ATLANTIC AMERICAN CORP 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS Page ATLANTIC AMERICAN CORPORATION Report of Independent Registered Public Accounting Firm ( Forvis Mazars, LLP ), Atlanta, Georgia , PCAOB Firm ID No. 686 ) 26 Consolidated Balance Sheets as of December 31, 2025 and 2024 29 Consolidated Statements of Operations for the years ended December 31, 2025 and 2024 30 Consolidated Statements of Comprehensive Income for the years ended December 31, 2025 and 2024 31 Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2025 and 2024 32 Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 33 Notes to Consolidated Financial Statements 34 25 Table of Contents Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Atlantic American Corporation Atlanta, Georgia Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Atlantic American Corporation (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2025, and the related notes and schedules II (Condensed Financial Information of Registrant), III (Supplementary Insurance Information), IV (Reinsurance Information) and VI (Supplemental Information Concerning Property-Casualty Insurance Operations) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Change in Accounting Principle As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting and presentation related to long-duration contracts and certain related balances effective January 1, 2025, with a transition date of January 1, 2024 due to the adoption of Accounting Standards Update No. 2018-12, Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, as amended (“ASU 2018-12”). Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. 26 Table of Contents Shareholders and Board of Directors Atlantic American Corporation Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of Insurance Reserves for Losses and Claims (Claim Reserves) As reflected on the consolidated balance sheet and discussed in Note 8 to the consolidated financial statements, the Company’s insurance reserves for losses and claims (“claim reserves”), were $113.8 million as of December 31, 2025. The Company’s claim reserves relate primarily to its property casualty lines of business and Medicare supplement business. The process of establishing claim reserves requires the use of estimates and judgments based on circumstances underlying the insured loss at the date of accrual. Management’s judgments include claims adjusters’ evaluations for unpaid claims reported prior to the close of the accounting period, estimates of incurred but not reported (“IBNR”) claims based on past experience and estimates of loss adjustment expenses. The principal considerations for our determination that the valuation of claim reserves is a critical audit matter are the high degree of judgment and subjectivity in auditing the actuarial methods and assumptions used in the valuation process, including assumptions around expected loss ratios and reported and paid loss emergence patterns. Addressing the matter involved performing the following audit procedures, among others: ● Involving our actuarial specialists to assist in our procedures in: o Evaluating the appropriateness of management’s actuarial reserving methodologies and assumptions; o Evaluating management’s hindsight analyses; o Comparing management’s carried reserve to the range calculated by management’s specialist for property casualty claim reserves; ● Testing the completeness and accuracy of data provided by management that served as the basis for the actuarial analyses on a sample basis; and ● Evaluating the movement of the Company’s recorded property casualty claim reserves within the Company’s estimated reserve range year over year. Valuation of Insurance Reserves for Future Policy Benefits (Policy Reserves) As reflected on the consolidated balance sheet and discussed in Notes 1 and 7 to the consolidated financial statements, the Company’s insurance reserves for future policy benefits (“policy reserves”) were $84.7 million as of December 31, 2025. The Company adopted ASU 2018-12, effective January 1, 2025 with a transition date of January 1, 2024 (See Change in Accounting Principle explanatory paragraph above). As part of the adoption, policy reserves were remeasured using the modified retrospective transition method. Policy reserves are related to long-duration life and health insurance policies and are based upon significant management assumptions including mortality, morbidity, policyholder lapses and other termination rates, claim costs, loss ratios, anticipated premium-rate increases, discount rates and expenses. These assumptions are based on historical experience modified as necessary to reflect anticipated trends and are established at contract inception and updated at least annually. 27 Table of Contents Shareholders and Board of Directors Atlantic American Corporation The principal considerations for our determination that the valuation of policy reserves is a critical audit matter are the high degree of judgment and involvement of actuarial specialists required to assess certain assumptions that impact reserves for future policy benefits, the complexity of the underling actuarial calculations and the judgment and complexity of adopting ASU 2018-12 in the current period. Addressing the matter involved performing the following audit procedures, among others: ● Involving our actuarial specialists to assist in our procedures in: o Evaluating whether the methodology applied by management is consistent in the aggregate with the methodology compliant with US GAAP; o Assessing the significant assumptions used by management for new insurance contracts issued during the current year by comparing the significant assumptions noted above to historical experience, observable market data or management’s estimates of prospective changes to these assumptions; and o Evaluating whether significant assumptions were applied in the valuation model as intended on a sample basis. ● Testing the completeness and accuracy of data used by management in developing the valuation and evaluating the valuation on a sample basis. ● Reviewing the adequacy of the Company’s disclosures related to the transition impact as well as the ongoing disclosure requirements under ASU 2018-12. We have served as the Company’s auditor since 2018. Atlanta, Georgia October 16, 2026 28 Table of Contents ATLANTIC AMERICAN CORPORATION CONSOLIDATED BALANCE SHEETS December 31, 2025 2024 (Restated) (In thousands, except share and per share data) ASSETS Cash and cash equivalents $ 43,636 $ 35,570 Investments: Fixed maturities, available-for-sale, at fair value (amortized cost: $ 260,225 and $ 236,299 ; no allowance for credit losses) 244,111 212,612 Equity securities, at fair value (cost: $ 4,943 and $ 4,939 ) 12,395 7,900 Other invested assets (cost: $ 7,946 and $ 7,946 ) 6,037 6,616 Policy loans 1,683 1,722 Real estate 38 38 Investment in unconsolidated trusts (cost: $ 1,238 and $ 1,238 ) 1,238 1,238 Total investments 265,502 230,126 Receivables: Reinsurance (net of allowance for uncollectible reinsurance of $ 58 and $ 73 ) 25,539 22,881 Insurance premiums and other (net of allowance for expected credit losses $ 189 and $ 201 ) 26,956 21,878 Deferred income taxes, net 15,044 15,970 Deferred acquisition costs 42,318 41,244 Other assets 12,398 11,826 Intangibles 2,544 2,544 Total assets $ 433,937 $ 382,039 LIABILITIES AND SHAREHOLDERS’ EQUITY Insurance reserves and policyholder funds Future policy benefits $ 84,719 $ 76,881 Unearned premiums 34,737 28,845 Losses and claims 113,836 93,707 Other policy liabilities 7,573 6,249 Total insurance reserves and policyholder funds 240,865 205,682 Accounts payable and accrued expenses 33,525 28,025 Revolving credit facility 5,021 4,023 Junior subordinated debenture obligations, net 33,738 33,738 Total liabilities 313,149 271,468 Commitments and contingencies (Note 19) Shareholders’ equity: Preferred stock, $ 1 par, 4,000,000 shares authorized; Series D preferred, 55,000 shares issued and outstanding; $ 5,500 redemption value 55 55 Common stock, $ 1 par, 50,000,000 shares authorized; 22,400,894 shares issued; $ 20,397,228 and 20,399,758 shares outstanding as of 2025 and 2024, respectively 22,401 22,401 Additional paid-in capital 57,425 57,425 Retained earnings 48,709 43,499 Accumulated other comprehensive loss ( 390 ) ( 5,399 ) Unearned stock grant compensation - ( 2 ) Treasury stock, at cost, 2,003,666 and 2,001,136 shares as of 2025 and 2024, respectively ( 7,412 ) ( 7,408 ) Total shareholders’ equity 120,788 110,571 Total liabilities and shareholders’ equity $ 433,937 $ 382,039 See the accompanying notes to the consolidated financial statements. 29 Table of Contents ATLANTIC AMERICAN CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31 2025 2024 (Restated) (In thousands, except share and per share data) Revenue: Insurance premiums, net $ 196,142 $ 178,588 Net investment income 10,266 9,791 Realized investment gains (losses), net ( 471 ) 1,210 Unrealized gains (losses) on equity securities, net 4,491 ( 1,516 ) Other income 12 9 Total revenue 210,440 188,082 Benefits and expenses: Insurance benefits and losses incurred 137,541 124,078 Future policy benefits remeasurement gain ( 4,866 ) ( 2,334 ) Commissions and underwriting expenses 50,473 48,333 Interest expense 3,080 3,419 Other expense 16,491 16,211 Total benefits and expenses 202,719 189,707 Income (loss) before income taxes 7,721 ( 1,625 ) Income tax expense (benefit) 1,704 ( 232 ) Net income (loss) 6,017 ( 1,393 ) Preferred stock dividends ( 399 ) ( 399 ) Net income (loss) applicable to common shareholders $ 5,618 $ ( 1,792 ) Earnings (loss) per common share (basic) 0.28 ( 0.09 ) Earnings (loss) per common share (diluted) 0.28 ( 0.09 ) See the accompanying notes to the consolidated financial statements. 30 Table of Contents ATLANTIC AMERICAN CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31 2025 2024 (Restated) (In thousands) Net income (loss) $ 6,017 $ ( 1,393 ) Other comprehensive gain: Gross unrealized holding gain (loss) on available-for-sale fixed maturities 7,102 ( 3,263 ) Reclassification adjustment for net realized gains (losses) included in net income (loss) 471 ( 17 ) Change in future policy benefit due to change in discount rate ( 1,233 ) 8,774 Subtotal 6,340 5,494 Related income tax (expense) benefit ( 1,331 ) ( 1,154 ) Subtotal ( 1,331 ) ( 1,154 ) Total other comprehensive income, net of tax 5,009 4,340 Total comprehensive income $ 11,026 $ 2,947 See the accompanying notes to the consolidated financial statements. 31 Table of Contents ATLANTIC AMERICAN CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY Year Ended December 31, 2025 2024 (Restated) (In thousands, except share and per share data) Preferred stock: Balance, beginning of year $ 55 $ 55 Balance, end of year 55 55 Common stock: Balance, beginning of year 22,401 22,401 Balance, end of year 22,401 22,401 Additional paid-in capital: Balance, beginning of year 57,425 57,425 Balance, end of year 57,425 57,425 Retained earnings: Balance, beginning of year 43,499 49,721 Cumulative effect from the adoption of new accounting standards, net of tax - ( 4,022 ) Net income (loss) 6,017 ( 1,393 ) Dividends on common stock ( 408 ) ( 408 ) Dividends accrued on preferred stock ( 399 ) ( 399 ) Balance, end of year 48,709 43,499 Accumulated other comprehensive loss: Balance, beginning of year ( 5,399 ) ( 16,121 ) Cumulative effect from the adoption of new accounting standards, net of tax - 6,382 Other comprehensive income, net of tax 5,009 4,340 Balance, end of year ( 390 ) ( 5,399 ) Unearned stock grant compensation: Balance, beginning of year ( 2 ) ( 13 ) Amortization of unearned compensation 2 11 Balance, end of year - ( 2 ) Treasury stock: Balance, beginning of year ( 7,408 ) ( 7,401 ) Net shares acquired related to employee share-based compensation plans ( 4 ) ( 7 ) Balance, end of year ( 7,412 ) ( 7,408 ) Total shareholders’ equity $ 120,788 $ 110,571 Dividends declared on common stock per share $ 0.02 $ 0.02 Common shares outstanding: Balance, beginning of year 20,399,758 20,402,288 Net shares acquired under employee share-based compensation plans ( 2,530 ) ( 2,530 ) Balance, end of year 20,397,228 20,399,758 See the accompanying notes to the consolidated financial statements. 32 Table of Contents ATLANTIC AMERICAN CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2025 2024 (Restated) (In thousands) Cash flows from operating activities: Net income (loss) $ 6,017 $ ( 1,393 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Amortization of deferred acquisition costs 18,858 18,551 Acquisition costs deferred ( 19,932 ) ( 19,239 ) Realized investment gains, net ( 17 ) ( 1,210 ) Other than temporary impairment loss on available for sale securities 488 - Unrealized (gains) losses on equity securities, net ( 4,491 ) 1,516 Losses from equity method investees 579 766 Compensation expense related to share awards 2 11 Benefit for credit losses ( 27 ) ( 4 ) Depreciation and amortization 438 366 Deferred income tax benefit ( 405 ) ( 3,290 ) (Increase) decrease in receivables, net ( 7,709 ) 2,888 Increase in insurance reserves and policyholder funds 33,950 5,480 Increase in accounts payable and accrued expenses 5,500 3,215 Other, net ( 377 ) ( 2,857 ) Net cash provided by operating activities 32,874 4,800 Cash flows from investing activities: Proceeds from investments sold and policy loans redeemed 13,486 2,567 Proceeds from investments matured, called or redeemed 17,301 13,791 Investments purchased ( 55,318 ) ( 13,850 ) Additions to property and equipment ( 466 ) ( 225 ) Net cash (used in) provided by investing activities ( 24,997 ) 2,283 Cash flows from financing activities: Payment of dividends on Series D preferred stock ( 399 ) ( 399 ) Payment of dividends on common stock ( 408 ) ( 408 ) Treasury stock acquired — net employee share-based compensation ( 4 ) ( 7 ) Proceeds from revolving credit facility, net 1,000 1,000 Net cash provided by financing activities 189 186 Net increase in cash 8,066 7,269 Cash and cash equivalents at beginning of year 35,570 28,301 Cash and cash equivalents at end of year 43,636 $ 35,570 Supplemental cash flow information: Cash paid for interest $ 3,106 $ 3,445 Cash paid for federal income taxes $ 1,652 $ 580 Cash paid for state income taxes $ 187 $ 213 See the accompanying notes to the consolidated financial statements. 33 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) Note 1. Summary of Significant Accounting Policies Business Atlantic American Corporation (“Atlantic American” or the “Parent”), a Georgia corporation incorporated in 1968, is an insurance holding company. Atlantic American and its consolidated subsidiaries (collectively, the “Company”) provide life and health and property and casualty insurance products through two operating groups: Bankers Fidelity and American Southern. As of December 31, 2025, Bankers Fidelity consisted of Bankers Fidelity Life Insurance Company and its wholly owned subsidiaries, Bankers Fidelity Assurance Company and Atlantic Capital Life Assurance Company. American Southern consisted of American Southern Insurance Company; its wholly owned insurance subsidiary, American Safety Insurance Company; and its wholly owned non-insurance subsidiaries, Premier Adjusting and Claim Services, Inc., Automobile Safety Management, Inc. and Automated Systems of Georgia, Inc. The Parent also owned xCalibre Risk Services, Inc., a non-insurance subsidiary. Basis of Presentation and Consolidation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) under guidance issued by the Financial Accounting Standards Board (“FASB”) and include the accounts of the Parent and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company’s insurance subsidiaries also prepare financial statements in accordance with statutory accounting practices prescribed or permitted by their respective state insurance regulatory authorities, which differ from GAAP. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Adoption of ASU 2018-12—Targeted Improvements to the Accounting for Long-Duration Contracts. Effective January 1, 2025, the Company adopted Accounting Standards Update (“ASU”) No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts , as subsequently amended by ASU Nos. 2019-09, 2020-11 and 2022-05 (collectively, “LDTI”). The Company applied LDTI using the modified retrospective transition method as of January 1, 2024 (the “Transition Date”) to its whole life, Medicare Supplement and certain guaranteed-renewable accident and health insurance products. Accordingly, amounts previously reported as of and for the year ended December 31, 2024, have been adjusted to conform to LDTI’s recognition, measurement, presentation and disclosure requirements. The effects of adoption as of the Transition Date are summarized below, and additional disaggregated information is presented in Notes 7, 8 and 9. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates include, among others, liabilities for future policy benefits, unpaid claims and claim adjustment expenses, reinsurance recoverables, deferred policy acquisition costs, the valuation and impairment of investments, and deferred income taxes. These estimates and assumptions are based on information available as of the date of the consolidated financial statements and are reviewed periodically as additional information becomes available. Changes in estimates are recognized in the period in which they are determined. Actual results could differ from these estimates. Summary of Significant Accounting Policies Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and investments in short-term, highly liquid securities with original maturities of three months or less from date of purchase. 