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What changed in ATLANTIC AMERICAN CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ATLANTIC AMERICAN CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+139 added−151 removedSource: 10-K (2024-04-01) vs 10-K (2023-06-30)

Top changes in ATLANTIC AMERICAN CORP's 2023 10-K

139 paragraphs added · 151 removed · 119 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

48 edited+3 added−10 removed90 unchanged
Biggest changeGovernment agencies and authorities $ 44,412 19.4 % $ 50,298 17.7 % States, municipalities and political subdivisions 9,187 4.1 11,644 4.2 Public utilities 10,284 4.5 13,952 4.9 All other corporate bonds 144,623 63.2 184,842 65.2 Redeemable preferred stock 223 0.1 250 0.1 Total fixed maturities (1) 208,729 91.3 260,986 92.1 Equity securities (2) 11,562 5.0 19,124 6.7 Other invested assets (3) 5,386 2.4 198 0.1 Policy loans (4) 1,759 0.8 1,858 0.7 Real estate 38 0.0 38 0.0 Investments in unconsolidated trusts 1,238 0.5 1,238 0.4 Total investments $ 228,712 100.0 % $ 283,442 100.0 % 9 Table of Contents (1) Fixed maturities are carried on the balance sheet at estimated fair value.
Biggest changeGovernment agencies and authorities $ 50,059 21.1 % $ 44,412 19.4 % States, municipalities and political subdivisions 8,106 3.4 9,187 4.1 Public utilities 9,530 4.0 10,284 4.5 All other corporate bonds 150,319 63.4 144,623 63.2 Redeemable preferred stock 205 0.1 223 0.1 Total fixed maturities (1) 218,219 92.0 208,729 91.3 Equity securities (2) 9,413 4.0 11,562 5.0 Other invested assets (3) 6,381 2.8 5,386 2.4 Policy loans (4) 1,778 0.7 1,759 0.8 Real estate 38 0.0 38 0.0 Investments in unconsolidated trusts 1,238 0.5 1,238 0.5 Total investments $ 237,067 100.0 % $ 228,712 100.0 % (1) Fixed maturities are carried on the balance sheet at estimated fair value.
Property and Casualty Operations American Southern comprises the Company’s property and casualty operations and its primary product lines are as follows: Business Automobile Insurance policies provide bodily injury and/or property damage liability coverage, uninsured motorist coverage and physical damage coverage for commercial accounts.
Property and Casualty Operations American Southern comprises the Company’s property and casualty operations and its primary product lines are as follows: Commercial Automobile Insurance policies provide bodily injury and/or property damage liability coverage, uninsured motorist coverage and physical damage coverage for commercial accounts.
The ceding of insurance does not legally discharge the insurer from primary liability for the full amount of the policies written by it, and the ceding company will incur a loss if the reinsurer fails to meet its obligations under the reinsurance agreement. 6 Table of Contents Property and Casualty Operations American Southern’s basic reinsurance treaties generally cover all claims in excess of specified per occurrence limitations.
The ceding of insurance does not legally discharge the insurer from primary liability for the full amount of the policies written by it, and the ceding company will incur a loss if the reinsurer fails to meet its obligations under the reinsurance agreement. 8 Table of Contents Property and Casualty Operations American Southern’s basic reinsurance treaties generally cover all claims in excess of specified per occurrence limitations.
This obligation may involve meeting a contractual commitment, paying a debt or performing certain duties. American Southern provides tailored business automobile insurance coverage, on a multi-year contract basis, to state governments, local municipalities and other large motor pools and fleets (“block accounts”) that can be specifically rated and underwritten.
This obligation may involve meeting a contractual commitment, paying a debt or performing certain duties. American Southern provides tailored commercial automobile insurance coverage, on a multi-year contract basis, to state governments, local municipalities and other large motor pools and fleets (“block accounts”) that can be specifically rated and underwritten.
Bankers Fidelity has also entered into a reinsurance contract ceding excess new Medicare supplement business to General Re Life Corporation. Ceding thresholds are set annually. During 2022, the liability of the reinsurer was 50% of all new Medicare supplement business issued by the Company on amounts up to a maximum retention of $15.0 million of annualized premium.
Bankers Fidelity has also entered into a reinsurance contract ceding excess new Medicare Supplement business to General Re Life Corporation. Ceding thresholds are set annually. During 2023, the liability of the reinsurer was 50% of all new Medicare Supplement business issued by the Company on amounts up to a maximum retention of $15.0 million of annualized premium.
The RBC calculation determines the amount of adjusted capital needed by a company to avoid regulatory action. “Authorized Control Level Risk-Based Capital” (“ACL”) is calculated, and if a company’s adjusted capital is 200% or lower than ACL, it is subject to regulatory action. At December 31, 2022, the Company’s insurance subsidiaries’ RBC levels exceeded the required regulatory levels.
The RBC calculation determines the amount of adjusted capital needed by a company to avoid regulatory action. “Authorized Control Level Risk-Based Capital” (“ACL”) is calculated, and if a company’s adjusted capital is 200% or lower than ACL, it is subject to regulatory action. At December 31, 2023, the Company’s insurance subsidiaries’ RBC levels exceeded the required regulatory levels.
Operational data generated from this system allows management to further refine ongoing client service programs and service representative training modules. 4 Table of Contents Property and Casualty Operations American Southern controls its claims costs by utilizing an in-house staff of claims supervisors to investigate, verify, negotiate and settle claims.
Operational data generated from this system allows management to further refine ongoing client service programs and service representative training modules. 6 Table of Contents Property and Casualty Operations American Southern controls its claims costs by utilizing an in-house staff of claims supervisors to investigate, verify, negotiate and settle claims.
IBNR reserves for prior accident years are similarly determined, again relying on an indicated, historical development pattern for reported losses. 5 Table of Contents Based on the results of regular reserve estimate reviews, the Company determines the appropriate reserve adjustment, if any, to record in each period.
IBNR reserves for prior accident years are similarly determined, again relying on an indicated, historical development pattern for reported losses. 7 Table of Contents Based on the results of regular reserve estimate reviews, the Company determines the appropriate reserve adjustment, if any, to record in each period.
Certain fixed maturities do not have publicly quoted prices, and are carried at estimated fair value as determined by management. Total amortized cost of fixed maturities was $236.8 million as of December 31, 2022 and $238.6 million as of December 31, 2021. (2) Equity securities are carried on the balance sheet at estimated fair value.
Certain fixed maturities do not have publicly quoted prices, and are carried at estimated fair value as determined by management. Total amortized cost of fixed maturities was $238.6 million as of December 31, 2023 and $236.8 million as of December 31, 2022. (2) Equity securities are carried on the balance sheet at estimated fair value.
Name Age Positions with the Company Director or Officer Since Hilton H. Howell, Jr. 61 Chairman of the Board, President & CEO 1992 J. Ross Franklin 45 Vice President, CFO and Corporate Secretary 2017 Officers are elected annually and serve at the discretion of the board of directors. Mr.
Name Age Positions with the Company Director or Officer Since Hilton H. Howell, Jr. 61 Chairman of the Board, President & CEO 1992 J. Ross Franklin 46 Vice President, CFO and Corporate Secretary 2017 Officers are elected annually and serve at the discretion of the board of directors. Mr.
Other Accident and Health Insurance coverages include several individual and group policies providing for the payment of standard benefits in connection with the treatment of diagnosed cancer and other critical illnesses, as well as a number of other policies providing short-term nursing facility care, accident expense, hospital indemnity and disability coverages.
Other Accident and Health Insurance coverages include several individual and group policies providing for the payment of standard benefits in connection with the treatment of diagnosed cancer and other critical illnesses, as well as a number of other policies providing short-term nursing facility care, accident only, hospital indemnity and disability coverages.
For the year ended December 31, 2022, Bankers Fidelity Assurance Company had three ratios outside the usual range, primarily as a result of net loss for the year, certain surplus ratios and Non-admitted Assets to Admitted Assets.
For the year ended December 31, 2023, Bankers Fidelity Assurance Company had three ratios outside the usual range, primarily as a result of net loss for the year, certain surplus ratios and Non-admitted Assets to Admitted Assets.
Limits per occurrence within the reinsurance treaties are as follows: Inland marine and commercial automobile physical damage - $225,000 excess of $125,000 retention; and automobile liability and general liability - excess coverage of $2.0 million less retentions that may vary from $100,000 to $500,000 depending on the account.
