UNITED STATES
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
20182020☐ oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
ATLANTIC AMERICAN CORPORATION Yes Yes ☒ No ☐ Yes ☒ No ☐ ☐ Yes 58-1027114 (I.R.S. Employer Identification No.) 30319 (Zip Code) sectionSection 12(b) of the Act:$1.00 $1.00 per shareNASDAQ Global Market Securities registered pursuant to Section 12(g) of the Act:Noneo☐ No ☒o☐ No ☒oand posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒or a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”in Rule 12b-2 of the Exchange Act. (Check one):o☐o☐o☐(Do not check if a smaller reporting company)ooo☐ No ☒2018,2020, the last business day of the registrant’s most recently completed second fiscal quarter, was $11,087,680.$6,720,805. For purposes hereof, beneficial ownership is determined under rules adopted pursuant to Section 13 of the Securities Exchange Act of 1934, and the foregoing excludes value ascribed to common stock that may be deemed beneficially owned by the directors and executive officers, and 10% or greater stockholders, of the registrant, some of whom may not be deemed to be affiliates upon judicial determination. On March 15, 201910, 2021 there were 20,154,83220,415,243 shares of the registrant’s common stock, par value $1.00 per share, outstanding.1. 20192021 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year end, have been incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III of this Form 10-K.TABLE OF CONTENTSPART I PART I3 4 5 6 6 7 7 7 8 8 9 9 9 9 10 10 10 10 11 11 PART II PART II12 12 13 21 22 53 53 53 PART III PART III54 54 54 PART IV PART IV55 56
PART I
Item 1. | Business |
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The following table summarizes, for the periods indicated, the allocation of American Southern’s net earned premiums from each of its principal product lines:
Year Ended December 31, | ||||||
2018 | 2017 | |||||
(In thousands) | ||||||
Automobile liability | $ | 28,840 | $ | 29,370 | ||
Automobile physical damage | 11,922 | 9,972 | ||||
General liability | 2,920 | 2,953 | ||||
Surety | 7,170 | 8,441 | ||||
Other lines | 2,955 | 2,925 | ||||
Total | $ | 53,807 | $ | 53,661 |
Year Ended December 31, 2020 2019 (In thousands) Automobile liability Automobile physical damage General liability Surety Other lines Total
Life Insurance products include non-participating term, individual term and group whole life insurance policies with a variety of riders and options. Policy premiums are dependent upon a number of factors, including issue age, level of coverage and selected riders or options.
Year Ended December 31, | ||||||||
2020 | 2019 | |||||||
(In thousands) | ||||||||
Life insurance | $ | 9,270 | $ | 8,427 | ||||
Medicare supplement | 102,680 | 107,001 | ||||||
Other accident and health | 9,217 | 7,817 | ||||||
Total health insurance | 111,897 | 114,818 | ||||||
Total | $ | 121,167 | $ | 123,245 |
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of the underlying business. American Southern also solicits business from governmental entities. As an experienced writer of insurance policies for certain governmental programs, the company actively pursues this market on a direct basis. Much of this business is priced by means of competitive bid situations andsituations. As a result, there can be no assurance with respect to the ultimate profitability or thatability of the company canCompany to obtain or retain such business at the time of a specific contract renewal.
policyholders.
achieve profitability.
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Life and Health Operations
Reserves are set by line of business within each of the subsidiaries. At December 31, 2018,2020, approximately 68%69% of the losses and claims reserves related to property and casualty losses and approximately 32%31% related to life and health losses.health. The Company’s property and casualty operations incur losses which may take extended periods of time to evaluate and settle. Issues with respect to legal liability, actual loss quantification, legal discovery and ultimate subrogation, among other factors, may influence the initial and subsequent estimates of loss. In the property and casualty operations, the Company’s general practice is to reserve at the higher end of the determined reasonable range of loss if no other value within the range is determined to be more probable. The Company’s life and health operations generally incur losses which are more readily quantified. Medical claims received are recorded in case reserves based on contractual terms using the submitted billings as a basis for determination. Life claims are recorded based on contract value at the time of notification to the Company; althoughoffset by policy reserves related to such contracts have been previously established. Individual case reserves are established by a claims processor on each individual claim and are periodically reviewed and adjusted as new information becomes known during the course of handling a claim. Regular internal periodic reviews are also performed by management to ensure that loss reserves are established and revised timely relative to the receipt of new or additional information. Lines of business for which loss data (e.g. paid losses and case reserves) emerge over a long period of time are referred to as long-tail lines of business. Lines of business for which loss data emerge more quickly are referred to as short-tail lines of business. The Company’s long-tail line of business generally consists of its general liability coverage while the short-tail lines of business generally consist of property and automobile coverages.
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uncertainties create greater imprecision in estimating required levels of loss reserves. The property and automobile lines of business generally have less variable reserve estimates than other lines. This is largely due to the coverages having relatively shorter periods of loss emergence. Estimates, however, can still vary due to a number of factors, including interpretations of frequency and severity trends. Severity trends can be impacted by changes in internal claim handling and reserving practices in addition to changes in the external environment. These changes in claim practices increase the uncertainty in the interpretation of case reserve data, which increases the uncertainty in recorded reserve levels.
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insurance does 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.
are important measures within the insurance industry, and higher ratings are expected to have a favorable impact on the ability of a company to compete in the marketplace. Ratings of insurance companies are not designed for investors and do not constitute recommendations to buy, sell, or hold any security. Ratings are important measures within the insurance industry, and higher ratings should have a favorable impact on the ability of a company to compete in the marketplace.
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The NAIC conducts annual reviews of the financial data of insurance companies primarily through the application of financial ratios prepared on a statutory basis. Annual statements are required to be submitted to state insurance departments to assist them in monitoring insurance companies in their state and to allow such states to determine a desirable range for each such ratio with which companies should comply.
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The Audit Committee of the Board of Directors has oversight of the Company’s information security program. The Company’s senior officers, including its Chief Information Officer, are responsible for the operation of the information security program and regularly communicate with the Audit Committee on the state of the program.
lost revenue due to a damaged reputation from a cyber breach.
December 31, | ||||||||||||
2018 | 2017 | |||||||||||
Amount | Percent | Amount | Percent | |||||||||
(Dollars in thousands) | ||||||||||||
Fixed maturities: | ||||||||||||
U.S. Treasury securities and obligations of U.S. Government agencies and authorities | $ | 27,422 | 11.3 | % | $ | 31,155 | 12.6 | % | ||||
States, municipalities and political subdivisions | 8,364 | 3.5 | 10,809 | 4.4 | ||||||||
Public utilities | 13,524 | 5.6 | 14,935 | 6.0 | ||||||||
All other corporate bonds | 160,884 | 66.5 | 158,017 | 63.8 | ||||||||
Redeemable preferred stock | 192 | 0.1 | 192 | 0.1 | ||||||||
Total fixed maturities(1) | 210,386 | 87.0 | 215,108 | 86.9 | ||||||||
Common and non-redeemable preferred stocks(2) | 20,758 | 8.6 | 23,355 | 9.4 | ||||||||
Policy loans(3) | 2,085 | 0.9 | 2,146 | 0.9 | ||||||||
Other invested assets(4) | 7,424 | 3.0 | 5,626 | 2.3 | ||||||||
Real estate | 38 | 0.0 | 38 | 0.0 | ||||||||
Investments in unconsolidated trusts | 1,238 | 0.5 | 1,238 | 0.5 | ||||||||
Total investments | $ | 241,929 | 100.0 | % | $ | 247,511 | 100.0 | % |
December 31, | ||||||||||||||||
2020 | 2019 | |||||||||||||||
Amount | Percent | Amount | Percent | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Fixed maturities: | ||||||||||||||||
U.S. Treasury securities and obligations of U.S. Government agencies and authorities | $ | 30,762 | 11.0 | % | $ | 20,259 | 7.5 | % | ||||||||
States, municipalities and political subdivisions | 11,802 | 4.2 | 11,940 | 4.5 | ||||||||||||
Public utilities | 13,651 | 4.9 | 11,449 | 4.3 | ||||||||||||
All other corporate bonds | 197,641 | 70.8 | 188,574 | 70.2 | ||||||||||||
Redeemable preferred stock | 250 | 0.1 | 250 | 0.1 | ||||||||||||
Total fixed maturities(1) | 254,106 | 91.0 | 232,472 | 86.6 | ||||||||||||
Common and non-redeemable preferred stocks(2) | 18,716 | 6.7 | 22,922 | 8.5 | ||||||||||||
Policy loans(3) | 1,975 | 0.7 | 2,007 | 0.7 | ||||||||||||
Other invested assets(4) | 3,238 | 1.2 | 9,960 | 3.7 | ||||||||||||
Real estate | 38 | 0.0 | 38 | 0.0 | ||||||||||||
Investments in unconsolidated trusts | 1,238 | 0.4 | 1,238 | 0.5 | ||||||||||||
Total investments | $ | 279,311 | 100.0 | % | $ | 268,637 | 100.0 | % |
(1) | Fixed maturities are carried on the balance sheet at estimated fair value. Certain fixed maturities do not have publicly quoted prices, and are carried at estimated fair value as determined by management. Total |
(2) | Equity securities are carried on the balance sheet at estimated fair value. Total |
(3) | Policy loans are valued at unpaid principal balances. |
(4) | Other invested assets are accounted for using the equity method. Total |
Year Ended December 31, | ||||||
2018 | 2017 | |||||
(Dollars in thousands) | ||||||
Average investments(1) | $ | 252,480 | $ | 247,739 | ||
Net investment income | 9,549 | 8,496 | ||||
Average yield on investments | 3.8 | % | 3.4 | % | ||
Realized investment gains, net | 5,154 | 9,168 |
Year Ended December 31, | ||||||||
2020 | 2019 | |||||||
(Dollars in thousands) | ||||||||
Average investments(1) | $ | 252,141 | $ | 253,467 | ||||
Net investment income | 7,744 | 8,979 | ||||||
Average yield on investments | 3.1 | % | 3.5 | % | ||||
Realized investment gains, net | 7,420 | 1,574 |
(1) | Calculated as the average of cash and investment balances (at amortized cost) at the beginning of the year and at the end of each of the succeeding four quarters. |
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During 2019, the Company engaged a global investment management firm serving the insurance industry to manage the Company’s investment portfolios. Management’s recent investment strategy has been a continued focus on quality and diversification, and higher yielding corporate bonds and preferred stocks; but atwhile improving the same time shortening up on maturities to give recognition tooverall risk versus return profile of the rise and potential future increases in longer-term interest rates.
portfolio.
Name | Age | Positions with the Company | Director or Officer Since | ||||
Hilton H. Howell, Jr. | 56 | Chairman of the Board, President & CEO | 1992 | ||||
J. Ross Franklin | 41 | Vice President, CFO and Corporate Secretary | 2017 |
Name Age Positions with the Company Director or Officer Since 58 1992 43 2017
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safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Exchange Act of 1933, and Section 21E of the Securities Act of 1934, and include estimates and assumptions related to, among other things, general economic, competitive, operational and legislative developments. Forward-looking statements are subject to changes and uncertainties which are, in many instances, beyond the Company’s control and have been made based upon management’s current expectations and beliefs concerning future developments and their potential effect upon the Company. There can be no assurance that future developments will be in accordance with management’s expectations or that the effect of future developments on the Company will be those anticipated by management. Actual results could differ materially from those expected by the Company, depending on the occurrence or outcome of various factors. These factors include, among others: significant changes in general economic conditions; the possible occurrence of terrorist attacks; unexpected developments in the health care or insurance industries affecting providers or individuals, including the cost or availability of services, or the tax consequences related thereto; disruption to the financial markets; unanticipated increases in the rate, number and amounts of claims outstanding; the level of performance of reinsurance companies under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect the Company against losses; changes in the stock markets, interest rates or other financial markets, including the potential effect on the Company’s statutory capital levels; the uncertain effect on the Company of regulatory and market-driven changes in practices relating to the payment of incentive compensation to brokers, agents and other producers; the impact of COVID-19 or other public health emergencies; the incidence and severity of catastrophes, both natural and man-made; the possible occurrence of terrorist attacks; stronger than anticipated competitive activity; unfavorable judicial or legislative developments; the potential effect of regulatory developments, including those which could increase the Company’s business costs and required capital levels; the Company’s ability to distribute its products through distribution channels, both current and future; the uncertain effect of emerging claim and coverage issues; the effect of assessments and other surcharges for guaranty funds and other mandatory pooling arrangements; and risks related to cybersecurity matters, such as breaches of our computer network or the loss of unauthorized access to the data we maintain. Many of such factors are beyond the Company’s ability to control or predict. As a result, the Company’s actual financial condition and results of operations could differ materially from those expressed in any forward-looking statements made by the Company. Undue reliance should not be placed upon forward-looking statements. The Company does not intend to publicly update any forward-looking statements that may be made from time to time by, or on behalf of, the Company.
Item 1A. | Risk Factors |
Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
The terms12
Item 3. | Legal Proceedings |
Item 4. | Mine Safety Disclosures |
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PART II
Item 5. | Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities |
Year Ended December 31, | High | Low | ||||
2018 | ||||||
1st quarter | $ | 3.90 | $ | 3.10 | ||
2nd quarter | 3.45 | 2.30 | ||||
3rd quarter | 3.20 | 2.20 | ||||
4th quarter | 3.80 | 2.24 | ||||
2017 | ||||||
1st quarter | $ | 4.35 | $ | 3.40 | ||
2nd quarter | 4.03 | 3.50 | ||||
3rd quarter | 3.75 | 3.15 | ||||
4th quarter | 4.00 | 3.00 |
In each year since 2012, the Company has paid an annual cash dividend of $0.02 per share. In addition, on
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs | ||||||||
October 1 – October 31, 2018 | 18,386 | $ | 2.85 | 18,386 | 380,645 | |||||||
November 1 – November 30, 2018 | 14,093 | 3.11 | 14,093 | 366,552 | ||||||||
December 1 – December 31, 2018 | 15,213 | 2.52 | 15,213 | 351,339 | ||||||||
Total | 47,692 | $ | 2.82 | 47,692 |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs | ||||||||||||
October 1 – October 31, 2020 | — | $ | — | — | 325,129 | |||||||||||
November 1 – November 30, 2020 | — | — | — | 325,129 | ||||||||||||
December 1 – December 31, 2020 | — | — | — | 325,129 | ||||||||||||
Total | — | $ | — | — |
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Stock Performance Graph
Item 6. | Selected Financial Data |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Unpaid loss and loss adjustment expenses comprised 30% of the Company’s total liabilities at December 31, 2018. This liability includes estimates for: 1) unpaid losses on claims reported prior to December 31, 2018, 2) future development on those reported claims, 3) unpaid ultimate losses on claims incurred prior to December 31, 2018 but not yet reported and 4) unpaid loss adjustment expenses for reported and unreported claims incurred prior to December 31, 2018. Quantification of loss estimates for each of these components involves a significant degree of judgment and estimates may vary, materially, from period to period. Estimated unpaid losses on reported claims are developed based on historical experience with similar claims by the Company. Development on reported claims, estimates of unpaid ultimate losses on claims incurred prior to December 31, 2018 but not yet reported, and estimates of unpaid loss adjustment expenses are developed based on the Company’s historical experience, using actuarial methods to assist in the analysis. The Company’s actuaries develop ranges of estimated development on reported and unreported claims as well as loss adjustment expenses using various methods, including the paid-loss development method, the reported-loss development method, the paid Bornhuetter-Ferguson method and the reported Bornhuetter-Ferguson method. Any single method used to estimate ultimate losses has inherent advantages and disadvantages due to the trends and changes affecting the business environment and the Company’s administrative policies. Further, external factors, such as legislative changes, medical cost inflation, and others may directly or indirectly impact the relative adequacy of liabilities for unpaid losses and loss adjustment expenses. The Company’s approach is to select an estimate of ultimate losses based on comparing results of a variety of reserving methods, as opposed to total reliance on any single method. Unpaid loss and loss adjustment expenses are reviewed periodically for significant lines of business, and when current results differ from the original assumptions used to develop such estimates, the amount of the Company’s recorded liability for unpaid loss and loss adjustment expenses is adjusted. In the event the Company’s actual reported losses in any period are materially in excess of the previously estimated amounts, such losses, to the extent reinsurance coverage does not exist, could have a material adverse effect on the Company’s results of operations.
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Future policy benefits comprised 37% of the Company’s total liabilities at December 31, 2018. These liabilities relate primarily to life insurance products and are based upon assumed future investment yields, mortality rates, and withdrawal rates after giving effect to possible risks of adverse deviation. The assumed mortality and withdrawal rates are based upon the Company’s experience. If actual results differ from the initial assumptions, the amount of the Company’s recorded liability could require adjustment.
Deferred acquisition costs comprised 11% of the Company’s total assets at December 31, 2018. Deferred acquisition costs are commissions, premium taxes, and other incremental direct costs of contract acquisition that results directly from and are essential to the contract transaction(s) and would not have been incurred by the Company had the contract transaction(s) not occurred. The deferred amounts are recorded as an asset on the balance sheet and amortized to expense in a systematic manner. Traditional life insurance and long-duration health insurance deferred policy acquisition costs are amortized over the estimated premium-paying period of the related policies using assumptions consistent with those used in computing the related liability for policy benefit reserves. Deferred acquisition costs for property and casualty insurance and short-duration health insurance are amortized over the effective period of the related insurance policies. Deferred policy acquisition costs are expensed when such costs are deemed not to be recoverable from future premiums (for traditional life and long-duration health insurance) and from the related unearned premiums and investment income (for property and casualty and short-duration health insurance). Assessments of recoverability for property and casualty and short-duration health insurance are extremely sensitive to the estimates of a subsequent year’s projected losses related to the unearned premiums. Projected loss estimates for a current block of business for which unearned premiums remain to be earned may vary significantly from the indicated losses incurred in any previous calendar year.
Receivables are amounts due from reinsurers, insureds and agents, and any sales of investment securities not yet settled, and comprised 12% of the Company’s total assets at December 31, 2018. Insured and agent balances are evaluated periodically for collectibility. Annually, the Company performs an analysis of the creditworthiness of the reinsurers with whom the Company contracts using various data sources. Failure of reinsurers to meet their obligations due to insolvencies, disputes or otherwise could result in uncollectible amounts and losses to the Company. Allowances for uncollectible amounts are established, as and when a loss has been determined probable, against the related receivable. Losses are recognized by the Company when determined on a specific account basis and a general provision for loss is made based on the Company’s historical experience.
Cash and investments comprised 74% of the Company’s total assets at December 31, 2018.2020. Substantially all of the Company’s investments are in bonds and common and preferred stocks, the values of which are subject to significant market fluctuations. The Company carries all fixed maturities, which includes bonds and redeemable preferred stocks, and equity securities, which includes common and non-redeemable preferred stocks, as available for sale and, accordingly, at their estimated fair values. The Company owns certain fixed maturities that do not have publicly quoted values, but had an estimated fair value as determined by management of $1.1 million at December 31, 2018. Such values inherently involve a greater degree of judgment and uncertainty and therefore ultimately greater price volatility than the value of securities with publicly quoted market values. On occasion, the value of a fixed maturity investment may decline to a value below its amortized purchase price and remain at such value for an extended period of time. When a fixed maturity investment’s indicated fair value has declined below its cost basis for a period of time, the Company evaluates such investment for an other than temporary impairment. The evaluation for an other than temporary impairment is a quantitative and qualitative process, which is subject to risks and uncertainties in the determination of whether declines in the fair value of investments are other than temporary. Potential risks and uncertainties include, among other things, changes in general economic conditions, an issuer’s financial condition or near term recovery prospects and the effects of changes in interest rates. In evaluating a potential impairment, the Company considers, among other factors, management’s intent and ability to hold the securities until price recovery, the nature of the investment and the expectation of prospects for the issuer and its industry, the status of an issuer’s continued satisfaction of its obligations in accordance with their contractual terms, and management’s expectation as to the issuer’s ability and intent to continue to do so, as well as ratings actions that may affect the issuer’s credit status. If an other than temporary impairment is deemed to exist, then the Company will write down the amortized cost basis of the investment to its estimated fair value. While any such write down does not impact the reported value of the investment in the Company’s balance sheet, it is reflected as a realized investment loss in the Company’s net income or other comprehensive income, depending upon the nature of the loss, in the period incurred.
