SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
Commission file number 0-3722
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
Atlantic American Corporation
401(k) Retirement Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Atlantic American Corporation
4370 Peachtree Road, N.E.
Atlanta, Georgia 30319
<PAGE>
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
The following exhibits are filed herewith:
Exhibit 99.1: Financial Statements and Schedules as of December 31,
1997 and 1996 together with auditor's report.
Exhibit 99.2: Consent of Arthur Andersen LLP
1
<PAGE>
SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Atlantic American Corporation
401(k) Retirement Savings Plan
------------------------------------------
(Name of Plan)
Date: July 15, 1997 Edward L. Rand, Jr.
------------- ------------------------------------------
Vice President - Treasurer
2
EXHIBIT 99.1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee of the
Atlantic American Corporation 401(k)
Retirement Savings Plan:
We have audited the accompanying financial statements of the ATLANTIC AMERICAN
CORPORATION 401(k) RETIREMENT SAVINGS PLAN as of December 31, 1997 and 1996 and
for the year ended December 31, 1997, as listed in the accompanying table of
contents. These financial statements and the schedules referred to below are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Atlantic
American Corporation 401(k) Retirement Savings Plan as of December 31, 1997 and
1996 and the changes in its net assets available for benefits for the year ended
December 31, 1997 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes and reportable transactions are presented for purposes
of additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of Labor
Rules and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974. The supplemental schedules have been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, are fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
Arthur Andersen, LLP
Atlanta, Georgia
June 26, 1998
<PAGE>
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1997 AND 1996
TABLE OF CONTENTS
FINANCIAL STATEMENTS
Statements of Net Assets Available for
Benefits--December 31, 1997 and 1996
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1997
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
SCHEDULES SUPPORTING FINANCIAL STATEMENTS
Schedule I: Item 27a--Schedule of Assets Held for
Investment Purposes--December 31, 1997
Schedule II: Item 27d--Schedule of Reportable Transactions
for the Year Ended December 31, 1997
<PAGE>
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997 AND 1996
1997 1996
----------------------
ASSETS:
Cash $ 17,607 $ 28,963
Investments, at market value:
Participant-directed:
Common stock--Atlantic American 795,012 433,926
Corporation
INVESCO Cash Reserves Fund 411,740 426,508
INVESCO Industrial Income Fund 627,177 415,985
INVESCO Intermediate Government Bond 289,584 299,669
Fund
INVESCO Total Return Fund 775,377 539,575
INVESCO Dynamics Fund 849,528 644,193
Nonparticipant-directed:
Common stock--Atlantic American 141,309 51,376
Corporation
Participant loans 19,593 1,240
----------------------
NET ASSETS AVAILABLE FOR BENEFITS $3,926,927 $2,841,435
======================
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
SCHEDULE II
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
Nonparticipant- Participant-Directed
--------------------------------------------------------------------
Directed
Atlantic Atlantic INVESCO INVESCO INVESCO INVESCO
American American Cash Industrial Intermediate Total INVESCO
Corporation Corporation Reserves Income Government Return Dynamics Loan
Common Common Fund Fund Bond Fund Fund Fund Other Fund Total
Stock Stock
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ADDITIONS:
Participant
contributions $ 0 $ 19,196 $ 6,029 $ 75,952 $ 13,167 $ 62,696 $ 79,621 $ 0 $ (3,311) $253,350
Employer
contributions 36,705 55,137 0 0 0 0 0 14,400 0 106,242
-------------------------------------------------------------------------------------------------------------
Total
contributions 36,705 74,333 6,029 75,952 13,167 62,696 79,621 14,400 (3,311) 359,592
Net appreciation
(depreciation) in
fair market value
of investments 50,541 310,110 135 47,190 2,017 118,541 59,484 0 0 588,018
Interest and
dividend income 0 0 19,096 74,434 14,892 31,006 102,079 0 0 241,507
-------------------------------------------------------------------------------------------------------------
Total additions 87,246 384,443 25,260 197,576 30,076 212,243 241,184 14,400 (3,311) 1,189,117
-------------------------------------------------------------------------------------------------------------
DEDUCTIONS:
Benefit payments to
participants (1,547) (10,969) (10,841) (18,638) (7,354) (23,372) (18,001) (9,853) 0 (100,575)
Participant loans 0 (3,611) (514) (5,072) (470) (3,209) (11,563) (275) 21,664 (3,050)
-------------------------------------------------------------------------------------------------------------
Total deductions (1,547) (14,580) (11,355) (23,710) (7,824) (26,581) (29,564) (10,128) 21,664 (103,625)
-------------------------------------------------------------------------------------------------------------
TRANSFERS BETWEEN FUNDS 4,234 (8,777) (28,673) 37,326 (32,337) 50,140 (6,285) (15,628) 0 0
-------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) 89,933 361,086 (14,768) 211,192 (10,085) 235,802 205,335 (11,356) 18,353 1,085,492
NET ASSETS AVAILABLE
FOR BENEFITS:
