- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-Q
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|X| Quarterly Report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
OR
|_| Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
-----------
Commission File Number 0-3722
ATLANTIC AMERICAN CORPORATION
Incorporated pursuant to the laws of the State of Georgia
-----------
Internal Revenue Service-- Employer Identification No.
58-1027114
Address of Principal Executive Offices:
4370 Peachtree Road, N.E., Atlanta, Georgia 30319
(404) 266-5500
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES |X| NO |_|
The total number of shares of the registrant's Common Stock, $1 par value,
outstanding on November 7, 1997, was 18,899,747.
- --------------------------------------------------------------------------------
<PAGE>
ATLANTIC AMERICAN CORPORATION
INDEX
Part 1. Financial Information Page No.
- ------------------------------ --------
Item 1. Financial Statements:
Consolidated Balance Sheets -
December 31, 1996 and September 30, 1997 2
Consolidated Statements of Operations -
Three months and nine months ended September 30,
1996 and 1997 ` 3
Consolidated Statements of Cash Flows -
Nine months ended September 30, 1996 and 1997 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-8
Part II. Other Information
- ---------------------------
Item 6. Exhibits and reports on Form 8-K 9
Signatures 10
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- --------------------------------
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
ASSETS
September December
30, 31,
1997 1996
--------- ---------
Cash, including short-term investments of $40,787 and
41,614 $ 47,005 $ 45,499
---------------------
Investments:
Bonds (cost: $95,482 and $91,611) 95,815 91,310
Common and preferred stocks (cost: $18,042 and
$19,748) 43,071 37,762
Mortgage loans 4,281 6,812
Policy and student loans 4,152 6,555
Real estate 46 46
---------------------
Total investments 147,365 142,485
---------------------
Receivables:
Reinsurance 24,493 26,854
Other (net of allowance for bad debts: $876 and
($1,151) 21,547 16,301
Deferred acquisition costs 16,429 15,179
Other assets 7,001 4,576
Goodwill 1,988 2,100
=====================
Total assets $265,828 $252,994
=====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Insurance reserves and policy funds:
Future policy benefits $ 35,888 $ 36,385
Unearned premiums 30,225 25,100
Losses and claims 84,379 84,074
Other policy liabilities 4,230 3,639
---------------------
Total policy liabilities 154,722 149,198
---------------------
Accounts payable and accrued expenses 7,496 9,049
Debt payable ($0 and $1,058 due to affiliates) 32,611 35,611
---------------------
Total liabilities 194,829 193,858
---------------------
Commitments and contingencies Shareholders' equity:
Preferred stock, $1 par, 4,000,000 shares authorized;
Series A preferred, 30,000 shares issued and
outstanding, $3,000 redemption value 30 30
Series B preferred, 134,000 shares issued and
outstanding, $13,400 redemption value 134 134
Common stock, $1 par, 30,000,000 shares authorized;
18,712,167 shares issued in 1997 and 1996;
18,613,324 shares outstanding in 1997 and
18,684,217 shares outstanding in 1996 18,712 18,712
Additional paid-in capital 52,921 54,062
Accumulated deficit (25,836) (31,426)
Net unrealized investment gains 25,362 17,713
Treasury stock, at cost, 98,843 shares in 1997 and
27,950 shares in 1996 (324) (89)
---------------------
Total shareholders' equity 70,999 59,136
---------------------
Total liabilities and shareholders' equity $265,828 $252,994
=====================
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------
(In thousands, except per share data) 1997 1996 1997 1996
---- ---- ---- ----
Revenue:
Insurance premiums $21,950 $22,542 $64,953 $65,384
Investment income 2,915 2,711 8,627 8,269
Realized investment gains, net 344 322 630 1,004
Other income 40 106 69 211
---------------------------------------
Total revenue 25,249 25,681 74,279 74,868
---------------------------------------
Benefits and expenses:
Insurance benefits and losses
incurred 14,748 14,903 44,216 42,948
Commissions and underwriting
expenses 5,777 6,393 17,569 19,041
Interest expense 726 766 2,197 2,491
Other 1,580 1,450 4,435 4,393
---------------------------------------
Total benefits and expenses 22,831 23,512 68,417 68,873
---------------------------------------
Income before income tax expense and
discontinued operations 2,418 2,169 5,862 5,995
Income tax expense (23) (101) (83) (160)
---------------------------------------
Income from continuing operations 2,395 2,068 5,779 5,835
Loss from discontinued operations - - - (4,447)
---------------------------------------
Net income $ 2,395 $ 2,068 $ 5,779 $ 1,388
=======================================
Net income (loss) per common share data:
Continuing operations $ 0.11 $ 0.09 $ 0.25 $ 0.25
Discontinued operations - - - (0.24)
---------------------------------------
Net income $ 0.11 $ 0.09 $ 0.25 $ 0.01
=======================================
Weighted average common shares