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The Company determines the fair values of certain financial instruments based on the fair value hierarchy established in Accounting Standards Codification (“ASC”) 820-10-20, Fair Value Measurements and Disclosures (“ASC 820-10-20”). The fair values of fixed maturities and equity securities are largely determined by either independent methods prescribed by the National Association of Insurance Commissioners, which do not differ materially from nationally quoted market prices, when available, or independent broker quotations. See Note 2 and Note 153 of Notes to Consolidated Financial Statements with respect to assets and liabilities carried at fair value and information about the inputs used to value those financial instruments, by hierarchy level, in accordance with ASC 820-10-20.
Year Ended December 31, | ||||||
2018 | 2017 | |||||
(In thousands) | ||||||
Revenue | ||||||
Property and Casualty: | ||||||
American Southern | $ | 59,254 | $ | 59,485 | ||
Life and Health: | ||||||
Bankers Fidelity | 127,005 | 117,495 | ||||
Corporate and Other | (706 | ) | 4,134 | |||
Total revenue | $ | 185,553 | $ | 181,114 | ||
Income (loss) before income taxes | ||||||
Property and Casualty: | ||||||
American Southern | $ | 5,661 | $ | 8,567 | ||
Life and Health: | ||||||
Bankers Fidelity | 896 | (268 | ) | |||
Corporate and Other | (7,528 | ) | (2,943 | ) | ||
Income (loss) before income taxes | $ | (971 | ) | $ | 5,356 | |
Net income (loss) | $ | (704 | ) | $ | 4,528 |
Year Ended December 31, 2020 2019 (In thousands) Revenue Property and Casualty: American Southern Life and Health: Bankers Fidelity Corporate and Other Total revenue Income (loss) before income taxes Property and Casualty: American Southern Life and Health: Bankers Fidelity Corporate and Other Income (loss) before income taxes Net income (loss)
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A reconciliation of net income (loss) to operating income (loss) is as follows:
Year Ended December 31, | ||||||
2018 | 2017 | |||||
(In thousands) | ||||||
Reconciliation of Non-GAAP Financial Measure | ||||||
Net income (loss) | $ | (704 | ) | $ | 4,528 | |
Income tax expense (benefit) | (267 | ) | 828 | |||
Realized investment gains, net | (5,154 | ) | (9,168 | ) | ||
Unrealized losses on equity securities, net | 2,194 | — | ||||
Non-GAAP operating loss | $ | (3,931 | ) | $ | (3,812 | ) |
Year Ended December 31, 2020 2019 (In thousands) Reconciliation of Non-GAAP Financial Measure Net income (loss) Income tax expense (benefit) Realized investment gains, net Unrealized (gains) losses on equity securities, net Non-GAAP operating income (loss)
place orders instituted throughout the United States during 2020 as a result of COVID-19.
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UNDERWRITING RESULTS
Year Ended December 31, | ||||||
2018 | 2017 | |||||
(Dollars in thousands) | ||||||
Gross written premiums | $ | 59,485 | $ | 58,149 | ||
Ceded premiums | (5,075 | ) | (4,787 | ) | ||
Net written premiums | $ | 54,410 | $ | 53,362 | ||
Net earned premiums | $ | 53,807 | $ | 53,661 | ||
Net losses and loss adjustment expenses | 38,829 | 34,486 | ||||
Underwriting expenses | 14,764 | 16,432 | ||||
Underwriting income | $ | 214 | $ | 2,743 | ||
Loss ratio | 72.2 | % | 64.3 | % | ||
Expense ratio | 27.4 | 30.6 | ||||
Combined ratio | 99.6 | % | 94.9 | % |
Year Ended December 31, 2020 2019 (Dollars in thousands) Gross written premiums Ceded premiums Net written premiums Net earned premiums Insurance benefits and losses incurred Commissions and underwriting expenses Underwriting income Loss ratio Expense ratio Combined ratio
a decline of usage due to the impact of the COVID-19 pandemic.
Year Ended December 31, | ||||||
2018 | 2017 | |||||
(In thousands) | ||||||
Automobile liability | $ | 28,840 | $ | 29,370 | ||
Automobile physical damage | 11,922 | 9,972 | ||||
General liability | 2,920 | 2,953 | ||||
Surety | 7,170 | 8,441 | ||||
Other lines | 2,955 | 2,925 | ||||
Total | $ | 53,807 | $ | 53,661 |
Year Ended December 31, 2020 2019 (In thousands) Automobile liability Automobile physical damage General liability Surety Other lines Total
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combined ratio of over 100% indicates an underwriting loss. The combined ratio is divided into two components, the loss ratio (the ratio of losses and loss adjustment expenses incurred to premiums earned) and the expense ratio (the ratio of expenses incurred to premiums earned).
Net
Underwriting expenses decreased $1.7 million, or 10.2%, during 2018 as compared to 2017.2019. As a percentage of premiums, underwritingthese expenses were 27.4%31.1% in 20182020 as compared to 30.6%29.2% in 2017.2019. The decreaseincrease in the expense ratio was primarily due to an increase in fixed costs related to new business related to the new agency as previously mentioned. Also contributing to the increase in the expense ratio is American Southern’s use of a variable commission structure with certain agents, which compensates the participating agents in relation to the loss ratios of the business they write. During periods in which the loss ratio decreases, commissions and underwriting expenses will generally increase, and conversely, during periods in which the loss ratio increases, commissions and underwriting expenses will generally decrease. In 2018,2020, variable commissions at American Southern decreased $1.1increased $0.1 million as compared to 20172019 due to less favorableimproved loss experienceratios from certain accounts subject to variable commissions.
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Bankers Fidelity
Year Ended December 31, | ||||||
2018 | 2017 | |||||
(Dollars in thousands) | ||||||
Medicare supplement | $ | 164,074 | $ | 126,154 | ||
Other health products | 7,545 | 6,440 | ||||
Life insurance | 8,964 | 9,657 | ||||
Gross earned premiums | 180,583 | 142,251 | ||||
Ceded premiums | (61,459 | ) | (32,585 | ) | ||
Net earned premiums | 119,124 | 109,666 | ||||
Insurance benefits and losses | 93,821 | 83,029 | ||||
Underwriting expenses | 32,288 | 34,734 | ||||
Total expenses | 126,109 | 117,763 | ||||
Underwriting loss | $ | (6,985 | ) | $ | (8,097 | ) |
Loss ratio | 78.8 | % | 75.7 | % | ||
Expense ratio | 27.1 | 31.7 | ||||
Combined ratio | 105.9 | % | 107.4 | % |
Year Ended December 31, 2020 2019 (Dollars in thousands) Medicare supplement Other health products Life insurance Gross earned premiums Ceded premiums Net earned premiums Insurance benefits and losses incurred Commissions and underwriting expenses Total expenses Underwriting income (loss) Loss ratio Expense ratio Combined ratio
Benefits
Underwritingunderwriting expenses decreased $2.4$1.4 million, or 7.0%3.9%, during 20182020 as compared to 2017.2019. As a percentage of earned premiums, these expenses were 27.1%28.2% in 20182020 as compared to 31.7%28.9% in 2017.2019. The decrease in the expense ratio was primarily due to the increasea decrease in earned premiums coupled with a relatively consistent levelagent incentive costs and realization of fixed general and administrative expenses.costs saving initiatives, predominantly related to postage costs. Also contributing to the decrease in the expense ratio was an increasea decrease in expenses related to servicing the amountMedicare supplement line of reinsurance expense-reimbursement allowance associated with the Company’s reinsurance agreement, which reimbursed the Company for a portion of its indirect underwriting expenses.
business.
the Company’s limited partnerships and limited liability companies of $0.9 million.
21
investments in fixed maturities. The net realized investment gains in 2019 resulted from the disposition of certain of the Company’s investments in equity and fixed maturities. Management continually evaluates the Company’s investment portfolio and, as may be determined to be appropriate, makes adjustments for impairments and/or will divest investments. See Note 2 of Notes to Consolidated Financial Statements.
As described in Note 1 of Notes to Consolidated Financial Statements, on January 1, 2018 the Company adopted ASU No. 2016-01, which requires, among other things, investments Net
securities.
Other Expenses
Other expenses (commissions, underwriting expenses, and other expenses) decreased $4.7 million, or 8.3%, in 2018 as compared to 2017. The decrease in other expenses was primarily attributable to a reinsurance expense-reimbursement allowance associated with the reinsurance agreement in Bankers Fidelity, which reimbursed a portion of the Company’s indirect underwriting expenses. Also contributing to the decrease in other expenses was the $1.1 million decrease in variable commission accruals at American Southern due to the unfavorable loss experience from certain accounts subject to variable commissions. American Southern’s variable commission structure compensates the participating agents in relation to the loss ratios of the business they write. As a percentage of earned premiums, other expenses were 30.0% in 2018 as compared with 34.6% in 2017. The decrease in the expense ratio was primarily attributable to the increase in earned premiums coupled with a lower level of general and administrative expenses.
2020.
22
income and proceeds from the sale and maturity of its invested assets. The Company believes that, within each operating company, total invested assets will be sufficient to satisfy all policy liabilities and that cash inflows from investment earnings, future premium receipts and reinsurance collections will be adequate to fund the payment of claims and operating expenses as needed.
The Company believes that existing cash balances as well as the dividends, fees, and tax-sharing payments it expects to receive from its subsidiaries and, if needed, additional borrowings from financial institutions, will enable the Company to meet its liquidity requirements for the foreseeable future. Management is not aware of any current recommendations by regulatory authorities, which, if implemented, would have a material adverse effect on the Company’s liquidity, capital resources or operations.
Board of Directors and Shareholders
Adoption of New Accounting Standard
As discussed in Note 1 to the financial statements, the Company changed its method of accounting for certain equity investments as of January 1, 2018 due to the adoption of Accounting Standards Update No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities(GAAP).
The Company is not required to have, nor were we engaged to perform, an audit of 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.
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; |
o | Evaluating whether the methodology applied by management is consistent in the aggregate with the methodology compliant with 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; |
o | Performing an independent recalculation of policy reserves for a sample of contracts for comparison to management’s estimate; and |
o | Evaluating management’s loss recognition testing of aggregate reserve sufficiency. |
26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and ShareholdersAtlantic American CorporationAtlanta, Georgia
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Atlantic American Corporation (the “Company”) and subsidiaries as of December 31, 2017, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for the year ended December 31, 2017, and the related notes and schedules (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at December 31, 2017 and the results of their operations and their cash flows for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Basis of 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 audit. 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 audit 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 audit 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 included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit 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.
/s/ BDO USA, LLP
We have served as the Company’s auditor since 2008.
Atlanta, Georgia, United StatesMarch 26, 2018
27
December 31, | ||||||
2018 | 2017 | |||||
(Dollars in thousands, except per share data) | ||||||
ASSETS | ||||||
Cash and cash equivalents | $ | 12,630 | $ | 24,547 | ||
Investments: | ||||||
Fixed maturities, available-for-sale, at fair value (amortized cost: $219,924 and $212,544) | 210,386 | 215,108 | ||||
Equity securities, at fair value (cost: $10,515 and $10,918) | 20,758 | 23,355 | ||||
Other invested assets (cost: $6,905 and $5,973) | 7,424 | 5,626 | ||||
Policy loans | 2,085 | 2,146 | ||||
Real estate | 38 | 38 | ||||
Investment in unconsolidated trusts | 1,238 | 1,238 | ||||
Total investments | 241,929 | 247,511 | ||||
Receivables: | ||||||
Reinsurance | 26,110 | 17,613 | ||||
Insurance premiums and other, net of allowance for doubtful accounts of $207 and $209 in 2018 and 2017, respectively | 15,223 | 13,241 | ||||
Deferred income taxes, net | 4,184 | — | ||||
Deferred acquisition costs | 37,094 | 32,694 | ||||
Other assets | 4,560 | 5,089 | ||||
Intangibles | 2,544 | 2,544 | ||||
Total assets | $ | 344,274 | $ | 343,239 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Insurance reserves and policyholder funds | ||||||
Future policy benefits | $ | 90,257 | $ | 82,435 | ||
Unearned premiums | 24,206 | 23,449 | ||||
Losses and claims | 72,612 | 65,689 | ||||
Other policy liabilities | 1,973 | 2,010 | ||||
Total insurance reserves and policyholder funds | 189,048 | 173,583 | ||||
Accounts payable and accrued expenses | 20,116 | 22,342 | ||||
Deferred income taxes, net | — | 593 | ||||
Junior subordinated debenture obligations, net | 33,738 | 33,738 | ||||
Total liabilities | 242,902 | 230,256 | ||||
Commitments and contingencies (Note 9) | ||||||
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; 20,170,360 and 20,449,531 shares outstanding in 2018 and 2017, respectively | 22,401 | 22,401 | ||||
Additional paid-in capital | 57,414 | 57,495 | ||||
Retained earnings | 37,208 | 30,993 | ||||
Accumulated other comprehensive income (loss) | (7,535 | ) | 9,751 | |||
Unearned stock grant compensation | (186 | ) | (579 | ) | ||
Treasury stock, at cost, 2,230,534 and 1,951,363 shares in 2018 and 2017, respectively | (7,985 | ) | (7,133 | ) | ||
Total shareholders’ equity | 101,372 | 112,983 | ||||
Total liabilities and shareholders’ equity | $ | 344,274 | $ | 343,239 |
December 31, | ||||||||
2020 | 2019 | |||||||
(Dollars in thousands, except share data) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 19,319 | $ | 12,893 | ||||
Investments: | ||||||||
Fixed maturities, available-for-sale, at fair value (amortized cost: $222,461 and $219,233) | 254,106 | 232,472 | ||||||
Equity securities, at fair value (cost: $6,393 and $7,168) | 18,716 | 22,922 | ||||||
Other invested assets (cost: $3,765 and $9,908) | 3,238 | 9,960 | ||||||
Policy loans | 1,975 | 2,007 | ||||||
Real estate | 38 | 38 | ||||||
Investment in unconsolidated trusts | 1,238 | 1,238 | ||||||
Total investments | 279,311 | 268,637 | ||||||
Receivables: | ||||||||
Reinsurance | 29,086 | 32,135 | ||||||
Insurance premiums and other, net of allowance for doubtful accounts of $198 and $183 as of 2020 and 2019, respectively | 27,512 | 13,134 | ||||||
Deferred income taxes, net | — | 314 | ||||||
Deferred acquisition costs | 39,611 | 38,861 | ||||||
Other assets | 7,804 | 9,108 | ||||||
Intangibles | 2,544 | 2,544 | ||||||
Total assets | $ | 405,187 | $ | 377,626 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Insurance reserves and policyholder funds | ||||||||
Future policy benefits | $ | 90,872 | $ | 92,490 | ||||
Unearned premiums | 27,131 | 26,035 | ||||||
Losses and claims | 79,147 | 81,448 | ||||||
Other policy liabilities | 1,526 | 1,933 | ||||||
Total insurance reserves and policyholder funds | 198,676 | 201,906 | ||||||
Accounts payable and accrued expenses | 26,412 | 23,588 | ||||||
Deferred income taxes, net | 1,301 | — | ||||||
Junior subordinated debenture obligations, net | 33,738 | 33,738 | ||||||
Total liabilities | 260,127 | 259,232 | ||||||
Commitments and contingencies (Note 16) | ||||||||
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; 20,415,243 and 20,472,162 shares outstanding as of 2020 and 2019, respectively | 22,401 | 22,401 | ||||||
Additional paid-in capital | 57,437 | 57,820 | ||||||
Retained earnings | 47,790 | 36,020 | ||||||
Accumulated other comprehensive income | 25,000 | 10,459 | ||||||
Unearned stock grant compensation | (284 | ) | (781 | ) | ||||
Treasury stock, at cost, 1,985,651 and 1,928,732 shares as of 2020 and 2019, respectively | (7,339 | ) | (7,580 | ) | ||||
Total shareholders’ equity | 145,060 | 118,394 | ||||||
Total liabilities and shareholders’ equity | $ | 405,187 | $ | 377,626 |
See the accompanying notes to the consolidated financial statements.
