INCOME TAX
                    PROVISION



                                                Three Months Ended
                                                     March 31,
                                             -------------------------
                                              2001               2000
                                             -------------------------
                                                         
American Southern                            $ 1,290           $ 1,559
Association Casualty                             245              (175)
Georgia Casualty                                 636               444
Bankers Fidelity                                 831             1,060
Corporate and Other                           (1,403)           (1,162)
                                             -------------------------

Consolidated results                         $ 1,599           $ 1,726
======================================================================



                                       -6-
   8

NOTE 3.  Credit Arrangements

The Company is a party to a five-year revolving credit facility 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 March 31, 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 Bank, N.A.
("Wachovia"), which is automatically renewable on a monthly basis until thirteen
months after such time as Wachovia gives the Company notice of 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 March 31, 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 March 31, 2001 and expects to remain in compliance for the
remainder of 2001.

NOTE 4.  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 is
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. 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 March 31, 2001, as
follows:



                               -----------------------------------------
                                                              Carrying
                               Notional         Fair           Value
                                Amount          Value        (Liability)
                               -----------------------------------------
                                                    
Interest rate swap agreement   $15,000          $(34)           $(34)


NOTE 5.  Reconciliation of Other Comprehensive Income (Loss)



                                                                                                            March 31,
                                                                                                    -------------------------
                                                                                                      2001             2000
                                                                                                    -------------------------
                                                                                                                
Gain on sale of securities included in net income                                                   $   154           $   547
                                                                                                    =========================
Other comprehensive income (loss):
     Net pre-tax unrealized gain (loss) arising during year                                         $ 4,245           $(4,295)
     Reclassification adjustment                                                                       (154)             (547)
                                                                                                    -------------------------
     Net pre-tax unrealized gain (loss) recognized in other comprehensive income (loss)               4,091            (4,842)
     Fair value adjustment to interest rate swap                                                        (34)               --
     Deferred income tax attributable to other comprehensive income (loss)                           (1,432)            1,695
                                                                                                    -------------------------
Other comprehensive income (loss)                                                                   $ 2,625           $(3,147)
                                                                                                    =========================



                                       -7-
   9

NOTE 6.  Earnings per common share

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



                                                               Three Months Ended
                                                                    March 31,
                                                            -------------------------
(In thousands, except per share data)                         2001             2000
                                                            -------------------------
                                                                        
Basic Earnings Per Common Share
     Net income                                             $   990           $ 1,152
     Less preferred stock dividends                            (358)             (302)
                                                            -------------------------
     Net income applicable to common
     shareholders                                           $   632           $   850
                                                            =========================

     Weighted average common shares outstanding              21,164            21,012
                                                            =========================

     Net income per common share                            $   .03           $   .04
                                                            =========================

Diluted Earnings Per Common Share:
     Net income applicable to common
     shareholders                                           $   632           $   850
                                                            =========================

     Weighted average common shares outstanding              21,164            21,012

Effect of dilutive stock options                                 --                21
                                                            -------------------------
     Weighted average common shares outstanding
     adjusted for dilutive stock options                     21,164            21,033
                                                            =========================

     Net income per common share                            $   .03           $   .04
                                                            =========================


Outstanding stock options of 753,000 for the three months ended March 31, 2001
were excluded from the earnings per common share calculation since their impact
was antidilutive. Outstanding stock options of 811,000 for the quarter ended
March 31, 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 7.  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
is to remain in effect pending appeal. While management believes that the effect
of an adverse outcome on this case would not materially affect the current
financial position of the Company, 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 8.  Prior year Reclassifications

Certain reclassifications have been made to the 2000 balances to conform with
the 2001 presentation.


                                       -8-
   10

                                     ITEM 2.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


OVERALL CORPORATE RESULTS

On a consolidated basis, the Company earned $1.0 million, or $0.03 per diluted
share, during the first quarter of 2001 compared to net income of $1.2 million,
or $0.04 per diluted share, during the first quarter of 2000. Pre-tax income
before realized gains increased to $1.5 million during the first quarter of 2001
from $1.2 million for the comparable period in 2000. The improved operating
performance is attributable to better underwriting results in Georgia Casualty
and Association Casualty. Premium revenue for the quarter increased 12.5% or
$4.0 million and is primarily due to rate increases on renewal business.