outstanding 18,758 18,869 18,786 18,860
=======================================
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
--------------------
1997 1996
--------------------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,779 $ 1,388
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Amortization of deferred acquisition costs 5,394 6,243
Acquisition costs deferred (6,644) (7,375)
Realized investment gains (630) (1,004)
Increase in insurance reserves 5,524 10,998
Depreciation and amortization 959 875
Increase in receivables, net (2,249) (9,348)
(Decrease) increase in other liabilities (2,569) 285
Other, net (2,706) 1,659
--------------------
Net cash provided by continuing operations 2,858 3,721
Net cash used by discontinued operations - (5,902)
--------------------
Net cash provided (used) by operating activities 2,858 (2,181)
--------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investments sold or matured 47,935 65,141
Investments purchased (44,957) (50,799)
Reduction in minority interest liability payable (96) (814)
Additions to property and equipment (527) (593)
Sale of Leath - 4,550
--------------------
Net cash provided by investing activities 2,355 17,485
Net cash used by discontinued operations - (440)
--------------------
Net cash provided by investing activities 2,355 17,045
--------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred stock dividends (237) (237)
Proceeds from exercise of stock options 62 44
Purchase of treasury shares (532) (338)
Proceeds from bank financing 5,617 -
Repayments of debt (8,617) (7,310)
--------------------
Net cash used by continuing operations (3,707) (7,841)
Net cash provided by discontinued operations - 6,342
--------------------
Net cash used by financing activities (3,707) (1,499)
--------------------
Net increase in cash and cash equivalents 1,506 13,365
Cash and cash equivalents at beginning of period 45,499 15,069
--------------------
Cash and cash equivalents at end of period $47,005 $28,434
====================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 2,253 $ 2,491
====================
Cash paid for income taxes $ 85 $ 71
====================
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of presentation.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. All significant intercompany accounts and transactions have been
eliminated in consolidation. Operating results for the nine month period ended
September 30, 1997, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. For further information, refer
to the financial statements and footnotes thereto included in the Company's
annual report on Form 10-K for the year ended December 31, 1996.
Note 2. New Accounting Standards.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per
Share", which becomes effective for periods ending after December 15, 1997. SFAS
128 will require dual presentation of basic and diluted earnings per share (EPS)
on the face of the income statement for all entities with complex capital
structures and will require restatement of all prior period EPS data presented.
The impact of SFAS 128 on the Company's EPS information disclosed in the
accompanying financial statement is not material.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129 (SFAS 129), "Disclosure of Information About Capital
Structure". This Statement is effective for financial statements for periods
ending after December 15, 1997. SFAS No. 129 establishes standards for
disclosing information about an entity's capital structure. The Company does not
anticipate that the implementation of this Statement will have a material impact
on the financial statements.
-5-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
-------------
Management's discussion of the financial condition and results of
operations for the periods ended September 30, 1997 and 1996 analyzes the
results of operations, consolidated financial condition, liquidity and capital
resources of Atlantic American Corporation (the "Company") and its consolidated
subsidiaries: Georgia Casualty & Surety Company ("Georgia Casualty"), American
Southern Insurance Company ("American Southern"), and Bankers Fidelity Life
Insurance Company ("Bankers Fidelity" or the "Life and Health Division").
Effective January 1, 1997, Atlantic American Life Insurance Company, which was a
wholly-owned subsidiary of the Company, was merged with and into Bankers
Fidelity.
The Company's net income for the third quarter of 1997 was $2.4 million,
or $0.11 per share, compared to net income of $2.1 million, or $0.09 per share,
for the third quarter of 1996. The Company's net income from continuing
operations year-to-date for 1997 was $5.8 million, or $0.25 per share, compared
to net income of $5.8 million, or $0.25 per share, in 1996. The principal reason
for the increase in net income over the third quarter of 1996 was a decline in
commissions and underwriting expenses of 10%. For the year the increase in net
income for the third quarter served to offset the decline in net income
experienced in the second quarter of 1997.
