What changed in this filing

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Item 1. Financial Statements

2021-11-10 compared with 2021-08-10 · 335 added, 285 removed, 633 unchanged (49% of the section changed)

3 unchanged sentences

(Dollars in thousands, except share data)

September 30,

Cash and cash equivalents

45 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Insurance premiums, net

18 unchanged sentences

ATLANTIC AMERICAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Dollars in thousands)

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Net income (loss)

12 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Preferred stock:

7 unchanged sentences

Restricted stock grants, net of forfeitures

Issuance of 999 and 2,741 shares, as of 2021 and 2020, respectively, under stock plans

Issuance of shares under stock plans

Balance, end of period

17 unchanged sentences

Restricted stock grants, net of forfeitures

Net shares acquired of 5,479 and 5,902 in 2021 and 2020, respectively related to employee share-based

compensation plans

Issuance of 999 and 2,741 shares, as of 2021 and 2020, respectively, under stock plans

Net shares acquired related to employee share-based compensation plans

Issuance of shares under stock plans

Balance, end of period

1 unchanged sentence

Dividends declared on common stock per share

Common shares outstanding:

Balance, beginning of period

Net shares acquired under employee share-based compensation plans

Issuance of shares under stock plans

Restricted stock grants, net of forfeitures

Balance, end of period

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

2 unchanged sentences

Dollars in thousands)

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

Adjustments to reconcile net income to net cash used in operating activities:

Amortization of (additions to) acquisition costs, net

5 unchanged sentences

Increase in receivables, net

Increase in insurance reserves and policyholder funds

Increase (decrease) in insurance reserves and policyholder funds

Decrease in accounts payable and accrued expenses

Net cash (used in) provided by operating activities

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

3 unchanged sentences

Additions to property and equipment

Net cash provided by investing activities

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

3 unchanged sentences

Net cash used in financing activities

Net (decrease) increase in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

23 unchanged sentences

(the “2020 Annual Report”).

The Company’s financial condition and results of operations and cash flows as of and for the three and six month periods ended June 30, 2021 are not necessarily indicative of the financial condition or results of

The Company’s financial condition and results of operations and cash flows as of and for the three and nine month periods ended September 30, 2021 are not necessarily indicative of the financial condition or results of

operations and cash flows that may be expected for the year ending December 31, 2021 or for any other future period.

9 unchanged sentences

Although the ultimate impact cannot be

predicted with certainty at this time, the Company’s insurance subsidiaries do not expect a direct material impact from the outbreak of COVID-19 in terms of increased claims and losses, but that may change as more information becomes available.

addition, economic uncertainty related to COVID-19 has led to, and may continue to create, increased volatility in the investment markets.

The impact of COVID-19 on the economy and on the Company continues to evolve and its future effects are

predicted with any certainty at this time, the Company’s insurance subsidiaries do not expect a direct material impact from the outbreak of COVID-19 in terms of increased claims and losses, but that may change as more information becomes

In addition, economic uncertainty related to COVID-19 has led to, and may continue to create, increased volatility in the investment markets.

The impact of COVID-19 on the economy and on the Company continues to evolve and its future

effects are uncertain.

The Company continues to monitor the effects and risks of COVID-19 to assess its impact on the Company’s business, financial condition, results of operations, liquidity and capital position.

15 unchanged sentences

The following tables set forth the estimated fair value, gross unrealized gains, gross unrealized losses and cost or amortized cost of

the Company’s investments in fixed maturities and equity securities, aggregated by type and industry, as of June 30, 2021 and December 31, 2020.

the Company’s investments in fixed maturities and equity securities, aggregated by type and industry, as of September 30, 2021 and December 31, 2020.

Fixed maturities were comprised of the following:

June 30, 2021

September 30, 2021

Fixed maturities:

28 unchanged sentences

Bonds having an amortized cost of $ 10,923

and $ 10,670 and included in the tables above were on deposit with insurance regulatory authorities as of June 30, 2021 and December 31,

and $ 10,670 and included in the tables above were on deposit with insurance regulatory authorities as of September 30, 2021 and December

31, 2020, respectively, in accordance with statutory requirements.

Additionally, bonds having an amortized cost of $ 6,394 and $ 1,997 and included in the tables above were pledged as collateral to FHLB at June 30, 2021 and December 31, 2020, respectively.

Additionally, bonds having an amortized cost of $ 5,898 and $ 1,997 and included in the tables above were pledged as collateral to the Federal Home Loan Bank of Atlanta ("FHLB") at September 30, 2021 and December

31, 2020, respectively.

Equity securities were comprised of the following:

June 30, 2021

September 30, 2021

Equity securities:

9 unchanged sentences

Total equity securities

The carrying value and amortized cost of the Company’s investments in fixed maturities at June 30, 2021 and December 31, 2020 by contractual

The carrying value and amortized cost of the Company’s investments in fixed maturities at September 30, 2021 and December 31, 2020 by contractual

maturity were as follows.

Actual maturities may differ from contractual maturities because issuers may call or prepay obligations with or without call or prepayment penalties.

June 30, 2021

September 30, 2021

December 31, 2020

5 unchanged sentences

The following tables present the Company’s unrealized loss aging for securities by type and length of time the security was in a continuous

unrealized loss position as of June 30, 2021 and December 31, 2020.

June 30, 2021

unrealized loss position as of September 30, 2021 and December 31, 2020.

September 30, 2021

Less than 12 months

19 unchanged sentences

There were no OTTI charges

recorded during the three month and six month periods ended June 30, 2021 and 2020.

As of June 30, 2021 and December 31, 2020, there were twenty-six

and twenty securities, respectively, in an unrealized loss position which primarily included certain of the Company’s investments in

fixed maturities within the financial services, other diversified business and other diversified consumer sectors.

The increase in the number of securities in an unrealized loss position during the six month period ended June 30, 2021, was

primarily attributable to a decline in market values in certain of the Company’s fixed maturity securities as a result of a rising interest rate environment.

The Company does not currently intend to sell nor does it expect to be required to sell

any of the securities in an unrealized loss position.

Based upon the Company’s expected continuation of receipt of contractually required principal and interest payments and its intent and ability to retain the securities until price recovery, as

well as the Company’s evaluation of other relevant factors, including those described above, the Company has deemed these securities to be temporarily impaired as of June 30, 2021.

The following tables summarize realized investment gains for the three month period ended June 30, 2021 and the six month periods ended June 30, 2021 and 2020.

were no realized investment gains (losses) in the three month period ended June 30, 2020.

recorded during the three month and nine month periods ended September 30, 2021 and 2020.

As of September 30, 2021 and December 31, 2020, there were thirty and twenty securities, respectively, in an unrealized loss position which primarily included

certain of the Company’s investments in fixed maturities within the financial services, other diversified business and other diversified consumer sectors.

