UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2019~~2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-3722

ATLANTIC AMERICAN CORPORATION

(Exact name of registrant as specified in its charter)

Georgia		58-1027114
(State or other jurisdiction of incorporation or organization)		~~(I.R.S.~~(I.R.S. Employer Identification No.)

4370 Peachtree Road, N.E., Atlanta, Georgia		30319
(Address of principal executive offices)		(Zip Code)

(404) 266-5500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $1.00 per share		AAME		NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ ~~(Do not check if a smaller reporting company)~~ Smaller reporting company ☑ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The total number of shares of the registrant’s Common Stock, $1 par value, outstanding on July ~~26, 2019~~24, 2020 was ~~20,160,859.~~20,454,001.

ATLANTIC AMERICAN CORPORATION

TABLE OF CONTENTS


Part I.	Financial Information

Item 1.	Financial Statements:	2

	Condensed Consolidated Balance Sheets At June 30, ~~2019~~2020 And December 31, ~~2018~~2019	2

	Condensed Consolidated Statements Of Operations for the three months and six months ended June 30, ~~2019~~2020 and ~~2018~~2019	3

	Condensed Consolidated Statements Of Comprehensive Income ~~(Loss)~~ for the three months and six months ended June 30, ~~2019~~2020 and ~~2018~~2019	4

	Condensed Consolidated Statements Of Shareholders’ Equity for the three months and six months ended June 30, ~~2019~~2020 and ~~2018~~2019	5

	Condensed Consolidated Statements Of Cash Flows for the six months ended June 30, ~~2019~~2020 and ~~2018~~2019	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2221

Item 4.	Controls and Procedures	29 28

Part II.	Other Information

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3029

Item 6.	Exhibits	3029

Signatures		3130

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ATLANTIC AMERICAN CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except ~~per~~ share data)

ASSETS

	Unaudited June 30, 2020			December 31, 2019
Cash and cash equivalents	$	16,354		$	12,893
Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost: $214,080 and $219,233)		236,187			232,472
Equity securities, at fair value (cost: $7,311 and $7,168)		15,965			22,922
Other invested assets (cost: $11,905 and $9,908)		11,454			9,960
Policy loans		2,018			2,007
Real estate		38			38
Investment in unconsolidated trusts		1,238			1,238
Total investments		266,900			268,637
Receivables:
Reinsurance		27,562			32,135
Insurance premiums and other (net of allowance for doubtful accounts: $197 and $183)		23,785			13,134
Deferred income taxes, net		1,144			314
Deferred acquisition costs		39,148			38,861
Other assets		8,300			9,108
Intangibles		2,544			2,544
Total assets	$	385,737		$	377,626

LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance reserves and policyholder funds:
Future policy benefits	$	91,927		$	92,490
Unearned premiums		35,091			26,035
Losses and claims		76,498			81,448
Other policy liabilities		1,195			1,933
Total insurance reserves and policyholder funds		204,711			201,906
Accounts payable and accrued expenses		23,394			23,588
Junior subordinated debenture obligations, net		33,738			33,738
Total liabilities		261,843			259,232

Commitments and contingencies (Note 10)
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; shares issued: 22,400,894; shares outstanding: 20,454,001 and 20,472,162		22,401			22,401
Additional paid-in capital		57,435			57,820
Retained earnings		34,266			36,020
Accumulated other comprehensive income		17,464			10,459
Unearned stock grant compensation		(466	)		(781	)
Treasury stock, at cost: 1,946,893 and 1,928,732 shares		(7,261	)		(7,580	)
Total shareholders’ equity		123,894			118,394
Total liabilities and shareholders’ equity	$	385,737		$	377,626

~~ASSETS~~

Unaudited
June 30,
2019

December 31,
2018

Cash and cash equivalents
$
11,450

$
12,630

Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost: $217,291 and $219,924)
223,275

210,386

Equity securities, at fair value (cost: $9,060 and $10,515)
20,455

20,758

Other invested assets (cost: $7,005 and $6,905)
7,380

7,424

Policy loans
2,007

2,085

Real estate
38

38

Investment in unconsolidated trusts
1,238

1,238

Total investments
254,393

241,929

Receivables:
Reinsurance
30,253

26,110

Insurance premiums and other (net of allowance for doubtful accounts: $187 and $207)
23,891

15,223

Deferred income taxes, net
1,537

4,184

Deferred acquisition costs
38,144

37,094

Other assets
9,518

4,560

Intangibles
2,544

2,544

Total assets
$
371,730

$
344,274

LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance reserves and policyholder funds:
Future policy benefits
$
92,108

$
90,257

Unearned premiums
33,947

24,206

Losses and claims
75,155

72,612

Other policy liabilities
1,331

1,973

Total insurance reserves and policyholder funds
202,541

189,048

Other liabilities
22,681

20,116

Junior subordinated debenture obligations, net
33,738

33,738

Total liabilities
258,960

242,902

Commitments and contingencies (Note 10)
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; shares issued: 22,400,894; shares outstanding: 20,160,859 and 20,170,360
22,401

22,401

Additional paid-in capital
57,444

57,414

Retained earnings
36,342

37,208

Accumulated other comprehensive income (loss)
4,727

(7,535
)
Unearned stock grant compensation
(150
)

(186
)
Treasury stock, at cost: 2,240,035 and 2,230,534 shares
(8,049
)

(7,985
)
Total shareholders’ equity
112,770

101,372

Total liabilities and shareholders’ equity
$
371,730

$
344,274

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

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Table of Contents

ATLANTIC AMERICAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; Dollars in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Revenue:
Insurance premiums, net	$	45,469		$	42,845		$	90,251		$	85,047		$	46,499		$	45,469		$	92,049		$	90,251
Net investment income		2,313			2,537			4,647			4,896			1,850			2,313			3,889			4,647
Realized investment gains (losses), net		610			(57	)		1,995			313
Realized investment gains, net														-			610			249			1,995
Unrealized gains (losses) on equity securities, net		(5,337	)		4,089			1,152			(330	)		1,355			(5,337	)		(7,100	)		1,152
Other income		72			29			100			57			33			72			60			100
Total revenue		43,127			49,443			98,145			89,983			49,737			43,127			89,147			98,145

Benefits and expenses:
Insurance benefits and losses incurred		34,151			32,219			69,458			65,391			27,076			34,151			60,659			69,458
Commissions and underwriting expenses		11,509			9,715			22,524			19,734			10,854			11,509			23,480			22,524
Interest expense		545			506			1,091			968			414			545			890			1,091
Other expense		2,511			2,970			5,376			6,208			3,112			2,511			6,064			5,376
Total benefits and expenses		48,716			45,410			98,449			92,301			41,456			48,716			91,093			98,449
Income (loss) before income taxes		(5,589	)		4,033			(304	)		(2,318	)		8,281			(5,589	)		(1,946	)		(304	)
Income tax expense (benefit)		(1,163	)		848			(40	)		(479	)		1,749			(1,163	)		(391	)		(40	)
Net income (loss)		(4,426	)		3,185			(264	)		(1,839	)		6,532			(4,426	)		(1,555	)		(264	)
Preferred stock dividends		(100	)		(100	)		(199	)		(199	)		(100	)		(100	)		(199	)		(199	)
Net income (loss) applicable to common shareholders	$	(4,526	)	$	3,085		$	(463	)	$	(2,038	)	$	6,432		$	(4,526	)	$	(1,754	)	$	(463	)
Earnings (loss) per common share (basic)	$	(.22	)	$	.15		$	(.02	)	$	(.10	)	$	.31		$	(.22	)	$	(.09	)	$	(.02	)
Earnings (loss) per common share (diluted)	$	(.22	)	$	.15		$	(.02	)	$	(.10	)	$	.30		$	(.22	)	$	(.09	)	$	(.02	)

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

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Table of Contents

ATLANTIC AMERICAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(Unaudited; Dollars in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Net income (loss)	$	(4,426	)	$	3,185		$	(264	)	$	(1,839	)	$	6,532		$	(4,426	)	$	(1,555	)	$	(264	)
Other comprehensive income (loss):
Other comprehensive income:
Available-for-sale fixed maturity securities:
Gross unrealized holding gain (loss) arising in the period		7,964			(3,616	)		16,404			(10,390	)
Gross unrealized holding gain arising in the period														19,997			7,964			9,117			16,404
Related income tax effect		(1,673	)		760			(3,445	)		2,182			(4,200	)		(1,673	)		(1,915	)		(3,445	)
Subtotal		6,291			(2,856	)		12,959			(8,208	)		15,797			6,291			7,202			12,959
Less: reclassification adjustment for net realized (gains) losses included in net income (loss)		(610	)		57			(882	)		(313	)
Less: reclassification adjustment for net realized gains included in net income (loss)														-			(610	)		(249	)		(882	)
Related income tax effect		128			(12	)		185			66			-			128			52			185
Subtotal		(482	)		45			(697	)		(247	)		-			(482	)		(197	)		(697	)
Total other comprehensive income (loss), net of tax		5,809			(2,811	)		12,262			(8,455	)
Total comprehensive income (loss)	$	1,383		$	374		$	11,998		$	(10,294	)
Total other comprehensive income, net of tax														15,797			5,809			7,005			12,262
Total comprehensive income													$	22,329		$	1,383		$	5,450		$	11,998

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

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ATLANTIC AMERICAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited; Dollars in ~~thousands)~~thousands except share data)

