☑ |
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Georgia
|
58-1027114
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
4370 Peachtree Road, N.E.,
Atlanta, Georgia
|
30319
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Part I. Financial Information
|
Page No.
|
|
Item 1.
|
Financial Statements: | |
2
|
||
|
||
3
|
||
|
||
4
|
||
|
||
5
|
||
|
||
6
|
||
7
|
||
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21
|
Item 4.
|
Controls and Procedures |
29
|
Part II. Other Information
|
||
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds |
30
|
Item 6.
|
Exhibits |
30
|
31
|
ASSETS
|
||||||||
Unaudited
September 30,
|
December 31,
|
|||||||
2018
|
2017
|
|||||||
Cash and cash equivalents
|
$
|
10,038
|
$
|
24,547
|
||||
Investments:
|
||||||||
Fixed maturities, available-for-sale (cost: $215,698 and $212,544)
|
207,138
|
215,108
|
||||||
Equity securities (cost: $10,515 and $10,918)
|
23,705
|
23,355
|
||||||
Other invested assets
|
10,817
|
5,626
|
||||||
Policy loans
|
2,084
|
2,146
|
||||||
Real estate
|
38
|
38
|
||||||
Investment in unconsolidated trusts
|
1,238
|
1,238
|
||||||
Total investments
|
245,020
|
247,511
|
||||||
Receivables:
|
||||||||
Reinsurance
|
24,022
|
17,613
|
||||||
Insurance premiums and other (net of allowance for doubtful accounts: $216 and $209)
|
14,972
|
13,241
|
||||||
Deferred income taxes, net
|
3,077
|
-
|
||||||
Deferred acquisition costs
|
34,934
|
32,694
|
||||||
Other assets
|
4,942
|
5,089
|
||||||
Intangibles
|
2,544
|
2,544
|
||||||
Total assets
|
$
|
339,549
|
$
|
343,239
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Insurance reserves and policyholder funds:
|
||||||||
Future policy benefits
|
$
|
88,437
|
$
|
82,435
|
||||
Unearned premiums
|
26,272
|
23,449
|
||||||
Losses and claims
|
71,816
|
65,689
|
||||||
Other policy liabilities
|
1,288
|
2,010
|
||||||
Total insurance reserves and policyholder funds
|
187,813
|
173,583
|
||||||
Accounts payable and accrued expenses
|
15,880
|
22,342
|
||||||
Deferred income taxes, net
|
-
|
593
|
||||||
Junior subordinated debenture obligations, net
|
33,738
|
33,738
|
||||||
Total liabilities
|
237,431
|
230,256
|
||||||
Commitments and contingencies (Note 9)
|
||||||||
Shareholders’ equity:
|
||||||||
Preferred stock, $1 par, 4,000,000 shares authorized; Series D preferred, 55,000 shares issued and
outstanding; $5,500 redemption value
|
55
|
55
|
||||||
Common stock, $1 par, 50,000,000 shares authorized; shares issued: 22,400,894; shares outstanding:
20,218,836 and 20,449,531
|
22,401
|
22,401
|
||||||
Additional paid-in capital
|
57,419
|
57,495
|
||||||
Retained earnings
|
37,107
|
30,993
|
||||||
Accumulated other comprehensive income (loss)
|
(6,762
|
)
|
9,751
|
|||||
Unearned stock grant compensation
|
(252
|
)
|
(579
|
)
|
||||
Treasury stock, at cost: 2,182,058 and 1,951,363 shares
|
(7,850
|
)
|
(7,133
|
)
|
||||
Total shareholders’ equity
|
102,118
|
112,983
|
||||||
Total liabilities and shareholders’ equity
|
$
|
339,549
|
$
|
343,239
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Revenue:
|
||||||||||||||||
Insurance premiums
|
$
|
42,557
|
$
|
42,094
|
$
|
127,604
|
$
|
122,996
|
||||||||
Net investment income
|
2,215
|
2,136
|
7,111
|
6,380
|
||||||||||||
Realized investment gains, net
|
484
|
539
|
797
|
2,818
|
||||||||||||
Unrealized gains on equity securities, net
|
1,083
|
-
|
753
|
-
|
||||||||||||
Other income
|
31
|
29
|
88
|
95
|
||||||||||||
Total revenue
|
46,370
|
44,798
|
136,353
|
132,289
|
||||||||||||
Benefits and expenses:
|
||||||||||||||||