The increase in the number of securities in an unrealized loss position during the nine month

period ended September 30, 2021, was primarily attributable to a decline in market values in certain of the Company’s fixed maturity securities as a result of a rising interest rate environment.

The Company does not currently intend to sell nor

does it expect to be required to sell any of the securities in an unrealized loss position.

Based upon the Company’s expected continuation of receipt of contractually required principal and interest payments and its intent and ability to retain the

securities until price recovery, as well as the Company’s evaluation of other relevant factors, including those described above, the Company has deemed these securities to be temporarily impaired as of September 30, 2021.

The following tables summarize realized investment gains for the three month and nine month periods ended September 30, 2021 and 2020.

Three Months Ended

June 30, 2021

September 30, 2021

Realized investment gains, net

Six Months Ended

June 30, 2021

Three Months Ended

September 30, 2020

Realized investment gains, net

Six Months Ended

June 30, 2020

Nine Months Ended

September 30, 2021

Realized investment gains, net

The following table presents the portion of unrealized gains (losses) related to equity securities still held for the three month and six month

periods ended June 30, 2021 and 2020.

Nine Months Ended

September 30, 2020

Realized investment gains, net

The following table presents the portion of unrealized gains (losses) related to equity securities still held for the three month and nine month

periods ended September 30, 2021 and 2020.

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Net realized and unrealized gains (losses) recognized during the period on equity securities

Net realized gains (losses) recognized during the period on equity securities sold during the period

Net realized gains recognized during the period on equity securities sold during the period

Unrealized gains (losses) recognized during the reporting period on equity securities, net

4 unchanged sentences

assets, totaled $ 3,095 and $ 3,238

as of June 30, 2021 and December 31, 2020, respectively.

The Company’s VIE interests, carried as a part of investment in unconsolidated trusts, totaled $ 1,238 as of June 30, 2021 and December 31, 2020.

as of September 30, 2021 and December 31, 2020, respectively.

The Company’s VIE interests, carried as a part of investment in unconsolidated trusts, totaled $ 1,238 as of September 30, 2021 and December 31, 2020.

The Company does not have power over the activities that most significantly impact the economic performance of these VIEs and thus is not the

4 unchanged sentences

financial support to or on behalf of the VIE.

The Company’s maximum loss exposure relative to these investments was limited to the carrying value of the Company’s investment in the VIEs, which amount to $ 4,355 and $ 4,476 , as of June 30, 2021 and December 31, 2020,

The Company’s maximum loss exposure relative to these investments was limited to the carrying value of the Company’s investment in the VIEs, which amount to $ 4,333 and $ 4,476 , as of September 30, 2021 and December 31,

2020, respectively.

As of June 30, 2021 and December 31, 2020, the Company had outstanding commitments totaling $ 1,997 , whereby the Company

is committed to fund these investments and may be called by the partnership during the commitment period to fund the purchase of new investments and partnership expenses.

As of September 30, 2021 and December 31, 2020, the Company had outstanding commitments totaling $ 1,997 ,

whereby the Company is committed to fund these investments and may be called by the partnership during the commitment period to fund the purchase of new investments and partnership expenses.

Fair Values of Financial Instruments

27 unchanged sentences

The Company’s financial instruments valued using Level 3 criteria consist of two fixed maturity securities and one equity security.

As of June 30, 2021 and December 31, 2020, the value of the fixed maturities valued using

Level 3 criteria was $ 124 and $ 0 , respectively.

As of June 30, 2021

and December 31, 2020, the value of the equity security valued using Level 3 criteria was $ 83 and $ 143 , respectively.

The equity security is not traded and valued at cost.

The use of different criteria or assumptions regarding data may have yielded materially different

of June 30, 2021, financial instruments carried at fair value were measured on a recurring basis as summarized below:

Quoted Prices

As of September 30, 2021 and December 31, 2020, the value of the fixed maturities valued using

Level 3 criteria was $ 0 in each period.

As of September 30, 2021 and December 31, 2020, the value of the equity security valued using Level 3 criteria was $ 157 and $ 143 , respectively.

The equity security is not traded and is valued at cost.

The use of different

criteria or assumptions regarding data may have yielded materially different valuations.

of September 30, 2021, financial instruments carried at fair value were measured on a recurring basis as summarized below:

Quoted Prices in

Active Markets

for Identical

9 unchanged sentences

Cash equivalents

following table sets forth the carrying amount, estimated fair value and level within the fair value hierarchy of the Company’s financial instruments as of June 30, 2021 and December 31, 2020.

June 30, 2021

The following table sets forth the

carrying amount, estimated fair value and level within the fair value hierarchy of the Company’s financial instruments as of September 30, 2021

and December 31, 2020.

September 30, 2021

December 31, 2020

8 unchanged sentences

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

Liabilities for Unpaid Losses, Claims and Loss Adjustment Expenses

roll-forward of liabilities for unpaid losses, claims and loss adjustment expenses for the six months ended June 30, 2021 and 2020 is as follows:

Six Months Ended

Beginning liabilities for unpaid losses, claims and loss adjustment expenses, gross

Insurance Reserves for Losses and Claims

roll-forward of insurance reserves for losses and claims for the nine months ended September 30, 2021 and 2020 is as follows:

Nine Months Ended

September 30,

Beginning insurance reserves for losses and claims, gross

Reinsurance recoverable on unpaid losses

Beginning liabilities for unpaid losses, claims and loss adjustment expenses, net

Beginning insurance reserves for losses and claims, net

Incurred related to:

5 unchanged sentences

Prior accident years

Ending liabilities for unpaid losses, claims and loss adjustment expenses, net

Ending insurance reserves for losses and claims, net

Reinsurance recoverable on unpaid losses

Ending liabilities for unpaid losses, claims and loss adjustment expenses, gross

Ending insurance reserves for losses and claims, gross

In establishing property and casualty reserves, the Company initially reserves for losses at the higher end of the reasonable range if no other value within the range is

4 unchanged sentences

redundancies when analyzing the development of prior year losses in a current period.

Prior years’ development was primarily the result of unfavorable development in the loss and claim reserves for the Medicare supplement line of business in Bankers

Prior years’ development was primarily the result of unfavorable development in the loss and claim reserves for the Medicare supplement line of business in Bankers Fidelity.

Partially offsetting the unfavorable development was favorable development in the property and casualty operations.

Prior years’ development was primarily the result of favorable development in the loss and claim reserves for the Medicare supplement line of business in Bankers Fidelity.

Rate increases on existing business and the resultant improvement in rate adequacy was more favorable than expected.

Following is a

reconciliation of total incurred losses to total insurance benefits and losses incurred:

Six Months Ended

Following is a reconciliation of total incurred losses to total

insurance benefits and losses incurred:

Nine Months Ended

September 30,

Total incurred losses

16 unchanged sentences

among other things, declare all obligations under the Credit Agreement immediately due and payable and terminate the revolving commitments.

As of June 30, 2021, the Company does no t have any outstanding borrowings under the Credit Agreement.