34 Table of Contents Investments Fixed Maturity and Equity Securities The Company’s investments in fixed maturity securities, which include bonds and redeemable preferred stocks, are classified as “available-for-sale” and, accordingly, are carried at fair value with the after-tax difference from amortized cost, less allowance for credit losses (“ACL”), as adjusted if applicable, reflected in shareholders’ equity as a component of accumulated other comprehensive income or loss (“AOCI”). The Company’s equity securities, which include common and non-redeemable preferred stocks, are carried at fair value with changes in fair value reported in net income. The fair values of fixed maturity securities and equity securities are largely determined from publicly quoted market prices, when available, or independent broker quotations. Values that are not determined using quoted market prices inherently involve a greater degree of judgment and uncertainty and therefore ultimately greater price volatility than the value of securities with publicly quoted market prices. Income from investments is recorded in net investment income on the Consolidated Statement of Operations. Gains and losses from sales, maturities, or other redemptions of investments are recorded in realized investment gains (losses). Gains and losses on the disposition of investments are determined on a specific identification basis. Interest income and prepayment fees are recognized when earned. Premiums and discounts related to investments are amortized or accreted over the life of the related investment as an adjustment to yield using the effective interest method. Dividends and interest income are recognized when earned or declared. The cost of securities sold is based on specific identification. Unrealized gains (losses) in the value of fixed maturity securities are accounted for as a direct increase (decrease) in Other Comprehensive Income (“OCI”), net of deferred tax and, accordingly, have no effect on net income. Policy Loans Policy loans are carried at unpaid principal balance and are fully collateralized by the cash surrender value of the underlying insurance contract. Interest income is recorded as earned using the contractual interest rate, in net investment income in the Consolidated Statement of Operations. Variable Interest Entities The Company holds passive interests in certain limited partnerships, limited liability companies and unconsolidated trusts that are considered variable interest entities (“VIEs”). Because the Company does not have the power to direct the activities that most significantly affect the economic performance of these entities, it is not the primary beneficiary and does not consolidate the VIEs. The limited partnership and limited liability company interests are accounted for using the equity method and presented as a single investment balance within other invested assets in the Consolidated Balance Sheets. Each investment is initially recorded at cost and subsequently increased or decreased for the Company’s allocable share of the investee’s net income or loss, which is recognized in net investment income in the Consolidated Statements of Operations. Contributions increase the carrying amount of the investment, while distributions generally reduce it. Investee results are recorded using the most recent financial information available, generally on a same-period basis with adjustments for material intervening events when necessary. Investments in unconsolidated trusts are presented separately in the Consolidated Balance Sheets and are carried at cost. The Company’s maximum exposure to loss generally consists of the carrying amounts of its investments and related unfunded commitments, and the Company has no obligation to provide financial support beyond those commitments. The Company evaluates its equity-method investments for impairment at least quarterly and recognizes any other-than-temporary decline in value as a reduction of the investment’s carrying amount and a charge to net investment income. Reinsurance The Company purchases reinsurance from unaffiliated reinsurers to reduce exposure to significant individual risks and catastrophic events. The Reinsurance arrangements do not legally discharge the insurer from primary liability for the full amount of the policies written by it, and the ceding company will incur a loss if the reinsurer fails to meet its obligations under the reinsurance agreement. In order to qualify for reinsurance accounting treatment, there must be a risk transfer. Insurance liabilities are reported gross of reinsurance. Amounts recoverable from reinsurers are recognized separately as reinsurance recoverables and are reduced by an allowance for expected credit losses. The allowance reflects management’s estimate of amounts that may not be collected and considers the financial condition of reinsurers, historical collection experience, current conditions, reasonable and supportable forecasts, collateral and other relevant factors. For ceded long-duration insurance contracts, reinsurance recoverables are measured using assumptions consistent with those used to measure the underlying direct insurance contracts, adjusted for the terms and conditions of the applicable reinsurance agreements. Changes resulting from actual experience and updates to future cash-flow assumptions are recognized in earnings. Effects attributable solely to changes in current discount rates are recognized in other comprehensive income. Bankers Fidelity has entered reinsurance contracts ceding a proportionate share of new Medicare Supplement business and the excess of its life retention to General Re Life Corporation. Ceding thresholds are set for all policies issued in a given calendar year. 35 Table of Contents For ceded short-duration insurance contracts, ceded premiums are recognized as a reduction of premium revenue over the coverage period in proportion to the insurance protection provided. Amounts recoverable for ceded claims and claim adjustment expenses are recognized as reductions of the related benefits and claims expense. Ceded unearned premiums and recoverables for unpaid claims are included in reinsurance recoverables. American Southern’s basic reinsurance treaties generally cover all claims in excess of specified per occurrence limitations. Insurance Premiums and Other Receivables Insurance premiums and other receivables are reported at the amounts expected to be collected, net of allowances for expected credit losses. The allowance is estimated using historical collection experience, current conditions, reasonable and supportable forecasts and information specific to individual insureds, agents and other counterparties. Receivables are written off when they are determined to be uncollectible. Recoveries of amounts previously written off are recognized when received. Deferred Acquisition Costs Deferred Acquisition Costs (“DAC”) represent commissions, premium taxes and other incremental direct costs that result directly from and are essential to the successful acquisition of insurance contracts and would not have been incurred had the contracts not been issued. Long-Duration Contracts DAC associated with long-duration contracts is grouped on a basis consistent with the related insurance contracts and amortized on a constant-level basis over the expected term of those contracts. The expected remaining term is calculated based on assumptions of expected mortality, lapses, and other contract terminations that are consistent with the assumptions used to measure the related liability for future policy benefits. These assumptions are reviewed at least annually and are updated as warranted whenever experience changes significantly. Actual contract terminations are reflected in the amortization calculation when they occur. Short-Duration Contracts DAC associated with short-duration contracts is amortized over the related coverage period in proportion to premium revenue recognized. The Company evaluates the recoverability of short-duration DAC when indications exist that expected claims, claim adjustment expenses, maintenance costs and other related expenses may exceed anticipated premium revenue. If a premium deficiency exists, DAC is reduced to the extent necessary, and an additional liability is recognized for any remaining deficiency. Intangibles Intangibles consist of goodwill and other indefinite-lived intangible assets. Goodwill represents the excess of cost over the fair value of net assets acquired and is not amortized. Other indefinite-lived intangibles represent the value of licenses and are not amortized. The Company periodically reviews its goodwill and other indefinite-lived intangibles to determine if any adverse conditions exist that could indicate impairment. Conditions that could trigger impairment include, but are not limited to, a significant change in business climate that could affect the value of the related asset, an adverse action, or an assessment by a regulator. No impairment of the Company’s recorded intangibles was identified during any of the periods presented. Leases The Company determines whether an arrangement contains a lease at contract inception. Right-of-use assets and lease liabilities for operating leases are recognized at the lease commencement date. Lease liabilities are measured at the present value of fixed lease payments over the lease term. The Company uses the rate implicit in the lease when that rate is readily determinable; otherwise, it uses its incremental borrowing rate at lease commencement. The lease term includes renewal and termination options when the Company is reasonably certain to exercise those options. Operating lease expense is recognized on a straight-line basis over the lease term. Operating lease right-of-use assets are included in other assets, and operating lease liabilities are included in other liabilities in the Consolidated Balance Sheets. Policy Benefits, Claims and Insurance Reserves Insurance reserves represent management’s estimates of the Company’s obligations under insurance and investment contracts in force as of the balance sheet date. These reserves principally include the Liability for Future Policy Benefits (“LFPB”) under long-duration contracts, deposit liabilities associated with investment contracts, and liabilities for unpaid claims and claim-related expenses under both short and long-duration insurance contracts. 36 Table of Contents For long-duration insurance contracts, the LFPB includes the present value of expected future policy benefits and related expenses, less the present value of expected future net premiums. The LFPB also includes liabilities associated with claims incurred for long-duration contracts, including reported claims, claims incurred but not reported (“IBNR”), claims in the course of settlement and related claim adjustment expenses. Accordingly, claim liabilities associated with Medicare Supplement, life and other long-duration accident and health products are included in LFPB and the liability for losses and claims in the Consolidated Balance Sheet. For short-duration insurance contracts, liabilities for unpaid claims and claim adjustment expenses relate to insured events that have occurred on or before the balance sheet date and include reported claims, expected development on reported claims, IBNR and related claim adjustment expenses. These liabilities are reported within losses and claims in the Consolidated Balance Sheets. Insurance liabilities are reported gross of reinsurance, and amounts recoverable from reinsurers are reported separately as an asset within reinsurance receivables in the Consolidated Balance Sheet. The use of reinsurance does not relieve the Company of its obligations to policyholders. Long-Duration Contracts The Company’s long-duration contracts principally include individual life, group whole life, Medicare Supplement and certain guaranteed-renewable individual accident and health insurance products. The LFPB is measured at the cohort level as the present value of expected future benefit payments and related claim expenses, less the present value of expected future net premiums. Expected future cash flows are projected through the period in which the related contracts are expected to remain in force. Such liabilities are established based on methods and underlying assumptions in accordance with GAAP and applicable actuarial standards. Cash-flow assumptions are incorporated into the calculation of a cohort and include mortality, morbidity, policyholder lapses and other termination rates, claim costs, loss ratios, anticipated premium-rate increases and expenses. For life insurance products, significant assumptions principally include mortality and voluntary lapses. For Medicare Supplement products, significant assumptions principally include incurred loss ratios, anticipated premium-rate increases and total termination rates. For other long-duration accident and health products, significant assumptions principally include claim costs and total termination rates. These assumptions reflect management’s current best estimates of future experience without provision for adverse deviation and are based on Company experience, relevant industry data and anticipated future trends. Actual experience through the reporting date is incorporated into the measurement each reporting period. Assumptions regarding future cash flows are reviewed at least annually and updated more frequently when evidence indicates that revisions are warranted. Differences between actual and expected experience and changes in future cash-flow assumptions are recognized in earnings as remeasurement gains or losses within insurance benefits and losses incurred in the Consolidated Statement of Operations. The Company also has a block of annuity contracts under which amounts payable upon death, accident or sickness do not exceed the contract holder’s accumulated account value. Because these contracts do not expose the Company to significant mortality or morbidity risk, they are accounted for as investment contracts rather than long-duration insurance contracts. The related liability is measured based on accumulated contract holder account values, including credited interest, and is not included in the LFPB measurement under the long-duration insurance accounting model. The investment-contract liability, which was approximately $ 4,600 at December 31, 2025, is included in other policy liabilities in the Consolidated Balance Sheets. Policy Grouping and Net Premium Ratio Long-duration insurance contracts are grouped into cohorts based on product line and issue year, with no cohort containing contracts issued more than one year apart. The net premium ratio (“NPR”) is the ratio of the present value of expected future benefits and related claim expenses to the present value of expected future gross premiums. The NPR used to accrue the LFPB in each period is determined by using the historical and present value of expected future benefits and claim settlement expenses for the cohort divided by the historical and present value of expected future gross premiums for the cohort. For contracts in force at the Transition Date, the NPR reflects the applicable carrying amount under the Company’s modified retrospective transition method. For contracts issued after the Transition Date, the NPR is established based on expected benefits, related expenses and gross premiums as of the applicable contract issue date. At each reporting date, actual experience is incorporated into the calculation, and the NPR is recalculated using actual experience and current assumptions about future cash flows. The NPR is capped at 100%. If the calculated NPR for a cohort exceeds 100%, the Company increases the LFPB by the amount necessary to reduce the NPR to 100% and recognizes the resulting loss immediately in earnings. The LFPB for an individual cohort may not be less than zero. Flooring adjustments are necessary when the present value of future net premiums exceeds the present value of future benefits for a given cohort. The flooring adjustment is the total of the flooring adjustments for each cohort, if any. These adjustments ensure that the liability for future policy benefits is at least zero for all cohorts. 37 Table of Contents Changes in the LFPB as a result of changes in the current discount rates are recognized separately in OCI and do not affect the NPR. Discount Rates on Long Duration Contracts The Company uses two discount-rate bases in measuring LFPB: ● Locked‑in discount rate – For contracts issued before the Transition Date, the cohort-level locked-in discount rate reflects the historical interest-accretion rates used to measure the contracts under previous GAAP. For contracts issued after the Transition Date, the locked-in discount rate is based on the upper-medium-grade fixed-income instrument yield applicable when the underlying contracts are issued. The locked-in discount rate is used to calculate the net premium ratio, interest accretion and remeasurement gains or losses recognized in earnings. ● Current discount rate – At each reporting date, the Company remeasures the LFPB using a current discount-rate curve based on yields for upper-medium-grade, or single-A, corporate fixed-income instruments. The curve is constructed to reflect the duration characteristics of the related liabilities and is updated quarterly. Observable market information is used for durations of up to 50 years. For projected cash flows beyond the last observable point, the Company holds the yield at the 50-year point constant. The difference between the liability measured using the current discount rate and the liability measured using the locked-in discount rate is recognized in OCI. Changes in the current discount rate do not affect the net premium ratio or the remeasurement gains or losses recognized in earnings. Short Duration Contracts The Company’s short-duration insurance contracts principally include property and casualty insurance products and group accident and health products for which the Company generally has the unilateral right to terminate the group policy at an annual renewal date. Liabilities for unpaid claims and claim adjustment expenses under short-duration contracts include estimates for reported claims and IBNR. The liabilities are established using actuarial methods applied to historical claim-development experience, expected loss ratios, claim frequency and severity trends and other relevant information. The estimates are reviewed each reporting period, and changes in estimated ultimate losses and claim adjustment expenses are recognized in earnings in the period in which the estimates are revised. Because these estimates are subject to significant uncertainty, actual claim payments may differ from the amounts recorded. The Company also evaluates its short-duration insurance contracts for premium deficiencies. A premium deficiency exists when expected claims costs, claim adjustment expenses, policy maintenance costs and unamortized acquisition costs exceed the related unearned premiums and anticipated investment income. If a premium deficiency is identified, the Company first reduces the related DAC. Treasury Stock Treasury stock is reflected as a reduction of shareholders’ equity at cost. The Company uses the first-in-first-out purchase cost to determine the cost of treasury stock that is reissued. The Company includes any gains and losses in additional paid-in capital when treasury stock is reissued. Premium Revenue Short Duration Contracts Premiums for short-duration insurance contracts are recognized as revenue over the coverage period in proportion to the insurance protection provided. Unearned premiums represent the portion of premiums written applicable to coverage periods after the balance sheet date and are reported as liabilities until earned. Certain property and casualty contracts provide for retrospective premium adjustments based on the insured’s loss experience or other contractual criteria. Under these arrangements, additional premiums may be billed to or refunded to policyholders based on actual loss experience relative to contractual thresholds. Estimated retrospective premiums are recognized over the contract period based on experience to date and the terms of the underlying contracts. Estimates are revised as additional information becomes available, with resulting adjustments recognized in premium revenue in the period of revision. 