Current limits per occurrence within the reinsurance treaties are as follows: Inland marine and commercial automobile physical damage - $225,000 excess of $125,000 retention; and automobile liability and general liability - excess coverage of $2.0 million less retentions that may vary from $150,000 to $500,000 depending on the account.
While the majority of American Southern’s premiums are derived from its automobile lines of business, American Southern also offers inland marine and general liability coverages. Additionally, American Southern directly provides surety bond coverage for subdivision construction, school bus contracts, as well as performance and payment bonds.
While the majority of American Southern’s premiums are derived from its automobile lines of business, American Southern also offers general liability and other lines such as inland marine coverage. Additionally, American Southern directly provides surety bond coverage for subdivision construction, school bus contracts, as well as performance and payment bonds.
As the Company continues to expand its geographical footprint with agents and products, one of its main objectives is to have a healthy mix of all of its product lines nationwide. Differentiation . Bankers Fidelity prides itself on the quality of customer service it offers to policyholders and agents.
As the Company continues to expand its geographical footprint with agents and products, one of its main objectives is to have a healthy mix of all of its product lines nationwide. 5 Table of Contents Differentiation . Bankers Fidelity prides itself on the quality of customer service it offers to policyholders and agents.
He is also Executive Chairman and Chief Executive Officer of Gray Television, Inc. Mr. Franklin has been Vice President, Chief Financial Officer and Corporate Secretary of the Company since November 2017, and prior thereto served as Interim Chief Financial Officer from August 2017 to November 2017.
He is also Executive Chairman and Chief Executive Officer of Gray Television, Inc. 12 Table of Contents Mr. Franklin has been Vice President, Chief Financial Officer and Corporate Secretary of the Company since November 2017, and prior thereto served as Interim Chief Financial Officer from August 2017 to November 2017.
Management does not anticipate regulatory action as a result of the 2022 IRIS ratio results for the insurance subsidiaries. 8 Table of Contents Risk-Based Capital Risk-based capital (“RBC”) is a metric used by ratings agencies and regulators as an early warning tool to identify weakly capitalized companies for the purpose of initiating further regulatory action.
Management does not anticipate regulatory action as a result of the 2023 IRIS ratio results for the insurance subsidiaries. 10 Table of Contents Risk-Based Capital Risk-based capital (“RBC”) is a metric used by ratings agencies and regulators as an early warning tool to identify weakly capitalized companies for the purpose of initiating further regulatory action.
Bankers Fidelity prides itself on being agile, which we believe differentiates us from larger carriers and helps the Company to quickly execute senior management’s initiatives. 3 Table of Contents Quality . Bankers Fidelity is focused on being a niche carrier that delivers superior service, quality products and innovative solutions.
Bankers Fidelity prides itself on being agile, which we believe differentiates us from larger carriers and helps the Company to quickly execute senior management’s initiatives. Quality . Bankers Fidelity is focused on being a niche carrier that delivers superior service, quality products and innovative solutions.
Products offered by Bankers Fidelity include ordinary life insurance, Medicare supplement and other accident and health insurance products. Life Insurance products include non-participating, individual and group whole life insurance policies with a variety of riders and options.
Products offered by Bankers Fidelity include ordinary life insurance, Medicare supplement and other accident and health insurance products. 4 Table of Contents Life Insurance products include non-participating, individual and group whole life insurance policies with a variety of riders and options.
December 31, 2022 2021 Amount Percent Amount Percent (Dollars in thousands) Fixed maturities: U.S. Treasury securities and obligations of U.S.
December 31, 2023 2022 Amount Percent Amount Percent (Dollars in thousands) Fixed maturities: U.S. Treasury securities and obligations of U.S.
Executive Officers of the Registrant The table and information below set forth, for each current executive officer of the Company, his name, age (as of June 1, 2023), positions with the Company and business experience for the past five years, as well as any prior service to the Company.
Executive Officers of the Registrant The table and information below set forth, for each current executive officer of the Company, his name, age (as of March 1, 2024), positions with the Company and business experience for the past five years, as well as any prior service to the Company.
These reserves are calculated to satisfy policy and contract obligations as they are projected to come due. Reserves for insurance policies are calculated using assumptions for interest rates, mortality rates, disablement rates, and lapse rates. These assumptions vary by the product type, the year the policy was issued, and other demographic information about the policyholder.
These reserves are calculated to satisfy policy and contract obligations as they are projected to come due. Reserves for insurance policies are calculated using assumptions for interest rates, mortality rates, disablement rates, benefit utilization rates, and lapse rates. These assumptions vary by the product type, the year the policy was issued, and certain policyholder demographic information.
Variations in assumptions may be made from one issue year to another to reflect actual experience. Assumptions that deviate significantly from actual future experience, or actual results that differ significantly from our estimates, could have a materially adverse effect on our liquidity, results of operations, or financial condition.
Changes in assumptions may be made from one issue year to another to reflect actual experience. Actual future experience that deviates significantly from the assumptions, or actual results that differ significantly from our estimates, could have a materially adverse effect on our liquidity, results of operations, or financial condition.
Life and Health Operations Bankers Fidelity has entered into reinsurance contracts ceding the excess of its life retention. Maximum retention by Bankers Fidelity on any one individual in the case of life insurance policies is $200,000.
Life and Health Operations Bankers Fidelity has entered into reinsurance contracts ceding the excess of its life retention. Maximum retention by Bankers Fidelity on any one individual life insurance policyholder is $200,000.
Contracting as independent agents enables Bankers Fidelity to effectively expand or contract its sales force without incurring significant expense. Bankers Fidelity had approximately 4,337 licensed agents contracted in both the individual and group divisions as of December 31, 2022. During 2022, approximately 476 of these licensed agents wrote policies on behalf of Bankers Fidelity.
Contracting as independent agents enables Bankers Fidelity to effectively expand or contract its sales force without incurring significant expense. Bankers Fidelity had approximately 4,639 licensed agents contracted in both the individual and group divisions as of December 31, 2023. During 2023, approximately 454 of these licensed agents wrote policies on behalf of Bankers Fidelity.
As of December 31, 2022, the Company was in compliance with all such requirements, and securities with an amortized cost of $12.3 million were on deposit either directly with various state authorities or with third parties pursuant to various custodial agreements on behalf of the Company’s insurance subsidiaries.
As of December 31, 2023, the Company was in compliance with all such requirements, and securities with an amortized cost of $14.6 million were on deposit either directly with various state authorities or with third parties pursuant to various custodial agreements on behalf of the Company’s insurance subsidiaries.
Of the 142 people, 141 were full-time. We believe that our ability to attract and retain highly motivated and skilled employees with diverse backgrounds and experiences is critical to our continued success. We also believe the structure of our compensation program is aligned with the interests of our shareholders and serves to reward the performance of our employees.
We believe that our ability to attract and retain highly motivated and skilled employees with diverse backgrounds and experiences is critical to our continued success. We also believe the structure of our compensation program is aligned with the interests of our shareholders and serves to reward the performance of our employees.
American Southern also solicits business from governmental entities. As an experienced writer of insurance policies for certain governmental programs, the company actively pursues this market on a direct basis. Much of this business is priced by means of competitive bid situations.
As an experienced writer of insurance policies for certain governmental programs, the company actively pursues this market on a direct basis. Much of this business is priced by means of competitive bid situations.
Actuarial best estimates do not necessarily represent the midpoint value determined using the various actuarial methods; however, such estimates will fall between the estimated low and high end reserve values. The range of estimates developed in connection with the December 31, 2022 actuarial review indicated that reserves could be as much as 10.1% lower or as much as 10.0% higher.
Actuarial best estimates do not necessarily represent the midpoint value determined using the various actuarial methods; however, such estimates will fall between the estimated low and high end reserve values. The range of estimates developed in connection with the December 31, 2023 actuarial review indicated that reserves could be as much as 16.9% lower or as much as 18.3% higher.
Accordingly, $1.0 million of the Company’s $2.0 million of new annualized Medicare supplement premium was ceded.
Accordingly, $0.8 million of the Company’s $1.5 million of new annualized Medicare Supplement premium was ceded.
At December 31, 2022, approximately 72% of the losses and claims reserves related to property and casualty and approximately 28% related to life and health. The Company’s property and casualty operations incur losses which may take extended periods of time to evaluate and settle.
At December 31, 2023, approximately 73% of the losses and claims reserves related to property and casualty and approximately 27% related to life and health. The Company’s property and casualty operations incur losses which may take extended periods of time to evaluate and settle.
