What changed in this filing

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Item 1. Financial Statements

2025-05-13 compared with 2024-11-12 · 361 added, 453 removed, 611 unchanged (57% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

September 30,

Cash and cash equivalents

9 unchanged sentences

Reinsurance (net of allowance for expected credit losses of $ 45 and $ 51 )

Insurance premiums and other (net of allowance for expected credit losses of $ 215

Insurance premiums and other (net of allowance for expected credit losses $ 195

Deferred income taxes, net

31 unchanged sentences

ATLANTIC AMERICAN CORPORATION

CONDENSED CONSOLIDATED

STATEMENTS OF

Dollars in thousands, except per share data)

CONDENSED CO NSOLIDATED

STATEMENTS OF OPERATIONS

In thousands, except per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Insurance premiums, net

Net investment income

Realized investment gains, net

Unrealized losses on equity securities, net

Unrealized gains (losses) on equity securities, net

Total revenue

10 unchanged sentences

Net income (loss) applicable to common shareholders

Earnings (loss) per common share (basic)

Earnings (loss) per common share (diluted)

Earnings (loss) per common share (basic and diluted)

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

2 unchanged sentences

COMPREHENSIVE INCOME (LOSS)

Dollars in thousands)

In thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Net income (loss)

1 unchanged sentence

Available-for-sale fixed maturity securities:

unrealized holding gains (losses) arising in the period

Related income tax effect

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

Gross unrealized holding gains (losses) arising in the period

Related income tax effect

3 unchanged sentences

ATLANTIC AMERICAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF

CONDENSED CONSOLIDATED

STATEMENTS OF

SHAREHOLDERS’ EQUITY

Dollars in thousands except share data)

In thousands except share and per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Preferred stock:

9 unchanged sentences

Balance, beginning of period

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

Net income (loss)

24 unchanged sentences

In thousands)

Nine Months Ended

September 30,

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

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

(Additions to) amortization of acquisition costs, net

Realized investment gains, net

Unrealized investment losses, net

Net income (loss)

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

Amortization of acquisition costs, net

Unrealized (gains) losses on equity securities

Losses from equity method investees

Compensation expense related to share awards

(Benefit) provision for credit losses

Benefit for credit losses

Depreciation and amortization

Deferred income tax benefit

Increase in receivables, net

Increase (decrease) in insurance reserves and policyholder funds

Deferred income tax expense (benefit)

Decrease in receivables, net

Decrease in insurance reserves and policyholder funds

Decrease in accounts payable and accrued expenses

5 unchanged sentences

Additions to property and equipment

Net cash used in investing activities

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of dividends on common stock

Treasury stock acquired — net employee share-based compensation

Proceeds from revolving credit facility, net

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Net cash (used in) provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

5 unchanged sentences

ATLANTIC AMERICAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

17 unchanged sentences

2024 Annual Report.

The Company’s financial condition and operating results as of and for the three month and nine month periods ended September 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.

The Company’s financial condition and operating results as of and for the three month period ended March 31, 2025 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, 2025 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

7 unchanged sentences

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 2024 Annual Report.

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 September 30, 2024 and December 31, 2023.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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, 2025 and December 31, 2024.

Fixed maturities were comprised of the following:

September 30, 2024

March 31, 2025

Allowance for

3 unchanged sentences

Government agencies and authorities

Loan backed and structured securities

Obligations of states and political subdivisions

15 unchanged sentences

Government agencies and authorities

Loan backed and structured securities

Obligations of states and political subdivisions

10 unchanged sentences

Bonds having an amortized cost of $ 14,890

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

and $ 15,065 and included in the tables above were on deposit with insurance regulatory authorities as of March 31, 2025 and December 31,

2024, 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 September 30, 2024 and December 31, 2023.

Additionally, bonds having an amortized cost of $ 9,282 and $ 9,584 and included in the

tables above were pledged as collateral to the Federal Home Loan Bank of Atlanta (“FHLB”) at September 30, 2024 and December 31, 2023, respectively.

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

as of March 31, 2025 and December 31, 2024.

Additionally, bonds having an amortized cost of $ 9,132 and $ 9,209 and included in the tables above were pledged as collateral to the Federal Home Loan Bank of Atlanta (“FHLB”) at March 31, 2025 and December 31,

2024, respectively.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Equity securities were comprised of the following:

September 30, 2024

March 31, 2025

Equity securities:

9 unchanged sentences

Total equity securities

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

The carrying value and amortized cost of the Company’s investments in fixed maturities at March 31, 2025 and December 31, 2024 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.

September 30, 2024

March 31, 2025

December 31, 2024

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 September 30, 2024 and December 31, 2023.

September 30, 2024

unrealized loss position as of March 31, 2025 and December 31, 2024.

