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Item 1. Financial Statements

2024-08-14 compared with 2024-05-14 · 438 added, 292 removed, 605 unchanged (55% of the section changed)

49 unchanged sentences

ATLANTIC AMERICAN CORPORATION

CONDENSED CO NSOLIDATED STATEMENTS OF OPERATIONS

In thousands, except per share data)

CONDENSED CONSOLIDATED STATEMENTS OF

Dollars in thousands, except per share data)

Three Months Ended

Six Months Ended

Insurance premiums, net

Net investment income

Unrealized losses on equity securities, net

Realized investment gains, net

Unrealized gains (losses) on equity securities, net

Total revenue

5 unchanged sentences

Total benefits and expenses

Loss before income taxes

Income tax benefit

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Preferred stock dividends

Net loss applicable to common shareholders

Loss per common share (basic and diluted)

Net income (loss) applicable to common shareholders

Earnings (loss) per common share (basic)

Earnings (loss) per common share (diluted)

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

ATLANTIC AMERICAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

In thousands)

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

Dollars in thousands)

Three Months Ended

Six Months Ended

Net income (loss)

Other comprehensive income (loss):

2 unchanged sentences

Related income tax effect

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

Related income tax effect

Total other comprehensive income (loss), net of tax

2 unchanged sentences

ATLANTIC AMERICAN CORPORATION

CONDENSED CONSOLIDATED

STATEMENTS OF

CONDENSED CONSOLIDATED STATEMENTS OF

SHAREHOLDERS’ EQUITY

In thousands except share and per share data)

Dollars in thousands except share data)

Three Months Ended

Six Months Ended

Preferred stock:

10 unchanged sentences

Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2023

Net income (loss)

Dividends on common stock

23 unchanged sentences

In thousands)

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

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

Amortization of acquisition costs, net

Unrealized losses on equity securities, net

Realized investment gains, net

Unrealized investment (gains) losses, net

Losses from equity method investees

3 unchanged sentences

Deferred income tax benefit

Decrease in receivables, net

Decrease in insurance reserves and policyholder funds

Increase in receivables, net

Increase in insurance reserves and policyholder funds

Decrease in accounts payable and accrued expenses

7 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of dividends on common stock

Treasury stock acquired — net employee share-based compensation

6 unchanged sentences

Cash paid for interest

Cash paid for income taxes

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

ATLANTIC AMERICAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Dollars in thousands, except per share amounts)

17 unchanged sentences

2023 Annual Report.

The Company’s financial condition and results of operations and cash flows as of and for the three month period ended March 31, 2024 are not necessarily indicative of the financial condition or results of operations and cash

flows that may be expected for the year ending December 31, 2024 or for any other future period.

The Company’s financial condition and operating results as of and for the three month and six month periods ended June 30, 2024 are not necessarily indicative of the financial condition or results of operations and cash flows

that may be expected for the year ending December 31, 2024 or for any other future period.

preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosures of contingent assets and liabilities at the date of the

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adopted, see the “Recently Issued Accounting Standards - Future Adoption of New Accounting Standards” section of Note 1 of Notes to Consolidated Financial Statements in the 2023 Annual Report.

The following tables set forth the estimated fair value, gross unrealized gains, gross unrealized losses, allowance for credit losses and cost or amortized cost of the Company’s investments in fixed maturities and

equity securities, aggregated by type and industry, as of March 31, 2024 and December 31, 2023.

The following tables set forth the estimated fair value, gross unrealized gains, gross unrealized losses, allowance for credit losses

(“ACL”) and cost or amortized cost of the Company’s investments in fixed maturities and equity securities, aggregated by type and industry, as of June 30, 2024 and December 31, 2023.

Fixed maturities were comprised of the following:

March 31, 2024

June 30, 2024

Allowance for

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Bonds having an amortized cost of $ 14,697

and $ 14,647 and included in the tables above were on deposit with insurance regulatory authorities as of March 31, 2024 and December 31,

and $ 14,647 and included in the tables above were on deposit with insurance regulatory authorities as of June 30, 2024 and December 31,

2023, respectively, in accordance with statutory requirements.

In addition, the Company maintains cash and cash equivalents on deposit with insurance regulatory authorities of $ 226

as of March 31, 2024 and December 31, 2023.

Additionally, bonds having an amortized cost of $ 9,498 and $ 9,584 and included in the tables above were pledged as collateral to the Federal Home Loan Bank of Atlanta (“FHLB”) at March 31, 2024 and December 31,

as of June 30, 2024 and December 31, 2023.

Additionally, bonds having an amortized cost of $ 9,363 and $ 9,584 and included in the tables above were pledged as collateral to the Federal Home Loan Bank of Atlanta (“FHLB”) at June 30, 2024 and December 31,

2023, respectively.

Equity securities were comprised of the following:

March 31, 2024

June 30, 2024

Equity securities:

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Total equity securities

The carrying value and amortized cost of the Company’s investments in fixed maturities at March 31, 2024 and December 31, 2023 by contractual

The carrying value and amortized cost of the Company’s investments in fixed maturities at June 30, 2024 and December 31, 2023 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.

March 31, 2024

June 30, 2024

December 31, 2023

5 unchanged sentences

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

unrealized loss position as of March 31, 2024 and December 31, 2023.

March 31, 2024

unrealized loss position as of June 30, 2024 and December 31, 2023.

June 30, 2024

Less than 12 months

13 unchanged sentences

Total temporarily impaired securities

of Securities in Unrealized Loss Positions

As of March 31, 2024 and December 31, 2023, there were 224 and 222 securities,

respectively, in an unrealized loss position which primarily included certain of the Company’s investments in fixed maturities within the utilities and telecom, financial services, other diversified business and other diversified consumer

The unrealized

losses on the Company’s fixed maturity securities investments have been primarily related to general market changes in interest rates and/or the levels of credit spreads rather than specific concerns with the issuer’s ability to pay interest

and repay principal.

any of its fixed maturity securities with significant declines in fair value, the Company performs detailed analyses to identify whether the drivers of the declines are due to general market drivers, such as the recent rise in interest rates, or

due to credit-related factors.

Identifying the drivers of the declines in fair value helps to focus the Company’s attention on securities with credit-related concerns that could impact the ultimate collection of principal and interest.

significant declines in fair value determined to be non-interest rate or market related, the Company performs a more focused review of the related issuer’s specific credit profile.

corporate issuers, the Company evaluates their assets, business profile including industry dynamics and competitive positioning, financial statements and other available financial data.

For non-corporate issuers, the Company analyzes all

reasonably available sources of credit support, including issuer-specific factors.