38 Table of Contents Premium revenue is presented net of premiums ceded under reinsurance agreements. Long Duration Contracts Premiums for nonparticipating long-duration insurance contracts are recognized as revenue when due from policyholders. Premiums received before their contractual due dates are reported as advance premiums and reported within other policyholder liabilities on the Consolidated Balance Sheets. These amounts are recognized as premium revenue when they become due under the terms of the related insurance contracts. Amounts received under annuity and other investment contracts that do not subject the Company to significant mortality or morbidity risk are reported as deposits within policyholder account balances rather than as premium revenue. Interest credited to policyholder account balances is recognized in benefits and other changes in policy reserves. Premium revenue is presented net of premiums ceded under reinsurance agreements. Income Taxes Deferred income taxes represent the expected future tax consequences when the reported amounts of assets and liabilities are recovered or paid. They arise from differences between the financial reporting and tax basis of assets and liabilities and are adjusted for changes in tax laws and tax rates as those changes are enacted. The provision for income taxes represents the total amount of income taxes due related to the current year, plus the change in deferred income taxes during the year. A valuation allowance is recognized if, based on management’s assessment of the relevant facts, it is more likely than not that some portion of a deferred tax asset will not be realized. Earnings Per Common Share Basic earnings per common share are based on the weighted average number of common and participating shares outstanding during the relevant period. Diluted earnings per common share are based on the weighted average number of common and participating shares outstanding during the relevant period, plus options outstanding, if applicable, using the treasury stock method and the assumed conversion of the Series D preferred stock, if dilutive. Unless otherwise indicated, earnings per common share amounts are presented on a diluted basis. Revision of Previously Issued Financial Statements Nature of the Errors Management identified deficiencies in the design and operating effectiveness of controls over the recording and reconciliation of premium receivables and the application of premium payments held in suspense within the Company’s group whole life and group accident and health business. The Company did not design and maintain effective controls to timely and accurately reconcile enrollment, billing and cash receipt information at the individual policyholder level and to resolve differences among third-party enrollment data, the policy administration system and the general ledger. As a result, the Company did not maintain controls operating at a sufficient level of precision to determine whether recorded premium receivables were valid, whether amounts held in suspense should be applied to individual policyholders or otherwise recognized, and whether the related amounts were recorded in the appropriate period and were appropriately classified in the consolidated financial statements. As a result, the Company has revised its previously reported 2024 financial information to remove the affected receivables and premium revenue. Errors attributable to periods before January 1, 2024 were reflected as adjustments to the affected balance-sheet accounts and retained earnings as of December 31, 2023 . Errors attributable to 2024 are reflected in the Company’s 2024 results of operations. Effect of the Corrections As of December 31, 2024, the cumulative corrections: • reduced insurance premiums and other receivables by approximately $ 5,580 ; • increased deferred income tax, net by approximately $ 1,172 ; • reduced accounts payable and accrued expenses by approximately $ 2,923 ; • reduced retained earnings by approximately $ 1,485 . • reduced insurance premium, net and income (loss) before income taxes by $ 351 ; and • increased net loss by $ 277 . 39 Table of Contents For the year ended December 31, 2024, the corrections reduced insurance premiums, net, and increased loss before income taxes by approximately $ 351 ,000, increased the income tax benefit by approximately $ 74 ,000, and increased net loss by approximately $ 277 ,000. The corrections reduced basic and diluted earnings per common share by approximately $ 0.02 . The corrections also affected certain components of the reconciliation of net income to net cash provided by operating activities. They did not affect the Company’s cash and cash equivalents or net cash provided by operating activities, net cash used in investing activities, or net cash provided by financing activities. Materiality assessment The Company evaluated the errors in accordance with ASC Topic 250, Accounting Changes and Error Corrections , and considered both quantitative and qualitative factors, including the guidance in Staff Accounting Bulletin (“SAB”) No. 99, Materiality , and SAB No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements . The Company quantified the errors under both the rollover and iron-curtain methods and evaluated the errors individually and in the aggregate with other identified misstatements. Based on this evaluation, management concluded that the errors were not material, individually or in the aggregate, to any of the Company’s previously issued annual or interim financial statements affected by the errors. Management further concluded that correcting the cumulative errors entirely in the consolidated statement of operations for the year ended December 31, 2025 would materially misstate the Company’s 2025 results of operations. Accordingly, the Company revised the comparative 2024 financial information and the applicable opening balances as of January 1, 2024 presented in these consolidated financial statements. The Company did not amend its previously filed Annual Report on Form 10-K for the year ended December 31, 2024. The due-premium error-correction adjustments are presented separately from the adjustments resulting from the Company’s adoption of LDTI. The following table represents a summary of the impacts of the revision at December 31 , 2023. December 31, 2023 December 31, 2023 As Previously Reported Revision Impacts As Revised (In thousands) ASSETS Receivables: Insurance premiums and other $ 23,690 $ ( 3,457 ) $ 20,233 Deferred income taxes, net 15,682 726 16,408 Total assets 381,265 ( 2,731 ) 378,534 LIABILITIES AND SHAREHOLDERS’ EQUITY Accounts payable and accrued expenses 24,811 ( 1,523 ) 23,288 Total liabilities 273,990 ( 1,523 ) 272,467 Shareholders’ equity: Retained earnings 50,929 ( 1,208 ) 49,721 Total shareholders’ equity 107,275 ( 1,208 ) 106,067 Total liabilities and shareholders’ equity $ 381,265 $ ( 2,731 ) $ 378,534 40 Table of Contents The following table represents a summary of the impacts of the revision for the Balance Sheet at December 31, 2024. December 31, 2024 As Previously Reported Revision Impacts As Revised (In thousands) ASSETS Receivables: Insurance premiums $ 27,458 $ ( 5,580 ) $ 21,878 Deferred income taxes, net 18,118 1,172 19,290 Total assets 393,428 ( 4,408 ) 389,020 LIABILITIES AND SHAREHOLDERS’ EQUITY Accounts payable and other accrued expenses 30,948 ( 2,923 ) 28,025 Total liabilities 293,815 ( 2,923 ) 290,892 Shareholders’ equity: Retained earnings 45,854 ( 1,485 ) 44,369 Total shareholders’ equity 99,613 ( 1,485 ) 98,128 Total liabilities and shareholders’ equity $ 393,428 $ ( 4,408 ) $ 389,020 The following table represents a summary of the impacts of the revision for the Statement of Operations for the year ended December 31, 2024. Year Ended December 31, 2024 As Previously Reported Revision Impacts As Revised (In thousands, except share and per share data) Revenue: Insurance premiums, net $ 178,731 $ ( 351 ) $ 178,380 Total revenue 188,227 ( 351 ) 187,876 Loss before income taxes ( 5,264 ) ( 351 ) ( 5,615 ) Income tax benefit ( 996 ) ( 74 ) ( 1,070 ) Net loss ( 4,268 ) ( 277 ) ( 4,545 ) Net loss applicable to common shareholders $ ( 4,667 ) $ ( 277 ) $ ( 4,944 ) Earnings (loss) per common share (basic) $ ( 0.23 ) $ ( 0.02 ) $ ( 0.25 ) Earnings (loss) per common share (diluted) $ ( 0.23 ) $ ( 0.02 ) $ ( 0.25 ) The following table represents a summary of the impacts of the revision for the Statement of Comprehensive Income for the year ended December 31, 2024. Year Ended December 31, 2024 As Previously Reported Revision Impacts As Revised (In thousands) Net loss $ ( 4,268 ) $ ( 277 ) $ ( 4,545 ) Other comprehensive gain (loss): Future policy benefit discount rate remeasurement gain (loss) - - Subtotal ( 3,280 ) ( 3,280 ) Related income tax effect 689 689 Subtotal 689 689 Total other comprehensive income, net of tax ( 2,591 ) - ( 2,591 ) Total comprehensive income $ ( 6,859 ) $ ( 277 ) $ ( 7,136 ) 41 Table of Contents The following table represents a summary of the impacts of the revision for the Statement of Stockholders' Equity at December 31, 2024. Year Ended December 31, 2024 As Previously Reported Revision Impacts As Revised (In thousands) Retained earnings: Balance, beginning of year $ 50,929 $ ( 1,208 ) $ 49,721 Net loss ( 4,268 ) ( 277 ) ( 4,545 ) Balance, end of year 45,854 ( 1,485 ) 44,369 Total shareholders’ equity $ 99,613 $ ( 1,485 ) $ 98,128 The following table represents a summary of the impacts of the revision for the Statement of Cash Flows for the year ended December 31, 2024. Year Ended December 31, 2024 As Previously Reported Revision Impacts As Revised (In thousands) Cash flows from operating activities: Net loss $ ( 4,268 ) $ ( 277 ) $ ( 4,545 ) Adjustments to reconcile net income to net cash provided by operating activities: Deferred income tax benefit ( 1,747 ) ( 2,380 ) ( 4,127 ) Increase in receivables, net ( 5,581 ) 5,580 ( 1 ) (Decrease) increase in accounts payable and accrued expenses 6,137 ( 2,922 ) 3,215 Net cash provided by operating activities $ 4,800 $ - $ 4,800 Recently Issued Accounting Standards Adoption of New Accounting Standards Income Taxes. In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The amendment requires that all entities disclose on an annual basis the following information about income taxes paid; the amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes; and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5% of total income taxes paid (net of refunds received). All entities also are required to disclose: income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign; and income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. The ASU, which also includes certain other amendments to improve the effectiveness of income tax disclosures, is effective for public business entities for annual periods beginning after December 15, 2024. The Company adopted ASU No. 2023-09 on December 31, 2025. Refer to Note 10 of Notes to Consolidated Financial Statements for details regarding the Company’s income tax disclosure. Adoption of ASU 2018-12—Targeted Improvements to the Accounting for Long-Duration Contracts. Effective January 1, 2025, the Company adopted ASU No. 2018-12. The Company applied LDTI using the modified retrospective transition method as of January 1, 2024 (the “Transition Date”) to its whole life, Medicare Supplement and certain guaranteed-renewable accident and health insurance products. Accordingly, amounts previously reported as of and for the year ended December 31, 2024, have been adjusted to conform to LDTI’s recognition, measurement, presentation and disclosure requirements. The effects of adoption as of the Transition Date are summarized below, and additional disaggregated information is presented in Notes 7, 8 and 9. Under the modified retrospective transition method, the carrying amount of the LFPB reported under previous GAAP as of December 31, 2023 was used as the starting point for determining the LFPB for in-force long-duration contracts as of the Transition Date. The Company adjusted that carrying amount to remove provisions for adverse deviation from assumptions other than discount rates, apply current best-estimate assumptions for future experience, remeasure the LFPB using applicable locked-in discount rates and recognize additional reserves for cohorts for which the NPR exceeded 100%. 42 Table of Contents As part of its LDTI implementation, the Company reassessed product classifications for its Bankers Fidelity subsidiary for group accident and health products, which were reclassified from long‑duration to short‑duration. This reclassification is supported by the Company’s ability to unilaterally cancel coverage annually. As of the Transition Date, this reclassification reduced the LFPB by $ 1,300 , DAC by $ 3,300 resulting in a $ 1,576 reduction to opening retained earnings. The carrying amount of DAC associated with contracts in force as of December 31, 2023 was used as the starting point for applying LDTI’s revised DAC amortization requirements, subject to the applicable product reclassifications. Related reinsurance recoverables were remeasured using assumptions and methodologies consistent with those applied to the underlying reinsured contracts and adjusted for the terms of the applicable reinsurance agreements. The difference between the LFPB measured under LDTI using the applicable locked-in discount rate and the corresponding carrying amount reported under previous GAAP was recognized as an adjustment to retained earnings. The difference between the LFPB measured using the current discount rate as of the Transition Date and the LFPB measured using the applicable locked-in discount rate was recognized as an adjustment to AOCI. The resulting cumulative-effect adjustments were recorded as of the Transition Date, net of related income tax effects. The following table represents a summary of the Transition Date impacts associated with the implementation of LDTI to the consolidated balance sheet: (In thousands) Reinsurance Recoverables Deferred Income Tax Asset Deferred Acquisition Costs Future Policy Benefits Unearned Premiums Other Policy Liabilities Retained Earnings Accumulated Other Comprehensive Income (Loss) Balance as of December 31, 2023 (as revised) $ 21,103 $ 16,408 $ 43,850 $ 92,495 $ 31,317 $ 1,132 $ 49,721 $ ( 16,121 ) Reclassification of annuities - - - ( 4,799 ) - 4,799 - - Reclassification of certain group accident and health products - 419 ( 3,294 ) ( 1,300 ) - - ( 1,576 ) - Reclassifications and adjustments for the cumulative effect of adoption on assets and liabilities 1,617 8 - 4,075 ( 2,467 ) - ( 3 ) - Impact from capping Transition Date net premium ratio - 650 - 3,093 - - ( 2,443 ) - Effect of remeasurement of future policy benefits to an upper-medium grade discount rate 1,233 ( 1,697 ) - ( 6,846 ) - - - 6,382 Adjusted balance as of January 1, 2024, gross of reinsurance $ 23,953 $ 15,788 $ 40,556 $ 86,718 $ 28,850 $ 5,931 $ 45,699 $ ( 9,739 ) 43 Table of Contents The following table presents the effects of the retrospective application of the adoption of the new LDTI accounting guidance to the Company's previously reported consolidated balance sheet: December 31, 2024 As Revised LDTI Adoption Impacts As Adjusted (In thousands) ASSETS Receivables: Reinsurance recoverables $ 22,942 $ ( 61 ) $ 22,881 Deferred income taxes, net 19,290 ( 3,320 ) 15,970 Deferred acquisition costs 44,842 ( 3,598 ) 41,244 Other assets 11,828 ( 2 ) 11,826 Total assets 389,020 ( 6,981 ) 382,039 LIABILITIES AND SHAREHOLDERS’ EQUITY Insurance reserves and policyholder funds Future policy benefits 98,464 ( 21,583 ) 76,881 Unearned premiums 31,178 ( 2,333 ) 28,845 Other policy liabilities 1,757 4,492 6,249 Total insurance reserves and policyholder funds 225,106 ( 19,424 ) 205,682 Total liabilities 290,892 ( 19,424 ) 271,468 Shareholders’ equity: Retained earnings 44,369 ( 870 ) 43,499 Accumulated other comprehensive loss ( 18,712 ) 13,313 ( 5,399 ) Total shareholders’ equity 98,128 12,443 110,571 Total liabilities and shareholders’ equity $ 389,020 $ ( 6,981 ) $ 382,039 The following table presents the effects of the retrospective application of the adoption of the new LDTI accounting guidance to the Company's previously reported consolidated statement of operations: Year Ended December 31, 2024 As Revised LDTI Adoption Impacts As Adjusted (In thousands, except share and per share data) Revenue: Insurance premiums, net $ 178,380 $ (208 ) (1) $ 178,588 Total revenue 187,876 206 188,082 Benefits and expenses: Insurance benefits and losses incurred 125,831 ( 1,753 ) 124,078 Future policy benefits remeasurement (gain) loss - ( 2,334 ) ( 2,334 ) Commissions and underwriting expenses 48,030 303 48,333 Total benefits and expenses 193,491 ( 3,784 ) 189,707 Loss before income taxes ( 5,615 ) 3,990 ( 1,625 ) Income tax benefit ( 1,070 ) 838 ( 232 ) Net loss ( 4,545 ) 3,152 ( 1,393 ) Net loss applicable to common shareholders $ ( 4,944 ) $ 3,152 $ ( 1,792 ) Earnings (loss) per common share (basic) $ ( 0.25 ) $ 0.16 $ ( 0.09 ) Earnings (loss) per common share (diluted) $ ( 0.25 ) $ 0.16 $ ( 0.09 ) (1) Related to reclassification of group accident and health from long duration to short duration . 