CONDENSED FINANCIAL INFORMATION OF REGISTRANT

ATLANTIC AMERICAN CORPORATION

(Parent Company Only)

BALANCE SHEETS

ASSETS

	December 31,
	2018		2017
	(In thousands)

Cash and cash equivalents	$	3,142	$	9,732
Investments		14,154		16,097
Investment in subsidiaries		108,756		116,351
Investments in unconsolidated trusts		1,238		1,238
Deferred tax asset, net		3,524		-
Income taxes receivable from subsidiaries		2,856		2,879
Other assets		3,311		3,762
Total assets	$	136,981	$	150,059

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deferred tax liability, net	$	-	$	1,253
Other payables		1,871		2,085
Junior subordinated debentures		33,738		33,738

Total liabilities		35,609		37,076

Shareholders’ equity		101,372		112,983
Total liabilities and shareholders’ equity	$	136,981	$	150,059

See accompanying report of independent registered public accounting firm.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

ATLANTIC AMERICAN CORPORATION

(Parent Company Only)

STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2018			2017
	(In thousands)
REVENUE
Fee income from subsidiaries	$	7,995		$	7,702
Distributed earnings from subsidiaries		4,800			4,850
Unrealized losses on equity securities, net		(1,460	)		-
Other		752			4,130
Total revenue		12,087			16,682

GENERAL AND ADMINISTRATIVE EXPENSES		12,764			13,015

INTEREST EXPENSE		2,037			1,723
		(2,714	)		1,944
INCOME TAX BENEFIT⁽¹⁾		(3,544	)		(2,553	)
		830			4,497
EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES, NET		(1,534	)		31
NET INCOME (LOSS)	$	(704	)	$	4,528

⁽¹⁾

Under the terms of a tax-sharing agreement, income tax provisions for the subsidiary companies are computed on a separate company basis. Accordingly, the Company’s income tax benefit results from the utilization of the Parent’s separate return loss to reduce the consolidated taxable income of the Company.

See accompanying report of independent registered public accounting firm.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

ATLANTIC AMERICAN CORPORATION

(Parent Company Only)

STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2018			2017
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(704	)	$	4,528
Adjustments to reconcile net income to net cash provided by operating activities:
Realized investment gains, net		(272	)		(3,891	)
Unrealized losses on equity securities, net		1,460			-
Depreciation and amortization		715			712
Compensation expense related to share awards		244			495
Distributions received from equity method investees		183			4,513
Equity in undistributed earnings of consolidated subsidiaries		1,534			(31	)
Decrease in intercompany taxes		24			82
Deferred income tax benefit		(2,236	)		(1,358	)
(Decrease) increase in other liabilities		(214	)		136
Other, net		(190	)		295
Net cash provided by operating activities		544			5,481

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investments sold, called or matured		675			1,501
Investments purchased		-			-
Capital contribution to subsidiaries		(6,000	)		-
Additions to property and equipment		(219	)		(91	)
Net cash provided by investing activities		(5,544	)		1,410

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends on Series D preferred stock		(399	)		(399	)
Payment of dividends on common stock		(407	)		(408	)
Proceeds from shares issued under stock plans		36			32
Treasury stock acquired — share repurchase authorization		(597	)		(692	)
Treasury stock acquired — net employee share-based compensation		(223	)		-
Net cash used in financing activities		(1,590	)		(1,467	)

Net increase (decrease) in cash		(6,590	)		5,424
Cash and cash equivalents at beginning of year		9,732			4,308
Cash and cash equivalents at end of year	$	3,142		$	9,732

Supplemental disclosure:
Cash paid for interest	$	1,996		$	1,705
Cash paid for income taxes	$	2,107		$	1,400
Intercompany tax settlement from subsidiaries	$	3,439		$	2,676