The Company utilizes information available in the public domain and, for certain private placement issuers, from consultations with the issuers directly.

Company also considers ratings from Nationally Recognized Statistical Rating Organizations, as well as the specific characteristics of the security it owns including seniority in the issuer’s capital structure, covenant protections, or other

relevant features.

From these reviews, the Company evaluates the issuers’ continued ability to service the Company’s investment through payment of interest and principal.

no credit-related factors develop, unrealized gains and losses on fixed maturity securities are expected to diminish as investments near maturity.

Based on its credit analysis, the Company believes that the issuers of its fixed maturity

investments in the sectors shown in the table above have the ability to service their obligations to the Company, and the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell

the investments before recovery of their amortized cost bases, which may be at maturity.

However, from time to time the Company identifies certain available-for-sale fixed maturity securities where the amortized cost basis exceeds the present value of the cash flows expected to be collected due to credit-related factors and as a

result, a credit allowance will be estimated.

The Company had no allowance for expected credit losses on its available-for-sale

fixed maturities as of March 31, 2024 and December 31, 2023.

There were no realized

investment gains for the three month periods ended March 31, 2024 and 2023.

The following table presents the portion of unrealized losses related to equity securities still held for the three month period ended March 31, 2024 and 2023.

Analysis of Securities in Unrealized Loss Positions

As of June 30, 2024 and December 31, 2023, there were 225

and 222 securities, respectively, in an unrealized loss position which primarily included certain of the Company’s investments in fixed

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

The unrealized losses on the Company’s fixed maturity securities investments have been primarily related to general

market changes in interest rates and/or the levels of credit spreads rather than specific concerns with the issuer’s ability to pay interest and repay principal.

For any of its fixed maturity securities with significant declines in fair value, the Company performs detailed analyses to identify whether the

drivers of the declines are due to general market drivers, such as the recent increases in interest rates, or due to credit-related factors.

Identifying the drivers of the declines in fair value helps to align and allocate the Company’s resources

to securities with real credit-related concerns that could impact the ultimate collection of principal and interest.

For any significant declines in fair value determined to be non-interest rate or market related, the Company performs a more

focused review of the related issuers’ specific credit profile.

For corporate issuers, the Company evaluates their assets, business profile including industry dynamics and competitive positioning, financial

statements and other available financial data.

For non-corporate issuers, the Company analyzes all reasonably available sources of credit support, including issuer-specific factors.

The Company utilizes information available in the public domain

and, for certain private placement issuers, from consultations with the issuers directly.

The Company also considers ratings from Nationally Recognized Statistical Rating Organizations, as well as the specific characteristics of the security it

owns including seniority in the issuer’s capital structure, covenant protections, or other relevant features.

From these reviews, the Company evaluates the issuers’ continued ability to service the Company’s investment through payment of interest

and principal.

Assuming no credit-related factors develop, unrealized gains and losses on fixed maturity securities are expected to diminish as investments near

Based on its credit analysis, the Company believes that the issuers of its fixed maturity investments in the sectors shown in the table above have the ability to service their obligations to the Company.

In addition, the Company does not

intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

However, from time to time the Company identifies certain available-for-sale fixed maturity securities where the amortized cost basis exceeds the

present value of the cash flows expected to be collected due to credit related factors and as a result, a credit allowance will be estimated.

The Company had no ACL on its available-for-sale fixed maturities as of June 30, 2024 or December 31, 2023.

The following tables summarize realized investment gains (losses) for the three month and six month periods ended June 30, 2024 and 2023.

Three Months Ended

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

June 30, 2024

Invested Assets

Realized investment gains, net

Three Months Ended

June 30, 2023

Invested Assets

Realized investment gains, net

Six Months Ended

June 30, 2024

Invested Assets

Realized investment gains, net

Six Months Ended

June 30, 2023

Invested Assets

Realized investment gains, net

The following table presents the change in unrealized gains (losses) related to equity securities still held for the three month and six month periods ended June 30, 2024 and 2023.

Three Months Ended

Six Months Ended

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

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

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

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

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.

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 $ 6,278 and $ 6,381

as of March 31, 2024 and December 31, 2023, respectively.

The Company’s VIE interests, carried as a part of investment in unconsolidated trusts, totaled $ 1,238 as of March 31, 2024 and December 31, 2023.

Company’s VIE interests principally consist of interests in 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 $ 6,063 and $ 6,381 as of June 30, 2024

and December 31, 2023, respectively.

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

as of June 30, 2024 and December 31, 2023.

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

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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.

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 $ 7,516 and $ 7,619 , as of March 31, 2024 and December 31, 2023,

respectively.

As of March 31, 2024 and December 31, 2023, the Company had outstanding commitments totaling $ 4,518 , respectively,

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

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 $ 7,301 and $ 7,619 , as of June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024 and December 31, 2023, the Company had outstanding commitments

totaling $ 4,518 , respectively, whereby the Company is committed to fund these investments and may be called by the partnership

during the commitment period to fund the purchase of new investments and partnership expenses.

Fair Values of Financial Instruments

27 unchanged sentences

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

As of March 31, 2024 and December 31, 2023, the value of the equity security valued using Level 3 criteria was $ 189 and $ 185 , respectively.

of March 31, 2024, financial instruments carried at fair value were measured on a recurring basis as summarized below:

As of June 30, 2024 and December 31, 2023, the value of the equity security valued using Level 3 criteria was $ 189 and $ 185 , respectively.

of June 30, 2024, financial instruments carried at fair value were measured on a recurring basis as summarized below:

Quoted Prices in

12 unchanged sentences

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 March 31, 2024

carrying amount, estimated fair value and level within the fair value hierarchy of the Company’s financial instruments as of June 30, 2024

and December 31, 2023.

March 31, 2024

June 30, 2024

December 31, 2023

6 unchanged sentences

Revolving credit facility

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

See the aforementioned information for a description of the fair value hierarchy as well as a description of levels

for classes of these financial assets.

Allowance for Expected Credit Losses

1 unchanged sentence

The following table presents the balances of reinsurance recoverables, net of the allowance for expected credit

losses, at March 31, 2024 and 2023, and the changes in the allowance for expected credit losses for the three months ended March 31, 2024 and 2023.

At and for the three months ended March 31, 2024

Reinsurance Recoverables,

Net of Allowance for Expected

Credit Losses

Allowance for Expected

Credit Losses

losses, at June 30, 2024 and 2023, and the changes in the allowance for expected credit losses for the three month and six month periods ended June 30, 2024 and 2023.