March 31, 2025

Less than 12 months

2 unchanged sentences

Government agencies and authorities

Loan backed and structured securities

Obligations of states and political subdivisions

Corporate securities

Redeemable preferred stocks

Total temporarily impaired securities

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2024

3 unchanged sentences

Government agencies and authorities

Loan backed and structured securities

Obligations of states and political subdivisions

Corporate securities

Redeemable preferred stocks

Total temporarily impaired securities

Analysis of Securities in Unrealized Loss Positions

As of September 30, 2024 and December 31, 2023, there were 183 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 September 30, 2024 or December 31, 2023.

The following tables summarize realized investment gains for the three month and nine month periods ended September 30, 2024 and 2023.

Three Months Ended

September 30, 2024

Invested Assets

Realized investment gains, net

Three Months Ended

September 30, 2023

Invested Assets

Realized investment gains, net

Nine Months Ended

September 30, 2024

Invested Assets

Realized investment gains, net

Nine Months Ended

September 30, 2023

Invested Assets

Realized investment gains, net

The following table presents the change in unrealized losses related to equity securities still held for the three month and nine month periods ended September 30, 2024 and 2023.

of Securities in Unrealized Loss Positions

As of March 31, 2025 and December 31, 2024, there were 207 and 213 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 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.

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.

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 allowance for credit losses on its available-for-sale fixed

maturities as of March 31, 2025 and December 31, 2024.

There were no realized

investment gains for the three month periods ended March 31, 2025 and 2024.

The following table presents the portion of unrealized gains (losses) related to equity securities still held for the three month period ended March 31, 2025 and 2024.

Three Months Ended

September 30,

Nine Months Ended

September 30,

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

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

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 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 $ 8,205 and $ 6,381 as of September 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 September 30, 2024 and December 31, 2023.

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 $ 6,461 and $ 6,616

as of March 31, 2025 and December 31, 2024, respectively.

The Company’s VIE interests, carried as a part of investment in unconsolidated trusts, totaled $ 1,238 as of March 31, 2025 and December 31, 2024.

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

2 unchanged sentences

The Company’s involvement with each VIE is limited to its direct ownership interest in 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 $ 9,443 and $ 7,619 , as of September 30, 2024 and December 31, 2023, respectively.

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

commitments totaling $ 2,200 , and $ 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 reduction in the Company’s outstanding commitments

was a result of an additional investment of $ 2,318 in the partnership.

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 $ 7,699 and $ 7,854 , as of March 31, 2025 and December 31, 2024,

respectively.

As of March 31, 2025 and December 31, 2024, the Company had outstanding commitments totaling $ 2,200 , 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 September 30, 2024 and December 31, 2023, the value of the equity security valued using Level 3 criteria was $ 189 and $ 185 , respectively.

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

As of March 31, 2025 and December 31, 2024, the value of the equity security valued using Level 3 criteria was $ 192 and $ 189 , respectively.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

of March 31, 2025, 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 September 30, 2024

carrying amount, estimated fair value and level within the fair value hierarchy of the Company’s financial instruments as of March 31, 2025

and December 31, 2024.

September 30, 2024

March 31, 2025

December 31, 2024

8 unchanged sentences

for classes of these financial assets.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Allowance for Expected Credit Losses

Reinsurance Recoverables

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

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

At and for the three months ended

September 30, 2024

At and for the nine months ended

September 30, 2024

Recoverables,

Net of Allowance

for Expected Credit

Allowance for

Expected Credit

Recoverables,

Net of Allowance

for Expected Credit

Allowance for

Expected Credit

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

uncollectible reinsurance, at March 31, 2025 and 2024, and the changes in the allowance for expected credit losses for the three months ended March 31, 2025 and 2024.

At and for the three months ended March 31, 2025

Reinsurance Recoverables,

Net of Allowance for Expected

Credit Losses

Allowance for Expected

Credit Losses

Balance, beginning of period

Current period change for estimated uncollectible reinsurance

Current period change for expected credit losses

Write-offs of uncollectible reinsurance recoverables

Balance, end of period

At and for the three months ended

September 30, 2023

At and for the nine months ended

September 30, 2023

Recoverables,

Net of Allowance

for Expected Credit

Allowance for

Expected Credit

Recoverables,

Net of Allowance

for Expected Credit

Allowance for

Expected Credit

At and for the three months ended March 31, 2024

Reinsurance Recoverables,

Net of Allowance for Expected

Credit Losses

Allowance for Expected

Credit Losses

Balance, beginning of period

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

Current period change for estimated uncollectible reinsurance

Current period change for expected credit losses

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 September 30, 2024 and 2023, and the changes in the allowance for expected credit losses for the three month and nine month periods ended September 30, 2024 and 2023.

At and for the three months ended

September 30, 2024

At and for the nine months ended

September 30, 2024

Insurance Premiums

and Other, Net of

Expected Credit

Allowance for

Expected Credit

credit losses, at March 31, 2025 and 2024, and the changes in the allowance for expected credit losses for the three months ended March 31, 2025 and 2024.