As of September 30, 2021, the Company does no t have any outstanding borrowings under the Credit Agreement.

Junior Subordinated Debentures

The Company has two unconsolidated Connecticut statutory business trusts, which exist for the exclusive purposes of:

(i) issuing trust preferred securities (“Trust Preferred Securities”) representing

undivided beneficial interests in the assets of the trusts;

(ii) investing the gross proceeds of the Trust Preferred Securities in junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) of Atlantic American;

(iii) engaging in those activities necessary or incidental thereto.

The financial structure of each of Atlantic American Statutory Trust I and II as of June 30, 2021 was as follows:

(i) issuing trust preferred securities (“Trust

Preferred Securities”) representing undivided beneficial interests in the assets of the trusts;

(ii) investing the gross proceeds of the Trust Preferred Securities in junior subordinated deferrable interest debentures (“Junior Subordinated

Debentures”) of Atlantic American;

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

The financial structure of each of

Atlantic American Statutory Trust I and II as of September 30, 2021 was as follows:

Atlantic American

3 unchanged sentences

JUNIOR SUBORDINATED DEBENTURES (1) (2)

Principal amount owed June 30, 2021

Principal amount owed September 30, 2021

Treasury debt (3)

Net balance June 30, 2021

Net balance September 30, 2021

Net balance December 31, 2020

33 unchanged sentences

Three Months Ended

June 30, 2021

September 30 , 2021

(In thousands)

Basic Earnings Per Common Share:

Basic and Diluted Loss Per Common Share:

Less preferred stock dividends

Net income applicable to common shareholders

Diluted Earnings Per Common Share:

Effect of Series D preferred stock

Net income applicable to common shareholders

Net loss applicable to common shareholders

Three Months Ended

June 30, 2020

September 30, 2020

(In thousands)

5 unchanged sentences

Net income applicable to common shareholders

Six Months Ended

June 30, 2021

Nine Months Ended

September 30, 2021

(In thousands)

2 unchanged sentences

Net income applicable to common shareholders

Six Months Ended

June 30, 2020

Nine Months Ended

September 30, 2020

(In thousands)

Basic and Diluted Loss Per Common Share:

Basic and Diluted Earnings Per Common Share:

Less preferred stock dividends

Net loss applicable to common shareholders

The assumed conversion of the Company’s Series D preferred stock was included in the earnings (loss) per common share calculation for the three month periods ended June 30, 2021 and 2020.

The assumed conversion of the

Company’s Series D preferred stock was excluded from the earnings (loss) per common share calculation for the six month periods ended June 30, 2021 and 2020 since its impact would have been antidilutive.

Net income applicable to common shareholders

The assumed conversion of the Company’s Series D preferred stock was excluded from the earnings (loss) per common share calculation for all periods presented, except for the three month period ended September 30, 2020,

since its impact would have been antidilutive.

A reconciliation of the differences between income taxes computed at the federal

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Federal income tax provision at statutory rate of 21 %

3 unchanged sentences

Parking disallowance

Adjustment for prior years' estimates to actual

Income tax expense (benefit)

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Current – Federal

11 unchanged sentences

lease expense is recognized on a straight-line basis over the term of the lease.

Lease expense reported for the six months ended June 30, 2021 and June 30, 2020 was $ 507 .

Lease expense reported for the nine months ended September 30, 2021 and September 30, 2020 was $ 761 .

Additional information regarding the Company’s real estate

operating leases is as follows:

Six Months Ended

Nine Months Ended

September 30,

Other information on operating leases:

11 unchanged sentences

Operating lease liability included in accounts payable and accrued expenses on the condensed consolidated balance sheet

As of June 30, 2021, the Company has no operating leases that

have not yet commenced.

As of September 30, 2021, the Company has no operating leases

that have not yet commenced.

Commitments and Contingencies

10 unchanged sentences

taxes for each business unit as of and for the periods ended 2021 and 2020.

September 30,

American Southern

2 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

American Southern

4 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

American Southern

4 unchanged sentences

AND RESULTS OF OPERATIONS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains and references certain information that constitutes forward-looking statements as that term is defined in the federal securities laws.

Statements, to the extent they are not

statements of historical facts, are considered forward-looking statements, and are subject to various risks and uncertainties.

Such forward-looking statements are made based upon management’s current assessments of various risks and

uncertainties, as well as assumptions made in accordance with the “safe harbor” provisions of the federal securities laws.

The Company’s actual results could differ materially from the results expressed in or implied by these forward-looking

statements as a result of such risks and uncertainties, including those identified in filings made by the Company from time to time with the Securities and Exchange Commission.

In addition, other risks and uncertainties not known by us, or that

we currently determine to not be material, may materially adversely affect our financial condition, results of operations or cash flows.

The Company undertakes no obligation to update any forward-looking statement as a result of subsequent

developments, changes in underlying assumptions or facts, or otherwise, except as may be required by law.

The following is management’s discussion and analysis of the financial condition and results of operations of Atlantic American Corporation (“Atlantic American” or the “Parent”) and its

subsidiaries (collectively with the Parent, the “Company”) as of and for the three month and six month periods ended June 30, 2021.

This discussion should be read in conjunction with the unaudited condensed consolidated financial statements and

notes thereto included elsewhere herein, as well as with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report”).

subsidiaries (collectively with the Parent, the “Company”) as of and for the three month and nine month periods ended September 30, 2021.

This discussion should be read in conjunction with the unaudited condensed consolidated financial statements

and notes thereto included elsewhere herein, as well as with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report”).

Atlantic American is an insurance holding company whose operations are conducted primarily through its insurance subsidiaries:

6 unchanged sentences

In March 2020, the impact of COVID-19 and related actions to attempt to control its spread began to

impact our business operations, and we expect that the pandemic, actions that have been or will be taken in response to it and its overall impact on the economy, will continue to have an effect on our business operations and our operating results.

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

8 unchanged sentences

Overall Corporate Results

The following presents the Company’s revenue, expenses and net income (loss) for the three month and six month periods ended June 30, 2021 and the comparable periods in 2020:

The following presents the Company’s revenue, expenses and net income (loss) for the three month and nine month periods ended September 30, 2021 and the comparable periods in 2020:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Insurance premiums, net

11 unchanged sentences

Management also considers and evaluates performance by analyzing the non-GAAP measure operating income (loss), and believes it is a useful metric for investors, potential investors, securities

analysts and others because it isolates the “core” operating results of the Company before considering certain items that are either beyond the control of management (such as taxes, which are subject to timing, regulatory and rate changes depending

on the timing of the associated revenues and expenses) or are not expected to regularly impact the Company’s operational results (such as any realized and unrealized investment gains, which are not a part of the Company’s primary operations and

are, to a limited extent, subject to discretion in terms of timing of realization).