At and for the three months ended

June 30, 2024

At and for the six months ended

June 30, 2024

Recoverables,

Net of Allowance

for Expected Credit

Allowance for

Expected Credit

Recoverables,

Net of Allowance

for Expected Credit

Allowance for

Expected Credit

Balance, beginning of period

Current period change for expected credit losses

Current period change for estimated uncollectible reinsurance

Write-offs of uncollectible reinsurance recoverables

Balance, end of period

At and for the three months ended March 31, 2023

Reinsurance Recoverables,

Net of Allowance for Expected

Credit Losses

Allowance for Expected

Credit Losses

At and for the three months ended

June 30, 2023

At and for the six months ended

June 30, 2023

Recoverables,

Net of Allowance

for Expected Credit

Allowance for

Expected Credit

Recoverables,

Net of Allowance

for Expected Credit

Allowance for

Expected Credit

Balance, beginning of period

Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2023

Current period change for expected credit losses

Current period change for estimated uncollectible reinsurance

Write-offs of uncollectible reinsurance recoverables

2 unchanged sentences

The following table presents the balances of insurance premiums and other, net of the allowance for expected

credit losses, at March 31, 2024 and 2023, and the changes in the allowance for expected credit losses for the three months ended March 31, 2024 and 2023.

At and for the three months ended March 31, 2024

Insurance Premiums and Other,

Net of Expected Credit Losses

Allowance for Expected

Credit Losses

credit losses, at June 30, 2024 and 2023, and the changes in the allowance for expected credit losses for the three month and six month periods ended June 30, 2024 and 2023.

At and for the three months ended

June 30, 2024

At and for the six months ended

June 30, 2024

Insurance Premiums

and Other, Net of

Expected Credit

Allowance for

Expected Credit

Insurance Premiums

and Other, Net of

Expected Credit

Allowance for

Expected Credit

Balance, beginning of period

2 unchanged sentences

Balance, end of period

At and for the three months ended March 31, 2023

Insurance Premiums and Other,

Net of Expected Credit Losses

Allowance for Expected

Credit Losses

At and for the three months ended

June 30, 2023

At and for the six months ended

June 30, 2023

Insurance Premiums

and Other, Net of

Expected Credit

Allowance for

Expected Credit

Insurance Premiums

and Other, Net of

Expected Credit

Allowance for

Expected Credit

Balance, beginning of period

15 unchanged sentences

software is substantially ready for its intended use.

The Company incurred and capitalized implementation costs of $ 970 and $ 592 during the three months ended March 31, 2024 and 2023, respectively.

As a result, the Company has capitalized $ 5,537 and $ 3,614 in implementation costs

in other assets within its condensed consolidated balance sheet as of March 31, 2024 and 2023, respectively.

The Company incurred and capitalized implementation costs of $ 51 and $ 628 during the six months ended June 30, 2024 and 2023, respectively.

As a result, the Company has capitalized $ 4,618 and $ 4,567 in implementation costs in other assets within

its condensed consolidated balance sheet as of June 30, 2024 and December 31, 2023, respectively.

The Company expects the software will be substantially ready for its intended use in the second half of 2024 .

Accordingly, the Company has no t recorded any amortization expense

related to software implementation costs for the three months ended March 31, 2024 and 2023.

related to software implementation costs for the three months and six months ended June 30, 2024 and 2023.

Insurance Reserves for Losses and Claims

roll-forward of insurance reserves for losses and claims for the three months ended March 31, 2024 and 2023 is as follows:

Three Months Ended

roll-forward of insurance reserves for losses and claims for the six months ended June 30, 2024 and 2023 is as follows:

Six Months Ended

Beginning insurance reserves for losses and claims, gross

11 unchanged sentences

Ending insurance reserves for losses and claims, gross

Prior years’ development was primarily the result of favorable development in the property

and casualty operations, partially offset by unfavorable development in the Medicare supplement line of business in the life and health operations.

Prior years’ development was primarily the result of favorable development in the property

and casualty operations, as well as favorable development in the Medicare supplement line of business in the life and health operations.

Prior years’ development was

primarily the result of unfavorable development in the property and casualty operations predominately in the automobile liability line of business due to inflationary factors.

Prior years’ development was

primarily the result of unfavorable development in the property and casualty operations predominately in the automobile liability line of business due to inflationary factors, partially offset by favorable development in the Medicare

supplement line of business in the life and health operations.

Following is a reconciliation of total incurred losses to total

insurance benefits and losses incurred:

Three Months Ended

Six Months Ended

Total incurred losses

5 unchanged sentences

The Revolving Credit Agreement provides for an unsecured $ 10,000 revolving credit facility that originally matured on April 12, 2024 .

On March 22, 2024, the Company entered into a First Amendment (the “Amendment”) to its Revolving Credit Agreement (as amended, the “Credit Agreement”) with the Lender.

The Amendment, among other things, (a) updates the interest rate provisions

to memorialize that the Company pays interest on the unpaid principal balance of outstanding revolving loans at the Adjusted Term SOFR rate (as defined in the Credit Agreement), plus 2.00 %, (b) extends the maturity date of the revolving credit facility to March 22, 2027 ,

and (c) requires that the Company maintain a consolidated net worth of not less than $ 64.2 million.

Except as modified by the

Amendment, the existing terms of the original Credit Agreement remain in effect.

On March 22, 2024, the

Company entered into a First Amendment (the “Amendment”) to its Revolving Credit Agreement (as amended, the “Credit Agreement”) with the Lender.

The Amendment, among other things, (a) updates the interest rate provisions to memorialize that the

Company pays interest on the unpaid principal balance of outst anding revolving loans at the Adjusted Term SOFR

rate (as defined in the Credit Agreement), plus 2.00 %, (b) extends the maturity date of the revolving credit facility to March 22, 2027 , (c) requires the

monthly payment of an unused commitment fee of $ 0.2 % of the un used facility amount, and (d) requires that the

Company maintain a consolidated net worth of not less than $ 64,200 .

Except as modified by the Amendment, the existing terms of the

original Credit Agreement remain in effect.

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 and maintained a minimum consolidated net worth, as previously mentioned.

Company’s consolidated capitalization at any time and maintaining a minimum consolidated net worth, as previously mentioned.

The Credit Agreement also contains customary representations and warranties and events of default.

3 unchanged sentences

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 March 31, 2024 and

As of June 30, 2024, and

December 31, 2023, the Company had outstanding borrowings including accrued interest of $ 4,024 and $ 3,019 , respectively, under the Credit Agreement.

For the three months ended June 30, 2024 and 2023, the Company incurred $ 61 and $ 33 in interest expense, respectively, on the

revolving credit facility borrowing.

For the six months ended June 30, 2024 and 2023, the Company incurred $ 137 and $ 86 , respectively, in interest expense.