Health insurance products, primarily Medicare supplement insurance, accounted for 86% of Bankers Fidelity’s net earned premiums in 2022 while life insurance, including both whole and term life insurance policies, accounted for the balance. In terms of the number of policies written in 2022, 58% were health insurance policies and 42% were life insurance policies.
Health insurance products, primarily Medicare supplement insurance, accounted for 83% of Bankers Fidelity’s net earned premiums in 2023 while life insurance, including both whole and term life insurance policies, accounted for the balance. In terms of the number of policies written in 2023, 63% were health insurance policies and 37% were life insurance policies.
Total cost of equity securities was $4.9 million as of December 31, 2022 and $4.9 million as of December 31, 2021. (3) Other invested assets are accounted for using the equity method. Total cost of other invested assets was $5.6 million as of December 31, 2022 and $0.7 million as of December 31, 2021.
Total cost of equity securities was $4.9 million as of December 31, 2023 and 2022. (3) Other invested assets are accounted for using the equity method. Total cost of other invested assets was $7.0 million as of December 31, 2023 and $5.6 million as of December 31, 2022. (4) Policy loans are valued at unpaid principal balances.
The net loss at Bankers Fidelity Assurance Company is primarily related to federal income taxes incurred which resulted in a corresponding decrease in surplus levels for the year as well as a growing Deferred Tax Asset which is a Non-admitted.
The net loss at Bankers Fidelity Assurance Company is primarily related to federal income taxes incurred which resulted in a corresponding decrease in surplus levels for the year as well as a growing Deferred Tax Asset which is a Non-admitted. Atlantic Capital Life Assurance Company had one ratio outside the normal range, Change in Asset Mix.
The following table summarizes, for the periods indicated, the allocation of Bankers Fidelity’s net earned premiums from each of its principal product lines: Year Ended December 31, 2022 2021 (In thousands) Life insurance $ 15,805 $ 10,557 Medicare supplement 86,970 95,314 Other accident and health 12,389 10,363 Total health insurance 99,359 105,677 Total $ 115,164 $ 116,234 Marketing Property and Casualty Operations A portion of American Southern’s business is marketed through a small number of specialized, experienced independent agents.
The following table summarizes, for the periods indicated, the allocation of Bankers Fidelity’s net earned premiums from each of its principal product lines: Year Ended December 31, 2023 2022 (In thousands) Life insurance $ 18,584 $ 15,805 Medicare supplement 77,425 86,970 Other accident and health 14,373 12,389 Total health insurance 91,798 99,359 Total $ 110,382 $ 115,164 Marketing Property and Casualty Operations A portion of American Southern’s business is marketed through a small number of specialized, experienced independent agents.
At December 31, 2022, $9.6 million of the $670.6 million of life insurance in force at Bankers Fidelity was reinsured under a mix of coinsurance and yearly renewable term agreements. Certain prior year reinsurance agreements also remain in force although they no longer provide reinsurance for new business.
As of December 31, 2023, $8.3 million of the $814.2 million of life insurance in force at Bankers Fidelity was reinsured under a combination of coinsurance and yearly renewable term agreements. Certain prior year reinsurance agreements also remain in force although they no longer provide reinsurance for new business.
The following table summarizes, for the periods indicated, the allocation of American Southern’s net earned premiums from each of its principal product lines: Year Ended December 31, 2022 2021 (In thousands) Automobile liability $ 33,981 $ 30,453 Automobile physical damage 21,069 22,917 General liability 5,871 5,637 Surety 6,039 5,620 Other lines 3,316 3,355 Total $ 70,276 $ 67,982 Life and Health Operations Bankers Fidelity comprises the life and health operations of the Company and offers a variety of life and supplemental health products.
The following table summarizes, for the periods indicated, the allocation of American Southern’s net earned premiums from each of its principal product lines: Year Ended December 31, 2023 2022 (In thousands) Automobile liability $ 38,821 $ 33,981 Automobile physical damage 15,046 21,069 General liability 5,758 5,871 Surety 6,303 6,039 Other lines 2,515 3,316 Total $ 68,443 $ 70,276 Life and Health Operations Bankers Fidelity comprises the life and health operations of the Company and offers a variety of life and supplemental health products.
Policy premiums are dependent upon a number of factors, including issue age, level of coverage and selected riders or options. 2 Table of Contents Medicare Supplement Insurance includes 8 of the 10 standardized Medicare supplement policies created under the Medicare Improvements for Patients and Providers Act of 2008 (“MIPPA”), which are designed to provide insurance coverage for certain expenses not covered by the Medicare program, including copayments and deductibles.
Medicare Supplement Insurance includes 8 of the 10 standardized Medicare supplement policies created under the Medicare Improvements for Patients and Providers Act of 2008 (“MIPPA”), which are designed to provide insurance coverage for certain expenses not covered by the Medicare program, including copayments and deductibles.
(4) Policy loans are valued at unpaid principal balances. Estimated fair values are determined as discussed in Note 1 of Notes to Consolidated Financial Statements.
Estimated fair values are determined as discussed in Note 1 of Notes to Consolidated Financial Statements.
For more information on segments, see Note 16 of Notes to Consolidated Financial Statements. 10 Table of Contents Available Information The Company files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports and other information with the Securities and Exchange Commission (the “SEC”).
Available Information The Company files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports and other information with the Securities and Exchange Commission (the “SEC”).
Best’s financial strength ratings, which may be revised or revoked at any time, follow a graduated scale of rating categories and notches ranging from A++ (Superior) to F (in liquidation). A.M. Best’s ratings are based on a detailed analysis of the statutory financial condition and operations of an insurance company compared to the industry in general. American Southern.
Best’s financial strength ratings, which may be revised or revoked at any time, follow a graduated scale of rating categories and notches ranging from A++ (Superior) to F (in liquidation). A.M.
The Company engages a global investment management firm serving the insurance industry to manage the Company’s investment portfolios. Management’s recent investment strategy has been a continued focus on quality and diversification, while improving the overall risk versus return profile of the portfolio. Human Capital The Company and its subsidiaries employed 142 people at December 31, 2022.
Management’s recent investment strategy has been a continued focus on quality and diversification, while improving the overall risk versus return profile of the portfolio. Human Capital The Company and its subsidiaries employed 155 people at December 31, 2023. Of the 155 people, 154 were full-time.
Results of the Company’s investment portfolio for periods shown were as follows: Year Ended December 31, 2022 2021 (Dollars in thousands) Average investments (1) $ 270,636 $ 260,240 Net investment income 9,932 8,528 Average yield on investments 3.7 % 3.3 % Realized investment gains, net 30 4,903 (1) Calculated as the average of cash and investment balances (at amortized cost) at the beginning of the year and at the end of each of the succeeding four quarters.
Results of the Company’s investment portfolio for periods shown were as follows: Year Ended December 31, 2023 2022 (Dollars in thousands) Average investments (1) $ 275,995 $ 270,636 Net investment income 10,058 9,932 Average yield on investments 3.6 % 3.7 % Realized investment gains, net 70 30 (1) Calculated as the average of cash and investment balances (at amortized cost) at the beginning of the year and at the end of each of the succeeding four quarters. 11 Table of Contents The Company engages a global investment management firm serving the insurance industry to manage the Company’s investment portfolios.
American Southern’s agent selection process is actively managed by internal marketing personnel with oversight from management. Senior management carefully reviews all new programs prior to acceptance. Most of American Southern’s agents are paid an up-front commission with the potential for additional commissions by participating in a profit sharing arrangement that is directly linked to the profitability of the underlying business.
Most of American Southern’s agents are paid an up-front commission with the potential for additional commissions by participating in a profit sharing arrangement that is directly linked to the profitability of the underlying business. American Southern also solicits business from governmental entities.
American Southern Insurance Company and its wholly-owned subsidiary, American Safety Insurance Company, are each, as of the date of this report, rated “A” (Excellent) by A.M. Best. Bankers Fidelity. Bankers Fidelity Life Insurance Company and its wholly-owned subsidiary, Bankers Fidelity Assurance Company, are each, as of the date of this report, rated “A-” (Excellent) by A.M.
Bankers Fidelity Life Insurance Company and its wholly-owned subsidiary, Bankers Fidelity Assurance Company, are each, as of the date of this report, rated “A-” (Excellent) by A.M. Best. Regulation Like all domestic insurance companies, the Company’s insurance subsidiaries are subject to regulation and supervision in the jurisdictions in which they do business.