A reconciliation of net income (loss) to operating income (loss) for the three month and six month periods ended June 30, 2021 and the comparable periods in 2020 is as follows:

depending on the timing of the associated revenues and expenses) or are not expected to regularly impact the Company’s operational results (such as any realized and unrealized investment gains, which are not a part of the Company’s primary

operations and are, to a limited extent, subject to discretion in terms of timing of realization).

A reconciliation of net income (loss) to operating income (loss) for the three month and nine month periods ended September 30, 2021 and the comparable periods in 2020 is as follows:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Reconciliation of Non-GAAP Financial Measure

5 unchanged sentences

Non-GAAP operating income (loss)

On a consolidated basis, the Company had net income of $3.0 million, or $0.14 per diluted share, for the three month period ended June 30, 2021, compared to net income of $6.5 million, or $0.30 per

diluted share, for the three month period ended June 30, 2020.

The Company had net income of $2.5 million, or $0.11 per diluted share, for the six month period ended June 30, 2021, compared to net loss of $1.6 million, or $0.09 per diluted share,

for the six month period ended June 30, 2020.

For the three month period ended June 30, 2021, premium revenue decreased $1.4 million, or 2.9%, to $45.1 million from $46.5 million in the comparable period in 2020.

For the six month period ended

June 30, 2021, premium revenue decreased $0.8 million, or 0.9%, to $91.2 million from $92.0 million in the comparable period in 2020.

The decrease in premium revenue was primarily attributable to a decrease in the Medicare supplement line of

business in the life and health operations.

Operating income decreased $7.2 million in the three month period ended June 30, 2021 from the three month period ended June 30, 2020.

For the six month period ended June 30, 2021, operating income decreased $6.6

million from the comparable period in 2020.

The decrease in operating income was primarily due to less favorable loss experience in the life and health operations, resulting from a significant increase in the number of incurred claims within the

Medicare supplement line of business.

During 2021, utilization of Medicare supplement insurance benefits has increased, returning to historical averages relative to the exceptionally low utilization experienced after the onset of the COVID-19

pandemic when many policyholders were sheltered in place.

On a consolidated basis, the Company had net loss of $0.9 million, or $0.05 per diluted share, for the three month period ended September 30, 2021, compared to net income of $1.9 million, or

$0.09 per diluted share, for the three month period ended September 30, 2020.

The Company had net income of $1.6 million, or $0.06 per diluted share, for the nine month period ended September 30, 2021, compared to net income of $0.3 million, or

$0.00 per diluted share, for the nine month period ended September 30, 2020.

For the three month period ended September 30, 2021, premium revenue increased $1.1 million, or 2.5%, to $46.1 million from $45.0 million in the comparable period in

For the nine month period ended September 30, 2021, premium revenue increased $0.3 million, or 0.2%, to $137.3 million from $137.0 million in the comparable period in 2020.

The increase in premium revenue was primarily attributable to an

increase in automobile physical damage coverage resulting from existing agencies and an increase in general liability as a result of a new program in the property and casualty operations.

Partially offsetting this increase was a decrease in the

Medicare supplement line of business in the life and health operations.

Operating income decreased $5.3 million in the three month period ended September 30, 2021 from the three month period ended September 30, 2020.

For the nine month period ended September 30,

2021, operating income decreased $12.0 million from the comparable period in 2020.

The decrease in operating income was primarily due to less favorable loss experience in the life and health operations, resulting from a significant increase in

the number of incurred claims within the Medicare supplement line of business.

During 2021, utilization of Medicare supplement insurance benefits has increased, returning to historical averages relative to the exceptionally low utilization

experienced after the onset of the COVID-19 pandemic when many policyholders were sheltered in place.

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

American Southern

The following summarizes American Southern’s premiums, losses, expenses and underwriting ratios for the three month and six month periods ended June 30, 2021 and the comparable periods in 2020:

The following summarizes American Southern’s premiums, losses, expenses and underwriting ratios for the three month and nine month periods ended September 30, 2021 and the comparable periods in

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

8 unchanged sentences

Combined ratio

Gross written premiums at American Southern decreased $0.3 million, or 0.8%, during the three month period ended June 30, 2021 and increased $1.6 million, or 3.7%, during the six month period ended

June 30, 2021, from the comparable periods in 2020.

The decrease in gross written premiums during the three month period ended June 30, 2021 was primarily due to decreases in the automobile liability line of business resulting from a decline in

gross premiums written within a certain agency, as well as retro premium adjustments.

The increase in gross written premiums during the six month period ended June 30, 2021 was primarily attributable to an increase in premiums written in the

automobile physical damage line of business from existing agencies, as well as an increase in gross written premiums in the general liability line of business as a result of a new program that started in the second half of 2020.

offsetting the increase was a decline in premiums written in the automobile liability line of business as previously discussed.

Ceded premiums increased $0.1 million, or 7.9%, during the three month period ended June 30, 2021 and $0.4 million, or 14.2%, during the six month period ended June 30, 2021, from the comparable

periods in 2020.

Gross written premiums at American Southern increased $2.4 million, or 20.5%, during the three month period ended September 30, 2021 and $3.9 million, or 7.2%, during the nine month period ended

September 30, 2021, from the comparable periods in 2020.

The increase in gross written premiums during the three month and nine month periods ended September 30, 2021 was primarily attributable to an increase in premiums written in the automobile

physical damage line of business from existing agencies, as well as an increase in gross written premiums in the general liability line of business as a result of a new program that started in the second half of 2020.

Partially offsetting the

increase during the nine month period ended September 30, 2021 was a decrease in premiums written in the automobile liability line of business resulting from a decline in gross premiums written within a certain program, as well as retro premium

Ceded premiums increased $0.1 million, or 7.0%, during the three month period ended September 30, 2021 and $0.5 million, or 11.7%, during the nine month period ended September 30, 2021, from the

comparable periods in 2020.

American Southern’s ceded premiums are typically determined as a percentage of earned premiums and generally increase or decrease as earned premiums increase or decrease.

Also contributing to the increase in ceded premiums in 2021

was an increase in earned premiums and reinsurance rates in certain accounts within the automobile physical damage and general liability lines of business, which are subject to reinsurance.

The following presents American Southern’s net earned premiums by line of business for the three month and six month periods ended June 30, 2021 and the comparable periods in 2020:

Also contributing to the increase in ceded

premiums in 2021 was an increase in earned premiums and reinsurance rates in certain accounts within the automobile physical damage and general liability lines of business, which are subject to reinsurance.

The following presents American Southern’s net earned premiums by line of business for the three month and nine month periods ended September 30, 2021 and the comparable periods in 2020:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

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General liability

Net earned premiums increased $0.5 million, or 3.4%, during the three month period ended June 30, 2021, and $2.2 million, or 7.3%, during the six month period ended June 30, 2021, over the

comparable periods in 2020.

The increase in net earned premiums was primarily attributable to an increase in automobile physical damage coverage resulting from existing agencies and an increase in general liability as a result of a new program as

previously mentioned.

