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Item 8. Financial Statements and Supplementary Data

2022-03-25 compared with 2021-03-23 · 531 added, 510 removed, 596 unchanged (64% of the section changed)

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ATLANTIC AMERICAN CORPORATION

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm ( Dixon Hughes Goodman, LLP , Atlanta, GA PCAOB Firm ID No.

Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Statements of Operations for the years ended December 31, 2021 and 2020

Consolidated Statements of Comprehensive Income for the years ended December 31, 2020 and 2019

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2021 and 2020

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2021 and 2020

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Atlantic American Corporation and subsidiaries (the Company) as of December 31, 2020 and 2019, and the related consolidated statements

of operations, comprehensive income, shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2020 and the related notes and schedules (collectively, referred to as the financial statements).

In our opinion, the

financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31,

2020, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Atlantic American Corporation and subsidiaries (the Company) as of December 31, 2021

and 2020, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2021 and the related notes and schedules (collectively,

referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows

for each of the two years in the period ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles (GAAP).

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These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public

accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

Our responsibility is to express an opinion on the Company’s financial

statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting.

As part of our audit we are required to obtain

an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Those standards require that we plan and perform the audits to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial

As part of our audit we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and

performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management,

as well as evaluating the overall presentation of the financial statements.

Our audits also included evaluating the accounting principles used and

significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit

committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any

way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or

required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of

critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the

accounts or disclosures to which they relate.

Valuation of Insurance Reserves for Losses and Claims (Claim Reserves)

As reflected on the consolidated balance sheet and discussed in Note 5 to the financial statements, the Company’s insurance reserves for losses and claims (claim reserves), were $79.1 million as of

December 31, 2020.

As reflected on the consolidated balance sheet and discussed in Note 5 to the financial statements, the Company’s insurance reserves for losses and

claims (claim reserves), were $85.6 million as of December 31, 2021.

The Company’s claim reserves relate primarily to its property casualty lines of business and Medicare supplement business.

The process of establishing claim reserves requires the use of estimates and judgments based on

circumstances underlying the insured loss at the date of accrual.

Management’s judgments include claims adjusters’ evaluations for unpaid claims reported prior to the close of the accounting period, estimates of incurred but not reported (IBNR)

claims based on past experience and estimates of loss adjustment expenses.

The principal considerations for our determination that the valuation of claim reserves is a critical audit matter are the high degree of judgment and subjectivity in auditing the actuarial methods

and assumptions used in the valuation process, including assumptions around expected loss ratios and reported and paid loss emergence patterns.

The process of establishing claim reserves requires the

use of estimates and judgments based on circumstances underlying the insured loss at the date of accrual.

Management’s judgments include claims adjusters’ evaluations for unpaid claims reported prior to the close of the accounting period, estimates

of incurred but not reported (IBNR) claims based on past experience and estimates of loss adjustment expenses.

The principal considerations for our determination that the valuation of claim reserves is a critical audit matter are the high degree of judgment and

subjectivity in auditing the actuarial methods and assumptions used in the valuation process, including assumptions around expected loss ratios and reported and paid loss emergence patterns.

Addressing the matter involved performing the following audit procedures, among others:

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Valuation of Insurance Reserves for Future Policy Benefits (Policy Reserves)

As reflected on the consolidated balance sheet and discussed in Note 5 to the financial statements, the Company’s insurance reserves for future policy benefits (policy reserves) were $90.9 million as

of December 31, 2020.

Policy reserves are related to life and health insurance policies and are based upon significant assumptions including future investment yields, mortality rates, withdrawal rates and expenses after giving effect to possible

risks of unexpected claim experience.

As reflected on the consolidated balance sheet and discussed in Note 5 to the financial statements, the Company’s insurance reserves for future policy

benefits (policy reserves) were $87.3 million as of December 31, 2021.

Policy reserves are related to life and health insurance policies and are based upon significant assumptions including future investment yields, mortality rates, withdrawal rates

and expenses after giving effect to possible risks of unexpected claim experience.

These assumptions are based on historical experience modified as necessary to reflect anticipated trends and are generally established at contract inception.

The principal considerations for our determination that the valuation of policy reserves is a critical audit matter are the high degree of judgment required to assess certain assumptions that impact

policy reserves and the complexity of the actuarial calculations.

The principal considerations for our determination that the valuation of policy reserves is a critical audit matter are the high degree of judgment

required to assess certain assumptions that impact policy reserves and the complexity of the actuarial calculations.

Addressing the matter involved performing the following audit procedures, among others:

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

Assessing the significant assumptions used by management for new insurance contracts issued during the current year by comparing the significant assumptions noted above to historical experience, observable

market data or management’s estimates of prospective changes to these assumptions;

Assessing the significant assumptions used by management for new insurance contracts issued during the current year by comparing the significant assumptions

noted above to historical experience, observable market data or management’s estimates of prospective changes to these assumptions;

Performing an independent recalculation of policy reserves for a sample of contracts for comparison to management’s estimate;

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ATLANTIC AMERICAN CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands,

except share data)

BALANCE SHEETS

(In thousands,

except share and per share data)

Cash and cash equivalents

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Total investments

Insurance premiums and other, net of allowance for doubtful accounts of $198 and $183 as of 2020 and 2019, respectively

Insurance premiums and other, net of allowance for doubtful accounts of $ 188 and

$ 198 as of 2021

and 2020 , respectively

Deferred income taxes, net

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Preferred stock, $ 1 par, 4,000,000 shares authorized;

Series D preferred, 55,000 shares issued and outstanding;

Series D preferred, 55,000

shares issued and outstanding;

$ 5,500 redemption value

Common stock, $ 1 par, 50,000,000 shares authorized;

22,400,894 shares issued;

20,415,243 and 20,472,162 shares outstanding as of 2020 and 2019, respectively

22,400,894 shares

20,378,576 and 20,415,243

shares outstanding as of 2021 and 2020 , respectively

Additional paid-in capital

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Year Ended December 31,

(Dollars in thousands,

(In thousands,

except per share data)

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Total benefits and expenses

Income (loss) before income taxes

Income tax expense (benefit)

Net Income (loss)

Income before income taxes

Income tax expense

Preferred stock dividends

Net Income (loss) applicable to common shareholders

Earnings (loss) per common share (basic)

Earnings (loss) per common share (diluted)

Net Income applicable to common shareholders

Earnings per common share (basic)

Earnings per common share (diluted)

See the accompanying notes to the consolidated financial statements.

ATLANTIC AMERICAN CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS)

Year Ended December 31,

(Dollars in thousands)

Net income (loss)

(In thousands)

Other comprehensive income:

Available-for-sale fixed maturity securities:

Gross unrealized holding gain arising in the period

Gross unrealized holding gain (loss) arising in the period

Related income tax effect

reclassification adjustment for net realized gains included in net income (loss)

reclassification adjustment for net realized gains included in net income

Related income tax effect

Total other comprehensive income, net of tax

Total comprehensive income

Total other comprehensive income (loss), net of tax

Total comprehensive income (loss)

See the accompanying notes to the consolidated financial statements.

ATLANTIC AMERICAN CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF

SHAREHOLDERS’ EQUITY

Year Ended December 31,

(Dollars in thousands, except per share data)

(In thousands, except share and per share data)

Preferred stock:

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Restricted stock grants, net of forfeitures

20,000 and 355,000 restricted shares issued, as of 2020 and 2019, respectively

Issuance of 4,701 and 10,862 shares, as of 2020 and 2019, respectively, under stock plans

Issuance of shares under stock plans

Balance, end of year

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Balance, beginning of year

Net Income (loss)

Dividends on common stock

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Balance, end of year

Accumulated other comprehensive income (loss):

Accumulated other comprehensive income:

Balance, beginning of year

Other comprehensive income, net of tax

Other comprehensive income (loss), net of tax

Balance, end of year

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Restricted stock grants, net of forfeitures

20,000 and 355,000 restricted shares issued, as of 2020 and 2019, respectively

Amortization of unearned compensation

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Restricted stock grants, net of forfeitures

20,000 and 355,000 restricted shares issued, as of 2020 and 2019, respectively

Purchase of 0 and 26,210 shares, as of 2020 and 2019, respectively, for treasury

Net shares acquired related to employee share-based compensation plans

Issuance of 4,701 and 10,862 shares, as of 2020 and 2019, respectively, shares under stock plans

Issuance of shares under stock plans

Balance, end of year

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Dividends declared on common stock per share

Common shares outstanding:

Balance, beginning of year

Net shares acquired under employee share-based compensation plans

Issuance of shares under stock plans

Restricted stock grants, net of forfeitures

Balance, end of year

See the accompanying notes to the consolidated financial statements.

ATLANTIC AMERICAN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENTS OF

Year Ended December 31,

(Dollars in thousands)

(In thousands)

Cash flows from operating activities:

Net Income (loss)

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

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of deferred acquisition costs

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Deferred income tax benefit

(Increase) decrease in receivables, net

Decrease in receivables, net

Increase (decrease) in insurance reserves and policyholder funds

Increase in accounts payable and accrued expenses

Net cash provided by (used in) operating activities

(Decrease) increase in accounts payable and accrued expenses

Net cash provided by operating activities

Cash flows from investing activities:

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Additions to property and equipment

Net cash (used in) provided by investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

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Proceeds from shares issued under stock plans

Treasury stock acquired — share repurchase authorization

Treasury stock acquired — net employee share-based compensation

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Dollars in thousands)

Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) which, for insurance

companies, differ in some respects from the statutory accounting practices prescribed or permitted by regulatory authorities.

