What changed in this filing

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Item 1. Business

2023-06-30 compared with 2022-03-25 · 109 added, 115 removed, 378 unchanged (37% of the section changed)

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The Parent’s principal operating subsidiaries are American Southern Insurance Company and American Safety Insurance Company (together known as “American Southern”) within

the property and casualty insurance industry and Bankers Fidelity Life Insurance Company and Bankers Fidelity Assurance Company (together known as “Bankers Fidelity”) within the life and health insurance industry.

Each of American Southern and

Bankers Fidelity is managed separately based upon the type of products it offers, and is evaluated on its individual performance.

The Company’s strategy is to focus on well-defined geographic, demographic and/or product niches within the insurance

the property and casualty insurance industry and Bankers Fidelity Life Insurance Company, Bankers Fidelity Assurance Company and Atlantic Capital Life Assurance Company (together known as “Bankers Fidelity”) within the life and health insurance

Each of American Southern and Bankers Fidelity is managed separately based upon the type of products it offers, and is evaluated on its individual performance.

The Company’s strategy is to focus on well-defined geographic, demographic

and/or product niches within the insurance marketplace.

Each of American Southern and Bankers Fidelity operates with relative autonomy, which structure is designed to allow for quick reaction to market opportunities.

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American Southern comprises the Company’s property and casualty operations and its primary product lines are as follows:

Business Automobile Insurance policies

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

General Liability Insurance policies

cover bodily injury and/or property damage liability for both premises and completed operations exposures for general classes of business.

Surety Bonds are contracts under which one party, the

insurance company issuing the surety bond, guarantees to a third party that the primary party will fulfill an obligation in accordance with a contractual agreement.

This obligation may involve meeting a contractual commitment, paying a debt or

performing certain duties.

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

damage coverage for commercial accounts.

General Liability Insurance policies cover bodily injury and/or property damage liability for both premises and completed operations exposures for

general classes of business.

Surety Bonds are contracts under which one party, the insurance company issuing the surety bond, guarantees to a third party that the primary party

will fulfill an obligation in accordance with a contractual agreement.

This obligation may involve meeting a contractual commitment, paying a debt or performing certain duties.

American Southern provides tailored business automobile insurance coverage, on a multi-year contract basis, to state governments, local municipalities and other large motor pools and fleets (“block

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insurance, Medicare supplement and other accident and health insurance products.

Life Insurance products include

non-participating, individual and group whole life insurance policies with a variety of riders and options.

Policy premiums are dependent upon a number of factors, including issue age, level of coverage and selected riders or options.

Medicare Supplement Insurance includes

8 of the 10 standardized Medicare supplement policies created under the Medicare Improvements for Patients and Providers Act of 2008 (“MIPPA”), which are designed to provide insurance coverage for certain expenses not covered by the Medicare

program, including copayments and deductibles.

Other Accident and Health Insurance

coverages include several individual and group policies providing for the payment of standard benefits in connection with the treatment of diagnosed cancer and other critical illnesses, as well as a number of other policies providing short-term

nursing facility care, accident expense, hospital indemnity and disability coverages.

Life Insurance products include non-participating, individual and group whole life insurance policies with a variety of riders and options.

premiums are dependent upon a number of factors, including issue age, level of coverage and selected riders or options.

Medicare Supplement Insurance includes 8 of the 10 standardized Medicare supplement policies created under the Medicare Improvements for Patients and

Providers Act of 2008 (“MIPPA”), which are designed to provide insurance coverage for certain expenses not covered by the Medicare program, including copayments and deductibles.

Other Accident and Health Insurance coverages include several individual and group policies providing for the payment of standard benefits in

connection with the treatment of diagnosed cancer and other critical illnesses, as well as a number of other policies providing short-term nursing facility care, accident expense, hospital indemnity and disability coverages.

Health insurance products, primarily Medicare supplement insurance, accounted for 86% of Bankers Fidelity’s net earned premiums in 2022 while life insurance, including both whole and term life

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Diversification .

Through unique product

offerings such as the Vantage Recovery®, short-term care product and a group whole life product featuring a chronic illness rider, the Company is able to offer its distributors an array of products to sell that stand out from the competition.

the Company continues to expand its geographical footprint with agents and products, one of its main objectives is to have a healthy mix of all of its product lines nationwide.