28
Year Ended December 31, | ||||||
2018 | 2017 | |||||
(Dollars in thousands, except per share data) | ||||||
Revenue: | ||||||
Insurance premiums, net | $ | 172,931 | $ | 163,327 | ||
Net investment income | 9,549 | 8,496 | ||||
Realized investment gains, net | 5,154 | 9,168 | ||||
Unrealized losses on equity securities, net | (2,194 | ) | — | |||
Other income | 113 | 123 | ||||
Total revenue | 185,553 | 181,114 | ||||
Benefits and expenses: | ||||||
Insurance benefits and losses incurred | 132,650 | 117,515 | ||||
Commissions and underwriting expenses | 39,042 | 43,446 | ||||
Interest expense | 2,037 | 1,723 | ||||
Other expense | 12,795 | 13,074 | ||||
Total benefits and expenses | 186,524 | 175,758 | ||||
Income (loss) before income taxes | (971 | ) | 5,356 | |||
Income tax expense (benefit) | (267 | ) | 828 | |||
Net income (loss) | (704 | ) | 4,528 | |||
Preferred stock dividends | (399 | ) | (399 | ) | ||
Net income (loss) applicable to common shareholders | $ | (1,103 | ) | $ | 4,129 | |
Earnings (loss) per common share (basic and diluted) | $ | (.05 | ) | $ | .20 |
Year Ended December 31, | ||||||||
2020 | 2019 | |||||||
(Dollars in thousands, except per share data) | ||||||||
Revenue: | ||||||||
Insurance premiums, net | $ | 183,539 | $ | 181,925 | ||||
Net investment income | 7,744 | 8,979 | ||||||
Realized investment gains, net | 7,420 | 1,574 | ||||||
Unrealized gains (losses) on equity securities, net | (3,431 | ) | 5,511 | |||||
Other income | 76 | 190 | ||||||
Total revenue | 195,348 | 198,179 | ||||||
Benefits and expenses: | ||||||||
Insurance benefits and losses incurred | 119,876 | 139,225 | ||||||
Commissions and underwriting expenses | 46,811 | 45,477 | ||||||
Interest expense | 1,610 | 2,130 | ||||||
Other expense | 11,548 | 11,754 | ||||||
Total benefits and expenses | 179,845 | 198,586 | ||||||
Income (loss) before income taxes | 15,503 | (407 | ) | |||||
Income tax expense (benefit) | 3,334 | (21 | ) | |||||
Net Income (loss) | 12,169 | (386 | ) | |||||
Preferred stock dividends | (399 | ) | (399 | ) | ||||
Net Income (loss) applicable to common shareholders | $ | 11,770 | $ | (785 | ) | |||
Earnings (loss) per common share (basic) | 0.58 | (0.04 | ) | |||||
Earnings (loss) per common share (diluted) | $ | 0.56 | $ | (0.04 | ) |
29
Year Ended December 31, | ||||||
2018 | 2017 | |||||
(Dollars in thousands) | ||||||
Net income (loss) | $ | (704 | ) | $ | 4,528 | |
Other comprehensive income (loss): | ||||||
Available-for-sale fixed maturity securities: | ||||||
Gross unrealized holding gain (loss) arising in the period | (6,948 | ) | 15,200 | |||
Related income tax effect | 1,459 | (5,320 | ) | |||
Subtotal | (5,489 | ) | 9,880 | |||
Gross OTTI losses charged to realized gains | 1,525 | — | ||||
Related income tax effect | (320 | ) | — | |||
Subtotal | 1,205 | — | ||||
Less: reclassification adjustment for net realized gains included in net income | (6,679 | ) | (9,168 | ) | ||
Related income tax effect | 1,402 | 3,209 | ||||
Subtotal | (5,277 | ) | (5,959 | ) | ||
Total other comprehensive income (loss), net of tax | (9,561 | ) | 3,921 | |||
Total comprehensive income (loss) | $ | (10,265 | ) | $ | 8,449 |
Year Ended December 31, | ||||||||
2020 | 2019 | |||||||
(Dollars in thousands) | ||||||||
Net income (loss) | $ | 12,169 | $ | (386 | ) | |||
Other comprehensive income: | ||||||||
Available-for-sale fixed maturity securities: | ||||||||
Gross unrealized holding gain arising in the period | 18,791 | 23,130 | ||||||
Related income tax effect | (3,946 | ) | (4,857 | ) | ||||
Subtotal | 14,845 | 18,273 | ||||||
Less: reclassification adjustment for net realized gains included in net income (loss) | (385 | ) | (353 | ) | ||||
Related income tax effect | 81 | 74 | ||||||
Subtotal | (304 | ) | (279 | ) | ||||
Total other comprehensive income, net of tax | 14,541 | 17,994 | ||||||
Total comprehensive income | $ | 26,710 | $ | 17,608 |
30
Preferred Stock | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income | Unearned Stock Grant Compensation | Treasury Stock | Total | |||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Balance, December 31, 2016 | $ | 55 | $ | 22,401 | $ | 57,114 | $ | 27,272 | $ | 5,830 | $ | (428 | ) | $ | (6,738 | ) | $ | 105,506 | ||||||
Net income | — | — | — | 4,528 | — | — | — | 4,528 | ||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | 3,921 | — | — | 3,921 | ||||||||||||||||
Dividends on common stock ($0.02 per share) | — | — | — | (408 | ) | — | — | — | (408 | ) | ||||||||||||||
Dividends on preferred stock | — | — | — | (399 | ) | — | — | — | (399 | ) | ||||||||||||||
Restricted stock grants, net of forfeitures | — | — | 363 | — | — | (646 | ) | 283 | — | |||||||||||||||
Amortization of unearned compensation | — | — | — | — | — | 495 | — | 495 | ||||||||||||||||
Purchase of 188,066 shares for treasury | — | — | — | — | — | — | (692 | ) | (692 | ) | ||||||||||||||
Issuance of 8,892 shares under stock plans | — | — | 18 | — | — | — | 14 | 32 | ||||||||||||||||
Balance, December 31, 2017 | 55 | 22,401 | 57,495 | 30,993 | 9,751 | (579 | ) | (7,133 | ) | 112,983 | ||||||||||||||
Cumulative effect of adoption of accounting guidance for equity financial instruments at January 1, 2018 | — | — | — | 9,825 | (9,825 | ) | — | — | — | |||||||||||||||
Reclassification of certain tax effects from accumulated other comprehensive income at January 1, 2018 | — | — | — | (2,100 | ) | 2,100 | — | — | — | |||||||||||||||
Net loss | — | — | — | (704 | ) | — | — | — | (704 | ) | ||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | (9,561 | ) | — | — | (9,561 | ) | ||||||||||||||
Dividends on common stock ($0.02 per share) | — | — | — | (407 | ) | — | — | — | (407 | ) | ||||||||||||||
Dividends on preferred stock | — | — | — | (399 | ) | — | — | — | (399 | ) | ||||||||||||||
Restricted stock grants, net of forfeitures | — | — | (96 | ) | — | — | 149 | (53 | ) | — | ||||||||||||||
Amortization of unearned compensation | — | — | — | — | — | 244 | — | 244 | ||||||||||||||||
Purchase of 193,103 shares for treasury | — | — | — | — | — | — | (597 | ) | (597 | ) | ||||||||||||||
Net shares acquired related to employee share-based compensation plans | — | — | — | — | — | — | (223 | ) | (223 | ) | ||||||||||||||
Issuance of 13,415 shares under stock plans | — | — | 15 | — | — | — | 21 | 36 | ||||||||||||||||
Balance, December 31, 2018 | $ | 55 | $ | 22,401 | $ | 57,414 | $ | 37,208 | $ | (7,535 | ) | $ | (186 | ) | $ | (7,985 | ) | $ | 101,372 |
Year Ended December 31, | ||||||||
(Dollars in thousands, except per share data) | 2020 | 2019 | ||||||
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 | 57,820 | 57,414 | ||||||
Restricted stock grants, net of forfeitures; 20,000 and 355,000 restricted shares issued, as of 2020 and 2019, respectively | (376 | ) | 396 | |||||
Issuance of 4,701 and 10,862 shares, as of 2020 and 2019, respectively, under stock plans | (7 | ) | 10 | |||||
Balance, end of year | 57,437 | 57,820 | ||||||
Retained earnings: | ||||||||
Balance, beginning of year | 36,020 | 37,208 | ||||||
Net Income (loss) | 12,169 | (386 | ) | |||||
Dividends on common stock | — | (403 | ) | |||||
Dividends accrued on preferred stock | (399 | ) | (399 | ) | ||||
Balance, end of year | 47,790 | 36,020 | ||||||
Accumulated other comprehensive income (loss): | ||||||||
Balance, beginning of year | 10,459 | (7,535 | ) | |||||
Other comprehensive income, net of tax | 14,541 | 17,994 | ||||||
Balance, end of year | 25,000 | 10,459 | ||||||
Unearned Stock Grant Compensation: | ||||||||
Balance, beginning of year | (781 | ) | (186 | ) | ||||
Restricted stock grants, net of forfeitures; 20,000 and 355,000 restricted shares issued, as of 2020 and 2019, respectively | 60 | (948 | ) | |||||
Amortization of unearned compensation | 437 | 353 | ||||||
Balance, end of year | (284 | ) | (781 | ) | ||||
Treasury Stock: | ||||||||
Balance, beginning of year | (7,580 | ) | (7,985 | ) | ||||
Restricted stock grants, net of forfeitures; 20,000 and 355,000 restricted shares issued, as of 2020 and 2019, respectively | 316 | 552 | ||||||
Purchase of 0 and 26,210 shares, as of 2020 and 2019, respectively, for treasury | — | (71 | ) | |||||
Net shares acquired related to employee share-based compensation plans | (91 | ) | (92 | ) | ||||
Issuance of 4,701 and 10,862 shares, as of 2020 and 2019, respectively, shares under stock plans | 16 | 16 | ||||||
Balance, end of year | (7,339 | ) | (7,580 | ) | ||||
Total shareholders’ equity | $ | 145,060 | $ | 118,394 | ||||
Dividends declared on common stock per share | $ | — | $ | (.02 | ) |
31
Year Ended December 31, | ||||||
2018 | 2017 | |||||
(Dollars in thousands) | ||||||
Cash flows from operating activities: | ||||||
Net (loss) income | $ | (704 | ) | $ | 4,528 | |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||
Amortization of deferred acquisition costs | 17,611 | 16,036 | ||||
Acquisition costs deferred | (22,011 | ) | (19,755 | ) | ||
Realized investment gains, net | (5,154 | ) | (9,168 | ) | ||
Unrealized losses on equity securities, net | 2,194 | — | ||||
Distributions received from equity method investees | 10,777 | 9,535 | ||||
Compensation expense related to share awards | 244 | 495 | ||||
Depreciation and amortization | 987 | 1,438 | ||||
Deferred income tax benefit | (2,236 | ) | (1,358 | ) | ||
Increase in receivables, net | (10,221 | ) | (6,185 | ) | ||
Increase in insurance reserves and policyholder funds | 15,465 | 10,904 | ||||
(Decrease) increase in other liabilities | (2,226 | ) | 5,665 | |||
Other, net | (266 | ) | 34 | |||
Net cash provided by operating activities | 4,460 | 12,169 | ||||
Cash flows from investing activities: | ||||||
Proceeds from investments sold | 30,140 | 74,457 | ||||
Proceeds from investments matured, called or redeemed | 4,906 | 10,791 | ||||
Investments purchased | (49,552 | ) | (84,552 | ) | ||
Additions to property and equipment | (281 | ) | (103 | ) | ||
Net cash (used in) provided by investing activities | (14,787 | ) | 593 | |||
Cash flows from financing activities: | ||||||
Payment of dividends on Series D preferred stock | (399 | ) | (399 | ) | ||
Payment of dividends on common stock | (407 | ) | (408 | ) | ||
Proceeds from shares issued under stock plans | 36 | 32 | ||||
Treasury stock acquired — share repurchase authorization | (597 | ) | (692 | ) | ||
Treasury stock acquired — net employee share-based compensation | (223 | ) | — | |||
Net cash used in financing activities | (1,590 | ) | (1,467 | ) | ||
Net (decrease) increase in cash | (11,917 | ) | 11,295 | |||
Cash and cash equivalents at beginning of year | 24,547 | 13,252 | ||||
Cash and cash equivalents at end of year | $ | 12,630 | $ | 24,547 | ||
Supplemental cash flow information: | ||||||
Cash paid for interest | $ | 1,996 | $ | 1,705 | ||
Cash paid for income taxes | $ | 2,107 | $ | 1,400 |
Year Ended December 31, | ||||||||
2020 | 2019 | |||||||
(Dollars in thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net Income (loss) | $ | 12,169 | $ | (386 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Amortization of deferred acquisition costs | 19,393 | 17,288 | ||||||
Acquisition costs deferred | (20,143 | ) | (19,055 | ) | ||||
Realized investment gains, net | (7,420 | ) | (1,574 | ) | ||||
Unrealized (gains) losses on equity securities, net | 3,431 | (5,511 | ) | |||||
Distributions received from equity method investees | — | 379 | ||||||
Compensation expense related to share awards | 437 | 353 | ||||||
Depreciation and amortization | 980 | 996 | ||||||
Deferred income tax benefit | (2,250 | ) | (913 | ) | ||||
(Increase) decrease in receivables, net | 1,349 | (4,709 | ) | |||||
Increase (decrease) in insurance reserves and policyholder funds | (3,230 | ) | 12,858 | |||||
Increase in accounts payable and accrued expenses | 2,324 | 3,472 | ||||||
Other, net | 1,931 | (5,005 | ) | |||||
Net cash provided by (used in) operating activities | 8,971 | (1,807 | ) | |||||
Cash flows from investing activities: | ||||||||
Proceeds from investments sold | 18,541 | 120,950 | ||||||
Proceeds from investments matured, called or redeemed | 7,117 | 6,157 | ||||||
Investments purchased | (27,489 | ) | (124,029 | ) | ||||
Additions to property and equipment | (233 | ) | (69 | ) | ||||
Net cash (used in) provided by investing activities | (2,064 | ) | 3,009 | |||||
Cash flows from financing activities: | ||||||||
Payment of dividends on Series D preferred stock | (399 | ) | (399 | ) | ||||
Payment of dividends on common stock | — | (403 | ) | |||||
Proceeds from shares issued under stock plans | 9 | 26 | ||||||
Treasury stock acquired — share repurchase authorization | — | (71 | ) | |||||
Treasury stock acquired — net employee share-based compensation | (91 | ) | (92 | ) | ||||
Net cash used in financing activities | (481 | ) | (939 | ) | ||||
Net increase in cash | 6,426 | 263 | ||||||
Cash and cash equivalents at beginning of year | 12,893 | 12,630 | ||||||
Cash and cash equivalents at end of year | $ | 19,319 | $ | 12,893 | ||||
Supplemental cash flow information: | ||||||||
Cash paid for interest | $ | 1,665 | $ | 2,155 | ||||
Cash paid for income taxes | $ | 3,883 | $ | 1,662 | ||||
Non-cash investing activities: | ||||||||
Receivable from sale of other invested assets | $ | 12,678 | $ | - |
32
Note 1. | Summary of Significant Accounting Policies |
2018,2020, the Parent owned four insurance subsidiaries, Bankers Fidelity Life Insurance Company and its wholly-owned subsidiary, Bankers Fidelity Assurance Company (together known as “Bankers Fidelity”), and American Southern Insurance Company and its wholly-owned subsidiary, American Safety Insurance Company (together known as “American Southern”), in addition to one non-insurance subsidiary, xCalibre Risk Services, Inc. The Parent has issued a guarantee of all liabilities of Bankers Fidelity.Deferred policy acquisition costsDAC for property and casualty insurance and short-duration health insurance areis amortized over the effective period of the related insurance policies. Contingent commissions, if contractually applicable, are ultimately payable to agents based on the underlying profitability of a particular insurance contract or a group of insurance contracts, and are periodically evaluated and accrued as earned. In periods in which revisions are made to the estimated loss reserves related to the particular insurance contract or group of insurance contracts subject to such commissions, corresponding adjustments are also made to the related accruals. Deferred policy acquisition costs areDAC is expensed when such costs are deemed not to be recoverable from future premiums (for traditional life and long-duration health insurance) and from the related unearned premiums and investment income (for property and casualty and short-duration health insurance).33
comprehensive income or loss. Effective January 1, 2018, upon adoption of new accounting guidance, theThe 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. Prior to January 1, 2018, changes in fair value were reported in other comprehensive income. The fair values of fixed maturities and equity securities are largely determined by either independent methods prescribed by the NAIC, which do not differ materially from publicly quoted market prices, when available, or independent broker quotations. TheAs of December 31, 2020, the Company ownsowned a certain equity security in the amount of $143, with a valuation that was derived from techniques in which one or more of the significant inputs are unobservable. As of December 31, 2020, all fixed maturities that do not havewere valued using publicly quoted market values, but had an estimated fair value asprices or techniques with observable inputs. Values that are not determined by management of $1,066 and $1,369 at December 31, 2018 and 2017, respectively. Such valuesusing 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 values.prices. Policy loans are carried at unpaid principal balance and real estate is carried at historical cost. Other invested assets are comprised of investments in limited partnerships, limited liability companies, and real estate joint ventures, and are accounted for using the equity method. If the value of a fixed maturity security or other invested asset declines below its cost or amortized cost, as applicable, and the decline is considered to be other than temporary, a realized loss is recorded to reduce the carrying value of the investment to its estimated fair value, which becomes the new cost basis. The evaluation for an other than temporary impairment (“OTTI”) is a quantitative and qualitative process, which is subject to risks and uncertainties in the determination
34
or liability relating to insurance risk in accordance with applicable accounting standards. Reinsurance premiums and benefits paid or provided are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums, benefits and DAC are reported net of insurance ceded.
Reinsurance premiums from assumed business are estimated based on information received from ceding companies and reinsureds. Any subsequent differences that arise regarding such estimates are recorded in the period in which they are determined.
Reclassification of Effect of Tax Rate Change from AOCI to Retained Earnings. In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). The FASB issued this guidance for the effect on deferred tax assets and liabilities related to items recorded in accumulated other comprehensive income (“AOCI”) resulting from legislated tax reform enacted on December 22, 2017. The tax reform reduced the federal tax rate applied to the Company’s deferred tax balances from 35% to 21% on enactment. The Company recorded the total effect of the change in enacted tax rates on deferred tax balances in the income tax expense component of net income. ASU 2018-02 permits the Company to reclassify out of AOCI and into retained earnings the “stranded” tax effects that resulted from recording the tax effects of unrealized investment gains at a 35% tax rate because the 14% reduction in tax rate was recognized in net income instead of other comprehensive income. The Company adopted ASU 2018-02 as of January 1, 2018. As a result, on January 1, 2018, the Company reclassified $2,100 of stranded tax effects related to continuing operations which increased AOCI and reduced retained earnings.
Classification of Certain Cash Receipts and Cash Payments. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The issues addressed in ASU 2016-15 are: 1) debt prepayment or debt extinguishment costs, 2) settlement of zero-coupon debt instruments, 3) contingent consideration payments made after a business combination, 4) proceeds from the settlement of insurance claims, 5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, 6) distributions received from equity method investees, 7) beneficial interests in securitization transactions and 8) separately identifiable cash flows and application of the predominance principle. The Company adopted ASU 2016-15 as of January 1, 2018, which impacted the classification of distributions from equity method investees. The Company made the election to use the nature of distributions approach. For the year ended December 31, 2018, the Company classified distributions from equity method investees of $10,777 as cash flows from operating activities and reclassified $9,535 as cash flows from investing activities to cash flows from operating activities for the year ended December 31, 2017, in its consolidated statements of cash flows.
Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10) (“ASU 2016-01”). ASU 2016-01 provides updated guidance for the recognition and measurement of financial instruments. The guidance requires investments in equity securities to be measured at fair value with any changes in valuation reported in net income except for investments that are consolidated or are accounted for under the
35
equity method of accounting. The guidance also requires a deferred tax asset resulting from net unrealized losses on available-for-sale (“AFS”) fixed maturities that are recognized in AOCI to be evaluated for recoverability in combination with the Company’s other deferred tax assets. Under previous guidance, the Company measured investments in equity securities at fair value with any changes in fair value reported in other comprehensive income. The Company adopted ASU 2016-01 as of January 1, 2018. The adoption of this guidance resulted in the recognition of $9,825 of net after tax unrealized gains on equity securities as a cumulative effect adjustment that increased retained earnings as of January 1, 2018 and decreased AOCI by the same amount. The Company elected to report changes in the fair value of equity securities in a separate line item on the Company’s consolidated statements of operations. At December 31, 2017, equity securities were classified as AFS in the Company’s consolidated balance sheets. However, upon adoption, the updated guidance eliminated the AFS balance sheet classification for equity securities.
Revenue from Contracts with Customers. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09, as modified, provides guidance for recognizing revenue which excludes insurance contracts and financial instruments. Revenue is to be recognized when, or as, goods or services are transferred to customers in an amount that reflects the consideration that an entity is expected to be entitled in exchange for those goods or services. The Company adopted ASU No. 2014-09 as of January 1, 2018. For the year ended December 31, 2018, approximately $113, or less than one-tenth of 1% of the Company’s total revenues, were within the scope of this updated guidance. The adoption of this ASU did not have an impact on the Company’s consolidated financial statements.
Future Adoption of New Accounting Standards
Fair Value Measurement – Changes to the Disclosure Requirements for Fair Value Measurement. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This guidance removes the following disclosure requirements from Topic 820: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels, and (3) the valuation processes for Level 3 fair value measurements. This disclosure also includes the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Company adopted ASU 2018-13 as of January 1, 2020. The adoption of this ASU did not have an impact on the Company’s consolidated financial statements.
Premium Amortization on Purchased Callable Debt Securities. In March 2017, the FASB issued ASU No. 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities (“ASU 2017-08”). This guidance shortens the amortization period for certain callable debt securities held at a premium to the earliest call date. Under current GAAP, premiums and discounts on callable securities generally are amortized to the maturity date. ASU 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2018, although earlier adoption is permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.
Goodwill. In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 is intended to simplify the evaluation of goodwill. The updated guidance requires recognition and measurement of goodwill impairment based on the excess of the carrying value of the reporting unit compared to its estimated fair value,
36
with the amount of the impairment not to exceed the carrying value of the reporting unit’s goodwill. Under existing guidance, if the reporting unit’s carrying value exceeds its estimated fair value, the Company allocates the fair value of the reporting unit to all of the assets and liabilities of the reporting unit to determine an implied goodwill value. An impairment loss is then recognized for the excess, if any, of the carrying value of the reporting unit’s goodwill compared to the implied goodwill value. The amendments in ASU 2017-04 are effective for interim and annual reporting periods beginning after December 15, 2019. The Company expects to adopt the updated guidance January 1, 2020 on a prospective basis as required, although earlier adoption is permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.
Financial Instruments – Credit Losses. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments —– Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires entities to measure all expected credit losses for financial instruments (including reinsurance recoverable and policy loans) held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Under current GAAP, entities generally recognize credit losses when it is probable that the loss has been incurred. ASU 2016-13 will remove all recognition thresholds and will require entities to recognize an allowance for credit losses equal to the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the entity expects to collect over the instrument’s contractual life. ASU 2016-13 also amends the credit loss measurement guidance for AFSavailable-for-sale (“AFS”) debt securities and beneficial interests in securitized financial assets. Credit losses on AFS debt securities carried at fair value will continue to be measured as OTTIan other than temporary impairment (“OTTI”) when incurred; however, the losses will be recognized through an allowance and no longer as an adjustment to the cost basis. Recoveries of OTTI will be recognized as reversals of valuation allowances and no longer accreted as investment income through an adjustment to the investment yield. The allowance on AFS debt securities cannot cause the net carrying value to be below fair value and, therefore, it is possible that increases in fair value due to decreases in market interest rates could cause the reversal of a valuation allowance and increase net income. The new guidance will also require purchased financial assets with a more-than-insignificant amount of credit deterioration since original issuance to be recorded based on contractual amounts due and an initial allowance recorded at the date of purchase. For the Company, the amendments in ASU 2016-13 will be effective for interim and annual reporting periods beginning after December 15, 2019.2022. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has not yet determined the timing of adoption. Implementation matters yet to be addressed include determining the impact of valuation allowances on the effective interest method for recognizing interest income from AFS debt securities as well as updating our investment accounting system functionality to adjust valuation allowances based on changes in fair value. The estimated effect on the Company’s consolidated financial statements can only be estimated based on the current investment portfolio at any given point in time, and accordingly, has not currently been determined.