Net earned premiums increased $2.6 million, or 17.3%, during the three month period ended September 30, 2021, and $4.8 million, or 10.5%, during the nine month period ended September 30, 2021,

over the comparable periods in 2020.

program as previously mentioned.

Premiums are earned ratably over their respective policy terms, and therefore premiums earned in the current year are related to policies written during both the current year and immediately preceding year.

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loss ratio (the ratio of losses and loss adjustment expenses incurred to premiums earned) and the expense ratio (the ratio of expenses incurred to premiums earned).

Insurance benefits and losses incurred at American Southern increased $0.1 million, or 1.4%, during the three month period ended June 30, 2021, and increased $2.4 million, or 12.0%, during the six

month period ended June 30, 2021, over the comparable periods in 2020.

As a percentage of earned premiums, insurance benefits and losses incurred were 62.1% in the three month period ended June 30, 2021, compared to 63.3% in the three month period

ended June 30, 2020.

For the six month period ended June 30, 2021, this ratio increased to 66.4% from 63.6% in the comparable period in 2020.

The decrease in the loss ratio during the three month period ended June 30, 2021 was primarily

attributable to an increase in earned premiums in the general liability line of business.

The increase in the loss ratio during the six month period ended June 30, 2021 was mainly due to an increase in the frequency of claims in the automobile

physical damage line of business, as well as in the inland marine segment of the other line of business.

Commissions and underwriting expenses increased $0.5 million, or 10.5%, during the three month period ended June 30, 2021, and remained consistent during the six month period ended June 30, 2021,

over the comparable periods in 2020.

As a percentage of earned premiums, underwriting expenses were 32.3% in the three month period ended June 30, 2021, compared to 30.3% in the three month period ended June 30, 2020.

For the six month period ended

June 30, 2021, this ratio decreased to 29.0% from 31.2% in the comparable period in 2020.

The increase in the expense ratio during the three month period ended June 30, 2021 and the decrease in the expense ratio during the six month period ended

June 30, 2021 was primarily due to American Southern’s use of a variable commission structure with certain agents, which compensates the participating agents in relation to the loss ratios of the business they write.

During periods in which the

loss ratio decreases, commissions and underwriting expenses will generally increase, and conversely, during periods in which the loss ratio increases, commissions and underwriting expenses will generally decrease.

Insurance benefits and losses incurred at American Southern increased $2.5 million, or 27.6%, during the three month period ended September 30, 2021, and increased $4.9 million, or 17.0%, during

the nine month period ended September 30, 2021, over the comparable periods in 2020.

As a percentage of earned premiums, insurance benefits and losses incurred were 67.3% in the three month period ended September 30, 2021, compared to 61.8% in

the three month period ended September 30, 2020.

For the nine month period ended September 30, 2021, this ratio increased to 66.7% from 63.0% in the comparable period in 2020.

The increase in the loss ratio during the three month and nine month

periods ended September 30, 2021 was mainly due to an increase in the frequency of claims in the automobile physical damage line of business, as well as increased costs related to the auto liability line of business.

Commissions and underwriting expenses increased $0.2 million, or 4.5%, during the three month period ended September 30, 2021, and increased $0.2 million, or 1.3% during the nine month period

ended September 30, 2021, over the comparable periods in 2020.

As a percentage of earned premiums, underwriting expenses were 28.1% in the three month period ended September 30, 2021, compared to 31.6% in the three month period ended September

For the nine month period ended September 30, 2021, this ratio decreased to 28.7% from 31.3% in the comparable period in 2020.

The decrease in the expense ratio during the three month and nine month periods ended September 30, 2021 was

primarily due to American Southern’s use of a variable commission structure with certain agents, which compensates the participating agents in relation to the loss ratios of the business they write.

During periods in which the loss ratio

decreases, commissions and underwriting expenses will generally increase, and conversely, during periods in which the loss ratio increases, commissions and underwriting expenses will generally decrease.

Bankers Fidelity

The following summarizes Bankers Fidelity’s earned premiums, losses, expenses and underwriting ratios for the three month and six month periods ended June 30, 2021 and the comparable periods in

The following summarizes Bankers Fidelity’s earned premiums, losses, expenses and underwriting ratios for the three month and nine month periods ended September 30, 2021 and the comparable

periods in 2020:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

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Combined ratio

Net earned premium revenue at Bankers Fidelity decreased $1.9 million, or 6.2%, during the three month period ended June 30, 2021, and $3.1 million, or 5.0%, during the six month period ended June

30, 2021, from the comparable periods in 2020.

Gross earned premiums from the Medicare supplement line of business decreased $2.9 million, or 6.7%, during the three month period ended June 30, 2021, and $6.2 million, or 7.1%, during the six month

period ended June 30, 2021, due primarily to non-renewals exceeding the level of new business writings.

Other health product premiums increased $0.1 million, or 2.5%, during the three month period ended June 30, 2021, and $0.3 million, or 5.8%,

during the six month period ended June 30, 2021, over the comparable periods in 2020, primarily as a result of new sales of the company’s group health products.

Gross earned premiums from the life insurance line of business decreased $0.1 million,

or 4.2%, during the three month period ended June 30, 2021, due to a decrease in individual life products premium, resulting from the redemption and settlement of existing individual life policy obligations exceeding the level of new individual

Gross earned premiums from the life insurance line of business increased $0.5 million, or 10.9%, during the six month period ended June 30, 2021 over the comparable periods in 2020 due to an increase in the group life products premium,

partially offset by a decrease in individual life products premium as previously mentioned.

Premiums ceded decreased $1.1 million, or 5.9%, during the three month period ended June 30, 2021 and $2.4 million, or 6.7%, during the six month period

ended June 30, 2021, over the comparable periods in 2020.

The decrease in ceded premiums for the three month and six month periods ended June 30, 2021 was due to a decrease in Medicare supplement premiums subject to reinsurance.

Insurance benefits and losses incurred increased $4.5 million, or 26.3%, during the three month period ended June 30, 2021, and $2.0 million, or 4.8%, during the six month period ended June 30,

2021, from the comparable periods in 2020.

As a percentage of earned premiums, benefits and losses were 74.9% in the three month period ended June 30, 2021, compared to 55.6% in the three month period ended June 30, 2020.

For the six month period

ended June 30, 2021, this ratio increased to 73.9% from 67.1% in the comparable period in 2020.

The increase in the loss ratio for the three month and six month periods ended June 30, 2021 was primarily due to an increase in the number of claims

incurred in the Medicare supplement line of business.

During 2021, utilization of Medicare supplement insurance benefits has increased, returning to historical averages relative to the exceptionally low utilization experienced after the onset of

the COVID-19 pandemic when many policyholders were sheltered in place.

Commissions and underwriting expenses increased $1.0 million, or 12.6%, during the three month period ended June 30, 2021, and $1.3 million, or 7.2%, during the six month period ended June 30,

2021, over the comparable periods in 2020.