Substantially all revenue other than that in the corporate and other segment is from external sources.
Substantially all revenue other than that in the corporate and other segment is from external sources. For more information on segments, see Note 16 of Notes to Consolidated Financial Statements.
Bankers Fidelity Life Insurance Company, American Southern Insurance Company and American Safety Insurance Company had no IRIS ratios outside the usual ranges.
The Change in Asset Mix was the result of Atlantic Capital Life Assurance Company investing its cash and cash equivalents from prior year into bonds. Bankers Fidelity Life Insurance Company, American Southern Insurance Company and American Safety Insurance Company had no IRIS ratios outside the usual ranges.
Best. 7 Table of Contents Regulation Like all domestic insurance companies, the Company’s insurance subsidiaries are subject to regulation and supervision in the jurisdictions in which they do business. Statutes typically delegate regulatory, supervisory, and administrative powers to state insurance commissioners.
Statutes typically delegate regulatory, supervisory, and administrative powers to state insurance commissioners.
Removed
Atlantic Capital Life Assurance Company had one ratio outside the usual range primarily due to the fact that the Change in Asset Mix was automatically considered unusual because the prior year value was zero, as the company was not in existence during the prior year.
Added
Policy premiums are dependent upon a number of factors, including issue age, level of coverage and selected riders or options.
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Information Technology and Cybersecurity The Company’s operations rely on the secure processing, storage, and transmission of confidential and personal identifiable information within various technology platforms. Cybersecurity is a high priority and the Company has made significant investments in order to prevent, detect, and respond to cyber threats.
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American Southern’s agent selection process is actively managed by internal marketing personnel with oversight from management. Senior management carefully reviews all new programs prior to acceptance. American Southern solicits business through multiple channels.
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The Company continues to enhance its intrusion protection and detection technology, infrastructure and application firewalls, and network monitoring. The Company has also installed advanced endpoint threat protection technology and implemented a mandatory security awareness training program for all employees. This training is reinforced through periodic simulated phishing tests.
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Best’s ratings are based on a detailed analysis of the statutory financial condition and operations of an insurance company compared to the industry in general. 9 Table of Contents American Southern. American Southern Insurance Company and its wholly-owned subsidiary, American Safety Insurance Company, are each, as of the date of this report, rated “A” (Excellent) by A.M. Best. Bankers Fidelity.
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The Company uses a sophisticated backup and recovery methodology that supports the replication of data across multiple secure data centers. It also includes a comprehensive disaster recovery plan that is continually tested to help enable us to resume business in the event of a disaster.
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The Company’s technology environment is managed by an experienced team of professionals who follow an extensive set of policies and procedures related to data security. Through recurring internal and external audits, controls are regularly reviewed, tested, and enhanced to promote best practices.
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The Company has augmented the information security program through a partnership with a leading global cybersecurity service provider to review and implement additional services such as Security Event Monitoring, Advanced Endpoint Threat Detection, Incident Management Retainer Services, and Strategic Advisory Services focused on Chief Information Security Officer (CISO) duties such as counter-threat intelligence.
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The information security program also includes a cybersecurity Incident Response Plan (“IRP”) that was established to help protect the integrity, availability and confidentiality of information, prevent loss of service, and comply with legal requirements.
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The IRP specifies the process for identifying and reporting an incident, initial investigation, risk classification, documentation and communication of incidents, responder procedures, incident reporting, and ongoing training. Additionally, the IRP specifies the notification to directors, officers, and other corporate insiders to not trade the Company’s securities while in possession of potentially material nonpublic information about the incident.
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The Audit Committee of the Board of Directors has oversight of the Company’s information security program. The Company’s senior officers, including its Chief Information Officer, are responsible for the operation of the information security program and regularly communicate with the Audit Committee on the state of the program.
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The Company also maintains dedicated cyber liability insurance for breach event costs, including: post breach event remediation costs; cyber crime coverage (including financial fraud, telecommunications fraud, and phishing attacks); and coverage for system failure, bricking loss, and physical damage. The policy also provides coverage for lost revenue due to a damaged reputation from a cyber breach.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 1A. Risk Factors As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K (a “smaller reporting company”), we have elected to comply with certain scaled disclosure reporting obligations, and therefore are not providing the information required by this Item.
Biggest changeItem 1A. Risk Factors As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K (a “smaller reporting company”), we have elected to comply with certain scaled disclosure reporting obligations, and therefore are not providing the information required by this Item. Item 1B. Unresolved Staff Comments Not applicable.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed3 unchanged
Biggest changeThe Company believes that its current properties are in good condition, and are sufficient for the operations of its business. 11 Table of Contents
Biggest changeThe Company believes that its current properties are in good condition, and are sufficient for the operations of its business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+2 added−0 removed2 unchanged
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is listed on the Nasdaq Global Market (Symbol: AAME). As of June 12, 2023, there were 4,467 shareholders of record. From time to time, the Company’s board of directors may declare dividends on the Company’s common stock.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is listed on the Nasdaq Global Market (Symbol: AAME). As of March 13, 2024, there were 1,286 shareholders of record.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs October 1 – October 31, 2022 — $ — — 325,129 November 1 – November 30, 2022 — — — 325,129 December 1 – December 31, 2022 — — — 325,129 Total — $ — — Stock Performance Graph As a smaller reporting company, we have elected to comply with certain scaled disclosure reporting obligations, and therefore are not providing the information required by this Item.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs October 1 – October 31, 2023 — $ — — 325,129 November 1 – November 30, 2023 — — — 325,129 December 1 – December 31, 2023 — — — 325,129 Total — $ — — Stock Performance Graph As a smaller reporting company, we have elected to comply with certain scaled disclosure reporting obligations, and therefore are not providing the information required by this Item.
Issuer Purchases of Equity Securities 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.
Issuer Purchases of Equity Securities 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.
Payment of any dividends will be at the discretion of the Company’s board of directors and will depend upon the financial condition, capital requirements, and earnings of the Company, as well as any restrictions contained in any agreements by which the Company is bound and other factors as the board of directors may deem relevant.
The declaration and payment of any future dividends will be at the discretion of the Company’s board of directors and will depend upon the financial condition, capital requirements, and earnings of the Company, as well as any restrictions contained in any agreements by which the Company is bound and other factors as the board of directors may deem relevant.
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 December 31, 2022.
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 December 31, 2023.
The Company’s primary recurring source of cash for the payment of dividends is dividends from its subsidiaries; although as of December 31, 2022, the Parent held unrestricted cash and investment balances of approximately $5.0 million.
The Company’s primary recurring source of cash for the payment of dividends is dividends from its subsidiaries; although as of December 31, 2023, the Parent held unrestricted cash and investment balances of approximately $4.7 million.
In 2022, dividend payments to the Parent by the insurance subsidiaries in excess of $8.7 million would require prior approval. Pending the filing of this Form 10-K, the Company has not declared and paid an annual dividend during 2023.
In 2024, dividend payments to the Parent by the insurance subsidiaries in excess of $8.8 million would require prior approval.
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On April 1, 2024, the Company announced that the board of directors declared an annual cash dividend of $0.02 per share of common stock that is payable to shareholders of record at the close of business on April 12, 2024.
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On August 8, 2023, the Company announced that the board of directors declared an annual cash dividend of $0.02 per share, which was paid on September 12, 2023 to shareholders of record as of August 22, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

61 edited+15 added−22 removed40 unchanged
Biggest changePartially offsetting this increase was a decrease in the frequency of claims in the automobile physical damage line of business. 17 Table of Contents Commissions and underwriting expenses remained constant during 2022 as compared to 2021. As a percentage of premiums, these expenses were 28.7% in 2022 as compared to 29.6% in 2021.
Biggest changeCommissions and underwriting expenses decreased $3.4 million, or 16.9%, during 2023 as compared to 2022. As a percentage of premiums, these expenses were 24.5% in 2023 as compared to 28.7% in 2022. The decrease in the expense ratio was primarily due to the decrease in fixed and variable commissions.
The Company intends to pay its obligations under the Junior Subordinated Debentures using existing cash balances, dividend and tax-sharing payments from the operating subsidiaries, or from existing or potential future financing arrangements. At December 31, 2022, the Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding.
The Company intends to pay its obligations under the Junior Subordinated Debentures using existing cash balances, dividend and tax-sharing payments from the operating subsidiaries, or from existing or potential future financing arrangements. At December 31, 2023, the Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding.
