Item 9A. Controls and Procedures
Item 9A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed
in our Securities Exchange Act of 1934 (the “Exchange Act”) reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is
accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the
participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of
the Securities Exchange Act of 1934). Based on that evaluation, management, including the Chief Executive Officer and Chief Financial Officer, concluded that disclosure controls and procedures were not effective as of that date due to the
previously identified and unremediated material weakness in internal control over financial reporting described below.
Management’s Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting for the Company. The Company’s internal control over financial reporting system has been designed to provide reasonable assurance regarding the reliability and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Management recognizes that there are inherent limitations in the effectiveness of any internal control system. Because of its inherent limitations, internal control over financial reporting may not
prevent or detect all misstatements. Furthermore, the application of any evaluations of effectiveness on future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31,
2024 based upon the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the updated 2013 Internal
Control – Integrated Framework . Based on that evaluation, management believes that internal control over financial reporting as such
term is defined in Exchange Act Rule 13a-15(f) was not effective as of December 31, 2024, as a result of the previously identified and unremediated material weakness described below. A material weakness is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
As initially disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, we previously
identified certain deficiencies in internal control that we believe rise to the level of a material weakness. Specifically, management determined that the design of the controls surrounding the process of reviewing insurance reserves and deferred
acquisition costs within the Company’s life and health segment was not effective. This deficiency in design did not enable the timely detection of anomalies in these values at the level of precision necessary to detect misstated values that may be
material.
Notwithstanding these deficiencies, management believes that, because of the actions taken by management in
identifying, and the efforts that the Company has been taking to address and correct, these deficiencies prior to the completion and filing of this Annual Report on Form 10-K, and the effective operation of other internal controls over financial
reporting, the material weakness did not result in any identified material misstatements to our financial statements. Similarly, there were no changes to any of our historical financial statements.
Changes in Internal Control Over Financial Reporting
The Company’s remediation efforts of the previously identified material weakness, which began in the quarter ended
March 31, 2024, remained ongoing though the quarter ended December 31, 2024, and through the date hereof. The Company has made significant progress in its remediation efforts, and during the quarter ended December 31, 2024, management conducted a
systematic review of the components of underwriting income for the Company’s Life products. This review included independent calculations of actuarial values for these products using a comprehensive process that had been developed, tested, and
implemented during the quarter ended December 31, 2024. Based on this review, management did not identify any material misstatement in the Company’s financial statements.
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Table of Contents
In furtherance of the remediation efforts, the Company has continued the development of a system to perform
calculations independently of the actuarial models. This system is intended to verify that the product parameters and actuarial assumptions are properly reflected in the reported values. The Company’s group whole life product has been implemented
on the system, which was used to validate the actuarial values for this product as of December 31, 2024. The Company currently expects that an extension of this system to accommodate other product lines the Company offers will be operational by
September 30, 2025. Full development and implementation of this system has required more time than previously anticipated due to unforeseen complexities inherent in the actuarial software systems used to calculate and report the actuarial values.
These complexities have required additional effort to understand and to replicate in this system, and to complete the remediation process
Inherent Limitations on Effectiveness of Controls
No system of controls, no matter how well designed and implemented, can provide absolute assurance that the objectives
of the system of controls are met. Furthermore, no evaluation of controls can provide absolute assurance that all control issues and any instances of fraud within a company have been detected.
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of the Company’s independent registered public accounting
firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to certain rules of the Securities and Exchange Commission that
exempt non-accelerated filers, including the Company, from such requirement.
Item 9B.
Other Information
None of the Company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended December 31, 2024, as such terms are
defined under Item 408(a) of Regulation S-K.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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Table of Contents
PART III
With the exception of certain information relating to the executive officers of the Company, which is provided in Part I hereof, the information relating to securities
authorized for issuance under equity compensation plans and the information relating to the Company’s Code of Business Conduct and Ethics, each of which is included below, all information required by Part III (Items 10, 11, 12, 13 and 14 of Form
10-K) is incorporated by reference to the sections entitled “Election of Directors,” “Security Ownership of Certain Beneficial Owners and Management,” “Delinquent Section 16(a) Reports” (if applicable), “Executive Compensation,” “Certain
Relationships and Related Person Transactions" and “Ratification of the Appointment of the Company's Independent Registered Public Accounting Firm” to be contained in the Company’s definitive proxy statement in connection with the Company’s 2025
Annual Meeting of Shareholders, to be filed with the SEC within 120 days of the Company’s fiscal year end.