During the three month and six month periods ended June 30, 2024, the Company paid $ 0.3 and $ 3.3 , respectively, in fees

on the available unused amount of the revolving credit facility of $ 6,000 .

At June 30, 2024 and December 31, 2023, the effective

interest rate was 7.43 % and 9.69 %,

respectively.

Junior Subordinated Debentures

5 unchanged sentences

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

The outstanding $ 18.0 million and $ 15.7 million of Junior Subordinated Debentures mature on December 4, 2032

The outstanding $ 18,042 and $ 15,696 of Junior Subordinated Debentures mature on December 4, 2032

and May 15, 2033 , respectively, are callable quarterly, in whole or in part, only at the option of the Company.

2 unchanged sentences

Effective July 1, 2023, the interest rate is

determined based on a reference rate of the 3-month SOFR plus applicable tenor spread of 0.26161 percent plus an applicable margin, ranging from 4.00 %

determined based on a reference rate of the 3-month SOFR plus applicable tenor spread of 0.26161 percent plus an applicable

margin, ranging from 4.00 % to 4.10 %.

2024, the effective interest rate was 9.65 %.

The financial structure of each of

Atlantic American Statutory Trust I and II as of March 31, 2024 was as follows:

Atlantic American Statutory Trust I and II as of June 30, 2024 was as follows:

Atlantic American

3 unchanged sentences

JUNIOR SUBORDINATED DEBENTURES (1) (2)

Principal amount owed March 31 ,

Principal amount owed June 30 ,

Treasury debt (3)

Net balance March 31 , 2024

Net balance June 30 , 2024

Net balance December 31, 2023

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accumulated and unpaid distributions to the extent of available funds and upon dissolution, winding up or liquidation.

Loss Per Common Share

A reconciliation of the numerator and denominator used in the loss per common share calculations is as follows:

Earnings (Loss) Per Common Share

A reconciliation of the numerator and denominator used in the earnings (loss) per

common share calculations is as follows:

Three Months Ended

March 31, 2024

June 30 , 2024

Average Shares

4 unchanged sentences

Three Months Ended

March 31, 2023

June 30 , 2023

Average Shares

(In thousands)

Basic Earnings Per Common Share:

Less preferred stock dividends

Net income applicable to common shareholders

Diluted Earnings Per Common Share:

Effect of Series D preferred stock

Net income applicable to common shareholders

Six Months Ended

Average Shares

(In thousands)

Basic and Diluted Loss Per Common Share:

1 unchanged sentence

Net loss applicable to common shareholders

The assumed conversion of the Company’s Series D preferred stock was excluded from the loss per common share calculation for three month periods ended

March 31, 2024 and 2023, since its impact would have been antidilutive.

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

Six Months Ended

Average Shares

(In thousands)

Basic and Diluted Earnings Per Common Share:

Less preferred stock dividends

Net income applicable to common shareholders

The assumed conversion of the Company’s Series D preferred stock was excluded from the earnings (loss) per common share calculation for all periods presented, except for the three month period ended June 30, 2023, since its impact would have

been antidilutive.

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

statutory income tax rate and income tax expense (benefit) is as follows:

Three Months Ended

Six Months Ended

Federal income tax provision at statutory rate of 21 %

3 unchanged sentences

Parking disallowance

Income tax benefit

The components of income tax benefit were:

Income tax expense (benefit)

The components of income tax expense (benefit) were:

Three Months Ended

Six Months Ended

Current – Federal

7 unchanged sentences

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 the three months ended March 31, 2024 and March 31 , 2023 was $ 254 .

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 the six months ended June 30, 2024 and June 30 , 2023 was $ 507 .

Additional information regarding the Company’s real estate

operating leases is as follows:

Three Months Ended

Six Months Ended

Other information on operating leases:

11 unchanged sentences

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

As of March 31, 2024, the Company has no operating leases that

As of June 30, 2024, the Company has no operating leases that

have not yet commenced.

13 unchanged sentences

Segment Information

Parent’s primary insurance subsidiaries, American Southern and Bankers Fidelity, operate in two principal business units, each focusing

on specific products.

The Parent’s primary

insurance subsidiaries, American Southern and Bankers Fidelity, operate in two principal business units, each focusing on specific

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

5 unchanged sentences

Three Months Ended

Six Months Ended

American Southern

3 unchanged sentences

Three Months Ended

Income (Loss) Before Income Taxes

Six Months Ended

In come (Loss) Before Income Taxes

American Southern

1 unchanged sentence

Corporate and Other

Loss before income taxes

Income (loss) before income taxes

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

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

subsidiaries (collectively with the Parent, the “Company”) as of and for three month period ended March 31, 2024.

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

(collectively with the Parent, the “Company”) as of and for the three month and six month periods ended June 30, 2024.

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

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Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions

that affect reported amounts and related disclosures.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that

affect reported amounts and related disclosures.

Actual results could differ significantly from those estimates.

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Overall Corporate Results

The following presents the Company’s revenue, expenses and net loss for the three month period ended March 31, 2024 and the comparable period in 2023:

The following presents the Company’s revenue, expenses and net income (loss) for the three month and six month periods ended June 30, 2024 and the comparable periods in 2023:

Three Months Ended

Six Months Ended

(In thousands)

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Net investment income

Unrealized losses on equity securities, net

Realized investment gains, net

Unrealized gains (losses) on equity securities, net

Total revenue

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Total benefits and expenses

Loss before income taxes

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

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

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

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

A reconciliation of net loss to operating income (loss) for the three month period ended March 31, 2024 and the comparable period in 2023 is as follows:

Income (loss) before income taxes

Net income (loss)

In addition to measures of operating performance determined in accordance with GAAP, management also considers and evaluates performance by analyzing the non-GAAP measure operating income (loss).

define operating income (loss) as net income (loss) excluding:

(i) income tax expense (benefit);

(ii) realized investment (gains) losses, net;

and (iii) unrealized (gains) losses on equity securities, net.

Management believes operating income (loss)

is a useful metric for investors, potential investors, securities analysts and others because it isolates the “core” operating results of the Company before considering certain items that are either beyond the control of management (such as taxes,

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

which are not a part of the Company’s primary operations and are, to a limited extent, subject to discretion in terms of timing of realization).

A reconciliation of net income (loss) to operating income (loss) for the three month and six month periods ended June 30, 2024 and the comparable periods in 2023 is as follows:

Three Months Ended

Six Months Ended

Reconciliation of Non-GAAP Financial Measure

(In thousands)

Income tax benefit

Unrealized losses on equity securities, net

Net income (loss)

Income tax expense (benefit)

Realized investment gains, net

Unrealized (gains) losses on equity securities, net

Non-GAAP operating income (loss)

On a consolidated basis, the Company had net loss of $2.0 million, or $(0.10) per diluted share, for the three month period ended March 31, 2024, compared to net loss of $1.4 million, or $(0.08)

per diluted share, for the three month period ended March 31, 2023.