44 Table of Contents The following table presents the effects of the retrospective application of the adoption of the new LDTI accounting guidance to the Company's previously reported consolidated statements of comprehensive income: Consolidated Statements of Comprehensive Income Year Ended December 31, 2024 As Revised LDTI Adoption Impacts As Adjusted (In thousands) Net loss ( 4,545 ) 3,152 ( 1,393 ) Other comprehensive gain (loss): Future policy benefit discount rate remeasurement gain (loss) - 8,774 8,774 Subtotal ( 3,280 ) 8,774 5,494 Related income tax effect 689 ( 1,843 ) ( 1,154 ) Subtotal 689 ( 1,843 ) ( 1,154 ) Total other comprehensive income, net of tax ( 2,591 ) 6,931 4,340 Total comprehensive income ( 7,136 ) $ 10,083 2,947 The following table presents the effects of the retrospective application of the adoption of the new LDTI accounting guidance to the Company's previously reported consolidated statements of equity: Year Ended December 31, 2024 As Revised LDTI Adoption Impacts As Adjusted (In thousands) Retained earnings: Balance, beginning of year $ 49,721 $ ( 4,022 ) $ 45,699 Net loss ( 4,545 ) 3,152 ( 1,393 ) Balance, end of year 44,369 ( 870 ) 43,499 Accumulated other comprehensive loss: Balance, beginning of year ( 16,121 ) 6,382 ( 9,739 ) Other comprehensive income (loss), net of tax ( 2,591 ) 6,931 4,340 Balance, end of year ( 18,712 ) 13,313 ( 5,399 ) Total shareholders’ equity $ 98,128 $ 12,443 $ 110,571 45 Table of Contents The following table presents the effects of the retrospective application of the adoption of the new LDTI accounting guidance to the Company's previously reported consolidated statements of cash flows: Year Ended December 31, 2024 As Revised LDTI Adoption Impacts As Adjusted (In thousands) Cash flows from operating activities: Net loss ( 4,545 ) $ 3,152 ( 1,393 ) Adjustments to reconcile net income to net cash provided by operating activities: Amortization of deferred acquisition costs 16,645 1,906 18,551 Acquisition costs deferred ( 17,637 ) ( 1,602 ) ( 19,239 ) Benefit provision for credit losses ( 26 ) 22 ( 4 ) Deferred income tax benefit ( 4,127 ) 837 ( 3,290 ) Increase in receivables, net ( 1 ) 2,889 2,888 Increase in insurance reserves and policyholder funds 12,684 ( 7,204 ) 5,480 Net cash provided by operating activities $ 4,800 $ - $ 4,800 Future Adoption of New Accounting Standards Expense Disaggregation Disclosures . In November 2024, the FASB issued ASU No. 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (“ASU 2024-03”). This Update requires disaggregated disclosure of income statement expenses for public business entities (“PBE”). The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 adds ASC 220-40 to require a footnote disclosure about specific expenses by requiring companies to disaggregate, in a tabular presentation, each relevant expense caption on the face of the income statement that includes employee compensation, depreciation, and intangible asset amortization. The tabular disclosure would also include certain other expenses, which do not apply to the Company. The ASU does not change or remove existing expense disclosure requirements; however, it may affect where that information appears in the footnotes to the financial statements. ASU 2024-03 is effective for all PBEs for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the new guidance and any effect it will have on the Company’s Consolidated Financial Statements. Accounting for Internal-Use Software. In September 2025, the FASB issued ASU No. 2025-06 Intangibles – Goodwill and Other – Internal-Use Software (“ASU 350-40”): Targeted Improvements to the Accounting for Internal-Use Software. The update modernizes the accounting guidance based on stakeholder concerns that the existing guidance was designed around “waterfall” software development methods and does not align well with today’s agile and iterative development practices. The most significant change is the elimination of the existing software development “project stage” model as the trigger for capitalization. Instead, entities begin capitalizing internal-use software costs when management has authorized and committed funding for the project and it is probable the project will be completed and the software will be used as intended. The ASU does not change accounting for software to be sold, leased, or marketed externally (ASC 985-20), the requirement to expense items such as training, maintenance, data conversion, and data migration costs as incurred and the point at which capitalization ceases, which remains when the software is substantially complete and ready for its intended use. ASU 2025-06 is effective for all PBEs for fiscal years beginning after December 15, 2027, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the new guidance and any effect it will have on the Company’s Consolidated Financial Statements. Note 2. Investments 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 maturity and equity securities, aggregated by type and industry, as of December 31, 2025 and December 31, 2024. 46 Table of Contents Fixed maturity securities were comprised of the following: 2025 Estimated Fair Value Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Amortized Cost Fixed maturity securities: Bonds: U.S. Treasury securities and obligations of U.S. Government agencies and authorities $ 24,067 $ 207 $ 1,525 $ - $ 25,385 Loan backed and structured securities 29,033 192 1,322 - 30,163 Obligations of states and political subdivisions 7,335 16 1,445 - 8,764 Corporate securities: Utilities and telecom 30,844 240 2,736 - 33,340 Financial services 65,779 952 3,193 - 68,020 Other business – diversified 41,191 174 3,184 - 44,201 Other consumer – diversified 45,658 97 4,597 - 50,158 Total corporate securities 183,472 1,463 13,710 - 195,719 Redeemable preferred stocks: Other consumer – diversified 204 10 - - 194 Total redeemable preferred stocks 204 10 - - 194 Total fixed maturity securities $ 244,111 $ 1,888 $ 18,002 $ - $ 260,225 2024 Estimated Fair Value Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Amortized Cost Fixed maturity securities: Bonds: U.S. Treasury securities and obligations of U.S. Government agencies and authorities $ 22,251 $ 24 $ 2,144 $ - $ 24,371 Loan backed and structures securities 22,290 17 2,457 - 24,730 Obligations of states and political subdivisions 7,623 9 1,517 - 9,131 Corporate securities: Utilities and telecom 24,623 108 3,206 - 27,721 Financial services 59,564 563 4,768 - 63,769 Other business – diversified 34,117 160 3,919 - 37,876 Other consumer – diversified 41,957 33 6,585 - 48,509 Total corporate securities 160,261 864 18,478 - 177,875 Redeemable preferred stocks: Other consumer – diversified 187 - 5 - 192 Total redeemable preferred stocks 187 - 5 - 192 Total fixed maturity securities $ 212,612 $ 914 $ 24,601 $ - $ 236,299 Bonds having an amortized cost of $ 15,376 and $ 15,065 and included in the tables above were on deposit with insurance regulatory authorities at December 31, 2025 and 2024, respectively, in accordance with statutory requirements. In addition, the Company maintains cash and cash equivalents on deposit with insurance regulatory authorities of $ 0 and $ 226 at December 31, 2025 and 2024, respectively. Additionally, bonds having an amortized cost of $ 8,861 and $ 9,209 and included in the tables above were pledged as collateral to FHLB at December 31, 2025 and 2024, respectively. Equity securities were comprised of the following: 2025 Estimated Fair Value Gross Unrealized Gains Gross Unrealized Losses Cost Equity securities: Common and non-redeemable preferred stocks: Financial services 1,319 1,009 - 310 Communications 11,076 6,443 - 4,633 Total equity securities $ 12,395 $ 7,452 $ - $ 4,943 47 Table of Contents 2024 Estimated Fair Value Gross Unrealized Gains Gross Unrealized Losses Cost Equity securities: Common and non-redeemable preferred stocks: Financial services 1,149 843 - 306 Communications 6,751 2,118 - 4,633 Total equity securities $ 7,900 $ 2,961 $ - $ 4,939 The carrying value and amortized cost of the Company’s investments in fixed maturity securities at December 31, 2025 and 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. 2025 2024 Carrying Value Amortized Cost Carrying Value Amortized Cost Due in one year or less $ 10,389 $ 10,469 $ 7,484 $ 7,497 Due after one year through five years 62,870 63,892 62,722 64,703 Due after five years through ten years 33,769 34,264 32,820 35,552 Due after ten years 100,099 112,608 80,199 95,466 Asset backed securities 36,984 38,992 29,387 33,081 Totals $ 244,111 $ 260,225 $ 212,612 $ 236,299 The following tables present the Company’s unrealized loss aging for securities by type and length of time the security was in a continuous unrealized loss position as of December 31, 2025 and 2024. 2025 Less than 12 months 12 months or longer Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasury securities and obligations of U.S. Government agencies and authorities $ 846 $ 3 $ 13,934 $ 1,522 $ 14,780 $ 1,525 Loan backed and structured securities 1,793 14 13,755 1,308 15,548 1,322 Obligations of states and political subdivisions 1,087 238 4,823 1,207 5,910 1,445 Corporate securities 20,083 661 120,360 13,049 140,443 13,710 Total temporarily impaired securities $ 23,809 $ 916 $ 152,872 $ 17,086 $ 176,681 $ 18,002 2024 Less than 12 months 12 months or longer Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasury securities and obligations of U.S. Government agencies and authorities $ 3,753 $ 33 $ 16,136 $ 2,111 $ 19,889 $ 2,144 Loan backed and structured securities 1,010 5 16,069 2,452 17,079 2,457 Obligations of states and political subdivisions - - 5,839 1,517 5,839 1,517 Corporate securities 18,510 755 125,930 17,723 144,440 18,478 Redeemable preferred stocks 188 5 - - 188 5 Total temporarily impaired securities $ 23,461 $ 798 $ 163,974 $ 23,803 $ 187,435 $ 24,601 48 Table of Contents Analysis of Securities in Unrealized Loss Positions As of December 31, 2025 and 2024, there were 210 and 213 securities, respectively, in an unrealized loss position which primarily included certain of the Company’s investments in fixed maturity securities within the utilities and telecom, financial services, other diversified business and other diversified consumer sectors. With the exception of the other than temporary impairment loss noted below, 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. At each reporting date, the Company evaluates available-for-sale fixed maturity securities whose fair values are below their amortized cost bases. The Company first determines whether it intends to sell a security or whether it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, which may be at maturity. An intent to sell exists when the Company has made a decision to sell a security. If either condition is met, any existing allowance for credit losses (“ACL”) is written off, the security’s amortized cost basis is written down to fair value and any incremental impairment loss is recognized in earnings within realized investment gains (losses). If the Company does not intend to sell a security and it is not more likely than not that the Company will be required to sell the security before recovery, the Company evaluates whether any portion of the decline in fair value is attributable to credit-related factors. A credit loss exists when the present value of the cash flows expected to be collected is less than the security’s amortized cost basis. Credit-related losses are recognized in earnings through an ACL, limited to the amount by which the security’s amortized cost basis exceeds its fair value. Unrealized losses attributable to noncredit factors are recognized in other comprehensive income, net of applicable income taxes. As part of this evaluation, the Company reviews each security in an unrealized loss position to determine whether the decline in fair value is attributable to general market factors, including changes in interest rates and market credit spreads, or to issuer-specific credit factors. Securities with significant declines in fair value or other indicators of potential credit deterioration are subject to a more detailed credit review. 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. During the year ended December 31, 2025, the Company recognized an impairment loss of approximately $ 488 related to an asset-backed security. Based on management’s evaluation of the underlying collateral performance, projected cash flows, and market conditions, the Company concluded that recovery of the security’s amortized cost basis was not expected. Accordingly, the Company recorded a full write-down of the investment to its estimated realizable value, resulting in a charge to realized investment losses of $ 488 . The Company intends to sell the security. For the other fixed maturity securities in an unrealized loss position, the Company similarly concluded that the unrealized losses were attributed to noncredit factors. Based on its credit analyses, the Company believes that the issuers have the ability to continue servicing their obligations. The Company does not intend to sell these securities, and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost bases. Accordingly, the related unrealized losses remain in AOCI. Assuming no credit-related deterioration occurs, these unrealized losses are generally expected to diminish as the securities approach maturity. The Company had no ACL on its available-for-sale fixed maturity securities as of December 31, 2025 and 2024. Investment income was earned from the following sources: 2025 2024 Fixed maturity securities $ 9,802 $ 9,520 Equity securities 335 335 Other 394 191 10,531 10,046 Investment expenses 265 255 Net investment income $ 10,266 $ 9,791 Included in the net realized investment losses for the year ended December 31, 2025, was an impairment of a fixed maturity security totaling $ 488 . The impairment resulted from a write-down of a security to its market value, which was recognized in earnings during the period. There were no impairments recognized for the year ended December 31, 2024. 49 Table of Contents A summary of realized investment gains (losses) follows: 2025 Fixed Maturity Securities Equity Securities Other Invested Assets Total Gains $ 196 $ - $ - $ 196 Losses ( 179 ) - - ( 179 ) Impairment losses ( 488 ) - - ( 488 ) Realized investment losses, net $ ( 471 ) $ - $ - $ ( 471 ) 2024 Fixed Maturity Securities Equity Securities Other Invested Assets Total Gains $ 19 $ - $ 1,193 $ 1,212 Losses ( 2 ) - - ( 2 ) Realized investment gains, net $ 17 $ - $ 1,193 $ 1,210 Proceeds from the sales of available-for-sale fixed maturity securities were as follows: 2025 2024 Sales proceeds $ 13,447 $ - Gross gains 186 - Gross losses 178 - There were no proceeds from the sales of equity securities during 2025 and 2024. Proceeds from the sales of other invested assets were as follows: 2025 2024 Sales proceeds $ - $ 2,510 Gross gains - 1,193 Gross losses - - Sales of available-for-sale securities in 2025 were primarily a result of improving the overall risk versus return profile of the portfolio. In addition, the Company sold its interest in a certain limited liability company held as other invested assets to a third-party in 2024. The following table presents the portion of unrealized gains (losses) related to equity securities still held for the years ended December 31, 2025 and 2024. 2025 2024 Net realized and unrealized gains (losses) recognized during the period on equity securities $ 4,491 $ ( 1,516 ) Less: Net realized gains recognized during the period on equity securities sold during the period - - Unrealized gains (losses) on equity securities, net $ 4,491 $ ( 1,516 ) The Company’s bond portfolio included 99 % investment grade securities, as defined by the National Association of Insurance Commissioners (“NAIC”), at December 31, 2025 and 2024. Variable Interest Entities The Company holds passive interests in a number of entities that are considered to be variable interest entities (“VIEs”) under GAAP guidance. The Company’s VIE interests principally consist of interests in limited partnerships and limited liability companies formed for the purpose of achieving diversified equity returns. The Company’s VIE interests, carried as a part of other invested assets, totaled $ 6,037 and $ 6,616 at December 31, 2025 and 2024, respectively. The Company’s VIE interests, carried as a part of investment in unconsolidated trusts, totaled $ 1,238 at December 31, 2025 and 2024. 50 Table of Contents The Company does not have power over the activities that most significantly impact the economic performance of these VIEs and thus is not the primary beneficiary. Therefore, the Company has not consolidated these VIEs. The Company’s involvement with each VIE is limited to its direct ownership interest in the VIE. The Company has no arrangements with any of the VIEs to provide other financial support to or on behalf of the VIE other than future funding commitments. 