At and for the three months ended March 31, 2025

Insurance Premiums

and Other, Net of

Expected Credit

Expected Credit Losses

Allowance for

Expected Credit

Expected Credit Losses

Balance, beginning of period

2 unchanged sentences

Balance, end of period

At and for the three months ended

September 30, 2023

At and for the nine months ended

September 30, 2023

Insurance Premiums

and Other, Net of

Expected Credit

Allowance for

Expected Credit

At and for the three months ended March 31, 2024

Insurance Premiums

and Other, Net of

Expected Credit

Expected Credit Losses

Allowance for

Expected Credit

Expected Credit Losses

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

2 unchanged sentences

Internal-Use Software

On March 3, 2021, the

Company entered into a hosting arrangement through a service contract with a third party software solutions vendor to provide a suite of policy, billing, claim, and customer management services.

The software is managed, hosted, supported, and

delivered as a cloud-based software service product offering (software-as-a-service).

The initial term of the arrangement is five years

from the effective date with a renewal term of an additional five years .

Service fees related to

the hosting arrangement are recorded as an expense in the Company’s condensed consolidated statement of operations as incurred.

On March 3, 2021, the Company entered

into a hosting arrangement through a service contract with a third party software solutions vendor to provide a suite of policy, billing, claim, and customer management services.

The software is managed, hosted, supported, and delivered as a

cloud-based software service product offering (software-as-a-service).

The initial term of the arrangement, as amended, was three years .

The arrangement was renewed in March 2024 for an additional five years , with a subsequent renewal term of five years .

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Service fees related to the hosting

arrangement are recorded as an expense in the Company’s condensed consolidated statement of operations as incurred.

Implementation expenses incurred related to third party professional and consulting services have been capitalized.

Company will begin amortizing, on a straight-line basis over the remainder of the original ten year term of the hosting arrangement,

when the software is substantially ready for its intended use.

The Company incurred and capitalized implementation costs of $ 78 and $ 1,218 during the nine months ended September 30, 2024 and 2023, respectively.

As a result, the Company has capitalized $ 4,645 and $ 4,567 in implementation costs

in other assets within its condensed consolidated balance sheet as of September 30, 2024 and December 31, 2023, respectively.

will begin amortizing, on a straight-line basis over the expected remaining term of the hosting arrangement, when the software is substantially ready for its intended use.

The Company incurred and capitalized implementation costs of $ 20 and $ 10 during the three months

ended March 31, 2025 and 2024, respectively.

As a result, the Company has capitalized $ 4,695 and $ 4,675 in implementation costs in other assets within its condensed consolidated balance sheet as of March 31, 2025 and December 31, 2024,

respectively.

The Company expects the software will be substantially ready for its intended use during 2025.

Accordingly, the Company has no t recorded any amortization

expense related to software implementation costs for the three months and nine months ended September 30, 2024 and 2023.

Accordingly, the Company has no t

recorded any amortization expense related to software implementation costs for the three months ended March 31, 2025 and 2024.

Insurance Reserves for Losses and Claims

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

Nine Months Ended

September 30,

roll-forward of insurance reserves for losses and claims for the three months ended March 31, 2025 and 2024 is as follows:

Three 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 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.

Prior years’ development was primarily the result of favorable 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, partially

offset by unfavorable 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:

Nine Months Ended

September 30,

Three Months Ended

Total incurred losses

2 unchanged sentences

Total insurance benefits and losses incurred

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On May 12, 2021, the

1 unchanged sentence

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 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 .

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,

6 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 September 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 September 30, 2024 and 2023, the Company incurred $ 77 and $ 56 in interest expense, respectively, on the revolving credit

facility borrowing.

For the nine months ended September 30, 2024 and 2023, the Company incurred $ 213 and $ 142 , respectively, in interest expense.

During the three month and nine month periods ended September 30, 2024, the Company paid $ 3 and $ 6 , respectively, in fees on

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

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

interest rate was 7.35 % and 9.69 %,

respectively.

As of March 31, 2025, and

December 31, 2024, the Company had outstanding borrowings including accrued interest of $ 4,022 and $ 4,023 , respectively, under the Credit Agreement.

For the three months ended March 31, 2025 and 2024, the Company incurred $ 64 and $ 61 in interest expense, respectively, on the

revolving credit facility borrowing.

During the three month periods ended March 31, 2025 and 2024, the Company paid $ 3 and $ 0 , respectively, in fees on the available unused amount of the revolving credit facility of $ 6,000 .

At March 31, 2025 and December 31, 2024, the effective interest rate was 6.42 % and 6.67 %, respectively.

Junior Subordinated Debentures

5 unchanged sentences

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

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.

Prior to July 1, 2023, the interest rate

was based on 3-month LIBOR plus an applicable margin.

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 % plus an applicable margin, ranging from 4.00 % to 4.10 %.