Equity Compensation Plan Information
The following table sets forth, as of December 31, 2024, the number of securities issuable upon exercise of outstanding options, warrants and rights, the weighted average
exercise price thereof and the number of securities remaining available for future issuance under the Company’s equity compensation plans:
Plan Category
Number of
Securities to Be
Issued Upon
Exercise of
Outstanding
Options,
Warrants
and Rights
Weighted-Average
Exercise Price
of Outstanding
Options,
Warrants
and Rights
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in the
First Column)
Equity compensation plans approved by security holders
—
$
—
2,960,000
Equity compensation plans not approved by security holders (1)
—
—
—
Total
—
$
—
2,960,000
(1)
All of the Company’s equity compensation plans have been approved by the Company’s shareholders.
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or
controller, or any persons performing similar functions, as well as its directors and other employees. A copy of this Code of Business Conduct and Ethics has been filed as an exhibit to this annual report on Form 10-K.
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PART IV
Item 15.
Exhibits and Financial Statement Schedules
(a)
List of documents filed as part of this report:
1.
Financial Statements:
See Index to Financial Statements contained in Item 8 hereof.
2.
Financial Statement Schedules:
Schedule II - Condensed financial information of the registrant
Schedule III - Supplementary insurance information of the registrant
Schedule IV - Reinsurance information for the registrant
Schedule VI - Supplemental information concerning property-casualty insurance operations of the registrant
Schedules other than those listed above are omitted as they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. Columns
omitted from schedules filed have been omitted because the information is not applicable.
3.
Exhibits *:
3.1
Restated Articles of Incorporation of the registrant, as amended [incorporated by reference to Exhibit 3.1 to the registrant’s Form 10-K for the year ended December 31, 2008].
3.2
Restated Bylaws of the registrant, as amended [incorporated by reference to Exhibit 3.1 to the registrant’s Form 8-K filed on March 4, 2016].
4.1
Description of the registrant’s common stock registered pursuant to section 12 of the Securities Exchange Act of 1934 [incorporated by reference to Exhibit 4.1 to the registrant’s Form
10-K filed on March 24, 2020].
10.01
Management Agreement, dated July 1, 1993, between the registrant and Atlantic American Life Insurance Company and Bankers Fidelity Life Insurance Company [incorporated by reference to
Exhibit 10.41 to the registrant’s Form 10-Q for the quarter ended September 30, 1993].
10.02
Tax Allocation Agreement, dated as of January 4, 2016, between the registrant and the registrant’s subsidiaries [incorporated by reference to Exhibit 10.02 to the registrant’s Form
10-K for the year ended December 31, 2017].
10.03**
Atlantic American Corporation 2012 Nonqualified Stock Purchase Plan [incorporated by reference to Exhibit 99.1 to the registrant’s Form S-8 (File No. 333-183207) filed on August 10,
2012].
10.04**
Atlantic American Corporation 2012 Equity Incentive Plan [incorporated by reference to Exhibit 10.1 to the registrant’s Form 10-Q for the quarter ended March 31, 2013].
10.05
Lease Agreement, dated as of November 1, 2007, between Georgia Casualty & Surety Company, Bankers Fidelity Life Insurance Company, Atlantic American Corporation and Delta Life
Insurance Company [incorporated by reference to Exhibit 10.10 to the registrant’s Form 10-K for the year ended December 31, 2007].
10.06
First Amendment to Lease Agreement, dated as of March 31, 2008, between Georgia Casualty & Surety Company, Bankers Fidelity Life Insurance Company, Atlantic American Corporation
and Delta Life Insurance Company [incorporated by reference to Exhibit 10.2 to the registrant’s Form 10-Q for the quarter ended March 31, 2008].
10.07
Assignment and Assumption of Leases and Contracts, dated as of December 21, 2022, by and between Delta Life Insurance Company and 4370 Peachtree LLC [incorporated by reference to
Exhibit 10.07 to the registrant’s Form 10-K filed on June 30, 2023].
10.09
Revolving Credit Agreement, dated as of May 12, 2021, as amended by that certain First Amendment to Revolving Credit Agreement, dated as of March 22, 2024, by and between Atlantic
American Corporation and Truist Bank [incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K filed with the SEC on May 13, 2021].
10.10**
Atlantic American Corporation 2022 Equity and Incentive Compensation Plan [incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K filed on May 31, 2022].
10.11
Second Amendment to Lease Agreement, dated as of December 26, 2024, by and among 4370 Peachtree LLC, Atlantic American Corporation and Bankers Fidelity Life Insurance Company
[incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K filed with the SEC on December 30, 2024].
14.1
Code of Business Conduct and Ethics [incorporated by reference to Exhibit 14.1 to the registrant’s Form 10-K for the year ended December 31, 2003].
19.1
Atlantic
American Corporation Insider Trading Policy
21.1
Subsidiaries of the registrant [incorporated by reference to Exhibit 21.1 to the registrant’s Form 10-K for the year ended December 31, 2015].
23.1
Consent of Forvis Mazars, LLP, Independent Registered Public Accounting Firm.