Insurance benefits and losses incurred
|
33,087
|
30,417
|
98,478
|
87,446
|
||||||||||||
Commissions and underwriting expenses
|
8,722
|
10,176
|
28,456
|
31,800
|
||||||||||||
Interest expense
|
529
|
440
|
1,497
|
1,273
|
||||||||||||
Other expense
|
2,960
|
3,134
|
9,168
|
9,301
|
||||||||||||
Total benefits and expenses
|
45,298
|
44,167
|
137,599
|
129,820
|
||||||||||||
Income (loss) before income taxes
|
1,072
|
631
|
(1,246
|
)
|
2,469
|
|||||||||||
Income tax expense (benefit)
|
138
|
(116
|
)
|
(341
|
)
|
483
|
||||||||||
Net income (loss)
|
934
|
747
|
(905
|
)
|
1,986
|
|||||||||||
Preferred stock dividends
|
(100
|
)
|
(100
|
)
|
(299
|
)
|
(299
|
)
|
||||||||
Net income (loss) applicable to common shareholders
|
$
|
834
|
$
|
647
|
$
|
(1,204
|
)
|
$
|
1,687
|
|||||||
Earnings (loss) per common share (basic and diluted)
|
$
|
.04
|
$
|
.03
|
$
|
(.06
|
)
|
$
|
.08
|
|||||||
Dividends per common share
|
$
|
-
|
$
|
-
|
$
|
.02
|
$
|
.02
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Net income (loss)
|
$
|
934
|
$
|
747
|
$
|
(905
|
)
|
$
|
1,986
|
|||||||
Other comprehensive income (loss):
|
||||||||||||||||
Available-for-sale securities:
|
||||||||||||||||
Gross unrealized holding gain (loss) arising in the period
|
63
|
2,852
|
(10,327
|
)
|
7,271
|
|||||||||||
Related income tax effect
|
(13
|
)
|
(997
|
)
|
2,169
|
(2,544
|
)
|
|||||||||
Subtotal
|
50
|
1,855
|
(8,158
|
)
|
4,727
|
|||||||||||
Less: reclassification adjustment for net realized losses included in net income (loss)
|
(484
|
)
|
(539
|
)
|
(797
|
)
|
(2,818
|
)
|
||||||||
Related income tax effect
|
101
|
188
|
167
|
986
|
||||||||||||
Subtotal
|
(383
|
)
|
(351
|
)
|
(630
|
)
|
(1,832
|
)
|
||||||||
Total other comprehensive income (loss), net of tax
|
(333
|
)
|
1,504
|
(8,788
|
)
|
2,895
|
||||||||||
Total comprehensive income (loss)
|
$
|
601
|
$
|
2,251
|
$
|
(9,693
|
)
|
$
|
4,881
|
Nine Months Ended September 30, 2018
|
Preferred
Stock
|
Common
Stock
|
Additional
Paid-In
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income
|
Unearned
Stock Grant
Compensation
|
Treasury
Stock
|
Total
|
||||||||||||||||||||||||
Balance, December 31, 2017
|
$
|
55
|
$
|
22,401
|
$
|
57,495
|
$
|
30,993
|
$
|
9,751
|
$
|
(579
|
)
|
$
|
(7,133
|
)
|
$
|
112,983
|
||||||||||||||
Cumulative effect of adoption of accounting guidance for equity financial instruments at January 1, 2018
|
-
|
-
|
-
|
9,825
|
(9,825
|
)
|
-
|
-
|
-
|
|||||||||||||||||||||||
Reclassification of certain tax effects from accumulated other comprehensive income at January 1, 2018
|
-
|
-
|
-
|
(2,100
|
)
|
2,100
|
-
|
-
|
-
|
|||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
(905
|
)
|
-
|
-
|
-
|
(905
|
)
|
||||||||||||||||||||||
Other comprehensive loss, net of tax
|
-
|
-
|
-
|
-
|
(8,788
|
)
|
-
|
-
|
(8,788
|
)
|
||||||||||||||||||||||
Dividends on common stock
|
-
|
-
|
-
|
(407
|
)
|
-
|
-
|
-
|
(407
|
)
|
||||||||||||||||||||||
Dividends accrued on preferred stock
|
-
|
-
|
-
|
(299
|
)
|
-
|
-
|
-
|
(299
|
)
|
||||||||||||||||||||||
Restricted stock grants, net
|
-
|
-
|
(88
|
)
|
-
|
-
|
135
|
(47
|
)
|
-
|
||||||||||||||||||||||
Amortization of unearned compensation
|
-
|
-
|
-
|
-
|
-
|
192
|
-
|
192
|
||||||||||||||||||||||||
Purchase of shares for treasury
|
-
|
-
|
-
|
-
|
-
|
-
|
(463
|
)
|
(463
|
)
|
||||||||||||||||||||||
Net shares acquired related to employee share-based compensation plans
|
-
|
-
|
-
|
-
|
-
|
-
|
(223
|
)
|
(223
|
)
|
||||||||||||||||||||||
Issuance of shares under stock plans
|
-
|
-
|
12
|
-
|
-
|
-
|
16
|