These financial statements include the accounts of Atlantic American Corporation (“Atlantic American” or the “Parent”) and

its subsidiaries (collectively with the Parent, the “Company”).

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United

States of America (“GAAP”) which, for insurance companies, differ in some respects from the statutory accounting practices prescribed or permitted by regulatory authorities.

These financial statements include the accounts of Atlantic American

Corporation (“Atlantic American” or the “Parent”) and its subsidiaries (collectively with the Parent, the “Company”).

All significant intercompany accounts and transactions have been eliminated in consolidation.

Operating results achieved in any historical period are not necessarily indicative of

results to be expected in any future period.

At December 31, 2020, the Parent owned four insurance subsidiaries, Bankers Fidelity Life Insurance Company and its wholly-owned subsidiary, Bankers Fidelity Assurance Company (together known as

“Bankers Fidelity”), and American Southern Insurance Company and its wholly-owned subsidiary, American Safety Insurance Company (together known as “American Southern”), in addition to one non-insurance subsidiary, xCalibre Risk Services, Inc.

Parent has issued a guarantee of all liabilities of Bankers Fidelity.

Operating results achieved in any

historical period are not necessarily indicative of results to be expected in any future period.

At December 31, 2021, the Parent owned four

insurance subsidiaries, Bankers Fidelity Life Insurance Company and its wholly-owned subsidiary, Bankers Fidelity Assurance Company (together known as “Bankers Fidelity”), and American Southern Insurance Company and its wholly-owned subsidiary,

American Safety Insurance Company (together known as “American Southern”), in addition to one non-insurance subsidiary, xCalibre Risk

Services, Inc.

The Parent has issued a guarantee of all liabilities of Bankers Fidelity.

Premium Revenue and Cost Recognition

Life insurance premiums are recognized as revenue when due;

accident and health insurance premiums are recognized as revenue over the premium paying period and property and casualty insurance

premiums are recognized as revenue over the period of the contract in proportion to the amount of insurance protection provided.

Losses, benefits and expenses are accrued as incurred and are associated with premiums as they are earned so as to result

in recognition of profits over the lives of the contracts.

For traditional life insurance and long-duration health insurance, this association is accomplished by the provision of a future policy benefits reserve and the deferral and subsequent

amortization of the costs of acquiring business, which are referred to as “deferred policy acquisition costs” (principally commissions, premium taxes, and other incremental direct costs of issuing policies).

Deferred policy acquisition costs (“DAC”)

are amortized over the estimated premium-paying period of the related policies using assumptions consistent with those used in computing the future policy benefits reserve.

The Company provides for insurance benefits and losses on accident, health,

and property-casualty claims based upon estimates of projected ultimate losses.

DAC for property and casualty insurance and short-duration health insurance is amortized over the effective period of the related insurance policies.

commissions, if contractually applicable, are ultimately payable to agents based on the underlying profitability of a particular insurance contract or a group of insurance contracts, and are periodically evaluated and accrued as earned.

In periods in

which revisions are made to the estimated loss reserves related to the particular insurance contract or group of insurance contracts subject to such commissions, corresponding adjustments are also made to the related accruals.

DAC is expensed when

such costs are deemed not to be recoverable from future premiums (for traditional life and long-duration health insurance) and from the related unearned premiums and investment income (for property and casualty and short-duration health insurance).

accident and health insurance premiums are recognized as revenue over the premium paying

period and property and casualty insurance premiums are recognized as revenue over the period of the contract in proportion to the amount of insurance protection provided.

Losses, benefits and expenses are accrued as incurred and are associated

with premiums as they are earned so as to result in recognition of profits over the lives of the contracts.

For traditional life insurance and long-duration health insurance, this association is accomplished by the provision of a future policy

benefits reserve and the deferral and subsequent amortization of the costs of acquiring business, which are referred to as “deferred policy acquisition costs” (principally commissions, premium taxes, and other incremental direct costs of issuing

Deferred policy acquisition costs (“DAC”) are amortized over the estimated premium-paying period of the related policies using assumptions consistent with those used in computing the future policy benefits reserve.

The Company provides

for insurance benefits and losses on accident, health, and property-casualty claims based upon estimates of projected ultimate losses.

DAC for property and casualty insurance and short-duration health insurance is amortized over the effective

period of the related insurance policies.

Contingent commissions, if contractually applicable, are ultimately payable to agents based on the underlying profitability of a particular insurance contract or a group of insurance contracts, and are

periodically evaluated and accrued as earned.

In periods in which revisions are made to the estimated loss reserves related to the particular insurance contract or group of insurance contracts subject to such commissions, corresponding adjustments

are also made to the related accruals.

DAC is expensed when such costs are deemed not to be recoverable from future premiums (for traditional life and long-duration health insurance) and from the related unearned premiums and investment income (for

property and casualty and short-duration health insurance).

Intangibles consist of goodwill and other indefinite-lived intangible assets.

Goodwill represents the excess of cost over the fair value of net assets acquired and is not amortized.

indefinite-lived intangibles represent the value of licenses and are not amortized.

The Company periodically reviews its goodwill and other indefinite-lived intangibles to determine if any adverse conditions exist that could indicate impairment.

Conditions that could trigger impairment include, but are not limited to, a significant change in business climate that could affect the value of the related asset, an adverse action, or an assessment by a regulator.

No impairment of the Company’s

recorded intangibles was identified during any of the periods presented.

The Company’s investments in fixed maturities, which include bonds and redeemable preferred stocks, are classified as “available-for-sale” and, accordingly, are carried at fair value with the

after-tax difference from amortized cost, as adjusted if applicable, reflected in shareholders’ equity as a component of accumulated other comprehensive income or loss.

The Company’s equity securities, which include common and non-redeemable

preferred stocks, are carried at fair value with changes in fair value reported in net income.

The fair values of fixed maturities and equity securities are largely determined from publicly quoted market prices, when available, or independent broker

As of December 31, 2020, the Company owned a certain equity security in the amount of $143, with a valuation that was derived from techniques in which one or more of the significant inputs are unobservable.

As of December 31, 2020, all

fixed maturities were valued using publicly quoted market prices or techniques with observable inputs.

Values that are not determined using quoted market prices inherently involve a greater degree of judgment and uncertainty and therefore ultimately

greater price volatility than the value of securities with publicly quoted market prices.

Policy loans are carried at unpaid principal balance and real estate is carried at historical cost.

Other invested assets are comprised of investments in

limited partnerships, limited liability companies, and real estate joint ventures, and are accounted for using the equity method.

If the value of a fixed maturity security or other invested asset declines below its cost or amortized cost, as

applicable, and the decline is considered to be other than temporary, a realized loss is recorded to reduce the carrying value of the investment to its estimated fair value, which becomes the new cost basis.

Premiums and discounts related to investments are amortized or accreted over the life of the related investment as an adjustment to yield using the effective interest method.

Dividends and interest

income are recognized when earned or declared.

Goodwill represents the excess of cost over the fair value of net

assets acquired and is not amortized.

Other indefinite-lived intangibles represent the value of licenses and are not amortized.

The Company periodically reviews its goodwill and other indefinite-lived intangibles to determine if any adverse

conditions exist that could indicate impairment.

Conditions that could trigger impairment include, but are not limited to, a significant change in business climate that could affect the value of the related asset, an adverse action, or an

assessment by a regulator.

No impairment of the Company’s recorded intangibles was identified during any of the periods presented.

The Company’s investments in fixed maturities, which include bonds and redeemable preferred stocks, are classified as “available-for-sale” and,

accordingly, are carried at fair value with the after-tax difference from amortized cost, as adjusted if applicable, reflected in shareholders’ equity as a component of accumulated other comprehensive income or loss.

The Company’s equity

securities, which include common and non-redeemable preferred stocks, are carried at fair value with changes in fair value reported in net income.

The fair values of fixed maturities and equity securities are largely determined from publicly quoted

market prices, when available, or independent broker quotations.

As of December 31, 2021, the Company owned a certain equity security in the amount of $ 157 ,

with a valuation that was derived from techniques in which one or more of the significant inputs are unobservable.

As of December 31, 2021, the Company owned a certain fixed maturity in the amount of $ 250 , with a valuation that was derived from techniques in which one or more of the significant inputs are unobservable.

Values that are not determined using quoted market

prices inherently involve a greater degree of judgment and uncertainty and therefore ultimately greater price volatility than the value of securities with publicly quoted market prices.

Policy loans are carried at unpaid principal balance and real

estate is carried at historical cost.

Other invested assets are comprised of investments in limited partnerships and limited liability companies and are accounted for using the equity method.

If the value of a fixed maturity security or other

invested asset declines below its cost or amortized cost, as applicable, and the decline is considered to be other than temporary, a realized loss is recorded to reduce the carrying value of the investment to its estimated fair value, which becomes

the new cost basis.

Premiums and discounts related to investments are amortized or accreted over the life of the related investment as an adjustment to yield using the

effective interest method.

Dividends and interest income are recognized when earned or declared.

The cost of securities sold is based on specific identification.

Unrealized gains (losses) in the value of fixed maturities are accounted for as a direct increase (decrease) in accumulated other

comprehensive income in shareholders’ equity, net of deferred tax and, accordingly, have no effect on net income.

Unrealized gains (losses) in the value of fixed maturities are accounted for as a

direct increase (decrease) in accumulated other comprehensive income in shareholders’ equity, net of deferred tax and, accordingly, have no effect on net income.