Georgia Casualty & Surety Company ("Georgia Casualty") had income before
taxes of $287,000 in the third quarter of 1997 and $1.3 million year-to-date,
compared to $94,000 in the third quarter of 1996 and $1.2 million year-to-date.
The increase in third quarter operating income is due in large part to an
increase in premiums of $547,000 and an increase in realized investment gains of
$242,000 offset by a combination of an increase in insurance benefits and losses
of $232,000 and an increase in commission and underwriting expenses of $280,000.
American Southern had income before taxes of $1.5 million in the third
quarter of 1997 and $4.1 million year-to-date compared to $1.8 million in the
third quarter of 1996 and $4.7 million for the first nine months of 1996. The
decline in pretax income for the third quarter is the result of a 9% decline in
insurance premiums mitigated by a 9% decline in insurance benefits and expenses
and a 12% decline in commissions and underwriting expenses.
The Life and Health Division had net income of $1.0 million for the
quarter and $2.0 million for the nine months ended September 30, 1997, compared
to $884,000 and $2.4 million, respectively, for 1996. The increase in income in
the third quarter of 1997 was the result of a $383,000 reduction in commissions
and underwriting expenses offset by an increase of $289,000 in insurance
benefits and losses incurred.
The Company announced on February 21, 1996, its intention to sell its
interest in Leath Furniture and its subsidiaries. Therefore, beginning with the
fourth quarter of 1995, the Company began reporting the results from its
furniture operations as discontinued operations. The Company completed the sale
of Leath Furniture on April 8, 1996, which, as anticipated, resulted in a loss.
The loss reported for the first nine months of 1996 was $4.4 million ($0.24 per
share).
RESULTS OF OPERATIONS
Total revenues for the quarter decreased slightly from $25.7 million to
$25.2 million and from $74.9 million to $74.3 million for the nine months ended
September 30, 1997. The decline in total revenues for the quarter was
attributable to a 3% decline in insurance premiums offset by a 8% increase in
investment income. Year-to-date insurance premiums were down less than 1% while
investment income was up by 4%. Adversely impacting revenue year-to-date was a
reduction in realized investment gains of $374,000.
The decline in premium revenue for the quarter of $592,000 was comprised
of a declines of $81,000 in the Life and Health Division and $1.1 million for
American Southern partially offset by an increase in premiums of $547,000 for
Georgia Casualty. The Life and Health Division's decline in premiums was the
result of a 3% decrease in the Life lines of business combined with minor growth
in the Accident and Health lines. American Southern's decline in premium is the
result of a decrease in experienced based premiums on its automobile line of
business as a result of lower losses in 1997 compared to 1996. The increase in
premiums for Georgia Casualty was principally derived from increases of $325,000
in the business automobile line and a $113,000 increase in the general liability
line of business.
For the nine months ended September 30, 1997 insurance premiums were down
less than 1%, or $431,000. An increase in premiums of $530,000 for Georgia
Casualty was offset by declines for both American Southern and the Life and
Health Division of $830,000 and $131,000, respectively. Georgia Casualty
experienced a $1.1 million decline in its workers compensation line of business;
however, an increase of $1.2 million in the business automobile line coupled
with $285,000 and $158,000 increases in the property and general liability
lines, respectively, more than compensated for this decline. The Company
believes that the decline in workers' compensation business is the result of a
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<PAGE>
prolonged soft market for this line which has held premium levels down,
resulting in renewal rates that are down by as much as 18% to 25%. The increase
in the other casualty lines of business was principally the result of expansions
of Georgia Casualty's agency force in these niche markets. The reasons for the
year-to-date decline in premiums for both American Southern and the Life and
Health Division were the same as for the quarter.
Investment income for the quarter increased $204,000 and increased
$358,000 for the nine months ended September 30, 1997. Management has continued
to focus on investing new funds in short and medium term maturity bonds and
government backed securities. The carrying value of funds available for
investment (which includes cash and short-term investments, bonds and common and
preferred stocks) at September 30, 1997 was up $11.3 million over year end 1996.