Through unique product offerings such as the Vantage Flex Plus®, a hospital indemnity plan, and Vantage Recovery®, short-term care product

and a group whole life product featuring a chronic illness rider, the Company is able to offer its distributors an array of products to sell that stand out from the competition.

As the Company continues to expand its geographical footprint with

agents and products, one of its main objectives is to have a healthy mix of all of its product lines nationwide.

Differentiation .

Bankers Fidelity prides itself

on the quality of customer service it offers to policyholders and agents.

A dedicated agent support team is available to the field to support them on administration, underwriting, sales training, product questions and a plethora of other services

which differentiates the Company from other carriers.

Additionally, a customer loyalty team is available solely to serve insureds for any of their insurance needs.

Bankers Fidelity prides itself on being agile, which we believe differentiates us

from larger carriers and helps the Company to quickly execute senior management’s initiatives.

Bankers Fidelity is focused on being a

niche carrier that delivers superior service, quality products and innovative solutions.

Sophisticated technology and reporting allows the home office teams to work with the sales force to deliver a tailored experience and phenomenal customer

Through seasonal campaigns and

customer outreach, the Company is focused on client retention and servicing its policyholders through all stages in their lives.

By providing its agents with an innovative product portfolio, the Company further promotes client retention by

empowering its agents to continually meet the needs of our policyholders.

Bankers Fidelity prides itself on the quality of customer service it offers to policyholders and agents.

A dedicated agent support team is

available to the field to support them on administration, underwriting, sales training, product questions and a plethora of other services which differentiates the Company from other carriers.

Additionally, a customer loyalty team is available

solely to serve insureds for any of their insurance needs.

Bankers Fidelity prides itself on being agile, which we believe differentiates us from larger carriers and helps the Company to quickly execute senior management’s initiatives.

Bankers Fidelity is focused on being a niche carrier that delivers superior service, quality products and innovative solutions.

Sophisticated

technology and reporting allows the home office teams to work with the sales force to deliver a tailored experience and phenomenal customer service.

Through seasonal campaigns and customer outreach, the Company is focused on client retention and servicing its policyholders through all stages in

By providing its agents with an innovative product portfolio, the Company further promotes client retention by empowering its agents to continually meet the needs of our policyholders.

Profitability .

In an effort to be sustainable

in the marketplace as a long-term partner, senior management is focused on diversification, differentiation, quality and retention to achieve profitability.

In an effort to be sustainable in the marketplace as a long-term partner, senior management is focused on diversification, differentiation,

quality and retention to achieve profitability.

Property and Casualty Operations

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that is offered to employers who are looking to provide coverage for their employees and have the related premiums deducted through payroll deductions.

The majority of the products are underwritten on a non-medical basis using a simplified issue approach by which an application containing a variety of health related questions is submitted.

Applications for insurance are reviewed to determine the face amount, age, medical history and any other necessary information.

Bankers Fidelity utilizes information obtained directly from the insured, the medical claims data, prescription

utilization reports as well as telephone interviews to determine whether an applicant meets the Company’s underwriting criteria.

Bankers Fidelity may also utilize medical records and investigative services to supplement and substantiate

information, as necessary.

The individual products are underwritten on a non-medical basis using a simplified issue approach by which an application containing a variety of health related questions is submitted.

for insurance are reviewed to determine the face amount, age, medical history and any other necessary information.

Bankers Fidelity utilizes information obtained directly from the insured, the medical claims data, prescription utilization reports

as well as telephone interviews to determine whether an applicant meets the Company’s underwriting criteria.

Bankers Fidelity may also utilize medical records and investigative services to supplement and substantiate information, as necessary.

The group products are underwritten and assessed at the group level for financial risk.

The underwriting will utilize several factors to determine this risk such as the industry, demographics, enrollment strategies,

employee access, locations of offices and any regulatory or legislative changes that could impact the decisions.

The spread of risk is also reviewed which analyzes the content of the employees within the group which includes the spread of gender,

ages, salaries and occupations.

This information is used to quote an appropriate benefits package, pricing, waiting periods and rates for the group entity.

Policyholder and Claims Services

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(a) management’s estimate of ultimate liability and claims adjusters’ evaluations of unpaid claims reported prior to the close of the

accounting period, (b) estimates of IBNR claims based on past experience, and (c) estimates of LAE.