Deferred income taxes represent the expected future tax consequences when the reported amounts of assets and liabilities are recovered or paid.

They arise from differences between the financial

reporting and tax basis of assets and liabilities and are adjusted for changes in tax laws and tax rates as those changes are enacted.

The provision for income taxes represents the total amount of income taxes due related to the current year, plus

the change in deferred income taxes during the year.

A valuation allowance is recognized if, based on management’s assessment of the relevant facts, it is more likely than not that some portion of a deferred tax asset will not be realized.

arise from differences between the financial reporting and tax basis of assets and liabilities and are adjusted for changes in tax laws and tax rates as those changes are enacted.

The provision for income taxes represents the total amount of income

taxes due related to the current year, plus the change in deferred income taxes during the year.

A valuation allowance is recognized if, based on management’s assessment of the relevant facts, it is more likely than not that some portion of a

deferred tax asset will not be realized.

Earnings Per Common Share

Basic earnings per common share are based on the weighted average number of common and participating shares outstanding during the relevant period.

Diluted earnings per common share are based on the

weighted average number of common and participating shares outstanding during the relevant period, plus options outstanding, if applicable, using the treasury stock method and the assumed conversion of the Series D preferred stock, if dilutive.

Diluted earnings per common share are based on the weighted average number of common and participating shares outstanding during the relevant period, plus options outstanding, if applicable, using the treasury stock method and the assumed

conversion of the Series D preferred stock, if dilutive.

Unless otherwise indicated, earnings per common share amounts are presented on a diluted basis.

Cash and Cash Equivalents

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

Cash and cash equivalents consist of cash on hand and investments in short-term, highly liquid securities with original maturities of three months

or less from date of purchase.

The Company enters into reinsurance agreements with other companies in the normal course of business.

For each reinsurance agreement, the Company determines if the agreement provides indemnification

against loss or liability relating to insurance risk in accordance with applicable accounting standards.

Reinsurance premiums and benefits paid or provided are accounted for on bases consistent with those used in accounting for the original policies

issued and the terms of the reinsurance contracts.

For each reinsurance agreement, the Company determines if the agreement provides indemnification against loss or

liability relating to insurance risk in accordance with applicable accounting standards.

Reinsurance premiums and benefits paid or provided are accounted for on bases consistent with those used in accounting for the original policies issued and

the terms of the reinsurance contracts.

Premiums, benefits and DAC are reported net of insurance ceded.

Reinsurance premiums from assumed business are estimated based on information received from ceding companies and reinsureds.

subsequent differences that arise regarding such estimates are recorded in the period in which they are determined.

Any subsequent

differences that arise regarding such estimates are recorded in the period in which they are determined.

Share-Based Transactions

For employee and director share-based compensation awards, the Company determines a grant date fair value based on the price of our publicly-traded common stock and recognize the related compensation

expense, adjusted for actual forfeitures, in the consolidated statement of operations on a straight-line basis over the requisite service period for the entire award.

For non-employee share-based compensation awards, the Company recognizes the impact

during the period of performance, and the fair value of the award is measured as of the date performance is complete, which is the vesting date.

For employee and director share-based compensation awards, the Company determines a grant date fair value based on the price of our publicly-traded

common stock and recognize the related compensation expense, adjusted for actual forfeitures, in the consolidated statement of operations on a straight-line basis over the requisite service period for the entire award.

For non-employee share-based

compensation awards, the Company recognizes the impact during the period of performance, and the fair value of the award is measured as of the date performance is complete, which is the vesting date.

Treasury Stock

Treasury stock is reflected as a reduction of shareholders’ equity at cost.

The Company uses the first-in-first-out (“FIFO”) purchase cost to determine the cost of treasury stock that is reissued.

The Company uses the first-in-first-out (“FIFO”) purchase cost to

determine the cost of treasury stock that is reissued.

The Company includes any gains and losses in additional paid-in capital when treasury stock is reissued.

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Adoption of New Accounting Standards

Fair Value Measurement – Changes to the Disclosure Requirements for Fair Value Measurement.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value

Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”).

This guidance removes the following disclosure requirements from Topic 820:

(1) the amount of and reasons for transfers

between Level 1 and Level 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels, and (3) the valuation processes for Level 3 fair value measurements.

This disclosure also includes the changes in unrealized gains and

losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair

value measurements.

The Company adopted ASU 2018-13 as of January 1, 2020.

The adoption of this ASU did not have an impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No.

2017-04, Intangibles – Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment (“ASU

ASU 2017-04 is intended to simplify the evaluation of goodwill.

The updated guidance requires recognition and measurement of goodwill impairment based on the excess of the carrying value of the reporting unit compared to its estimated

fair value, with the amount of the impairment not to exceed the carrying value of the reporting unit’s goodwill.

Under the prior accounting guidance, if the reporting unit’s carrying value exceeds its estimated fair value, the Company allocates the

fair value of the reporting unit to all of the assets and liabilities of the reporting unit to determine an implied goodwill value.

An impairment loss is then recognized for the excess, if any, of the carrying value of the reporting unit’s goodwill

compared to the implied goodwill value.

The Company adopted ASU 2017-04 as of January 1, 2020.

Income Taxes – Simplifying the Accounting for Income Taxes.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”).

This updated guidance is intended to simplify the accounting for income taxes by removing several exceptions contained in existing guidance and amending

other existing guidance to simplify several other income tax accounting matters.

The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2020, although earlier adoption is permitted.

adopted ASU 2019-12 as of January 1, 2021.

The adoption of this ASU did not have an impact on the Company’s consolidated financial statements.

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2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform

on Financial Reporting (“ASU 2020-04”).

This guidance provides optional expedients and exceptions for applying GAAP to investments, derivatives, or other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate

expected to be discontinued because of reference rate reform.

Along with the optional expedients, the amendments include a general principle that permits an entity to consider contract modifications due to reference reform to be an event that does

not require contract re-measurement at the modification date or reassessment of a previous accounting determination.

Additionally, a company may make a one-time election to sell, transfer, or both sell and transfer debt securities classified as held

to maturity that reference a rate affected by reference rate reform and that were classified as held to maturity before January 1, 2020.

This standard may be elected over time through December 31, 2022 as reference rate reform activities occur.

Company is currently assessing the effect of adopting this guidance on its financial condition and results of operations.

Investments – Equity Securities.

In January 2020, the FASB issued ASU No.

2020-01 (“ASU 2020-01”) Investments-Equity Securities (Topic 321), Investments-Equity

Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.

This update, among others, clarifies the interaction of the accounting for equity securities under

Topic 321 and investments under the equity method of accounting in Topic 323 when there is a change in level of ownership or degree of influence.

ASU 2020-01 is effective for the Company beginning with the first quarter of 2021 and will be applied

prospectively.

Early adoption is permitted.

This guidance is not expected to have a material impact on the Company’s consolidated financial statements.

Income Taxes – Simplifying the Accounting for Income Taxes.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the

Accounting for Income Taxes (“ASU 2019-12”).

This updated guidance is intended to simplify the accounting for income taxes by removing several exceptions contained in existing guidance and amending other existing guidance to simplify several other

income tax accounting matters.

The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2020, although earlier adoption is permitted.

The Company expects to adopt the updated guidance January 1, 2021,

and does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”).

This guidance provides optional expedients and exceptions for applying GAAP to investments, derivatives, or other transactions that reference the London

Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform.

Along with the optional expedients, the amendments include a general principle that permits an entity to consider contract

modifications due to reference reform to be an event that does not require contract re-measurement at the modification date or reassessment of a previous accounting determination.

Additionally, a company may make a one-time election to sell,

transfer, or both sell and transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform and that were classified as held to maturity before January 1, 2020.

This standard may be elected over time

through December 31, 2022 as reference rate reform activities occur.

The Company is currently assessing the effect of adopting this guidance on its financial condition and results of operations.

Accounting for Long-Duration Contracts.

In August 2018, the FASB issued ASU No.

2018-12, Financial Services —Insurance (Topic 944):

Targeted Improvements to

the Accounting for Long-Duration Contracts (“ASU 2018-12”).

This guidance (1) improves the timeliness of recognizing changes in the liability for future policy benefits and modifies the rate used to discount future cash flows, (2) simplifies and

improves the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts, (3) simplifies the amortization of deferred acquisition costs, and (4) improves the effectiveness of the required

2018-12, Financial Services

—Insurance (Topic 944):

Targeted Improvements to the Accounting for Long-Duration Contracts (“ASU 2018-12”).

This guidance (1) improves the timeliness of recognizing changes in the liability for future policy benefits and modifies the rate used to

discount future cash flows, (2) simplifies and improves the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts, (3) simplifies the amortization of deferred acquisition costs, and (4)

improves the effectiveness of the required disclosures.

ASU 2018-12 is effective for interim and annual reporting periods beginning after December 15, 2024, although earlier adoption is permitted.

The Company has not yet determined the method or timing for adoption or estimated the impact on

the Company’s consolidated financial statements.

The Company is currently evaluating the new

guidance, but has not yet determined the method or timing for adoption or estimated the impact on the Company’s consolidated financial statements.

Financial Instruments – Credit Losses.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit

Losses on Financial Instruments (“ASU 2016-13”).

ASU 2016-13 requires entities to measure all expected credit losses for financial instruments (including reinsurance recoverable and policy loans) held at the reporting date based on historical

experience, current conditions and reasonable and supportable forecasts.

2016-13, Financial Instruments

– Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

ASU 2016-13 requires entities to measure all expected credit losses for financial instruments (including reinsurance recoverable and policy loans)

held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts.