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Preferred stock:
Balance, beginning of period	$	55		$	55		$	55		$	55		$	55		$	55		$	55		$	55
Repurchases of preferred stock		-			-			-			-
Net issuance of preferred stock		-			-			-			-
Balance, end of period		55			55			55			55			55			55			55			55
Common stock:
Balance, beginning of period		22,401			22,401			22,401			22,401			22,401			22,401			22,401			22,401
Repurchases of common stock		-			-			-			-
Net issuance of common stock		-			-			-			-
Balance, end of period		22,401			22,401			22,401			22,401			22,401			22,401			22,401			22,401
Additional paid-in capital:
Balance, beginning of period		57,417			57,431			57,414			57,495			57,777			57,417			57,820			57,414
Restricted stock grants, net of forfeitures		24			(20	)		24			(88	)		(333	)		24			(377	)		24
Issuance of shares under stock plans		3			5			6			9			(9	)		3			(8	)		6
Balance, end of period		57,444			57,416			57,444			57,416			57,435			57,444			57,435			57,444
Retained earnings:
Balance, beginning of period		40,868			33,188			37,208			30,993			27,834			40,868			36,020			37,208
Cumulative effect of adoption of updated accounting guidance for equity financial instruments at January 1, 2018		-			-			-			9,825
Reclassification of certain tax effects from accumulated other comprehensive income at January 1, 2018		-			-			-			(2,100	)
Net income (loss)		(4,426	)		3,185			(264	)		(1,839	)		6,532			(4,426	)		(1,555	)		(264	)
Dividends on common stock		-			-			(403	)		(407	)		-			-			-			(403	)
Dividends accrued on preferred stock		(100	)		(100	)		(199	)		(199	)		(100	)		(100	)		(199	)		(199	)
Balance, end of period		36,342			36,273			36,342			36,273			34,266			36,342			34,266			36,342
Accumulated other comprehensive income (loss):
Balance, beginning of period		(1,082	)		(3,618	)		(7,535	)		9,751			1,667			(1,082	)		10,459			(7,535	)
Cumulative effect of adoption of updated accounting guidance for equity financial instruments at January 1, 2018		-			-			-			(9,825	)
Reclassification of certain tax effects from accumulated other comprehensive income at January 1, 2018		-			-			-			2,100
Other comprehensive income (loss), net of tax		5,809			(2,811	)		12,262			(8,455	)
Other comprehensive income, net of tax														15,797			5,809			7,005			12,262
Balance, end of period		4,727			(6,429	)		4,727			(6,429	)		17,464			4,727			17,464			4,727
Unearned Stock Grant Compensation:
Balance, beginning of period		(128	)		(387	)		(186	)		(579	)		(584	)		(128	)		(781	)		(186	)
Restricted stock grants, net of forfeitures		(71	)		20			(71	)		135			(37	)		(71	)		61			(71	)
Amortization of unearned compensation		49			45			107			122			155			49			254			107
Balance, end of period		(150	)		(322	)		(150	)		(322	)		(466	)		(150	)		(466	)		(150	)
Treasury Stock:
Balance, beginning of period		(8,044	)		(7,346	)		(7,985	)		(7,133	)		(7,632	)		(8,044	)		(7,580	)		(7,985	)
Restricted stock grants, net of forfeitures		47			-			47			(47	)		370			47			316			47
Purchase of shares for treasury		(22	)		(281	)		(71	)		(360	)
Purchase of 0 and 26,210 shares, as of 2020 and 2019, respectively, for treasury														-			(22	)		-			(71	)
Net shares acquired related to employee share-based compensation plans		(35	)		(107	)		(49	)		(197	)		(10	)		(35	)		(10	)		(49	)
Issuance of shares under stock plans		5			7			9			10			11			5			13			9
Balance, end of period		(8,049	)		(7,727	)		(8,049	)		(7,727	)		(7,261	)		(8,049	)		(7,261	)		(8,049	)

Total shareholders’ equity	$	112,770		$	101,667		$	112,770		$	101,667		$	123,894		$	112,770		$	123,894		$	112,770
Dividends declared on common stock per share	$	-		$	-		$	(.02	)	$	(.02	)	$	-		$	-		$	-		$	(.02	)

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

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ATLANTIC AMERICAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; Dollars in thousands)


	Six Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(264	)	$	(1,839	)	$	(1,555	)	$	(264	)
Adjustments to reconcile loss to net cash used in operating activities:
Acquisition costs deferred, net		(1,050	)		(1,499	)
Additions to acquisition costs, net								(287	)		(1,050	)
Realized investment gains, net		(1,995	)		(313	)		(249	)		(1,995	)
Unrealized (gains) losses on equity securities, net		(1,152	)		330
Unrealized losses (gains) on equity securities, net								7,100			(1,152	)
Distributions received from equity method investees		106			202			-			106
Compensation expense related to share awards		107			122			254			107
Depreciation and amortization		337			532			503			337
Deferred income tax benefit		(612	)		(1,218	)		(2,693	)		(612	)
Increase in receivables, net		(13,393	)		(12,691	)		(6,078	)		(13,393	)
Increase in insurance reserves and policyholder funds		13,493			17,837			2,805			13,493
Increase (decrease) in other liabilities		2,366			(7,712	)
(Decrease) increase in accounts payable and accrued expenses								(393	)		2,366
Other, net		(5,162	)		(147	)		1,151			(5,162	)
Net cash used in operating activities		(7,219	)		(6,396	)
Net cash provided by (used in) operating activities								558			(7,219	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investments sold		70,171			25,849			7,448			70,171
Proceeds from investments matured, called or redeemed		3,628			3,985			3,031			3,628
Investments purchased		(67,220	)		(39,329	)		(7,411	)		(67,220	)
Additions to property and equipment		(32	)		(224	)		(160	)		(32	)
Net cash provided by (used in) investing activities		6,547			(9,719	)
Net cash provided by investing activities								2,908			6,547

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends on common stock		(403	)		(407	)		-			(403	)
Proceeds from shares issued under stock plans		15			19			5			15
Treasury stock acquired — share repurchase authorization		(71	)		(360	)		-			(71	)
Treasury stock acquired — net employee share-based compensation		(49	)		(197	)		(10	)		(49	)
Net cash used in financing activities		(508	)		(945	)		(5	)		(508	)

Net decrease in cash and cash equivalents		(1,180	)		(17,060	)
Net increase (decrease) in cash and cash equivalents								3,461			(1,180	)
Cash and cash equivalents at beginning of period		12,630			24,547			12,893			12,630

Cash and cash equivalents at end of period	$	11,450		$	7,487		$	16,354		$	11,450

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	1,100		$	941		$	944		$	1,100
Cash paid for income taxes	$	850		$	1,412		$	-		$	850

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

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ATLANTIC AMERICAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; Dollars in thousands, except per share amounts)

Note 1.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Atlantic American Corporation (the “Parent”) and its subsidiaries (collectively with the Parent, the “Company”). The Parent’s primary operating subsidiaries, American Southern Insurance Company and American Safety Insurance Company (together known as “American Southern”) and Bankers Fidelity Life Insurance Company and Bankers Fidelity Assurance Company (together known as “Bankers Fidelity”), operate in two principal business units. American Southern operates in the property and casualty insurance market, while Bankers Fidelity operates in the life and health insurance market. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for audited annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The unaudited condensed consolidated financial statements included herein and these related notes should be read in conjunction with the Company’s consolidated financial statements, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 (the ~~“2018~~“2019 Annual Report”). The Company’s financial condition and results of operations and cash flows as of and for the three month and six month periods ended June 30, ~~2019~~2020 are not necessarily indicative of the financial condition or results of operations and cash flows that may be expected for the year ending December 31, ~~2019~~2020 or for any other future period.

The Company’s significant accounting policies have not changed materially from those set out in the ~~2018~~2019 Annual Report, except as noted below for the adoption of new accounting standards.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

On March 11, 2020, the World Health Organization declared the Novel Coronavirus (“COVID-19”) outbreak a global pandemic. The impact of COVID-19 and related actions to attempt to control its spread began to impact the Company’s business operations in March 2020, and we expect that the pandemic, actions that have been or will be taken in response to it and its overall impact on the economy, will continue to have an effect on our business operations and our operating results. The Company’s insurance subsidiaries may experience difficulties collecting premiums from some policyholders, and policyholders with financial difficulties may decide not to renew insurance policies with the Company. Although it cannot be predicted with certainty at this time, the Company’s insurance subsidiaries do not expect a direct material impact from the outbreak of COVID-19 in terms of increased claims and losses, but that may change as more information becomes available. In addition, economic uncertainty related to COVID-19 has led to a decline in the investment markets, and may continue to create increased volatility. The impact of COVID-19 on the economy and on the Company is evolving and its future effects are uncertain. The Company is closely monitoring the effects and risks of COVID-19 to assess its impact on the Company’s business, financial condition, results of operations, liquidity and capital position.

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which is intended to provide fast and direct economic assistance for American workers and families, small businesses, and to preserve jobs in American industries. The CARES Act includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The Company does not qualify as a small business under the CARES Act and therefore did not apply for any of the government loan programs; however, the Company intends to monitor and assess the availability of resources and other benefits that might be available to the Company under the CARES Act and through other programs.

Note 2.

Recently Issued Accounting Standards

Adoption of New Accounting Standards

~~Leases.~~ ~~On January 1, 2019,~~Fair Value Measurement – Changes to the ~~Company adopted~~Disclosure Requirements for Fair Value Measurement. In August 2018, the ~~requirements of~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~No. 2016-02, Leases~~2018-13, Fair Value Measurement (Topic ~~842)~~820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ~~The objective~~This guidance removes the following disclosure requirements from Topic 820: (1) the amount of ~~this ASU, along with several related ASUs issued subsequently, is to increase transparency~~ and ~~comparability~~reasons for transfers between ~~organizations that enter into lease agreements. For lessees, the key difference~~Level 1 and Level 2 of the ~~new standard from~~fair value hierarchy, (2) the ~~previous guidance (Topic 840) is~~policy for timing of transfers between levels, and (3) the ~~recognition of a right-of-use (“ROU”) asset~~valuation processes for Level 3 fair value measurements. This disclosure also includes the changes in unrealized gains and ~~lease liability on~~losses for the ~~balance sheet. The most significant change is~~period included in other comprehensive income for recurring Level 3 fair value measurements held at the requirement to recognize ROU assets and lease liabilities for leases classified as operating leases. The new standard requires disclosures to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

~~As part~~end of the ~~transition~~reporting period and the range and weighted average of significant unobservable inputs used to the new standard, the Company was required to measure and recognize leases that existed at January 1, 2019 and elected to use a modified retrospective approach. For leases that existed at the effective date, the Company elected the package of three transition practical expedients and therefore did not reassess any of the following: (i) whether an arrangement is or contains a lease, (ii) lease classification, or (iii) what qualifies as an initial direct cost.

The adoption of this ASU resulted in the Company recognizing a ROU asset of $6,088 as part of other assets and a lease liability of $6,088 as part of other liabilities in the consolidated balance sheet. The adoption of this ASU did not have a material effect on the Company’s results of operations or liquidity.

~~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. For the six months ended June 30, 2019 and 2018, approximately $100 and $57, respectively, or approximately one-tenth of 1% of the Company’s total revenues, were within the scope of this updated guidance.develop Level 3 fair value measurements. The Company adopted ASU ~~2014-09~~2018-13 as of January 1, ~~2018.~~2020. The adoption of this ASU did not have an impact on the Company’s consolidated financial statements.

-7-

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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, with the amount of the impairment not to exceed the carrying value of the reporting unit’s goodwill. Under the prior accounting 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 Company adopted ASU 2017-04 as of January 1, 2020. The adoption of this ASU did not have an impact on the Company’s consolidated financial statements.