The estimated liability is periodically reviewed and updated, and changes to the estimated liability are recorded in the statement of operations in

the period in which such changes become known.

accounting period, (b) estimates of incurred but not reported (“IBNR”) claims based on past experience, and (c) estimates of losses and loss adjustment expense (“LAE”).

The estimated liability is periodically reviewed and updated, and changes to

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

For long-tail lines of business, the emergence of paid losses and case reserves is less credible in the early periods, and accordingly may not be indicative of ultimate losses.

For these lines,

methods which incorporate a development pattern assumption are given less weight in calculating incurred but not reported (“IBNR”) reserves for the early periods of loss emergence because such a low percentage of ultimate losses are reported in

that time frame.

Accordingly, for any given accident year, the rate at which losses on long-tail lines of business emerge in the early periods is generally not as reliable an indication of ultimate losses as it would be for shorter-tail lines of

The estimation of reserves for these lines of business in the early periods of loss emergence is therefore largely influenced by statistical analyses and application of prior accident years’ loss ratios, after considering changes to

earned pricing, loss costs, mix of business, ceded reinsurance and other factors that are expected to affect the estimated ultimate losses.

For later periods of loss emergence, methods which incorporate a development pattern assumption are given

more weight in estimating ultimate losses.

For short-tail lines of business, the emergence of paid loss and case reserves is more credible in the early periods and is more likely to be indicative of ultimate losses.

The method used to set reserves

for these lines of business is based upon utilization of a historical development pattern for reported losses.

IBNR reserves for the current year are set as the difference between the estimated fully developed ultimate losses for each year, less

the established, related case reserves and cumulative related payments.

methods which incorporate a development pattern assumption are given less weight in calculating IBNR for the early periods of loss emergence because such a low percentage of ultimate losses are reported in that time frame.

Accordingly, for any

given accident year, the rate at which losses on long-tail lines of business emerge in the early periods is generally not as reliable an indication of ultimate losses as it would be for shorter-tail lines of business.

The estimation of reserves for

these lines of business in the early periods of loss emergence is therefore largely influenced by statistical analyses and application of prior accident years’ loss ratios, after considering changes to earned pricing, loss costs, mix of business,

ceded reinsurance and other factors that are expected to affect the estimated ultimate losses.

For later periods of loss emergence, methods which incorporate a development pattern assumption are given more weight in estimating ultimate losses.

short-tail lines of business, the emergence of paid loss and case reserves is more credible in the early periods and is more likely to be indicative of ultimate losses.

The method used to set reserves for these lines of business is based upon

utilization of a historical development pattern for reported losses.

IBNR reserves for the current year are set as the difference between the estimated fully developed ultimate losses for each year, less the established, related case reserves and

cumulative related payments.

IBNR reserves for prior accident years are similarly determined, again relying on an indicated, historical development pattern for reported losses.

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years and less volatile lines of business.

The Company’s policy is to record reserves for losses and claims in amounts which approximate actuarial best estimates of ultimate values.

The Company’s policy is to record reserves for losses and claims in amounts that represent actuarial best estimates of ultimate values.

Actuarial best estimates do not necessarily represent the

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Property and Casualty Operations

American Southern maintains loss reserves representing estimates of amounts necessary for payment of losses and loss adjustment expense (“LAE”), which are not discounted.

IBNR reserves are also

maintained for future development.

American Southern maintains loss reserves representing estimates of amounts necessary for payment of losses and LAE, which are not discounted.

IBNR reserves are also maintained for future

These loss reserves are estimates, based on known facts and circumstances at a given date, of amounts the Company expects to pay on incurred claims.

All balances are reviewed periodically by the Company’s

independent consulting actuary.

All balances are reviewed periodically by the Company’s independent consulting

Reserves for LAE are intended to cover the ultimate costs of settling claims, including investigation and defense of any lawsuits resulting from such claims.

Loss reserves for reported claims are based on a

case-by-case evaluation of the type of claim involved, the circumstances surrounding the claim, and the policy provisions relating to the type of loss along with anticipated future development.

The LAE for claims reported and claims not reported is

based on historical statistical data and anticipated future development.

Inflation and other factors which may affect claim payments are implicitly reflected in the reserving process through analysis and consideration of cost trends and reviews of

historical reserve results.