Under current GAAP, entities generally recognize credit losses when it is probable that the loss has been incurred.

ASU 2016-13 will remove all recognition thresholds and will

require entities to recognize an allowance for credit losses equal to the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the entity expects to collect over the instrument’s contractual

will remove all recognition thresholds and will require entities to recognize an allowance for credit losses equal to the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the entity expects

to collect over the instrument’s contractual life.

ASU 2016-13 also amends the credit loss measurement guidance for available-for-sale (“AFS”) debt securities and beneficial interests in securitized financial assets.

Credit losses on AFS debt securities carried at fair value will continue to be

measured as an other than temporary impairment (“OTTI”) when incurred;

Credit losses on AFS debt

securities carried at fair value will continue to be measured as an other than temporary impairment (“OTTI”) when incurred;

however, the losses will be recognized through an allowance and no longer as an adjustment to the cost basis.

Recoveries of OTTI will be recognized as reversals of valuation

allowances and no longer accreted as investment income through an adjustment to the investment yield.

The allowance on AFS debt securities cannot cause the net carrying value to be below fair value and, therefore, it is possible that increases in

fair value due to decreases in market interest rates could cause the reversal of a valuation allowance and increase net income.

The new guidance will also require purchased financial assets with a more-than-insignificant amount of credit

deterioration since original issuance to be recorded based on contractual amounts due and an initial allowance recorded at the date of purchase.

For the Company, the amendments in ASU 2016-13 will be effective for interim and annual reporting periods

beginning after December 15, 2022.

Recoveries of

OTTI will be recognized as reversals of valuation allowances and no longer accreted as investment income through an adjustment to the investment yield.

The allowance on AFS debt securities cannot cause the net carrying value to be below fair value

and, therefore, it is possible that increases in fair value due to decreases in market interest rates could cause the reversal of a valuation allowance and increase net income.

The new guidance will also require purchased financial assets with a

more-than-insignificant amount of credit deterioration since original issuance to be recorded based on contractual amounts due and an initial allowance recorded at the date of purchase.

For the Company, the amendments in ASU 2016-13 will be

effective for interim and annual reporting periods beginning after December 15, 2022.

Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

The Company has not yet determined the timing of adoption.

Implementation matters

yet to be addressed include determining the impact of valuation allowances on the effective interest method for recognizing interest income from AFS debt securities as well as updating our investment accounting system functionality to adjust

valuation allowances based on changes in fair value.

The estimated effect on the Company’s consolidated financial statements can only be estimated based on the current investment portfolio at any given point in time, and accordingly, has not

currently been determined.

The Company will adopt on

January 1, 2023.

Implementation matters yet to be addressed include determining the impact of valuation allowances on the effective interest method for recognizing interest income from AFS debt securities as well as updating our investment

accounting system functionality to adjust valuation allowances based on changes in fair value.

The estimated effect on the Company’s consolidated financial statements can only be estimated based on the current investment portfolio at any given

point in time, and accordingly, has not currently been determined.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and

liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period.

Significant estimates and assumptions are used in developing and evaluating deferred income

taxes, deferred acquisition costs, insurance reserves, investments, and receivables, among others, and actual results could differ materially from management’s estimates.

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 December 31, 2020 and December 31, 2019.

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that

affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period.

Significant estimates and assumptions are used

in developing and evaluating deferred income taxes, deferred acquisition costs, insurance reserves, investments, and receivables, among others, and actual results could differ materially from management’s estimates.

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 December 31, 2021 and December 31, 2020.

Fixed maturities were comprised of the following:

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Total fixed maturities

Bonds having an amortized cost of $10,670 and $10,669 and included in the tables above were on deposit with insurance regulatory authorities at December 31, 2020 and 2019, respectively, in

accordance with statutory requirements.

Bonds having an amortized cost of $ 11,169

and $ 10,670 and included in the tables above were on deposit with insurance regulatory authorities at December 31, 2021 and 2020,

respectively, in accordance with statutory requirements.

Additionally, bonds having an amortized cost of $ 5,371 and $ 1,997 and included in the tables above were pledged as collateral to FHLB at December 31, 2021 and 2020, respectively.

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Total equity securities

The carrying value and amortized cost of the Company’s investments in fixed maturities at December 31, 2020 and 2019 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.

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

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

Due in one year or less

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Asset backed securities

The following tables present the Company’s unrealized loss aging for securities by type and length of time the security was in a continuous unrealized loss position as of December 31, 2020 and

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

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

Less than 12 months

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Government agencies and authorities

Obligations of states and political subdivisions

Corporate securities

Total temporarily impaired securities

The evaluation for an OTTI is a quantitative and qualitative process, which is subject to risks and uncertainties in the determination of whether declines in the fair value of investments are other

than temporary.

Potential risks and uncertainties include, among other things, changes in general economic conditions, an issuer’s financial condition or near term recovery prospects and the effects of changes in interest rates.

In evaluating a

potential impairment, the Company considers, among other factors, management’s intent and ability to hold the securities until price recovery, the nature of the investment and the expectation of prospects for the issuer and its industry, the status

of an issuer’s continued satisfaction of its obligations in accordance with their contractual terms, and management’s expectation as to the issuer’s ability and intent to continue to do so, as well as ratings actions that may affect the issuer’s

credit status.

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

As of December 31, 2020 and 2019, there were twenty and thirty 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 decrease in the number and value of securities in an unrealized loss position during the year ended December 31, 2020, was primarily

attributable to improvement in market values in certain of the Company’s fixed maturity securities as a result of a declining 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 December 31, 2020.

The evaluation for an other than temporary impairment (“OTTI”) is a quantitative and qualitative process, which is subject to risks and

uncertainties in the determination of whether declines in the fair value of investments are other than temporary.

Potential risks and uncertainties include, among other things, changes in general economic conditions, an issuer’s financial

condition or near term recovery prospects and the effects of changes in interest rates.

In evaluating a potential impairment, the Company considers, among other factors, management’s intent and ability to hold the securities until price

recovery, the nature of the investment and the expectation of prospects for the issuer and its industry, the status of an issuer’s continued satisfaction of its obligations in accordance with their contractual terms, and management’s

expectation as to the issuer’s ability and intent to continue to do so, as well as ratings actions that may affect the issuer’s credit status.

There were no OTTI charges

recorded during the years ended December 31, 2021 and 2020.

As of December 31, 2021 and 2020, there were sixty-one

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 and value of securities in an unrealized loss position during the year ended December 31, 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 December 31, 2021.

Investment income was earned from the following sources:

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Sales proceeds

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

Proceeds from the sales of equity securities were as follows:

Sales proceeds

Sales of available-for-sale securities in 2020 and 2019 were primarily a result of improving the overall risk versus return profile of the portfolio.

In addition, the Company sold its interest in a

certain limited liability company held as other invested assets to a third-party.

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

Sales proceeds

Sales of available-for-sale securities in 2021 and 2020 were primarily a result of improving the overall risk versus return profile of the

In addition, the Company sold its interest in a certain limited liability company held as other invested assets to a third-party.

The transaction closed prior to December 31, 2020.

The Company recorded gross realized gains on this sale of $6.9 million and proceeds of $12.7 million which

settled after year end.

The following table presents the portion of unrealized gains (losses) related to equity securities still held for the years ended December 31, 2020 and 2019.

The Company recorded gross realized gains on this

sale of $ 6.9 million and proceeds of $ 12.7

million which settled after year end.

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

2021 and 2020.

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) on equity securities, net

The Company’s bond portfolio included 97% investment grade securities, as defined by the NAIC, at December 31, 2020.

The Company’s bond portfolio included 99 %

investment grade securities, as defined by the NAIC, at December 31, 2021.

Variable Interest Entities

The Company holds passive interests in a number of entities that are considered to be variable interest entities (“VIEs”) under GAAP guidance.

The Company’s VIE interests principally consist of

interests in limited partnerships and limited liability companies formed for the purpose of achieving diversified equity returns.

The Company’s VIE interests, carried as a part of other invested assets, totaled $3,238 and $9,960 at December 31,

2020 and 2019, respectively.

The Company’s VIE interests, carried as a part of investment in unconsolidated subsidiaries, totaled $1,238 at December 31, 2020 and 2019.

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

Therefore, the Company has not

consolidated these VIEs.

Company’s VIE interests principally consist of interests in limited partnerships and limited liability companies formed for the purpose of achieving diversified equity returns.

The Company’s VIE interests, carried as a part of other invested

assets, totaled $ 198 and $ 3,238

at December 31, 2021 and 2020, respectively.

The Company’s VIE interests, carried as a part of investment in unconsolidated subsidiaries, totaled $ 1,238

at December 31, 2021 and 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

primary beneficiary.

Therefore, the Company has not consolidated these VIEs.

The Company’s involvement with each VIE is limited to its direct ownership interest in the VIE.

The Company has no arrangements with any of the VIEs to provide other financial support to or on behalf of the VIE.

Company’s maximum loss exposure relative to these investments was limited to the carrying value of the Company’s investment in the VIEs, which amount to $4,476 and $11,198, at December 31, 2020 and 2019, respectively.

As of December 31, 2020 and

2019, the Company had outstanding commitments totaling $1,997, whereby the Company is committed to fund these investments and may be called by such VIEs during the commitment period to fund the purchase of new investments and partnership expenses.

The Company has no arrangements with any of the VIEs to provide other

financial support to or on behalf of the VIE.