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 first quarter
of 2001 and the comparable period in 2000 (in thousands):



                                       Three months ended
                                            March 31,
                                   ---------------------------
                                     2001               2000
                                   --------           --------
                                                
Gross written premiums             $  5,549           $  9,272
Ceded premiums                       (1,162)            (1,318)
                                   --------           --------

Net written premiums               $  4,387           $  7,954
                                   ========           ========

Net earned premiums                $ 10,062           $  9,678
                                   ========           ========


Gross written premiums at American Southern decreased 40.1% or $3.7 million for
the quarter. In April of 2000, the company began recognizing written premiums
produced by its joint venture with the AAA of Carolinas Motor Club on an annual
basis instead of on a semiannual basis as was done in the previous year and is
primarily attributable to the quarter to quarter decrease in written premiums.
In addition, 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 is to remain in effect pending appeal. As a conservative measure,
American Southern is recognizing this premium on a monthly basis until the
appeal is settled rather than recognizing the annual premium and offsetting this
with unearned premium. This contract, when renewed, was done so at a lower rate
than in the previous year, contributing to the decline in written premiums.

Net earned premiums for the quarter increased slightly to $384,000 or 4% over
the first quarter of 2000.


                                       -9-
   11

The following is American Southern's earned premium by line of business for the
first quarter of 2001 and the comparable period in 2000 (in thousands):



                                       Three months ended
                                            March 31,
                                   ------------------------
                                    2001              2000
                                   -------          -------
                                              
Commercial automobile              $ 7,802          $ 6,906
Private passenger auto                 692              819
General liability                      760              964
Property                               795              976
Other                                   13               13
                                   -------          -------

                                   $10,062          $ 9,678
                                   =======          =======


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.

The following is the loss and expense ratios of American Southern for the first
quarter of 2001 and for the comparable periods in 2000:



                                         Three months ended
                                              March 31,
                                       -----------------------
                                       2001               2000
                                       ----               ----
                                                    
Loss ratio                             71.1%              64.3%
Expense ratio*                         27.9%              32.4%
                                       ----               ----
Combined ratio                         99.0%              96.7%
                                       ====               ====


*  Excludes the amortization of goodwill associated with the acquisition of
   American Southern.

The loss ratio for the first quarter of 2001 was 71.1% compared to 64.3% in the
first quarter of 2000. American Southern was impacted by an abnormally high
occurrence of automobile claims during the first quarter. The decline 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.


                                      -10-
   12

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 first quarter of 2001 and the comparable quarter in 2000.

The following is a summary of Association Casualty's premiums for the first
quarter of 2001 and the comparable quarter in 2000 (in thousands):



                                        Three months ended
                                             March 31,
                                   ----------------------------
                                     2001               2000
                                   --------           --------
                                                
Gross written premiums             $ 10,481           $  5,005
Ceded premiums                         (953)              (353)
                                   --------           --------

Net written premiums               $  9,528           $  4,652
                                   ========           ========

Net earned premiums                $  6,056           $  4,368
                                   ========           ========


Gross written premiums for the first quarter of 2001 increased 109.4% or $5.5
million over the comparable period in 2000. 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. 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. While
Association Casualty currently writes predominately workers' compensation
insurance in the state of Texas (94% 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
first quarter of 2001 and the comparable period in 2000:



                                      Three months ended
                                           March 31,
                                   -----------------------
                                    2001             2000
                                   ------           ------
                                              
Loss ratio                           74.2%            89.2%
Expense ratio*                       29.6%            29.8%
                                   ------           ------

Combined ratio                      103.8%           119.0%
                                   ======           ======


*  Excludes the amortization of goodwill and interest on an intercompany surplus
   note associated with the acquisition of Association Casualty.

The loss ratio declined to 74.2% in the first quarter of 2001 from 89.2% in the
first quarter of 2000. The primary reason for the decline can be attributable to
the benefits of the premium rate increases that began during the second half of
2000. 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. Loss control efforts are directed toward reducing the frequency of
claims.