Atlantic American does not expect that changes in the estimates determined using these policies will have a material effect on the Company’s financial condition or liquidity, although changes could have a material effect on its consolidated results of operations. Cash and investments comprised 70% of the Company’s total assets at December 31, 2022.
Atlantic American does not expect that changes in the estimates determined using these policies will have a material effect on the Company’s financial condition or liquidity, although changes could have a material effect on its consolidated results of operations. Cash and investments comprised 70% of the Company’s total assets at December 31, 2023.
Losses are recognized by the Company when determined on a specific account basis and a general provision for loss is made based on the Company’s historical experience. Deferred acquisition costs comprised 12% of the Company’s total assets at December 31, 2022.
Losses are recognized by the Company when determined on a specific account basis and a general provision for loss is made based on the Company’s historical experience. Deferred acquisition costs comprised 12% of the Company’s total assets at December 31, 2023.
Development on reported claims, estimates of unpaid ultimate losses on claims incurred prior to December 31, 2022 but not yet reported, and estimates of unpaid loss adjustment expenses are developed based on the Company’s historical experience, using actuarial methods to assist in the analysis.
Development on reported claims, estimates of unpaid ultimate losses on claims incurred prior to December 31, 2023 but not yet reported, and estimates of unpaid loss adjustment expenses are developed based on the Company’s historical experience, using actuarial methods to assist in the analysis.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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”) for the years ended December 31, 2022 and 2021.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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”) for the years ended December 31, 2023 and 2022.
This liability includes estimates for: (1) unpaid losses on claims reported prior to December 31, 2022, (2) future development on those reported claims, (3) unpaid ultimate losses on claims incurred prior to December 31, 2022 but not yet reported and (4) unpaid loss adjustment expenses for reported and unreported claims incurred prior to December 31, 2022.
This liability includes estimates for: (1) unpaid losses on claims reported prior to December 31, 2023, (2) future development on those reported claims, (3) unpaid ultimate losses on claims incurred prior to December 31, 2023 but not yet reported and (4) unpaid loss adjustment expenses for reported and unreported claims incurred prior to December 31, 2023.
The Series D Preferred Stock is not currently convertible. The Company had accrued, but unpaid, dividends on the Series D Preferred Stock of $17.7 thousand at December 31, 2022 and 2021. During each of 2022 and 2021, the Company paid Series D Preferred Stock dividends of $0.4 million.
The Series D Preferred Stock is not currently convertible. The Company had accrued, but unpaid, dividends on the Series D Preferred Stock of $17.7 thousand at December 31, 2023 and 2022. During each of 2023 and 2022, the Company paid Series D Preferred Stock dividends of $0.4 million.
Bankers Fidelity Life Insurance Company (‘‘BFLIC”) is a member of the Federal Home Loan Bank of Atlanta (“FHLB”), for the primary purpose of enhancing financial flexibility. As a member, BFLIC can obtain access to low-cost funding and also receive dividends on FHLB stock.
Bankers Fidelity Life Insurance Company (''BFLIC") is a member of the Federal Home Loan Bank of Atlanta ("FHLB"), for the primary purpose of enhancing financial flexibility. As a member, BFLIC can obtain access to low-cost funding and also receive dividends on FHLB stock.
Receivables are amounts due from reinsurers, insureds and agents, and any sales of investment securities not yet settled, and comprised 11% of the Company’s total assets at December 31, 2022. Insured and agent balances are evaluated periodically for collectibility. Annually, the Company performs an analysis of the creditworthiness of the reinsurers with whom the Company contracts using various data sources.
Receivables are amounts due from reinsurers, insureds and agents, and any sales of investment securities not yet settled, and comprised 12% of the Company’s total assets at December 31, 2023. Insured and agent balances are evaluated periodically for collectibility. Annually, the Company performs an analysis of the creditworthiness of the reinsurers with whom the Company contracts using various data sources.
See Note 2 and Note 3 of Notes to Consolidated Financial Statements with respect to assets and liabilities carried at fair value and information about the inputs used to value those financial instruments, by hierarchy level, in accordance with ASC 820-10-20. Future policy benefits comprised 32% of the Company’s total liabilities at December 31, 2022.
See Note 2 and Note 3 of Notes to Consolidated Financial Statements with respect to assets and liabilities carried at fair value and information about the inputs used to value those financial instruments, by hierarchy level, in accordance with ASC 820-10-20. Future policy benefits comprised 34% of the Company’s total liabilities at December 31, 2023.
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.
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 a property and casualty insurance company is often measured by its combined ratio.
Upon an event of default, the Lender may, among other things, declare all obligations under the Credit Agreement immediately due and payable and terminate the revolving commitments. As of December 31, 2022, the Company had outstanding borrowings of $2.0 million under the Credit Agreement.
Upon an event of default, the Lender may, among other things, declare all obligations under the Credit Agreement immediately due and payable and terminate the revolving commitments. As of December 31, 2023, the Company had outstanding borrowings of $3.0 million under the Credit Agreement.
At December 31, 2022, the Parent’s insurance subsidiaries had an aggregate statutory surplus of $89.7 million. Dividends were paid to Atlantic American by its subsidiaries totaling $7.2 million and $8.4 million in 2022 and 2021, respectively. The Parent provides certain administrative, purchasing and other services to each of its subsidiaries.
At December 31, 2023, the Parent’s insurance subsidiaries had an aggregate statutory surplus of $90.1 million. Dividends were paid to Atlantic American by its subsidiaries totaling $8.4 million and $7.2 million in 2023 and 2022, respectively. The Parent provides certain administrative, purchasing and other services to each of its subsidiaries.
The amount charged to and paid by the subsidiaries for these services was $7.6 million and $7.4 million in 2022 and 2021, respectively. In addition, the Parent has a formal tax-sharing agreement with each of its insurance subsidiaries.
The amount charged to and paid by the subsidiaries for these services was $8.7 million and $7.6 million in 2023 and 2022, respectively. In addition, the Parent has a formal tax-sharing agreement with each of its insurance subsidiaries.
The membership arrangement provides for credit availability of five percent of statutory admitted assets, or approximately $7.9 million, as of December 31, 2022. Additional FHLB stock purchases may be required based upon the amount of funds borrowed from the FHLB. As of December 31, 2022, BFLIC has pledged bonds having an amortized cost of $7.2 million to the FHLB.
The membership arrangement provides for credit availability of five percent of statutory admitted assets, or approximately $8.0 million, as of December 31, 2023. Additional FHLB stock purchases may be required based upon the amount of funds borrowed from the FHLB. As of December 31, 2023, BFLIC has pledged bonds having an amortized cost of $9.6 million to the FHLB.
Refer to Note 1 of Notes to Consolidated Financial Statements for details regarding the Company’s significant accounting policies. 15 Table of Contents Overall Corporate Results Year Ended December 31, 2022 2021 (In thousands) Revenue Property and Casualty: American Southern $ 73,949 $ 73,868 Life and Health: Bankers Fidelity 114,015 125,702 Corporate and Other (113 ) (16 ) Total revenue $ 187,851 $ 199,554 Income before income taxes Property and Casualty: American Southern $ 6,613 $ 9,292 Life and Health: Bankers Fidelity 3,812 3,726 Corporate and Other (8,329 ) (7,716 ) Income before income taxes $ 2,096 $ 5,302 Net income $ 1,525 $ 4,281 Management also considers and evaluates performance by analyzing the non-GAAP measure operating income or 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 income tax expense, which is 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 or unrealized investment gains or losses, 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).
Refer to Note 1 of Notes to Consolidated Financial Statements for details regarding the Company’s significant accounting policies. 17 Table of Contents Overall Corporate Results Year Ended December 31, 2023 2022 (In thousands) Revenue Property and Casualty: American Southern $ 72,846 $ 73,949 Life and Health: Bankers Fidelity 114,199 114,015 Corporate and Other (252 ) (113 ) Total revenue $ 186,793 $ 187,851 Income (loss) before income taxes Property and Casualty: American Southern $ 5,085 $ 6,613 Life and Health: Bankers Fidelity 4,722 3,812 Corporate and Other (10,372 ) (8,329 ) Income (loss) before income taxes $ (565 ) $ 2,096 Net income (loss) $ (171 ) $ 1,525 Management also considers and evaluates performance by analyzing the non-GAAP measure operating income or 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 income tax expense, which is 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 or unrealized investment gains or losses, 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).