At September 30, 2024, the effective interest rate was

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.

Prior to July 1,

2023, the interest rate was based on 3-month LIBOR plus an applicable margin.

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 % plus an applicable margin, ranging from 4.00 % to 4.10 %.

At March 31, 2025 and December 31, 2024, the effective interest rate was 8.64 % and 8.82 %, respectively.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The financial structure of each of

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

Atlantic American Statutory Trust I and II as of March 31, 2025 and December 31, 2024 was as follows:

Atlantic American

3 unchanged sentences

JUNIOR SUBORDINATED DEBENTURES (1) (2)

Principal amount owed September 30 ,

Principal amount owed March 31 ,

Treasury debt (3)

Net balance September 30 , 2024

Net balance March 31 , 2025

Net balance December 31, 2024

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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

September 30 , 2024

Average Shares

(In thousands)

Basic and Diluted Loss Per Common Share:

Less preferred stock dividends

Net loss applicable to common shareholders

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

Three Months Ended

September 30 , 2023

March 31, 2025

Average Shares

(In thousands)

Basic Earnings Per Common Share:

Basic and Diluted 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

Nine Months Ended

September 30,

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Three Months Ended

March 31, 2024

Average Shares

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Net loss applicable to common shareholders

Nine Months Ended

September 30,

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 September 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:

The assumed conversion of the Company’s Series D preferred stock was excluded from the e arnings ( loss) per common share calculation for three month periods ended March 31, 2025 and 2024, 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

Three Months Ended

September 30,

Nine Months Ended

September 30,

Federal income tax provision at statutory rate of 21 %

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Parking disallowance

Adjustment for prior years’ estimates to actual

Income tax expense (benefit)

1 unchanged sentence

Three Months Ended

September 30,

Nine Months Ended

September 30,

Current – Federal

Deferred – Federal

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

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

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

The original term of the second lease was ten years

and amended in January 2017 to provide for an additional seven years , with a termination date on September 30, 2026.

The rate used in

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

The Company has two operating lease agreements, each for the use of office space in the ordinary course of business.The original term of the first lease was to automatically renew on an annual

basis and was amended on December 26, 2024, when the Company and its subsidiary, Bankers Fidelity Life Insurance Company, entered into a Second Amendment to the Lease Agreement (the “Second Amendment”) with 4370 Peachtree LLC.

The Second Amendment

amends the Lease Agreement, dated November 1, 2007, by and among the same parties (as previously amended, the “Lease Agreement”), pursuant to which the Company leases space for its principal offices and for some of its insurance operations in an

office building located in Atlanta, Georgia.

Pursuant to the Second Amendment, the Lease Agreement was modified to increase the base rent payable by the Company, beginning January 1, 2025.

The Second Amendment also provides for rent adjustment on

January 1, 2027, January 1, 2030 and each five years thereafter.

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

The rate used in determining the present value of lease payments is based upon an estimate of the Company’s incremental secured

borrowing rate commensurate with the term of the underlying lease.

These leases are accounted for

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

Lease expense reported for the nine months ended September 30, 2024 and September 30 , 2023 was $ 761 .

Lease expense reported for the three months ended March 31, 2025 and March 31, 2024 was $ 285 and $ 254 , respectively.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Additional information regarding the Company’s real estate

operating leases is as follows:

Nine Months Ended

September 30,

Three Months Ended

Other information on operating leases:

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

As of September 30, 2024, the Company has no operating leases

that have not yet commenced.

As of March 31, 2025, the Company has no operating leases that

have not yet commenced.

Commitments and Contingencies

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Segment Information

The Parent’s primary

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

The Parent’s primary insurance subsidiaries operate with relative autonomy and each

company is evaluated based on its individual performance.

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

Each business unit is managed independently and is evaluated on its individual

The following sets forth the assets, revenue and income (loss) before income taxes for each business unit as of and for the periods ended 2024 and 2023.

September 30,

Each segment derives revenue from the

collection of premiums, as well as from investment income.

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

Substantially all revenue other than that in the

corporate and other segment is from external sources.

The Company adopted ASU No.

2023-07, Segment

Reporting- An Amendment for Improvements to Reportable Segment Disclosures (Topic 280) in December 2024.

The most significant provision was for the Company to disclose significant segment expenses that are regularly provided to the Chief Operating

Decision Maker (“CODM”).

Our CODM is the Company’s Chairman, President and Chief Executive Officer.

The segment’s most significant expenses include insurance benefits and losses incurred and other expenses, such as commissions and underwriting.

Interest expense at the segment level is insignificant.

To assess proﬁtability on a reportable segment basis, the CODM reviews income (loss) before income taxes.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following sets

forth the assets, revenue and income (loss) before income taxes for each business unit as of and for the periods ended 2025 and 2024.