The expense ratio in the first quarter of 2001 declined slightly to 29.6% from
29.8% in the first quarter of 2000 primarily as a result of the increase in
earned premiums and only a moderate increase in fixed expenses.


                                      -11-
   13

GEORGIA CASUALTY

The following is a summary of Georgia Casualty's premiums for the first quarter
of 2001 and the comparable period in 2000 (in thousands):



                                       Three months ended
                                             March 31,
                                   ---------------------------
                                     2001               2000
                                   --------           --------
                                                
Gross written premiums             $  9,432           $ 11,021
Ceded premiums                       (3,886)              (818)
                                   --------           --------

Net written premiums               $  5,546           $ 10,203
                                   ========           ========

Net earned premiums                $  6,373           $  6,425
                                   ========           ========


Gross written premiums at Georgia Casualty decreased $1.6 million or 14.4%
during the first quarter of 2001 as compared to the same period in 2000. The
decrease in premiums for the quarter is the result of several factors. First,
approximately $1.2 million of written premiums related to 1999 were recorded in
the first quarter of 2000. The impact to earned premiums was not significant. In
addition, the company began recognizing one of its larger accounts on a direct
bill basis as opposed to one installment as was done in the previous year.
Excluding the impact of these events, written premiums increased 4.8% over the
first quarter in 2000 primarily as a result of the premium rate increases on its
new and renewal business.

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
continue its premium growth and protect its surplus.

The following is Georgia Casualty's earned premium by line of business for the
first quarter of 2001 and the comparable period in 2000 (in thousands):



                                       Three months ended
                                           March 31,
                                   --------------------------
                                     2001               2000
                                   -------            -------
                                                
Workers' compensation              $ 2,910            $ 4,031
General Liability                      664              1,008
Commercial multi-peril               1,517                576
Commercial automobile                1,282                810
                                   -------            -------
                                   $ 6,373            $ 6,425
                                   =======            =======


Net earned premiums declined slightly during the quarter primarily due to the
factors 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.


                                      -12-
   14

The following is Georgia Casualty's loss and expense ratios for the first
quarter of 2001 and the comparable period in 2000:



                                     Three months ended
                                         March 31,
                                   ---------------------
                                    2001            2000
                                   -----           -----
                                             
Loss ratio                          67.4%           68.7%
Expense ratio                       34.2%           36.8%
                                   -----           -----

Combined ratio                     101.6%          105.5%
                                   =====           =====


The loss ratio declined to 67.4% in the first quarter of 2001 from 68.7% in the
first quarter of 2000. 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 for the quarter declined to 34.2% from 36.8% 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 first quarter of
2001 and the comparable period in 2000 (in thousands):



                                       Three months ended
                                            March 31,
                                   ---------------------------
                                     2001               2000
                                   --------           --------
                                                
Medicare supplement                $  9,185           $  7,394
Other health                            718                765
Life                                  3,455              3,249
                                   --------           --------

Total all lines                    $ 13,358           $ 11,408
                                   ========           ========


Premium revenue at Bankers Fidelity increased $2.0 million or 17.1% during the
first quarter of 2001. The most significant increase in premium arose in the
Medicare supplement line of business, which increased 24.2% for the quarter.
Bankers Fidelity has continued to expand its market presence throughout the
Southeast and Mid Atlantic Region, especially in Pennsylvania. During the first
quarter of 2001, the company added additional Medicare premiums in Pennsylvania
of approximately $0.9 million as compared to the same period in 2000. In
addition, during 2000 Bankers Fidelity implemented rate increases on this
product, in some cases up to 30%, which are reflected in the current quarter
increases for premium revenues. Bankers Fidelity is also continuing to see
increased sales of its life products. The major marketing effort at Bankers
Fidelity continues to be on this product line.