The Company has taken the proceeds from the reimbursements of student loans and
repayments of mortgage loans of $2.4 million and $2.5 million, respectively and
increased its investments in common and preferred stocks, bonds and short-term
investments.
Realized investment gains were flat for the third quarter and down
$374,000 for the year. The decline in investment gains for the year was due to a
market downturn during the first quarter of 1997. Due to unfavorable market
conditions at the beginning of the year, the Company chose to hold certain
investments rather than sell at undesirable prices during the first half of
1997.
Insurance benefits and losses decreased to $14.8 million for the third
quarter of 1997 from $14.9 million for the same quarter of 1996 while
year-to-date insurance benefits and losses increased to $44.2 million from $42.9
million in 1996. Georgia Casualty experienced an increase of $232,000 for the
third quarter and $187,000 for the nine month period. Insurance benefits and
losses at American Southern were down $676,000 for the quarter and up $164,000
for the nine months ended September 30, 1997. For the Life and Health Division
insurance benefits and losses were up $289,000 for the quarter and $918,000 for
the year-to-date. These increases were on Bankers' senior products in both life
and health lines.
As a percentage of premium revenue, insurance benefits and losses incurred
increased to 67.19% in the third quarter of 1997 from 66.11% in 1996 and to
68.07% year-to-date for 1997 from 65.68% for 1996. These results are not
necessarily indicative of results to be expected for the year. The timing of
significant losses incurred by the insurance operations, coupled with the risks
inherent with the estimation of liabilities for unpaid losses can cause results
to vary from period to period. The percentage of insurance benefits and losses
incurred to premium for the third quarter and year-to date for each of the
subsidiaries were as follows:
QTD YTD
----------------------------------------------------
1997 1996 1997 1996
----------------------------------------------------
Life and Health Division 59.18% 54.11% 59.96% 54.86%
Georgia Casualty 70.12% 73.38% 66.29% 67.45%
American Southern 70.86% 70.20% 74.02% 71.57%
Commission and underwriting expenses in the first nine months declined to
$17.6 million in 1997 from $19.0 million in 1996. This decrease was primarily
due to a decrease in commissions of $914,000, a decrease in underwriting
expenses of $488,000 and a net deferral of acquisition costs of $71,000. The
Company periodically reevaluates deferred acquisition costs and their related
amortization periods. In 1997 the Company modified its methodology for recording
and amortizing certain deferred acquisition costs in both its Life and Health
Division and its casualty lines of business. The net effect of this change in
estimate contributed to the reduction in commission and underwriting expenses
for the year.
Interest expense decreased to $726,000 and $2.2 million for the third
quarter and first nine months of 1997, respectively, from $766,000 and $2.5
million, respectively, for the comparable 1996 periods. Lower interest expense
resulted from quarterly repayments on the American Southern acquisition loan and
the repayment of $5.3 million of affiliated debt in April 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's insurance subsidiaries reported a combined statutory income
of $2.2 million and $5.4 million in the third quarter and first nine months,
respectively, of 1997, compared to $1.2 million and $5.4 million for the same
periods in 1996. These statutory results were due to statutory net income of
$559,000 in the Life and Health Division, $405,000 for Georgia Casualty and $1.2
million for American Southern. Statutory income for the first nine months of
1997 was $1.1 million in the Life and Health Division, $1.2 million for Georgia
Casualty, and $3.1 million for American Southern.
In connection with the acquisition of American Southern on December 31,
1995, the Company entered into a Credit Agreement with Wachovia Bank of Georgia,
N.A. ("Wachovia"). At September 30, 1997, the Company's outstanding borrowings
under this agreement were approximately $27.0 million, of which $1.0 million
will become due and payable during the last quarter of 1997. The Company repaid
$3.0 million of outstanding principal during the first nine months of 1997 as
-7-
<PAGE>
scheduled under the terms of the agreement. The Company intends to repay its
obligations under the Credit Agreement using dividend payments received from its
subsidiaries and cash settlements from its tax sharing agreement with the
subsidiaries.
On May 15, 1997, the Company received additional financing from Wachovia
pursuant to its existing Credit Agreement in the amount of $5.6 million. These
funds were used to retire the $5.6 million in outstanding principal of the
Company's 8% Convertible Subordinated Notes, which matured on May 15, 1997. The
note payable to Wachovia is due December 31, 2000, and interest is payable
quarterly in arrears.