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 $ 7,275 and $ 7,854 , at December 31, 2025 and 2024, respectively. As of December 31, 2025 and 2024, the Company had outstanding commitments totaling $ 2,200 and $ 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. Note 3. Disclosures About Fair Value of Financial Instruments The estimated fair values have been determined by the Company using available market information from various market sources and appropriate valuation methodologies as of the respective dates. However, considerable judgment is necessary to interpret market data and to develop the estimates of fair value. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, the estimates presented herein are not necessarily indicative of the amounts which the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The following describes the fair value hierarchy and provides information as to the extent to which the Company uses fair value to measure the value of its financial instruments and information about the inputs used to value those financial instruments. The fair value hierarchy prioritizes the inputs in the valuation techniques used to measure fair value into three broad levels. Level 1 Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. The Company’s financial instruments valued using Level 1 criteria include cash equivalents and exchange traded common stocks. Level 2 Observable inputs, other than quoted prices included in Level 1, for an asset or liability or prices for similar assets or liabilities. The Company’s financial instruments valued using Level 2 criteria include significantly most of its fixed maturity securities, which consist of U.S. Treasury securities, U.S. Government securities, obligations of states and political subdivisions, and certain corporate fixed maturity securities, as well as its non-redeemable preferred stocks. In determining fair value measurements of its fixed maturity securities and non-redeemable preferred stocks using Level 2 criteria, the Company utilizes data from outside sources, including nationally recognized pricing services and broker/dealers. Prices for the majority of the Company’s Level 2 fixed maturity securities and non-redeemable preferred stocks were determined using unadjusted prices received from pricing services that utilize models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities) or can be corroborated by observable market data. Level 3 Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (including assumptions about risk). Fair value is based on criteria that use assumptions or other data that are not readily observable from objective sources. With little or no observable market, the determination of fair values uses considerable judgment and represents the Company’s best estimate of an amount that could be realized in a market exchange for the asset or liability. The Company’s financial instruments valued using Level 3 criteria consist of one equity security. As of December 31, 2025 and December 31, 2024, the value of the equity security valued using Level 3 criteria was $ 193 and $ 189 , respectively. The equity security is not traded and is valued at cost. The use of different criteria or assumptions regarding data may have yielded materially different valuations. Other policy liabilities consisting of annuities of $ 4,783 and $ 4,938 were also included in level 3 valuations. Recurring Fair Value Measurements Cash Equivalents . The carrying amount approximates fair value due to the short-term nature of the instruments. Fixed Maturity Securities and Common and Non-Redeemable Preferred Stocks . The carrying amount is determined from publicly quoted market prices. Certain fixed maturity securities do not have publicly quoted values and consist solely of issuances of pooled debt obligations of multiple, smaller financial services companies. They are not actively traded and valuation techniques used to measure fair value are based on future estimated cash flows discounted at reasonable estimated rates of interest. Other qualitative and quantitative information is also considered, as applicable. Nonrecurring Fair Value Measurements Non-publicly Traded Invested Assets . The fair value of investments in certain limited partnerships which are included in other invested assets on the consolidated balance sheet were determined by officers of those limited partnerships. Policy Loans . Policy loans, which are categorized as Level 3 fair value measurements, are carried at the unpaid principal balances. Annuities. Annuities, which are categorized as Level 3 fair value measurements, are carried at the present value of future annuity payments. 51 Table of Contents Junior Subordinated Debentures . The fair value is estimated based on observable interest rates and yields for debt instruments having similar characteristics. As of December 31, 2025, financial instruments carried at fair value were measured on a recurring basis as summarized below: Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Assets: Fixed maturity securities $ - $ 244,111 $ - $ 244,111 Equity securities 12,202 - 193 12,395 Cash equivalents 16,941 994 - 17,935 Total $ 29,143 $ 245,105 $ 193 $ 274,441 As of December 31, 2024, financial instruments carried at fair value were measured on a recurring basis as summarized below: Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Assets: Fixed maturity securities $ - $ 212,612 $ - $ 212,612 Equity securities 7,711 - 189 7,900 Cash equivalents 14,948 - - 14,948 Total $ 22,659 $ 212,612 $ 189 $ 235,460 The following table sets forth the carrying amount, estimated fair value and level within the fair value hierarchy of the Company’s financial instruments as of December 31, 2025 and 2024: Level in Fair Value Hierarchy (1) 2025 2024 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Assets: Cash and cash equivalents (1) $ 43,636 $ 43,636 $ 35,570 $ 35,570 Fixed maturity securities Level 2 244,111 244,111 212,612 212,612 Equity securities (1) 12,395 12,395 7,900 7,900 Policy loans Level 3 1,683 1,683 1,722 1,722 Liabilities: Junior subordinated debentures, net Level 2 33,738 33,595 33,738 35,443 Revolving credit facility Level 2 5,021 5,021 4,023 4,023 Other policy liabilities -annuities Level 3 (2) 4,783 4,783 4,938 4,938 (1) See the aforementioned information for a description of the fair value hierarchy as well as a disclosure of levels for classes of these financial assets. (2) This value relates to annuities, which is a financial instrument, whereas the remaining items within other policy liabilities are not financial instruments. Note 4. Allowance for Expected Credit Losses Reinsurance Recoverables 52 Table of Contents The following table presents the balances of reinsurance recoverables, net of the allowance for expected credit losses, at December 31, 2025 and 2024, and the changes in the allowance for expected credit losses for the years ended December 31, 2025 and 2024: At and year ended December 31, 2025 Reinsurance Recoverables, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses Balance, beginning of period $ 22,881 $ 73 Current period change for estimated uncollectible reinsurance ( 15 ) Write-offs of uncollectible reinsurance recoverables - Balance, end of period $ 25,539 $ 58 At and year ended December 31, 2024 (Restated) Reinsurance Recoverables, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses Balance, beginning of period $ 23,953 $ 61 Current period change for estimated uncollectible reinsurance 12 Write-offs of uncollectible reinsurance recoverables - Balance, end of period $ 22,881 $ 73 Insurance Premium and Other Receivables The following table presents the balances of insurance premiums and other, net of the allowance for expected credit losses, at December 31, 2025 and 2024, and the changes in the allowance for expected credit losses for the years ended December 31, 2025 and 2024: At and year ended December 31, 2025 Insurance Premiums and Other, Net of Expected Credit Losses Allowance for Expected Credit Losses Balance, beginning of period $ 21,878 $ 201 Current period change for expected credit losses ( 12 ) Write-offs of uncollectible insurance premiums and other receivables - Balance, end of period $ 26,956 $ 189 53 Table of Contents At and year ended December 31, 2024 (restated) Insurance Premiums and Other, Net of Expected Credit Losses Allowance for Expected Credit Losses Balance, beginning of period $ 23,690 $ 217 Current period change for expected credit losses ( 16 ) Write-offs of uncollectible insurance premiums and other receivables - Balance, end of period $ 21,878 $ 201 Note 5. Deferred Policy Acquisition Costs The following table presents a rollforward of deferred policy acquisition costs by segment for the years ended December 31, 2025 and 2024: 2025 2024 (Restated) American Southern Bankers Fidelity Total American Southern Bankers Fidelity Total Deferred policy acquisition costs: Balance, beginning of year $ 2,866 $ 38,378 $ 41,244 $ 2,700 $ 37,856 $ 40,556 Capitalization 9,634 10,298 19,932 8,498 10,741 19,239 Amortization ( 9,745 ) ( 9,113 ) ( 18,858 ) ( 8,332 ) ( 10,219 ) ( 18,551 ) Balance, end of year (1) $ 2,755 $ 39,563 $ 42,318 $ 2,866 $ 38,378 $ 41,244 1) DAC is associated with the following product lines: American Southern products include automobile liability, general liability, inland marine, automobile physical damage, and surety; and Bankers Fidelity products include individual life, group whole life, Medicare Supplement, and individual and group accident and health products. The following table presents a rollforward of deferred policy acquisition costs for American Southern by line of business for the years ended December 31, 2025 and 2024: 2025 Automobile Liability General Liability Inland Marine Automobile Physical Damage Surety Total DAC balance as of the beginning of the year $ 721 $ 633 $ 186 $ 524 $ 802 $ 2,866 Capitalized expenses 2,781 2,182 691 1,876 2,104 9,634 Amortization of DAC ( 2,707 ) ( 2,191 ) ( 679 ) ( 1,864 ) ( 2,304 ) ( 9,745 ) DAC balance as of the valuation date $ 795 $ 624 $ 198 $ 536 $ 602 $ 2,755 2024 Automobile Liability General Liability Inland Marine Automobile Physical Damage Surety Total DAC balance as of the beginning of the year $ 731 $ 585 $ 151 $ 431 $ 802 $ 2,700 Capitalized expenses 2,139 1,875 551 1,555 2,378 8,498 Amortization of DAC ( 2,149 ) ( 1,827 ) ( 516 ) ( 1,462 ) ( 2,378 ) ( 8,332 ) DAC balance as of the valuation date $ 721 $ 633 $ 186 $ 524 $ 802 $ 2,866 54 Table of Contents The following table presents a rollforward of deferred policy acquisition costs for Bankers Fidelity by line of business for the years ended December 31, 2025 and 2024: 2025 Individual Life Group Whole Life Medicare Supplement Other Individual Accident and Health Group Accident and Health Total DAC balance as of the beginning of the year $ 6,258 $ 10,788 $ 17,368 $ 3,958 $ 6 $ 38,378 Capitalized expenses 514 3,440 3,270 1,521 1,553 10,298 Amortization of DAC ( 601 ) ( 2,090 ) ( 3,415 ) ( 1,451 ) ( 1,556 ) ( 9,113 ) DAC balance as of the valuation date $ 6,171 $ 12,138 $ 17,223 $ 4,028 $ 3 $ 39,563 2024 (Restated) Individual Life Group Whole Life Medicare Supplement Other Individual Accident and Health Group Accident and Health Total DAC balance as of the beginning of the year $ 6,428 $ 8,435 $ 19,443 $ 3,527 $ 23 $ 37,856 Capitalized expenses 376 3,818 1,985 1,229 3,333 10,741 Amortization of DAC ( 546 ) ( 1,465 ) ( 4,060 ) ( 798 ) ( 3,350 ) ( 10,219 ) DAC balance as of the valuation date $ 6,258 $ 10,788 $ 17,368 $ 3,958 $ 6 $ 38,378 Note 6. 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, 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 . 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. The Company 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 $ 638 and $ 108 during the years ended December 31, 2025 and 2024, respectively. The Company has capitalized $ 5,313 and $ 4,675 in implementation costs in other assets in its Consolidated Balance Sheet as of December 31, 2025 and 2024, respectively. The Company expects the software will be substantially ready for its intended use during 2026. Accordingly, the Company has no t recorded any amortization expense related to software implementation costs for years ended December 31, 2025 and 2024. Note 7. Future Policy Benefits The LFPB represents the present value of expected future policy benefits and claim‑related expenses, less the present value of expected future net premiums. Net premiums represent the portion of gross premiums required to fund expected benefits based on current assumptions. The following table sets forth the liability for future policy benefits as of December 31, 2025 and 2024: 2025 2024 (Dollar amounts in thousands) (Restated) Individual life $ 42,411 $ 43,477 Group life 11,254 5,483 Medicare Supplement 9,617 8,478 Other individual health 21,437 19,443 Net liability for future policy benefits 84,719 76,881 Less: reinsurance recoverable ( 5,309 ) ( 5,217 ) Net liability for future policy benefits, net of reinsurance recoverable $ 79,410 $ 71,664 55 Table of Contents Changes in Future Liability Policy Benefits One component of the change in the LFPB is the change attributable to changes in cash flow assumptions. The LFPB is calculated based on assumptions that are evaluated at least annually. These assumptions include mortality and voluntary policyholder lapses for individual life and group life, and total policy terminations and claim costs for Medicare Supplement products and other individual health products. The Company performed experience studies based on cutoff dates of December 31, 2024 and December 31, 2025 to determine the assumptions for the calculation of the LFPB as of the respective valuation dates. Based on these studies, the Company updated mortality and voluntary lapse assumptions for individual and group life products and claim cost assumptions for Medicare Supplement products. The updated assumptions did not significantly affect LFPB for the life products. Changes in Medicare Supplement claim cost assumptions reduced LFPB by approximately $ 1,467 and $ 2,480 as of December 31, 2024 and December 31, 2025, respectively, primarily due to lower projected claim costs during the first three policy years. The remainder of the remeasurement gain of $ 225 and $ 1,232 in 2024 and 2025, respectively, were attributable to the differences between actual and expected cash flows. No portion of the LFPB remeasurement gain for 2024 or 2025 resulted from the application of the 100 % net premium ratio cap. The following table presents the balances of and changes in the liability for future policy benefits as of and for the year ended December 31, 2025: 2025 (Dollar amounts in thousands) Individual Life Group Life Medicare Supplement Other Individual Health Total Present value of expected net premiums: Beginning balance as of January 1 $ 18,698 $ 60,665 $ 749,267 $ 28,888 $ 857,518 Beginning balance, at original discount rate 19,313 67,017 835,891 31,290 953,511 Effect of changes in cash flow assumptions 15 ( 2,046 ) ( 17,467 ) - ( 19,498 ) Effect of actual variances from expected experience ( 35 ) ( 9,613 ) 18,362 ( 1,692 ) 7,022 Adjusted beginning balance 19,293 55,358 836,786 29,598 941,035 Issuances 785 15,092 313,351 8,407 337,635 Interest accretion 919 2,926 34,958 1,259 40,062 Net premiums collected (1) ( 2,697 ) ( 6,641 ) ( 97,008 ) ( 5,067 ) ( 111,413 ) Other ( 1 ) - - ( 10 ) ( 11 ) Ending balance, at original discount rate 18,299 66,735 1,088,087 34,187 1,207,308 Effect of changes in discount rate assumptions ( 229 ) ( 3,977 ) ( 60,414 ) ( 1,364 ) ( 65,984 ) Ending balance as of December 31, $ 18,070 $ 62,758 $ 1,027,673 $ 32,823 $ 1,141,324 Present value of expected future policy benefits: Beginning balance as of January 1 $ 62,175 $ 66,148 $ 757,649 $ 48,331 934,303 Beginning balance, at original discount rate 63,964 84,798 842,118 55,055 1,045,935 Effect of changes in cash flow assumptions 21 ( 2,138 ) ( 19,947 ) ( 2 ) ( 22,066 ) Effect of actual variances from expected experience 171 ( 9,834 ) 17,130 ( 2,743 ) 4,724 Adjusted beginning balance 64,156 72,826 839,301 52,310 1,028,593 Issuances 784 15,101 313,018 8,300 337,203 Interest accretion 3,167 3,843 36,102 2,175 45,287 Benefit payments ( 6,558 ) ( 2,003 ) ( 88,477 ) ( 2,520 ) ( 99,558 ) Other ( 436 ) ( 195 ) ( 2,875 ) ( 1,028 ) ( 4,534 ) Ending balance, at original discount rate 61,113 89,572 1,097,069 59,237 1,306,991 Effect of changes in discount rate assumptions ( 632 ) ( 15,560 ) ( 60,367 ) ( 4,977 ) ( 81,536 ) Ending balance as of December 31, $ 60,481 $ 74,012 $ 1,036,702 $ 54,260 $ 1,225,455 Net liability for future policy benefits, before flooring adjustments 42,411 11,254 9,029 21,437 84,131 Flooring adjustments (2) - - 588 - 588 Net liability for future policy benefits 42,411 11,254 9,617 21,437 84,719 Less: reinsurance recoverable ( 47 ) - ( 5,262 ) - ( 5,309 ) Net liability for future policy benefits, net of reinsurance recoverable $ 42,364 $ 11,254 $ 4,355 $ 21,437 $ 79,410 Weighted average liability duration (years) 8.7 16.2 6.5 7.9 (1) Net premiums represent the portion of gross premiums collected from policyholders that is necessary to fund expected benefit payments. (2) Flooring adjustments are necessary when the present value of future net premiums exceeds the present value of future benefits for a given cohort. The flooring adjustment is the total of the flooring adjustments for each cohort, if any. These adjustments ensure that the liability for future policy benefits is at least zero for all cohorts. 56 Table of Contents The following table presents the balances of and changes in the liability for future policy benefits as of and for the year ended December 31, 2024. 