The Company’s maximum loss exposure relative to these investments was limited to the carrying value of the Company’s investment in the VIEs, which amount to $ 1,436 and $ 4,476 , at December 31, 2021 and 2020, respectively.

As of December 31, 2021 and 2020, the Company had outstanding commitments totaling $ 1,997 , whereby the Company is committed to fund

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

Disclosures About Fair Value of Financial Instruments

The estimated fair values have been determined by the Company using available market information from various market sources and appropriate valuation methodologies as of the respective dates.

The estimated fair values have been determined by the Company using available market information from various market sources and appropriate

valuation methodologies as of the respective dates.

However, considerable judgment is necessary to interpret market data and to develop the estimates of fair value.

Although management is not aware of any factors that would significantly affect the estimated fair value amounts, the estimates

presented herein are not necessarily indicative of the amounts which the Company could realize in a current market exchange.

The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair

value amounts.

The following describes the fair value hierarchy and provides information as to the extent to which the Company uses fair value to measure the value of its financial instruments and information

about the inputs used to value those financial instruments.

Although management is not aware of any factors that would significantly affect

the estimated fair value amounts, the estimates presented herein are not necessarily indicative of the amounts which the Company could realize in a current market exchange.

The use of different market assumptions and/or estimation methodologies

may have a material effect on the estimated fair value amounts.

The following describes the fair value hierarchy and provides information as to the extent to which the Company uses fair value to measure the

value of its financial instruments and information about the inputs used to value those financial instruments.

The fair value hierarchy prioritizes the inputs in the valuation techniques used to measure fair value into three broad levels.

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observable from objective sources.

With little or no observable market, the determination of fair values uses considerable judgment and represents the Company’s best estimate of an amount that could be realized in a market exchange for the

asset or liability.

the asset or liability.

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

As of December 31, 2020 and December 31, 2019, the value of the fixed maturity valued

using Level 3 criteria was $0 for both years.

As of December 31, 2021 and December 31, 2020, the value of the fixed maturity

valued using Level 3 criteria was $ 250 and $ 0 , respectively.

As of December 31, 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 valued at

The equity security is

not traded and valued at cost.

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

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Cash Equivalents .

The carrying amount approximates fair value due to the short-term nature of the instruments.

The carrying amount approximates fair value

due to the short-term nature of the instruments.

Fixed Maturities and Common and Non-Redeemable Preferred Stocks .

The carrying amount is determined from publicly

quoted market prices.

carrying amount is determined from publicly quoted market prices.

Certain fixed maturities do not have publicly quoted values and consist solely of issuances of pooled debt obligations of multiple, smaller financial services companies.

They are not actively traded and valuation techniques

used to measure fair value are based on future estimated cash flows discounted at reasonable estimated rates of interest.

Other qualitative and quantitative information is also considered, as applicable.

not actively traded and valuation techniques used to measure fair value are based on future estimated cash flows discounted at reasonable estimated rates of interest.

Other qualitative and quantitative information is also considered, as

Nonrecurring Fair Value Measurements

Non-publicly Traded Invested Assets .

The fair value of investments in certain limited partnerships which are

included in other invested assets on the consolidated balance sheet were determined by officers of those limited partnerships.

The fair value of

investments in certain limited partnerships which are included in other invested assets on the consolidated balance sheet were determined by officers of those limited partnerships.

Policy Loans .

Policy loans, which are categorized as Level 2 fair value measurements, are carried at the unpaid

principal balances.

Policy loans, which are categorized as Level 2

fair value measurements, are carried at the unpaid principal balances.

Junior Subordinated Debentures .

The fair value is estimated based on observable interest rates and yields for debt

instruments having similar characteristics.

The fair value is estimated

based on observable interest rates and yields for debt instruments having similar characteristics.

As of December 31, 2021, financial instruments carried at fair value were measured on a recurring basis as summarized below:

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Cash equivalents

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

The following table sets forth the carrying amount, estimated fair value and level within the fair value hierarchy of the Company’s financial instruments as of December 31, 2020 and 2019.

The following table sets forth the carrying amount, estimated fair value and level within the fair value hierarchy of the Company’s financial

instruments as of December 31, 2021 and 2020.

Hierarchy (1)

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Junior Subordinated Debentures, net

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.

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.

Deferred Policy Acquisition Costs

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Insurance Reserves and Policyholder Funds

The following table presents the Company’s reserves for life, accident and health, and property and casualty losses, claims and loss adjustment expenses at December 31, 2020 and 2019.

The following table presents the Company’s reserves for life, accident and health, and property and casualty losses, claims and loss adjustment

expenses at December 31, 2021 and 2020.

Insurance In Force, Net

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Total insurance reserves and policyholder funds

The group life in force amounts increased significantly during 2020.

However, the impact on future policy benefits is not significant due to the deferred premium offset to the gross benefit reserve.

Annualized premiums for accident and health insurance policies were $ 101,315 and $ 109,430 at December 31, 2021 and 2020, respectively.

Future Policy Benefits

Liabilities for life insurance future policy benefits are based upon assumed future investment yields, mortality rates, and withdrawal rates after giving effect to possible risks of unexpected

claim experience.

The assumed mortality, withdrawal rates and expenses are based upon the Company’s experience modified as necessary to reflect anticipated trends and are generally established at contract inception.

The interest rates assumed for

life, accident and health future policy benefits are generally:

(i) 2.5% to 5.5% for issues prior to 1977, (ii) 7% graded to 5.5% for 1977 through 1979 issues, (iii) 9% for 1980 through 1987 issues, (iv) 5% to 7% for 1988 through 2009 issues, (v)

4% for 2010 through 2012 issues, and (vi) 3.5% to 4.0% for 2013 through 2020 issues.

Liabilities for life insurance future policy benefits are based upon assumed future investment yields, mortality rates, and lapse rates after

giving effect to possible risks of unexpected claim experience.

The assumed mortality and lapse rates are based upon the Company’s experience modified as necessary to reflect anticipated trends and are generally established at contract

The interest rates assumed for life, accident and health future policy benefits are generally:

(i) 2.5 % to 5.5 % for issues prior to 1977 , (ii) 5.5 % to 7.0 % for 1977 through 1979 issues, (iii) 9.0 %

for 1980 through 1987 issues, (iv) 5.0 %

to 7.0 % for 1988 through 2009

issues, (v) 4.0 % for 2010 through 2012

issues, (vi) 3.5 % to 4.0 %

for 2013 through 2020 issues, and (vii) 3.0 %

for 2021 issues.

Loss and Claim Reserves

Loss and claim reserves represent estimates of projected ultimate losses and are based upon:

(a) management’s estimate of ultimate liability and claims adjusters’ evaluations for unpaid claims

reported prior to the close of the accounting period, (b) estimates of IBNR claims based on past experience, and (c) estimates of loss adjustment expenses.

The estimated liability is periodically reviewed by management and updated, with changes to

the estimated liability recorded in the statement of operations in the year in which such changes are known.

(a) management’s estimate of ultimate liability and

claims adjusters’ evaluations for unpaid claims reported prior to the close of the accounting period, (b) estimates of incurred but not reported (“IBNR”) claims based on past experience, and (c) estimates of loss adjustment expenses.

estimated liability is periodically reviewed by management and updated, with changes to the estimated liability recorded in the statement of operations in the year in which such changes are known.

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

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Balance at December 31

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.

Additionally, the Company experienced favorable development in the surety line of business in American Southern due to a reduction in exposure coupled with recoveries on

certain prior year losses.

Prior years’ development was primarily the result of better than expected development on prior years loss and claim reserves for certain lines of business in American Southern, somewhat offset by unfavorable development on prior years

loss and claim reserves for the Medicare Supplement line of business in Bankers Fidelity.

Prior years’ development was primarily the result of better than expected development on prior

years loss and claim reserves for certain lines of business in American Southern, somewhat offset by unfavorable development on prior years’ loss and claim reserves for the Medicare Supplement line of business in Bankers Fidelity.

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.

Additionally, the Company experienced

favorable development in the surety line of business in American Southern due to a reduction in exposure coupled with recoveries on certain prior year losses.

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

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Liability for Unpaid Losses, Claims and Loss Adjustment Expenses

The following is information, by significant product lines, about incurred and paid claims development as of December 31, 2020, net of reinsurance, as well as the cumulative number of reported

claims and the total of IBNR reserves plus expected development on reported claims included within the net incurred claims amounts.

The information presented for the years ended December 31, 2015 and prior is presented as supplementary information

and is unaudited.

The following is information, by significant product lines, about incurred and paid claims development as of December 31, 2021, net of

reinsurance, as well as the cumulative number of reported claims and the total of IBNR reserves plus expected development on reported claims included within the net incurred claims amounts.

The information presented for the years ended December

31, 2015 and prior is presented as supplementary information and is unaudited.

Medicare Supplement

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As of December 31, 2021

Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of

Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance

Reported Claims

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Liabilities for losses, claims and loss adjustment expenses, net of reinsurance

The cumulative number of reported claims for the Medicare supplement line of business is the number of distinct claims incurred and submitted to Medicare for payment in the given year.

payments on the same claim are not counted in the frequency information.

Estimated ultimate claims incurred, using claims data reported during each month of any given year, are calculated using the chain ladder method modified to use seasonality

and trend-adjusted expected claims for the final four months.

Additional adjustments to the estimated ultimate claims incurred are then applied to account for seasonal changes in billing and payment frequencies.

The IBNR reserve is calculated as

estimated ultimate claims less paid claims and claims in course of settlement.