Leases. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Under ASU 2016-02, lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user
37
Note 2. | Investments |
2019.
2018 | ||||||||||||
Estimated Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Amortized Cost | |||||||||
Fixed maturities: | ||||||||||||
Bonds: | ||||||||||||
U.S. Treasury securities and obligations of U.S. Government agencies and authorities | $ | 27,422 | $ | 36 | $ | 1,061 | $ | 28,447 | ||||
Obligations of states and political subdivisions | 8,364 | 347 | 72 | 8,089 | ||||||||
Corporate securities: | ||||||||||||
Utilities and telecom | 19,642 | 873 | 431 | 19,200 | ||||||||
Financial services | 49,477 | 747 | 2,942 | 51,672 | ||||||||
Other business – diversified | 49,196 | 226 | 2,844 | 51,814 | ||||||||
Other consumer – diversified | 56,093 | 84 | 4,501 | 60,510 | ||||||||
Total corporate securities | 174,408 | 1,930 | 10,718 | 183,196 | ||||||||
Redeemable preferred stocks: | ||||||||||||
Other consumer – diversified | 192 | — | — | 192 | ||||||||
Total redeemable preferred stocks | 192 | — | — | 192 | ||||||||
Total fixed maturities | $ | 210,386 | $ | 2,313 | $ | 11,851 | $ | 219,924 |
2017 | 2020 | |||||||||||||||||||||||||||
Estimated Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Amortized Cost | Estimated Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Amortized Cost | |||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||||||
Bonds: | ||||||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. Government agencies and authorities | $ | 31,155 | $ | 149 | $ | 511 | $ | 31,517 | $ | 30,762 | $ | 1,381 | $ | 26 | $ | 29,407 | ||||||||||||
Obligations of states and political subdivisions | 10,809 | 630 | 1 | 10,180 | 11,802 | 898 | — | 10,904 | ||||||||||||||||||||
Corporate securities: | ||||||||||||||||||||||||||||
Utilities and telecom | 21,882 | 1,709 | 130 | 20,303 | 30,359 | 4,423 | — | 25,936 | ||||||||||||||||||||
Financial services | 53,686 | 2,049 | 453 | 52,090 | 78,258 | 9,811 | 6 | 68,453 | ||||||||||||||||||||
Other business – diversified | 44,184 | 1,024 | 1,349 | 44,509 | 41,145 | 5,689 | 15 | 35,471 | ||||||||||||||||||||
Other consumer – diversified | 53,200 | 924 | 1,477 | 53,753 | 61,530 | 9,479 | 47 | 52,098 | ||||||||||||||||||||
Total corporate securities | 172,952 | 5,706 | 3,409 | 170,655 | 211,292 | 29,402 | 68 | 181,958 | ||||||||||||||||||||
Redeemable preferred stocks: | ||||||||||||||||||||||||||||
Other consumer – diversified | 192 | — | — | 192 | 250 | 58 | — | 192 | ||||||||||||||||||||
Total redeemable preferred stocks | 192 | — | — | 192 | 250 | 58 | — | 192 | ||||||||||||||||||||
Total fixed maturities | $ | 215,108 | $ | 6,485 | $ | 3,921 | $ | 212,544 | $ | 254,106 | $ | 31,739 | $ | 94 | $ | 222,461 |
2019 | ||||||||||||||||
Estimated Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Amortized Cost | |||||||||||||
Fixed maturities: | ||||||||||||||||
Bonds: | ||||||||||||||||
U.S. Treasury securities and obligations of U.S. Government agencies and authorities | $ | 20,259 | $ | 467 | $ | 53 | $ | 19,845 | ||||||||
Obligations of states and political subdivisions | 11,940 | 371 | 53 | 11,622 | ||||||||||||
Corporate securities: | ||||||||||||||||
Utilities and telecom | 26,648 | 2,404 | 32 | 24,276 | ||||||||||||
Financial services | 73,917 | 4,249 | 57 | 69,725 | ||||||||||||
Other business – diversified | 41,706 | 2,335 | 98 | 39,469 | ||||||||||||
Other consumer – diversified | 57,752 | 3,702 | 54 | 54,104 | ||||||||||||
Total corporate securities | 200,023 | 12,690 | 241 | 187,574 | ||||||||||||
Redeemable preferred stocks: | ||||||||||||||||
Other consumer – diversified | 250 | 58 | — | 192 | ||||||||||||
Total redeemable preferred stocks | 250 | 58 | — | 192 | ||||||||||||
Total fixed maturities | $ | 232,472 | $ | 13,586 | $ | 347 | $ | 219,233 |
2020 | ||||||||||||||||
Estimated Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Cost or Amortized Cost | |||||||||||||
Equity securities: | ||||||||||||||||
Common and non-redeemable preferred stocks: | ||||||||||||||||
Financial services | 2,111 | 351 | — | 1,760 | ||||||||||||
Other business – diversified | 16,605 | 11,972 | — | 4,633 | ||||||||||||
Total equity securities | $ | 18,716 | $ | 12,323 | $ | — | $ | 6,393 |
2019 | ||||||||||||||||
Estimated Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Cost or Amortized Cost | |||||||||||||
Equity securities: | ||||||||||||||||
Common and non-redeemable preferred stocks: | ||||||||||||||||
Financial services | 3,159 | 624 | — | 2,535 | ||||||||||||
Other business – diversified | 19,763 | 15,130 | — | 4,633 | ||||||||||||
Total equity securities | $ | 22,922 | $ | 15,754 | $ | — | $ | 7,168 |
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2018 | ||||||||||||
Estimated Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Cost or Amortized Cost | |||||||||
Equity securities: | ||||||||||||
Common and non-redeemable preferred stocks: | ||||||||||||
Utilities and telecom | 1,686 | 722 | — | 964 | ||||||||
Financial services | 4,552 | 172 | — | 4,380 | ||||||||
Other business – diversified | 306 | 259 | — | 47 | ||||||||
Other consumer – diversified | 14,214 | 9,090 | — | 5,124 | ||||||||
Total equity securities | $ | 20,758 | $ | 10,243 | $ | — | $ | 10,515 |
2017 | ||||||||||||
Estimated Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Cost or Amortized Cost | |||||||||
Equity securities: | ||||||||||||
Common and non-redeemable preferred stocks: | ||||||||||||
Utilities and telecom | 1,588 | 624 | — | 964 | ||||||||
Financial services | 5,634 | 851 | — | 4,783 | ||||||||
Other business – diversified | 297 | 250 | — | 47 | ||||||||
Other consumer – diversified | 15,836 | 10,712 | — | 5,124 | ||||||||
Total equity securities | $ | 23,355 | $ | 12,437 | $ | — | $ | 10,918 |
The carrying value and amortized cost of the Company’s investments in fixed maturities at December 31, 20182020 and 20172019 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.
2018 | 2017 | |||||||||||
Carrying Value | Amortized Cost | Carrying Value | Amortized Cost | |||||||||
Due in one year or less | $ | 3,150 | $ | 3,150 | $ | 1,653 | $ | 1,655 | ||||
Due after one year through five years | 19,787 | 19,699 | 13,738 | 14,056 | ||||||||
Due after five years through ten years | 127,617 | 133,863 | 112,847 | 112,116 | ||||||||
Due after ten years | 43,823 | 46,338 | 67,328 | 64,928 | ||||||||
Asset backed securities | 16,009 | 16,874 | 19,542 | 19,789 | ||||||||
Totals | $ | 210,386 | $ | 219,924 | $ | 215,108 | $ | 212,544 |
2020 2019 Due in one year or less Due after one year through five years Due after five years through ten years Due after ten years Asset backed securities Totals
2018 | ||||||||||||||||||
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 | $ | — | $ | — | $ | 24,786 | $ | 1,061 | $ | 24,786 | $ | 1,061 | ||||||
Obligations of states and political subdivisions | — | — | 3,980 | 72 | 3,980 | 72 | ||||||||||||
Corporate securities | 49,633 | 1,592 | 97,012 | 9,126 | 146,645 | 10,718 | ||||||||||||
Total temporarily impaired securities | $ | 49,633 | $ | 1,592 | $ | 125,778 | $ | 10,259 | $ | 175,411 | $ | 11,851 |
2020 | ||||||||||||||||||||||||
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 | $ | 7,045 | $ | 26 | $ | — | $ | — | $ | 7,045 | $ | 26 | ||||||||||||
Corporate securities | 4,602 | 68 | — | — | 4,602 | 68 | ||||||||||||||||||
Total temporarily impaired securities | $ | 11,647 | $ | 94 | $ | — | $ | — | $ | 11,647 | $ | 94 |
2019 | ||||||||||||||||||||||||
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 | $ | 3,432 | $ | 22 | $ | 3,533 | $ | 31 | $ | 6,965 | $ | 53 | ||||||||||||
Obligations of states and political subdivisions | 3,106 | 53 | — | — | 3,106 | 53 | ||||||||||||||||||
Corporate securities | 23,245 | 145 | 2,504 | 96 | 25,749 | 241 | ||||||||||||||||||
Total temporarily impaired securities | $ | 29,783 | $ | 220 | $ | 6,037 | $ | 127 | $ | 35,820 | $ | 347 |
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2017 | ||||||||||||||||||
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 | $ | 12,175 | $ | 162 | $ | 12,737 | $ | 349 | $ | 24,912 | $ | 511 | ||||||
Obligations of states and political subdivisions | 999 | 1 | — | — | 999 | 1 | ||||||||||||
Corporate securities | 40,108 | 653 | 32,667 | 2,756 | 72,775 | 3,409 | ||||||||||||
Total temporarily impaired securities | $ | 53,282 | $ | 816 | $ | 45,404 | $ | 3,105 | $ | 98,686 | $ | 3,921 |
The evaluation for an other than temporary impairmentOTTI is a quantitative and qualitative process, which is subject to risks and uncertainties in the determination of whether declines in the fair value of investments are other than temporary. Potential risks and uncertainties include, among other things, changes in general economic conditions, an issuer’s financial condition or near term recovery prospects and the effects of changes in interest rates. In evaluating a potential impairment, the Company considers, among other factors, management’s intent and ability to hold the securities until price recovery, the nature of the investment and the expectation of prospects for the issuer and its industry, the status of an issuer’s continued satisfaction of its obligations in accordance with their contractual terms, and management’s expectation as to the issuer’s ability and intent to continue to do so, as well as ratings actions that may affect the issuer’s credit status.
During the year ended December 31, 2018, the Company recorded OTTI charges related to certain fixed maturity securities of $1,525 as a charge to net income due to management’s intention to sell such securities.
during the years ended December 31, 2020 and 2019.
2020.
2018 | 2017 | |||||
Fixed maturities | $ | 8,432 | $ | 8,297 | ||
Equity securities | 440 | 467 | ||||
Other | 677 | (268 | ) | |||
Net investment income | $ | 9,549 | $ | 8,496 |
2020 2019 Fixed maturities Equity securities Other Investment expenses Net investment income
2018 | ||||||||||||
Fixed Maturities | Equity Securities | Other Invested Assets | Total | |||||||||
Gains | $ | 884 | $ | 272 | $ | 5,827 | $ | 6,983 | ||||
Losses | (1,829 | ) | — | — | (1,829 | ) | ||||||
Realized investment gains (losses), net | $ | (945 | ) | $ | 272 | $ | 5,827 | $ | 5,154 |
2020 | ||||||||||||||||
Fixed Maturities | Equity Securities | Other Invested Assets | Total | |||||||||||||
Gains | $ | 835 | $ | 88 | $ | 6,948 | $ | 7,871 | ||||||||
Losses | (450 | ) | (1 | ) | — | (451 | ) | |||||||||
Realized investment gains, net | $ | 385 | $ | 87 | $ | 6,948 | $ | 7,420 |
2019 | ||||||||||||||||
Fixed Maturities | Equity Securities | Other Invested Assets | Total | |||||||||||||
Gains | $ | 2,003 | $ | 1,221 | $ | — | $ | 3,224 | ||||||||
Losses | (1,650 | ) | — | — | (1,650 | ) | ||||||||||
Realized investment gains, net | $ | 353 | $ | 1,221 | $ | — | $ | 1,574 |
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2017 | ||||||||||||
Fixed Maturities | Equity Securities | Other Invested Assets | Total | |||||||||
Gains | $ | 2,226 | $ | 1,044 | $ | 6,040 | $ | 9,310 | ||||
Losses | (142 | ) | — | — | (142 | ) | ||||||
Realized investment gains, net | $ | 2,084 | $ | 1,044 | $ | 6,040 | $ | 9,168 |
Proceeds from the sales of investmentsavailable-for-sale fixed maturities were as follows:
2018 | 2017 | |||||
Fixed maturities | $ | 30,078 | $ | 72,760 | ||
Equity securities | — | 1,579 | ||||
Other investments | 10,839 | 9,653 | ||||
Total proceeds | $ | 40,917 | $ | 83,992 |
2020 | 2019 | |||||||
Sales proceeds | $ | 18,504 | $ | 117,530 | ||||
Gross gains | 835 | 2,003 | ||||||
Gross losses | (450 | ) | (1,650 | ) |
2020 | 2019 | |||||||
Sales proceeds | $ | 5 | $ | 2,568 | ||||
Gross gains | — | 1,113 | ||||||
Gross losses | (1 | ) | — |
2018 | 2017 | |||||
Net gains (losses) recognized during the period on equity securities | $ | (1,922 | ) | $ | — | |
Less: Net gains (losses) recognized during the period on equity securities sold during the period | (272 | ) | — | |||
Net unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date | $ | (2,194 | ) | $ | — |
2020 | 2019 | |||||||
Net realized and unrealized gains (losses) recognized during the period on equity securities | $ | (3,344 | ) | $ | 6,732 | |||
Less: Net realized gains (losses) recognized during the period on equity securities sold during the period | 87 | 1,221 | ||||||
Unrealized gains (losses) on equity securities, net | $ | (3,431 | ) | $ | 5,511 |
2020.
2019.
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Note 3. | Disclosures About Fair Value of Financial Instruments |
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 |
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 maturities, which consist of U.S. Treasury securities, U.S. Government securities, obligations of states and political subdivisions, and certain corporate fixed maturities, as well as its non-redeemable preferred stocks. In determining fair value measurements of its fixed maturities 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 maturities and non-redeemable preferred stocks were determined using unadjusted prices received from pricing services that utilize |
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 |
in accordance with methods prescribed by the NAIC, which do not differ materially from publicly quoted market prices. Certain fixed maturities 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 received from the original underwriter of the pooled offerings is also considered, as applicable.42
Junior Subordinated Debentures. The fair value is estimated based on the quoted market prices for similar issuesobservable interest rates and the current rates offeredyields for debt instruments having similar returns and remaining maturities.
characteristics.
Assets: | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||
Fixed maturities | $ | 11,413 | $ | 197,907 | $ | 1,066 | (1) | $ | 210,386 | |||
Equity securities | 16,398 | 4,360 | (1) | — | 20,758 | |||||||
Cash equivalents | 8,250 | — | — | 8,250 | ||||||||
Total | $ | 36,061 | $ | 202,267 | $ | 1,066 | $ | 239,394 |
Assets: | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Fixed maturities | $ | — | $ | 254,106 | $ | — | $ | 254,106 | ||||||||
Equity securities | 18,573 | — | 143 | 18,716 | ||||||||||||
Cash equivalents | 12,010 | — | — | 12,010 | ||||||||||||
Total | $ | 30,583 | $ | 254,106 | $ | 143 | $ | 284,832 |
Assets: | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||
Fixed maturities | $ | — | $ | 213,739 | $ | 1,369 | (1) | $ | 215,108 | |||
Equity securities | 17,973 | 5,382 | (1) | — | 23,355 | |||||||
Cash equivalents | 13,855 | — | — | 13,855 | ||||||||
Total | $ | 31,828 | $ | 219,121 | $ | 1,369 | $ | 252,318 |
Assets: | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Fixed maturities | $ | — | $ | 232,472 | $ | — | $ | 232,472 | ||||||||
Equity securities | 22,922 | — | — | 22,922 | ||||||||||||
Cash equivalents | 7,173 | — | — | 7,173 | ||||||||||||
Total | $ | 30,095 | $ | 232,472 | $ | — | $ | 262,567 |
Fixed Maturities | |||
Balance, January 1, 2017 | $ | 1,264 | |
Total unrealized gains included in other comprehensive income | 105 | ||
Balance, December 31, 2017 | 1,369 | ||
Total realized gains included in earnings | 208 | ||
Total unrealized losses included in other comprehensive loss | (28 | ) | |
Settlements | (483 | ) | |
Balance, December 31, 2018 | $ | 1,066 |
The Company’s fixed maturities valued using Level 3 inputs consist solely of issuances of pooled debt obligations of multiple, smaller financial services companies that are not actively traded. There are no assumed prepayments and/or default probability assumptions as a majority of these instruments contain certain U.S. government agency strips to support repayment of the principal. Other qualitative2020 and quantitative information received from the original underwriter of the pooled offerings is also considered, as applicable.
43
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, 20182020 and 2017.
2018 | 2017 | ||||||||||||||
Level in Fair Value Hierarchy(1) | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||
Assets: | |||||||||||||||
Cash and cash equivalents | Level 1 | $ | 12,630 | $ | 12,630 | $ | 24,547 | $ | 24,547 | ||||||
Fixed maturities | (1) | 210,386 | 210,386 | 215,108 | 215,108 | ||||||||||
Equity securities | (1) | 20,758 | 20,758 | 23,355 | 23,355 | ||||||||||
Other invested assets | Level 3 | 7,424 | 7,424 | 5,626 | 5,626 | ||||||||||
Policy loans | Level 2 | 2,085 | 2,085 | 2,146 | 2,146 | ||||||||||
Real estate | Level 2 | 38 | 38 | 38 | 38 | ||||||||||
Investments in unconsolidated trusts | Level 2 | 1,238 | 1,238 | 1,238 | 1,238 | ||||||||||
Liabilities: | |||||||||||||||
Junior Subordinated Debentures, net | Level 2 | 33,738 | 33,738 | 33,738 | 33,738 |
Level in | 2020 | 2019 | ||||||||||||||||||
Fair Value Hierarchy(1) | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents | Level 1 | $ | 19,319 | $ | 19,319 | $ | 12,893 | $ | 12,893 | |||||||||||
Fixed maturities | (1) | 254,106 | 254,106 | 232,472 | 232,472 | |||||||||||||||
Equity securities | (1) | 18,716 | 18,716 | 22,922 | 22,922 | |||||||||||||||
Other invested assets | Level 3 | 3,238 | 3,238 | 9,960 | 9,960 | |||||||||||||||
Policy loans | Level 2 | 1,975 | 1,975 | 2,007 | 2,007 | |||||||||||||||
Investments in unconsolidated trusts | Level 2 | 1,238 | 1,238 | 1,238 | 1,238 | |||||||||||||||
Liabilities: | ||||||||||||||||||||
Junior Subordinated Debentures, net | Level 2 | 33,738 | 32,297 | 33,738 | 35,977 |
(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. |
Note 4. | Deferred Policy Acquisition Costs |
2018 | 2017 | |||||||||||
American Southern | Bankers Fidelity | American Southern | Bankers Fidelity | |||||||||
Deferred policy acquisition costs: | ||||||||||||
Balance, beginning of year | $ | 2,075 | $ | 30,619 | $ | 2,183 | $ | 26,792 | ||||
Capitalization | 7,893 | 14,118 | 8,062 | 11,693 | ||||||||
Amortization | (7,921 | ) | (9,690 | ) | (8,170 | ) | (7,866 | ) | ||||
Balance, end of year | $ | 2,047 | $ | 35,047 | $ | 2,075 | $ | 30,619 |
2020 | 2019 | |||||||||||||||
American Southern | Bankers Fidelity | American Southern | Bankers Fidelity | |||||||||||||
Deferred policy acquisition costs: | ||||||||||||||||
Balance, beginning of year | $ | 1,979 | $ | 36,882 | $ | 2,047 | $ | 35,047 | ||||||||
Capitalization | 9,910 | 10,233 | 8,761 | 10,294 | ||||||||||||
Amortization | (9,590 | ) | (9,803 | ) | (8,829 | ) | (8,459 | ) | ||||||||
Balance, end of year | $ | 2,299 | $ | 37,312 | $ | 1,979 | $ | 36,882 |
Note 5. | Insurance Reserves and Policyholder Funds |
Amount of Insurance In Force, Net | ||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Future policy benefits | ||||||||||||
Life insurance policies: | ||||||||||||
Ordinary | $ | 54,599 | $ | 54,752 | $ | 218,371 | $ | 238,534 | ||||
Mass market | 1,364 | 1,693 | 1,677 | 2,070 | ||||||||
Individual annuities | 39 | 50 | — | — | ||||||||
56,002 | 56,495 | $ | 220,048 | $ | 240,604 | |||||||
Accident and health insurance policies | 34,255 | 25,940 | ||||||||||
90,257 | 82,435 | |||||||||||
Unearned premiums | 24,206 | 23,449 | ||||||||||
Losses, claims and loss adjustment expenses | 72,612 | 65,689 | ||||||||||
Other policy liabilities | 1,973 | 2,010 | ||||||||||
Total insurance reserves and policyholder funds | $ | 189,048 | $ | 173,583 |
Amount of Insurance In Force, Net | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Future policy benefits | ||||||||||||||||
Life insurance policies: | ||||||||||||||||
Ordinary life and annuities | $ | 54,442 | $ | 55,403 | $ | 199,827 | $ | 212,774 | ||||||||
Group life | 91 | 93 | 83,533 | (1) | 33,508 | |||||||||||
54,533 | 55,496 | $ | 283,360 | $ | 246,282 | |||||||||||
Accident and health insurance policies | 36,339 | 36,994 | ||||||||||||||
90,872 | 92,490 | |||||||||||||||
Unearned premiums | 27,131 | 26,035 | ||||||||||||||
Losses, claims and loss adjustment expenses | 79,147 | 81,448 | ||||||||||||||
Other policy liabilities | 1,526 | 1,933 | ||||||||||||||
Total insurance reserves and policyholder funds | $ | 198,676 | $ | 201,906 |
(1) | The group life in force amounts increased significantly during 2020. However, the impact on future policy benefits is not significant due to the deferred premium offset to the gross benefit reserve. |
44
Annualized premiums for accident and health insurance policies were $116,404$109,430 and $105,422$112,734 at December 31, 20182020 and 2017,2019, respectively.