Loss reserves for reported claims are based on a case-by-case evaluation of the

type of claim involved, the circumstances surrounding the claim, and the policy provisions relating to the type of loss along with anticipated future development.

The LAE for claims reported and claims not reported is based on historical

statistical data and anticipated future development.

Inflation and other factors which may affect claim payments are implicitly reflected in the reserving process through analysis and consideration of cost trends and reviews of historical reserve

Estimating case reserves and ultimate losses involves various considerations which differ according to the line of business.

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Life and Health Operations

Bankers Fidelity establishes liabilities for future policy benefits to meet projected obligations under policies that are in force as of the statement date.

Bankers Fidelity establishes reserves for future policy benefits to meet projected obligations under policies that are in force as of the statement date.

These reserves are calculated to satisfy

policy and contract obligations as they are projected to come due.

Reserves for insurance policies are calculated using assumptions for interest rates, mortality rates, morbidity rates and lapse rates.

These assumptions vary by the product type,

the year the policy was issued, and other demographic information about the policyholder.

Reserves for insurance policies are calculated using assumptions for interest rates, mortality rates, disablement rates, and lapse rates.

These assumptions vary by the product

type, the year the policy was issued, and other demographic information about the policyholder.

Variations in assumptions may be made from one issue year to another to reflect actual experience.

Assumptions that deviate significantly from actual future

experience, or actual results that differ significantly from our estimates, could have a materially adverse effect on our liquidity, results of operations, or financial condition.

Assumptions that deviate significantly from actual

future experience, or actual results that differ significantly from our estimates, could have a materially adverse effect on our liquidity, results of operations, or financial condition.

See Note 6 of Notes to Consolidated Financial Statements for more information on insurance reserves and policyholder funds.

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American Southern.

American Southern Insurance

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

American Southern Insurance Company and its wholly-owned subsidiary, American Safety Insurance Company, are each, as of the date of this

report, rated “A” (Excellent) by A.M.

Bankers Fidelity.

Bankers Fidelity Life

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

Bankers Fidelity Life Insurance Company and its wholly-owned subsidiary, Bankers Fidelity Assurance Company, are each, as of the date of

this report, rated “A-” (Excellent) by A.M.

Like all domestic insurance companies, the Company’s insurance subsidiaries are subject to regulation and supervision in the jurisdictions in which they do business.

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approval of policy forms, reserve requirements, the standards of solvency to be met and maintained, deposits of securities for the benefit of policyholders, and periodic examinations of insurers and trade practices, among other things.

Company’s products generally are subject to rate regulation by state insurance commissioners, which require that certain minimum loss ratios be maintained.

Company’s products generally are subject to rate regulation by state insurance commissions, which require that certain minimum loss ratios be maintained.

Certain states also have insurance holding company laws which require registration and

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outside the usual ranges and the insurer’s financial condition is trending downward.

For the year ended December 31, 2021, Bankers Fidelity Life Insurance Company had two ratios outside the usual range as a result of net loss from operations primarily driven by the Medicare supplement line of business,

as well as a decrease in reserves on individual life policies.

Bankers Fidelity Assurance Company had four ratios outside the usual range primarily as a result of net loss for the year, an increase in nonadmitted deferred tax assets to admitted

assets and certain surplus ratios.

American Southern Insurance Company and American Safety Insurance Company had no IRIS ratios outside the usual ranges.

Management does not anticipate regulatory action as a result of the 2021 IRIS ratio results

for the insurance subsidiaries.

For the year ended December 31, 2022, Bankers Fidelity Assurance Company had three ratios outside the usual range, primarily as a result of net loss for the year, certain surplus ratios and

Non-admitted Assets to Admitted Assets.

The net loss at Bankers Fidelity Assurance Company is primarily related to federal income taxes incurred which resulted in a corresponding decrease in surplus levels for the year as well as a growing Deferred

Tax Asset which is a Non-admitted.

Atlantic Capital Life Assurance Company had one ratio outside the usual range primarily due to the fact that the Change in Asset Mix was automatically considered unusual because the prior year value was zero, as

the company was not in existence during the prior year.

Bankers Fidelity Life Insurance Company, American Southern Insurance Company and American Safety Insurance Company had no IRIS ratios outside the usual ranges.

Management does not anticipate

regulatory action as a result of the 2022 IRIS ratio results for the insurance subsidiaries.