As a percentage of earned premiums, underwriting expenses were 30.4% in the three month period ended June 30, 2021, compared to 25.4% in the three month period ended June 30, 2020.

For the six month

period ended June 30, 2021, this ratio increased to 32.0% from 28.4% in the comparable period in 2020.

The increase in the expense ratio for the three month and six month periods ended June 30, 2021 was primarily due to the amortization of deferred

acquisition costs ("DAC") exceeding the level of additions to DAC.

The increase in the net amortization of DAC during 2021 is primarily due to non-renewals exceeding the level of new business writings in the Medicare supplement line of business, as

previously mentioned.

Partially offsetting the increase in the expense ratio was a decrease in expenses related to servicing the Medicare supplement line of business.

Net Investment Income and Realized Gains (Losses)

Investment income increased $0.4 million, or 22.5%, during the three month period ended June 30, 2021, and $0.5 million, or 12.6%, during the six month period ended June 30, 2021, over the

comparable periods in 2020.

Net earned premium revenue at Bankers Fidelity decreased $1.4 million, or 4.8%, during the three month period ended September 30, 2021, and $4.5 million, or 4.9%, during the nine month period

ended September 30, 2021, from the comparable periods in 2020.

Gross earned premiums from the Medicare supplement line of business decreased $3.2 million, or 7.3%, during the three month period ended September 30, 2021, and $9.4 million, or 7.2%,

during the nine month period ended September 30, 2021, due primarily to non-renewals exceeding the level of new business writings.

Other health product premiums increased $0.4 million, or 16.4%, during the three month period ended September 30,

2021, and $0.7 million, or 9.5%, during the nine month period ended September 30, 2021, over the comparable periods in 2020, primarily as a result of new sales of the company’s group health and individual cancer products.

Gross earned premiums

from the life insurance line of business increased $0.1 million, or 5.4%, during the three month period ended September 30, 2021, and increased $0.6 million, or 9.1%, during the nine month period ended September 30, 2021, over the comparable

periods in 2020, primarily due to an increase in the group life product premiums.

Partially offsetting this increase was a decline in individual life products premium, resulting from the redemption and settlement of existing individual life

policy obligations exceeding the level of new individual life sales.

Premiums ceded decreased $1.3 million, or 6.9%, during the three month period ended September 30, 2021 and $3.7 million, or 6.8%, during the nine month period ended September

The decrease in ceded premiums for the three month and nine month periods ended September 30, 2021 was due to a decrease in Medicare supplement premiums subject to reinsurance.

Insurance benefits and losses incurred increased $3.3 million, or 16.5%, during the three month period ended September 30, 2021, and $5.3 million, or 8.6%, during the nine month period ended

September 30, 2021, from the comparable periods in 2020.

As a percentage of earned premiums, benefits and losses were 81.3% in the three month period ended September 30, 2021, compared to 66.5% in the three month period ended September 30,

For the nine month period ended September 30, 2021, this ratio increased to 76.4% from 66.9% in the comparable period in 2020.

The increase in the loss ratio for the three month and nine month periods ended September 30, 2021 was

primarily due to an increase in the number of claims incurred in the Medicare supplement line of business.

During 2021, utilization of Medicare supplement insurance benefits has increased, returning to historical averages relative to the

exceptionally low utilization experienced after the onset of the COVID-19 pandemic when many policyholders were sheltered in place.

Commissions and underwriting expenses increased $0.9 million, or 11.4%, during the three month period ended September 30, 2021, and $2.2 million, or 8.6%, during the nine month period ended

September 30, 2021, over the comparable periods in 2020.

As a percentage of earned premiums, underwriting expenses were 31.1% in the three month period ended September 30, 2021, compared to 26.6% in the three month period ended September 30,

For the nine month period ended September 30, 2021, this ratio increased to 31.7% from 27.8% in the comparable period in 2020.

The increase in the expense ratio for the three month and nine month periods ended September 30, 2021 was

primarily due to the amortization of deferred acquisition costs ("DAC") exceeding the level of additions to DAC.

The increase in the net amortization of DAC during 2021 is primarily due to non-renewals exceeding the level of new business writings

in the Medicare supplement line of business, as previously mentioned.

Net Investment Income and Realized Gains

Investment income increased $0.3 million, or 16.9%, during the three month period ended September 30, 2021, and $0.8 million, or 14.0%, during the nine month period ended September 30, 2021, over

the comparable periods in 2020.

The increase in investment income was attributable to an increase in the equity in earnings from investments in the Company's limited partnerships and limited liability companies of $0.3 million and $0.7 million,

respectively.

The Company had net realized investment gains of $0.1 million during the three month period ended June 30, 2021, compared to no realized investment gains during the three month period ended June

The Company had net realized investment gains of $0.2 million in each of the six month periods ended June 30, 2021 and 2020.

The net realized investment gains during the three month and six month periods ended June 30, 2021 resulted

primarily from the disposition of several of the Company’s investments in fixed maturity securities.

Management continually evaluates the Company’s investment portfolio and makes adjustments for impairments and/or divests investments as may be

determined to be appropriate.

The Company had net realized investment gains of $0.3 million during the three month period ended September 30, 2021, compared to net realized investment gains of $0.2 during the three month

period ended September 30, 2020.

The Company had net realized investment gains of $0.5 million during the nine month period ended September 30, 2021 and net realized investment gains of $0.4 during the nine month period ended September 30,

The net realized investment gains during the three month and nine month periods ended September 30, 2021 resulted primarily from the disposition of several of the Company’s investments in fixed maturity securities.

The net realized

investment gains during the three month and nine month periods ended September 30, 2020 resulted from the disposition of several of the Company’s investments in fixed maturity and equity securities.

Management continually evaluates the Company’s

investment portfolio and makes adjustments for impairments and/or divests investments as may be determined to be appropriate.

Unrealized Gains (Losses) on Equity Securities

Investments in equity securities are measured at fair value at the end of the reporting period, with any changes in fair value reported in net income during the period, with certain exceptions.

Company recognized net unrealized gains on equity securities of $4.0 million during the three month period ended June 30, 2021 and unrealized gains on equity securities of $1.4 million during the three month period ended June 30, 2020.

recognized net unrealized gains on equity securities of $4.7 million during the six month period ended June 30, 2021 and unrealized losses on equity securities of $7.1 million during the six month period ended June 30, 2020.

Changes in unrealized

gains on equity securities for the applicable periods are primarily the result of fluctuations in the market value of certain of the Company’s equity securities.

The Company recognized net unrealized gains on equity securities of $0.7 million during the three month period ended September 30, 2021 and unrealized losses on equity securities of $0.7 million during the three month period ended September 30,

The Company recognized net unrealized gains on equity securities of $5.5 million during the nine month period ended September 30, 2021 and unrealized losses on equity securities of $7.8 million during the nine month period ended September

Changes in unrealized gains on equity securities for the applicable periods are primarily the result of fluctuations in the market value of certain of the Company’s equity securities.