American Southern

Bankers Fidelity

Corporate and Other

Corporate, Other and Eliminations

Three Months Ended

September 30,

Nine Months Ended

September 30,

American Southern

Bankers Fidelity

Corporate and Other

Corporate, Other and Eliminations

Total revenue

Three Months Ended

September 30,

Nine Months Ended

September 30,

In come (Loss) Before Income Taxes

Insurance benefits and losses incurred

American Southern

Bankers Fidelity

Corporate and Other

Corporate, Other and Eliminations

Total insurance benefits and losses incurred

Three Months Ended

Commissions and underwriting expenses

American Southern

Bankers Fidelity

Corporate, Other and Eliminations

Total commissions and underwriting expenses

Three Months Ended

Income (loss) before income taxes

American Southern

Bankers Fidelity

Corporate, Other and Eliminations

Income (loss) before income taxes

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

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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 nine month periods ended September 30, 2024.

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

and notes thereto included elsewhere herein, as well as with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”).

subsidiaries (collectively with the Parent, the “Company”) as of and for three month period ended March 31, 2025.

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

included elsewhere herein, as well as with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”).

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

12 unchanged sentences

Overall Corporate Results

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

The following presents the Company’s revenue, expenses and net income (loss) for the three month period ended March 31, 2025 and the comparable period in 2024:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

1 unchanged sentence

Net investment income

Realized investment gains, net

Unrealized losses on equity securities, net

Unrealized gains (losses) on equity securities, net

Total revenue

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

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

A reconciliation of net income (loss) to operating income (loss) for the three month period ended March 31, 2025 and the comparable period in 2024 is as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Reconciliation of Non-GAAP Financial Measure

2 unchanged sentences

Income tax expense (benefit)

Realized investment gains, net

Unrealized losses on equity securities, 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 September 30, 2024, compared to net income of $1.8 million, or

$0.08 per diluted share, for the three month period ended September 30, 2023.

The Company had net loss of $4.7 million, or $(0.24) per diluted share, for the nine month period ended September 30, 2024, compared to net income of $2.1 million, or

$0.09 per diluted share, for the nine month period ended September 30, 2023.

The increase in net loss for the three month and nine month periods ended September 30, 2024 was primarily the result of 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, as well as in the property and casualty operations due to the frequency and severity of claims in the automobile liability line of

business, from the comparable periods in 2023.

For the three month period ended September 30, 2024, premium revenue increased slightly to $43.8 million from $43.7 million in the comparable period in 2023.

For the nine month period ended

September 30, 2024, premium revenue decreased $2.6 million, or 1.9%, to $133.3 million from $135.9 million in the comparable period in 2023.

The decrease in premium revenue during the nine month period ended September 30, 2024 was primarily

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

Operating income decreased $4.3 million in the three month period ended September 30, 2024 from the three month period ended September 30, 2023.

For the nine month period ended September 30, 2024,

operating income decreased $10.0 million from the comparable period in 2023.

The decrease in operating income for the three month and nine month periods ended September 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, as previously mentioned.

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, as previously mentioned, as well as in the automobile physical damage line of business.

On a consolidated basis, the Company had net income of $0.8 million, or $0.03 per diluted share, for the three month period ended March 31, 2025, compared to net loss of $2.0 million, or $(0.10)

per diluted share, for the three month period ended March 31, 2024.

The increase in net income for the first quarter of 2025 was primarily the result of an increase in premium revenue in the life and health operations coupled with favorable loss

experience in the life and health operations.

Premium revenue for the three month period ended March 31, 2025 increased $2.4 million, or 5.3%, to $46.9 million from $44.6 million in the three month period ended March 31, 2024.

in premium revenue was primarily attributable to an increase in the group accident and health, other individual health and Medicare supplement lines of business due to new sales in the life and health operations.

Also contributing to the increase

was an increase in earned premiums in inland marine within the other lines of business and the automobile physical damage line of business in the property and casualty operations.

Operating income increased $2.7 million in the three month period ended March 31, 2025 from the three month period ended March 31, 2024.

The increase in operating income was primarily due to an

increase in premium revenue in the life and health operations coupled with favorable loss experience in the life and health operations.

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

American Southern

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

The following summarizes American Southern’s premiums, losses, expenses and underwriting ratios for the three month period ended March 31, 2025 and the comparable period in 2024:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

8 unchanged sentences

Combined ratio

Gross written premiums at American Southern decreased $2.3 million, or 21.4%, during the three month period ended September 30, 2024 and decreased $4.9 million, or 8.3%, during the nine month

period ended September 30, 2024, from the comparable periods in 2023.

The decrease in gross written premiums during the three month and nine month periods ended September 30, 2024 was primarily attributable to the decrease in premiums written in

the automobile liability line of business due to the non-renewal of a program, as well as a decrease in premiums written in the automobile physical damage line of business due to a decline in demand within 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 decreased $0.1 million, or 4.4%, during the three month period ended September 30, 2024 and decreased $0.1 million, or 1.9%, during the nine month period ended September 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 nine month periods ended September 30, 2024 and the comparable periods in 2023:

Gross written premiums at American Southern increased $0.9 million, or 10.2%, during the three month period ended March 31, 2025 from the comparable period in 2024.