The increase in net loss for the first quarter of 2024 was primarily the result of a decrease in premium revenue in the life and health operations coupled with unfavorable loss

experience in the life and health operations.

Premium revenue for the three month period ended March 31, 2024 decreased $1.5 million, or 3.4%, to $44.6 million from $46.1 million in the three month period ended March 31, 2023.

The decrease in

premium revenue was primarily attributable to a decrease in the Medicare supplement insurance premiums in the life and health operations.

Operating income decreased $2.9 million in the three month period ended March 31, 2024 from the three month period ended March 31, 2023.

The decrease in operating income was primarily due to

unfavorable loss experience in the life and health operations due to an increase in incurred losses in the group life and Medicare supplement lines of business.

On a consolidated basis, the Company had net loss of $0.7 million, or $(0.04) per diluted share, for the three month period ended June 30, 2024, compared to net income of $1.7 million, or $0.08 per

diluted share, for the three month period ended June 30, 2023.

The Company had net loss of $2.7 million, or $(0.14) per diluted share, for the six month period ended June 30, 2024, compared to net income of $0.3 million, or $0.00 per diluted share,

for the six month period ended June 30, 2023.

The increase in net loss for the three month and six month periods ended June 30, 2024 was primarily the result of unfavorable loss experience in the life and health operations, as well as in the

property and casualty operations, from the comparable periods in 2023, coupled with a decrease in premium revenue in the life and health operations.

Partially offsetting this increase in net loss for the three month and six month periods ended June

30, 2024 was a decrease in commissions and underwriting expenses primarily due to the variable commission structure in the property and casualty operations, coupled with a decrease in commission expenses within the life and health operations.

partially offsetting the increase in net loss was an increase in unrealized gains on equity securities during the six month period ended June 30, 2024.

For the three month period ended June 30, 2024, premium revenue decreased $1.1 million, or 2.3%, to $45.0 million from $46.1 million in the comparable period in 2023.

For the six month period ended

June 30, 2024, premium revenue decreased $2.6 million, or 2.8%, to $89.5 million from $92.2 million in the comparable period in 2023.

The decrease in premium revenue during the three month and six month periods ended June 30, 2024 was primarily

attributable to a decrease in the Medicare supplement insurance premiums in the life and health operations.

Also contributing to this decrease during the three month period ended June 30, 2024 was a decline in insurance premiums in the automobile

physical damage line of business due to an overall decline in the trucking industry in the property and casualty operations.

Operating income decreased $2.8 million in the three month period ended June 30, 2024 from the three month period ended June 30, 2023.

For the six month period ended June 30, 2024, operating income

decreased $5.7 million from the comparable period in 2023.

The decrease in operating income for the three month and six month periods ended June 30, 2024 was primarily the result of an unfavorable loss experience in the life and health operations

due to an increase in incurred losses in the group life and Medicare supplement lines of business.

Also contributing to the decrease in operating income was an unfavorable loss experience in the property and casualty operations due to the frequency

and severity of claims in the automobile liability line of business.

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

American Southern

The following summarizes American Southern’s premiums, losses, expenses and underwriting ratios for the three month period ended March 31, 2024 and the comparable period in 2023:

The following summarizes American Southern’s premiums, losses, expenses and underwriting ratios for the three month and six month periods ended June 30, 2024 and the comparable periods in 2023:

Three Months Ended

Six Months Ended

(Dollars in thousands)

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Commissions and underwriting expenses

Underwriting income

Underwriting income (loss)

Expense ratio

Combined ratio

Gross written premiums at American Southern decreased $1.0 million, or 10.2%, during the three month period ended March 31, 2024 from the comparable period in 2023.

The decrease in gross written

premiums was primarily attributable to the decrease in premiums written in the automobile physical damage line of business due to an overall decline in the trucking industry.

Partially offsetting the decrease in gross written premiums was an

increase in premiums written in the automobile liability line of business resulting from retrospective premium adjustments.

Ceded premiums decreased slightly during the three month period ended March 31, 2024 from the comparable period in 2023.

American Southern’s ceded premiums are typically determined as a percentage

of earned premiums and generally increase or decrease as earned premiums increase or decrease.

The following presents American Southern’s net earned premiums by line of business for the three month period ended March 31, 2024 and the comparable period in 2023:

Gross written premiums at American Southern decreased $1.6 million, or 4.1%, during the three month

period ended June 30, 2024 and decreased $2.5 million, or 5.3%, during the six month period ended June 30, 2024, from the comparable periods in 2023.

The decrease in gross written premiums during the three month and six month periods ended June

30, 2024 was primarily attributable to the decrease in premiums written in the automobile physical damage line of business due to an overall decline in the trucking industry.

Also contributing to the decrease in gross written premiums was a

decrease in premiums written in the surety line of business due to construction slowdowns in certain regions.

Ceded premiums increased slightly during the three month period ended June 30, 2024 and decreased slightly

during the six month period ended June 30, 2024, from the comparable periods in 2023.

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

retentions levels change.

The following presents American Southern’s net earned premiums by line of business for the three month and six month periods ended June 30, 2024 and the comparable periods in 2023:

Three Months Ended

Six Months Ended

(In thousands)

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General liability

Net earned premiums increased $0.7 million, or 3.9%, during the three month period ended March 31, 2024 over the comparable period in 2023.

The increase in net earned premiums was primarily

attributable to an increase in earned premiums in the automobile liability line of business due to an increase in the number of programs.

Partially offsetting the increase in net earned premiums was a decrease in earned premiums in the automobile

physical damage line of business due to an overall decline in the trucking industry as previously mentioned.

Premiums are earned ratably over their respective policy terms, and therefore premiums earned in the current year are related to policies

written during both the current year and immediately preceding year.

Net earned premiums decreased $0.3 million, or 1.9%, during the three month period ended June 30, 2024, and increased $0.3 million, or 0.9%, during the six month period ended June 30, 2024, over the

comparable periods in 2023.

The decrease in net earned premiums during the three month period ended June 30, 2024 was primarily attributable to a decrease in earned premiums in the automobile physical damage line of business due to an overall decline

in the trucking industry as previously mentioned.

The increase in net earned premiums during the six month period ended June 30, 2024 was primarily attributable to an increase in earned premiums in the automobile liability line of business due to an

increase in the number of programs.