Interest Expense

Interest expense decreased $0.1 million, or 16.2%, during the three month period ended June 30, 2021, and $0.2 million, or 22.1%, during the six month period ended June 30, 2021, from the

comparable periods in 2020.

Changes in interest expense were primarily due to changes in the London Interbank Offered Rate (“LIBOR”), as the interest rates on the Company’s outstanding junior subordinated deferrable interest debentures (“Junior

Subordinated Debentures”) are directly related to LIBOR.

Interest expense remained relatively consistent during the three month period ended September 30, 2021, and decreased $0.2 million, or 17.0%, during the nine month period ended September 30,

2021, from the comparable periods in 2020.

debentures (“Junior Subordinated Debentures”) are directly related to LIBOR.

Liquidity and Capital Resources

The primary cash needs of the Company are for the payment of claims and operating expenses, maintaining adequate statutory capital and surplus levels, and meeting debt service requirements.

and expected patterns of claim frequency and severity may change from period to period but generally are expected to continue within historical ranges.

The Company’s primary sources of cash are written premiums, investment income and proceeds from

the sale and maturity of its invested assets.

The Company believes that, within each operating company, total invested assets will be sufficient to satisfy all policy liabilities and that cash inflows from investment earnings, future premium

receipts and reinsurance collections will be adequate to fund the payment of claims and operating expenses as needed.

Current and expected patterns of claim frequency and severity may change from period to period but generally are expected to continue within historical ranges.

The Company’s primary sources of cash are written premiums, investment income and

proceeds from the sale and maturity of its invested assets.

The Company believes that, within each operating company, total invested assets will be sufficient to satisfy all policy liabilities and that cash inflows from investment earnings,

future premium receipts and reinsurance collections will be adequate to fund the payment of claims and operating expenses as needed.

Cash flows at the Parent are derived from dividends, management fees, and tax-sharing payments, as described below, from the subsidiaries.

The principal cash needs of the Parent are for the payment

of operating expenses, the acquisition of capital assets and debt service requirements, as well as the repurchase of shares and payments of any dividends as may be authorized and approved by the Company’s board of directors from time to time.

June 30, 2021, the Parent had approximately $3.9 million of unrestricted cash and investments.

The Parent’s insurance subsidiaries reported statutory net income of $1.5 million for the six month period ended June 30, 2021, compared to statutory net income of $4.7 million for the six month

period ended June 30, 2020.

The principal cash needs of the Parent are for the

payment of operating expenses, the acquisition of capital assets and debt service requirements, as well as the repurchase of shares and payments of any dividends as may be authorized and approved by the Company’s board of directors from time to

At September 30, 2021, the Parent had approximately $3.7 million of unrestricted cash and investments.

The Parent’s insurance subsidiaries reported statutory net income of $0.8 million for the nine month period ended September 30, 2021, compared to statutory net income of $8.5 million for the nine

month period ended September 30, 2020.

Statutory results are impacted by the recognition of all costs of acquiring business.

In periods in which the Company’s first year premiums increase, statutory results are generally lower than results determined under

In periods in which the Company’s first year premiums increase, statutory results are generally lower than results

determined under GAAP.

Statutory results for the Company’s property and casualty operations may differ from the Company’s results of operations under GAAP due to the deferral of acquisition costs for financial reporting purposes.

The Company’s life and health

operations’ statutory results may differ from GAAP results primarily due to the deferral of acquisition costs for financial reporting purposes, as well as the use of different reserving methods.

The Company’s

life and health operations’ statutory results may differ from GAAP results primarily due to the deferral of acquisition costs for financial reporting purposes, as well as the use of different reserving methods.

Over 90% of the invested assets of the Parent’s insurance subsidiaries are invested in marketable securities that can be converted into cash, if required;

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recognizing realized investment gains of the individual insurance subsidiaries.

At June 30, 2021, American Southern had $50.0 million of statutory capital and surplus and Bankers Fidelity had $41.7 million of statutory capital and surplus.

dividend payments by the Parent’s insurance subsidiaries in excess of $9.6 million would require prior approval.

Through June 30, 2021, the Parent received dividends of $5.4 million from its subsidiaries.

At September 30, 2021, American Southern had $50.4 million of statutory capital and surplus and Bankers Fidelity had $38.5 million of statutory capital and surplus.

In 2021, dividend payments by the Parent’s insurance subsidiaries in excess of $9.6 million would require prior approval.

Through September 30, 2021, the Parent received dividends of $6.9 million from its subsidiaries.

The Parent provides certain administrative and other services to each of its insurance subsidiaries.

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In addition, there is in place a formal tax-sharing agreement between the Parent and its insurance subsidiaries.

As a result of the Parent’s tax loss, it is

anticipated that the tax-sharing agreement will continue to provide the Parent with additional funds from profitable subsidiaries to assist in meeting its cash flow obligations.

As a result of the Parent’s tax loss, it

is anticipated that the tax-sharing agreement will continue to provide the Parent with additional funds from profitable subsidiaries to assist in meeting its cash flow obligations.

The Company has two statutory trusts which exist for the exclusive purpose of issuing trust preferred securities representing undivided beneficial interests in the assets of the trusts and

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The margin ranges from 4.00% to 4.10%.

At June 30, 2021, the effective interest rate was 4.20%.

At September 30, 2021, the effective interest rate was

The obligations of the Company with respect to the issuances of the trust preferred securities represent a full and unconditional guarantee by the Parent of each trust’s obligations with respect to the trust preferred securities.

Subject to certain

exceptions and limitations, the Company may elect from time to time to defer Junior Subordinated Debenture interest payments, which would result in a deferral of distribution payments on the related trust preferred securities.

As of June 30, 2021,

the Company has not made such an election.

The Company intends to pay its obligations under the Junior Subordinated Debentures using existing cash balances, dividend and tax-sharing payments from the operating subsidiaries, or from existing

or potential future financing arrangements.

At June 30, 2021, the Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding.

All of the shares of Series D Preferred Stock are held by an affiliate of the

Company’s controlling shareholder.

to certain exceptions and limitations, the Company may elect from time to time to defer Junior Subordinated Debenture interest payments, which would result in a deferral of distribution payments on the related trust preferred securities.

September 30, 2021, the Company has not made such an election.

The Company intends to pay its obligations under the Junior Subordinated Debentures using existing cash balances, dividend and tax-sharing payments from the operating subsidiaries, or from

existing or potential future financing arrangements.

At September 30, 2021, the Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding.

All of the shares of Series D Preferred Stock are held by an affiliate

of the Company’s controlling shareholder.

The outstanding shares of Series D Preferred Stock have a stated value of $100 per share;

accrue annual dividends at a rate of $7.25 per share (payable in cash or shares of the Company’s common stock at the option

of the board of directors of the Company) and are cumulative.