On October 1, 1997, Bankers Fidelity completed its acquisition of American
Independent Life Insurance Company. Approximate consideration given was $2.9
million in cash and a $700,000 promissory note that matures on March 31, 1999.
American Independent Life Insurance Company, which had been headquartered in
King of Prussia, Pennsylvania, specializes in traditional life insurance and
supplemental health insurance.
On October 31, 1997, the Company acquired 100% of the stock of Self
Insurance Administrators, Inc. ("SIA") in exchange for the issuance of
approximately $1.2 million in common stock of the Company. SIA, headquartered in
Atlanta, operates as a third party administrator of self-insured companies and
public organizations specializing in worker's compensation coverages.
The Company provides certain administrative and other services to each of
its insurance subsidiaries. The amounts charged to and paid by the subsidiaries
in 1997 remained approximately the same as in 1996. In addition, the Company has
a formal tax-sharing agreement between the Company and its insurance
subsidiaries. It is anticipated that this agreement will provide the Company
with additional funds from profitable subsidiaries due to the subsidiaries' use
of the Company's tax loss carryforwards, which totaled approximately $50.3
million at September 30, 1997. The Company believes that the fees and charges it
receives from its subsidiaries and, if needed, borrowings from banks and
affiliates of the Company will enable the Company to meet its liquidity
requirements for the foreseeable future. Management is not aware of any current
recommendations by regulatory authorities that, if implemented, would have a
material adverse effect on the Company's liquidity, capital resources, or
operations.
American Southern acts as a reinsurer with respect to all of the risks
associated with certain automobile policies issued by a state administrative
agency and naming the state and various local governmental entities as insureds.
Approximately 33% of American Southern's, and 16% of the Company's, premium
revenues for the first nine months of 1997 were attributable to one contract.
The contract is scheduled to expire on January 31, 1998, and the Company is
currently in negotiations to renew the contract. While the Company believes that
its relationship with the state agency is good, there can be no assurance that
the contact will be renewed for an additional term. The loss of such agency as a
customer could have a material adverse effect on the financial condition of the
Company.
At September 30, 1997, the Company had a net cumulative deferred tax asset
of zero. The net cumulative deferred tax asset consisted of $25.2 million of
deferred tax assets, offset by $12.4 million of deferred tax liabilities, and a
$12.8 million valuation allowance. Due to the uncertain nature of their ultimate
realization based upon past performance and expiration dates, the Company
established a full valuation allowance against these carryforward benefits and
recognizes the benefits only as reassessment demonstrates they are realizable.
The Company's ability to generate taxable income from operations is dependent
upon various factors, many of which are beyond management's control.
Accordingly, based on historical performance, there can be no assurance that the
Company will generate future taxable income. Therefore, the realization of the
deferred tax assets will be assessed periodically based on the Company's current
and anticipated results of operations.
At September 30, 1997, approximately 95% of the investment assets of the
insurance subsidiaries were in marketable securities that can be converted into
cash, if required. However, state insurance regulations limit use of such assets
by the Company. Dividend payments to the Company by its insurance subsidiaries
are also limited by insurance regulations. At September 30, 1997, the
subsidiaries' accumulated statutory earnings were as follows: Georgia Casualty
had $12.0 million of accumulated statutory earnings, American Southern had $18.7
million, Bankers Fidelity had $21.3. American Southern paid the Company monthly
dividends totaling $900,000 for each quarter of 1997. Bankers Fidelity paid the
company a dividend totaling $1.0 million in the second quarter of 1997.
Net cash provided by operating activities totaled $2.9 million in 1997,
compared to net cash provided by continuing operations of $3.7 million in the
first nine months of 1996. The decline in cash provided by operations was
primarily due to an increase in claims paid at Georgia Casualty of $622,000 and
at Bankers Fidelity of $868,000. Cash utilized by these subsidiaries was offset
by cash provided by American Southern of $6.5 million.
Cash and short-term investments increased from $45.5 million at December
31, 1996, to $47.0 million at September 30, 1997. This increase was due to cash
generated from operations. Total investments (excluding short-term investments)
increased to $147.4 million at September 30, 1997, from $142.5 million at
December 31, 1996, due to additional investment purchases, primarily bonds, made
during the third quarter.