2024 (Restated) (Dollar amounts in thousands) Individual Life Group Life Medicare Supplement Other Individual Health Total Present value of expected net premiums: Beginning balance as of January 1 $ 19,626 $ 52,337 $ 769,715 $ 26,734 $ 868,412 Beginning balance, at original discount rate 19,429 56,900 838,249 29,115 943,693 Effect of changes in cash flow assumptions ( 2 ) ( 1,729 ) ( 17,867 ) - ( 19,598 ) Effect of actual variances from expected experience 744 ( 5,838 ) 21,955 ( 3,094 ) 13,767 Adjusted beginning balance 20,171 49,333 842,337 26,021 937,862 Issuances 883 21,609 50,374 8,589 81,455 Interest accretion 947 2,762 28,816 1,096 33,621 Net premiums collected (1) ( 2,688 ) ( 6,688 ) ( 85,637 ) ( 4,420 ) ( 99,433 ) Other - 1 1 4 6 Ending balance, at original discount rate 19,313 67,017 835,891 31,290 953,511 Effect of changes in discount rate assumptions ( 615 ) ( 6,352 ) ( 86,624 ) ( 2,402 ) ( 95,993 ) Ending balance as of December 31, $ 18,698 $ 60,665 $ 749,267 $ 28,888 $ 857,518 Present value of expected future policy benefits: Beginning balance as of January 1 $ 67,902 $ 56,767 $ 784,912 $ 45,549 955,130 Beginning balance, at original discount rate 66,232 69,013 851,128 50,884 1,037,257 Effect of changes in cash flow assumptions ( 3 ) ( 1,749 ) ( 19,334 ) - ( 21,086 ) Effect of actual variances from expected experience 941 ( 5,886 ) 21,730 ( 4,024 ) 12,761 Adjusted beginning balance 67,170 61,378 853,524 46,860 1,028,932 Issuances 885 21,609 50,327 8,662 81,483 Interest accretion 3,304 3,388 29,975 1,913 38,580 Benefit payments ( 6,592 ) ( 1,322 ) ( 90,961 ) ( 2,200 ) ( 101,075 ) Other ( 803 ) ( 255 ) ( 747 ) ( 180 ) ( 1,985 ) Ending balance, at original discount rate 63,964 84,798 842,118 55,055 1,045,935 Effect of changes in discount rate assumptions ( 1,789 ) ( 18,650 ) ( 84,469 ) ( 6,724 ) ( 111,632 ) Ending balance as of December 31, $ 62,175 $ 66,148 $ 757,649 $ 48,331 $ 934,303 Net liability for future policy benefits, before flooring adjustments 43,477 5,483 8,382 19,443 76,785 Flooring adjustments (2) - - 96 - 96 Net liability for future policy benefits 43,477 5,483 8,478 19,443 76,881 Less: reinsurance recoverable ( 56 ) - ( 5,161 ) - ( 5,217 ) Net liability for future policy benefits, net of reinsurance recoverable $ 43,421 $ 5,483 $ 3,317 $ 19,443 $ 71,664 Weighted average liability duration (years) 8.4 17.2 6.2 8.2 (1) Net premiums represent the portion of gross premiums collected from policyholders that is necessary to fund expected benefit payments (2) Flooring adjustments are necessary when the present value of future net premiums exceeds the present value of future benefits for a given cohort. The flooring adjustment is the total of the flooring adjustments for each cohort, if any. These adjustments ensure that the liability for future policy benefits is at least zero for all cohorts. 57 Table of Contents Weighted Average Interest Rates The following table presents the balances of and changes in the liability for future policy benefits as of and for the years ended December 31, 2025 and 2024. Year Ended December 31, 2025 Year Ended December 31, 2024 Individual Life Interest accretion (locked-in) rate 4.9 % 4.5 % Current discount rate 5.3 % 5.5 % Group Life Interest accretion (locked-in) rate 5.0 % 4.6 % Current discount rate 5.9 % 5.9 % Medicare Supplement Interest accretion (locked-in) rate 4.8 % 3.6 % Current discount rate 6.4 % 6.0 % Other Individual Health Interest accretion (locked-in) rate 4.0 % 3.8 % Current discount rate 5.5 % 5.7 % Discounted Future Gross Premium The following table sets forth the amount of undiscounted and discounted expected future gross premiums and expected future benefit payments as December 31, 2025 and 2024. 2025 2024 (Dollar amounts in thousands) Undiscounted Discounted Undiscounted Discounted Individual life Expected future gross premiums $ 61,771 $ 37,820 $ 67,906 $ 40,068 Expected future benefits payments 115,435 60,481 121,624 62,175 Group Life Expected future gross premiums 214,892 127,261 202,437 116,517 Expected future benefits payments 237,776 74,012 222,729 66,148 Medicare Supplement Expected future gross premiums 2,264,574 1,515,989 1,642,269 1,104,499 Expected future benefits payments 1,528,633 1,036,702 1,112,219 757,649 Other Individual Health Expected future gross premiums 76,730 55,173 66,512 45,630 Expected future benefits payments 84,052 54,260 77,814 48,331 58 Table of Contents Revenue Interest Accretion The following table sets forth the amount of revenue and interest accretion (expense) recognized in net income related to our liability for future policy benefits for the years ended December 31, 2025 and 2024. 2025 2024 (Dollar amounts in thousands) Gross Premiums Interest Accretion (1) Gross Premiums Interest Accretion (1) Individual life $ 5,782 $ 2,248 $ 5,947 $ 2,357 Group Life 13,468 918 12,834 626 Medicare Supplement 144,644 1,144 126,726 1,159 Other Individual Health 9,199 916 8,042 816 $ 173,093 $ 5,226 $ 153,549 $ 4,958 (1) Amounts for interest accretion are included in benefits and other changes in policy reserves in the consolidated statement of operations. Note 8. Other Insurance Reserves and Policyholder Funds Loss and Claim Reserves Loss and claim reserves represent estimates of projected ultimate losses and are based upon: (a) management’s estimate of ultimate liability and claims adjusters’ evaluations for unpaid claims reported prior to the close of the accounting period, (b) estimates of IBNR claims based on past experience, and (c) estimates of loss adjustment expenses. The estimated liability is periodically reviewed by management and updated, with changes to the estimated liability recorded in the statement of operations in the year in which such changes are known. Activity in the liability for unpaid loss and claim reserves is summarized as follows: 2025 2024 Balance at January 1 $ 93,707 $ 87,478 Less: Reinsurance recoverable on unpaid losses ( 17,390 ) ( 14,678 ) Net balance at January 1 76,317 72,800 Incurred related to: Current year 123,043 112,393 Prior years 1,076 (1) 5,708 (2) Total incurred 124,119 118,101 Paid related to: Current year 64,115 64,300 Prior years 41,783 50,284 Total paid 105,898 114,584 Net balance at December 31 94,538 76,317 Plus: Reinsurance recoverable on unpaid losses 19,298 17,390 Balance at December 31 $ 113,836 $ 93,707 (1) 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 reserve strengthening, partially offset by favorable development in the Medicare Supplement line of business in the life and health segment. (2) Prior years’ development was primarily the result of unfavorable development in the property and casualty operations in the automobile liability line of business due to frequency and severity in the inflationary factors, as well as unfavorable development in the 2021 and 2022 accident years. Following is a reconciliation of total incurred losses to total insurance benefits and losses incurred: 2025 2024 (Restated) Total incurred losses $ 124,119 $ 118,101 Cash surrender value and matured endowments 2,001 1,340 Benefit reserve changes 6,555 2,303 Total insurance benefits and losses incurred (1) $ 132,675 $ 121,744 (1) This line is net of LFPB remeasurement gain of $ 4,866 and $ 2,334 for 2025 and 2024, respectively. 59 Table of Contents Liability for Unpaid Losses, Claims and Loss Adjustment Expenses The following is information, by significant product lines, about incurred and paid claims development as of December 31, 2025, net of reinsurance, as well as the cumulative number of reported claims and the total of IBNR reserves plus expected development on reported claims included within the net incurred claims amounts. The information presented for the years ended December 31, 2024 and prior is presented as supplementary information and is unaudited. Medicare Supplement As of December 31, 2025 For the Years Ended December 31, IBNR Reserves Cumulative Number of Reported Claims Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016 $ 58,849 $ 59,851 $ 63,226 $ 63,225 $ 63,221 $ 63,221 $ 63,221 $ 63,221 $ 63,221 $ 63,221 $ - 1,879 2017 67,960 69,655 69,643 69,635 69,633 69,633 69,632 69,633 69,633 - 2,929 2018 79,140 80,404 80,361 80,357 80,351 80,348 80,348 80,348 - 4,106 2019 88,765 87,028 86,988 86,986 86,980 86,978 86,978 - 4,494 2020 75,857 75,715 75,730 75,730 75,708 75,709 - 3,706 2021 65,267 61,579 61,785 61,740 61,727 - 3,543 2022 58,777 56,047 55,970 55,911 11 4,214 2023 48,367 47,029 47,098 66 4,320 2024 43,708 39,863 474 3,797 2025 41,383 12,033 2,014 $ 621,871 Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016 $ 49,165 $ 59,747 $ 63,226 $ 63,225 $ 63,221 $ 63,221 $ 63,221 $ 63,221 $ 63,221 $ 63,221 2017 57,696 69,517 69,643 69,635 69,633 69,633 69,633 69,633 69,633 2018 66,565 80,222 80,361 80,355 80,351 80,348 80,348 80,348 2019 72,333 86,856 86,978 86,985 86,980 86,978 86,978 2020 63,129 75,527 75,710 75,715 75,708 75,709 2021 50,197 61,350 61,733 61,726 61,727 2022 46,111 55,808 55,920 55,900 2023 36,388 46,795 47,032 2024 31,500 39,389 2025 29,350 $ 609,287 Liabilities for losses, claims and loss adjustment expenses, net of reinsurance $ 12,584 The cumulative number of reported claims for the Medicare Supplement line of business is the number of distinct claims incurred and submitted to the Centers for Medicare and Medicaid Services (or its designee) for payment in the given year. Multiple payments on the same claim are not counted in the claim frequency data. For Medicare Supplement policies, the estimated ultimate claims incurred, using claims data reported during each month of any given year, are calculated using the chain ladder method. Because claim patterns vary significantly during the year, this method is modified to reflect claim experience over the corresponding four-month period prior to the statement date during the prior two calendar years, and recent claim experience during a twelve-month period from sixteen months prior to the valuation date through five months prior to the valuation date. Additional adjustments to the estimated ultimate claims incurred are then applied to account for seasonal changes in claim experience and changes in the rate of claim processing. The liability for Medicare Supplement claims that are Incurred but Not Reported (the IBNR) is calculated by subtracting both paid claims through the valuation date and claims in the course of settlement as of the valuation date from the estimated ultimate claims. Thirty-six months of loss data are used to develop the estimated ultimate incurred claims. For other accident and health products and life products, similar approaches are used and modified to reflect the unique aspects of the products. 60 Table of Contents Automobile Liability As of December 31, 2025 For the Years Ended December 31, IBNR Reserves Cumulative Number of Reported Claims Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016 $ 20,549 $ 21,275 $ 21,846 $ 22,388 $ 22,245 $ 22,310 $ 22,448 $ 22,448 $ 22,448 $ 22,448 3,863 2017 22,179 24,212 23,766 25,180 26,009 26,153 26,231 26,254 26,255 $ 1 3,813 2018 24,284 25,682 27,338 30,013 30,464 31,135 31,170 31,154 16 3,651 2019 25,241 24,045 25,724 28,042 28,513 29,216 29,384 59 3,608 2020 22,416 16,442 20,137 21,164 21,459 21,066 84 2,523 2021 25,887 21,172 24,957 27,041 26,866 215 2,794 2022 28,860 27,293 31,633 33,348 1,379 2,933 2023 33,266 33,626 39,468 3,408 2,986 2024 34,105 31,049 3,955 2,808 2025 42,314 22,340 2,371 303,352 Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016 $ 6,796 $ 13,141 $ 16,397 $ 19,613 $ 21,408 $ 21,809 $ 22,448 $ 22,448 $ 22,448 $ 22,448 2017 7,401 16,317 20,221 22,778 25,023 25,712 26,222 26,249 26,249 2018 6,989 15,647 21,121 24,662 27,671 29,201 30,507 31,057 2019 7,305 14,694 19,384 22,868 26,126 28,778 29,025 2020 5,172 9,941 14,693 18,133 20,466 20,553 2021 6,242 13,918 19,230 24,798 25,552 2022 7,023 18,010 24,137 29,123 2023 9,068 22,232 29,019 2024 8,939 18,929 2025 8,193 $ 240,148 Liabilities for losses, claims and loss adjustment expenses, net of reinsurance $ 63,204 Automobile Physical Damage As of December 31, 2025 For the Years Ended December 31, IBNR Reserves Cumulative Number of Reported Claims Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance Accident Year 2021 2022 2023 2024 2025 2021 $ 14,296 $ 13,385 $ 13,305 $ 13,329 $ 13,323 $ 1 1,914 2022 10,962 10,648 10,564 10,574 - 1,777 2023 6,460 6,485 6,301 3 1,599 2024 7,418 8,029 12 1,679 2025 9,707 247 1,538 47,934 Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance Accident Year 2021 2022 2023 2024 2025 2021 $ 11,993 $ 13,277 $ 13,257 $ 13,302 $ 13,315 2022 8,475 10,368 10,528 10,573 2023 5,397 6,340 6,263 2024 5,864 7,885 2025 7,055 $ 45,091 Liabilities for losses, claims and loss adjustment expenses, net of reinsurance $ 2,843 61 Table of Contents General Liability As of December 31, 2025 For the Years Ended December 31, IBNR Reserves Cumulative Number of Reported Claims Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016 $ 3,119 $ 1,148 $ 736 $ 608 $ 621 $ 619 $ 620 $ 620 $ 620 $ 620 94 2017 1,490 488 513 738 738 839 777 777 777 84 2018 1,656 333 198 128 183 183 193 185 77 2019 1,916 707 455 515 909 516 547 $ 12 98 2020 2,223 670 657 363 793 687 13 91 2021 2,567 1,329 1,328 1,267 1,377 9 106 2022 2,770 2,380 2,530 2,447 103 143 2023 2,887 1,445 1,015 70 126 2024 3,139 1,836 405 120 2025 2,111 1,271 70 11,602 Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016 $ 116 $ 203 $ 568 $ 608 $ 617 $ 619 $ 620 $ 620 $ 620 $ 620 2017 75 136 365 556 696 741 777 777 777 2018 65 90 115 128 183 183 185 185 2019 41 209 242 354 404 433 491 2020 208 385 462 539 593 629 2021 364 646 813 1,178 1,336 2022 402 1,169 1,622 2,156 2023 125 399 857 2024 239 1,002 2025 247 $ 8,300 All outstanding liabilities before 2016, net of reinsurance 205 Liabilities for losses, claims and loss adjustment expenses, net of reinsurance $ 3,507 Surety As of December 31, 2025 For the Years Ended December 31, IBNR Reserves Cumulative Number of Reported Claims Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016 $ 3,314 $ 1,812 $ 1,865 $ 1,876 $ 1,865 $ 1,678 $ 1,670 $ 1,666 $ 1,660 $ 1,654 $ - $ 50 2017 4,677 3,671 3,799 3,629 3,514 3,440 3,448 3,403 3,398 2 47 2018 3,528 1,938 1,381 956 767 750 750 748 - 67 2019 2,130 657 630 513 507 439 424 - 64 2020 2,263 574 465 460 402 400 - 32 2021 2,936 1,455 1,497 1,475 1,524 7 23 2022 3,202 2,339 2,296 2,265 19 36 2023 2,634 1,627 1,581 4 51 2024 2,324 1,074 159 122 2025 1,771 1,413 33 $ 14,839 62 Table of Contents Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016 $ 1,054 $ 1,732 $ 1,772 $ 1,873 $ 1,862 $ 1,677 $ 1,670 $ 1,666 $ 1,660 $ 1,654 2017 1,971 3,255 3,523 3,545 3,442 3,402 3,400 3,394 3,388 2018 1,157 1,454 1,361 941 760 749 748 748 2019 259 395 568 446 444 439 424 2020 97 460 464 459 400 400 2021 156 803 1,496 1,475 1,475 2022 970 2,191 2,180 2,153 2023 98 1,602 1,565 2024 392 735 2025 211 $ 12,753 All outstanding liabilities before 2016, net of reinsurance 47 Liabilities for losses, claims and loss adjustment expenses, net of reinsurance $ 2,133 For the property and casualty lines of business, the number of claims presented above equals the number of occurrences by type of claim reported to the Company. The number of claims reported during a given year corresponds to the number of claims records opened during the year. Frequency information is maintained on a cumulative basis by accident year by line of business. For automobile claims, a claim count is separately maintained for bodily injury, property damage and physical damage claims. The Company has consistently monitored claim frequency on this basis, and believes this provides more meaningful information than using claimant count which can change over the course of settling a claim. In general, when a claim is reported, claims representatives establish a “case reserve” for the estimated amount of the ultimate payment based on the known information of the claim at that time. Claims managers review and monitor all property and casualty claims in excess of $ 25,000 . As new information becomes available or payments are made on a claim, the case reserve is adjusted to reflect the revised estimate of the ultimate amount to be paid out. Estimates and assumptions pertaining to individual claims are based on complex and subjective judgments and subject to change at any time as new information becomes available. In addition to case reserves, IBNR reserves are established to provide for claims which have not been reported to the Company as of the reporting date as well as potential adverse development on known case reserves. IBNR reserve estimates are derived through a number of analytical techniques. Actuarial data is analyzed by line of business, coverage and accident year. Qualitative factors are also considered in determining IBNR reserves and include such factors as judicial decisions, general economic trends such as inflation, changes in policy forms, and underwriting changes. Reserves are reviewed quarterly and any indicated adjustments are made. Because of the inherent uncertainties in establishing both case and IBNR reserves, ultimate loss experience may prove better or worse than indicated by the combined claim reserves. Adjustments to claim reserves are reflected in the period recognized and could increase or decrease earnings for the period. The following is supplementary information about average historical claims duration as of December 31, 2025. Average Annual Percentage Payout of Incurred Claims by Age, Net of Subrogation and Reinsurance (Unaudited) Reserve Line 1st Year 2nd Year 3rd Year 4th Year 5th Year 6th Year 7th Year 8th Year 9th Year 10th Year Medicare Supplement 80.5 % 18.1 % 0.3 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % Automobile liability 24.6 % 29.4 % 17.6 % 14.2 % 8.5 % 3.8 % 2.5 % 0.6 % 0.0 % 0.0 % Automobile physical damage 80.3 % 16.9 % 0.0 % 0.4 % 0.1 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % General liability 18.1 % 23.6 % 24.4 % 16.9 % 12.9 % 3.3 % 4.1 % 0.0 % 0.0 % 0.0 % Surety 46.9 % 51.6 % 10.3 % - 11.7 % - 7.2 % - 3.0 % - 1.0 % - 0.1 % - 0.3 % - 0.4 % 63 Table of Contents The reconciliation of the net