2018 | 2017 | |||||
Balance at January 1 | $ | 65,689 | $ | 62,562 | ||
Less: Reinsurance recoverable on unpaid losses | (11,968 | ) | (10,796 | ) | ||
Net balance at January 1 | 53,721 | 51,766 | ||||
Incurred related to: | ||||||
Current year | 128,242 | 114,099 | ||||
Prior years | 308 | (1) | (1,765 | )(2) | ||
Total incurred | 128,550 | 112,334 | ||||
Paid related to: | ||||||
Current year | 90,981 | 82,092 | ||||
Prior years | 33,032 | 28,287 | ||||
Total paid | 124,013 | 110,379 | ||||
Net balance at December 31 | 58,258 | 53,721 | ||||
Plus: Reinsurance recoverable on unpaid losses | 14,354 | 11,968 | ||||
Balance at December 31 | $ | 72,612 | $ | 65,689 |
2020 | 2019 | |||||||
Balance at January 1 | $ | 81,448 | $ | 72,612 | ||||
Less: Reinsurance recoverable on unpaid losses | (18,339 | ) | (14,354 | ) | ||||
Net balance at January 1 | 63,109 | 58,258 | ||||||
Incurred related to: | ||||||||
Current year | 122,626 | 137,305 | ||||||
Prior years | (3,480 | )(1) | (80 | )(2) | ||||
Total incurred | 119,146 | 137,225 | ||||||
Paid related to: | ||||||||
Current year | 84,518 | 95,489 | ||||||
Prior years | 36,190 | 36,885 | ||||||
Total paid | 120,708 | 132,374 | ||||||
Net balance at December 31 | 61,547 | 63,109 | ||||||
Plus: Reinsurance recoverable on unpaid losses | 17,600 | 18,339 | ||||||
Balance at December 31 | $ | 79,147 | $ | 81,448 |
(1) | Prior years’ development was primarily the result of |
(2) | Prior years’ development was primarily the result of better than expected development on prior years loss and claim reserves for certain lines of business in American |
2018 | 2017 | |||||
Total incurred losses | $ | 128,550 | $ | 112,334 | ||
Cash surrender value and matured endowments | 1,316 | 1,442 | ||||
Benefit reserve changes | 2,784 | 3,739 | ||||
Total insurance benefits and losses incurred | $ | 132,650 | $ | 117,515 |
2020 | 2019 | |||||||
Total incurred losses | $ | 119,146 | $ | 137,225 | ||||
Cash surrender value and matured endowments | 1,198 | 1,362 | ||||||
Benefit reserve changes | (468 | ) | 638 | |||||
Total insurance benefits and losses incurred | $ | 119,876 | $ | 139,225 |
45
Liability for Unpaid Losses, Claims and Loss Adjustment Expenses
For the Years Ended December 31, | ||||||||||||||||||||||||||||||||||||
As of December 31, 2018 | ||||||||||||||||||||||||||||||||||||
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | IBNR Reserves | Cumulative Number of Reported Claims | ||||||||||||||||||||||||||||||||||
Accident Year | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||||||||||
2009 | $ | 31,124 | $ | 30,455 | $ | 30,481 | $ | 30,447 | $ | 30,438 | $ | 30,432 | $ | 30,431 | $ | 30,430 | $ | 30,430 | $ | 30,430 | $ | — | 560,430 | |||||||||||||
2010 | 34,849 | 34,328 | 34,323 | 34,303 | 34,282 | 34,272 | 34,268 | 34,265 | 34,264 | 625,698 | ||||||||||||||||||||||||||
2011 | 38,188 | 38,296 | 38,360 | 38,327 | 38,316 | 38,302 | 38,299 | 38,297 | — | 664,056 | ||||||||||||||||||||||||||
2012 | 50,021 | 50,996 | 51,021 | 50,998 | 50,989 | 50,987 | 50,985 | — | 867,050 | |||||||||||||||||||||||||||
2013 | 56,974 | 56,970 | 57,034 | 57,023 | 57,021 | 57,016 | — | 957,362 | ||||||||||||||||||||||||||||
2014 | 57,179 | 56,938 | 56,981 | 56,981 | 56,976 | — | 939,472 | |||||||||||||||||||||||||||||
2015 | 55,482 | 54,939 | 54,993 | 54,990 | — | 898,370 | ||||||||||||||||||||||||||||||
2016 | 58,849 | 59,851 | 63,226 | — | 1,036,748 | |||||||||||||||||||||||||||||||
2017 | 67,960 | 69,655 | 130 | 1,510,485 | ||||||||||||||||||||||||||||||||
2018 | 79,140 | 11,584 | 1,781,051 | |||||||||||||||||||||||||||||||||
$ | 534,979 |
For the Years Ended December 31, | As of December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | IBNR Reserves | Cumulative Number of Reported Claims | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accident Year | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 29,866 | $ | 30,455 | $ | 30,481 | $ | 30,447 | $ | 30,438 | $ | 30,432 | $ | 30,431 | $ | 30,430 | $ | 30,430 | $ | 30,430 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 29,127 | 34,328 | 34,323 | 34,303 | 34,282 | 34,272 | 34,268 | 34,265 | 34,264 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 31,720 | 38,296 | 38,360 | 38,327 | 38,316 | 38,302 | 38,299 | 38,297 | $ | 38,188 | $ | 38,296 | $ | 38,360 | $ | 38,327 | $ | 38,316 | $ | 38,302 | $ | 38,299 | $ | 38,297 | $ | 38,297 | $ | 38,297 | $ | — | 664,056 | |||||||||||||||||||||||||||||||||||||||||||||||
2012 | 42,267 | 50,996 | 51,021 | 50,998 | 50,989 | 50,987 | 50,985 | 50,021 | 50,996 | 51,021 | 50,998 | 50,989 | 50,987 | 50,985 | 50,984 | 50,984 | — | 867,050 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 47,770 | 56,970 | 57,034 | 57,023 | 57,021 | 57,016 | 56,974 | 56,970 | 57,034 | 57,023 | 57,021 | 57,016 | 57,015 | 57,014 | — | 957,363 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | 48,024 | 56,938 | 56,981 | 56,981 | 56,976 | 57,179 | 56,938 | 56,981 | 56,981 | 56,976 | 56,977 | 56,976 | — | 939,478 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 45,430 | 54,876 | 54,993 | 54,990 | 55,482 | 54,939 | 54,993 | 54,990 | 54,984 | 54,985 | — | 898,374 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 49,165 | 59,747 | 63,226 | 58,849 | 59,851 | 63,226 | 63,225 | 63,221 | — | 1,036,769 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 57,696 | 69,517 | 67,960 | 69,655 | 69,643 | 69,635 | — | 1,510,654 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 66,565 | 79,140 | 80,404 | 80,361 | — | 1,782,982 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2019 | 88,765 | 87,028 | 172 | 2,242,156 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 75,857 | 12,728 | 1,620,697 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | 522,266 | $ | 634,358 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance | $ | 12,713 |
Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | ||||||||||||||||||||||||||||||||||||||||
Accident Year | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||||||||||||||||||||
2011 | $ | 31,720 | $ | 38,296 | $ | 38,360 | $ | 38,327 | $ | 38,316 | $ | 38,302 | $ | 38,299 | $ | 38,297 | $ | 38,297 | $ | 38,297 | ||||||||||||||||||||
2012 | 42,267 | 50,996 | 51,021 | 50,998 | 50,989 | 50,987 | 50,985 | 50,984 | 50,984 | |||||||||||||||||||||||||||||||
2013 | 47,770 | 56,970 | 57,034 | 57,023 | 57,021 | 57,016 | 57,015 | 57,014 | ||||||||||||||||||||||||||||||||
2014 | 48,024 | 56,938 | 56,981 | 56,981 | 56,976 | 56,977 | 56,976 | |||||||||||||||||||||||||||||||||
2015 | 45,430 | 54,876 | 54,993 | 54,990 | 54,984 | 54,985 | ||||||||||||||||||||||||||||||||||
2016 | 49,165 | 59,747 | 63,226 | 63,225 | 63,221 | |||||||||||||||||||||||||||||||||||
2017 | 57,696 | 69,517 | 69,643 | 69,635 | ||||||||||||||||||||||||||||||||||||
2018 | 66,565 | 80,222 | 80,361 | |||||||||||||||||||||||||||||||||||||
2019 | 72,333 | 86,856 | ||||||||||||||||||||||||||||||||||||||
2020 | 63,129 | |||||||||||||||||||||||||||||||||||||||
$ | 621,458 | |||||||||||||||||||||||||||||||||||||||
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance | $ | 12,900 |
46
Automobile Liability
For the Years Ended December 31, | ||||||||||||||||||||||||||||||||||||
As of December 31, 2018 | ||||||||||||||||||||||||||||||||||||
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | IBNR Reserves | Cumulative Number of Reported Claims | ||||||||||||||||||||||||||||||||||
Accident Year | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||||||||||
2009 | $ | 10,817 | $ | 8,891 | $ | 8,659 | $ | 8,558 | $ | 8,245 | $ | 8,123 | $ | 8,155 | $ | 8,154 | $ | 8,153 | $ | 8,153 | $ | — | 1,755 | |||||||||||||
2010 | 10,752 | 10,818 | 10,547 | 9,937 | 10,068 | 10,185 | 10,202 | 10,201 | 10,209 | — | 1,947 | |||||||||||||||||||||||||
2011 | 12,263 | 13,802 | 13,235 | 13,289 | 13,281 | 13,495 | 13,385 | 13,330 | — | 2,132 | ||||||||||||||||||||||||||
2012 | 12,980 | 15,007 | 14,108 | 13,707 | 13,313 | 13,343 | 13,357 | 12 | 2,343 | |||||||||||||||||||||||||||
2013 | 18,664 | 20,702 | 21,096 | 21,823 | 21,352 | 21,020 | 7 | 3,265 | ||||||||||||||||||||||||||||
2014 | 20,812 | 21,881 | 22,041 | 22,353 | 21,682 | 134 | 3,541 | |||||||||||||||||||||||||||||
2015 | 18,521 | 19,857 | 20,017 | 20,007 | 898 | 3,521 | ||||||||||||||||||||||||||||||
2016 | 20,549 | 21,275 | 21,846 | 2,043 | 3,822 | |||||||||||||||||||||||||||||||
2017 | 22,179 | 24,212 | 2,961 | 3,719 | ||||||||||||||||||||||||||||||||
2018 | 24,284 | 7,466 | 3,205 | |||||||||||||||||||||||||||||||||
$ | 178,100 |
Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | ||||||||||||||||||||||||||||||
Accident Year | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||||
2009 | $ | 3,250 | $ | 5,208 | $ | 6,353 | $ | 7,502 | $ | 7,995 | $ | 8,123 | $ | 8,155 | $ | 8,154 | $ | 8,153 | $ | 8,153 | ||||||||||
2010 | 3,211 | 6,274 | 8,291 | 9,382 | 9,725 | 10,056 | 10,090 | 10,206 | 10,210 | |||||||||||||||||||||
2011 | 4,205 | 7,934 | 9,858 | 12,071 | 13,039 | 13,106 | 13,199 | 13,330 | ||||||||||||||||||||||
2012 | 4,627 | 8,791 | 11,507 | 12,932 | 13,197 | 13,211 | 13,288 | |||||||||||||||||||||||
2013 | 5,144 | 12,193 | 16,782 | 19,407 | 20,382 | 20,982 | ||||||||||||||||||||||||
2014 | 6,822 | 13,807 | 17,554 | 20,177 | 20,878 | |||||||||||||||||||||||||
2015 | 6,226 | 11,878 | 14,938 | 17,612 | ||||||||||||||||||||||||||
2016 | 6,796 | 13,141 | 16,397 | |||||||||||||||||||||||||||
2017 | 7,401 | 16,317 | ||||||||||||||||||||||||||||
2018 | 6,989 | |||||||||||||||||||||||||||||
$ | 144,156 | |||||||||||||||||||||||||||||
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance | $ | 33,944 |
For the Years Ended December 31, | As of December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | IBNR Reserves | Cumulative Number of Reported Claims | ||||||||||||||||||||||||||||||||||||||||||||||
Accident Year | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||||||||||||||||||||||||||||
2011 | $ | 12,263 | $ | 13,802 | $ | 13,235 | $ | 13,289 | $ | 13,281 | $ | 13,495 | $ | 13,385 | $ | 13,330 | $ | 13,329 | $ | 13,328 | $ | — | 2,134 | |||||||||||||||||||||||||
2012 | 12,980 | 15,007 | 14,108 | 13,707 | 13,313 | 13,343 | 13,357 | 13,373 | 13,373 | — | 2,343 | |||||||||||||||||||||||||||||||||||||
2013 | 18,664 | 20,702 | 21,096 | 21,823 | 21,352 | 21,020 | 20,972 | 20,972 | — | 3,267 | ||||||||||||||||||||||||||||||||||||||
2014 | 20,812 | 21,881 | 22,041 | 22,353 | 21,682 | 22,080 | 22,100 | 48 | 3,544 | |||||||||||||||||||||||||||||||||||||||
2015 | 18,521 | 19,857 | 20,017 | 20,007 | 20,086 | 20,680 | 75 | 3,525 | ||||||||||||||||||||||||||||||||||||||||
2016 | 20,549 | 21,275 | 21,846 | 22,388 | 22,245 | 140 | 3,842 | |||||||||||||||||||||||||||||||||||||||||
2017 | 22,179 | 24,212 | 23,766 | 25,180 | 801 | 3,772 | ||||||||||||||||||||||||||||||||||||||||||
2018 | 24,284 | 25,682 | 27,338 | 2,072 | 3,578 | |||||||||||||||||||||||||||||||||||||||||||
2019 | 25,241 | 24,045 | 3,117 | 3,479 | ||||||||||||||||||||||||||||||||||||||||||||
2020 | 22,416 | 12,187 | 2,183 | |||||||||||||||||||||||||||||||||||||||||||||
$ | 211,677 |
Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | ||||||||||||||||||||||||||||||||||||||||
Accident Year | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||||||||||||||||||||
2011 | $ | 4,205 | $ | 7,934 | $ | 9,858 | $ | 12,071 | $ | 13,039 | $ | 13,106 | $ | 13,199 | $ | 13,330 | $ | 13,329 | $ | 13,328 | ||||||||||||||||||||
2012 | 4,627 | 8,791 | 11,507 | 12,932 | 13,197 | 13,211 | 13,288 | 13,373 | 13,373 | |||||||||||||||||||||||||||||||
2013 | 5,144 | 12,193 | 16,782 | 19,407 | 20,382 | 20,982 | 20,972 | 20,972 | ||||||||||||||||||||||||||||||||
2014 | 6,822 | 13,807 | 17,554 | 20,177 | 20,878 | 21,735 | 21,813 | |||||||||||||||||||||||||||||||||
2015 | 6,226 | 11,878 | 14,938 | 17,612 | 19,557 | 20,234 | ||||||||||||||||||||||||||||||||||
2016 | 6,796 | 13,141 | 16,397 | 19,613 | 21,408 | |||||||||||||||||||||||||||||||||||
2017 | 7,401 | 16,317 | 20,221 | 22,778 | ||||||||||||||||||||||||||||||||||||
2018 | 6,989 | 15,647 | 21,121 | |||||||||||||||||||||||||||||||||||||
2019 | 7,305 | 14,694 | ||||||||||||||||||||||||||||||||||||||
2020 | 5,172 | |||||||||||||||||||||||||||||||||||||||
$ | 174,893 | |||||||||||||||||||||||||||||||||||||||
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance | $ | 36,784 |
Automobile Physical Damage
For the Years Ended December 31, | |||||||||||||||||||||
As of December 31, 2018 | |||||||||||||||||||||
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | IBNR Reserves | Cumulative Number of Reported Claims | |||||||||||||||||||
Accident Year | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||
2014 | $ | 8,079 | $ | 7,657 | $ | 7,583 | $ | 7,562 | $ | 7,561 | $ | — | 1,635 | ||||||||
2015 | 8,287 | 7,955 | 7,887 | 7,896 | — | 1,588 | |||||||||||||||
2016 | 6,877 | 6,386 | 6,352 | 1 | 1,267 | ||||||||||||||||
2017 | 6,257 | 5,933 | 2 | 1,316 | |||||||||||||||||
2018 | 7,805 | 145 | 1,343 | ||||||||||||||||||
$ | 35,547 |
Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | |||||||||||||||
Accident Year | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||
2014 | $ | 6,437 | $ | 7,619 | $ | 7,570 | $ | 7,562 | $ | 7,561 | |||||
2015 | 6,745 | 7,937 | 7,885 | 7,895 | |||||||||||
2016 | 5,804 | 6,353 | 6,349 | ||||||||||||
2017 | 5,215 | 5,914 | |||||||||||||
2018 | 6,344 | ||||||||||||||
$ | 34,063 | ||||||||||||||
All outstanding liabilities before 2014, net of reinsurance | — | ||||||||||||||
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance | $ | 1,484 |
For the Years Ended December 31, | As of December 31, 2020 | |||||||||||||||||||||||||||
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | IBNR Reserves | Cumulative Number of Reported Claims | ||||||||||||||||||||||||||
Accident Year | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||||||
2016 | $ | 6,877 | $ | 6,386 | $ | 6,352 | $ | 6,289 | $ | 6,289 | $ | — | 1,269 | |||||||||||||||
2017 | 6,257 | 5,933 | 5,857 | 5,860 | — | 1,324 | ||||||||||||||||||||||
2018 | 7,805 | 7,530 | 7,447 | — | 1,452 | |||||||||||||||||||||||
2019 | 8,526 | 8,026 | 2 | 1,485 | ||||||||||||||||||||||||
2020 | 10,288 | 177 | 1,526 | |||||||||||||||||||||||||
$ | 37,910 |
Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | ||||||||||||||||||||
Accident Year | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||
2016 | $ | 5,804 | $ | 6,353 | $ | 6,349 | $ | 6,289 | $ | 6,289 | ||||||||||
2017 | 5,215 | 5,914 | 5,856 | 5,860 | ||||||||||||||||
2018 | 6,344 | 7,510 | 7,446 | |||||||||||||||||
2019 | 6,360 | 8,005 | ||||||||||||||||||
2020 | 8,347 | |||||||||||||||||||
$ | 35,947 | |||||||||||||||||||
All outstanding liabilities before 2016, net of reinsurance | 1 | |||||||||||||||||||
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance | $ | 1,964 |
48
General Liability
For the Years Ended December 31, | ||||||||||||||||||||||||||||||||||||
As of December 31, 2018 | ||||||||||||||||||||||||||||||||||||
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | IBNR Reserves | Cumulative Number of Reported Claims | ||||||||||||||||||||||||||||||||||
Accident Year | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||||||||||
2009 | $ | 3,392 | $ | 2,215 | $ | 1,944 | $ | 1,730 | $ | 1,702 | $ | 1,727 | $ | 1,828 | $ | 1,832 | $ | 1,888 | $ | 1,921 | $ | 0 | 290 | |||||||||||||
2010 | 4,114 | 2,699 | 2,269 | 2,337 | 2,258 | 2,400 | 2,423 | 2,473 | 2,480 | 4 | 289 | |||||||||||||||||||||||||
2011 | 3,022 | 1,723 | 1,452 | 1,338 | 1,174 | 1,242 | 1,327 | 1,335 | 12 | 204 | ||||||||||||||||||||||||||