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

The performance of an insurance company is often measured by its combined ratio.

The combined ratio represents the percentage of losses, loss adjustment expenses and other expenses that are

incurred for each dollar of premium earned by the company.

The combined ratio represents the percentage of losses, loss adjustment expenses and other expenses that are incurred

for each dollar of premium earned by the company.

A combined ratio of under 100% represents an underwriting profit while a combined ratio of over 100% indicates an underwriting loss.

The combined ratio is divided into two components, the

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

Insurance benefits and losses incurred at American Southern increased $0.2 million, or 1.2%, during the three month period ended March 31, 2024 over the comparable period in 2023.

As a percentage

of earned premiums, insurance benefits and losses incurred were 71.7% in the three month period ended March 31, 2024, compared to 73.6% in the three month period ended March 31, 2023.

The decrease in the loss ratio during the three month period

ended March 31, 2024 was primarily due to a decrease in losses in the general liability line of business, resulting from favorable reserve development.

Also contributing to the decrease in the loss ratio was a decrease in loss adjustment expenses

related to a decline in claims costs, as well as a decline in the surety line of business resulting from the loss of one program.

Partially offsetting the decrease was an increase in the frequency and severity of claims in the automobile liability

line of business.

Commissions and underwriting expenses increased $0.3 million, or 8.3%, during the three month period ended March 31, 2024, over the comparable period in 2023.

As a percentage of earned premiums,

underwriting expenses were 25.4% in the three month period ended March 31, 2024, compared to 24.3% in the three month period ended March 31, 2023.

The increase in the expense ratio during the three month period ended March 31, 2024 was primarily

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

During periods in which the loss ratio decreases,

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

During the three month period ended March 31, 2024,

variable commissions at American Southern increased by $0.3 million from the comparable period in 2023 due to a favorable loss experience from accounts subject to variable commissions.

The combined ratio is divided into two components, the loss ratio

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

Insurance benefits and losses incurred at American Southern increased $0.7 million, or 5.0%, during the three month period ended June 30, 2024, and increased $0.8 million, or 3.2%, during the six

month period ended June 30, 2024, over the comparable periods in 2023.

As a percentage of earned premiums, insurance benefits and losses incurred were 81.1% in the three month period ended June 30, 2024, compared to 75.8% in the three month period

ended June 30, 2023.

For the six month period ended June 30, 2024, this ratio increased to 76.3% from 74.7% in the comparable period in 2023.

The increase in the loss ratio during the three month and six month periods ended June 30, 2024 was mainly

due to an increase in the frequency and severity of claims in the automobile liability line of business, as well as in the surety line of business.

Partially offsetting the increase in the loss ratio was a decrease in loss adjustment expenses

related to a decline in claims costs.

Commissions and underwriting expenses decreased $0.8 million, or 19.1%, during the three month period ended June 30, 2024, and $0.5 million, or 5.7% during the six month period ended June 30, 2024,

over the comparable periods in 2023.

As a percentage of earned premiums, underwriting expenses were 20.2% in the three month period ended June 30, 2024, compared to 24.5% in the three month period ended June 30, 2023.

For the six month period ended

June 30, 2024, this ratio decreased to 22.8% from 24.4% in the comparable period in 2023.

The decrease in the expense ratio during the three month and six month periods ended June 30, 2024 was primarily due to American Southern’s use of a variable

commission structure with certain agents, which compensates the participating agents in relation to the loss ratios of the business they write.

During periods in which the loss ratio decreases, commissions and underwriting expenses will generally

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

During the three month and six month periods ended June 30, 2024, variable commissions at American Southern

decreased by $0.6 million and $0.9 million, respectively, from the comparable periods in 2023 due to an unfavorable loss experience from accounts subject to variable commissions.

Bankers Fidelity

The following summarizes Bankers Fidelity’s earned premiums, losses, expenses and underwriting ratios for the three month period ended March 31, 2024 and the comparable period in 2023:

The following summarizes Bankers Fidelity’s earned premiums, losses, expenses and underwriting ratios for the three month and six month periods ended June 30, 2024 and the comparable periods in 2023:

Three Months Ended

Six Months Ended

(Dollars in thousands)

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Combined ratio

Net earned premium revenue at Bankers Fidelity decreased $2.2 million, or 7.7%, during the three month period ended March 31, 2024, from the comparable period in 2023.

Gross earned premiums from

the Medicare supplement line of business decreased $2.9 million, or 8.6%, during the three month period ended March 31, 2024, due primarily to non-renewals exceeding the level of new business writings as the existing block of business has incurred

rate increases.

Other health product premiums decreased $0.1 million, or 3.8%, during the three month period ended March 31, 2024, over the comparable period in 2023, primarily as a result of a decline in new sales of the company’s group health

products, partially offset by an increase in new sales of the company's individual cancer product.

Gross earned premiums from the life insurance line of business decreased $0.2 million, or 4.1%, during the three month period ended March 31, 2024

over the comparable period in 2023 due to a decrease in the individual life products premium, resulting from the redemption and settlement of existing individual life policy obligations exceeding the level of new individual life sales.

ceded decreased $1.1 million, or 7.6%, during the three month period ended March 31, 2024, from the comparable period in 2023.

The decrease in ceded premiums for the three month period ended March 31, 2024 was due to a decrease in Medicare

supplement premiums subject to reinsurance.

Insurance benefits and losses incurred increased $1.3 million, or 7.4%, during the three month period ended March 31, 2024, from the comparable period in 2023.

As a percentage of earned premiums,

insurance benefits and losses incurred were 71.7% in the three month period ended March 31, 2024, compared to 61.6% in the three month period ended March 31, 2023.

The increase in the loss ratio for the three month period ended March 31, 2024 was

primarily due to an increase in incurred losses in the group life and Medicare supplement lines of business.

This increase was marginally offset by decreased loss ratios in the individual life lines of business.

Commissions and underwriting expenses decreased $0.4 million, or 3.5%, during the three month period ended March 31, 2024, over the comparable period in 2023.

As a percentage of earned premiums,

underwriting expenses were 38.8% in the three month period ended March 31, 2024, compared to 37.1% in the three month period ended March 31, 2023.

The increase in the expense ratio was primarily due to an increase in administrative costs related

to the group and individual health lines of business.

Net earned premium revenue at Bankers Fidelity decreased $0.7 million, or 2.6%, during the three month period ended June 30, 2024, and $2.9 million, or 5.2%, during the six month period ended June

30, 2024, from the comparable periods in 2023.

Gross earned premiums from the Medicare supplement line of business decreased $2.7 million, or 8.2%, during the three month period ended June 30, 2024, and $5.7 million, or 8.4%, during the six month

period ended June 30, 2024, due primarily to non-renewals exceeding the level of new business writings.