Beginning of year 51,376 433,926 426,508 415,985 299,669 539,575 644,193 28,963 1,240 2,841,435
-------------------------------------------------------------------------------------------------------------
End of year $141,309 $795,012 $411,740 $627,177 $289,584 $775,377 $849,528 $17,607 $19,593 $3,926,927
=============================================================================================================
The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE>
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1997 AND 1996
1. PLAN DESCRIPTION
General
The Atlantic American Corporation 401(k) Retirement Savings Plan (the "Plan") is
a defined contribution plan established by the Atlantic American Corporation
(the "Company") under the provisions of Section 401(a) of the Internal Revenue
Code (the "Code"), which includes a qualified cash or deferred arrangement as
described in Sections 401(k) and 401(m) of the Code, for the benefit of eligible
employees of the Company. All employees of the Company who have completed one
year of service, as defined, are eligible to participate. The Plan is subject to
the provisions of the Employee Retirement Income Security Act of 1974, as
amended. Participants should refer to the plan agreement for a complete
description of the Plan.
Plan Administration
INVESCO Trust Company (the "Trustee") is the Trustee of the Plan and has
custodial responsibility for the Plan's assets including the authority and power
to, among other things, invest the principal and income of the Plan's assets.
Contributions
Eligible employees can contribute an amount up to 16% of annual compensation, as
defined by the Plan, subject to certain limitations under the Code. The Company
provides a matching contribution equal to 50% of the first 6% of each
participant's contribution. All company matching contributions are made in
Atlantic American Corporation common stock. A participant can elect to transfer
the company contribution into another investment fund only after the participant
is fully vested in the company matching contributions.
Vesting
Participants are always fully vested in their own contributions. Each
participant becomes vested in the employer contributions based on years of
continuous service. Participants become fully vested after seven years of
service with no intervening breaks in service of five years or more. A
participant is credited with one year of service each calendar year in which the
participant works 1,000 hours. A break in service is deemed to be any year in
which the participant does not complete more than 500 hours of service. The
participants vested percentage in employer contributions with years of service
is as follows:
Years of Vested
Service Percentage
------------- ----------
Less than one 0%
One 10
Two 20
Three 30
Four 40
Five 60
Six 80
Seven or more 100
Benefits
Upon termination of service due to death, disability, or retirement, a
participant or their beneficiary may elect to receive an amount equal to the
value of the participant's vested interest in his/her account. The form of
payment, selected by the participant or their beneficiary, is either a lump-sum
distribution, an annuity to be paid in monthly installments over a fixed period
of years, or a direct rollover into a qualified retirement plan or IRA.
Participant Accounts
Individual accounts are maintained for each of the Plan's participants and
reflect the participant's contributions, employer contributions, and the
participant's share of the Plan's income. Allocations are based on the
proportion that each participant's account balance bears to the total of all
participant account balances.
Investment Options
Participants may direct their contributions and any related earnings into
several investment options in 10% increments. Participants may change their
investment elections once each calendar quarter. The participants in the Plan
can invest in any of the following options:
o Atlantic American Corporation Stock--Funds are invested in common stock
of Atlantic American Corporation.
o INVESCO Cash Reserves Fund--Funds are invested in short-term obligations
such as commercial paper, U.S. government and government agency
obligations, and repurchase agreements.
o INVESCO Industrial Income Fund--Funds are invested in dividend-paying
common stocks of large U.S. companies and in convertible bonds, debt
issues, and preferred stocks.
o INVESCO Intermediate Government Bond Fund--Funds are invested in
obligations of the U.S. government and government agencies maturing in
three to five years.
o INVESCO Total Return Fund--Funds are invested in common stocks and in
fixed and variable income securities.
o INVESCO Dynamics Fund--Funds are invested with rapidly growing companies,
traded essentially on national exchanges and over-the-counter.
Forfeitures
Amounts forfeited from nonvested accounts are used to reduce future employer
contributions.
Termination
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become fully vested in their accounts as of the termination
date.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
Basis of Accounting
The accompanying financial statements have been prepared using the accrual basis
of accounting.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Valuation of Investments
Cash equivalents are stated at cost, which approximates market value. Marketable
securities are stated at fair value. Purchases and sales of securities and
mutual funds are reflected on a trade-date basis.