Risk-Based Capital

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This training is reinforced through periodic simulated phishing

The Company uses a sophisticated backup and recovery situation that supports the replication of data across multiple secure data centers.

The Company uses a sophisticated backup and recovery methodology that supports the replication of data across multiple secure data centers.

It also includes a comprehensive disaster recovery plan

that is continually tested to ensure capabilities to resume business in the event of a disaster.

The Company’s technology environment is managed by an experienced team of professionals who follow an extensive set of policies and procedures related

to data security.

Through recurring internal and external audits, controls are regularly reviewed, tested, and enhanced to ensure best practices.

that is continually tested to help enable us to resume business in the event of a disaster.

The Company’s technology environment is managed by an experienced team of professionals who follow an extensive set of policies and procedures related to

data security.

Through recurring internal and external audits, controls are regularly reviewed, tested, and enhanced to promote best practices.

The Company has augmented the information security program through a partnership with a leading global

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We believe that our ability to attract and retain highly motivated and skilled

corporate employees with diverse backgrounds and experiences is critical to our continued success.

We also believe the structure of our compensation program is aligned with the interests of our shareholders and serves to reward the performance of

our employees.

We monitor and evaluate the effectiveness of our human capital management efforts by seeking formal and informal feedback from our corporate employees, including periodic surveys to obtain opinions on key topics.

We sponsor health and wellness programs in an effort to support a healthier employee base.

employees with diverse backgrounds and experiences is critical to our continued success.

We also believe the structure of our compensation program is aligned with the interests of our shareholders and serves to reward the performance of our

We monitor and evaluate the effectiveness of our human capital management efforts by seeking formal and informal feedback from our employees, including periodic surveys to obtain opinions on key topics.

We sponsor health and wellness programs in an effort to promote a healthier employee base.

We also offer competitive health and wellbeing benefits to include health, dental, vision, health and

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We strive to provide a work environment that encourages work/life balance.

Options depend on job responsibilities and may include flexible work schedules, paid time off, paid holidays and

part-time employment.

Options depend on job responsibilities and may include flexible work schedules, paid time off, paid holidays and part-time employment.

We offer tuition reimbursement along with budgeted professional development opportunities in order to foster professional growth and to increase skillsets.

The Company requires all employees to be fully vaccinated against COVID-19 where allowable under the law, unless they are approved for a reasonable accommodation based on disability, medical

condition or religious belief that prevents them from being vaccinated.

Financial Information by Industry Segment

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Executive Officers of the Registrant

The table and information below set forth, for each current executive officer of the Company, his name, age (as of March 1, 2022), positions with the Company and business experience for the past

The table and information below set forth, for each current executive officer of the Company, his name, age (as of June 1, 2023), positions with the Company and business experience for the past

five years, as well as any prior service to the Company.

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Officers are elected annually and serve at the discretion of the board of directors.

Howell has been President and Chief

Executive Officer of the Company since May 1995, and prior thereto served as Executive Vice President of the Company from October 1992 to May 1995.

He has been a Director of the Company since October 1992 and effective February 24, 2009, began

serving as Chairman of the board of directors.

He is also Executive Chairman and Chief Executive Officer of Gray Television, Inc.

Franklin has been Vice President, Chief

Financial Officer and Corporate Secretary of the Company since November 2017, and prior thereto served as Interim Chief Financial Officer from August 2017 to November 2017.

Since 2000 he has held various roles of increasing responsibility with

Atlantic American and its subsidiaries, previously serving as Vice President, Accounting and Treasurer of Bankers Fidelity since 2009.

Howell has been President and Chief Executive Officer of the Company since May 1995, and prior thereto served as Executive Vice President of the Company

from October 1992 to May 1995.

He has been a Director of the Company since October 1992 and effective February 24, 2009, began serving as Chairman of the board of directors.

He is also Executive Chairman and Chief Executive Officer of Gray

Television, Inc.

Franklin has been Vice President, Chief Financial Officer and Corporate Secretary of the Company since November 2017, and prior thereto served as Interim

Chief Financial Officer from August 2017 to November 2017.

Since 2000 he has held various roles of increasing responsibility with Atlantic American and its subsidiaries, previously serving as Vice President, Accounting and Treasurer of Bankers

Fidelity since 2009.

As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K (a “smaller reporting company”), we have elected to comply with certain scaled

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

What changed 10-K

Item 1. Business