28
|
||||||||||||||||||||||||
Balance, September 30, 2018
|
$
|
55
|
$
|
22,401
|
$
|
57,419
|
$
|
37,107
|
$
|
(6,762
|
)
|
$
|
(252
|
)
|
$
|
(7,850
|
)
|
$
|
102,118
|
|||||||||||||
Nine Months Ended September 30, 2017
|
||||||||||||||||||||||||||||||||
Balance, December 31, 2016
|
$
|
55
|
$
|
22,401
|
$
|
57,114
|
$
|
27,272
|
$
|
5,830
|
$
|
(428
|
)
|
$
|
(6,738
|
)
|
$
|
105,506
|
||||||||||||||
Net income
|
-
|
-
|
-
|
1,986
|
-
|
-
|
-
|
1,986
|
||||||||||||||||||||||||
Other comprehensive income, net of tax
|
-
|
-
|
-
|
-
|
2,895
|
-
|
-
|
2,895
|
||||||||||||||||||||||||
Dividends on common stock
|
-
|
-
|
-
|
(408
|
)
|
-
|
-
|
-
|
(408
|
)
|
||||||||||||||||||||||
Dividends accrued on preferred stock
|
-
|
-
|
-
|
(299
|
)
|
-
|
-
|
-
|
(299
|
)
|
||||||||||||||||||||||
Restricted stock grants
|
-
|
-
|
293
|
-
|
-
|
(522
|
)
|
229
|
-
|
|||||||||||||||||||||||
Amortization of unearned compensation
|
-
|
-
|
-
|
-
|
-
|
363
|
-
|
363
|
||||||||||||||||||||||||
Purchase of shares for treasury
|
-
|
-
|
-
|
-
|
-
|
-
|
(546
|
)
|
(546
|
)
|
||||||||||||||||||||||
Issuance of shares under stock plans
|
-
|
-
|
13
|
-
|
-
|
-
|
10
|
23
|
||||||||||||||||||||||||
Balance, September 30, 2017
|
$
|
55
|
$
|
22,401
|
$
|
57,420
|
$
|
28,551
|
$
|
8,725
|
$
|
(587
|
)
|
$
|
(7,045
|
)
|
$
|
109,520
|
Nine Months Ended
September 30,
|
||||||||
2018
|
2017
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net (loss) income
|
$
|
(905
|
)
|
$
|
1,986
|
|||
Adjustments to reconcile net (loss) income to net cash used in operating activities:
|
||||||||
Amortization of deferred acquisition costs
|
8,986
|
8,696
|
||||||
Acquisition costs deferred
|
(11,226
|
)
|
(11,880
|
)
|
||||
Realized investment gains, net
|
(797
|
)
|
(2,818
|
)
|
||||
Unrealized losses on equity securities, net
|
(753
|
)
|
-
|
|||||
Distributions received from equity method investees
|
725
|
58
|
||||||
Compensation expense related to share awards
|
192
|
363
|
||||||
Depreciation and amortization
|
783
|
1,149
|
||||||
Deferred income tax benefit
|
(1,335
|
)
|
(423
|
)
|
||||
Increase in receivables, net
|
(7,882
|
)
|
(8,289
|
)
|
||||
Increase in insurance reserves
|
14,230
|
12,513
|
||||||
Decrease in other liabilities
|
(6,760
|
)
|
(2,096
|
)
|
||||
Other, net
|
(377
|
)
|
(344
|
)
|
||||
Net cash used in operating activities
|
(5,119
|
)
|
(1,085
|
)
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Proceeds from investments sold
|
28,177
|
52,702
|
||||||
Proceeds from investments matured, called or redeemed
|
4,577
|
8,982
|
||||||
Investments purchased
|
(40,827
|
)
|
(63,346
|
)
|
||||
Additions to property and equipment
|
(252
|
)
|
(101
|
)
|
||||
Net cash used in investing activities
|
(8,325
|
)
|
(1,763
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Payment of dividends on common stock
|
(407
|
)
|
(408
|
)
|
||||
Proceeds from shares issued under stock plans
|
28
|
23
|
||||||
Treasury stock acquired — share repurchase authorization
|
(463
|
)
|
(546
|
)
|
||||
Treasury stock acquired — net employee share-based compensation
|
(223
|
)
|
-
|
|||||
Net cash used in financing activities
|
(1,065
|
)
|
(931
|
)
|
||||
Net decrease in cash and cash equivalents
|
(14,509
|
)
|
(3,779
|
)
|
||||
Cash and cash equivalents at beginning of period
|
24,547
|
13,252
|
||||||
Cash and cash equivalents at end of period
|
$
|
10,038
|
$
|
9,473
|
||||
SUPPLEMENTAL CASH FLOW INFORMATION:
|
||||||||
Cash paid for interest
|
$
|
1,471
|
$
|
1,263
|
||||
Cash paid for income taxes
|
$
|
1,892
|
$
|
1,400
|
Note 1.
