CONDENSED FINANCIAL INFORMATION OF REGISTRANT

ATLANTIC AMERICAN CORPORATION

(Parent Company Only)

BALANCE SHEETS

ASSETS

	December 31,
	2019		2018
	(In thousands)

Cash and cash equivalents	$	2,068	$	3,142
Investments		3,267		14,154
Investment in subsidiaries		142,707		108,756
Investments in unconsolidated trusts		1,238		1,238
Deferred tax asset, net		-		3,524
Income taxes receivable from subsidiaries		2,304		2,856
Other assets		5,126		3,311
Total assets	$	156,710	$	136,981

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deferred tax liability, net	$	346	$	-
Other payables		4,232		1,871
Junior subordinated debentures		33,738		33,738

Total liabilities		38,316		35,609

Shareholders’ equity		118,394		101,372
Total liabilities and shareholders’ equity	$	156,710	$	136,981

See accompanying report of independent registered public accounting firm.

Schedule II

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

ATLANTIC AMERICAN CORPORATION

(Parent Company Only)

STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2019			2018
	(In thousands)
REVENUE
Fee income from subsidiaries	$	7,210		$	7,995
Distributed earnings from subsidiaries		4,800			4,800
Unrealized losses on equity securities, net		2,976			(1,460	)
Other		1,190			752
Total revenue		16,176			12,087

GENERAL AND ADMINISTRATIVE EXPENSES		11,731			12,764

INTEREST EXPENSE		2,130			2,037
		2,315			(2,714	)
INCOME TAX BENEFIT⁽¹⁾		(2,035	)		(3,544	)
		4,350			830
EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES, NET		(4,736	)		(1,534	)
NET LOSS	$	(386	)	$	(704	)

⁽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.

Schedule II

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

ATLANTIC AMERICAN CORPORATION

(Parent Company Only)

STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2019			2018
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(386	)	$	(704	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Realized investment gains, net		(1,120	)		(272	)
Unrealized (gains) losses on equity securities, net		(2,976	)		1,460
Depreciation and amortization		552			715
Compensation expense related to share awards		353			244
Distributions received from equity method investees		51			183
Equity in undistributed earnings of consolidated subsidiaries		4,736			1,534
Decrease in intercompany taxes		551			24
Deferred income tax benefit		(913	)		(2,236	)
Increase (decrease) in accounts payable and accrued expenses		2,360			(214	)
Other, net		(2,314	)		(190	)
Net cash provided by operating activities		894			544

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investments sold, called or matured		3,574			675
Investments purchased		(1,060	)		-
Capital contribution to subsidiaries		(3,500	)		(6,000	)
Additions to property and equipment		(44	)		(219	)
Net cash used in investing activities		(1,030	)		(5,544	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends on Series D preferred stock		(399	)		(399	)
Payment of dividends on common stock		(403	)		(407	)
Proceeds from shares issued under stock plans		27			36
Treasury stock acquired — share repurchase authorization		(71	)		(597	)
Treasury stock acquired — net employee share-based compensation		(92	)		(223	)
Net cash used in financing activities		(938	)		(1,590	)

Net decrease in cash		(1,074	)		(6,590	)
Cash and cash equivalents at beginning of year		3,142			9,732
Cash and cash equivalents at end of year	$	2,068		$	3,142

Supplemental disclosure:
Cash paid for interest	$	2,155		$	1,996
Cash paid for income taxes	$	1,662		$	2,107
Intercompany tax settlement from subsidiaries	$	3,335		$	3,439