The cumulative number of reported claims for the Medicare supplement line of business is the number of distinct claims incurred and submitted to

Medicare for payment in the given year.

Multiple payments on the same claim are not counted in the frequency information.

Estimated ultimate claims incurred, using claims data reported during each month of any given year, are calculated using the

chain ladder method modified to use seasonality and trend-adjusted expected claims for the most recent four-month period prior to the statement date.

Additional adjustments to the estimated ultimate claims incurred are then applied to account for

seasonal changes in claim experience and in the rate of claim processing.

The IBNR liability is calculated as estimated ultimate claims less paid claims and claims in course of settlement.

Thirty-six months of loss data are used to develop the estimated ultimate incurred claims.

Similar approaches are used for other less significant health products,

subject to modifications to account for unique aspects of the product.

Similar approaches are used for other less significant health products, subject to modifications

to account for unique aspects of the products.

Automobile Liability

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As of December 31,

Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of

Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance

Reported Claims

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As of December 31, 2021

Incurred Losses, Claims and Allocated Loss Adjustment Expenses,

Net of Reinsurance

Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance

Accident Year

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As of December 31,

Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of

Reported Claims

Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance

Accident Year

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As of December 31, 2021

Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of

Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance

Reported Claims

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Liabilities for losses, claims and loss adjustment expenses, net of reinsurance

For the property and casualty lines of business, the number of claims presented above equals the number of occurrences by type of claim reported to the Company.

The number of claims reported during

a given year corresponds to the number of claims records opened during the year.

For the property and casualty lines of business, the number of claims presented above equals the number of occurrences by type of claim reported

to the Company.

The number of claims reported during a given year corresponds to the number of claims records opened during the year.

Frequency information is maintained on a cumulative basis by accident year by line of business.

For automobile claims, a claim count is separately maintained for

bodily injury, property damage and physical damage claims.

The Company has consistently monitored claim frequency on this basis, and believes this provides more meaningful information than using claimant count which can change over the course of

settling a claim.

In general, when a claim is reported, claims representatives establish a “case reserve” for the estimated amount of the ultimate payment based on the known information of the claim at that time.

For automobile

claims, a claim count is separately maintained for bodily injury, property damage and physical damage claims.

The Company has consistently monitored claim frequency on this basis, and believes this provides more meaningful information than using

claimant count which can change over the course of settling a claim.

In general, when a claim is reported, claims representatives establish a “case reserve” for the estimated amount of the ultimate payment based on

the known information of the claim at that time.

Claims managers review and monitor all property and casualty claims in excess of $ 25,000 .

As new information becomes available or payments are made on a claim, the case reserve is adjusted to reflect the revised estimate of the ultimate amount to

Estimates and assumptions pertaining to individual claims are based on complex and subjective judgments and subject to change at any time as new information becomes available.

In addition to case reserves, IBNR reserves are established to provide for claims which have not been reported to the Company as of the reporting date as well as potential adverse development on

known case reserves.

As new information becomes available or payments are made on a claim, the case reserve is adjusted to reflect the revised estimate of the ultimate amount to be paid out.

Estimates and assumptions pertaining to individual claims are based on

complex and subjective judgments and subject to change at any time as new information becomes available.

In addition to case reserves, IBNR reserves are established to provide for claims which have not been reported to the Company as of the reporting

date as well as potential adverse development on known case reserves.

IBNR reserve estimates are derived through a number of analytical techniques.

Actuarial data is analyzed by line of business, coverage and accident year.

Qualitative factors are also considered in determining IBNR reserves and

include such factors as judicial decisions, general economic trends such as inflation, changes in policy forms, and underwriting changes.

Reserves are reviewed quarterly and any indicated adjustments are made.

Because of the inherent uncertainties in establishing both case and IBNR reserves, ultimate loss experience may prove better or worse than indicated by the combined claim reserves.

Adjustments to

claim reserves are reflected in the period recognized and could increase or decrease earnings for the period.

Qualitative factors

are also considered in determining IBNR reserves and include such factors as judicial decisions, general economic trends such as inflation, changes in policy forms, and underwriting changes.

Reserves are reviewed quarterly and any indicated

adjustments are made.

Because of the inherent uncertainties in establishing both case and IBNR reserves, ultimate loss experience may prove better or worse than

indicated by the combined claim reserves.

Adjustments to claim reserves are reflected in the period recognized and could increase or decrease earnings for the period.

The following is supplementary information about average historical claims duration as of December 31, 2021.

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General Liability

The reconciliation of the net incurred and paid claims development tables to the liability for losses, claims and loss adjustment expenses is as follows:

The reconciliation of the net incurred and paid claims development tables to the liability for losses, claims and loss adjustment expenses is as

December 31, 2021

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

In accordance with general practice in the insurance industry, portions of the life, property and casualty insurance written by the Company are reinsured;

however, the Company remains liable with

respect to reinsurance ceded should any reinsurer be unable or unwilling to meet its obligations.

In accordance with general practice in the insurance industry, portions of the life, property and casualty insurance written by the Company are

however, the Company remains liable with respect to reinsurance ceded should any reinsurer be unable or unwilling to meet its obligations.

Approximately 99.6 % of the Company’s reinsurance recoverables were due from a single reinsurer as of December 31, 2021.

Reinsurance recoverables of

$28,980 were due from General Re Corporation, rated “AA+” by Standard & Poor’s and “A++” (Superior) by A.M.

Allowances for uncollectible amounts are established against reinsurance recoverables, if appropriate.

Reinsurance recoverables of $ 27,310 were due from General Re Corporation, rated “AA+” by Standard & Poor’s and “A++” (Superior) by A.M.

Allowances for uncollectible amounts are established

against reinsurance recoverables, if appropriate.

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

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Total income taxes were allocated as follows:

Total tax expense (benefit) on income

Total tax expense on income

Tax expense on components of shareholders’ equity:

Net unrealized gains on investment securities

Total tax expense

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

Net unrealized gains (losses) on investment securities

Total tax expense (benefit)

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

Federal income tax provision

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Dividends-received deduction

Meals & entertainment

Vested stock & club dues

Meals and entertainment

Vested stock and club dues

Parking disallowance

Adjustment for prior years’ estimates to actual

Income tax expense (benefit)

Income tax expense

Effective tax rate

The primary differences between the effective tax rate and the federal statutory income tax rate for 2020 resulted from permanent differences related to meals & entertainment and vested stock

Also contributing to differences between the effective tax rate and the federal statutory income tax rate were provision-to-filed return adjustments that are generally updated at the completion of the third quarter of each fiscal year and

were $18 in the year ended December 31, 2020.

The primary differences between the effective tax rate and the federal statutory income tax rate for 2019 resulted from permanent differences related to meals & entertainment and vested stock

Also contributing to differences between the effective tax rate and the federal statutory income tax rate was the dividends-received deduction (“DRD”).

The current estimated DRD is adjusted as underlying factors change and can vary from

estimates based on, but not limited to, actual distributions from investments as well as the amount of the Company’s taxable income.

The primary differences between the effective tax rate and the federal statutory income tax rate for 2021 resulted from the adjustment for prior years’ estimates to actual that

are generally updated at the completion of the third quarter of each fiscal year and were $ 85 in the year ended December 31, 2021.

Also contributing to differences between the effective tax rate and the federal statutory income tax rate were permanent differences related to meals and entertainment and vested stock and club dues.

Another contributing factor was the

dividends-received deduction (“DRD”).

The current estimated DRD is adjusted as underlying factors change and can vary from estimates based on, but not limited to, actual distributions from investments as well as the amount of the Company’s

taxable income.

The primary differences between the effective tax rate and the federal statutory income tax rate for 2020 resulted from permanent differences

related to meals and entertainment and vested stock and club dues.

Also contributing to differences between the effective tax rate and the federal statutory income tax rate were adjustment for prior years’ estimates to actual that are generally

updated at the completion of the third quarter of each fiscal year and were $ 18 in the year ended December 31, 2020.

Deferred tax assets and liabilities at December 31, 2021 and 2020 were comprised of the following:

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Total deferred tax liabilities

Net deferred tax (liability) asset

The components of income tax expense (benefit) were:

Net deferred tax asset (liability)

The components of income tax expense were:

Current – Federal

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The Company has formal tax-sharing agreements, and files a consolidated income tax return, with its subsidiaries.

Tax years 2017, 2018 and 2019 are considered open tax years that remain subject to

examination by the Internal Revenue Service.

Tax years 2018, 2019 and 2020 are considered open tax years that remain subject to examination by the Internal Revenue Service.

Credit Arrangements

Company is preparing for the expected discontinuation of LIBOR by identifying, assessing and monitoring risks associated with LIBOR transition.

Preparation includes taking steps to update operational processes to support alternative reference

rates and models, as well as evaluating legacy contracts for any changes that may be required, including the determination of applicable fallbacks.

On May 12, 2021, the Company entered into a Revolving Credit Agreement (the “Credit Agreement”) with Truist Bank as the lender (the “Lender”).

The Credit Agreement provides for

an unsecured $ 10 million revolving credit facility that matures on April 12, 2024 .

Under the Credit Agreement, the Company will pay interest on the unpaid principal balance of outstanding revolving loans at the LIBOR Rate (as defined in

the Credit Agreement) plus 2.00 %, subject to a LIBOR floor rate of 1.00 %.

The Credit Agreement requires the Company to comply with certain covenants, including a debt to capital ratio that restricts the Company from incurring consolidated indebtedness

that exceeds 35 % of the Company’s consolidated capitalization at any time.