Future Adoption of New Accounting Standards

Reference Rate Reform. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). This guidance provides optional expedients and exceptions for applying GAAP to investments, derivatives, or other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. Along with the optional expedients, the amendments include a general principle that permits an entity to consider contract modifications due to reference reform to be an event that does not require contract re-measurement at the modification date or reassessment of a previous accounting determination. Additionally, a company may make a one-time election to sell, transfer, or both sell and transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform and that were classified as held to maturity before January 1, 2020. This standard may be elected over time through December 31, 2022 as reference rate reform activities occur. The Company is currently assessing the effect of adopting this guidance on its financial condition and results of operations.

Investments – Equity Securities. In January 2020, the FASB issued ASU No. 2020-01 (“ASU 2020-01”) Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. This update, among others, clarifies the interaction of the accounting for equity securities under Topic 321 and investments under the equity method of accounting in Topic 323 when there is a change in level of ownership or degree of influence. ASU 2020-01 is effective for the Company beginning with the first quarter of 2021 and will be applied prospectively. Early adoption is permitted. This guidance is not expected to have a material impact on the Company’s consolidated financial statements.

For more information regarding other accounting standards that the Company has not yet adopted, see the “Recently Issued Accounting Standards - Future Adoption of New Accounting Standards” section of Note 1 of Notes to Consolidated Financial Statements in the ~~2018~~2019 Annual Report.

-8-

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~~-14-~~-13-

Table of Contents

Fixed
Maturities

Balance, December 31, 2017
$
1,369

Total unrealized losses included in other comprehensive loss
(30
)
Balance, March 31, 2018
1,339

Total unrealized gains included in other comprehensive loss
7

Balance, June 30, 2018
$
1,346

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 qualitative and quantitative information received from the original underwriter of the pooled offerings is also considered, as applicable.

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 June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

			June 30, 2019				December 31, 2018						June 30, 2020				December 31, 2019
	Level in Fair Value Hierarchy ⁽¹⁾		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Level in Fair Value Hierarchy ⁽¹⁾		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:
Cash and cash equivalents	Level 1		$	11,450	$	11,450	$	12,630	$	12,630	Level 1		$	16,354	$	16,354	$	12,893	$	12,893
Fixed maturities	⁽¹	⁾		223,275		223,275		210,386		210,386		⁽¹⁾		236,187		236,187		232,472		232,472
Equity securities	⁽¹	⁾		20,455		20,455		20,758		20,758		⁽¹⁾		15,965		15,965		22,922		22,922
Other invested assets	Level 3			7,380		7,380		7,424		7,424	Level 3			11,454		11,454		9,960		9,960
Policy loans	Level 2			2,007		2,007		2,085		2,085	Level 2			2,018		2,018		2,007		2,007
Real estate	Level 2			38		38		38		38	Level 2			38		38		38		38
Investment in unconsolidated trusts	Level 2			1,238		1,238		1,238		1,238	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 2			33,738		30,321		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.

~~There have not been any transfers between Level 1, Level 2 and Level 3 during the periods presented in these condensed consolidated financial statements.~~

~~-15-~~-14-

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Note 5.

Liabilities for Unpaid Losses, Claims and Loss Adjustment Expenses

The roll-forward of liabilities for unpaid losses, claims and loss adjustment expenses for the six months ended June 30, 2020 and 2019 is as follows:

	Six Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2020			2019
Beginning liabilities for unpaid losses, claims and loss adjustment expenses, gross	$	72,612		$	65,689		$	81,448		$	72,612
Less: Reinsurance recoverable on unpaid losses		(14,354	)		(11,968	)		(18,339	)		(14,354	)
Beginning liabilities for unpaid losses, claims and loss adjustment expenses, net		58,258			53,721			63,109			58,258

Incurred related to:
Current accident year		68,157			63,230			62,262			68,157
Prior accident year development		103			(163	)

Prior accident year development ⁽¹⁾								(2,302	)⁽²⁾		103
Total incurred		68,260			63,067			59,960			68,260

Paid related to:
Current accident year		38,875			36,508			33,911			38,875
Prior accident years		28,576			22,872			29,587			28,576
Total paid		67,451			59,380			63,498			67,451
Ending liabilities for unpaid losses, claims and loss adjustment expenses, net		59,067			57,408			59,571			59,067
Plus: Reinsurance recoverable on unpaid losses		16,088			14,667			16,927			16,088
Ending liabilities for unpaid losses, claims and loss adjustment expenses, gross	$	75,155		$	72,075		$	76,498		$	75,155

⁽¹⁾

In establishing property and casualty reserves, the Company initially reserves for losses at the higher end of the reasonable range if no other value within the range is determined to be more probable. Selection of such an initial loss estimate is an attempt by management to give recognition that initial claims information received generally is not conclusive with respect to legal liability, is generally not comprehensive with respect to magnitude of loss and generally, based on historical experience, will develop more adversely as time passes and more information becomes available. Accordingly, the Company generally experiences reserve redundancies when analyzing the development of prior year losses in a current period.

⁽²⁾

Prior years’ development was primarily the result of favorable development in the loss and claim reserves for the Medicare supplement line of business in Bankers Fidelity.

Following is a reconciliation of total incurred losses to total insurance benefits and losses incurred:

	Six Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2020		2019
Total incurred losses	$	68,260	$	63,067	$	59,960	$	68,260
Cash surrender value and matured endowments		588		707		697		588
Benefit reserve changes		610		1,617		2		610
Total insurance benefits and losses incurred	$	69,458	$	65,391	$	60,659	$	69,458

~~-16-~~-15-

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Note 6.

Junior Subordinated Debentures

The Company has two unconsolidated Connecticut statutory business trusts, which exist for the exclusive purposes of: (i) issuing trust preferred securities (“Trust Preferred Securities”) representing undivided beneficial interests in the assets of the trusts; (ii) investing the gross proceeds of the Trust Preferred Securities in junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) of Atlantic American; and (iii) engaging in those activities necessary or incidental thereto.

The financial structure of each of Atlantic American Statutory Trust I and II as of June 30, ~~2019~~2020 was as follows:

	Atlantic American Statutory Trust I			Atlantic American Statutory Trust II			Atlantic American Statutory Trust I			Atlantic American Statutory Trust II
JUNIOR SUBORDINATED DEBENTURES ^{(1) (2)}
Principal amount owed June 30, 2019	$	18,042		$	23,196
Principal amount owed June 30, 2020							$	18,042		$	23,196
Less: Treasury debt ⁽³⁾		—			(7,500	)		—			(7,500	)
Net balance June 30, 2019	$	18,042		$	15,696
Net balance December 31, 2018	$	18,042		$	15,696
Net balance June 30, 2020							$	18,042		$	15,696
Net balance December 31, 2019							$	18,042		$	15,696
Coupon rate	LIBOR + 4.00		%	LIBOR + 4.10		%	LIBOR + 4.00		%	LIBOR + 4.10		%
Interest payable	Quarterly			Quarterly			Quarterly			Quarterly
Maturity date	December 4, 2032			May 15, 2033			December 4, 2032			May 15, 2033
Redeemable by issuer	Yes			Yes			Yes			Yes
TRUST PREFERRED SECURITIES
Issuance date	December 4, 2002			May 15, 2003			December 4, 2002			May 15, 2003
Securities issued		17,500			22,500			17,500			22,500
Liquidation preference per security	$	1		$	1		$	1		$	1
Liquidation value	$	17,500		$	22,500		$	17,500		$	22,500
Coupon rate	LIBOR + 4.00		%	LIBOR + 4.10		%	LIBOR + 4.00		%	LIBOR + 4.10		%
Distribution payable	Quarterly			Quarterly			Quarterly			Quarterly
Distribution guaranteed by ⁽⁴⁾	Atlantic American Corporation			Atlantic American Corporation			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⁾	On August 4, 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.

~~-17-~~-16-

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Note 7.

Earnings (Loss) Per Common Share

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

Three Months Ended
June 30, 2019

Loss
Weighted
Average
Shares
(In thousands)

Per Share
Amount

Basic and Diluted Loss Per Common Share:

Net loss
$
(4,426
)

20,146

Less preferred stock dividends
(100
)

—

Net loss applicable to common shareholders
$
(4,526
)

20,146

$
(.22
)

	Three Months Ended June 30, 2020
	Income			Weighted Average Shares (In thousands)		Per Share Amount
Basic Earnings Per Common Share:
Net income	$	6,532			20,440
Less preferred stock dividends		(100	)	—
Net income applicable to common shareholders		6,432			20,440	$	.31
Diluted Earnings Per Common Share:
Effect of Series D preferred stock		100			1,378
Net income applicable to common shareholders	$	6,532			21,818	$	.30

Three Months Ended
June 30, 2018

Income
Weighted
Average
Shares
(In thousands)

Per Share
Amount

Basic Earnings Per Common Share:
Net income
$
3,185

20,286

Less preferred stock dividends
(100
)

Net income applicable to common shareholders
3,085

20,286

$
.15

Diluted Earnings Per Common Share:
Effect of Series D preferred stock
100

1,378

Net income applicable to common shareholders
$
3,185

21,664

$
.15

	Three Months Ended June 30, 2019
	Loss			Weighted Average Shares (In thousands)		Per Share Amount
Basic and Diluted Loss Per Common Share:
Net loss	$	(4,426	)		20,146
Less preferred stock dividends		(100	)		—
Net loss applicable to common shareholders	$	(4,526	)		20,146	$	(.22	)

	Six Months Ended June 30, 2019								Six Months Ended June 30, 2020
	Loss			Weighted Average Shares (In thousands)		Per Share Amount			Loss			Weighted Average Shares (In thousands)		Per Share Amount
Basic and Diluted Loss Per Common Share:
Net loss	$	(264	)		20,152				$	(1,555	)		20,455
Less preferred stock dividends		(199	)		—					(199	)		—
Net loss applicable to common shareholders	$	(463	)		20,152	$	(.02	)	$	(1,754	)		20,455	$	(.09	)

~~-18-~~-17-

Table of Contents

Six Months Ended
June 30, 2018

Loss
Weighted
Average
Shares
(In thousands)

Per Share
Amount

Basic and Diluted Loss Per Common Share:

Net loss
$
(1,839
)

20,352

Less preferred stock dividends
(199
)

—

Net loss applicable to common shareholders
$
(2,038
)

20,352

$
(.10
)

	Six Months Ended June 30, 2019
	Loss			Weighted Average Shares (In thousands)		Per Share Amount
Basic and Diluted Loss Per Common Share:
Net loss	$	(264	)		20,152
Less preferred stock dividends		(199	)		—
Net loss applicable to common shareholders	$	(463	)		20,152	$	(.02	)

The assumed conversion of the Company’s Series D preferred stock was excluded from the earnings (loss) per common share calculation for all periods presented, except for the three month period ended June 30, ~~2018,~~2020, since its impact would have been antidilutive.