-8-
<PAGE>
PART II. OTHER INFORMATION
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
(a) The following exhibits are filed herewith:
Exhibit 11. Computation of net income per common share.
Exhibit 27. Financial data schedule.
Exhibit 99.1 Press release dated October 2, 1997.
Exhibit 99.2 Press release dated October 28, 1997.
(b) No reports on Form 8-K were filed with the Securities and Exchange
Commission during the third quarter of 1997.
-9-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATLANTIC AMERICAN CORPORATION
(Registrant)
Date: November 12, 1997 By: /s/
----------------- ----------------------------------------------
John W. Hancock
Senior Vice President-Treasurer
(Principal Financial Officer)
By: /s/
----------------------------------------------
Edward L. Rand, Jr.
Vice President and Controller
(Principal Accounting Officer)
-10-
EXHIBIT 11
ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
SUPPORTING SCHEDULE
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------
(In thousands, except per share data) 1997 1996 1997 1996
---------------------------------------
Net income $ 2,395 $ 2,068 $ 5,779 $ 1,388
Less preferred dividends to affiliates (380) (380) (1,141) (1,141)
---------------------------------------
Net income available to common
shareholders $ 2,015 $ 1,688 $ 4,638 $ 247
=======================================
Weighted average common shares
outstanding 18,758 18,869 18,786 18,860
=======================================
Net income per common share $ 0.11 0.09 0.25 0.01
=======================================
NOTE: Fully diluted earnings per common share are not presented because the
effect of convertible subordinated notes and preferred stock is
anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 95815
<DEBT-MARKET-VALUE> 95815
<EQUITIES> 43071
<MORTGAGE> 4281
<REAL-ESTATE> 46
<TOTAL-INVEST> 147365
<CASH> 47005
<RECOVER-REINSURE> 24493
<DEFERRED-ACQUISITION> 16429
<TOTAL-ASSETS> 265828
<POLICY-LOSSES> 120267
<UNEARNED-PREMIUMS> 30225
<POLICY-OTHER> 4230
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 32611
0
164
<COMMON> 18712
<OTHER-SE> 52123
<TOTAL-LIABILITY-AND-EQUITY> 265828
64953
<INVESTMENT-INCOME> 8627
<INVESTMENT-GAINS> 630
<OTHER-INCOME> 69
<BENEFITS> 44216
<UNDERWRITING-AMORTIZATION> 17569
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 5862
<INCOME-TAX> (83)
<INCOME-CONTINUING> 5779
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5779
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
EXHIBIT 99.1
NEWS RELEASE
For Immediate Release
ATLANTIC AMERICAN COMPLETES ACQUISITION OF
AMERICAN INDEPENDENT LIFE INSURANCE COMPANY;
INCREASES LIFE INSURANCE OPERATIONS
TO INCLUDE FIVE ADDITIONAL STATES
ATLANTA, Georgia, October 2, 1997 - Atlantic American Corporation (NASDAQ-AAME)
announced today that, after receiving the necessary regulatory approvals, its
principal life insurance subsidiary, Bankers Fidelity Life Insurance Company,
completed its previously announced acquisition of American Independent Life
Insurance Company. The purchase price was approximately $3.6 million in a
combination of cash and a promissory note. The acquisition expands Atlantic
American's life insurance operations into five additional states, bringing the
total number of states in which the Company transacts business to 33. The
acquisition expands Atlantic American's presence in the senior market as well as
in the traditional life insurance and supplemental health insurance markets.
In an effort to achieve operational efficiencies, the administrative operations
of American Independent Life Insurance Company will be moved to Atlantic
American's office in Atlanta, Georgia and consolidated with the operations of
Bankers Fidelity.
Commenting on the acquisition Hilton H. Howell, Jr., president and chief
executive officer of Atlantic American Corporation, stated "We are pleased with
the completion of this acquisition, which demonstrates Atlantic American's
commitment to expand through selective acquisitions and complements our strategy
to grow through the addition of new and enhanced insurance products."
Atlantic American is an insurance holding company involved in specialty
insurance markets of the life, health, property and casualty insurance
industries. Its principal subsidiaries include American Southern Insurance
Company, American Safety Insurance Company, Bankers Fidelity Life Insurance
Company and Georgia Casualty & Surety Company.