The Credit Agreement also contains customary

representations and warranties and events of default.

Events of default include, among others, (a) the failure by the Company to pay any amounts owed under the Credit Agreement when due, (b) the failure to perform and not timely remedy

certain covenants, (c) a change in control of the Company and (d) the occurrence of bankruptcy or insolvency events.

Upon an event of default, the Lender may, among other things, declare all obligations under the Credit Agreement immediately

due and payable and terminate the revolving commitments.

As of December 31 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

The Company has two unconsolidated

Connecticut statutory business trusts, which exist for the exclusive purposes of:

(i) issuing trust preferred securities (“Trust Preferred Securities”) representing undivided beneficial interests in the assets of the trusts;

(ii) investing the

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

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

At December 31, 2020, the effective interest rate was 4.28%.

31, 2021, the effective interest rate was 4.22 %.

The financial structure of each of Atlantic American Statutory Trust I and II, as of December 31, 2021 and 2020, was as follows:

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LIBOR + 4.00 %

LIBOR + 4.10%

Interest payable

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Atlantic American Corporation

For each of the respective debentures, the Company has the right at any time, and from time to time, to defer payments of interest on the Junior Subordinated Debentures for a period not exceeding 20 consecutive quarters up to the

For each of the respective debentures, the Company has the right at any time, and from time to time, to defer

payments of interest on the Junior Subordinated Debentures for a period not exceeding 20 consecutive quarters up to the

debentures’ respective maturity dates.

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interest or premium payments on or repurchase any debt securities that rank equally with or junior to the Junior Subordinated Debentures.

The Company has the right at any time to dissolve each of the trusts and cause the Junior Subordinated

Debentures to be distributed to the holders of the Trust Preferred Securities.

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

The Company has the right at any time to dissolve each of the trusts and cause the Junior

Subordinated Debentures to be distributed to the holders of the Trust Preferred Securities.

The Junior Subordinated Debentures are unsecured and rank junior and subordinate in right of payment to all

senior debt of the Parent and are effectively subordinated to all existing and future liabilities of its subsidiaries.

In 2014, the Company acquired $ 7,500 of the Junior Subordinated Debentures.

The Parent has guaranteed, on a subordinated basis, all of the obligations under the Trust Preferred Securities, including payment of the redemption price and any accumulated and unpaid distributions to the extent of available funds and

upon dissolution, winding up or liquidation.

The Company has two operating lease agreements, each for the use of office space in the ordinary course of business.

The first lease renews annually on an automatic basis and based on original

assumptions, management is reasonably certain to exercise the renewal option through 2026.

The original term of the second lease was ten years and amended in January 2017 to provide for an additional seven years, with a termination date on

September 30, 2026.

The rate used in determining the present value of lease payments is based upon an estimate of the Company’s incremental secured borrowing rate commensurate with the term of the underlying lease.

The Parent has guaranteed, on a subordinated basis, all of the obligations under the Trust Preferred Securities,

including payment of the redemption price and any accumulated and unpaid distributions to the extent of available funds and upon dissolution, winding up or liquidation.

The Company has two operating

lease agreements, each for the use of office space in the ordinary course of business.

The first lease renews annually on an automatic basis and based on original assumptions, management is reasonably certain to exercise the renewal option

through 2026.

The original term of the second lease was ten years and amended in January 2017 to provide for an additional seven years , with a termination date on September 30, 2026.

The rate used in determining the present value of lease payments is based upon an estimate

of the Company’s incremental secured borrowing rate commensurate with the term of the underlying lease.

These leases are accounted for as operating leases, whereby lease expense is recognized on a straight-line basis over the term of the lease.

Lease expense reported for each of the years ended

December 31, 2020 and 2019 was $1,014.

expense reported for each of the years ended December 31, 2021 and 2020 was $ 1,014 .

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

December 31, 2021

Year Ended December 31, 2019

December 31, 2020

Other information on operating leases:

Cash payments included in the measurement of lease liabilities reported in operating cash flows

Right-of-use assets included in other assets on the consolidated balance sheet

Right-of-use assets included in other assets on the consolidated

balance sheet

Weighted average discount rate

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present value adjustment

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

Operating lease liability included in accounts payable and accrued expenses

on the consolidated balance sheet

As of December 31, 2021, the Company has no operating leases that have not yet commenced.

2 unchanged sentences

On May 1, 2012, the Company’s shareholders approved the 2012 Equity Incentive Plan (the “2012 Plan”).

The 2012 Plan authorizes the grant of up to 2,000,000 stock options, stock appreciation rights,

restricted shares, restricted stock units, performance shares, performance units and other awards for the purpose of providing the Company’s non-employee directors, consultants, officers and other employees incentives and rewards for superior

In 2020, a total of 20,000 restricted shares, with an estimated fair value of $38, were issued under the 2012 Plan and 35,000 restricted shares, with an estimated fair value of $98, were forfeited under such plan.

The 2012 Plan authorizes the grant of up to

2,000,000 stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares, performance units

and other awards for the purpose of providing the Company’s non-employee directors, consultants, officers and other employees incentives and rewards for superior performance.

In 2021, there were no restricted shares issued under the 2012 Plan.

In 2020, a total of 20,000

355,000 restricted shares, with an estimated fair value of $948, were issued under the 2012 Plan.

restricted shares, with an estimated fair value of $ 38 , were issued under the 2012 Plan and 35,000 restricted shares, with an estimated fair value of $ 98 ,

were forfeited under such plan .

The estimated fair value of the restricted shares issued under the 2012 Plan for 2021 and 2020 was based on the common stock price at date of grant.

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The Company accounts for forfeitures as they occur.

There were no stock options granted or outstanding under the

2012 Plan in 2020 or 2019.

There were no stock options granted or outstanding under the 2012 Plan in 2021 or 2020.

Shares available for future grant at December 31, 2021 and 2020 were 935,200 and 935,200 , respectively.

The Company initiated an employees’ savings plan (the “Plan”) qualified under Section 401(k) of the Internal Revenue Code in May 1995.

The Plan covers substantially all of the Company’s employees.

covers substantially all of the Company’s employees.

Effective January 1, 2009, the Company modified the Plan such that the Plan would operate on a safe harbor basis.

Under the Plan, employees may defer up to 50 % of their compensation, not to exceed the annual deferral limit.

The Company’s total

matching contribution for 2020 and 2019 was $231 and $230, respectively, and consisted of a contribution equal to 35% of up to the first 6% of each participant’s contributions.

In addition to the matching contribution, the Company also provided a

3% safe harbor non-elective contribution in 2020 and 2019 of $520 and $524, respectively.

The Company’s total matching contribution for 2021 and 2020 was $ 272 and $ 231 , respectively, and

consisted of a contribution equal to 35 % of up to the first 6 % of each participant’s contributions.

In addition to the matching contribution, the Company also provided a 3 % safe harbor non-elective contribution in 2021 and 2020 of $ 549

and $ 520 , respectively.

All contributions were made in cash.

Participants are 100% vested in their own contributions and the vested percentage attributable to certain employer

contributions is based on a five-year graded schedule.

Participants are 100% vested in their own contributions and the vested

percentage attributable to certain employer contributions is based on a five-year graded schedule.

Agent Stock Purchase Plan

The Company initiated a nonqualified stock purchase plan (the “Agent Stock Purchase Plan”) in May 2012.

The purpose of the Agent Stock Purchase Plan is to promote and advance the interests of the

Company and its shareholders by providing independent agents who qualify as participants with an opportunity to purchase the common stock of the Company.

Under the Agent Stock Purchase Plan, payment for shares of common stock of the Company is made

by either deduction from an agent’s commission payment or a direct cash payment.

The purpose of the Agent Stock Purchase

Plan is to promote and advance the interests of the Company and its shareholders by providing independent agents who qualify as participants with an opportunity to purchase the common stock of the Company.

Under the Agent Stock Purchase Plan,

payment for shares of common stock of the Company is made by either deduction from an agent’s commission payment or a direct cash payment.

Stock purchases are made at the end of each calendar quarter at the then current market value.

Preferred Stock

The Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding at December 31, 2020 and 2019, respectively.

All of the shares of Series D Preferred Stock are

held by an affiliate of the Company’s controlling shareholder.

The outstanding shares of Series D Preferred Stock have a par value of $1 per share and a redemption value of $100 per share;

accrue annual dividends at a rate of $7.25 per share

(payable in cash or shares of the Company’s common stock at the option of the board of directors of the Company) and are cumulative.

In certain circumstances, the shares of the Series D Preferred Stock may be convertible into an aggregate of

approximately 1,378,000 shares of the Company’s common stock, subject to certain adjustments and provided that such adjustments do not result in the Company issuing more than approximately 2,703,000 shares of common stock without obtaining prior

shareholder approval;

The Company had 55,000 shares

of Series D preferred stock (“Series D Preferred Stock”) outstanding at December 31, 2021 and 2020, respectively.

All of the shares of Series D Preferred Stock are held by an affiliate of the Company’s controlling shareholder.

The outstanding

shares of Series D Preferred Stock have a par value of $ 1 per share and a redemption value of $ 100 per share;

accrue annual dividends at a rate of $ 7.25 per share (payable in cash or shares of the Company’s common stock at the option of the board of directors of the Company) and are cumulative.

In certain circumstances, the shares of

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

subject to certain adjustments and provided that such adjustments do not result in the Company issuing more than approximately 2,703,000

shares of common stock without obtaining prior shareholder approval;

and are redeemable solely at the Company’s option.