Other health product premiums increased $0.2 million, or 4.7%, during the three month period ended June 30, 2024, and $0.1 million, or 0.9%,

during the six month period ended June 30, 2024, over the comparable periods in 2023, primarily due to new sales in the group accident and health products.

Gross earned premiums from the life insurance line of business increased $0.9 million, or

19.9%, during the three month period ended June 30, 2024, and increased $0.7 million, or 6.6%, during the six month period ended June 30, 2024, over the comparable periods in 2023, primarily due to an increase in the group life products premium.

Partially offsetting this increase was a decrease in individual life products premium, resulting from the redemption and settlement of existing individual life policy obligations exceeding the level of new individual life sales.

Ceded premiums

decreased $0.9 million, or 6.6%, during the three month period ended June 30, 2024 and $2.0 million, or 7.1%, during the six month period ended June 30, 2024, from the comparable periods in 2023.

The decrease in ceded premiums for the three month

and six month periods ended June 30, 2024 was due to a decrease in Medicare supplement premiums subject to reinsurance.

Insurance benefits and losses incurred increased $1.8 million, or 11.1%, during the three month period ended June 30, 2024, and $3.1 million, or 9.1%, during the six month period ended June 30, 2024,

from the comparable periods in 2023.

As a percentage of earned premiums, benefits and losses were 64.0% in the three month period ended June 30, 2024, compared to 56.1% in the three month period ended June 30, 2023.

For the six month period ended

June 30, 2024, this ratio increased to 67.8% from 58.9% in the comparable period in 2023.

The increase in the loss ratio for the three month and six month periods ended June 30, 2024 was primarily due to an increase in reserves in the group life

line of business, as well as an increase in paid claims in relation to premiums within the Medicare supplement line of business.

Commissions and underwriting expenses decreased $0.4 million, or 3.8%, during the three month period ended June 30, 2024, and $0.8 million, or 3.6%, during the six month period ended June 30, 2024,

over the comparable periods in 2023.

As a percentage of earned premiums, underwriting expenses were 38.0% in the three month period ended June 30, 2024, compared to 38.5% in the three month period ended June 30, 2023.

For the six month period ended

June 30, 2024, this ratio increased to 38.4% from 37.8% in the comparable period in 2023.

The decrease in the expense ratio for the three month period ended June 30, 2024 was primarily due to a decrease in commission expenses in the group life line

of business, coupled with a decrease in the Medicare supplement line of business as a result of non-renewals exceeding the level of new business writings, as previously mentioned.

The increase in the expense ratio for the six month period ended June

30, 2024 was due to an increase in administrative costs related to the growth in the group lines of business.

Net Investment Income and Realized Gains

Investment income increased slightly during the three month period ended March 31, 2024, from the comparable period in 2023.

The increase in investment income was primarily attributable to an

increase in investment income related to fixed maturities and equity securities.

Partially offsetting this increase was a decrease in the equity in earnings from investments in the Company's limited partnerships and limited liability companies of

$0.1 million.

The Company had no net realized investment gains during each of the three month periods ended March 31, 2024 and 2023.

Management continually evaluates the Company’s investment portfolio and makes

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

Unrealized Losses on Equity Securities

Investment income decreased $0.1 million, or 5.6%, during the three month period ended June 30, 2024, and decreased $0.1 million, or 2.5%, during the six month period ended June 30, 2024, over the

comparable periods in 2023.

The decrease in investment income in the three month and six month periods ended June 30, 2024, from the comparable periods in 2023, was primarily attributable to the decrease in the equity in earnings from investments in

the Company’s limited liability companies of $0.2 million and $0.3 million, respectively.

The Company had net realized investment gains of less than $0.1 million during the three month period ended June 30, 2024, compared to net realized investment gains of $0.1 million during the three

month period ended June 30, 2023.

The Company had net realized investment gains of less than $0.1 million during the six month period ended June 30, 2024 and net realized investment gains of $0.1 million during the six month period ended June 30,

The net realized investment gains during the three month and six month periods ended June 30, 2023 resulted primarily from the redemption of several of the Company’s investments in fixed maturity securities.

Management continually evaluates

the Company’s investment portfolio and makes adjustments for credit losses and/or divests investments as may be determined to be appropriate.

Unrealized Gains (Losses) on Equity Securities

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

The Company recognized net

unrealized losses on equity securities of $0.1 million during the three month period ended March 31, 2024 and unrealized losses on equity securities of $2.4 million during the three month period ended March 31, 2023.

Changes in unrealized gains

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

unrealized gains on equity securities of $0.2 million during the three month period ended June 30, 2024 and unrealized gains on equity securities of $0.5 million during the three month period ended June 30, 2023.

The Company recognized net

unrealized gains on equity securities of $0.1 million during the six month period ended June 30, 2024 and unrealized losses on equity securities of $1.9 million during the six month period ended June 30, 2023.

Changes in unrealized gains (losses) on

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

Interest Expense

Interest expense increased $0.1 million, or 14.0%, during the three month period ended March 31, 2024, from the comparable period in 2023.

Changes in interest expense were primarily due to changes

in the Secured Overnight Financing Rate (“SOFR”) published by CME Group Benchmark Administration Limited, as the interest rates on the Company’s outstanding junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) and

the revolving credit facility are directly related to SOFR.

Interest expense increased $0.1 million, or 7.4%, during the three month period ended June 30, 2024, and $0.2 million, or 10.6%, during the six month period ended June 30, 2024, from the comparable

periods in 2023.

Changes in interest expense were primarily due to changes in the Secured Overnight Financing Rate (“SOFR”) published by CME Group Benchmark Administration Limited, as the interest rates on the Company’s outstanding junior

subordinated deferrable interest debentures (“Junior Subordinated Debentures”) and the revolving credit facility are directly related to SOFR.

Liquidity and Capital Resources

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the sale and maturity of its invested assets.

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

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

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

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

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

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

March 31, 2024, the Parent had approximately $5.9 million of unrestricted cash and investments.

The Parent’s insurance subsidiaries reported statutory net loss of $1.6 million for the three month period ended March 31, 2024, compared to statutory net income of $1.1 million for the three month

period ended March 31, 2023.

30, 2024, the Parent had approximately $6.3 million of unrestricted cash and investments.

The Parent’s insurance subsidiaries reported statutory net loss of $0.4 million for the six month period ended June 30, 2024, compared to statutory net income of $4.1 million for the six month period

ended June 30, 2023.

