10-K: Atlantic American Corporation Reports FY 2024 Results: Impacted by P&C Losses, Focus Remains on Strategic Growth

Atlantic American Corporation reports a net loss for 2024, primarily due to unfavorable loss experience in its property and casualty operations, while life and health operations show mixed results.

Summary

• Atlantic American Corporation reported a net loss of $4.3 million, or $(0.23) per diluted share, for 2024, compared to a net loss of $0.2 million, or $(0.03) per diluted share, in 2023.
• The increase in net loss was primarily due to unfavorable loss experience in the property and casualty operations, specifically in the automobile liability line of business, and increased administrative costs in the life and health operations.
• Total revenue increased slightly to $188.2 million in 2024 from $186.8 million in 2023, with a slight decrease in premium revenue to $178.7 million.
• Operating loss was $5.0 million in 2024, compared to operating income of $1.5 million in 2023.
• American Southern's gross written premiums decreased by 5.0% due to non-renewal of a program and decreased demand in the trucking industry.
• Bankers Fidelity's gross earned premiums decreased by 1.3%, primarily due to a decrease in the Medicare supplement line of business.
• The company's investment portfolio includes fixed maturities and equity securities, with a focus on quality and diversification.
• The company employed 156 people as of December 31, 2024, and focuses on attracting and retaining skilled employees with diverse backgrounds.
• The company's insurance subsidiaries are subject to regulatory supervision and maintain required capital levels.
• The company declared an annual cash dividend of $0.02 per share of common stock, payable on April 9, 2025.

Sentiment

Score: 4

Explanation: The document presents a mixed picture, with some positive aspects like revenue growth and investment gains, but overshadowed by the net loss and unfavorable underwriting results in the P&C segment. The identified material weakness in internal control also contributes to a negative sentiment.

Positives

• Total revenue increased slightly to $188.2 million in 2024.
• Net realized investment gains increased to $1.2 million in 2024.
• The company continues to focus on quality and diversification in its investment strategy.
• The company maintains a comprehensive disaster recovery plan and cybersecurity measures.
• The company offers competitive health and wellbeing benefits to its employees.
• The company is in compliance with all regulatory requirements.

Negatives

• The company reported a net loss of $4.3 million in 2024.
• American Southern experienced an unfavorable loss experience in the automobile liability line of business.
• Bankers Fidelity's gross earned premiums decreased due to a decline in the Medicare supplement line of business.
• Operating loss was $5.0 million in 2024 as compared to operating income of $1.5 million in 2023.
• The company identified a material weakness in internal control over financial reporting related to insurance reserves and deferred acquisition costs within the life and health segment.

Risks

• The company's financial performance is subject to macroeconomic conditions and general economic uncertainty.
• Unexpected developments in the health care or insurance industries could affect the company's profitability.
• Disruptions to the financial markets could impact the company's investment portfolio.
• Unanticipated increases in the rate, number, and amounts of claims outstanding could adversely affect the company's financial condition.
• The company's ability to remediate the identified material weakness in its internal control over financial reporting is critical.
• The level of performance of reinsurance companies under reinsurance contracts could impact the company's ability to protect against losses.
• Changes in the stock markets, interest rates, or other financial markets could affect the company's statutory capital levels.
• Regulatory developments could increase the company's business costs and required capital levels.
• Information technology system failures or network disruptions could disrupt the company's operations.
• Cybersecurity breaches could result in the loss of or unauthorized access to the data the company maintains.

Future Outlook

The company believes that existing cash balances, dividends, fees, and tax-sharing payments from its subsidiaries, and potential borrowings from financial institutions, will enable the company to meet its liquidity requirements for the next 12 months and thereafter for the foreseeable future.

Management Comments

• Management continually evaluates the Company's investment portfolio and, as may be determined to be appropriate, makes adjustments for impairments and/or will divest investments.
• Management is not aware of any current recommendations by regulatory authorities, which, if implemented, would have a material adverse effect on the Company's liquidity, capital resources or operations.

Industry Context

The life and health insurance business remains highly competitive and includes a large number of insurance companies, many of which are new entrants to the business of providing Medicare supplement and other accident and health insurance products. The businesses in which American Southern engages are highly competitive. The principal areas of competition are pricing and service. Many competing property and casualty companies have been in business longer than American Southern, offer more diversified lines of insurance and have substantially greater financial resources.

Comparison to Industry Standards

• The document does not contain enough information to make a detailed comparison to industry standards.
• A.M. Best ratings are provided for the company's subsidiaries, which can be compared to other companies in the insurance industry.
• 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 Life Insurance Company and its wholly-owned subsidiaries, Bankers Fidelity Assurance Company and Atlantic Capital Life Assurance Company, are each, as of the date of this report, rated A(Excellent) by A.M. Best.

Corporate Governance

Related Party Transactions

• The company leases office space from 4370 Peachtree LLC, an entity affiliated with the controlling shareholder.
• Certain financing for the Company has also been provided by this entity in the form of an investment in the Series D Preferred Stock.
• Certain members of the Companys management and board of directors are shareholders and on the board of directors of Gray Media, Inc., formerly Gray Television, Inc. (Gray).
• In each of the years ended December 31, 2024 and 2023, Gray paid the Company approximately $2,173 and $2,050 in insurance premiums related to certain voluntary employee benefit plans.

Stakeholder Impact

• Shareholders: The net loss and decrease in retained earnings negatively impact shareholder value.
• Employees: The company's focus on attracting and retaining skilled employees benefits the workforce.
• Customers: The company's commitment to prompt and efficient policyholder and claims services is essential to its continued success in marketing its insurance products.
• Regulators: The company's compliance with regulatory requirements is crucial for maintaining its licenses and operations.

Next Steps

• The company expects that an extension of this system to accommodate other product lines the Company offers will be operational by September 30, 2025.
• The company will continue its remediation efforts of the previously identified material weakness.

Key Dates

Keywords

Financial results, Insurance, Losses, Premiums, Reinsurance, Investments, Regulation, Risk, Capital, Claims