Administrative Expenses
The Company pays all administrative expenses of the Plan, including trustee
fees.
Reclassifications
Certain 1996 amounts presented herein have been reclassified to conform with the
1997 presentation.
3. INVESTMENTS
The fair market values of individual investments that represent 5% or more of
the Plan's net assets as of December 31, 1997 and 1996 are as follows:
1997:
Atlantic American Corporation common $936,321
stock
INVESCO Cash Reserves Fund 411,740
INVESCO Industrial Income Fund 627,177
INVESCO Intermediate Government Bond 289,584
Fund
INVESCO Total Return Fund 775,377
INVESCO Dynamics Fund 849,528
1996:
Atlantic American Corporation common 485,302
stock
INVESCO Cash Reserves Fund 426,508
INVESCO Industrial Income Fund 415,985
INVESCO Intermediate Government Bond 299,669
Fund
INVESCO Total Return Fund 539,575
INVESCO Dynamics Fund 644,193
Net appreciation in fair value of investments by major investment type for the
year ended December 31, 1997 is as follows:
Common stock $360,651
Mutual funds 227,367
--------
$588,018
========
4. TAX STATUS
The Internal Revenue Service issued a determination letter dated May 21, 1996
stating that the Plan was in accordance with applicable plan requirements as of
that date. The Plan has been amended since receiving the determination letter.
However, the plan administrator believes that the Plan is currently designed and
is being operated in compliance with the applicable requirements of the Code.
Therefore, the plan administrator believes that the Plan was qualified and the
related trust was tax-exempt as of December 31, 1997.
5. PARTICIPANT LOANS
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50% of the employee contribution
balance. Participants may elect to have their loans disbursed from specific
investment funds. Loan terms range from six months to five years or within a
reasonable time if used for the purchase of a primary residence. The loans are
secured by the vested value of the participants account balance and bear
interest at the prime rate of interest on the date of the loan, plus 1%.
Principal and interest are paid ratably through payroll deductions of not less
than $10 per pay period, or in a single lump sum.
<PAGE>
SCHEDULE I
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
ITEM 27a--SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
Current
Units Cost Value
-----------------------------------
MONEY MARKET FUND:
* INVESCO Cash Reserves Fund 411,740 $ 411,740 $ 411,740
MUTUAL FUNDS:
* INVESCO Industrial Income Fund 42,064 543,096 627,177
* INVESCO Intermediate
Government Bond Fund 23,074 284,850 289,584
* INVESCO Total Return Fund 26,654 578,826 775,377
* INVESCO Dynamics Fund 60,854 762,376 849,528
COMMON STOCK:
* Atlantic American Corporation 184,934 507,124 936,321
* PARTICIPANT LOANS (9.5%) 19,593 19,593 19,593
------------------------
Total $3,107,605 $3,909,320
========================
*Indicates a party in interest.
The accompanying notes are an integral part of this
schedule.
<PAGE>
SCHEDULE II
<TABLE>
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
ITEM 27d--SCHEDULE OF REPORTABLE TRANSACTIONS (a)
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
Description of Asset, Including Rate of Purchase Selling Net
Identity of Party Involved Interest and Maturity in Case of Loans Price Cost Price Gain
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESCO TRUST COMPANY Atlantic American Corporation:
25 purchases $129,392 $ 0 $ 0 $ 0
15 sales 29,974 36,549 6,575
INVESCO TRUST COMPANY INVESCO Cash Reserve Fund:
63 purchases 39,786 0 0 0
37 sales 54,553 54,553 0
INVESCO TRUST COMPANY INVESCO Industrial Income Fund:
48 purchases 193,414 0 0 0
18 sales 24,212 28,853 4,641
INVESCO TRUST COMPANY INVESCO Intermediate
Government Bond Fund:
38 purchases 27,037 0 0 0
19 sales 39,763 40,161 398
INVESCO TRUST COMPANY INVESCO Total Return Fund:
49 purchases 147,847 0 0 0
21 sales 23,159 30,199 7,040
INVESCO TRUST COMPANY INVESCO Dynamics Fund:
34 purchases 188,843 0 0 0
26 sales 37,548 42,198 4,650
(a) Represents transactions or a series of transactions in excess of 5% of the
fair value of plan assets at the beginning of the year.
The accompanying notes are an integral part of this schedule.
</TABLE>
EXHIBIT 99.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated June 26, 1998, included in this Annual Report of
The Atlantic American Corporation 401(k) Retirement Savings Plan on Form 11-K
for the year ended December 31, 1997, into the Plan's previously filed
Registration Statement No. 33-90890.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
July 15, 1998