2012 | 4,055 | 1,305 | 1,269 | 1,270 | 1,214 | 1,333 | 1,344 | 19 | 158 | |||||||||||||||||||||||||||
2013 | 3,461 | 728 | 926 | 817 | 865 | 820 | 4 | 187 | ||||||||||||||||||||||||||||
2014 | 3,744 | 501 | 557 | 476 | 406 | 8 | 192 | |||||||||||||||||||||||||||||
2015 | 4,421 | 1,037 | 1,227 | 1,044 | 143 | 144 | ||||||||||||||||||||||||||||||
2016 | 3,119 | 1,148 | 736 | 80 | 84 | |||||||||||||||||||||||||||||||
2017 | 1,490 | 488 | 184 | 72 | ||||||||||||||||||||||||||||||||
2018 | 1,656 | 1,519 | 42 | |||||||||||||||||||||||||||||||||
$ | 12,230 |
Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | ||||||||||||||||||||||||||||||
Accident Year | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||||
2009 | $ | 476 | $ | 941 | $ | 1,082 | $ | 1,410 | $ | 1,629 | $ | 1,662 | $ | 1,796 | $ | 1,816 | $ | 1,855 | $ | 1,921 | ||||||||||
2010 | 284 | 678 | 1,374 | 1,542 | 2,037 | 2,368 | 2,382 | 2,457 | 2,463 | |||||||||||||||||||||
2011 | 295 | 412 | 582 | 835 | 1,161 | 1,169 | 1,278 | 1,285 | ||||||||||||||||||||||
2012 | 371 | 707 | 847 | 1,034 | 1,113 | 1,219 | 1,260 | |||||||||||||||||||||||
2013 | 104 | 339 | 579 | 811 | 791 | 803 | ||||||||||||||||||||||||
2014 | 171 | 299 | 331 | 369 | 373 | |||||||||||||||||||||||||
2015 | 98 | 259 | 464 | 664 | ||||||||||||||||||||||||||
2016 | 116 | 203 | 568 | |||||||||||||||||||||||||||
2017 | 75 | 136 | ||||||||||||||||||||||||||||
2018 | 65 | |||||||||||||||||||||||||||||
$ | 9,538 | |||||||||||||||||||||||||||||
All outstanding liabilities before 2009, net of reinsurance | 402 | |||||||||||||||||||||||||||||
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance | $ | 3,094 |
For the Years Ended December 31, | As of December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | IBNR Reserves | Cumulative Number of Reported Claims | ||||||||||||||||||||||||||||||||||||||||||||||
Accident Year | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||||||||||||||||||||||||||||
2011 | $ | 3,022 | $ | 1,723 | $ | 1,452 | $ | 1,338 | $ | 1,174 | $ | 1,242 | $ | 1,327 | $ | 1,335 | $ | 1,400 | $ | 1,534 | $ | 20 | 210 | |||||||||||||||||||||||||
2012 | 4,055 | 1,305 | 1,269 | 1,270 | 1,214 | 1,333 | 1,344 | 1,377 | 1,388 | 25 | 161 | |||||||||||||||||||||||||||||||||||||
2013 | 3,461 | 728 | 926 | 817 | 865 | 820 | 945 | 904 | 11 | 197 | ||||||||||||||||||||||||||||||||||||||
2014 | 3,744 | 501 | 557 | 476 | 406 | 497 | 523 | 6 | 194 | |||||||||||||||||||||||||||||||||||||||
2015 | 4,421 | 1,037 | 1,227 | 1,044 | 867 | 855 | — | 146 | ||||||||||||||||||||||||||||||||||||||||
2016 | 3,119 | 1,148 | 736 | 608 | 621 | 1 | 92 | |||||||||||||||||||||||||||||||||||||||||
2017 | 1,490 | 488 | 513 | 738 | 68 | 82 | ||||||||||||||||||||||||||||||||||||||||||
2018 | 1,656 | 333 | 198 | 40 | 75 | |||||||||||||||||||||||||||||||||||||||||||
2019 | 1,916 | 707 | 261 | 82 | ||||||||||||||||||||||||||||||||||||||||||||
2020 | 2,223 | 1,749 | 62 | |||||||||||||||||||||||||||||||||||||||||||||
$ | 9,691 |
Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | ||||||||||||||||||||||||||||||||||||||||
Accident Year | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||||||||||||||||||||
2011 | $ | 295 | $ | 412 | $ | 582 | $ | 835 | $ | 1,161 | $ | 1,169 | $ | 1,278 | $ | 1,285 | $ | 1,325 | $ | 1,426 | ||||||||||||||||||||
2012 | 371 | 707 | 847 | 1,034 | 1,113 | 1,219 | 1,260 | 1,269 | 1,280 | |||||||||||||||||||||||||||||||
2013 | 104 | 339 | 579 | 811 | 791 | 803 | 805 | 855 | ||||||||||||||||||||||||||||||||
2014 | 171 | 299 | 331 | 369 | 373 | 493 | 498 | |||||||||||||||||||||||||||||||||
2015 | 98 | 259 | 464 | 664 | 863 | 855 | ||||||||||||||||||||||||||||||||||
2016 | 116 | 203 | 568 | 608 | 617 | |||||||||||||||||||||||||||||||||||
2017 | 75 | 136 | 365 | 556 | ||||||||||||||||||||||||||||||||||||
2018 | 65 | 90 | 115 | |||||||||||||||||||||||||||||||||||||
2019 | 41 | 209 | ||||||||||||||||||||||||||||||||||||||
2020 | 208 | |||||||||||||||||||||||||||||||||||||||
$ | 6,619 | |||||||||||||||||||||||||||||||||||||||
All outstanding liabilities before 2011, net of reinsurance | 343 | |||||||||||||||||||||||||||||||||||||||
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance | $ | 3,415 |
Surety
For the Years Ended December 31, | ||||||||||||||||||||||||||||||||||||
As of December 31, 2018 | ||||||||||||||||||||||||||||||||||||
Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | IBNR Reserves | Cumulative Number of Reported Claims | ||||||||||||||||||||||||||||||||||
Accident Year | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||||||||||
2009 | $ | 4,920 | $ | 5,025 | $ | 4,239 | $ | 3,951 | $ | 3,616 | $ | 4,636 | $ | 4,916 | $ | 4,664 | $ | 4,667 | $ | 4,590 | $ | — | 84 | |||||||||||||
2010 | 3,995 | 4,624 | 3,618 | 3,396 | 3,607 | 3,549 | 3,563 | 3,534 | 3,530 | — | 95 | |||||||||||||||||||||||||
2011 | 4,422 | 4,786 | 5,080 | 5,092 | 4,966 | 5,031 | 5,112 | 5,111 | — | 126 | ||||||||||||||||||||||||||
2012 | 4,979 | 4,767 | 5,396 | 5,345 | 4,869 | 4,880 | 4,892 | 2 | 89 | |||||||||||||||||||||||||||
2013 | 3,060 | 2,007 | 2,743 | 2,947 | 2,866 | 2,809 | 10 | 58 | ||||||||||||||||||||||||||||
2014 | 3,214 | 3,130 | 2,990 | 2,760 | 2,685 | 4 | 53 | |||||||||||||||||||||||||||||
2015 | 1,902 | 1,630 | 1,400 | 1,359 | 39 | 49 | ||||||||||||||||||||||||||||||
2016 | 3,314 | 1,812 | 1,865 | 27 | 46 | |||||||||||||||||||||||||||||||
2017 | 4,677 | 3,671 | 203 | 57 | ||||||||||||||||||||||||||||||||
2018 | 3,528 | 1,872 | 59 | |||||||||||||||||||||||||||||||||
$ | 34,040 |
For the Years Ended December 31, | As of December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance | IBNR Reserves | Cumulative Number of Reported Claims | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accident Year | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 103 | $ | 1,595 | $ | 2,640 | $ | 3,205 | $ | 3,410 | $ | 3,760 | $ | 3,757 | $ | 4,663 | $ | 4,666 | $ | 4,590 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 928 | 2,193 | 2,780 | 2,943 | 3,252 | 3,545 | 3,560 | 3,534 | 3,530 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 1,031 | 3,207 | 4,622 | 4,748 | 4,939 | 5,022 | 5,109 | 5,111 | $ | 4,422 | $ | 4,786 | $ | 5,080 | $ | 5,092 | $ | 4,966 | $ | 5,031 | $ | 5,112 | $ | 5,111 | $ | 5,112 | $ | 5,163 | $ | 7 | 128 | |||||||||||||||||||||||||||||||||||||||||||||||
2012 | 2,257 | 4,581 | 4,856 | 5,331 | 4,869 | 4,880 | 4,878 | 4,979 | 4,767 | 5,396 | 5,345 | 4,869 | 4,880 | 4,892 | 4,925 | 4,944 | 2 | 89 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 323 | 1,010 | 1,369 | 2,763 | 2,789 | 2,749 | 3,060 | 2,007 | 2,743 | 2,947 | 2,866 | 2,809 | 2,765 | 2,757 | — | 58 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | 1,331 | 2,327 | 2,727 | 2,739 | 2,664 | 3,214 | 3,130 | 2,990 | 2,760 | 2,685 | 2,617 | 2,818 | 43 | 54 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 641 | 856 | 1,127 | 1,125 | 1,902 | 1,630 | 1,400 | 1,359 | 1,406 | 1,310 | 6 | 50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 1,054 | 1,732 | 1,772 | 3,314 | 1,812 | 1,865 | 1,876 | 1,865 | — | 46 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 1,971 | 3,255 | 4,677 | 3,671 | 3,799 | 3,629 | 13 | 58 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 1,157 | 3,528 | 1,938 | 1,381 | 6 | 62 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2019 | 2,130 | 657 | 128 | 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 2,263 | 1,887 | 20 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | 30,831 | $ | 26,787 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
All outstanding liabilities before 2009, net of reinsurance | 3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance | $ | 3,212 |
Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance Accident Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 All outstanding liabilities before 2011, net of reinsurance Liabilities for losses, claims and loss adjustment expenses, net of reinsurance
50
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.
Average Annual Percentage Payout of Incurred Claims by Age, Net of 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 | 83.5 | % | 16.5 | % | 0.1 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||||
Automobile Liability | 31.5 | % | 30.3 | % | 17.2 | % | 12.9 | % | 4.4 | % | 1.7 | % | 0.5 | % | 0.7 | % | 0.0 | % | 0.0 | % | ||||||||||
Automobile Physical Damage | 86.2 | % | 12.8 | % | -0.5 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||||
General Liability | 18.5 | % | 19.3 | % | 20.6 | % | 16.2 | % | 10.0 | % | 5.0 | % | 4.7 | % | 1.5 | % | 1.1 | % | 3.4 | % | ||||||||||
Surety | 34.6 | % | 34.1 | % | 15.3 | % | 11.3 | % | 0.9 | % | 3.3 | % | 0.5 | % | 6.3 | % | 0.0 | % | -1.7 | % |
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited) Reserve Line Medicare Supplement Automobile Liability Automobile Physical Damage General Liability Surety
December 31, 2018 | |||
Net outstanding liabilities: | |||
Medicare Supplement | $ | 12,713 | |
Automobile Liability | 33,944 | ||
Automobile Physical Damage | 1,484 | ||
General Liability | 3,094 | ||
Surety | 3,212 | ||
Other short-duration insurance lines | 2,118 | ||
Liabilities for unpaid losses, claims and loss adjustment expenses, net of reinsurance | 56,565 | ||
Reinsurance recoverable on unpaid losses: | |||
Medicare Supplement | 7,926 | ||
Automobile Liability | 4,777 | ||
Automobile Physical Damage | 156 | ||
General Liability | 1,495 | ||
Total reinsurance recoverable on unpaid losses | 14,354 | ||
Unallocated claims adjustment expenses | 1,693 | ||
Total gross liability for unpaid losses, claims and loss adjustment expenses | $ | 72,612 |
December 31, 2020 | ||||
Net outstanding liabilities | ||||
Medicare Supplement | $ | 12,900 | ||
Automobile Liability | 36,784 | |||
Automobile Physical Damage | 1,964 | |||
General Liability | 3,415 | |||
Surety | 2,940 | |||
Other short-duration insurance lines | 1,666 | |||
Liabilities for unpaid losses, claims and loss adjustment expenses, net of reinsurance | 59,669 | |||
Reinsurance recoverable on unpaid losses: | ||||
Medicare Supplement | 8,975 | |||
Automobile Liability | 6,260 | |||
Automobile Physical Damage | 3 | |||
General Liability | 2,362 | |||
Total reinsurance recoverable on unpaid losses | 17,600 | |||
Unallocated claims adjustment expenses | 1,878 | |||
Total gross liability for unpaid losses, claims and loss adjustment expenses | $ | 79,147 |
Note 6. | Reinsurance |
51
The effects of reinsurance on premiums written, premiums earned and insurance benefits and losses incurred were as follows:
2018 | 2017 | |||||
Direct premiums written | $ | 220,415 | $ | 181,568 | ||
Assumed premiums written | 20,093 | 19,373 | ||||
Ceded premiums written | (66,845 | ) | (38,019 | ) | ||
Net premiums written | $ | 173,663 | $ | 162,922 | ||
Direct premiums earned | $ | 219,785 | $ | 181,458 | ||
Assumed premiums earned | 19,680 | 19,241 | ||||
Ceded premiums earned | (66,534 | ) | (37,372 | ) | ||
Net premiums earned | $ | 172,931 | $ | 163,327 | ||
Provision for benefits and losses incurred | $ | 188,275 | $ | 147,444 | ||
Reinsurance loss recoveries | (55,625 | ) | (29,929 | ) | ||
Insurance benefits and losses incurred | $ | 132,650 | $ | 117,515 |
2020 2019 Direct premiums written Assumed premiums written Ceded premiums written Net premiums written Direct premiums earned Assumed premiums earned Ceded premiums earned Net premiums earned Provision for benefits and losses incurred Reinsurance loss recoveries Insurance benefits and losses incurred
2018 | 2017 | |||||
Recoverable on unpaid losses | $ | 14,354 | $ | 11,968 | ||
Recoverable on unpaid benefits | 9,355 | 4,403 | ||||
Recoverable on paid losses | 992 | — | ||||
Ceded unearned premiums | 1,185 | 874 | ||||
Ceded advanced premiums | 224 | 368 | ||||
Total reinsurance receivables | $ | 26,110 | $ | 17,613 |
2020 | 2019 | |||||||
Recoverable on unpaid losses | $ | 17,600 | $ | 18,339 | ||||
Recoverable on unpaid benefits | 9,832 | 10,772 | ||||||
Recoverable on paid losses | 447 | 1,538 | ||||||
Ceded unearned premiums | 963 | 1,155 | ||||||
Ceded advanced premiums | 244 | 331 | ||||||
Total reinsurance receivables | $ | 29,086 | $ | 32,135 |
Note 7. | Income Taxes |
2018 | 2017 | |||||
Total tax expense (benefit) on income | $ | (267 | ) | $ | 828 | |
Tax expense (benefit) on components of shareholders’ equity: | ||||||
Net unrealized gains on investment securities | (2,541 | ) | 2,111 | |||
Total tax expense (benefit) | $ | (2,808 | ) | $ | 2,939 |
2020 2019 Total tax expense (benefit) on income Tax expense on components of shareholders’ equity: Net unrealized gains on investment securities Total tax expense
2018 | 2017 | |||||
Federal income tax provision | $ | (204 | ) | $ | 1,875 | |
Statutory rate | 21 | % | 35 | % | ||
Dividends-received deduction | (39 | ) | (92 | ) | ||
Small life insurance company deduction | — | (613 | ) | |||
Other | 75 | 72 | ||||
Remeasurement of deferred taxes due to tax reform enactment | — | (395 | ) | |||
Adjustment for prior years’ estimates to actual | (99 | ) | (19 | ) | ||
Income tax expense (benefit) | $ | (267 | ) | $ | 828 | |
Effective tax rate | 27.5 | % | 15.5 | % |
2020 | 2019 | |||||||
Federal income tax provision | $ | 3,256 | $ | (86 | ) | |||
Statutory rate | 21 | % | 21 | % | ||||
Dividends-received deduction | (12 | ) | (23 | ) | ||||
Meals & entertainment | 20 | 55 | ||||||
Vested stock & club dues | 36 | 37 | ||||||
Parking disallowance | 16 | 17 | ||||||
Adjustment for prior years’ estimates to actual | 18 | (21 | ) | |||||
Income tax expense (benefit) | $ | 3,334 | $ | (21 | ) | |||
Effective tax rate | 21.5 | % | 5.2 | % |
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The primary differences between the effective tax rate and the federal statutory income tax rate for 20182020 resulted from permanent differences related to meals & entertainment and vested stock grants. Also contributing to differences between the effective tax rate and the federal statutory income tax rate were provision-to-filed return adjustments that are generally updated at the completion of the third quarter of each fiscal year and were $99$18 in the year ended December 31, 2018.
2020.
2018 | 2017 | |||||
Deferred tax assets: | ||||||
Deferred acquisition costs | $ | 175 | $ | — | ||
Insurance reserves | 3,410 | 3,216 | ||||
Impaired assets | 1,142 | 869 | ||||
Bad debts and other | 332 | 380 | ||||
Total deferred tax assets | 5,059 | 4,465 | ||||
Deferred tax liabilities: | ||||||
Deferred acquisition costs | $ | — | $ | (1,200 | ) | |
Deferred and uncollected premiums | (360 | ) | (377 | ) | ||
Net unrealized investment gains | (148 | ) | (3,150 | ) | ||
Other | (367 | ) | (331 | ) | ||
Total deferred tax liabilities | (875 | ) | (5,058 | ) | ||
Net deferred tax asset (liability) | $ | 4,184 | $ | (593 | ) |
2020 2019 Deferred tax assets: Deferred acquisition costs Insurance reserves Impaired assets Bad debts and other Total deferred tax assets Deferred tax liabilities: Deferred and uncollected premiums Net unrealized investment gains Other Total deferred tax liabilities Net deferred tax (liability) asset
2018 | 2017 | |||||
Current - Federal | $ | 1,969 | $ | 2,186 | ||
Deferred - Federal | (2,236 | ) | (1,358 | ) | ||
Total | $ | (267 | ) | $ | 828 |
2020 2019 Current – Federal Deferred – Federal Total
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Note 8. | Junior Subordinated Debentures |
At December 31, 2020, the effective interest rate was 4.28%.