31.1
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Table of Contents
31.2
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97.1
Atlantic American Corporation Compensation Clawback Policy
101.INS
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH
Inline XBRL Taxonomy Extension Schema.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase.
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
*
The registrant agrees to furnish to the Commission upon request a copy of any instruments defining the rights of security holders of the registrant that may be omitted from filing in accordance with the
Commission’s rules and regulations.
**
Management contract, compensatory plan or arrangement.
Item 16.
Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ATLANTIC AMERICAN CORPORATION
(Registrant)
By:
/s/ J. Ross Franklin
J. Ross Franklin
Vice President and Chief Financial Officer
Date: March 25, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature
Title
Date
/s/ Hilton H. Howell, Jr.
President, Chief Executive Officer and Chairman of the Board
(Principal Executive Officer)
March 25, 2025
HILTON H. HOWELL, JR.
/s/ J. Ross Franklin
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
March 25, 2025
J. ROSS FRANKLIN
/s/ Robin R. Howell
Director
March 25, 2025
ROBIN R. HOWELL
/s/ Mark E. Preisinger
Director
March 25, 2025
MARK E. PREISINGER
/s/ Joseph M. Scheerer
Director
March 25, 2025
JOSEPH M. SCHEERER
/s/ Scott G. Thompson
Director
March 25, 2025
SCOTT G. THOMPSON
/s/ D. Keehln Wheeler
Director
March 25, 2025
D. KEEHLN WHEELER
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Table of Contents
Schedule II
Page 1 of 3
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ATLANTIC AMERICAN CORPORATION
(Parent Company Only)
BALANCE SHEETS
ASSETS
December 31,
2024
2023
(In thousands)
Cash and cash equivalents
$
3,916
$
2,774
Investments
1,696
1,930
Investment in subsidiaries
109,127
117,637
Investments in unconsolidated trusts
1,238
1,238
Deferred tax asset, net
18,118
15,682
Income taxes receivable from subsidiaries
658
1,988
Other assets
9,874
6,733
Total assets
$
144,627
$
147,982
LIABILITIES AND SHAREHOLDERS’ EQUITY
Other payables
$
7,251
$
3,949
Revolving credit facility
4,023
3,019
Junior subordinated debentures obligations, net
33,738
33,738
Total liabilities
45,012
40,706
Shareholders’ equity
99,615
107,276
Total liabilities and shareholders’ equity
$
144,627
$
147,982
See accompanying report of independent registered public accounting firm.
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Table of Contents
Schedule II
Page 2 of 3
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ATLANTIC AMERICAN CORPORATION
(Parent Company Only)
STATEMENTS OF OPERATIONS
Year Ended December 31,
2024
2023
(In thousands)
Revenue
Fee income from subsidiaries
$
9,531
$
8,738
Distributed earnings from subsidiaries
9,000
8,400
Unrealized losses on equity securities, net
( 187
)
( 51
)
Other
( 159
)
( 455
)
Total revenue
18,185
16,632
General and administrative expenses
16,073
15,336
Interest expense
3,419
3,269
( 1,307
)
( 1,973
)
Income tax benefit (1)
( 2,314
)
( 4,802
)
1,007
2,829
Equity in undistributed earnings of subsidiaries, net
( 5,275
)
( 3,000
)
Net loss
$
( 4,268
)
$
( 171
)
(1)
Under the terms of a tax-sharing agreement, income tax provisions for the subsidiary companies are computed on a separate company
basis. Accordingly, the Company’s income tax benefit results from the utilization of the Parent’s separate return loss to reduce the consolidated taxable income of the Company.
See accompanying report of independent registered public accounting firm.
65
Table of Contents
Schedule II
Page 3 of 3
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ATLANTIC AMERICAN CORPORATION
(Parent Company Only)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2024
2023
(In thousands)
Cash flows from operating activities:
Net loss
$
( 4,268
)
$
( 171
)
Adjustments to reconcile net income to net cash used in operating activities:
Unrealized losses on equity securities, net
187
51
Depreciation and amortization
190
509
Compensation expense related to share awards
11
119
Loss from equity method investees
—
294
Equity in undistributed earnings of subsidiaries, net
5,275
3,000
Decrease (increase) in intercompany taxes
1,330
( 37
)
Deferred income tax benefit
( 1,748
)
( 3,123
)
Increase (decrease) in accounts payable and accrued expenses
3,303
( 181
)
Other, net
( 3,271
)
( 509
)
Net cash provided by (used in) operating activities
1,009
( 48
)
Cash flows from investing activities:
Additions to property and equipment
( 53
)
( 39
)
Net cash used in investing activities
( 53
)
( 39
)
Cash flows from financing activities:
Payment of dividends on Series D preferred stock
( 399
)
( 399
)
Payment of dividends on common stock
( 408
)
( 408
)
Proceeds from revolving credit facility, net
1,000
1,000
Treasury stock acquired — net employee share-based compensation
( 7
)
( 12
)
Net cash provided by financing activities
186
181
Net increase in cash
1,142
94
Cash and cash equivalents at beginning of year
2,774
2,680
Cash and cash equivalents at end of year
$
3,916
$
2,774
Supplemental disclosure:
Cash paid for interest
$
3,445
$
3,227
Cash paid for income taxes
$
580
$
2,582
Intercompany tax settlement from subsidiaries
$
4,352
$
4,031
See accompanying report of independent registered public accounting firm.