If actual results differ from the initial assumptions, the amount of the Company’s recorded liability could require adjustment. 14 Table of Contents Unpaid loss and loss adjustment expenses comprised 33% of the Company’s total liabilities at December 31, 2022.
If actual results differ from the initial assumptions, the amount of the Company’s recorded liability could require adjustment. 16 Table of Contents Unpaid loss and loss adjustment expenses comprised 32% of the Company’s total liabilities at December 31, 2023.
At December 31, 2022, the Parent had approximately $5.0 million of unrestricted cash and investments. 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 December 31, 2023, the Parent had approximately $4.7 million of unrestricted cash and investments. 21 Table of Contents 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.
The Company had net realized investment gains of $0.03 million in 2022 as compared to net realized investment gains of $4.9 million in 2021. The net realized investment gains in 2022 were primarily attributable to gains from the sale of fixed maturities.
The Company had net realized investment gains of $0.1 million in 2023 as compared to net realized investment gains of $0.03 million in 2022. The net realized investment gains in 2023 and 2022 were primarily attributable to gains from the sale of fixed maturities.
Other health product premiums increased $2.0 million, or 19.5%, during 2022 as compared to 2021, primarily as a result of new sales of the company’s group health and individual cancer products. Gross earned premiums from the life insurance line of business increased $5.2 million, or 49.4%, in 2022 from 2021 due to an increase in the group life product premiums.
Other health product premiums increased $2.0 million, or 16.0%, during 2023 as compared to 2022, primarily as a result of new sales of the company’s group health and individual cancer products. Gross earned premiums from the life insurance line of business increased $2.8 million, or 17.6%, in 2023 from 2022 due to an increase in the group life product premiums.
Income Taxes The primary difference between the effective tax rate and the federal statutory income tax rate for 2022 resulted from a permanent difference related to penalties and fines incurred of $0.1 million.
Also contributing to the differences between the effective tax rate and the federal statutory income tax rate was a permanent difference related to meals and entertainment. The primary differences between the effective tax rate and the federal statutory income tax rate for 2022 resulted from a permanent difference related to penalties and fines incurred of $0.1 million.
A net total of $3.9 million and $6.7 million were paid to the Parent under the tax sharing agreement in 2022 and 2021, respectively.
A net total of $4.0 million and $3.9 million were paid to the Parent under the tax sharing agreement in 2023 and 2022, respectively.
During periods in which the loss ratio decreases, commissions and underwriting expenses will generally increase, and conversely, during periods in which the loss ratio increases, commissions and underwriting expenses will generally decrease. In 2022, variable commissions at American Southern increased $0.7 million as compared to 2021 due to improved loss ratios from certain accounts subject to variable commissions.
During periods in which the loss ratio decreases, commissions and underwriting expenses will generally increase, and conversely, during periods in which the loss ratio increases, commissions and underwriting expenses will generally decrease. In 2023, variable commissions at American Southern decreased $1.4 million as compared to 2022 due to an increase in loss ratios from certain accounts subject to variable commissions.
A reconciliation of net income, the most directly comparable GAAP measure, to operating income (loss) is as follows: Year Ended December 31, 2022 2021 (In thousands) Reconciliation of Non-GAAP Financial Measure Net income $ 1,525 $ 4,281 Income tax expense 571 1,021 Realized investment gains, net (30 ) (4,903 ) Unrealized (gains) losses on equity securities, net 7,562 (1,894 ) Non-GAAP operating income (loss) $ 9,628 $ (1,495 ) On a consolidated basis, the Company had net income of $1.5 million, or $0.06 per diluted share, in 2022, compared to net income of $4.3 million, or $0.19 per diluted share, in 2021.
A reconciliation of net income, the most directly comparable GAAP measure, to operating income is as follows: Year Ended December 31, 2023 2022 (In thousands) Reconciliation of Non-GAAP Financial Measure Net income (loss) $ (171 ) $ 1,525 Income tax expense (benefit) (394 ) 571 Realized investment gains, net (70 ) (30 ) Unrealized losses on equity securities, net 2,177 7,562 Non-GAAP operating income $ 1,542 $ 9,628 On a consolidated basis, the Company had net loss of $0.2 million, or $0.03 per diluted share, in 2023, compared to net income of $1.5 million, or $0.06 per diluted share, in 2022.
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). Insurance benefits and losses incurred at American Southern increased $2.7 million, or 6.2%, during 2022 as compared to 2021.
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). 19 Table of Contents Insurance benefits incurred at American Southern increased $3.8 million, or 8.1%, during 2023 as compared to 2022.
BFLIC may be required to post additional acceptable forms of collateral for any borrowings that it makes in the future from the FHLB.
BFLIC may be required to post additional acceptable forms of collateral for any borrowings that it makes in the future from the FHLB. As of December 31, 2023, BFLIC does not have any outstanding borrowings from the FHLB.
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%.
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 3-month CME Term SOFR plus applicable tenor spread of 0.26161 percent plus an applicable margin.
As a percentage of premiums, insurance benefits and losses incurred were 67.1% in 2022 as compared to 65.4% in 2021. The increase in the loss ratio was mainly due to severity of losses reported from programs within the automobile liability line of business.
As a percentage of premiums, insurance benefits and losses incurred were 74.5% in 2023 as compared to 67.1% in 2022. The increase in the loss ratio was mainly due to overall inflation on claims and increased severity of losses reported from certain governmental programs within the automobile liability line of business.
Partially offsetting this increase was a decline in individual life products premium, resulting from the redemption and settlement of existing individual life policy obligations exceeding the level of new individual life sales. Premiums ceded decreased $5.3 million, or 7.9%, in 2022 from 2021.
Partially offsetting this increase was a decrease in individual life products premium, resulting from the redemption and settlement of existing individual life policy obligations exceeding the level of new individual life sales. Premiums ceded decreased $5.8 million, or 9.5%, in 2023 from 2022. The decrease in ceded premiums was due to a decrease in Medicare supplement premiums subject to reinsurance.
A more detailed analysis of the operating companies and other corporate activities follows. 16 Table of Contents UNDERWRITING RESULTS American Southern The following table summarizes, for the periods indicated, American Southern’s premiums, losses, expenses and underwriting ratios: Year Ended December 31, 2022 2021 (Dollars in thousands) Gross written premiums $ 79,218 $ 75,914 Ceded premiums (6,547 ) (6,511 ) Net written premiums $ 72,671 $ 69,403 Net earned premiums $ 70,276 $ 67,982 Insurance benefits and losses incurred 47,175 44,433 Commissions and underwriting expenses 20,161 20,143 Underwriting income $ 2,940 $ 3,406 Loss ratio 67.1 % 65.4 % Expense ratio 28.7 29.6 Combined ratio 95.8 % 95.0 % Gross written premiums at American Southern increased $3.3 million, or 4.4%, during 2022 as compared to 2021.
A more detailed analysis of the operating companies and other corporate activities follows. 18 Table of Contents UNDERWRITING RESULTS American Southern The following table summarizes, for the periods indicated, American Southern’s premiums, losses, expenses and underwriting ratios: Year Ended December 31, 2023 2022 (Dollars in thousands) Gross written premiums $ 77,567 $ 79,218 Ceded premiums (5,902 ) (6,547 ) Net written premiums $ 71,665 $ 72,671 Net earned premiums $ 68,443 $ 70,276 Insurance benefits and losses incurred 51,015 47,175 Commissions and underwriting expenses 16,746 20,161 Underwriting income $ 682 $ 2,940 Loss ratio 74.5 % 67.1 % Expense ratio 24.5 28.7 Combined ratio 99.0 % 95.8 % Gross written premiums at American Southern decreased $1.7 million, or 2.1%, during 2023 as compared to 2022.
At December 31, 2022, the effective interest rate was 8.73%. 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.
The margin ranges from 4.00% to 4.10%. At December 31, 2023, the effective interest rate was 9.69%. 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.
The primary differences between the effective tax rate and the federal statutory income tax rate for 2021 resulted from the adjustment for prior years’ estimates to actual that are generally updated at the completion of the third quarter of each fiscal year and were $0.1 million in the year ended December 31, 2021.
Income Taxes The primary difference between the effective tax rate and the federal statutory income tax rate for 2023 resulted from the adjustment for prior years’ estimates to actual of $0.3 million in the year ended December 31, 2023, which included the return to provision adjustment that is generally updated at the completion of the third quarter of each fiscal year and an adjustment for partnership valuation.