Atlantic American Statutory Trust I | Atlantic American Statutory Trust II | |||||
JUNIOR SUBORDINATED DEBENTURES(1)(2) | ||||||
Balance December 31, 2018 | $18,042 | $23,196 | ||||
Less: Treasury debt(3) | — | (7,500) | ||||
Net balance December 31, 2018 | $18,042 | $15,696 | ||||
Net balance December 31, 2017 | $18,042 | $15,696 | ||||
Coupon rate | LIBOR + 4.00% | LIBOR + 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 | LIBOR + 4.00% | LIBOR + 4.10% | ||||
Distribution payable | Quarterly | Quarterly | ||||
Distribution guaranteed by(4) | Atlantic | Atlantic | ||||
American | American | |||||
Corporation | Corporation |
Atlantic American Statutory Trust I | Atlantic American Statutory Trust II | |||||||
JUNIOR SUBORDINATED DEBENTURES(1)(2) | ||||||||
Balance December 31, 2020 | $ | 18,042 | $ | 23,196 | ||||
Less: Treasury debt(3) | — | (7,500 | ) | |||||
Net balance December 31, 2020 | $ | 18,042 | $ | 15,696 | ||||
Net balance December 31, 2019 | $ | 18,042 | $ | 15,696 | ||||
Coupon rate | LIBOR + 4.00% | LIBOR + 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 | LIBOR + 4.00% | LIBOR + 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. |
Note 9. | Leases |
Year Ended December 31, 2020 | Year Ended December 31, 2019 | |||||||
Other information on operating leases: | ||||||||
Cash payments included in the measurement of lease liabilities reported in operating cash flows | $ | 978 | 815 | |||||
Right-of-use assets included in other assets on the consolidated balance sheet | 4,832 | 5,476 | ||||||
Weighted average discount rate | 6.8 | % | 6.8 | % | ||||
Weighted average remaining lease term in years | 5.9 years | 6.9 years |
Lease Liability | ||||
2021 | $ | 1,015 | ||
2022 | 1,031 | |||
2023 | 1,048 | |||
2024 | 1,065 | |||
2025 | 1,083 | |||
Thereafter | 942 | |||
Total undiscounted lease payments | 6,184 | |||
Less: present value adjustment | 1,116 | |||
Operating lease liability included in accounts payable and accrued expenses on the consolidated balance sheet | $ | 5,068 |
Note 10. | Benefit Plans |
54
Note 11. | Preferred Stock |
Note 12. | Earnings (Loss) Per Common Share |
For the Year Ended December 31, 2020 | ||||||||||||
Income | Weighted Average Shares Outstanding (In thousands) | Per Share Amount | ||||||||||
Basic Earnings Per Common Share | ||||||||||||
Net income before preferred stock dividends | $ | 12,169 | 20,441 | - | ||||||||
Less preferred stock dividends | (399 | ) | — | |||||||||
Net income applicable to common shareholders | 11,770 | 20,441 | 0.58 | |||||||||
Diluted Earnings Per Common Share: | ||||||||||||
Effect of Series D preferred stock | 399 | 1,378 | ||||||||||
Net income applicable to common shareholders | $ | 12,169 | 21,819 | $ | 0.56 |
For the Year Ended December 31, 2019 | ||||||||||||
Loss | Weighted Average Shares Outstanding (In thousands) | Per Share Amount | ||||||||||
Basic and Diluted Loss Per Common Share | ||||||||||||
Net loss before preferred stock dividends | $ | (386 | ) | 20,258 | - | |||||||
Less preferred stock dividends | (399 | ) | — | |||||||||
Net loss applicable to common shareholders | $ | (785 | ) | 20,258 | $ | (.04 | ) |
Litigation
From time to time, the Company is, and expects to continue to be, involved in various claims and lawsuits incidental to and 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.
Operating Lease Commitments
The Company’s rental expense, including common area charges, for operating leases was $1,233 and $1,306 in 2018 and 2017, respectively. The Company’s future minimum base lease obligations under non-cancelable operating leases are as follows:
Year Ending December 31, | |||
2019 | $ | 815 | |
2020 | 506 | ||
2021 | 544 | ||
Thereafter | 3,240 | ||
Total | $ | 5,105 |
Equity Incentive Plan
On May 1, 2012, the Company’s shareholders approved the 2012 Equity Incentive Plan (the “2012 Plan”). The 2012 Plan authorizes the grant of up to 2,000,000 stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares, performance units and other awards for the purpose of providing the Company’s non-employee directors, consultants, officers and other employees incentives and rewards for superior performance. In 2018, a total of 30,000 restricted shares, with an estimated fair value of $87, were issued under the 2012 Plan and 64,000 restricted shares, with an estimated fair value of $236, were forfeited under such plan. In 2017, a total of 182,000 restricted shares, with an estimated fair value of $646, were issued under the 2012 Plan. The estimated fair value of the restricted shares issued under the 2012 Plan for 2018 and 2017 was 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. The Company accounts for forfeitures as they occur. There were no stock options granted or outstanding under the 2012 Plan in 2018 or 2017. Shares available for future grant at December 31, 2018 and 2017 were 1,275,200 and 1,241,200, respectively.
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 2018 and 2017 was $233 and $237, 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 2018 and 2017 of $491 and $450, 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.
55
The Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding at December 31, 2018 and 2017, 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, 2018 and 2017. During each of 2018 and 2017, the Company paid Series D Preferred Stock dividends of $399.
Basic earnings per share was computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. The computation of diluted earnings per share reflected the effect of potentially dilutive securities.
A reconciliation of the numerator and denominator of the earnings (loss) per common share calculations is as follows:
For the Year Ended December 31, 2018 | |||||||||
Income | Shares (In thousands) | Per Share Amount | |||||||
Basic and Diluted Loss Per Common Share | |||||||||
Net loss before preferred stock dividends | $ | (704 | ) | 20,284 | |||||
Less preferred stock dividends | (399 | ) | — | ||||||
Net loss applicable to common shareholders | $ | (1,103 | ) | 20,284 | $ | (.05 | ) |
For the Year Ended December 31, 2017 | |||||||||
Income | Shares (In thousands) | Per Share Amount | |||||||
Basic and Diluted Earnings Per Common Share | |||||||||
Net income before preferred stock dividends | $ | 4,528 | 20,431 | ||||||
Less preferred stock dividends | (399 | ) | — | ||||||
Net income applicable to common shareholders | $ | 4,129 | 20,431 | $ | .20 |
The assumed conversion of the Company’s Series D Preferred Stock was excluded from the earnings per common share calculation for 2018 and 2017 since its impact would have been antidilutive.
Note 13. | Statutory Reporting |
56
The Company meets the minimum capital requirements in the states in which it does business. The amount of reported statutory net income and surplus (shareholders’ equity) for the Parent’s insurance subsidiaries for the years ended December 31 was as follows:
2018 | 2017 | |||||
Bankers Fidelity, net loss | $ | (3,963 | ) | $ | (2,880 | ) |
American Southern, net income | 5,445 | 6,647 | ||||
Statutory net income | $ | 1,482 | $ | 3,767 | ||
Bankers Fidelity, surplus | $ | 34,214 | $ | 34,135 | ||
American Southern, surplus | 43,467 | 43,348 | ||||
Statutory surplus | $ | 77,681 | $ | 77,483 |
2020 2019 Bankers Fidelity, net income (loss) American Southern, net income Statutory net income (loss) Bankers Fidelity, surplus American Southern, surplus Statutory surplus
Note 14. | Related Party Transactions |
During the years ended December 31, 2018 and 2017,2019, Gray paid the Company approximately $403$1,038 and $597,$1,022, respectively, in employer paid insurance premiums related to a group accident plan.
57
Note 15. | Segment Information |
For the Year Ended December 31, 2018 | |||||||||||||||
American Southern | Bankers Fidelity | Corporate & Other | Adjustments & Eliminations | Consolidated | |||||||||||
Insurance premiums, net | $ | 53,807 | $ | 119,124 | $ | — | $ | — | $ | 172,931 | |||||
Insurance benefits and losses incurred | 38,829 | 93,821 | — | — | 132,650 | ||||||||||
Expenses deferred | (7,893 | ) | (14,118 | ) | — | — | (22,011 | ) | |||||||
Amortization and depreciation expense | 7,991 | 9,892 | 715 | — | 18,598 | ||||||||||
Other expenses | 14,666 | 36,514 | 16,613 | (10,506 | ) | 57,287 | |||||||||
Total expenses | 53,593 | 126,109 | 17,328 | (10,506 | ) | 186,524 | |||||||||
Underwriting income (loss) | 214 | (6,985 | ) | ||||||||||||
Net investment income | 3,783 | 5,382 | 2,895 | (2,511 | ) | 9,549 | |||||||||
Other income | 8 | 7 | 8,093 | (7,995 | ) | 113 | |||||||||
Operating income (loss) | 4,005 | (1,596 | ) | (6,340 | ) | — | (3,931 | ) | |||||||
Net realized gains | 1,876 | 3,006 | 272 | — | 5,154 | ||||||||||
Unrealized losses on equity securities | (220 | ) | (514 | ) | (1,460 | ) | — | (2,194 | ) | ||||||
Income (loss) before income taxes | $ | 5,661 | $ | 896 | $ | (7,528 | ) | $ | — | $ | (971 | ) | |||
Total revenues | $ | 59,254 | $ | 127,005 | $ | 9,800 | $ | (10,506 | ) | $ | 185,553 | ||||
Intangibles | $ | 1,350 | $ | 1,194 | $ | — | $ | — | $ | 2,544 | |||||
Total assets | $ | 122,724 | $ | 195,663 | $ | 134,643 | $ | (108,756 | ) | $ | 344,274 |
For the Year Ended December 31, 2017 | |||||||||||||||
American Southern | Bankers Fidelity | Corporate & Other | Adjustments & Eliminations | Consolidated | |||||||||||
Insurance premiums, net | $ | 53,661 | $ | 109,666 | $ | — | $ | — | $ | 163,327 | |||||
Insurance benefits and losses incurred | 34,486 | 83,029 | — | — | 117,515 | ||||||||||
Expenses deferred | (8,062 | ) | (11,693 | ) | — | — | (19,755 | ) | |||||||
Amortization and depreciation expense | 8,543 | 8,232 | 712 | — | 17,487 | ||||||||||
Other expenses | 15,951 | 38,195 | 16,191 | (9,826 | ) | 60,511 | |||||||||
Total expenses | 50,918 | 117,763 | 16,903 | (9,826 | ) | 175,758 | |||||||||
Underwriting income (loss) | 2,743 | (8,097 | ) | ||||||||||||
Net investment income | 3,332 | 5,021 | 2,267 | (2,124 | ) | 8,496 | |||||||||
Other income | 11 | 8 | 7,806 | (7,702 | ) | 123 | |||||||||
Operating income (loss) | 6,086 | (3,068 | ) | (6,830 | ) | — | (3,812 | ) | |||||||
Net realized gains | 2,481 | 2,800 | 3,887 | — | 9,168 | ||||||||||
Income (loss) before income taxes | $ | 8,567 | $ | (268 | ) | $ | (2,943 | ) | $ | — | $ | 5,356 | |||
Total revenues | $ | 59,485 | $ | 117,495 | $ | 13,960 | $ | (9,826 | ) | $ | 181,114 | ||||
Intangibles | $ | 1,350 | $ | 1,194 | $ | — | $ | — | $ | 2,544 | |||||
Total assets | $ | 126,313 | $ | 185,624 | $ | 147,653 | $ | (116,351 | ) | $ | 343,239 |
For the Year Ended December 31, 2020 | ||||||||||||||||||||
American Southern | Bankers Fidelity | Corporate & Other | Adjustments & Eliminations | Consolidated | ||||||||||||||||
Insurance premiums, net | $ | 62,372 | $ | 121,167 | $ | — | $ | — | $ | 183,539 | ||||||||||
Insurance benefits and losses incurred | 39,339 | 80,537 | — | — | 119,876 | |||||||||||||||
Expenses deferred | (9,910 | ) | (10,233 | ) | — | — | (20,143 | ) | ||||||||||||
Amortization and depreciation expense | 9,772 | 10,007 | 594 | — | 20,373 | |||||||||||||||
Other expenses | 19,542 | 34,403 | 14,526 | (8,732 | ) | 59,739 | ||||||||||||||
Total expenses | 58,743 | 114,714 | 15,120 | (8,732 | ) | 179,845 | ||||||||||||||
Underwriting income | 3,629 | 6,453 | - | - | 10,082 | |||||||||||||||
Net investment income | 3,586 | 4,971 | 1,174 | (1,987 | ) | 7,744 | ||||||||||||||
Other income | 37 | 11 | 6,773 | (6,745 | ) | 76 | ||||||||||||||
Operating income (loss) | 7,252 | 11,435 | (7,173 | ) | — | 11,514 | ||||||||||||||
Net realized gains | 3,389 | 4,031 | — | — | 7,420 | |||||||||||||||
Unrealized losses on equity securities | (205 | ) | (3,036 | ) | (190 | ) | — | (3,431 | ) | |||||||||||
Income (loss) before income taxes | $ | 10,436 | $ | 12,430 | $ | (7,363 | ) | $ | — | $ | 15,503 | |||||||||
Total revenues | $ | 69,179 | $ | 127,144 | $ | 7,757 | $ | (8,732 | ) | $ | 195,348 | |||||||||
Intangibles | $ | 1,350 | $ | 1,194 | $ | — | $ | — | $ | 2,544 | ||||||||||
Total assets | $ | 158,808 | $ | 236,197 | $ | 183,178 | $ | (172,996 | ) | $ | 405,187 |
58
For the Year Ended December 31, 2019 | ||||||||||||||||||||
American Southern | Bankers Fidelity | Corporate & Other | Adjustments & Eliminations | Consolidated | ||||||||||||||||
Insurance premiums, net | $ | 58,680 | $ | 123,245 | $ | — | $ | — | $ | 181,925 | ||||||||||
Insurance benefits and losses incurred | 39,541 | 99,684 | — | — | 139,225 | |||||||||||||||
Expenses deferred | (8,761 | ) | (10,294 | ) | — | — | (19,055 | ) | ||||||||||||
Amortization and depreciation expense | 9,024 | 8,709 | 551 | — | 18,284 | |||||||||||||||
Other expenses | 16,869 | 37,158 | 15,939 | (9,834 | ) | 60,132 | ||||||||||||||
Total expenses | 56,673 | 135,257 | 16,490 | (9,834 | ) | 198,586 | ||||||||||||||
Underwriting income (loss) | 2,007 | (12,012 | ) | - | - | (10,005 | ) | |||||||||||||
Net investment income | 3,689 | 5,317 | 2,597 | (2,624 | ) | 8,979 | ||||||||||||||
Other income | 75 | 18 | 7,307 | (7,210 | ) | 190 | ||||||||||||||
Operating income (loss) | 5,771 | (6,677 | ) | (6,586 | ) | — | (7,492 | ) | ||||||||||||
Net realized gains (losses) | (386 | ) | 840 | 1,120 | — | 1,574 | ||||||||||||||
Unrealized gains on equity securities | 344 | 2,191 | 2,976 | — | 5,511 | |||||||||||||||
Income (loss) before income taxes | $ | 5,729 | $ | (3,646 | ) | $ | (2,490 | ) | $ | — | $ | (407 | ) | |||||||
Total revenues | $ | 62,402 | $ | 131,611 | $ | 14,000 | $ | (9,834 | ) | $ | 198,179 | |||||||||
Intangibles | $ | 1,350 | $ | 1,194 | $ | — | $ | — | $ | 2,544 | ||||||||||
Total assets | $ | 141,524 | $ | 224,122 | $ | 154,687 | $ | (142,707 | ) | $ | 377,626 |
Note 16. | Commitments and Contingencies |
Note 17. | Subsequent Events |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
On September 13, 2018, the Audit Committee (the “Audit Committee”) of the Company’s Board of Directors approved the appointment of Dixon Hughes Goodman LLP (“Dixon Hughes”) as the Company’s independent registered public accounting firm, commencing with the quarter ended September 30, 2018 and for the fiscal year ended December 31, 2018. In connection with the selection of Dixon Hughes, on September 13, 2018 the Audit Committee approved terminating the engagement of BDO USA, LLP (“BDO”) as the Company’s independent registered public accounting firm.
The audit reports of BDO on the Company’s consolidated financial statements as of and for the years ended December 31, 2016 and 2017 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 2016 and 2017, and through the date hereof, there were no disagreements, within the meaning of Item 304(a)(1)(iv) of Regulation S-K, with BDO on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures which, if not resolved to BDO’s satisfaction, would have caused BDO to make reference to the subject matter in connection with its reports; and there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
Item 9A. |
2020.