The Series D Preferred Stock is not currently convertible.

The Company had accrued, but unpaid, dividends, on the Series D Preferred Stock of $18 at December 31, 2020 and

During each of 2020 and 2019, the Company paid Series D Preferred Stock dividends of $399.

Earnings (Loss) Per Common Share

Basic earnings per share was computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period.

The computation

of diluted earnings per share reflected the effect of potentially dilutive securities.

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

The Company had accrued, but unpaid, dividends, on the Series D

Preferred Stock of $ 18 at December 31, 2021 and 2020.

During each of 2021 and 2020, the Company paid Series D Preferred Stock

dividends of $ 399 .

Earnings Per Common Share

Basic earnings per share was computed by dividing net income available to common shareholders by the weighted average number of common shares

outstanding during the period.

The computation of diluted earnings per share reflected the effect of potentially dilutive securities.

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

For the Year Ended December 31, 2021

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(In thousands)

Basic Earnings Per Common Share

Basic and Diluted Earnings Per Common Share

Net income before preferred stock dividends

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Net income applicable to common shareholders

Diluted Earnings Per Common Share:

Effect of Series D preferred stock

Net income applicable to common shareholders

For the Year Ended December 31, 2020

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(In thousands)

Basic and Diluted Loss Per Common Share

Net loss before preferred stock dividends

Basic Earnings Per Common Share

Net income before preferred stock dividends

Less preferred stock dividends

Net loss applicable to common shareholders

The assumed conversion of the Company’s Series D Preferred Stock was excluded from the earnings per common share calculation for 2019 since its impact would have been antidilutive.

Net income applicable to common shareholders

Diluted Earnings Per Common Share

Effect of Series D preferred stock

Net income applicable to common shareholders

The assumed conversion of the Company’s Series D Preferred Stock was excluded from the earnings per common share calculation for 2021 since its

impact would have been antidilutive.

Statutory Reporting

The assets, liabilities and results of operations have been reported on the basis of GAAP, which varies in some respects from statutory accounting practices (“SAP”) prescribed or permitted by

insurance regulatory authorities.

The assets, liabilities and results of operations have been reported on the basis of GAAP, which varies in some respects from statutory accounting

practices (“SAP”) prescribed or permitted by insurance regulatory authorities.

The principal differences between SAP and GAAP are that under SAP:

(i) certain assets that are non-admitted assets are eliminated from the balance sheet;

(ii) acquisition costs for policies are expensed as

incurred, while they are deferred and amortized over the estimated life of the policies under GAAP;

acquisition costs for policies are expensed as incurred, while they are deferred and amortized over the estimated life of the policies under GAAP;

(iii) the provision that is made for deferred income taxes is different than under GAAP;

(iv) the timing of establishing certain reserves is

different than under GAAP;

timing of establishing certain reserves is different than under GAAP;

and (v) certain valuation allowances attributable to certain investments are different.

The Company meets the minimum capital requirements in the states in which it does business.

The amount of reported statutory net income and surplus (shareholders’ equity) for the Parent’s insurance

subsidiaries for the years ended December 31 was as follows:

The amount of reported statutory net income and

surplus (shareholders’ equity) for the Parent’s insurance subsidiaries for the years ended December 31 was as follows:

Bankers Fidelity, net income (loss)

American Southern, net income

Statutory net income (loss)

Statutory net income

Bankers Fidelity, surplus

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Statutory surplus

Under the insurance code of the state in which each insurance subsidiary is domiciled, dividend payments to the Parent by its insurance subsidiaries are subject to certain limitations without the

prior approval of the applicable state’s Insurance Commissioner.

Under the insurance code of the state in which each insurance subsidiary is domiciled, dividend payments to the Parent by its insurance

subsidiaries are subject to certain limitations without the prior approval of the applicable state’s Insurance Commissioner.

The Parent received dividends of $ 8,400 and $ 3,900 in the years ended 2021 and 2020, respectively, from its subsidiaries.

In 2020, dividend payments to the Parent by the insurance

subsidiaries in excess of $9,589 would require prior approval.

dividend payments to the Parent by the insurance subsidiaries in excess of $ 5,629 would require prior approval.

Related Party Transactions

In the normal course of business the Company has engaged in transactions with entities affiliated with the controlling shareholder of the Company.

These transactions include the leasing of office

space as well as certain investing and financing activities.

At December 31, 2020, two members of the Company’s board of directors, including the Company’s chairman, president and chief executive officer, were considered to be affiliates of the

majority shareholder.

The Company leases approximately 49,586 square feet of office and covered garage space from one such controlled entity.

During the years ended December 31, 2020 and 2019, the Company paid $939 and

$908, respectively, under this lease.

These transactions include the leasing of office space as well as certain investing and financing activities.

At December 31, 2021, two

members of the Company’s board of directors, including the Company’s Chairman, President and Chief Executive Officer, were considered to be affiliates of the majority shareholder.

The Company leases approximately 49,586

square feet of office and covered garage space from one such controlled entity.

During the years ended December 31, 2021 and 2020, the Company paid $ 879

and $ 939 , respectively, under this lease.

Additionally, in each of the years ended December 31, 2021 and 2020, this entity owned 1,663,809 shares of the Company’s common stock.

Certain financing for the Company has also been provided by this entity in the form of an investment in the Series D Preferred Stock (See Note

During the years ended December 31, 2020 and

2019, the Company paid this entity $399 in dividends on the Series D Preferred Stock.

During the years ended December 31, 2021 and 2020, the Company paid this entity $ 399 in dividends on the Series D Preferred

Certain members of the Company’s management and board of directors are shareholders and on the board of directors of Gray Television, Inc.

As of December 31, 2020 and 2019, the Company

owned 880,272 shares of Gray Class A common stock and 106,000 shares of Gray common stock.

As of December 31, 2021 and 2020, the Company owned 880,272 shares of Gray Class A common stock and 106,000 shares of Gray common stock.

The aggregate carrying value of these investments in Gray at December 31, 2021 and 2020 was $ 18,325 and $ 16,606 , respectively.

During the years ended December 31, 2020 and 2019, Gray paid the Company approximately $1,038 and $1,022, respectively, in insurance premiums related to certain voluntary employee benefit plans.

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

In each of the years ended December 31, 2021 and 2020, Gray paid the Company approximately $ 1,308 in insurance premiums related to certain voluntary employee benefit plans.

Segment Information

The Parent’s primary insurance subsidiaries operate with relative autonomy and each company is evaluated based on its individual performance.

American Southern operates in the property and casualty

insurance market, while Bankers Fidelity operates in the life and health insurance market.

American Southern operates in the property and casualty insurance market, while Bankers Fidelity operates in the life and health insurance market.

Each segment derives revenue from the collection of premiums, as well as from investment income.

Substantially all revenue other than that in the corporate

and other segment is from external sources.

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

For the Year Ended December 31, 2021

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Total expenses

Underwriting income

Net investment income

Underwriting income (loss)

Net investment income (loss)

Other income (loss)

Operating income (loss)

Net realized gains

Unrealized losses on equity securities

Unrealized gains on equity securities

Income (loss) before income taxes

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Total expenses

Underwriting income (loss)

Net investment income

Underwriting income

Net investment income (loss)

Other income (loss)

Operating income (loss)

Net realized gains (losses)

Unrealized gains on equity securities

Net realized gains

Unrealized losses on equity securities

Income (loss) before income taxes

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Commitments and Contingencies

From time to time, the Company is, and expects to continue to be, involved in various claims and lawsuits incidental to and in the ordinary course of its business.

In the opinion of management, any

such known claims are not expected to have a material effect on the financial condition or results of operations of the Company.

From time to time, the Company is, and expects to continue to be, involved in various claims and lawsuits incidental to and in the ordinary course

of its business.

In the opinion of management, any such known claims are not expected to have a material effect on the financial condition or results of operations of the Company.

Regulatory matters

Like all domestic insurance companies, the Company’s insurance subsidiaries are subject to regulation and supervision in the jurisdictions in

which they do business.

Statutes typically delegate regulatory, supervisory, and administrative powers to state insurance commissioners.

From time to time, and in the ordinary course of business, the Company receives notices and inquiries from

state insurance departments with respect to various matters.

In November 2021, the Company was made aware by a state regulatory authority of alleged violations relating to certain sales of insurance

policies and that the Company may be subject to regulatory action, including fines.

Management is currently engaged in discussions with the state regulatory authorities with respect to a resolution;

however, inasmuch as this matter is of recent

origin, Management is unable at this time to predict the ultimate outcome.

Subsequent Events

On March 23, 2021, the Company’s board of directors declared an annual cash dividend of $0.02 per share of common stock that is payable to shareholders of record as of the close of business on

April 13, 2021.

Since December 31, 2020, the COVID-19 pandemic continues to cause material disruption to financial markets and the economy.

As a result of the pandemic, the Company could experience future losses

in its investment portfolio as a result of the weakened and volatile markets.

Additionally, the Company can experience increased risk of loss any time unforeseen infectious diseases impact large portions of a population.

Specifically, the

Company’s life and health business could experience significant loss due to increased claims volume arising from COVID-19.

The duration and impact of the COVID-19 pandemic is unknown at this time and it is not possible to reliably estimate the

impact on the financial condition, operating results or liquidity of the Company and its operating subsidiaries in future periods.

On March 22, 2022 , the Company’s

board of directors declared an annual cash dividend of $ 0.02 per share of common stock that is payable to shareholders of record as of

the close of business on April 13, 2022 .

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data