Note 8.

Income Taxes

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

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Federal income tax provision at statutory rate of 21%	$	(1,174	)	$	847		$	(64	)	$	(487	)	$	1,739		$	(1,174	)	$	(409	)	$	(64	)
Dividends-received deduction		(5	)		(10	)		(14	)		(20	)		(3	)		(5	)		(6	)		(14	)
Other permanent differences		16			11			38			28			13			16			24			38
Income tax expense (benefit)	$	(1,163	)	$	848		$	(40	)	$	(479	)	$	1,749		$	(1,163	)	$	(391	)	$	(40	)

The components of income tax benefit were:

Three Months Ended
June 30,

Six Months Ended
June 30,

2019 2018 2019 2018
Current - Federal
$
572

$
703

$
572

$
739

Deferred - Federal
(1,735
)

145

(612
)

(1,218
)
Total
$
(1,163
)

$
848

$
(40
)

$
(479
)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Current – Federal	$	2,173		$	572		$	2,302		$	572
Deferred – Federal		(424	)		(1,735	)		(2,693	)		(612	)
Total	$	1,749		$	(1,163	)	$	(391	)	$	(40	)

In addition, the Company determined there were no significant tax implications as a result of the CARES Act.

Note 9.

Leases

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

The first lease renews annually on an automatic basis and based on original assumptions, management is reasonably certain to exercise the renewal option for an additional eight years from the January 1, 2019 effective date of the new lease guidance. The original term of the second lease was ten years and amended in January 2017 to provide for an additional seven years, with a termination date on September 30, 2026. The rate used in determining the present value of lease payments is based upon an estimate of the Company’s incremental secured borrowing rate commensurate with the term of the underlying lease.

~~-19-~~

~~Table of Contents~~

These leases are accounted for as operating leases, whereby lease expense is recognized on a straight-line basis over the term of the lease. Lease expense reported for the six months ended June 30, 2020 and June 30, 2019 was $507. ~~See the “Adoption~~

-18-

Table of ~~New Accounting Standards – Leases~~” ~~section of Note 2 of Notes to Condensed Consolidated Financial Statements for additional information regarding the accounting for leases.~~Contents

Additional information regarding the Company’s real estate operating leases is as follows:

	Six Months Ended June 30,
	2019			Six Months Ended June 30,
Other information on operating leases:				2020			2019
Cash payments included in the measurement of lease liabilities reported in operating cash flows	$	450		$	475		$	450
Right-of-use assets included in other assets on the condensed consolidated balance sheet		5,785			5,159			5,785
Weighted average discount rate		6.8	%		6.8	%		6.8	%
Weighted average remaining lease term in years	7.4 years			6.4 years			7.4 years

The following table presents maturities and present value of the Company’s lease liabilities:

	Lease Liability		Lease Liability
Remainder of 2019	$	365
2020		978
Remainder of 2020			$	503
2021		1,015		1,015
2022		1,031		1,031
2023		1,048		1,048
2024				1,065
Thereafter		3,091		2,025
Total undiscounted lease payments		7,528		6,687
Less: present value adjustment		1,685		1,297
Operating lease liability included in other liabilities on the condensed consolidated balance sheet	$	5,843
Operating lease liability included in accounts payable and accrued expenses on the condensed consolidated balance sheet			$	5,390

As of June 30, ~~2019,~~2020, the Company has no operating leases that have not yet commenced.

Note 10.

Commitments and Contingencies

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 businesses. 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.

~~-20-~~-19-

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Note 11.

Segment Information

The Parent’s primary insurance subsidiaries, American Southern and Bankers Fidelity, operate in two principal business units, each focusing on specific products. American Southern operates in the property and casualty insurance market, while Bankers Fidelity operates in the life and health insurance market. Each business unit is managed independently and is evaluated on its individual performance. The following sets forth the assets, revenue and income (loss) before income taxes for each business unit as of and for the periods ended ~~2019~~2020 and ~~2018.~~2019.

Assets	June 30, 2019			December 31, 2018			June 30, 2020		December 31, 2019
American Southern	$	142,059		$	122,724		$	153,632	$	141,524
Bankers Fidelity		206,513			195,663			220,111		224,122
Corporate and Other		148,424			134,643			11,994		11,980
Adjustments & Eliminations		(125,266	)		(108,756	)
Total assets	$	371,730		$	344,274		$	385,737	$	377,626

Revenues	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
American Southern	$	15,740		$	14,643		$	30,975		$	28,176		$	16,896		$	15,740		$	32,123		$	30,975
Bankers Fidelity		31,244			31,641			65,620			61,754			32,871			31,244			57,744			65,620
Corporate and Other		(1,261	)		5,939			6,617			5,419			(30	)		(3,857	)		(720	)		1,550
Adjustments & Eliminations		(2,596	)		(2,780	)		(5,067	)		(5,366	)
Total revenue	$	43,127		$	49,443		$	98,145		$	89,983		$	49,737		$	43,127		$	89,147		$	98,145

Income (Loss) Before Income Taxes	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018		2019			2018			2020			2019			2020			2019
American Southern	$	1,396		$	1,929	$	3,378		$	2,897		$	2,087		$	1,396		$	2,965		$	3,378
Bankers Fidelity		(1,998	)		261		(2,494	)		(2,274	)		8,039			(1,998	)		(742	)		(2,494	)
Corporate and Other		(4,987	)		1,843		(1,188	)		(2,941	)		(1,845	)		(4,987	)		(4,169	)		(1,188	)
Income (loss) before income taxes	$	(5,589	)	$	4,033	$	(304	)	$	(2,318	)	$	8,281		$	(5,589	)	$	(1,946	)	$	(304	)

Note 12.

Related Party Transactions

During the ~~three~~six month period ended June 30, 2019, the Company transferred its remaining fractional interest in an aircraft arrangement to Gray Television, Inc., a related party, for $151.

Note 13.

Subsequent Events

Since June 30, 2020, the COVID-19 pandemic continues to cause material disruption to financial markets and the economy. As a result of the pandemic, the Company could experience future losses in its investment portfolio as a result of the weakened and volatile markets. Additionally, the Company can experience increased risk of loss any time unforeseen infectious diseases impact large portions of a population. Specifically, the Company’s life and health business could experience significant loss due to increased claims volume arising from COVID-19. The duration and impact of the COVID-19 pandemic is unknown at this time and it is not possible to reliably estimate the impact on the financial condition, operating results or liquidity of the Company and its operating subsidiaries in future periods.

~~-21-~~-20-

Table of Contents

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Overview

The following is management’s discussion and analysis of the financial condition and results of operations of Atlantic American Corporation (“Atlantic American” or the “Parent”) and its subsidiaries (collectively with the Parent, the “Company”) as of and for the three month and six month periods ended June 30, ~~2019.~~2020. This discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere herein, as well as with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 (the ~~“2018~~“2019 Annual Report”).

Atlantic American is an insurance holding company whose operations are conducted primarily through its insurance subsidiaries: American Southern Insurance Company and American Safety Insurance Company (together known as “American Southern”) and Bankers Fidelity Life Insurance Company and Bankers Fidelity Assurance Company (together known as “Bankers Fidelity”). Each operating company is managed separately, offers different products and is evaluated on its individual performance.

Recent Events and Outlook

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. In March 2020, the impact of COVID-19 and related actions to attempt to control its spread began to impact our business operations, and we expect that the pandemic, actions that have been or will be taken in response to it and its overall impact on the economy, will continue to have an effect on our business operations and our operating results. See “Expected Impact of COVID-19 on the Company’s Financial Condition and Results of Operations.”

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ significantly from those estimates. The Company has identified certain estimates that involve a higher degree of judgment and are subject to a significant degree of variability. The Company’s critical accounting policies and the resultant estimates considered most significant by management are disclosed in the ~~2018~~2019 Annual Report. Except as disclosed in Note 2 of Notes to Condensed Consolidated Financial Statements, the Company’s critical accounting policies are consistent with those disclosed in the ~~2018~~2019 Annual Report.

Overall Corporate Results

The following presents the Company’s revenue, expenses and net income (loss) for the three month and six month periods ended June 30, ~~2019~~2020 and the comparable period in ~~2018:~~2019:

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018			2019			2018			2020		2019			2020			2019
	(In thousands)												(In thousands)
Insurance premiums, net	$	45,469		$	42,845		$	90,251		$	85,047		$	46,499	$	45,469		$	92,049		$	90,251
Net investment income		2,313			2,537			4,647			4,896			1,850		2,313			3,889			4,647
Realized investment gains (losses), net		610			(57	)		1,995			313
Realized investment gains, net														-		610			249			1,995
Unrealized gains (losses) on equity securities, net		(5,337	)		4,089			1,152			(330	)		1,355		(5,337	)		(7,100	)		1,152
Other income		72			29			100			57			33		72			60			100
Total revenue		43,127			49,443			98,145			89,983			49,737		43,127			89,147			98,145
Insurance benefits and losses incurred		34,151			32,219			69,458			65,391			27,076		34,151			60,659			69,458
Commissions and underwriting expenses		11,509			9,715			22,524			19,734			10,854		11,509			23,480			22,524
Interest expense		545			506			1,091			968			414		545			890			1,091
Other expense		2,511			2,970			5,376			6,208			3,112		2,511			6,064			5,376
Total benefits and expenses		48,716			45,410			98,449			92,301			41,456		48,716			91,093			98,449
Income (loss) before income taxes	$	(5,589	)	$	4,033		$	(304	)	$	(2,318	)	$	8,281	$	(5,589	)	$	(1,946	)	$	(304	)
Net income (loss)	$	(4,426	)	$	3,185		$	(264	)	$	(1,839	)	$	6,532	$	(4,426	)	$	(1,555	)	$	(264	)

~~-22-~~-21-

Table of Contents

Management also considers and evaluates performance by analyzing the non-GAAP measure operating income (loss), and believes it is a useful metric for investors, potential investors, securities analysts and others because it isolates the “core” operating results of the Company before considering certain items that are either beyond the control of management (such as taxes, which are subject to timing, regulatory and rate changes depending on the timing of the associated revenues and expenses) or are not expected to regularly impact the Company’s operational results (such as any realized and unrealized investment gains, which are not a part of the Company’s primary operations and are, to a limited extent, subject to discretion in terms of timing of realization).