The increase in gross written

premiums was primarily attributable to the increase in premiums written in inland marine within the other lines of business due to a new program written by an existing agency.

Also contributing to the increase in gross written premiums was an

increase in the automobile physical damage line of business resulting from increased writings from existing agencies.

Partially offsetting the increase in gross written premiums was a decrease in premiums written in the automobile liability line of

business resulting from retrospective premium adjustments.

Ceded premiums increased $0.1 million, or 9.1%, during the three month period ended March 31, 2025 from the comparable period in 2024.

American Southern’s ceded premiums are typically determined as

a percentage of earned premiums and generally fluctuate as earned premiums increase or decrease or retention levels change.

The following presents American Southern’s net earned premiums by line of business for the three month period ended March 31, 2025 and the comparable period in 2024:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

2 unchanged sentences

General liability

Net earned premiums decreased $0.4 million, or 2.2%, during the three month period ended September 30, 2024, and decreased slightly during the nine month period ended September 30, 2024, over the

comparable periods in 2023.

The decrease in net earned premiums during the three month and nine month periods ended September 30, 2024 was primarily attributable to a decrease in earned premiums in the automobile physical damage line of business

due to a decline in demand within 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 increased $0.5 million, or 2.5%, during the three month period ended March 31, 2025 over the comparable period in 2024.

The increase in net earned premiums was primarily

attributable to an increase in earned premiums in inland marine within the other lines of business and the automobile physical damage line of business.

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

the automobile liability line of business resulting from the nonrenewal of one program and retrospective premiums adjustments.

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.

4 unchanged sentences

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 $2.1 million, or 17.7%, during the three month period ended September 30, 2024, and increased $2.9 million, or 7.7%, during the

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

As a percentage of earned premiums, insurance benefits and losses incurred were 86.2% in the three month period ended September 30, 2024, compared to 71.7% in the

three month period ended September 30, 2023.

For the nine month period ended September 30, 2024, this ratio increased to 79.5% from 73.7% in the comparable period in 2023.

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

periods ended September 30, 2024 was mainly due to an increase in the frequency and severity of claims in the automobile liability line of business.

Partially offsetting the increase in the loss ratio was a decrease in the general liability line

of business due to favorable reserve development, as a well as a decrease in loss adjustment expenses related to a decline in claims costs.

Commissions and underwriting expenses decreased $0.5 million, or 11.7%, during the three month period ended September 30, 2024, and $1.0 million, or 7.7% during the nine month period ended

September 30, 2024, over the comparable periods in 2023.

As a percentage of earned premiums, underwriting expenses were 23.6% in the three month period ended September 30, 2024, compared to 26.2% in the three month period ended September 30, 2023.

For the nine month period ended September 30, 2024, this ratio decreased to 23.1% from 25.0% in the comparable period in 2023.

The decrease in the expense ratio during the three month and nine month periods ended September 30, 2024 was primarily

Insurance benefits and losses incurred at American Southern increased $1.8 million, or 13.9%, during the three month period ended March 31, 2025 over the comparable period in 2024.

As a percentage

of earned premiums, insurance benefits and losses incurred were 79.6% in the three month period ended March 31, 2025, compared to 71.7% in the three month period ended March 31, 2024.

The increase in the loss ratio during the three month period

ended March 31, 2025 was primarily due to an increase in losses in the automobile physical damage and other lines of business.

Also contributing to the increase in the loss ratio was an increase in loss adjustment expenses related to an increase

in claims costs.

Partially offsetting the increase was a decrease in the frequency of claims in the automobile liability line of business.

Commissions and underwriting expenses decreased $0.4 million, or 8.8%, during the three month period ended March 31, 2025, over the comparable period in 2024.

As a percentage of earned premiums,

underwriting expenses were 22.6% in the three month period ended March 31, 2025, compared to 25.4% in the three month period ended March 31, 2024.

The decrease in the expense ratio during the three month period ended March 31, 2025 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.

1 unchanged sentence

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 nine month periods ended

September 30, 2024, variable commissions at American Southern decreased by $0.3 million and $0.9 million, respectively, from the comparable periods in 2023 due to an unfavorable loss experience from accounts subject to variable commissions.

During the three month period ended March 31, 2025,

variable commissions at American Southern decreased by $0.5 million from the comparable period in 2024 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 and nine month periods ended September 30, 2024 and the comparable periods

The following summarizes Bankers Fidelity’s earned premiums, losses, expenses and underwriting ratios for the three month period ended March 31, 2025 and the comparable period in 2024:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

Medicare supplement

Other health products

Life insurance

Gross earned premiums

7 unchanged sentences

Combined ratio

Net earned premium revenue at Bankers Fidelity increased $0.4 million, or 1.4%, during the three month period ended September 30, 2024, and decreased $2.6 million, or 3.0%, during the nine month

period ended September 30, 2024, from the comparable periods in 2023.