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

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

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

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

The Company’s life and health

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

The Company’s life and health operations’

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

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

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recognizing realized investment gains of the individual insurance subsidiaries.

At March 31, 2024, American Southern had $52.4 million of statutory capital and surplus and Bankers Fidelity had $32.6 million of statutory capital and surplus.

At June 30, 2024, American Southern had $52.0 million of statutory capital and surplus and Bankers Fidelity had $32.7 million of statutory capital and surplus.

dividend payments by the Parent’s insurance subsidiaries in excess of $8.8 million would require prior approval.

Through March 31, 2024, the Parent received dividends of $2.7 million from its subsidiaries.

Through June 30, 2024, the Parent received dividends of $5.4 million from its subsidiaries.

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

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

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

investing the gross proceeds of the trust preferred securities in Junior Subordinated Debentures.

The outstanding $18.0 million and $15.7 million of Junior Subordinated Debentures mature on December 4, 2032 and May 15, 2033, respectively, are

callable quarterly, in whole or in part, only at the option of the Company, and have an interest rate of 3-month CME Term SOFR plus applicable tenor spread of 0.26161 percent plus an applicable margin.

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

the gross proceeds of the trust preferred securities in Junior Subordinated Debentures.

The outstanding $18.0 million and $15.7 million of Junior Subordinated Debentures mature on December 4, 2032 and May 15, 2033, respectively, are callable

quarterly, in whole or in part, only at the option of the Company, and have an interest rate of 3-month CME Term SOFR plus applicable tenor spread of 0.26161 percent plus an applicable margin.

The margin ranges from 4.00% to 4.10%.

March 31, 2024, the effective interest rate was 9.64%.

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

respect to the trust preferred securities.

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

the related trust preferred securities.

As of March 31, 2024, the Company has not made such an election.

At June 30, 2024,

the effective interest rate was 9.65%.

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

preferred securities.

As of June 30, 2024, the Company has not made such an election.

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

or potential future financing arrangements.

At March 31, 2024, the Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding.

At June 30, 2024, the Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding.

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

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and are redeemable solely at the Company’s option.

The Series D Preferred Stock is not currently convertible.

At March 31, 2024, the Company had accrued but unpaid dividends on the Series D Preferred Stock totaling $0.1 million.

Series D Preferred Stock is not currently convertible.

At June 30, 2024, the Company had accrued but unpaid dividends on the Series D Preferred Stock totaling $0.2 million.

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

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

The membership arrangement provides for credit availability of five percent of statutory admitted assets, or approximately $8.2 million, as of March 31, 2024.

FHLB stock purchases may be required based upon the amount of funds borrowed from the FHLB.

As of March 31, 2024, BFLIC has pledged bonds having an amortized cost of $9.5 million to the FHLB.

BFLIC may be required to post additional acceptable

forms of collateral for any borrowings that it makes in the future from the FHLB.

As of March 31, 2024, BFLIC does not have any outstanding borrowings from the FHLB.

On May 12, 2021, the Company entered into a Revolving Credit Agreement with Truist Bank as the lender

(the “Lender”).

The Revolving Credit Agreement provides for an unsecured $10.0 million revolving credit facility that originally matured on April 12, 2024.

On March 22, 2024, the Company entered into a First Amendment (the "Amendment") to its

Revolving Credit Agreement (as amended, the “Credit Agreement”) with the Lender.

The Amendment, among other things, (a) updates the interest rate provisions to memorialize that the Company pays interest on the unpaid principal balance of

outstanding revolving loans at the Adjusted Term SOFR rate (as defined in the Credit Agreement), plus 2.00%, (b) extends the maturity date of the revolving credit facility to March 22, 2027, and (c) requires that the Company maintain a

consolidated net worth of not less than $64.2 million.

The membership arrangement provides for credit availability of five percent of statutory admitted assets, or approximately $8.2 million, as of June 30, 2024.

Additional FHLB

stock purchases may be required based upon the amount of funds borrowed from the FHLB.

As of June 30, 2024, BFLIC has pledged bonds having an amortized cost of $9.4 million to the FHLB.

BFLIC may be required to post additional acceptable forms of

collateral for any borrowings that it makes in the future from the FHLB.

As of June 30, 2024, BFLIC does not have any outstanding borrowings from the FHLB.

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

The Revolving Credit Agreement provides for an unsecured $10.0 million revolving

credit facility that originally matured on April 12, 2024.

On March 22, 2024, the Company entered into a First Amendment (the “Amendment”) to its Revolving Credit Agreement (as amended, the “Credit Agreement”) with the Lender.

The Amendment, among

other things, (a) updates the interest rate provisions to memorialize that the Company pays interest on the unpaid principal balance of outstanding revolving loans at the Adjusted Term SOFR rate (as defined in the Credit Agreement), plus 2.00%, (b)

extends the maturity date of the revolving credit facility to March 22, 2027, (c) requires the monthly payment of an unused commitment fee of $0.2% of the unused facility amount, and (d) requires that the Company maintain a consolidated net worth of

not less than $64.2 million.

Except as modified by the Amendment, the existing terms of the original Credit Agreement remain in effect.

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 and maintained a minimum consolidated net worth, as previously mentioned.

the Company’s consolidated capitalization at any time and maintaining a minimum consolidated net worth, as previously mentioned.

The Credit Agreement also contains customary representations and warranties and events of default.

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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 March 31, 2024 and December

31, 2023, the Company had outstanding borrowings including accrued interest of $4.0 million and $3.0 million, respectively, under the Credit Agreement.

Cash and cash equivalents decreased from $28.3 million at December 31, 2023 to $21.2 million at March 31, 2024.

The decrease in cash and cash equivalents during the three month period ended March

As of June 30, 2024 and December

31, 2023, the Company had outstanding borrowings of $4.0 and $3.0 million, respectively, under the Credit Agreement.

Cash and cash equivalents decreased from $28.3 million at December 31, 2023 to $21.2 million at June 30, 2024.

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

2024 was primarily attributable to net cash used in operating activities of $4.9 million.

Also contributing to the decrease in cash and cash equivalents was net cash used in investing activities of $2.8 million primarily as a result of

investment purchases exceeding investment sales and maturity of securities.

Partially offsetting the decrease in cash and cash equivalents was net cash provided by financing activities of $1.0 million primarily as a result of proceeds from bank

Also contributing to the decrease in cash and cash equivalents was net cash used in investing activities of $2.8 million primarily as a result of investment

purchases exceeding investment sales and maturity of securities.

Partially offsetting the decrease in cash and cash equivalents was net cash provided by financing activities of $0.6 million primarily as a result of proceeds from bank financing.

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

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

What changed 10-Q

Item 1. Financial Statements