This release contains forward-looking statements regarding the anticipated
financial and operating results of Atlantic American Corporation and its
subsidiaries. Forward-looking statements are subject to inherent risks and
uncertainties that may cause actual results to differ materially from those
projected in the forward-looking statements, including the unsuccessful
integration of operations and overall competition in the life and health
insurance industry, and other risks identified in the Company's periodic filings
with the Securities and Exchange Commission. The Company undertakes no
obligation to publicly release any revisions to any forward-looking statements
contained herein to reflect events or circumstances occurring after the date
hereof or to reflect the occurrence of unanticipated events.
For further information contact:
John W. Hancock Janice Kuntz
Senior Vice President and Treasurer Golin/Harris Communications
Atlantic American Corporation (404) 681-3808
(404) 266-5738
EXHIBIT 99.2
NEWS RELEASE
For Immediate Release
ATLANTIC AMERICAN CORPORATION TO ACQUIRE SIA, INC.;
AUTHORIZES THE REPURCHASE OF AN ADDITIONAL 500,000 SHARES OF
ATLANTIC AMERICAN COMMON STOCK
ATLANTA, Georgia, October 28, 1997 - Atlantic American Corporation (NASDAQ:AAME)
today announced that its board of directors has approved the acquisition of Self
Insurance Administrators, Inc. ("SIA, Inc."), an Atlanta-based third party
administrator of self-insured companies and public organizations. SIA, Inc.
specializes in the administration of these organizations' workers' compensation
coverages, primarily in the state of Georgia. Atlantic American will issue
approximately $1.2 million in its common stock in exchange for 100 percent of
the common stock of SIA, Inc., which, in 1996 generated approximately $600,000
in service fee revenue and approximately $630,000 in stop-loss reinsurance. The
acquisition is scheduled to be completed as of October 31, 1997.
Commenting on the acquisition, Hilton H. Howell, Jr., president and chief
executive officer of Atlantic American, stated, "We are excited about the
potential of this transaction. The acquisition of SIA, Inc. will allow Atlantic
American to expand its services in the workers' compensation arena beyond the
traditional workers' compensation insurance underwritten by our subsidiary,
Georgia Casualty & Surety Company. We will now have the added ability to offer
our agents and insureds the alternative of setting up self-insured workers'
compensation programs. We also expect that the acquisition will enable Georgia
Casualty to enter a new insurance market by providing stop-loss reinsurance for
some of the self-insured clients of SIA, Inc." Howell continued, "I am also
particularly pleased that Andy Thompson, the founder and president of SIA, Inc.,
will continue to run the company he has so successfully built. Andy is a true
insurance professional and we welcome him as a member of the Atlantic American
team and as a significant shareholder of our company."
Andy Thompson, president of SIA, Inc., commented, "All of us here at SIA, Inc.
are pleased and proud to be a member of the Atlantic American family of
companies, and we are excited to be able to offer our alternative insurance
programs to a larger base of clients."
In addition, the board of directors of Atlantic American authorized the
acquisition of up to an additional 500,000 shares of the company's issued and
outstanding common stock pursuant to a previously authorized stock repurchase
program. The shares are to be repurchased from time to time based upon
prevailing market conditions. The acquired shares will be held as treasury
shares and will be used principally to satisfy Atlantic American's obligations
to its various employee benefit programs. On May 2, 1995, Atlantic American
initiated the share buy back program with the authorization by its board to
acquire 500,000 shares of common stock and approximately 340,000 shares have
been repurchased under the program to date.
Atlantic American's news releases are immediately accessible on the World Wide
Web at http://www.prnewswire.com in the Company News Section. Reports filed with
the Security and Exchange Commission may be found by using "Edgar Search" in the
Company News On-Call Plus Section.
Atlantic American is an insurance holding company involved in specialty
insurance markets of the life, health, property and casualty insurance
industries. Its principal subsidiaries include: American Southern Insurance
Company, American Safety Insurance Company, Bankers Fidelity Life Insurance
Company and Georgia Casualty & Surety Company.
For further information contact:
John W. Hancock, Sr. VP and Treasurer Janice Kuntz
Edward L. Rand, Jr., VP and Controller Golin/Harris Communications
Atlantic American Corporation (404) 681-3808
(404) 266-5500