Gross earned premiums from the Medicare supplement line of business decreased $1.7 million, or 5.2%, during the three month period ended September 30, 2024, and $7.4 million, or

7.3%, during the nine month period ended September 30, 2024, due primarily to non-renewals exceeding the level of new business writings.

Other health product premiums increased $0.7 million, or 20.5%, during the three month period ended September

30, 2024, and $0.8 million, or 7.2%, during the nine month period ended September 30, 2024, over the comparable periods in 2023, primarily due to new sales.

Gross earned premiums from the life insurance line of business increased $0.8 million, or

16.6%, during the three month period ended September 30, 2024, and $1.4 million, or 9.8%, during the nine month period ended September 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 $0.6 million, or 4.5%, during the three month period ended September 30, 2024 and $2.6 million, or 6.2%, during the nine month period ended September 30, 2024, from the comparable periods in 2023.

The decrease in ceded premiums for the

three month and nine month periods ended September 30, 2024 was due to a decrease in Medicare supplement premiums subject to reinsurance.

Insurance benefits and losses incurred increased $1.8 million, or 12.3%, during the three month period ended September 30, 2024, and increased $4.9 million, or 10.1%, during the nine month period

ended September 30, 2024, from the comparable periods in 2023.

As a percentage of earned premiums, benefits and losses were 60.9% in the three month period ended September 30, 2024, compared to 55.0% in the three month period ended September 30,

For the nine month period ended September 30, 2024, this ratio increased to 65.5% from 57.6% in the comparable period in 2023.

The increase in the loss ratio for the three month and nine month periods ended September 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 increased $1.2 million, or 13.3%, during the three month period ended September 30, 2024, and increased $0.4 million, or 1.3%, during the nine month period

ended September 30, 2024, over the comparable periods in 2023.

As a percentage of earned premiums, underwriting expenses were 36.2% in the three month period ended September 30, 2024, compared to 32.4% in the three month period ended September 30,

For the nine month period ended September 30, 2024, this ratio increased to 37.6% from 36.1% in the comparable period in 2023.

The increase in the expense ratio for the three month period ended September 30, 2024 was primarily due to an

increase in administrative costs related to the growth in the group lines of business.

Partially offsetting the increase in the expense ratio was 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.

Net Investment Income and Realized Gains

Investment income increased $0.2 million, or 6.5%, during the three month period ended September 30, 2024, and increased slightly during the nine month period ended September 30, 2024, over the

comparable periods in 2023.

The increase in investment income in the three month and nine month periods ended September 30, 2024, from the comparable periods in 2023, was primarily attributable to a net loss in a certain investment within the

Company's limited liability companies of $0.3 million in the three month and nine month periods ended September 30, 2023, which did not occur in the comparable periods in 2024.

The Company had net realized investment gains of less than $0.1 million during the three month period ended September 30, 2024, compared to no net realized investment gains during the three month

period ended September 30, 2023.

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

September 30, 2023.

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

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 Losses on Equity Securities

Gross earned premiums at Bankers Fidelity increased $2.8 million, or 7.1%, during the three month period ended March 31, 2025, from the comparable period in 2024.

The increase in gross earned

premiums was primarily attributable to the increase in gross earned premiums from the Medicare supplement line of business due primarily to the level of new business writings exceeding non-renewals.

Also contributing to the increase in gross earned

premiums was an increase in gross earned premiums in the group accident and health line of business.

Ceded premiums increased $0.9 million, or 7.1%, during the three month period ended March 31, 2025, from the comparable period in 2024.

The increase in ceded premiums was due to an increase in

Medicare supplement premiums subject to reinsurance.

The following table summarizes, for the periods indicated, Bankers Fidelity’s net earned premiums by line of business:

Three Months Ended

(In thousands)

Medicare supplement

Individual life

Group accident and health

Other individual accident and health

Net earned premium revenue at Bankers Fidelity increased $1.9 million, or 7.2%, during the three month period ended March 31, 2025, from the comparable period in 2024.

The increase in net earned

premiums was primarily attributable to increases in the group accident and health, other individual health and Medicare supplement lines of business due to new sales as previously mentioned.

Insurance benefits and losses incurred decreased $1.8 million, or 9.4%, during the three month period ended March 31, 2025, from the comparable period in 2024.

As a percentage of earned premiums,

insurance benefits and losses incurred were 60.6% in the three month period ended March 31, 2025, compared to 71.7% in the three month period ended March 31, 2024.

The decrease in the loss ratio for the three month period ended March 31, 2025 was

primarily due to lower utilization in the Medicare supplement line of business.

Partially offsetting this decrease was an increase in incurred losses in the individual life and other individual accident and health lines of business.