A reconciliation of net income (loss) to operating ~~loss~~income (loss) for the three month and six month periods ended June 30, ~~2019~~2020 and the comparable period in ~~2018~~2019 is as follows:

Three Months Ended
June 30,

Six Months Ended
June 30,

Reconciliation of Non-GAAP Financial Measure 2019 2018 2019 2018
(In thousands)
Net income (loss)
$
(4,426
)

$
3,185

$
(264
)

$
(1,839
)
Income tax expense (benefit)
(1,163
)

848

(40
)

(479
)
Realized investment (gains) losses, net
(610
)

57

(1,995
)

(313
)
Unrealized (gains) losses on equity securities, net
5,337

(4,089
)

(1,152
)

330

Non-GAAP operating income (loss)
$
(862
)

$
1

$
(3,451
)

$
(2,301
)

	Three Months Ended June 30,						Six Months Ended June 30,
Reconciliation of Non-GAAP Financial Measure	2020			2019			2020			2019
	(In thousands)
Net income (loss)	$	6,532		$	(4,426	)	$	(1,555	)	$	(264	)
Income tax expense (benefit)		1,749			(1,163	)		(391	)		(40	)
Realized investment gains, net		-			(610	)		(249	)		(1,995	)
Unrealized (gains) losses on equity securities, net		(1,355	)		5,337			7,100			(1,152	)
Non-GAAP operating income (loss)	$	6,926		$	(862	)	$	4,905		$	(3,451	)

On a consolidated basis, the Company had net income of $6.5 million, or $0.30 per diluted share, for the three month period ended June 30, 2020, compared to net loss of $4.4 million, or $0.22 per diluted share, for the three month period ended June 30, ~~2019, compared to~~2019. The Company had net ~~income~~loss of ~~$3.2~~$1.6 million, or ~~$0.15~~$0.09 per diluted share, for the ~~three~~six month period ended June 30, ~~2018. The Company had~~2020, compared to net loss of $0.3 million, or $0.02 per diluted share, for the six month period ended June 30, ~~2019, compared to net loss of $1.8 million, or $0.10 per diluted share, for the six month period ended June 30, 2018.~~2019. Premium revenue for the three month period ended June 30, ~~2019~~2020 increased ~~$2.6~~$1.0 million, or ~~6.1%~~2.3%, to ~~$45.5~~$46.5 million from ~~$42.8~~$45.5 million in the three month period ended June 30, ~~2018.~~2019. For the six month period ended June 30, ~~2019,~~2020, premium revenue increased ~~$5.2~~$1.8 million, or ~~6.1%~~2.0%, to ~~$90.3~~$92.0 million from ~~$85.0~~$90.3 million in the comparable period in ~~2018.~~2019. The increase in premium revenue was primarily attributable to ~~an increase in Medicare supplement business in the life and health operations, coupled with~~ an increase in the automobile physical damage line of business in the property and casualty operations.

Operating ~~loss~~income increased ~~$0.9~~$7.8 million in the three month period ended June 30, ~~2019~~2020 from the three month period ended June 30, ~~2018.~~2019. For the six month period ended June 30, ~~2019, the~~2020, operating ~~loss~~income increased ~~$1.2~~$8.4 million over the comparable period in ~~2018.~~2019. The increase in operating ~~loss~~income was primarily due to ~~unfavorable~~favorable loss experience in the life and health ~~operations.~~operations, resulting from a significant decrease in the number of incurred claims within the Medicare supplement line of business. This decrease in the number of incurred claims was primarily attributable to the Company’s individual policy holders being subject to varying degrees of shelter in place orders instituted throughout the United States during the second quarter of 2020 as a result of COVID-19.

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

~~-23-~~

~~Table of Contents~~

American Southern

The following summarizes American Southern’s premiums, losses, expenses and underwriting ratios for the three month and six month periods ended June 30, ~~2019~~2020 and the comparable periods in ~~2018:~~2019:

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
	(Dollars in thousands)												(Dollars in thousands)
Gross written premiums	$	32,581		$	28,501		$	40,275		$	35,342		$	33,320		$	32,581		$	42,938		$	40,275
Ceded premiums		(1,313	)		(1,228	)		(2,688	)		(2,431	)		(1,451	)		(1,313	)		(2,845	)		(2,688	)
Net written premiums	$	31,268		$	27,273		$	37,587		$	32,911		$	31,869		$	31,268		$	40,093		$	37,587
Net earned premiums	$	14,754		$	13,542		$	28,560		$	26,249		$	15,824		$	14,754		$	30,746		$	28,560
Net loss and loss adjustment expenses		9,863			8,695			18,906			17,872			10,021			9,863			19,555			18,906
Underwriting expenses		4,480			4,019			8,690			7,406
Commissions and underwriting expenses														4,788			4,480			9,602			8,690
Underwriting income	$	411		$	828		$	964		$	971		$	1,015		$	411		$	1,589		$	964
Loss ratio		66.8	%		64.2	%		66.2	%		68.1	%		63.3	%		66.8	%		63.6	%		66.2	%
Expense ratio		30.4			29.7			30.4			28.2			30.3			30.4			31.2			30.4
Combined ratio		97.2	%		93.9	%		96.6	%		96.3	%		93.6	%		97.2	%		94.8	%		96.6	%

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Gross written premiums at American Southern increased ~~$4.1~~$0.7 million, or ~~14.3%~~2.3%, during the three month period ended June 30, ~~2019~~2020 and ~~$4.9~~$2.7 million, or ~~14.0%~~6.6%, during the six month period ended June 30, ~~2019,~~2020, from the comparable periods in ~~2018.~~2019. The increase in gross written premiums was primarily attributable to an increase in premiums written in the automobile physical damage line of business due to ~~increased writings from certain agencies and~~ a new agency that started in the second half of ~~2018. Partially offsetting the increase in gross written premiums was a decline in premiums written in the surety line of business~~2019, as ~~a result of~~well as increased ~~competition.~~writings from certain existing agencies.

Ceded premiums increased $0.1 million, or ~~6.9%~~10.5%, during the three month period ended June 30, ~~2019~~2020 and ~~$0.3~~$0.2 million, or ~~10.6%~~5.8%, during the six month period ended June 30, ~~2019,~~2020, from the comparable periods in ~~2018. The~~2019. American Southern’s ceded premiums are typically determined as a percentage of earned premiums and generally increase or decrease as earned premiums increase or decrease. Also contributing to the increase in ceded premiums in ~~2019~~2020 was ~~due primarily to~~ an increase in earned premiums in certain accounts within the automobile physical damage and general liability lines of business, which are subject to reinsurance.

The following presents American Southern’s net earned premiums by line of business for the three month and six month periods ended June 30, ~~2019~~2020 and the comparable periods in ~~2018:~~2019:

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2020		2019		2020		2019
	(In thousands)								(In thousands)
Automobile liability	$	7,813	$	7,380	$	14,837	$	14,245	$	8,223	$	7,813	$	15,363	$	14,837
Automobile physical damage		3,799		2,897		7,401		5,352		4,472		3,799		9,020		7,401
General liability		819		715		1,603		1,453		888		819		1,739		1,603
Surety		1,608		1,778		3,295		3,712		1,441		1,608		3,046		3,295
Other lines		715		772		1,424		1,487		800		715		1,578		1,424
Total	$	14,754	$	13,542	$	28,560	$	26,249	$	15,824	$	14,754	$	30,746	$	28,560

Net earned premiums increased ~~$1.2~~$1.1 million, or ~~8.9%~~7.3%, during the three month period ended June 30, ~~2019,~~2020, and increased ~~$2.3~~$2.2 million, or ~~8.8%~~7.7%, during the six month period ended June 30, ~~2019,~~2020, over the comparable periods in ~~2018.~~2019. The increase in net earned premiums was primarily attributable to an increase in automobile physical damage coverage resulting from ~~additional writings from a~~the new agency as previously ~~mentioned.~~mentioned, as well as a rate increase on a large automobile liability account. Premiums are earned ratably over their respective policy terms, and therefore premiums earned in the current year are related to policies written during both the current year and immediately preceding year.

The performance of an insurance company is often measured by its combined ratio. The combined ratio represents the percentage of losses, loss adjustment expenses and other expenses that are incurred for each dollar of premium earned by the ~~Company.~~company. A combined ratio of under 100% represents an underwriting profit while a combined ratio of over 100% indicates an underwriting loss. The combined ratio is divided into two components, the loss ratio (the ratio of losses and loss adjustment expenses incurred to premiums earned) and the expense ratio (the ratio of expenses incurred to premiums earned).

~~-24-~~

~~Table of Contents~~

Net loss and loss adjustment expenses at American Southern increased ~~$1.2~~$0.2 million, or ~~13.4%~~1.6%, during the three month period ended June 30, ~~2019,~~2020, and ~~$1.0~~$0.6 million, or ~~5.8%~~3.4%, during the six month period ended June 30, ~~2019,~~2020, over the comparable periods in ~~2018.~~2019. As a percentage of earned premiums, net loss and loss adjustment expenses were 63.3% in the three month period ended June 30, 2020, compared to 66.8% in the three month period ended June 30, ~~2019, compared to 64.2% in the three month period ended June 30, 2018.~~2019. For the six month period ended June 30, ~~2019,~~2020, this ratio decreased to ~~66.2%~~63.6% from ~~68.1%~~66.2% in the comparable period in ~~2018.~~2019. The ~~increase~~decrease in the loss ratio during the three month ~~period~~and six month periods ended June 30, ~~2019~~2020 was primarily due to ~~less favorable loss experience~~a decrease in the ~~auto~~severity of claims in the automobile liability ~~auto physical damage and general liability lines~~line of business. ~~The~~Partially offsetting the decrease in the loss ratio during the three month and six month ~~period~~periods ended June 30, ~~2019~~2020 was ~~primarily attributable to a decrease~~less favorable loss experience in the ~~severity of losses in the surety~~automobile physical damage line of ~~business.~~business due to an increase in frequency of claims from the new agency.

~~Underwriting~~Commissions and underwriting expenses increased ~~$0.5~~$0.3 million, or ~~11.5%~~6.9%, during the three month period ended June 30, ~~2019,~~2020, and ~~$1.3~~$0.9 million, or ~~17.3%~~10.5%, during the six month period ended June 30, ~~2019,~~2020, over the comparable periods in ~~2018.~~2019. As a percentage of earned premiums, underwriting expenses were 30.3% in the three month period ended June 30, 2020, compared to 30.4% in the three month period ended June 30, ~~2019, compared to 29.7% in the three month period ended June 30, 2018.~~2019. For the six month period ended June 30, ~~2019,~~2020, this ratio increased to ~~30.4%~~31.2% from ~~28.2%~~30.4% in the comparable period in ~~2018.~~2019. The increase in the expense ratio during the six month period ended June 30, ~~2019~~2020 was primarily due to American Southern’s use of a variable commission structure with certain agents, which compensates the participating agents in relation to the loss ratios of the business they write. During periods in which the loss ratio decreases, commissions and underwriting expenses will generally increase, and conversely, during periods in which the loss ratio increases, commissions and underwriting expenses will generally decrease. During the three month and six month periods ended June 30, ~~2019,~~2020, variable commissions at American Southern remained relatively consistent and increased ~~$0.1 million and $0.6~~by $0.2 million, respectively, from the comparable periods in ~~2018~~2019 due to ~~more~~ favorable loss experience ~~in the surety line~~from accounts subject to variable commissions.