incurred and paid claims development tables to the liability for losses, claims and loss adjustment expenses is as follows: Net outstanding liabilities: December 31, 2025 Medicare Supplement $ 12,584 Automobile liability 63,204 Automobile physical damage 2,843 General liability 3,507 Surety 2,133 Other short-duration insurance lines (1) 2,561 Liabilities for unpaid losses, claims and loss adjustment expenses, net of reinsurance 86,832 Reinsurance recoverable on unpaid losses: Medicare Supplement 11,583 Automobile liability 4,842 Automobile physical damage 209 General liability 2,664 Other short-duration insurance lines 5,054 Total reinsurance recoverable on unpaid losses 24,352 Unallocated claims adjustment expenses 2,652 Total gross liability for unpaid losses, claims and loss adjustment expenses $ 113,836 (1) For American Southern, other short duration insurance lines are inland marine cargo policies. For Bankers Fidelity, other short duration insurance lines for which the detailed claim development is not shown are group accident and health products, which collectively have a claim liability of $ 705 . These products are group critical illness, group disability income, group hospital indemnity, and group accident and medical expense. There are no reinsurance arrangements for any of these Bankers Fidelity products. Note 9. Reinsurance In accordance with general practice in the insurance industry, portions of the life, property and casualty insurance written by the Company are reinsured; however, the Company remains liable with respect to reinsurance ceded should any reinsurer be unable or unwilling to meet its obligations. Approximately 99.8 % of the Company’s reinsurance recoverables were due from a single reinsurer as of December 31, 2025. Reinsurance recoverables of $ 25,539 were due from General Re Corporation, rated “AA+” by Standard & Poor’s and “A++” (Superior) by A.M. Best. Allowances for uncollectible amounts are established against reinsurance recoverables, if appropriate. Property and Casualty Operations American Southern’s basic reinsurance treaties generally cover all claims in excess of specified per occurrence limitations. Limits per occurrence within the reinsurance treaties are as follows: Inland marine and commercial automobile physical damage - $ 225 ,000 excess of $ 125 ,000 retention; and automobile liability and general liability - excess coverage of $ 2,000 less retentions that may vary from $ 100 ,000 to $ 700 ,000 depending on the account. American Southern maintains a property catastrophe treaty with a $ 5,500 limit excess of $ 500 ,000 retention. Life and Health Operations Bankers Fidelity has entered into reinsurance contracts ceding the excess of its life retention. The maximum retention by Bankers Fidelity on any one individual life insurance policyholder is $ 200 . As of December 31, 2025, $ 5,700 of the $ 1,040,300 of life insurance in force at Bankers Fidelity was reinsured under a combination of coinsurance and yearly renewable term agreements. Certain prior year reinsurance agreements also remain in force although they no longer provide reinsurance for new business. 64 Table of Contents Bankers Fidelity has also entered into a reinsurance contract ceding excess new Medicare Supplement business to General Re Life Corporation. Ceding thresholds are set annually. During 2025, the liability of the reinsurer was 71 % of all new Medicare Supplement business issued by the Company. This percentage is calculated based on a cession percentage of 50 % on amounts of new business of up to $ 30,000 of annualized premium, and 100 % of all new Medicare Supplement business in excess of $ 30,000 of annualized premium. Accordingly, $ 36,900 of the Company’s $ 51,900 of new annualized Medicare Supplement premium was ceded. The effects of reinsurance on premiums written, premiums earned and insurance benefits and losses incurred were as follows: For the Year Ended Dec 31, 2025 American Southern Bankers Fidelity Total Direct premiums written $ 54,146 $ 177,947 $ 232,093 Assumed premiums written 42,453 - 42,453 Ceded premiums written ( 6,165 ) ( 68,234 ) ( 74,399 ) Net premiums written 90,434 109,713 200,147 Direct premiums earned 54,268 179,872 234,140 Assumed premiums earned 36,401 - 36,401 Ceded premiums earned ( 6,165 ) ( 68,234 ) ( 74,399 ) Net premiums earned 84,504 111,638 196,142 Provision for benefits and losses incurred 69,390 107,904 177,294 Reinsurance loss recoveries ( 4,136 ) ( 40,483 ) ( 44,619 ) Insurance benefits and losses incurred $ 65,254 $ 67,421 $ 132,675 (1) (1) This line is net of LFPB remeasurement gain of $ 4,866 for 2025. For the Year Ended Dec 31, 2024 (Restated) American Bankers Southern Fidelity Total Direct premiums written $ 45,837 $ 164,469 $ 210,306 Assumed premiums written 27,834 - 27,834 Ceded premiums written ( 5,979 ) ( 53,236 ) ( 59,215 ) Net premiums written 67,692 111,233 178,925 Direct premiums earned 46,149 164,135 210,284 Assumed premiums earned 27,519 - 27,519 Ceded premiums earned ( 5,979 ) ( 53,236 ) ( 59,215 ) Net premiums earned 67,689 110,899 178,588 Provision for benefits and losses incurred 58,024 103,272 161,296 Reinsurance loss recoveries ( 2,257 ) ( 37,295 ) ( 39,552 ) Insurance benefits and losses incurred $ 55,767 $ 65,977 $ 121,744 (2) (2) This line is net of LFPB remeasurement gain of $ 2,334 for 2024. 65 Table of Contents Components of reinsurance receivables at December 31, 2025 and 2024 were as follows: December 31, 2025 American Southern Bankers Fidelity Total Recoverable on unpaid losses, net of allowance $ 7,715 $ 11,583 $ 19,298 Recoverable on unpaid benefits - 5,309 5,309 Recoverable on paid losses - - - Ceded benefit reserves - ( 105 ) ( 105 ) Ceded unearned premiums - - - Ceded advanced premiums - 1,037 1,037 Total reinsurance receivables $ 7,715 $ 17,824 $ 25,539 December 31, 2024 American Southern Bankers Fidelity Total Recoverable on unpaid losses, net of allowance $ 8,602 $ 8,788 $ 17,390 Recoverable on unpaid benefits - 5,217 5,217 Recoverable on paid losses - - - Ceded benefit reserves - ( 64 ) ( 64 ) Ceded unearned premiums - - - Ceded advanced premiums - 338 338 Total reinsurance receivables $ 8,602 $ 14,279 $ 22,881 Reinsurance Concentration 2025 2024 General Re 25,539 22,881 General Re percentage 99.8 % 99.8 % Note 10. Income Taxes Total income taxes were allocated as follows: Year Ended December 31 2025 2024 Total tax expense (benefit) on income $ 1,704 $ ( 232 ) Tax expense (benefit) on components of shareholders’ equity: Unrealized gains and losses on available-for-sale fixed maturity securities, including reclassification adjustments 1,590 ( 689 ) LDTI future policy benefit discount-rate remeasurement, net of the related reinsurance-recoverable effect ( 259 ) 1,843 Total tax expense on components of shareholders’ equity 1,331 1,154 Total tax expense $ 3,035 $ 922 A reconciliation of the differences between income taxes computed at the federal statutory income tax rate and the income tax benefit is as follows: Year Ended December 31 2025 2024 Federal income tax provision at the statutory rate $ 1,621 $ ( 342 ) Statutory rate 21 % 21 % Dividends-received deduction ( 25 ) ( 25 ) Meals and entertainment 70 77 Vested stock and club dues 10 3 Parking disallowance 25 20 Adjustment for prior years’ estimates to actual 3 35 Income tax expense (benefit) $ 1,704 $ ( 232 ) Effective tax rate 22.1 % 14.3 % State income taxes, net of federal income tax effect (1)(2) 187 213 (1) State income taxes were paid to various states and are included in general and administrative expenses in the Consolidated Statement of Operations. (2) State taxes in Florida made up the majority of the tax effect in this category. The Company has adopted ASU 2023-09 – Improvements to Income Tax Disclosures which requires the Company to disaggregate state income tax expense, net of the federal income tax effect. 66 Table of Contents The primary difference between the effective tax rate and the federal statutory income tax rate for 2025 resulted from a permanent difference related to meals and entertainment. Another contributing factor to the differences between the effective tax rate and the federal statutory income tax rate was a permanent difference related to dividends-received deduction (“DRD”). The current estimated DRD is adjusted as underlying factors change and can vary from estimates based on, but not limited to, actual distributions from investments as well as the amount of the Company’s taxable income. The primary difference between the effective tax rate and the federal statutory income tax rate for 2024 resulted from a permanent difference related to meals and entertainment. Also contributing to differences between the effective tax rate and the federal statutory income tax rate was the adjustment for prior years’ estimates to actual that are generally updated at the completion of the third quarter of each fiscal year and were $ 35 in the year ended December 31, 2024. Another contributing factor to the differences between the effective tax rate and the federal statutory income tax rate was a permanent difference related to the DRD. The current estimated DRD is adjusted as underlying factors change and can vary from estimates based on, but not limited to, actual distributions from investments as well as the amount of the Company’s taxable income. Deferred tax assets and liabilities at December 31, 2025 and 2024 were comprised of the following: 2025 2024 Deferred tax assets: Deferred acquisition costs $ 11,098 $ 10,264 Net unrealized investment losses 1,815 3,303 Impaired assets 894 791 Bad debts and other 303 207 Net operating loss 1,503 1,945 Other 37 1,324 Total deferred tax assets 15,650 17,834 Deferred tax liabilities: Deferred and uncollected premiums $ ( 348 ) $ ( 738 ) Insurance reserves ( 258 ) ( 1,126 ) Total deferred tax liabilities ( 606 ) ( 1,864 ) Net deferred tax asset $ 15,044 $ 15,970 The components of income tax expense (benefit) were: Year Ended December 31 2025 2024 Federal Current U.S. income tax expense $ 2,109 $ 1,124 Deferred U.S. income tax expense (benefit) ( 405 ) ( 1,356 ) $ 1,704 $ ( 232 ) The Company has formal tax-sharing agreements, and files a consolidated income tax return, with its subsidiaries. Tax years 2022, 2023 and 2024 are considered open tax years that remain subject to examination by the Internal Revenue Service. 67 Table of Contents Note 11. Credit Arrangements Bank Debt On May 12, 2021, the Company entered into a revolving credit agreement (“Revolving Credit Agreement”) with Truist Bank as the lender (the “Lender”). The Revolving Credit Agreement provides for an unsecured $ 10,000 revolving credit facility that originally matured on April 12, 2024 . On March 22, 2024, the Company entered into a First Amendment (the "Amendment") to its Revolving Credit Agreement (as amended, the “Credit Agreement”) with the Lender. The Amendment, among other things, (a) updates the interest rate provisions to memorialize that the Company pays interest on the unpaid principal balance of outstanding revolving loans at the Adjusted Term SOFR rate (as defined in the Credit Agreement), plus 2.00 %, (b) extends the maturity date of the revolving credit facility to March 22, 2027 , (c) requires the monthly payment of an unused commitment fee of 0.2 % of the unused facility amount, and (d) requires that the Company maintain a consolidated net worth of not less than $ 64,200 . On May 27, 2026, July 31, 2026, October 9, 2026 and October 15, 2026, the Company and the Lender entered into amendments to the Credit Agreement, each of which had the effect of extending the then-applicable deadlines by which the Company must deliver to the Lender (i) the Company’s audited consolidated financial statements for the year ended December 31, 2025, (ii) the Company’s interim consolidated financial statements for the quarters ended March 31, 2026, June 30, 2026 and September 30, 2026, and (iii) related certificates of the Company’s compliance with financial covenants under the Credit Agreement and certain other matters. The Fifth Amendment to the Revolving Credit Agreement, dated October 15, 2026, also amended the minimum AM Best financial strength rating that must be maintained by American Southern Insurance Company to be no lower than “A-” and waived related defaults under the Credit Agreement occurring prior to such amendment. Except as modified by these amendments, the existing terms of the original Credit Agreement remain in effect. The Credit Agreement requires the Company to comply with certain covenants, including a debt-to-capital ratio that restricts the Company from incurring consolidated indebtedness that exceeds 35 % of the Company’s consolidated capitalization at any time and maintaining a minimum consolidated net worth, as previously mentioned. The Credit Agreement also contains customary representations and warranties and events of default. Events of default include, among others, (a) the failure by the Company to pay any amounts owed under the Credit Agreement when due, (b) the failure to perform and not timely remedy certain covenants, (c) a change in control of the Company and (d) the occurrence of bankruptcy or insolvency events. Upon an event of default, the Lender may, among other things, declare all obligations under the Credit Agreement immediately due and payable and terminate the revolving commitments. As of December 31, 2025 and 2024, the Company had outstanding borrowings of $ 5,021 and $ 4,023 , respectively, under the Credit Agreement. For the year ended 2025 and 2024, the Company incurred $ 257 and $ 283 in interest expense, respectively, on the revolving credit facility borrowing. During the year ended 2025 and 2024, the Company paid $ 12 and $ 9 , respectively, in fees on the available unused amount of the revolving credit facility of $ 5,000 and $ 6,000 , respectively. At December 31, 2025 and 2024, the effective interest rate was 5.97 % and 6.67 %, respectively. Junior Subordinated Debentures The Company has two unconsolidated Connecticut statutory business trusts, which exist for the exclusive purposes of: (i) issuing trust preferred securities (“Trust Preferred Securities”) representing undivided beneficial interests in the assets of the trusts; (ii) investing the gross proceeds of the Trust Preferred Securities in junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) of the Company; 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 December 31, 2025 and 2024, the effective interest rate was 8.13 % and 8.82 %, respectively. The financial structure of each of Atlantic American Statutory Trust I and II, as of December 31, 2025 and 2024, was as follows: Atlantic American Statutory Trust I Atlantic American Statutory Trust II JUNIOR SUBORDINATED DEBENTURES (1)(2) Balance December 31, 2025 $ 18,042 $ 23,196 Less: Treasury debt (3) - ( 7,500 ) Net balance December 31, 2025 $ 18,042 $ 15,696 Net balance December 31, 2024 $ 18,042 $ 15,696 Coupon rate 3-Month SOFR + 0.26161 spread adj + 4.00% 3-Month SOFR + 0.26161 spread adj + 4.10% Interest payable Quarterly Quarterly Maturity date December 4, 2032 May 15, 2033 Redeemable by issuer Yes Yes TRUST PREFERRED SECURITIES Issuance date December 4, 2002 May 15, 2003 Securities issued 17,500 22,500 Liquidation preference per security $ 1 $ 1 Liquidation value $ 17,500 $ 22,500 Coupon rate 3-Month SOFR + 0.26161 spread adj + 4.00% 3-Month SOFR + 0.26161 spread adj + 4.10% Distribution payable Quarterly Quarterly Distribution guaranteed by (4) Atlantic American Corporation Atlantic American Corporation (1) For each of the respective debentures, the Company has the right at any time, and from time to time, to defer payments of interest on the Junior Subordinated Debentures for a period not exceeding 20 consecutive quarters up to the debentures’ respective maturity dates. During any such period, interest will continue to accrue and the Company may not declare or pay any cash dividends or distributions on, or purchase, the Company’s common stock nor make any principal, interest or premium payments on or repurchase any debt securities that rank equally with or junior to the Junior Subordinated Debentures. The Company has the right at any time to dissolve each of the trusts and cause the Junior Subordinated Debentures to be distributed to the holders of the Trust Preferred Securities. (2) The Junior Subordinated Debentures are unsecured and rank junior and subordinate in right of payment to all senior debt of the Parent and are effectively subordinated to all existing and future liabilities of its subsidiaries. (3) In 2014, the Company acquired $ 7,500 of the Junior Subordinated Debentures. (4) The Parent has guaranteed, on a subordinated basis, all of the obligations under the Trust Preferred Securities, including payment of the redemption price and any accumulated and unpaid distributions to the extent of available funds and upon dissolution, winding up or liquidation. 68 Table of Contents Note 12. Leases The Company has three 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 second lease was amended on April 2, 2026 to extend the lease, commencing on October 1, 2026 and expiring on July 31, 2037. 