66
Table of Contents
Schedule III
Page 1 of 2
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
Segment
Deferred
Acquisition
Costs
Future Policy
Benefits,
Losses,
Claims and
Loss
Reserves
Unearned
Premiums
Other Policy
Claims and
Benefits
Payable
(In thousands)
December 31, 2024 :
Bankers Fidelity
$
41,976
$
124,357
$
2,420
$
1,757
American Southern
2,866
67,814
28,758
—
$
44,842
$
192,171
(1)
$
31,178
$
1,757
December 31, 2023 :
Bankers Fidelity
$
41,150
$
116,141
$
2,561
$
1,132
American Southern
2,700
63,832
28,756
—
$
43,850
$
179,973
(2)
$
31,317
$
1,132
(1)
Includes future policy benefits of $ 98,464
and losses and claims of $ 93,707 .
(2)
Includes future policy benefits of $ 92,495
and losses and claims of $ 87,478 .
See accompanying report of independent registered public accounting firm.
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Table of Contents
Schedule III
Page 2 of 2
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
Segment
Premium
Revenue
Net
Investment
Income
Benefits,
Claims,
Losses and
Settlement
Expenses
Amortization
of Deferred
Acquisition
Costs
Other
Operating
Expenses
Casualty
Premiums
Written
(In thousands)
December 31, 2024 :
Bankers Fidelity
$
111,042
$
5,544
$
70,064
$
8,313
$
33,564
$
—
American Southern
67,689
4,151
55,767
8,332
7,234
67,692
Corporate & other
—
96
—
—
10,217
—
$
178,731
$
9,791
$
125,831
$
16,645
$
51,015
$
67,692
December 31, 2023 :
Bankers Fidelity
$
110,382
$
5,755
$
71,485
$
8,050
$
29,942
$
—
American Southern
68,443
4,507
51,015
8,390
8,356
71,665
Corporate & other
—
( 204
)
—
—
10,120
—
$
178,825
$
10,058
$
122,500
$
16,440
$
48,418
$
71,665
See accompanying report of independent registered public accounting firm.
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Table of Contents
Schedule IV
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
REINSURANCE INFORMATION
Direct
Amount
Ceded to
Other
Companies
Assumed
From Other
Companies
Net
Amounts
Percentage
of Amount
Assumed
to Net
(Dollars in thousands)
Year ended December 31, 2024 :
Life insurance in force
$
982,997
$
( 7,245
)
$
—
$
975,752
Premiums —
Bankers Fidelity
$
164,282
$
( 53,249
)
$
9
$
111,042
0.0
%
American Southern
46,149
( 5,979
)
27,519
67,689
40.7
%
Total premiums
$
210,431
$
( 59,228
)
$
27,528
$
178,731
15.4
%
Year ended December 31, 2023 :
Life insurance in force
$
814,241
$
( 8,317
)
$
—
$
805,924
Premiums —
Bankers Fidelity
$
166,368
$
( 55,993
)
$
7
$
110,382
0.0
%
American Southern
46,349
( 5,902
)
27,996
68,443
40.9
%
Total premiums
$
212,717
$
( 61,895
)
$
28,003
$
178,825
15.7
%
See accompanying report of independent registered public accounting firm.
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Table of Contents
Schedule VI
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY-CASUALTY INSURANCE OPERATIONS
Claims and Claim
Adjustment
Expenses Incurred
Related To
Year Ended
Deferred
Policy
Acquisition
Costs
Reserves
Unearned
Premiums
Earned
Premiums
Net
Investment
Income
Current
Year
Prior
Years
Amortization
of Deferred
Acquisition
Costs
Paid Claims
and Claim
Adjustment
Expenses
Premiums
Written
(In thousands)
December 31, 2024
$
2,866
$
67,814
$
28,758
$
67,689
$
4,151
$
49,904
$
5,863
$
8,332
$
53,972
$
67,692
December 31, 2023
$
2,700
$
63,832
$
28,756
$
68,443
$
4,507
$
47,658
$
3,357
$
8,390
$
48,144
$
71,665
See accompanying report of independent registered public accounting firm.
70