-23-

Table of ~~business.~~Contents

Bankers Fidelity

The following summarizes Bankers Fidelity’s earned premiums, losses, expenses and underwriting ratios for the three month and six month periods ended June 30, ~~2019~~2020 and the comparable periods in ~~2018:~~2019:

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
	(Dollars in thousands)												(Dollars in thousands)
Medicare supplement	$	44,541		$	40,264		$	88,870		$	79,427		$	43,787		$	44,541		$	88,102		$	88,870
Other health products		1,896			1,745			3,886			3,590			2,311			1,896			4,495			3,886
Life insurance		2,154			2,271			4,296			4,573			2,557			2,154			4,814			4,296
Gross earned premiums		48,591			44,280			97,052			87,590			48,655			48,591			97,411			97,052
Ceded premiums		(17,876	)		(14,977	)		(35,361	)		(28,792	)		(17,980	)		(17,876	)		(36,108	)		(35,361	)
Net earned premiums		30,715			29,303			61,691			58,798			30,675			30,715			61,303			61,691
Insurance benefits and losses		24,288			23,524			50,552			47,519			17,055			24,288			41,104			50,552
Underwriting expenses		8,954			7,857			17,562			16,509
Commissions and underwriting expenses														7,778			8,954			17,382			17,562
Total expenses		33,242			31,381			68,114			64,028			24,833			33,242			58,486			68,114
Underwriting loss	$	(2,527	)	$	(2,078	)	$	(6,423	)	$	(5,230	)
Underwriting income (loss)													$	5,842		$	(2,527	)	$	2,817		$	(6,423	)
Loss ratio		79.1	%		80.3	%		81.9	%		80.8	%		55.6	%		79.1	%		67.1	%		81.9	%
Expense ratio		29.2			26.8			28.5			28.1			25.4			29.2			28.4			28.5
Combined ratio		108.3	%		107.1	%		110.4	%		108.9	%		81.0	%		108.3	%		95.5	%		110.4	%

Net earned premium revenue at Bankers Fidelity ~~increased $1.4 million, or 4.8%,~~remained relatively consistent during the three month period ended June 30, ~~2019,~~2020, and ~~$2.9~~$0.4 million, or ~~4.9%~~0.6%, during the six month period ended June 30, ~~2019, over~~2020, from the comparable periods in ~~2018.~~2019. Gross earned premiums from the Medicare supplement line of business ~~increased $4.3~~decreased $0.8 million, or ~~10.6%~~1.7%, during the three month period ended June 30, ~~2019,~~2020, and ~~$9.4~~$0.8 million, or ~~11.9%~~0.9%, during the six month period ended June 30, ~~2019,~~2020, due primarily to ~~successful execution~~non-renewals exceeding the level of new business ~~generating strategies with both new and existing agents.~~writings. Other health product premiums increased ~~$0.2~~$0.4 million, or ~~8.7%~~21.9%, during the three month period ended June 30, ~~2019,~~2020, and ~~$0.3~~$0.6 million, or ~~8.2%~~15.7%, during the six month period ended June 30, ~~2019, from~~2020, over the comparable periods in ~~2018,~~2019, primarily as a result of new sales of the company’s ~~hospital indemnity and~~ group health products. Gross earned premiums from the life insurance line of business ~~decreased $0.1~~increased $0.4 million, or ~~5.2%~~18.7%, during the three month period ended June 30, ~~2019,~~2020, and ~~$0.3~~$0.5 million, or ~~6.1%~~12.1%, during the six month period ended June 30, ~~2019 from~~2020 over the comparable periods in ~~2018~~2019 due to an increase in the group life products premium. Partially offsetting the increase in gross earned premiums from the life insurance line was a decrease in individual life products premium, resulting from the redemption and settlement of existing individual life policy obligations exceeding the level of new ~~sales activity.~~individual life sales. Premiums ceded increased ~~$2.9~~$0.1 million, or ~~19.4%~~0.6%, during the three month period ended June 30, ~~2019~~2020 and ~~$6.6~~$0.7 million, or ~~22.8%~~2.1%, during the six month period ended June 30, ~~2019,~~2020, over the comparable periods in ~~2018.~~2019. The increase in ceded premiums for the three month and six month periods ended June 30, ~~2019~~2020 was due to ~~a significant~~an increase in Medicare supplement premiums subject to reinsurance.

~~-25-~~

~~Table of Contents~~

Benefits and losses ~~increased $0.8~~decreased $7.2 million, or ~~3.2%~~29.8%, during the three month period ended June 30, ~~2019,~~2020, and ~~$3.0~~$9.4 million, or ~~6.4%~~18.7%, during the six month period ended June 30, ~~2019, over~~2020, from the comparable periods in ~~2018.~~2019. As a percentage of earned premiums, benefits and losses were 55.6% in the three month period ended June 30, 2020, compared to 79.1% in the three month period ended June 30, ~~2019, compared to 80.3% in the three month period ended June 30, 2018.~~2019. For the six month period ended June 30, ~~2019,~~2020, this ratio ~~increased~~decreased to ~~81.9%~~67.1% from ~~80.8%~~81.9% in the comparable period in ~~2018.~~2019. The decrease in the loss ratio for the three month ~~period~~and six month periods ended June 30, ~~2019~~2020 was primarily due to ~~more favorable loss experience in the life insurance and certain products in the other health lines~~a significantly lower number of business. The increase in the loss ratio for the six month period ended June 30, 2019 was primarily attributable to unfavorable loss experience in the Medicare supplement line of business. Throughout 2018 and continuing into the six month period ended June 30, 2019, Bankers Fidelity experienced a higher than expected level of claims incurred in the Medicare supplement line of business ~~which had an unfavorable effect on~~due to the Company’s ~~loss patterns and increased~~individual policy holders being subject to varying degrees of shelter in place orders instituted throughout the ~~resultant loss ratio.~~United States during the second quarter of 2020 as a result of COVID-19.

~~Underwriting~~Commissions and underwriting expenses ~~increased $1.1~~decreased $1.2 million, or ~~14.0%~~13.1%, during the three month period ended June 30, ~~2019,~~2020, and ~~$1.1~~$0.2 million, or ~~6.4%~~1.0%, during the six month period ended June 30, ~~2019,~~2020, over the comparable periods in ~~2018.~~2019. As a percentage of earned premiums, underwriting expenses were 25.4% in the three month period ended June 30, 2020, compared to 29.2% in the three month period ended June 30, ~~2019, compared to 26.8% in the three month period ended June 30, 2018.~~2019. For the six month period ended June 30, ~~2019,~~2020, this ratio ~~increased~~decreased to ~~28.5%~~28.4% from ~~28.1%~~28.5% in the comparable period in ~~2018.~~2019. The ~~increase~~decrease in the expense ratio for the three month and six month periods ended June 30, ~~2019~~2020 was primarily due to ~~an increase~~a decrease in ~~expenses~~agent incentive costs and realization of costs saving initiatives related to ~~servicing the Medicare supplement line of business.~~
postage and printing.

~~-26-~~-24-

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~~NET INVESTMENT INCOME AND REALIZED GAINS (LOSSES)~~Net Investment Income and Realized Gains

Investment income decreased ~~$0.2~~$0.5 million, or ~~8.8%~~20.0%, during the three month period ended June 30, ~~2019,~~2020, and ~~$0.2~~$0.8 million, or ~~5.1%~~16.3%, during the six month period ended June 30, ~~2019,~~2020, over the comparable periods in ~~2018.~~2019. The decrease in investment income was primarily attributable to ~~a decrease~~net losses in the equity in earnings from investments in real estate partnerships during the three month and six month periods ended June 30, 2019 of $0.2 million and $0.3 million, respectively, over the comparable periods in 2018.Company’s other invested assets coupled with slightly lower investment yields on fixed maturity securities.

The Company had no net realized investment gains during the three month period ended June 30, 2020, compared to net realized investment gains of $0.6 million during the three month period ended June 30, ~~2019, compared to~~2019. The Company had net realized investment ~~losses~~gains of ~~$0.1~~$0.2 million during the ~~three~~six month period ended June 30, ~~2018. The Company had~~2020, compared to net realized investment gains of $2.0 million during the six month period ended June 30, 2019, compared to net realized investment gains of $0.3 million during the six month period ended June 30, 2018. The net realized investment gains during the three month period ended June 30, 2019 resulted from the disposition of certain of the Company’s investments in fixed maturities.2019. The net realized investment gains during the six month period ended June 30, ~~2019~~2020 resulted primarily from the disposition of several of the Company’s investments in ~~fixed maturities and~~ equity securities. Management continually evaluates the Company’s investment portfolio and makes adjustments for impairments and/or divests investments as may be determined to be appropriate.

~~UNREALIZED GAINS (LOSSES) ON EQUITY SECURITIES~~Unrealized Gains (Losses) on Equity Securities

~~On January 1, 2018 the Company adopted ASU No. 2016-01, which requires, among other things, investments~~Investments in equity securities ~~to be~~are measured at fair value at the end of the reporting period, with any changes in fair value reported in net ~~income. As a result of~~income during the ~~adoption of ASU No. 2016-01, the~~period, with certain exceptions. The Company recognized net unrealized gains on equity securities of $1.4 million during the three month period ended June 30, 2020 and unrealized losses on equity securities ~~still held~~ of $5.3 million during the three month period ended June 30, ~~2019~~2019. The Company recognized net unrealized losses on equity securities of $7.1 million during the six month period ended June 30, 2020 and unrealized gains on equity securities ~~still held of $4.1 million during the three month period ended June 30, 2018. The Company recognized net unrealized gains on equity securities still held~~ of $1.2 million during the six month period ended June 30, ~~2019 and unrealized losses on equity securities still held of $0.3 million during the three month period ended June 30, 2018.~~2019. Changes in unrealized gains ~~and losses~~ on equity securities for the applicable periods are primarily the result of fluctuations in the market values of the Company’s equity investments.