Item 9B. | Other Information |
Executive Officersexecutive officers of the Company, which is provided in Part I hereof, the information relating to securities authorized for issuance under equity compensation plans and the information relating to the Company’s Code of Business Conduct and Ethics, each of which is included below, all information required by Part III (Items 10, 11, 12, 13 and 14 of Form 10-K) is incorporated by reference to the sections entitled “Election of Directors,” “Security Ownership of Certain Beneficial Owners and Management,” “Section“Delinquent Section 16(a) Beneficial Ownership Reporting Compliance,”Reports” (if applicable), “Executive Compensation,” “Certain Relationships and Related Transactions, and Director Independence”Transactions” and “Ratification of the Appointment of the Company’s Independent Registered Public Accounting Firm” to be contained in the Company’s definitive proxy statement in connection with the Company’s Annual Meeting of Shareholders to be held on or around May 21, 2019,18, 2021, to be filed with the SEC within 120 days of the Company’s fiscal year end.2018,2020, the number of securities issuable upon exercise of outstanding options, warrants and rights, the weighted average exercise price thereof and the number of securities remaining available for future issuance under the Company’s equity compensation plans:
Outstanding
Column)1,275,2001,275,200(1) (1)
60
PART IV
Item 15. | Exhibits and Financial Statement Schedules |
(a) List of documents filed as part of this report:
(a) | List of documents filed as part of this report: |
1. | Financial Statements: |
2. | Financial Statement Schedules: |
3. | Exhibits *: |
Restated Articles of Incorporation of the registrant, as amended [incorporated by reference to Exhibit 3.1 to the registrant’s Form 10-K for the year ended December 31, 2008]. | ||||
Restated Bylaws of the registrant, as amended [incorporated by reference to Exhibit 3.1 to the registrant’s Form 8-K filed on March 4, 2016]. | ||||
Description of the registrant’s common stock registered pursuant to section 12 of the Securities Exchange Act of 1934 [incorporated by reference to Exhibit 4.1 to the registrant’s Form 10-K filed on March 24, 2020]. | ||||
10.01 | Management Agreement, dated July 1, 1993, between the registrant and Atlantic American Life Insurance Company and Bankers Fidelity Life Insurance Company [incorporated by reference to Exhibit 10.41 to the registrant’s Form 10-Q for the quarter ended September 30, 1993]. | |||
Tax Allocation Agreement, dated as of January 4, 2016, between the registrant and the registrant’s subsidiaries [incorporated by reference to Exhibit 10.02 to the registrant’s Form 10-K for the year ended December 31, 2017]. | ||||
Atlantic American Corporation 2012 Nonqualified Stock Purchase Plan [incorporated by reference to Exhibit 99.1 to the registrant’s Form S-8 (File No. 333-183207) filed on August 10, 2012]. | ||||
Atlantic American Corporation 2012 Equity Incentive Plan [incorporated by reference to Exhibit 10.1 to the registrant’s Form 10-Q for the quarter ended March 31, 2013]. | ||||
Lease Agreement, dated as of November 1, 2007, between Georgia Casualty & Surety Company, Bankers Fidelity Life Insurance Company, Atlantic American Corporation and Delta Life Insurance Company [incorporated by reference to Exhibit 10.10 to the registrant’s Form 10-K for the year ended December 31, 2007]. | ||||
First Amendment to Lease Agreement, dated as of March 31, 2008, between Georgia Casualty & Surety Company, Bankers Fidelity Life Insurance Company, Atlantic American Corporation and Delta Life Insurance Company [incorporated by reference to Exhibit 10.2 to the registrant’s Form 10-Q for the quarter ended March 31, 2008]. | ||||
Employment and Transition Agreement with Fixed Determination Date, dated as of June 14, 2017 by and between John G. Sample, Jr. and the registrant [incorporated by reference to Exhibit 10.07 to the registrant’s Form 10-K for the year ended December 31, 2017]. | ||||
Code of Business Conduct and Ethics [incorporated by reference to Exhibit 14.1 to the registrant’s Form 10-K for the year ended December 31, 2003]. | ||||
Subsidiaries of the registrant [incorporated by reference to Exhibit 21.1 to the registrant’s Form 10-K for the year ended December 31, 2015]. | ||||
Consent of Dixon Hughes Goodman LLP, Independent Registered Public Accounting Firm. | ||||
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||||
Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||||
101.INS | XBRL Instance Document. | |||
101.SCH | XBRL Taxonomy Extension Schema. | |||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase. | |||
101.DEF | XBRL Taxonomy Extension Definition Linkbase. | |||
101.LAB | XBRL Taxonomy Extension Label Linkbase. | |||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase. |
* | The registrant agrees to furnish to the Commission upon request a copy of any instruments defining the rights of security holders of the registrant that may be omitted from filing in accordance with the Commission’s rules and regulations. |
** | Management contract, compensatory plan or arrangement required to be filed pursuant to Part IV, Item 15(c) of Form 10-K and Item 601 of Regulation S-K. |
Item 16. | Form 10-K Summary |
62
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ATLANTIC AMERICAN CORPORATION | ||
(Registrant) | ||
By: | /s/ J. Ross Franklin | |
J. Ross Franklin | ||
Vice President and Chief Financial Officer | ||
Date: |
Signature | Title | Date | ||
/s/ Hilton H. Howell, Jr. | President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer) | |||
HILTON H. HOWELL, JR. | ||||
/s/ J. Ross Franklin | Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | |||
J. ROSS FRANKLIN | ||||
/s/ Robin R. Howell | Director | |||
ROBIN R. HOWELL | ||||
/s/ Mark E. Preisinger | Director | |||
MARK E. PREISINGER | ||||
/s/ Joseph M. Scheerer | Director | |||
JOSEPH M. SCHEERER | ||||
/s/ Scott G. Thompson | Director | |||
SCOTT G. THOMPSON | ||||
/s/ D. Keehln Wheeler | Director | |||
D. KEEHLN WHEELER |
Schedule II
December 31, | ||||||
2018 | 2017 | |||||
(In thousands) | ||||||
Cash and cash equivalents | $ | 3,142 | $ | 9,732 | ||
Investments | 14,154 | 16,097 | ||||
Investment in subsidiaries | 108,756 | 116,351 | ||||
Investments in unconsolidated trusts | 1,238 | 1,238 | ||||
Deferred tax asset, net | 3,524 | — | ||||
Income taxes receivable from subsidiaries | 2,856 | 2,879 | ||||
Other assets | 3,311 | 3,762 | ||||
Total assets | $ | 136,981 | $ | 150,059 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Deferred tax liability, net | $ | — | $ | 1,253 | ||
Other payables | 1,871 | 2,085 | ||||
Junior subordinated debentures | 33,738 | 33,738 | ||||
Total liabilities | 35,609 | 37,076 | ||||
Shareholders’ equity | 101,372 | 112,983 | ||||
Total liabilities and shareholders’ equity | $ | 136,981 | $ | 150,059 |
December 31, | ||||||||
2020 | 2019 | |||||||
(In thousands) | ||||||||
Cash and cash equivalents | $ | 2,090 | $ | 2,068 | ||||
Investments | 2,598 | 3,267 | ||||||
Investment in subsidiaries | 172,996 | 142,707 | ||||||
Investments in unconsolidated trusts | 1,238 | 1,238 | ||||||
Income taxes receivable from subsidiaries | 1,683 | 2,304 | ||||||
Other assets | 4,311 | 5,126 | ||||||
Total assets | $ | 184,916 | $ | 156,710 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Deferred tax liability, net | $ | 1,765 | $ | 346 | ||||
Other payables | 4,353 | 4,232 | ||||||
Junior subordinated debentures | 33,738 | 33,738 | ||||||
Total liabilities | 39,856 | 38,316 | ||||||
Shareholders’ equity | 145,060 | 118,394 | ||||||
Total liabilities and shareholders’ equity | $ | 184,916 | $ | 156,710 |
II-1
Schedule II
Year Ended December 31, | ||||||
2018 | 2017 | |||||
(In thousands) | ||||||
REVENUE | ||||||
Fee income from subsidiaries | $ | 7,995 | $ | 7,702 | ||
Distributed earnings from subsidiaries | 4,800 | 4,850 | ||||
Unrealized losses on equity securities, net | (1,460 | ) | — | |||
Other | 752 | 4,130 | ||||
Total revenue | 12,087 | 16,682 | ||||
GENERAL AND ADMINISTRATIVE EXPENSES | 12,764 | 13,015 | ||||
INTEREST EXPENSE | 2,037 | 1,723 | ||||
(2,714 | ) | 1,944 | ||||
INCOME TAX BENEFIT(1) | (3,544 | ) | (2,553 | ) | ||
830 | 4,497 | |||||
EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES, NET | (1,534 | ) | 31 | |||
NET INCOME (LOSS) | $ | (704 | ) | $ | 4,528 |
Year Ended December 31, | ||||||||
2020 | 2019 | |||||||
(In thousands) | ||||||||
REVENUE | ||||||||
Fee income from subsidiaries | $ | 6,745 | $ | 7,210 | ||||
Distributed earnings from subsidiaries | 3,900 | 4,800 | ||||||
Unrealized gains (losses) on equity securities, net | (191 | ) | 2,976 | |||||
Other | (784 | ) | 1,190 | |||||
Total revenue | 9,670 | 16,176 | ||||||
GENERAL AND ADMINISTRATIVE EXPENSES | 11,521 | 11,731 | ||||||
INTEREST EXPENSE | 1,610 | 2,130 | ||||||
(3,461 | ) | 2,315 | ||||||
INCOME TAX BENEFIT(1) | (3,623 | ) | (2,035 | ) | ||||
162 | 4,350 | |||||||
EQUITY IN UNDISTRIBUTED EARNINGS (LOSS) OF SUBSIDIARIES, NET | 12,007 | (4,736 | ) | |||||
NET INCOME (LOSS) | $ | 12,169 | $ | (386 | ) |
(1) | Under the terms of a tax-sharing agreement, income tax provisions for the subsidiary companies are computed on a separate company basis. Accordingly, the Company’s income tax benefit results from the utilization of the Parent’s separate return loss to reduce the consolidated taxable income of the Company. |
See accompanying report of independent registered public accounting firm.
II-2
Schedule II
Year Ended December 31, | ||||||
2018 | 2017 | |||||
(In thousands) | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Net income (loss) | $ | (704 | ) | $ | 4,528 | |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Realized investment gains, net | (272 | ) | (3,891 | ) | ||
Unrealized losses on equity securities, net | 1,460 | — | ||||
Depreciation and amortization | 715 | 712 | ||||
Compensation expense related to share awards | 244 | 495 | ||||
Distributions received from equity method investees | 183 | 4,513 | ||||
Equity in undistributed earnings of consolidated subsidiaries | 1,534 | (31 | ) | |||
Decrease in intercompany taxes | 24 | 82 | ||||
Deferred income tax benefit | (2,236 | ) | (1,358 | ) | ||
(Decrease) increase in other liabilities | (214 | ) | 136 | |||
Other, net | (190 | ) | 295 | |||
Net cash provided by operating activities | 544 | 5,481 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Proceeds from investments sold, called or matured | 675 | 1,501 | ||||
Investments purchased | — | — | ||||
Capital contribution to subsidiaries | (6,000 | ) | — | |||
Additions to property and equipment | (219 | ) | (91 | ) | ||
Net cash provided by investing activities | (5,544 | ) | 1,410 | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Payment of dividends on Series D preferred stock | (399 | ) | (399 | ) | ||
Payment of dividends on common stock | (407 | ) | (408 | ) | ||
Proceeds from shares issued under stock plans | 36 | 32 | ||||
Treasury stock acquired — share repurchase authorization | (597 | ) | (692 | ) | ||
Treasury stock acquired — net employee share-based compensation | (223 | ) | — | |||
Net cash used in financing activities | (1,590 | ) | (1,467 | ) | ||
Net increase (decrease) in cash | (6,590 | ) | 5,424 | |||
Cash and cash equivalents at beginning of year | 9,732 | 4,308 | ||||
Cash and cash equivalents at end of year | $ | 3,142 | $ | 9,732 | ||
Supplemental disclosure: | ||||||
Cash paid for interest | $ | 1,996 | $ | 1,705 | ||
Cash paid for income taxes | $ | 2,107 | $ | 1,400 | ||
Intercompany tax settlement from subsidiaries | $ | 3,439 | $ | 2,676 |
Year Ended December 31, | ||||||||
2020 | 2019 | |||||||
(In thousands) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Income (loss) | $ | 12,169 | $ | (386 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Realized investment gains, net | — | (1,120 | ) | |||||
Unrealized losses (gains) on equity securities, net | 191 | (2,976 | ) | |||||
Depreciation and amortization | 594 | 552 | ||||||
Compensation expense related to share awards | 437 | 353 | ||||||
Distributions received from equity method investees | — | 51 | ||||||
Equity in undistributed (earnings) loss of subsidiaries, net | (12,007 | ) | 4,736 | |||||
Decrease in intercompany taxes | 622 | 551 | ||||||
Deferred income tax benefit | (2,446 | ) | (913 | ) | ||||
Increase in accounts payable and accrued expenses | 121 | 2,360 | ||||||
Other, net | 917 | (2,314 | ) | |||||
Net cash provided by operating activities | 598 | 894 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Proceeds from investments sold, called or matured | — | 3,574 | ||||||
Investments purchased | — | (1,060 | ) | |||||
Capital contribution to subsidiaries | — | (3,500 | ) | |||||
Additions to property and equipment | (95 | ) | (44 | ) | ||||
Net cash used in investing activities | (95 | ) | (1,030 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Payment of dividends on Series D preferred stock | (399 | ) | (399 | ) | ||||
Payment of dividends on common stock | — | (403 | ) | |||||
Proceeds from shares issued under stock plans | 9 | 27 | ||||||
Treasury stock acquired — share repurchase authorization | — | (71 | ) | |||||
Treasury stock acquired — net employee share-based compensation | (91 | ) | (92 | ) | ||||
Net cash used in financing activities | (481 | ) | (938 | ) | ||||
Net increase (decrease) in cash | 22 | (1,074 | ) | |||||
Cash and cash equivalents at beginning of year | 2,068 | 3,142 | ||||||
Cash and cash equivalents at end of year | $ | 2,090 | $ | 2,068 | ||||
Supplemental disclosure: | ||||||||
Cash paid for interest | $ | 1,665 | $ | 2,155 | ||||
Cash paid for income taxes | $ | 3,883 | $ | 1,662 | ||||
Intercompany tax settlement from subsidiaries | $ | 1,798 | $ | 3,335 |
II-3
Schedule III
Segment | Deferred Acquisition Costs | Future Policy Benefits, Losses, Claims and Loss Reserves | Unearned Premiums | Other Policy Claims and Benefits Payable | ||||||||
(In thousands) | ||||||||||||
December 31, 2018: | ||||||||||||
Bankers Fidelity | $ | 35,047 | $ | 113,515 | $ | 4,712 | $ | 1,973 | ||||
American Southern | 2,047 | 49,354 | 19,494 | — | ||||||||
$ | 37,094 | $ | 162,869 | (1) | $ | 24,206 | $ | 1,973 | ||||
December 31, 2017: | ||||||||||||
Bankers Fidelity | $ | 30,619 | $ | 100,127 | $ | 4,271 | $ | 2,010 | ||||
American Southern | 2,075 | 47,997 | 19,178 | — | ||||||||
$ | 32,694 | $ | 148,124 | (2) | $ | 23,449 | $ | 2,010 |
Segment | Deferred Acquisition Costs | Future Policy Benefits, Losses, Claims and Loss Reserves | Unearned Premiums | Other Policy Claims and Benefits Payable | ||||||||||||
(In thousands) | ||||||||||||||||
December 31, 2020: | ||||||||||||||||
Bankers Fidelity | $ | 37,312 | $ | 115,136 | $ | 4,199 | $ | 1,526 | ||||||||
American Southern | 2,299 | 54,883 | 22,932 | — | ||||||||||||
$ | 39,611 | $ | 170,019 | (1) | $ | 27,131 | $ | 1,526 | ||||||||
December 31, 2019: | ||||||||||||||||
Bankers Fidelity | $ | 36,882 | $ | 121,657 | $ | 4,606 | $ | 1,933 | ||||||||
American Southern | 1,979 | 52,281 | 21,429 | — | ||||||||||||
$ | 38,861 | $ | 173,938 | (2) | $ | 26,035 | $ | 1,933 |
(1) | Includes future policy benefits of |
(2) | Includes future policy benefits of |
See accompanying report of independent registered public accounting firm.
III-1
Schedule III
Segment | Premium Revenue | Net Investment Income | Benefits, Claims, Losses and Settlement Expenses | Amortization of Deferred Acquisition Costs | Other Operating Expenses | Casualty Premiums Written | ||||||||||||
(In thousands) | ||||||||||||||||||
December 31, 2018: | ||||||||||||||||||
Bankers Fidelity | $ | 119,124 | $ | 5,382 | $ | 93,821 | $ | 9,690 | $ | 22,598 | $ | — | ||||||
American Southern | 53,807 | 3,783 | 38,829 | 7,921 | 6,843 | 54,410 | ||||||||||||
Corporate & other | — | 384 | — | — | 6,822 | — | ||||||||||||
$ | 172,931 | $ | 9,549 | $ | 132,650 | $ | 17,611 | $ | 36,263 | $ | 54,410 | |||||||
December 31, 2017: | ||||||||||||||||||
Bankers Fidelity | $ | 109,666 | $ | 4,257 | $ | 83,029 | $ | 7,866 | $ | 26,868 | $ | — | ||||||
American Southern | 53,661 | 3,307 | 34,486 | 8,170 | 8,262 | 53,362 | ||||||||||||
Corporate & other | — | 143 | — | — | 7,077 | — | ||||||||||||
$ | 163,327 | $ | 7,707 | $ | 117,515 | $ | 16,036 | $ | 42,207 | $ | 53,362 |
Segment | Premium Revenue | Net Investment Income | Benefits, Claims, Losses and Settlement Expenses | Amortization of Deferred Acquisition Costs | Other Operating Expenses | Casualty Premiums Written | ||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
December 31, 2020: | ||||||||||||||||||||||||
Bankers Fidelity | $ | 121,167 | $ | 4,971 | $ | 80,537 | $ | 9,803 | $ | 24,374 | $ | — | ||||||||||||
American Southern | 62,372 | 3,586 | 39,339 | 9,590 | 9,814 | 64,366 | ||||||||||||||||||
Corporate & other | — | (813 | ) | — | — | 6,388 | — | |||||||||||||||||
$ | 183,539 | $ | 7,744 | $ | 119,876 | $ | 19,393 | $ | 40,576 | $ | 64,366 | |||||||||||||
December 31, 2019: | ||||||||||||||||||||||||
Bankers Fidelity | $ | 123,245 | $ | 5,317 | $ | 99,684 | $ | 8,459 | $ | 27,114 | $ | — | ||||||||||||
American Southern | 58,680 | 3,689 | 39,541 | 8,829 | 8,303 | 60,328 | ||||||||||||||||||
Corporate & other | — | (27 | ) | — | — | 6,656 | — | |||||||||||||||||
$ | 181,925 | $ | 8,979 | $ | 139,225 | $ | 17,288 | $ | 42,073 | $ | 60,328 |
III-2
Schedule IV
Direct Amount | Ceded To Other Companies | Assumed From Other Companies | Net Amounts | Percentage of Amount Assumed To Net | |||||||||||
(Dollars in thousands) | |||||||||||||||
Year ended December 31, 2018: | |||||||||||||||
Life insurance in force | $ | 232,311 | $ | (12,263 | ) | $ | — | $ | 220,048 | ||||||
Premiums — | |||||||||||||||
Bankers Fidelity | $ | 180,552 | $ | (61,459 | ) | $ | 31 | $ | 119,124 | 0.0 | % | ||||
American Southern | 39,233 | (5,075 | ) | 19,649 | 53,807 | 36.5 | % | ||||||||
Total premiums | $ | 219,785 | $ | (66,534 | ) | $ | 19,680 | $ | 172,931 | 11.4 | % | ||||
Year ended December 31, 2017: | |||||||||||||||
Life insurance in force | $ | 255,506 | $ | (14,902 | ) | $ | — | $ | 240,604 | ||||||
Premiums — | |||||||||||||||
Bankers Fidelity | $ | 142,210 | $ | (32,585 | ) | $ | 41 | $ | 109,666 | 0.0 | % | ||||
American Southern | 39,248 | (4,787 | ) | 19,200 | 53,661 | 35.8 | % | ||||||||
Total premiums | $ | 181,458 | $ | (37,372 | ) | $ | 19,241 | $ | 163,327 | 11.8 | % |
Direct Amount | Ceded to Other Companies | Assumed From Other Companies | Net Amounts | Percentage of Amount Assumed to Net | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Year ended December 31, 2020: | ||||||||||||||||||||
Life insurance in force | $ | 294,392 | $ | (11,032 | ) | $ | — | $ | 283,360 | |||||||||||
Premiums — | ||||||||||||||||||||
Bankers Fidelity | $ | 193,082 | $ | (71,924 | ) | $ | 9 | $ | 121,167 | 0.0 | % | |||||||||
American Southern | 45,127 | (5,890 | ) | 23,135 | 62,372 | 37.1 | % | |||||||||||||
Total premiums | $ | 238,209 | $ | (77,814 | ) | $ | 23,144 | $ | 183,539 | 12.6 | % | |||||||||
Year ended December 31, 2019: | ||||||||||||||||||||
Life insurance in force | $ | 257,731 | $ | (11,449 | ) | $ | — | $ | 246,282 | |||||||||||
Premiums — | ||||||||||||||||||||
Bankers Fidelity | $ | 195,481 | $ | (72,261 | ) | $ | 25 | $ | 123,245 | 0.0 | % | |||||||||
American Southern | 41,880 | (5,520 | ) | 22,320 | 58,680 | 39.6 | % | |||||||||||||
Total premiums | $ | 237,361 | $ | (77,781 | ) | $ | 22,345 | $ | 181,925 | 12.8 | % |
IV-1
Schedule VI
Year Ended | Deferred Policy Acquisition Costs | Reserves | Unearned Premiums | Earned Premiums | Net Investment Income | Claims and Claim Adjustment Expenses Incurred Related To | Amortization of Deferred Acquisition Costs | Paid Claims and Claim Adjustment Expenses | Premiums Written | |||||||||||||||||||||
Current Year | Prior Years | |||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||
December 31, 2018 | $ | 2,047 | $ | 49,354 | $ | 19,494 | $ | 53,807 | $ | 3,783 | $ | 39,735 | $ | (906 | ) | $ | 7,921 | $ | 36,680 | $ | 54,410 | |||||||||
December 31, 2017 | $ | 2,075 | $ | 47,997 | $ | 19,178 | $ | 53,661 | $ | 3,307 | $ | 37,016 | $ | (2,530 | ) | $ | 8,170 | $ | 33,459 | $ | 53,362 |
Claims and Claim Adjustment Expenses Incurred Related To | ||||||||||||||||||||||||||||||||||||||||
Year Ended | Deferred Policy Acquisition Costs | Reserves | Unearned Premiums | Earned Premiums | Net Investment Income | Current Year | Prior Years | Amortization of Deferred Acquisition Costs | Paid Claims and Claim Adjustment Expenses | Premiums Written | ||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||||||
December 31, 2020 | $ | 2,299 | $ | 54,883 | $ | 22,932 | $ | 62,372 | $ | 3,586 | $ | 39,859 | $ | (520 | ) | $ | 9,590 | $ | 37,645 | $ | 64,366 | |||||||||||||||||||
December 31, 2019 | $ | 1,979 | $ | 52,281 | $ | 21,429 | $ | 58,680 | $ | 3,689 | $ | 40,361 | $ | (820 | ) | $ | 8,829 | $ | 37,905 | $ | 60,328 |
VI-1