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 original term of the third lease was three years and renewed for an additional three years , effective August 1, 2025 with a termination date on July 31, 2028. The rate used in determining the present value of lease payments is based upon an estimate of the Company’s incremental secured borrowing rate commensurate with the term of the underlying lease. These leases are accounted for as operating leases, whereby lease expense is recognized on a straight-line basis over the term of the lease. Lease expense reported for each of the years ended December 31, 2025 and 2024 was $ 1,186 and $ 1,014 . Additional information regarding the Company’s real estate operating leases is as follows: Year Ended December 31, 2025 Year Ended December 31, 2024 Other information on operating leases: Cash payments included in the measurement of lease liabilities reported in operating cash flows $ 1,254 $ 1,065 Right-of-use assets included in other assets on the consolidated balance sheet 4,632 5,225 Weighted average discount rate 7.9 % 6.8 % Weighted average remaining lease term in years 6.7 years 7.9 years The following table presents maturities and present value of the Company’s lease liabilities: Lease Liability 2026 $ 1,113 2027 693 2028 673 2029 645 2030 719 Thereafter 2,876 Total undiscounted lease payments 6,719 Less: present value adjustment 2,023 Operating lease liability included in accounts payable and accrued expenses on the consolidated balance sheet $ 4,696 69 Table of Contents Note 13. Benefit Plans Equity Incentive Plan On May 24, 2022, the Company’s shareholders approved the 2022 Equity and Incentive Compensation Plan (the “2022 Plan”). The 2022 Plan authorizes the grant of up to 3,000,000 stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares, performance units and other awards, and succeeded the 2012 Plan for the purpose of providing the Company’s non-employee directors, consultants, officers and other employees incentives and rewards for performance and service. During the year ended 2025 and 2024, there were no restricted shares issued under the 2022 Plan. The estimated fair value of the restricted shares issued are based on the common stock price at date of grant. Stock grants are generally issued from treasury shares. Vesting of restricted shares generally occurs after a one to three year period following the date of grant. The Company accounts for forfeitures as they occur. There were no stock options granted or outstanding under the 2022 Plan in 2025 and 2024. Shares available for future grant under the 2022 Plan at December 31, 2025 and 2024 were 2,960,000 . 401(k) Plan The Company initiated an employees’ savings plan (the “Plan”) qualified under Section 401(k) of the Internal Revenue Code in May 1995. The Plan covers substantially all of the Company’s employees. Effective January 1, 2009, the Company modified the Plan such that the Plan would operate on a safe harbor basis. Under the Plan, employees may defer up to 50 % of their compensation, not to exceed the annual deferral limit. The Company’s total matching contribution for 2025 and 2024 was $ 270 and $ 306 , respectively, and consisted of a contribution equal to 35 % of up to the first 6 % of each participant’s contributions. In addition to the matching contribution, the Company also provided a 3 % safe harbor non-elective contribution in 2025 and 2024 of $ 716 and $ 682 , respectively. All contributions were made in cash. Participants are 100% vested in their own contributions and the vested percentage attributable to certain employer contributions is based on a five-year graded schedule. Agent Stock Purchase Plan The Company initiated a nonqualified stock purchase plan (the “Agent Stock Purchase Plan”) in May 2012. The purpose of the Agent Stock Purchase Plan is to promote and advance the interests of the Company and its shareholders by providing independent agents who qualify as participants with an opportunity to purchase the common stock of the Company. Under the Agent Stock Purchase Plan, payment for shares of common stock of the Company is made by either deduction from an agent’s commission payment or a direct cash payment. Stock purchases are made at the end of each calendar quarter at the then current market value. Note 14. Preferred Stock The Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding at December 31, 2025 and 2024, respectively. All of the shares of Series D Preferred Stock are held by an affiliate of the Company’s controlling shareholder. The outstanding shares of Series D Preferred Stock have a par value of $ 1 per share and a redemption value of $ 100 per share; accrue annual dividends at a rate of $ 7.25 per share (payable in cash or shares of the Company’s common stock at the option of the board of directors of the Company) and are cumulative. In certain circumstances, the shares of the Series D Preferred Stock may be convertible into an aggregate of approximately 1,378,000 shares of the Company’s common stock, subject to certain adjustments and provided that such adjustments do not result in the Company issuing more than approximately 2,703,000 shares of common stock without obtaining prior shareholder approval; and are redeemable solely at the Company’s option. The Series D Preferred Stock is not currently convertible. The Company had accrued, but unpaid, dividends, on the Series D Preferred Stock of $ 18 at December 31, 2025 and 2024. During each of 2025 and 2024, the Company paid Series D Preferred Stock dividends of $ 399 . Note 15. Earnings (Loss) Per Common Share Basic income (loss) per share was computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. The computation of diluted income (loss) per share reflected the effect of potentially dilutive securities. 70 Table of Contents A reconciliation of the numerator and denominator of the income (loss) per common share calculations is as follows: For the Year Ended December 31, 2025 Income Weighted Average Shares Outstanding (in thousands) Per Share Amount Basic and Diluted Earnings Per Common Share Net income before preferred stock dividends $ 6,017 20,398 Less preferred stock dividends ( 399 ) - Net income applicable to common shareholders $ 5,618 20,398 $ 0.28 For the Year Ended December 31, 2024 (Restated) Loss Weighted Average Shares Outstanding (in thousands) Per Share Amount Basic and Diluted Loss Per Common Share Net loss before preferred stock dividends $ ( 1,393 ) 20,400 Less preferred stock dividends ( 399 ) - Net loss applicable to common shareholders $ ( 1,792 ) 20,400 $ ( 0.09 ) The assumed conversion of the Company’s Series D Preferred Stock was excluded from the earnings per common share calculation for 2025 and 2024 since its impact would have been antidilutive. Note 16. Statutory Reporting The assets, liabilities and results of operations have been reported on the basis of GAAP, which varies in some respects from statutory accounting practices (“SAP”) prescribed or permitted by insurance regulatory authorities. The principal differences between SAP and GAAP are that under SAP: (i) carrying value of certain investments differ on a GAAP versus SAP basis, such as fixed maturity securities that are shown at amortized cost for SAP versus fair value for GAAP; (ii) certain assets that are non-admitted assets are eliminated from the balance sheet; (iii) acquisition costs for policies are expensed as incurred, while they are deferred and amortized over the estimated life of the policies under GAAP; (iv) the provision that is made for deferred income taxes is different than under GAAP; (v) the timing and methodology of establishing certain reserves is different than under GAAP; (vi) reinsurance is shown net on balance sheet for SAP; and (vii) certain valuation allowances attributable to certain investments are required under SAP such as asset valuation reserve and interest maintenance reserve. The Company meets the minimum capital requirements in the states in which it does business. The amount of reported statutory net income and capital and surplus (shareholders’ equity) for the Parent’s insurance subsidiaries as filed in the annual statements with the state insurance departments for the years ended December 31, 2025 and 2024 was as follows: 2025 2024 Bankers Fidelity, net income $ 6,946 $ 1,359 American Southern, net income 3,814 1,442 Statutory net income $ 10,760 $ 2,801 Bankers Fidelity, capital and surplus $ 34,393 $ 32,443 American Southern, capital and surplus 48,688 47,670 Statutory capital and surplus $ 83,081 $ 80,113 71 Table of Contents Under the insurance code of the state in which each insurance subsidiary is domiciled, dividend payments to the Parent by its insurance subsidiaries are subject to certain limitations without the prior approval of the applicable state’s Insurance Commissioner. The Parent received dividends of $ 8,400 and $ 9,000 in the years ended 2025 and 2024, respectively, from its subsidiaries. In 2026, dividend payments to the Parent by the insurance subsidiaries in excess of $ 8,058 would require prior approval. Note 17. Related Party Transactions In the normal course of business the Company has engaged in transactions with entities affiliated with the controlling shareholder of the Company. These transactions include the leasing of office space, certain investing and financing activities, as well as inconsequential administrative and consulting services. At December 31, 2025, two members of the Company’s board of directors, including the Company’s Chairman, President and Chief Executive Officer, were considered to be affiliates of the majority shareholder. The Company leases approximately 49,586 square feet of office and covered garage space from one such controlled entity, 4370 Peachtree LLC. During the years ended December 31, 2025 and 2024, the Company paid $ 1,352 and $ 1,153 , respectively, under this lease. On December 26, 2024, the Company and its subsidiary, Bankers Fidelity Life Insurance Company, entered into a Second Amendment to 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. Certain financing for the Company has also been provided by an entity affiliated with the controlling shareholder of the Company in the form of an investment in the Series D Preferred Stock (See Note 14). During the years ended December 31, 2025 and 2024, the Company paid this entity $ 399 in dividends on the Series D Preferred Stock. Certain members of the Company’s management and board of directors are shareholders and on the board of directors of Gray Media, Inc. (“Gray”). As of December 31, 2025 and 2024, the Company owned 880,272 shares of Gray Class A common stock and 106,000 shares of Gray common stock. The aggregate carrying value of these investments in Gray at December 31, 2025 and 2024 was $ 11,076 and $ 6,751 , respectively. In each of the years ended December 31, 2025 and 2024, Gray paid the Company approximately $ 2,119 and $ 2,173 in insurance premiums related to certain voluntary employee benefit plans. Note 18. Segment Information The Parent’s primary insurance subsidiaries operate with relative autonomy and each company is evaluated based on its individual performance. American Southern operates in the property and casualty insurance market, while Bankers Fidelity operates in the life and health insurance market. 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. Our Chief Operating Decision Maker (“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. For the Year Ended December 31, 2025 American Southern Bankers Fidelity Corporate & Other Adjustments & Eliminations Consolidated Insurance premiums, net $ 84,504 $ 111,638 $ - $ - $ 196,142 Insurance benefits and losses incurred 65,254 72,287 - - 137,541 Future policy benefit remeasurement gain - ( 4,866 ) - - ( 4,866 ) Expenses deferred ( 9,634 ) ( 10,298 ) - - ( 19,932 ) Amortization and depreciation expense 10,108 3,058 89 - 13,255 Other expenses 18,032 48,644 22,961 ( 12,916 ) 76,721 Total expenses 83,760 108,825 23,050 ( 12,916 ) 202,719 Underwriting income (loss) 744 2,813 - - 3,557 Net investment income (loss) 4,357 5,818 3,314 ( 3,223 ) 10,266 Other income (loss) 7 3 9,695 ( 9,693 ) 12 Subtotal 5,108 8,634 ( 10,041 ) - 3,701 Net realized gains (losses) ( 475 ) 4 - - ( 471 ) Unrealized gains on equity securities 85 4,238 168 - 4,491 Income (loss) before income taxes $ 4,718 $ 12,876 $ ( 9,873 ) $ - $ 7,721 Total revenues $ 88,478 $ 121,701 $ 13,177 $ ( 12,916 ) $ 210,440 Intangibles $ 1,350 $ 1,194 $ - $ - $ 2,544 Total assets $ 173,673 $ 229,001 $ 164,475 $ ( 133,212 ) $ 433,937 72 Table of Contents For the Year Ended December 31, 2024 (Restated) American Southern Bankers Fidelity Corporate & Other Adjustments & Eliminations Consolidated Insurance premiums, net $ 67,689 $ 110,899 $ - $ - $ 178,588 Insurance benefits and losses incurred 55,767 68,311 - - 124,078 Future policy benefit remeasurement gain - ( 2,334 ) - - ( 2,334 ) Expenses deferred ( 8,498 ) ( 10,741 ) - - ( 19,239 ) Amortization and depreciation expense 8,390 7,571 1 - 15,962 Other expenses 15,673 45,351 23,357 ( 13,141 ) 71,240 Total expenses 71,332 108,158 23,358 ( 13,141 ) 189,707 Underwriting income (loss) ( 3,643 ) 2,741 - - ( 902 ) Net investment income (loss) 4,151 5,544 3,705 ( 3,609 ) 9,791 Other income (loss) 5 5 9,531 ( 9,532 ) 9 Subtotal 513 8,290 ( 10,122 ) - ( 1,319 ) Net realized gains 666 544 - - 1,210 Unrealized losses on equity securities ( 291 ) ( 1,039 ) ( 186 ) - ( 1,516 ) Income (loss) before income taxes $ 888 $ 7,795 $ ( 10,308 ) $ - $ ( 1,625 ) Total revenues $ 72,220 $ 115,953 $ 13,050 $ ( 13,141 ) $ 188,082 Intangibles $ 1,350 $ 1,194 $ - $ - $ 2,544 Total assets $ 147,214 $ 202,751 $ 156,964 $ ( 124,890 ) $ 382,039 Note 19. Commitments and Contingencies Litigation From time to time, the Company is, and expects to continue to be, involved in various claims and lawsuits incidental to and arising in the ordinary course of its business. In the opinion of management, any such known claims are not expected to have a material effect on the financial condition or results of operations of the Company. Regulatory Matters Like all domestic insurance companies, the Company’s insurance subsidiaries are subject to regulation and supervision in the jurisdictions in which they do business. Statutes typically delegate regulatory, supervisory, and administrative powers to state insurance commissioners. From time to time, and in the ordinary course of business, the Company receives notices and inquiries from state insurance departments with respect to various matters. In the opinion of management, any such known regulatory matters are not expected to have a material effect on the financial condition or results of operations of the Company. 73 Table of Contents Note 20. Subsequent Events Management evaluated events and transactions occurring after December 31, 2025 through October 16, 2026, the date these consolidated financial statements were available to be issued, to determine whether such events required recognition or disclosure in the consolidated financial statements. Based on this evaluation, management identified the following subsequent events: Delinquent SEC Filings As previously disclosed, the Company has received notices from Nasdaq stating that the Company is not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports with the SEC. The Company is not in compliance with the Rule due to its delay in filing this Form 10-K and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2026 and June 30, 2026 (collectively, the “Delinquent Reports”). Following the Company’s timely submission of a compliance plan, Nasdaq informed the Company that it was granted an extension until October 12, 2026 to regain compliance with the Rule. The Company expects that it will receive a staff delisting determination from Nasdaq due to its inability to file each of the Delinquent Reports by such date. While the Company intends to appeal such determination to a Nasdaq Hearings Panel, an appeal may not be successful in preventing the suspension of trading, or delisting of, the Company’s common stock from Nasdaq. The Company continues to work diligently toward filing the remaining Delinquent Reports and regaining compliance with the Rule as promptly as practicable. CFO Resignation As previously disclosed, on April 29, 2026, J. Ross Franklin notified the Company of his decision to resign as Vice President, Chief Financial Officer and Secretary of the Company, effective May 27, 2026. Mr. Franklin’s decision to resign is not due to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. The Company has commenced the process to name a successor to Mr. Franklin as Chief Financial Officer. Amendments to Credit Agreement On May 27, 2026, July 31, 2026, October 9, 2026 and October 15, 2026, the Company entered into amendments to its Revolving Credit Agreement dated as of May 12, 2021 (as amended, the “Credit Agreement”) with Truist Bank as the lender (the “Lender”), each of which had the effect of extending the then-applicable deadlines by which the Company must deliver to the Lender (i) the Company’s audited consolidated financial statements for the year ended December 31, 2025, (ii) the Company’s interim consolidated financial statements for the quarters ended March 31, 2026, June 30, 2026 and September 30, 2026, and (iii) related certificates of the Company’s compliance with financial covenants under the Credit Agreement and certain other matters. The Fifth Amendment to the Revolving Credit Agreement, dated October 15, 2026, also amended the minimum AM Best financial strength rating that must be maintained by American Southern Insurance Company to be no lower than “A-” and waived related defaults under the Credit Agreement occurring prior to such amendment. Bankers Fidelity Audited Statutory Financial Statements and Second-Quarter Statutory Filing As of the date of this Form 10-K, Bankers Fidelity has not yet filed its annual audited statutory financial statements for the fiscal year ended December 31, 2025 or quarterly statutory financial statements for the quarter ended June 30, 2026 with the applicable state insurance regulatory authorities. Bankers Fidelity is working with its independent auditors and the state regulators to complete and file the required financial statements and intends to seek an extension if appropriate. If Bankers Fidelity is unable to file the required financial statements by the applicable deadlines (including as the same may be extended), actions may be imposed by the applicable regulatory authorities. Nebraska Regulatory Examination On August 24, 2026, the Nebraska Department of Insurance commenced a regulatory examination of the applicable insurance subsidiary. The Company is cooperating with the examination. Any findings or recommendations will be evaluated upon completion of the examination and issuance of a final examination report. 74 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.