The increase in operating income was primarily due to more favorable loss experience in the life and health operations, resulting from a significant decrease in the number of claims incurred in the Medicare supplement line of business.
Partially offsetting the decline in operating income was more favorable loss experience in the life and health operations, resulting from improved rate adequacy and a decrease in the number of incurred claims within the Medicare supplement line of business.
Gross earned premiums from the Medicare supplement line of business decreased $13.7 million, or 8.4%, in 2022 as compared to 2021, due primarily to non-renewals exceeding the level of new business writings.
Gross earned premiums from the Medicare supplement line of business decreased $15.4 million, or 10.4 %, in 2023 as compared to 2022, due primarily to non-renewals exceeding the level of new business writings as the existing block of business has incurred rate increases.
The following table summarizes, for the periods indicated, American Southern’s net earned premiums by line of business: Year Ended December 31, 2022 2021 (In thousands) Automobile liability $ 33,981 $ 30,453 Automobile physical damage 21,069 22,917 General liability 5,871 5,637 Surety 6,039 5,620 Other lines 3,316 3,355 Total $ 70,276 $ 67,982 Net earned premiums increased $2.3 million, or 3.4%, during 2022 as compared to 2021.
The following table summarizes, for the periods indicated, American Southern’s net earned premiums by line of business: Year Ended December 31, 2023 2022 (In thousands) Automobile liability $ 38,821 $ 33,981 Automobile physical damage 15,046 21,069 General liability 5,758 5,871 Surety 6,303 6,039 Other lines 2,515 3,316 Total $ 68,443 $ 70,276 Net earned premiums decreased $1.8 million, or 2.6%, during 2023 as compared to 2022.
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 next 12 months and thereafter for the foreseeable future.
Partially offsetting the decrease in cash and cash equivalents was an increase in net cash provided by operating activities of $2.6 million. 22 Table of Contents 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 next 12 months and thereafter for the foreseeable future.
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, as well as borrowings from time to time under our revolving credit facility.
The Company’s primary sources of cash are written premiums, investment income and proceeds from the sale and maturity of its invested assets, as well as borrowings from time to time under our revolving credit facility.
The increase in investment income was primarily attributable to an increase in the equity in earnings from investments in the Company’s limited partnerships and limited liability companies of $0.5 million. Also contributing to the increase in investment income was prepayment income of $0.3 million related to the redemption of certain fixed maturities.
The increase in investment income was primarily attributable to an increase in investment income related to fixed maturities and equity securities. Partially offsetting this increase was a decrease in the equity in earnings from investments in the Company's limited partnerships and limited liability companies of $0.6 million.
Under the Credit Agreement, the Company will pay interest on the unpaid principal balance of outstanding revolving loans at the LIBOR Rate (as defined in the Credit Agreement) plus 2.00%, subject to a LIBOR floor rate of 1.00%.
Under the Credit Agreement, the Company paid interest on the unpaid principal balance of outstanding revolving loans at 1-month SOFR plus a spread adjustment of 0.11448% plus 2.00%, subject to a SOFR floor rate of 1.00%.
As of December 31, 2022, BFLIC does not have any outstanding borrowings from the FHLB. 20 Table of Contents On May 12, 2021, the Company entered into a Revolving Credit Agreement (the “Credit Agreement”) with Truist Bank as the lender (the “Lender”). The Credit Agreement provides for an unsecured $10 million revolving credit facility that matures on April 12, 2024.
On May 12, 2021, the Company entered into a Revolving Credit Agreement (the “Credit Agreement”) with Truist Bank as the lender (the “Lender”). The Credit Agreement provides for an unsecured $10.0 million revolving credit facility that matures on April 12, 2024.
Bankers Fidelity The following summarizes, for the periods indicated, Bankers Fidelity’s premiums, losses and expenses: Year Ended December 31, 2022 2021 (Dollars in thousands) Medicare supplement $ 148,747 $ 162,400 Other health products 12,389 10,364 Life insurance 15,867 10,624 Gross earned premiums 177,003 183,388 Ceded premiums (61,839 ) (67,154 ) Net earned premiums 115,164 116,234 Insurance benefits and losses incurred 76,281 87,261 Commissions and underwriting expenses 33,922 34,715 Total expenses 110,203 121,976 Underwriting income (loss) $ 4,961 $ (5,742 ) Loss ratio 66.2 % 75.1 % Expense ratio 29.5 29.9 Combined ratio 95.7 % 105.0 % Net earned premium revenue at Bankers Fidelity decreased $1.1 million, or 0.9%, during 2022 as compared to 2021.
Bankers Fidelity The following summarizes, for the periods indicated, Bankers Fidelity’s premiums, losses and expenses: Year Ended December 31, 2023 2022 (Dollars in thousands) Medicare supplement $ 133,343 $ 148,747 Other health products 14,373 12,389 Life insurance 18,659 15,867 Gross earned premiums 166,375 177,003 Ceded premiums (55,993 ) (61,839 ) Net earned premiums 110,382 115,164 Insurance benefits and losses incurred 71,485 76,281 Commissions and underwriting expenses 37,992 33,922 Total expenses 109,477 110,203 Underwriting income $ 905 $ 4,961 Loss ratio 64.8 % 66.2 % Expense ratio 34.4 29.5 Combined ratio 99.2 % 95.7 % Net earned premium revenue at Bankers Fidelity decreased $4.8 million, or 4.2%, during 2023 as compared to 2022.
Unrealized Gains (Losses) on Equity Securities, Net Investments in equity securities are measured at fair value at the end of the reporting period, with any changes in fair value reported in net income during the period.
Unrealized Losses on Equity Securities, Net Investments in equity securities are measured at fair value at the end of the reporting period, with any changes in fair value reported in net income during the period. The Company recognized net unrealized losses on equity securities of $2.2 million and $7.6 million during the years ended December 2023 and 2022, respectively.
Partially offsetting the increase in net earned premiums was a decrease in earned premiums in the automobile physical damage line of business due to a reduction in the number of existing agencies.
The decrease in gross written premiums was primarily attributable to the decrease in premiums written in the automobile physical damage line of business due to a reduction in the number of agencies.
The decrease in the expense ratio was primarily due to the increase in earned premiums. Partially offsetting the decrease in expense ratio was 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.
Fixed commissions decreased as a result of the decline in written premiums during 2023. Also contributing to the decrease in expense ratio was 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.
If, for competitive reasons, premiums cannot be increased to anticipate inflation, this cost would be absorbed by the Company. Inflation also affects the rate of investment return on the Company’s investment portfolio with a corresponding effect on investment income. To date, inflation has not had a material effect on the Company’s results of operations in any of the periods presented.
If, for competitive reasons, premiums cannot be increased to anticipate inflation, this cost would be absorbed by the Company. Inflation also affects the rate of investment return on the Company’s investment portfolio with a corresponding effect on investment income. During 2023, inflation was a factor in increased loss experience within the Company’s automobile liability line of business.
The decrease in the loss ratio was primarily due to improved rate adequacy and a decrease in the number of claims incurred in the Medicare supplement line of business. Also contributing to the decrease in loss ratio was a decrease in both the group and individual lines of business.
The decrease in the loss ratio was primarily due to improved rate adequacy and a decrease in the number of incurred claims within the Medicare supplement line of business. Also contributing to the decrease in loss ratio was an improvement in the other health lines profitability. These decreases were offset by higher incurred claims on our life lines of business.
Also contributing to the increase in cash and cash equivalents were proceeds from the revolving credit facility of $2.0 million. Partially offsetting the increase in cash and cash equivalents was net cash used in investing activities of $3.4 million primarily as a result of investment purchases exceeding investment sales and maturity of securities.
Cash and cash equivalents decreased from $28.9 million at December 31, 2022 to $28.3 million at December 31, 2023. The decrease in cash and cash equivalents during 2023 was primarily attributable to a decrease in net cash used in investing activities of $3.4 million primarily as a result of investment purchases exceeding investment sales and maturity of securities.
Also contributing to the increase in premium revenue were business writings and price increases in certain programs within the automobile liability line of business within the property and casualty operations. Partially offsetting the increase in premium revenue was a decrease in the Medicare supplement line of business in the life and health operations.
The decrease in premium revenue was primarily attributable to a decrease in Medicare supplement insurance premiums within the life and health operations. Also contributing to the decrease in premium revenue was a decrease in earned premiums in the automobile physical damage line of business due to a reduction in the number of programs.
Another contributing factor was the DRD. 19 Table of Contents Liquidity and 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.