~~INTEREST EXPENSE~~Interest Expense

Interest expense ~~remained relatively consistent~~decreased $0.1 million, or 24.0%, during the three month period ended June 30, ~~2019,~~2020, and ~~increased $0.1~~$0.2 million, or ~~12.7%~~18.4%, during the six month period ended June 30, ~~2019, over~~2020, from the comparable periods in ~~2018. The increase~~2019. Changes in interest expense ~~was~~were primarily due to ~~an increase~~changes in the London Interbank Offered Rate (“LIBOR”), as the interest rates on the Company’s outstanding junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) are directly related to LIBOR.

~~OTHER EXPENSES~~

~~Other expenses (commissions, underwriting expenses,~~Liquidity and other expenses) increased $1.3 million, or 10.5%, during the three month period ended June 30, 2019, and $2.0 million, or 7.5%, during the six month period ended June 30, 2019, from the comparable periods in 2018. The increase in other expenses was primarily attributable to increased costs associated with the growth of the Medicare supplement line of business. Also contributing to the increase in other expenses was a $0.1 million and $0.6 million increase in the three month and six month periods ended June 30, 2019, respectively, in the variable commission accrual in the property and casualty operations. On a consolidated basis, as a percentage of earned premiums, other expenses increased to 30.8% in the three month period ended June 30, 2019 from 29.6% in the three month period ended June 30, 2018. For the six month period ended June 30, 2019, this ratio increased to 30.9% from 30.5% in the comparable period in 2018. The increase in the expense ratio during the three month and six month periods ended June 30, 2019 was primarily attributable to the increase costs associated with the growth in Medicare supplement line of business and variable commissions, as discussed previously.

~~LIQUIDITY AND CAPITAL RESOURCES~~Capital Resources

The primary cash needs of the Company are for the payment of claims and operating expenses, maintaining adequate statutory capital and surplus levels, and meeting debt service requirements. Current and expected patterns of claim frequency and severity may change from period to period but generally are expected to continue within historical ranges. The Company’s primary sources of cash are written premiums, investment 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.

Cash flows at the Parent are derived from dividends, management fees, and tax-sharing payments, as described below, from the subsidiaries. The principal cash needs of the Parent are for the payment of operating expenses, the acquisition of capital assets and debt service requirements, as well as the repurchase of shares and payments of any dividends as may be authorized and approved by the Company’s board of directors from time to time. At June 30, ~~2019,~~2020, the Parent had approximately ~~$15.0~~$5.2 million of unrestricted cash and investments.

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The Parent’s insurance subsidiaries reported astatutory net income of $4.7 million for the six month period ended June 30, 2020, compared to statutory net loss of $1.7 million for the six month period ended June 30, ~~2019, compared to statutory net loss of $1.0 million for the six month period ended June 30, 2018.~~2019. Statutory results are impacted by the recognition of all costs of acquiring business. In periods in which the Company’s first year premiums increase, statutory results are generally lower than results determined under GAAP. Statutory results for the Company’s property and casualty operations may differ from the Company’s results of operations under GAAP due to the deferral of acquisition costs for financial reporting purposes. The Company’s life and health operations’ statutory results may differ from GAAP results primarily due to the deferral of acquisition costs for financial reporting purposes, as well as the use of different reserving methods.

Over 90% of the invested assets of the Parent’s insurance subsidiaries are invested in marketable securities that can be converted into cash, if required; however, the use of such assets by the Company is limited by state insurance regulations. Dividend payments to a parent corporation by its wholly owned insurance subsidiaries are subject to annual limitations and are restricted to 10% of statutory surplus or statutory earnings before recognizing realized investment gains of the individual insurance subsidiaries. At June 30, ~~2019,~~2020, American Southern had ~~$42.0~~$42.9 million of statutory surplus and Bankers Fidelity had ~~$28.0~~$32.2 million of statutory surplus. In ~~2019,~~2020, dividend payments by the Parent’s insurance subsidiaries in excess of ~~$4.3~~$4.6 million would require prior approval. Through June 30, ~~2019,~~2020, the Parent received dividends of ~~$2.4~~$1.8 million from its subsidiaries.

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The Parent provides certain administrative and other services to each of its insurance subsidiaries. The amounts charged to and paid by the subsidiaries include reimbursements for various shared services and other expenses incurred directly on behalf of the subsidiaries by the Parent. In addition, there is in place a formal tax-sharing agreement between the Parent and its insurance subsidiaries. As a result of the Parent’s tax loss, it is anticipated that the tax-sharing agreement will continue to provide the Parent with additional funds from profitable subsidiaries to assist in meeting its cash flow obligations.

The Company has two statutory trusts which exist for the exclusive purpose of issuing trust preferred securities representing undivided beneficial interests in the assets of the trusts and investing the gross proceeds of the trust preferred securities in Junior Subordinated Debentures. The outstanding $18.0 million and $15.7 million of Junior Subordinated Debentures mature on December 4, 2032 and May 15, 2033, respectively, are callable quarterly, in whole or in part, only at the option of the Company, and have an interest rate of three-month LIBOR plus an applicable margin. The margin ranges from 4.00% to 4.10%. At June 30, ~~2019,~~2020, the effective interest rate was ~~6.57%~~4.42%. The obligations of the Company with respect to the issuances of the trust preferred securities represent a full and unconditional guarantee by the Parent of each trust’s obligations with respect to the trust preferred securities. Subject to certain exceptions and limitations, the Company may elect from time to time to defer Junior Subordinated Debenture interest payments, which would result in a deferral of distribution payments on the related trust preferred securities. As of June 30, ~~2019,~~2020, the Company has not made such an election.

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

At June 30, ~~2019,~~2020, the Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding. All of the shares of Series D Preferred Stock are held by an affiliate of the Company’s controlling shareholder. The outstanding shares of Series D Preferred Stock have a stated value of $100 per share; accrue annual dividends at a rate of $7.25 per share (payable in cash or shares of the Company’s common stock at the option of the board of directors of the Company) and are cumulative. In certain circumstances, the shares of the Series D Preferred Stock may be convertible into an aggregate of approximately 1,378,000 shares of the Company’s common stock, subject to certain adjustments and provided that such adjustments do not result in the Company issuing more than approximately 2,703,000 shares of common stock without obtaining prior shareholder approval; and are redeemable solely at the Company’s option. The Series D Preferred Stock is not currently convertible. At June 30, ~~2019,~~2020, the Company had accrued but unpaid dividends on the Series D Preferred Stock totaling $0.2 million.

Cash and cash equivalents ~~decreased~~increased from ~~$12.6~~$12.9 million at December 31, ~~2018~~2019 to ~~$11.5~~$16.4 million at June 30, ~~2019.~~2020. The ~~decrease~~increase in cash and cash equivalents during the six month period ended June 30, ~~2019~~2020 was primarily attributable to ~~net cash used in operating activities of $7.2 million, partially offset by~~ a ~~$6.6~~$3.1 million increase resulting from investment sales and maturity of securities exceeding purchases of ~~securities.~~securities in addition to net cash provided by operating activities of $0.6 million.

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

Expected Impact of COVID-19 on the Company’s Financial Condition and Results of Operations

The duration and impact of the COVID-19 pandemic is unknown at this time and it is not possible for us to reliably estimate the impact on the financial condition, operating results or liquidity of the Company and its operating subsidiaries in future periods. However, we do not currently expect a significant decline in liquidity or operating results as a result of the disruption caused by the ongoing COVID-19 pandemic. To date, the most significant impact of COVID-19 on the Company’s financial position has been volatility in the fair value of the Company’s fixed maturity and equity investments due to disruption in the financial markets.

We expect that earned premiums could be adversely impacted by a weakened economy leading to a slowdown in new sales and reduced retention of insureds. Additionally, a number of states have issued bulletins that either encourage or require premium leniency such as extension of grace periods or moratoriums on cancellation of policies for non-payment. The Company does not expect a significant reduction or delay in payments and continues to monitor state required actions as they develop.

For the Company’s property and casualty operations, the majority of premium revenue is derived from automobile liability and automobile physical damage lines of business written on a multi-year contract basis with state and local governments. Although we cannot predict with certainty at this time, we do not expect a significant level of cancellations or non-renewals of our property and casualty contracts in the short term but recognize that a prolonged economic slowdown could adversely affect future results.

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~~OFF-BALANCE SHEET ARRANGEMENTS~~Benefits and losses in our property and casualty operations could be adversely impacted as a result of disruption caused by the COVID-19 pandemic. However, due to the nature of our primary product lines, the impact is not currently expected to be material. Additionally, we expect to see a reduction in frequency and severity of claims in the automobile lines of business as fewer miles are driven and less people are on the roads. As a result, we do not currently expect a material adverse effect on operating results or liquidity in the property and casualty operations.

The ~~Company disclosed its off-balance sheet arrangements~~majority of premium revenue in our life and health operations are derived from the ~~2018 Annual Report.~~senior market segment of the population, or those individuals age sixty-five and up, who maintain Medicare supplement and to a lesser extent, whole life insurance policies with the Company. We expect that earned premiums could be adversely impacted by the rise in unemployment and economic slowdown related to the COVID-19 pandemic and individual, business and government responses thereto, which could lead to a decline in new sales and reduced retention of insureds. As ~~of June 30, 2019, there have been no material changes to these off-balance sheet arrangements outside~~a result, we currently anticipate that the ~~ordinary course of business.~~life and health operations may experience a marginal decline in earned premiums although the actual impact cannot be predicted with certainty at this time.

~~CONTRACTUAL OBLIGATIONS~~Unforeseen infectious diseases that impact large portions of a population can have an adverse impact on mortality and morbidity, and resultant benefits and losses incurred by the Company’s life and health operations. Accordingly, the Company does anticipate incurring higher costs, potentially similar to prior influenza seasons, as it relates to life insurance claims. However, with much of the country sheltering in place over an extended period, the Company expects a decrease in non-medically necessary services being performed with many of the services deferred until a later date when these procedures are allowed to take place. Additionally, the Company expects there will be some routine medical services that are deferred indefinitely. As a result, and although the actual impact cannot be predicted with certainty at this time, the Company does not expect significant adverse development in total benefits and losses incurred in its life and health operations.

~~As a smaller reporting company,~~In addition to the ~~Company has elected~~information set forth in this report, you should carefully consider the discussions of the COVID-19 pandemic and related economic developments presented in our Annual Report on Form 10-K for the year ended December 31, 2019, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and in other reports we file with the SEC from time to ~~comply with certain scaled disclosure reporting obligations, and therefore is not providing the table~~time, all of ~~contractual obligations required by Item 303 of Regulation S-K.~~which could materially affect our business, financial condition or future results.