                                      -13-
   15

The following summarizes Bankers Fidelity's operating expenses for the first
quarter of 2001 and the comparable period in 2000 (in thousands):



                                       Three months ended
                                            March 31,
                                   ---------------------------
                                     2001               2000
                                   --------           --------
                                                

Benefits and losses                $  9,607           $  8,342
Commission and other
   Expenses                           4,204              3,842
                                   --------           --------

Total expenses                     $ 13,811           $ 12,184
                                   ========           ========


The increase in both "benefits and losses" and "commission and other expenses"
is primarily attributable to the increase in premiums. Benefits and losses are
up 15.2% for the quarter. As a percentage of premiums, benefits and losses were
71.9% for the first quarter of 2001 compared to 73.1% in the first quarter of
2000. The decrease is primarily attributable to the rate increases that Bankers
Fidelity had put in place during 2000.

The company has been successful in keeping operating costs flat, while
continuing to add new business. As a percentage of premiums, these expenses were
31.5% for the first quarter of 2001 compared to 33.7% in the first quarter of
2000.

INVESTMENT INCOME AND REALIZED GAINS

Investment income for the quarter decreased $0.2 million or 5.2% over the first
quarter of 2000. During the first quarter of 2000, the Company benefited from a
significant gain in a real estate partnership in which it is involved. 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 quarter-to-quarter
decline in investment income.

The Company recognized a $0.2 million realized gain for the first quarter of
2001 compared to a $0.5 million realized gain in the first quarter of 2000.
Management continually evaluates the Company's investment portfolio and when
opportunities arise will divest appreciated investments.

INTEREST EXPENSE

Interest expense for the first quarter decreased slightly compared to the same
period in 2000. In conjunction with the acquisition of Association Casualty, the
Company entered into a $30.0 million revolving credit facility with Wachovia
Bank, N.A. During 2000, the Company paid down $4.5 million on the revolver,
leaving $21.5 million outstanding under the facility. This debt, coupled with
the $25 million variable rated demand bonds entered into 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 March 31, 2001 to $46.5 million, down
from $50.0 million in the first quarter of 2000. In addition, the base interest
rate, LIBOR, decreased over the prior quarter. The interest rate on both 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-to-quarter
decrease.

OTHER EXPENSES AND TAXES

The increase in other expenses (commissions, underwriting expenses, and other
expenses) of $0.8 million or 7.5% for the quarter is primarily attributable to
an overall increase in operating expenses related to Association Casualty.
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. On a consolidated basis, as a percentage of earned premiums, other
expenses declined to 33.8% in the first quarter of 2001 from 35.3% in the first
quarter of 2000.


                                      -14-
   16

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
$2.3 million for the first three months of 2001 compared to statutory net income
of $1.4 million for the first three months of 2000. The reasons for the increase
in statutory earnings in the first three months of 2001 are the same as those
discussed in "Results of Operations" above. Statutory results are further
compounded 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 March 31, 2001, the Company had accrued, but unpaid, dividends
on the Series B Stock totaling $6.3 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 March 31, 2001, the Company had accrued,
but unpaid, dividends on the Series C Stock totaling $0.1 million.

The Company is a party to a five-year revolving credit facility 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 March 31, 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 Bank, N.A.
("Wachovia"), which is automatically renewable on a monthly basis until thirteen
months after such time as Wachovia gives the Company notice of 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 March 31, 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 March 31, 2001 and expects to remain in compliance for the
remainder of 2001.


                                      -15-
   17

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 first quarter of 2001 decreased slightly over the first 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 $31 million at March 31, 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 March 31, 2001, Georgia Casualty had $14.0
million statutory surplus, American Southern had $31.7 million of statutory
surplus, Association Casualty had $15.7 million of statutory surplus, and
Bankers Fidelity had $23.2 million of statutory surplus.

Net cash provided by operating activities was $1.0 million in the first three
months of 2001 compared to net cash provided by operating activities of $2.2
million in the first three months of 2000. Cash and short-term investments
decreased from $31.9 million at December 31, 2000, to $23.0 million at March 31,
2001, mainly due to an increase in longer-term investments. Total investments
(excluding short-term investments) increased to $230.9 million due to the shift
from short-term investments.

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 is 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. 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.


                                      -16-
   18
                           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 first quarter of 2001.


                                      -17-
   19

                                    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:  May 15, 2001             By: /s/ Robert A. Renaud
                                    --------------------------------------------
                                    Robert A. Renaud
                                    Vice President and CFO
                                    Principal Financial and Accounting Officer)


                                      -18-