Liquidity and 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.
Interest Expense Interest expense increased $0.6 million, or 40.7%, in 2022 as compared to 2021. Changes in interest expense were primarily due to 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”) and the revolving credit facility are directly related to LIBOR.
Changes in interest expense were primarily due to changes in the Term Secured Overnight Financing Rate (“SOFR”) published by CME Group Benchmark Administration Limited (“CME”), as the interest rates on the Company’s outstanding junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) and the revolving credit facility are directly related to SOFR.
These decreases were marginally offset by increased loss ratios on the group accident and health lines of business. Commissions and underwriting expenses decreased $0.8 million, or 2.3%, during 2022 as compared to 2021. As a percentage of earned premiums, these expenses were 29.5% in 2022 as compared to 29.9% in 2021.
Commissions and underwriting expenses increased $4.1 million, or 12.0%, during 2023 as compared to 2022. As a percentage of earned premiums, these expenses were 34.4% in 2023 as compared to 29.5% in 2022.
The decrease in ceded premiums was due to a decrease in Medicare supplement premiums subject to reinsurance. 18 Table of Contents Insurance benefits and losses incurred decreased $11.0 million, or 12.6%, during 2022 as compared to 2021. As a percentage of premiums, benefits and losses were 66.2% in 2022 as compared to 75.1% in 2021.
Insurance benefits and losses incurred decreased $4.8 million, or 6.3%, during 2023 as compared to 2022. As a percentage of premiums, benefits and losses were 64.8% in 2023 as compared to 66.2% in 2022.
The Company recognized net unrealized losses on equity securities of $7.6 million and unrealized gains on equity securities of $1.9 million during the years ended December 2022 and 2021, respectively. Changes in unrealized gains on equity securities for the applicable periods are primarily the result of fluctuations in the market value of certain of the Company’s equity securities.
Changes in unrealized gains on equity securities for the applicable periods are primarily the result of fluctuations in the market value of certain of the Company’s equity securities. Interest Expense Interest expense increased $1.3 million, or 67.5%, in 2023 as compared to 2022.
Partially offsetting the increase in gross written premiums was a decrease in premiums written in the automobile physical damage line of business due to a reduction in the number of agencies, as well as a decrease in premiums written in the general liability line of business due to reduced premiums from existing agencies.
Also contributing to the increase in the loss ratio were increased losses in the general liability line of business from artisan contractor business. Partially offsetting the increase in the loss ratio was a decrease in losses related to the automobile physical damage line of business due to a decrease in exposure.
Ceded premiums increased slightly during 2022 as compared to 2021. 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.
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. The decrease in ceded premiums was primarily attributable to the decrease in earned premiums in the automobile physical damage line of business, as well as decreased ceding rates due to increased retention.
Offsetting the DAC benefit were increased commissions related to the aforementioned growth in group sales coupled with increased servicing costs related to our growing group lines of business. Net Investment Income and Realized Gains Investment income increased $1.4 million, or 16.5%, in 2022 as compared to 2021.
The increase in the expense ratio was primarily due to an increase in administrative costs related to growth in the group and individual health lines of business, coupled with increased Medicare supplement servicing costs. 20 Table of Contents Net Investment Income and Realized Gains Investment income increased $0.1 million, or 1.3%, in 2023 as compared to 2022.
The increase in gross written premiums was primarily attributable to an increase in premiums written in the automobile liability line of business, resulting from new business writings and price increases in certain programs.
Partially offsetting the decrease in gross written premiums was an increase in premiums written in the automobile liability line of business resulting from new business, rate increases, and retrospective premium adjustments. Ceded premiums decreased $0.6 million, or 9.9%, during 2023 as compared to 2022.
Partially offsetting the increase in operating income was a less favorable loss experience in the property and casualty operations due to severity of losses reported from programs within the automobile liability line of business. Total revenue was $187.9 million in 2022 as compared to $199.6 million in 2021.
Partially offsetting the decrease in premium revenue was an increase in earned premiums in the automobile liability line of business due mainly to rate increases and a retrospective premium adjustment in a governmental program. Operating income was $1.5 million in 2023 as compared to $9.6 million in 2022.
The increase in net earned premiums was primarily attributable to an increase in business writings and price increases in certain programs within the automobile liability line of business as previously mentioned.
Partially offsetting the decrease in net earned premiums was an increase in earned premiums in the automobile liability line of business due mainly to rate increases and a retrospective premium adjustment in a governmental program.
The decrease in net income was primarily due to a decrease in unrealized gains on equity securities of $9.5 million. Partially offsetting this decrease was a decrease in the insurance benefits and losses incurred of $8.2 million. Operating income was $9.6 million in 2022 as compared to operating loss of $1.5 million in 2021.
Partially offsetting this decrease was a decline in unrealized losses on equity securities. Total revenue was $186.8 million in 2023 as compared to $187.9 million in 2022. Premium revenue decreased to $178.8 million in 2023 from $185.4 million in 2022.
Removed
Due to market and other considerations, the value of a fixed maturity investment may decline to a value below its amortized purchase price and remain at such value for an extended period of time.
Added
Prior to January 1, 2023, the Company applied other than temporary impairment (“OTTI”) guidance for securities in an unrealized loss position. An OTTI was recognized in earnings within realized investment gains (losses) when it was anticipated that the amortized cost would not be recovered.
Removed
When a fixed maturity investment’s indicated fair value has declined below its cost basis for a period of time, the Company evaluates such investment for an other than temporary impairment.
Added
When either: (i) the Company had the intent to sell the security, or (ii) it was more likely than not that the Company would be required to sell the security before recovery, the reduction of amortized cost and the OTTI recognized in earnings was the entire difference between the security’s amortized cost and estimated fair value.
Removed
The evaluation for an other than temporary impairment is a quantitative and qualitative process, which is subject to risks and uncertainties in the determination of whether declines in the fair value of investments are other than temporary.
Added
If neither of these conditions existed, the difference between the amortized cost of the security and the present value of projected future cash flows expected to be collected was recognized as a reduction of amortized cost and an OTTI in earnings.
Removed
Potential risks and uncertainties include, among other things, changes in general economic conditions, an issuer’s financial condition or near term recovery prospects and the effects of changes in interest rates.
Added
If the estimated fair value was less than the present value of projected future cash flows expected to be collected, this portion of the decline in value related to other-than-credit factors was recorded in OCI.
Removed
In evaluating a potential impairment, the Company considers, among other factors, management’s intent and ability to hold the securities until price recovery, the nature of the investment and the expectation of prospects for the issuer and its industry, the status of an issuer’s continued satisfaction of its obligations in accordance with their contractual terms, and management’s expectation as to the issuer’s ability and intent to continue to do so, as well as ratings actions that may affect the issuer’s credit status.
Added
On January 1, 2023, the Company adopted accounting standards update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), using a modified retrospective approach.
Removed
If an other than temporary impairment is deemed to exist, then the Company will write down the amortized cost basis of the investment to its estimated fair value.
Added
Under ASU 2016-13, for securities in an unrealized loss position, a credit loss is recognized in earnings within realized investment gains (losses) when it is anticipated that the amortized cost will not be recovered.
Removed
While any such write down does not impact the reported value of the investment in the Company’s balance sheet, it is reflected as a realized investment loss in the Company’s net income or other comprehensive income, depending upon the nature of the loss, in the period incurred.
Added
When either: (i) the Company has the intent to sell the security; or (ii) it is more likely than not that the Company will be required to sell the security before recovery, the reduction of amortized cost and the loss recognized in earnings is the entire difference between the security’s amortized cost and estimated fair value.
Removed
Premium revenue increased to $185.4 million in 2022 from $184.2 million in 2021. The increase in premium revenue was primarily attributable to an increase in life insurance premiums within the life and health operations.
Added
If neither of these conditions exists, the difference between the amortized cost of the security and the present value of projected future cash flows expected to be collected is recognized as a credit loss by establishing an ACL with a corresponding charge to earnings in realized investment gains (losses).
Removed
In establishing reserves, American Southern initially reserves for losses based on management’s best estimate within a reasonable range.
Added
However, the ACL is limited by the amount that the fair value is less than the amortized cost.
Removed
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, we have elected to comply with certain scaled disclosure reporting obligations, and therefore are not providing the information required by this Item. 21 Table of Contents
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, we have elected to comply with certain scaled disclosure reporting obligations, and therefore are not providing the information required by this Item. 23 Table of Contents

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