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Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 (the “Exchange Act”) reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives. The Company’s management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures can prevent all possible errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. There are inherent limitations in all control systems, including the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the intentional acts of one or more persons. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and, while our disclosure controls and procedures are designed to be effective under circumstances where they should reasonably be expected to operate effectively, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in any control system, misstatements due to possible errors or fraud may occur and may not be detected. An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains and references certain information that constitutes forward-looking statements as that term is defined in the federal securities laws. Statements, to the extent they are not statements of historical facts, should be considered forward-looking statements, and are subject to various risks and uncertainties. Such forward-looking statements are made based upon management’s current assessments of various risks and uncertainties, as well as assumptions made in accordance with the “safe harbor” provisions of the federal securities laws. The Company’s actual results could differ materially from the results anticipated in these forward-looking statements as a result of such risks and uncertainties, including those identified in filings made by the Company from time to time with the Securities and Exchange Commission. In addition, other risks and uncertainties not known by us, or that we currently determine to not be material, may materially adversely affect our financial condition, results of operations or cash flows. The Company undertakes no obligation to update any forward-looking statement as a result of subsequent developments, changes in underlying assumptions or facts, or otherwise.

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PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On October 31, 2016, the Board of Directors of the Company approved a plan that allows for the repurchase of up to 750,000 shares of the Company’s common stock (the “Repurchase Plan”) on the open market or in privately negotiated transactions, as determined by an authorized officer of the Company. Any such repurchases ~~could~~can be made from time to time in accordance with applicable securities laws and other requirements. The Company suspended the Repurchase Plan in May 2019 in connection with ending the relationship with the registered broker under the Repurchase Plan. The Company expects to evaluate implementation of a replacement plan in the future.

Other than pursuant to the Repurchase Plan, no purchases of common stock of the Company were made by or on behalf of the Company during the periods described below.

The table below sets forth information regarding repurchases by the Company of shares of its common stock on a monthly basis during the three month period ended June 30, ~~2019.~~2020.

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

April 1 – April 30, 2019
6,400

$
2.56

6,400

327,074

May 1 – May 31, 2019
1,945

2.55

1,945

325,129

June 1 – June 30, 2019
-

-

-

325,129

Total
8,345

$
2.56

8,345

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
April 1 – April 30, 2020		-	$	-		-		325,129
May 1 – May 31, 2020		-		-		-		325,129
June 1 – June 30, 2020		-		-		-		325,129
Total		-	$	-		-

Item 6. Exhibits

31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101.INS~~101. INS	XBRL Instance Document.

~~101.SCH~~101. SCH	XBRL Taxonomy Extension Schema.

~~101.CAL~~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.

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SIGNATURES

Pursuant to the requirements 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)

Date: August ~~13, 2019~~11, 2020	By:	/s/ J. Ross Franklin
		J. Ross Franklin
		Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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	June 30, 2019								June 30, 2020
	Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Cost or Amortized Cost		Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Cost or Amortized Cost
Fixed maturities:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	27,929	$	560	$	329	$	27,698	$	20,461	$	1,739	$	25	$	18,747
Obligations of states and political subdivisions		4,999		420		-		4,579		11,520		910		-		10,610
Corporate securities:
Utilities and telecom		17,482		1,654		-		15,828		28,886		4,118		-		24,768
Financial services		61,103		2,506		474		59,071		73,151		6,050		132		67,233
Other business – diversified		43,516		1,667		658		42,507		41,739		3,331		945		39,353
Other consumer – diversified		68,054		1,889		1,251		67,416		60,180		7,407		404		53,177
Total corporate securities		190,155		7,716		2,383		184,822		203,956		20,906		1,481		184,531
Redeemable preferred stocks:
Other consumer – diversified		192		—		—		192		250		58		—		192
Total redeemable preferred stocks		192		—		—		192		250		58		—		192
Total fixed maturities	$	223,275	$	8,696	$	2,712	$	217,291	$	236,187	$	23,613	$	1,506	$	214,080

	December 31, 2018								December 31, 2019
	Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Cost or Amortized Cost		Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Cost or 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	$	20,259	$	467	$	53	$	19,845
Obligations of states and political subdivisions		8,364		347		72		8,089		11,940		371		53		11,622
Corporate securities:
Utilities and telecom		19,642		873		431		19,200		26,648		2,404		32		24,276
Financial services		49,477		747		2,942		51,672		73,917		4,249		57		69,725
Other business – diversified		49,196		226		2,844		51,814		41,706		2,335		98		39,469
Other consumer – diversified		56,093		84		4,501		60,510		57,752		3,702		54		54,104
Total corporate securities		174,408		1,930		10,718		183,196		200,023		12,690		241		187,574
Redeemable preferred stocks:
Other consumer – diversified		192		—		—		192		250		58		-		192
Total redeemable preferred stocks		192		—		—		192		250		58		-		192
Total fixed maturities	$	210,386	$	2,313	$	11,851	$	219,924	$	232,472	$	13,586	$	347	$	219,233

	June 30, 2019								June 30, 2020
	Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Cost or Amortized Cost		Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Cost or Amortized Cost
Equity securities:
Common and non-redeemable preferred stocks:
Financial services	$	4,799	$	419	$	—	$	4,380	$	3,061	$	384	$	1	$	2,678
Other business – diversified		318		271		—		47		12,904		8,271		-		4,633
Other consumer – diversified		15,338		10,705		—		4,633
Total equity securities	$	20,455	$	11,395	$	—	$	9,060	$	15,965	$	8,655	$	1	$	7,311

	December 31, 2018								December 31, 2019
	Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Cost or Amortized Cost		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	$	3,159		624		-		2,535
Other business – diversified		306		259		—		47		19,763		15,130		-		4,633
Other consumer – diversified		14,214		9,090		—		5,124
Total equity securities	$	20,758	$	10,243	$	—	$	10,515	$	22,922	$	15,754	$	-	$	7,168

	June 30, 2019				December 31, 2018				June 30, 2020				December 31, 2019
	Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost
Due in one year or less	$	-	$	-	$	3,150	$	3,150	$	509	$	500	$	-	$	-
Due after one year through five years		16,262		16,345		19,787		19,699		19,923		19,012		14,664		14,280
Due after five years through ten years		93,243		91,052		127,617		133,863		85,121		78,583		77,934		73,521
Due after ten years		97,444		93,488		43,823		46,338		122,141		107,964		130,680		122,321
Asset backed securities		16,326		16,406		16,009		16,874		8,493		8,021		9,194		9,111
Totals	$	223,275	$	217,291	$	210,386	$	219,924	$	236,187	$	214,080	$	232,472	$	219,233

	Unaudited June 30, 2019			December 31, 2018
Cash and cash equivalents	$	11,450		$	12,630
Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost: $217,291 and $219,924)		223,275			210,386
Equity securities, at fair value (cost: $9,060 and $10,515)		20,455			20,758
Other invested assets (cost: $7,005 and $6,905)		7,380			7,424
Policy loans		2,007			2,085
Real estate		38			38
Investment in unconsolidated trusts		1,238			1,238
Total investments		254,393			241,929
Receivables:
Reinsurance		30,253			26,110
Insurance premiums and other (net of allowance for doubtful accounts: $187 and $207)		23,891			15,223
Deferred income taxes, net		1,537			4,184
Deferred acquisition costs		38,144			37,094
Other assets		9,518			4,560
Intangibles		2,544			2,544
Total assets	$	371,730		$	344,274

LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance reserves and policyholder funds:
Future policy benefits	$	92,108		$	90,257
Unearned premiums		33,947			24,206
Losses and claims		75,155			72,612
Other policy liabilities		1,331			1,973
Total insurance reserves and policyholder funds		202,541			189,048
Other liabilities		22,681			20,116
Junior subordinated debenture obligations, net		33,738			33,738
Total liabilities		258,960			242,902

Commitments and contingencies (Note 10)
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; shares issued: 22,400,894; shares outstanding: 20,160,859 and 20,170,360		22,401			22,401
Additional paid-in capital		57,444			57,414
Retained earnings		36,342			37,208
Accumulated other comprehensive income (loss)		4,727			(7,535	)
Unearned stock grant compensation		(150	)		(186	)
Treasury stock, at cost: 2,240,035 and 2,230,534 shares		(8,049	)		(7,985	)
Total shareholders’ equity		112,770			101,372
Total liabilities and shareholders’ equity	$	371,730		$	344,274

	June 30, 2019																		June 30, 2020
	Less than 12 months						12 months or longer							Total					Less than 12 months				12 months or longer				Total
	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			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		$	—		$	—		$	10,865		$	329		$	10,865		$	329	$	887	$	25	$	-	$	-	$	887	$	25
Corporate securities			2,051			5			32,070			2,378			34,121			2,383		22,512		1,481		-		-		22,512		1,481
Total temporarily impaired securities		$	2,051		$	5		$	42,935		$	2,707		$	44,986		$	2,712	$	23,399	$	1,506	$	-	$	-	$	23,399	$	1,506

	Three Months Ended June 30, 2019
	Fixed Maturities			Equity Securities			Other Invested Assets			Total
Gains		$	610		$	—		$	—		$	610
Losses			—			—			—			—
Realized investment gains (losses), net		$	610		$	—		$	—		$	610

	Three Months Ended June 30, 2018
	Fixed Maturities				Equity Securities			Other Invested Assets			Total
Gains		$	247			$	—		$	—		$	247
Losses			(304	)			—			—			(304	)
Realized investment gains (losses), net		$	(57	)		$	—		$	—		$	(57	)

	Six Months Ended June 30, 2018
	Fixed Maturities				Equity Securities			Other Invested Assets			Total
Gains		$	617			$	—		$	—		$	617
Losses			(304	)			—			—			(304	)
Realized investment gains (losses), net		$	313			$	—		$	—		$	313

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Fixed maturities	$	250	$	235,937	$	—	$	236,187
Equity securities		15,822		—		143		15,965
Cash equivalents		8,429		—		—		8,429
Total	$	24,501	$	235,937	$	143	$	260,581

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
Assets:
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

	Fixed Maturities
Balance, December 31, 2018	$	1,066
Total unrealized gains included in other comprehensive loss		49
Balance, March 31, 2019		1,115
Total unrealized gains included in other comprehensive income		59
Balance, June 30, 2019	$	1,174

	Fixed Maturities
Balance, December 31, 2017	$	1,369
Total unrealized losses included in other comprehensive loss		(30	)
Balance, March 31, 2018		1,339
Total unrealized gains included in other comprehensive loss		7
Balance, June 30, 2018	$	1,346