Commissions and underwriting expenses increased $0.4 million, or 3.9%, during the three month period ended March 31, 2025, over the comparable period in 2024.

As a percentage of earned premiums,

underwriting expenses were 37.6% in the three month period ended March 31, 2025, compared to 38.8% in the three month period ended March 31, 2024.

The decrease in the expense ratio was primarily due to an increase in earned premiums in the

Medicare supplement, group life and group accident and health lines of business.

Net Investment Income and Realized Gains (Losses)

Investment income decreased $0.1 million, or 4.5%, during the three month period ended March 31, 2025, from the comparable period in 2024.

The decrease in investment income was primarily

attributable to 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, 2025 and 2024.

Management continually evaluates the Company’s investment portfolio and, as

may be determined to be appropriate, makes adjustments for impairments and/or will divest investments.

See Note 3 of Notes to Condensed Consolidated Financial Statements.

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 $1.7 million during the three month period ended September 30, 2024 and unrealized losses on equity securities of $1.5 million during the three month period ended September 30, 2023.

The Company recognized

net unrealized losses on equity securities of $1.6 million during the nine month period ended September 30, 2024 and unrealized losses on equity securities of $3.4 million during the nine month period ended September 30, 2023.

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

unrealized gains on equity securities of $0.8 million during the three month period ended March 31, 2025 and unrealized losses on equity securities of $0.1 million during the three month period ended March 31, 2024.

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.

Interest Expense

Interest expense increased slightly during the three month period ended September 30, 2024, and $0.2 million, or 7.6%, during the nine month period ended September 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 utilize SOFR as the reference rate.

Interest expense decreased $0.1 million, or 9.5%, during the three month period ended March 31, 2025, from the comparable period in 2024.

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 utilize SOFR as the reference rate.

Liquidity and Capital Resources

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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.

September 30, 2024, the Parent had approximately $7.4 million of unrestricted cash and investments.

The Parent’s insurance subsidiaries reported statutory net income of $2.0 million for the nine month period ended September 30, 2024, compared to statutory net income of $8.9 million for the nine

month period ended September 30, 2023.

March 31, 2025, the Parent had approximately $3.5 million of unrestricted cash and investments.

The Parent’s insurance subsidiaries reported statutory net income of $4.3 million for the three month period ended March 31, 2025, compared to statutory net income of $1.6 million for the three

month period ended March 31, 2024.

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 GAAP.

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

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 September 30, 2024, American Southern had $50.4 million of statutory capital and surplus and Bankers Fidelity had $31.0 million of statutory capital and surplus.

At March 31, 2025, American Southern had $47.6 million of statutory capital and surplus and Bankers Fidelity had $33.5 million of statutory capital and surplus.

2025, dividend payments by the Parent’s insurance subsidiaries in excess of $6.3 million would require prior approval.

Through September 30, 2024, the Parent received dividends of $8.1 million from its subsidiaries.

Through March 31, 2025, the Parent received dividends of $2.1 million from its subsidiaries.

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

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2025, the effective interest rate was 8.64%.

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 September 30, 2024, the Company has not made such an election.

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 March 31, 2025, the Company has not made such an election.

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

or potential future financing arrangements.

At September 30, 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 Company’s controlling shareholder.

At March 31, 2025, the Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding.

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

Company’s controlling shareholder.

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

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

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

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

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

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

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

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

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

and are redeemable solely at the Company’s option.

The Series D Preferred Stock is not currently convertible.

At September 30, 2024, the Company had accrued but unpaid dividends on the Series D Preferred Stock totaling $0.3 million.

At March 31, 2025, the Company had accrued but unpaid dividends on the Series D Preferred Stock totaling $0.1 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 September 30, 2024.

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

As of September 30, 2024, BFLIC has pledged bonds having an amortized cost of $9.3 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 September 30, 2024, BFLIC does not have any outstanding borrowings from the FHLB.

The membership arrangement provides for credit availability of five percent of statutory admitted assets, or approximately $8.4 million, as of March 31, 2025.

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

As of March 31, 2025, BFLIC has pledged bonds having an amortized cost of $9.1 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, 2025, 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”).

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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 September 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 $23.0 million at September 30, 2024.

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

September 30, 2024 was primarily attributable to net cash used in operating activities of $4.8 million.

Also contributing to the decrease in cash and cash equivalents was net cash used in investing activities of $1.0 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

As of March 31, 2025 and

December 31, 2024, the Company had outstanding borrowings, including accrued interest of $4.0 million in each of the respective periods, under the Credit Agreement.

Cash and cash equivalents increased from $35.6 million at December 31, 2024 to $35.9 million at March 31, 2025.

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

31, 2025 was primarily attributable to net cash provided by investing activities of $1.1 million primarily as a result of investment sales and maturity of securities exceeding investment purchases.

Partially offsetting the increase in cash and cash

equivalents was net cash used in operating activities of $0.7 million.

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