In certain circumstances, the shares of the Series D Preferred Stock may be convertible into an aggregate of approximately 1,378,000 shares of the Company’s common stock, subject to

certain adjustments and provided that such adjustments do not result in the Company issuing more than approximately 2,703,000 shares of common stock without obtaining prior shareholder approval;

and are redeemable solely at the Company’s option.

accrue annual dividends at a rate of $7.25 per share (payable in cash or shares of the Company’s common stock at

the option of the board of directors of the Company) and are cumulative.

In certain circumstances, the shares of the Series D Preferred Stock may be convertible into an aggregate of approximately 1,378,000 shares of the Company’s common stock,

subject to certain adjustments and provided that such adjustments do not result in the Company issuing more than approximately 2,703,000 shares of common stock without obtaining prior shareholder approval;

and are redeemable solely at the

Company’s option.

The Series D Preferred Stock is not currently convertible.

At June 30, 2021, the Company had accrued but unpaid dividends on the Series D Preferred Stock totaling $0.2 million.

At September 30, 2021, the Company had accrued but unpaid dividends on the Series D Preferred Stock totaling $0.3 million.

Bankers Fidelity Life Insurance Company (''BFLIC") is a member of the Federal Home Loan Bank of Atlanta ("FHLB"), for the primary purpose of enhancing financial flexibility.

As a member, BFLIC can

obtain access to low-cost funding and also receive dividends on FHLB stock.

As a member, BFLIC

can obtain access to low-cost funding and also receive dividends on FHLB stock.

The membership arrangement established initial credit availability of five percent of statutory admitted assets, or approximately $8 million.

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BFLIC would be required to post acceptable forms of collateral for any borrowings it makes from the FHLB.

As of June 30, 2021, BFLIC does not have any outstanding

borrowings from the FHLB.

See Note 6 of the Notes to Condensed Consolidated Financial Statements for a discussion of the Company’s available credit

under its new revolving credit facility.

Cash and cash equivalents decreased from $19.3 million at December 31, 2020 to $9.5 million at June 30, 2021.

The decrease in cash and cash equivalents during the six month period ended June 30,

2021 was primarily attributable to net cash used in operating activities of $13.9 million.

Partially offsetting the cash used in operating activities was net cash provided by investing activities of $4.5 million as a result of investment sales and

maturity of securities exceeding investment purchases.

As of September 30, 2021, BFLIC does not have any

outstanding borrowings from the FHLB.

See Note 6 of the Notes to Condensed Consolidated Financial Statements for a discussion of the Company’s available credit under its new revolving credit facility.

Cash and cash equivalents decreased from $19.3 million at December 31, 2020 to $14.3 million at September 30, 2021.

The decrease in cash and cash equivalents during the nine month period ended

September 30, 2021 was primarily attributable to net cash used in operating activities of $9.6 million.

Partially offsetting the cash used in operating activities was net cash provided by investing activities of $5.1 million as a result of

investment sales and maturity of securities exceeding investment purchases.

The Company believes that existing cash balances as well as the dividends, fees, and tax-sharing payments it expects to receive from its subsidiaries and, if needed, borrowings under its credit

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

The duration and ultimate impact of the COVID-19 pandemic remains unknown at this time and it is not possible for us to reliably estimate the impact on the financial condition, operating results or

liquidity of the Company and its operating subsidiaries in future periods.

The duration and ultimate impact of the COVID-19 pandemic remains unknown at this time and it is not possible for us to reliably estimate the impact on the financial condition, operating results

or liquidity of the Company and its operating subsidiaries in future periods.

However, we do not currently expect a significant decline in liquidity or operating results as a result of the disruption caused by the ongoing COVID-19 pandemic.

the most significant impact of COVID-19 on the Company’s financial position has been volatility in the fair value of the Company’s fixed maturity and equity investments due to disruption in the financial markets.

date, the most significant impact of COVID-19 on the Company’s financial position has been volatility in the fair value of the Company’s fixed maturity and equity investments due to disruption in the financial markets.

We expect that earned premiums could be adversely impacted by a weakened economy leading to a slowdown in new sales and reduced retention of insureds.

Additionally, a number of states have issued

bulletins that either encourage or require premium leniency such as extension of grace periods or moratoriums on cancellation of policies for non-payment.

The Company does not expect a significant reduction or delay in payments and continues to

monitor state required actions as they develop.

Additionally, a number of states have

issued bulletins that either encourage or require premium leniency such as extension of grace periods or moratoriums on cancellation of policies for non-payment.

The Company does not expect a significant reduction or delay in payments and

continues to monitor state requirements as they develop.

For the Company’s property and casualty operations, the majority of premium revenue is derived from automobile liability and automobile physical damage lines of business written on a multi-year

contract basis with state and local governments.

Although we cannot predict with certainty at this time, we do not expect a significant level of cancellations or non-renewals of our property and casualty contracts in the short term but recognize

that a prolonged economic slowdown could adversely affect future results.

Although we cannot predict with any certainty at this time, we do not expect a significant level of cancellations or non-renewals of our property and casualty contracts in the short term but

recognize that a prolonged economic slowdown could adversely affect future results.

However, the Company expects the aforementioned decline in usage to be temporary in nature.

Benefits and losses in our property and casualty operations could be adversely impacted as a result of disruption caused by the COVID-19 pandemic.

However, due to the nature of our primary product

lines, the impact is not currently expected to be material.

However, due to the nature of our primary

product lines, the impact is not currently expected to be material.

As a result, we do not currently expect a material adverse effect on operating results or liquidity in the property and casualty operations.

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impact cannot be predicted with certainty at this time.

Unforeseen infectious diseases that impact large portions of a population can have an adverse impact on mortality and morbidity, and resultant benefits and losses incurred by the Company’s life and

health operations.

Unforeseen infectious diseases that impact large portions of a population can have an adverse impact on mortality and morbidity, and resultant benefits and losses incurred by the Company’s life

and health operations.

Accordingly, the Company does anticipate incurring higher costs, potentially similar to prior influenza seasons, as it relates to life insurance claims.

However, due to the Company's individual policyholders being subject to

various degrees of shelter in place orders, the Company has experienced lower utilization of certain accident and health benefits, particularly in the Medicare supplement line of business.

As a result, and although the ultimate impact cannot be

predicted with certainty at this time, the Company does not expect significant adverse development in total benefits and losses incurred in its life and health operations.

During 2020, the Company's individual policyholders were subject to

various degrees of shelter in place orders.

As a result, the Company experienced lower utilization of certain accident and health benefits, particularly in the Medicare supplement line of business.

However, during 2021, utilization of

policyholder benefits have returned to historical averages.

As a result, and although the ultimate impact cannot be predicted with certainty at this time, the Company does not expect significant adverse development in total benefits and losses

incurred in its life and health operations.

In addition to the information set forth in this report, you should carefully consider the discussions of the COVID-19 pandemic and related economic developments presented in our Annual Report on

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements