10-K/A: Atlantic American Corp. Files Amended 10-K Amidst Control Weaknesses

Atlantic American Corporation filed an amended annual report (10-K/A) to correct omissions and address material weaknesses in internal controls, while facing Nasdaq non-compliance.

Summary

• Atlantic American Corporation filed an amended Form 10-K for the fiscal year ended December 31, 2025, primarily to include an omitted signature and a revised consent from its independent registered public accounting firm.
• The amendment also addresses the adoption of new accounting standards (LDTI) and the correction of errors related to premium receivables and revenue, which led to restatements of prior period financial information.
• The company identified material weaknesses in internal control over financial reporting concerning group premium receivables, suspense cash application, LDTI implementation, and income tax accounting.
• Due to the delayed filing of its annual and quarterly reports, the company is not in compliance with Nasdaq Listing Rule 5250(c)(1) and expects a delisting determination, though it plans to appeal.
• The company's financial statements for 2024 were revised due to errors in premium receivables and revenue recognition, resulting in a net loss of $1.39 million for 2024, an improvement from the previously reported $4.55 million net loss.
• For the year ended December 31, 2025, the company reported a net income of $6.02 million, or $0.28 per diluted share, a significant improvement from the prior year's net loss.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing as having a cautiously negative sentiment due to significant material weaknesses in internal controls, Nasdaq non-compliance concerns, and the need for extensive financial statement restatements and amendments.

Positives

• The company reported a net income of $6.02 million for the fiscal year ended December 31, 2025, a substantial turnaround from a net loss of $1.39 million in 2024.
• Total revenue increased to $210.4 million in 2025 from $188.1 million in 2024.
• Net earned premiums increased by 24.8% for American Southern and 0.7% for Bankers Fidelity, contributing to overall revenue growth.
• The combined ratio for American Southern improved to 99.1% in 2025 from 105.4% in 2024, indicating improved underwriting profitability.
• Bankers Fidelity maintained a combined ratio of 97.5% in both 2025 and 2024.
• Investments in fixed maturity securities increased to $244.1 million in 2025 from $212.6 million in 2024.
• The company's insurance subsidiaries' Risk-Based Capital (RBC) levels exceeded required regulatory levels as of December 31, 2025.
• The company has a $10 million revolving credit facility, with $5.02 million outstanding as of December 31, 2025.

Negatives

• The company identified material weaknesses in its internal control over financial reporting, specifically related to group premium receivables and suspense cash application, LDTI implementation, and income tax accounting.
• The company is not in compliance with Nasdaq Listing Rule 5250(c)(1) due to the delayed filing of required periodic financial reports and expects a delisting determination from Nasdaq.
• The company had to restate its 2024 financial information due to errors in premium receivables and revenue recognition, impacting retained earnings and net loss.
• The adoption of LDTI required significant adjustments and reclassifications, impacting the presentation of financial statements.
• The company's CFO resigned effective May 27, 2026.
• Bankers Fidelity has not yet filed its annual audited statutory financial statements for the fiscal year ended December 31, 2025, or its second-quarter statutory filing.
• The company's common stock is listed on the Nasdaq Global Market, and the potential delisting poses a significant risk to shareholders.
• The company's financial statements were amended to correct an omitted signature and a revised consent from its independent registered public accounting firm.

Risks

• The company faces a significant risk of delisting from the Nasdaq Global Market due to its failure to file required periodic financial reports on time.
• Material weaknesses in internal control over financial reporting increase the risk of future misstatements and could impact investor confidence.
• The company's ability to regain compliance with Nasdaq listing standards and maintain the listing of its common stock is uncertain.
• The adoption of LDTI and the correction of prior period errors introduce complexity and potential for ongoing accounting challenges.
• The company's reliance on a single reinsurer for approximately 99.8% of its reinsurance recoverables presents a concentration risk.
• The company is subject to extensive state and federal insurance regulations, which can impact operations and capital requirements.
• Cybersecurity threats remain a risk, although the company has invested in programs to prevent, detect, and respond to such threats.
• The company's financial performance is subject to macroeconomic conditions, general economic uncertainty, and developments within the health care and insurance industries.

Future Outlook

The company is working to regain compliance with Nasdaq listing standards and file its delinquent reports. Management believes it has sufficient cash and expects to meet liquidity requirements. However, the company faces risks related to its internal control weaknesses and potential delisting.

Management Comments

• Management identified deficiencies in controls over enrollment information, policy-status maintenance, due-premium accounting, account reconciliations, and related management review, which constituted a material weakness.
• Management concluded that deficiencies in controls over the adoption and implementation of LDTI constituted a material weakness.
• Management concluded that deficiencies in controls over the preparation, review, and financial reporting of income tax provision and balances constituted a material weakness.
• Management has initiated remediation activities to address the identified material weaknesses.
• The company believes that its current properties are in good condition and are sufficient for the operations of its business.

Industry Context

StockSavvy.ai notes that the insurance industry is heavily regulated and subject to evolving accounting standards like LDTI, which can significantly impact financial reporting and require substantial internal control adjustments. The company's struggles with timely filings and internal controls are concerning in this complex regulatory environment.

Comparison to Industry Standards

• The company's A- (Excellent) rating from A.M. Best for its insurance subsidiaries is a positive, aligning with many established insurers.
• However, the identified material weaknesses in internal controls and the expected delisting from Nasdaq are significant deviations from industry best practices and standards for publicly traded companies.
• The adoption of LDTI is a complex accounting change impacting many insurance companies, but the company's struggles highlight potential challenges in implementation and control design.
• The company's combined ratios are within a reasonable range for the insurance industry, but the trend and underlying profitability drivers require closer examination.

Management Changes

Corporate Governance

Legal Proceedings

• From time to time, the Company and its subsidiaries are involved in various claims and lawsuits arising in the ordinary course of business, both as a liability insurer defending third-party claims and as an insurer defending coverage claims, as well as in various regulatory proceedings. Management does not expect the ultimate liability to be material to consolidated financial condition, though results could be material to operations for any given period.

Related Party Transactions

• Lease of office space from 4370 Peachtree LLC, an entity controlled by the estate of Harriett J. Robinson, for approximately $1.4 million in 2025 and $1.2 million in 2024.
• The Company paid $0.4 million in dividends on Series D Preferred Stock to Delta Life, an entity controlled by the estate of Harriett J. Robinson, in both 2025 and 2024.
• Gray Media, Inc. paid the Company approximately $2.1 million in 2025 and $2.2 million in 2024 for insurance premiums related to employee benefit plans. Key executives of the Company are also directors or officers of Gray.

Stakeholder Impact

• Shareholders face increased risk due to potential Nasdaq delisting and the implications of material weaknesses in internal controls.
• Employees may be impacted by the uncertainty surrounding Nasdaq compliance and potential delisting.
• Creditors, including lenders under the revolving credit facility, are subject to covenant compliance and potential defaults related to delayed filings.
• Regulators will be monitoring the company's progress in addressing internal control deficiencies and filing requirements.

Next Steps

• Regain compliance with Nasdaq listing standards.
• File delinquent quarterly reports (Form 10-Q) for March 31, 2026, and June 30, 2026.
• Implement remediation plans to address material weaknesses in internal control over financial reporting.
• Continue to work diligently toward filing remaining delinquent reports and regaining compliance with Nasdaq rules.
• Appeal any delisting determination from Nasdaq.
• Complete and file Bankers Fidelity's annual audited statutory financial statements and second-quarter statutory filing.
• Cooperate with the Nebraska Department of Insurance regulatory examination.

Key Dates

Recommendation

While the company has shown a return to profitability in 2025 and improved underwriting results for American Southern, the significant material weaknesses in internal controls, the ongoing Nasdaq non-compliance, and the expected delisting present substantial risks. These factors outweigh the positive financial performance, making a 'hold' recommendation appropriate until these critical issues are resolved and the company demonstrates sustained operational and financial stability.

Keywords

Insurance, Annual Report, Form 10-K, Financial Statements, Internal Controls, LDTI, Nasdaq, Restatement