|
Basis of Presentation
|
Note 2.
|
Recently Issued Accounting Standards
|
Note 3.
|
Investments
|
September 30, 2018
|
||||||||||||||||
Estimated
Fair Value
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Cost or
Amortized
Cost
|
|||||||||||||
Fixed maturities:
|
||||||||||||||||
Bonds:
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. Government agencies and authorities
|
$
|
26,240
|
$
|
7
|
$
|
1,449
|
$
|
27,682
|
||||||||
Obligations of states and political subdivisions
|
8,224
|
259
|
135
|
8,100
|
||||||||||||
Corporate securities:
|
||||||||||||||||
Utilities and telecom
|
18,891
|
855
|
756
|
18,792
|
||||||||||||
Financial services
|
51,517
|
1,031
|
2,142
|
52,628
|
||||||||||||
Other business – diversified
|
47,267
|
240
|
2,668
|
49,695
|
||||||||||||
Other consumer – diversified
|
54,807
|
87
|
3,889
|
58,609
|
||||||||||||
Total corporate securities
|
172,482
|
2,213
|
9,455
|
179,724
|
||||||||||||
Redeemable preferred stocks:
|
||||||||||||||||
Other consumer – diversified
|
192
|
-
|
-
|
192
|
||||||||||||
Total redeemable preferred stocks
|
192
|
-
|
-
|
192
|
||||||||||||
Total fixed maturities
|
$
|
207,138
|
$
|
2,479
|
$
|
11,039
|
$
|
215,698
|
December 31, 2017
|
||||||||||||||||
Estimated
Fair Value
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Cost or
Amortized
Cost
|
|||||||||||||
Fixed maturities:
|
||||||||||||||||
Bonds:
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. Government agencies and authorities
|
$
|
31,155
|
$
|
149
|
$
|
511
|
$
|
31,517
|
||||||||
Obligations of states and political subdivisions
|
10,809
|
630
|
1
|
10,180
|
||||||||||||
Corporate securities:
|
||||||||||||||||
Utilities and telecom
|
21,882
|
1,709
|
130
|
20,303
|
||||||||||||
Financial services
|
53,686
|
2,049
|
453
|
52,090
|
||||||||||||
Other business – diversified
|
44,184
|
1,024
|
1,349
|
44,509
|
||||||||||||
Other consumer – diversified
|
53,200
|
924
|
1,477
|
53,753
|
||||||||||||
Total corporate securities
|
172,952
|
5,706
|
3,409
|
170,655
|
||||||||||||
Redeemable preferred stocks:
|
||||||||||||||||
Other consumer – diversified
|
192
|
-
|
-
|
192
|
||||||||||||
Total redeemable preferred stocks
|
192
|
-
|
-
|
192
|
||||||||||||
Total fixed maturities
|
$
|
215,108
|
$
|
6,485
|
$
|
3,921
|
$
|
212,544
|
September 30, 2018
|
||||||||||||||||
Estimated
Fair Value
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Cost
|
|||||||||||||
Equity securities:
|
||||||||||||||||
Common and non-redeemable preferred stocks:
|
||||||||||||||||
Utilities and telecom
|
$
|
1,602
|
$
|
637
|
$
|
-
|
$
|
965
|
||||||||
Financial services
|
4,770
|
390
|
-
|
4,380
|
||||||||||||
Other business – diversified
|
320
|
273
|
-
|
47
|
||||||||||||
Other consumer – diversified
|
17,013
|
11,890
|
-
|
5,123
|
||||||||||||
Total equity securities
|
$
|
23,705
|
$
|
13,190
|
$
|
-
|
$
|
10,515
|
December 31, 2017
|
||||||||||||||||
Estimated
Fair Value
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Cost
|
|||||||||||||
Equity securities:
|
||||||||||||||||
Common and non-redeemable preferred stocks:
|
||||||||||||||||
Utilities and telecom
|
$
|
1,588
|
$
|
624
|
$
|
-
|
$
|
964
|
||||||||
Financial services
|
5,634
|
851
|
-
|
4,783
|
||||||||||||
Other business – diversified
|
297
|
250
|
-
|
47
|
||||||||||||
Other consumer – diversified
|
15,836
|
10,712
|
-
|
5,124
|
||||||||||||
Total equity securities
|
$
|
23,355
|
$
|
12,437
|
$
|
-
|
$
|
10,918
|
September 30, 2018
|
December 31, 2017
|
|||||||||||||||
Carrying
Value
|
Amortized
Cost
|
Carrying
Value
|
Amortized
Cost
|
|||||||||||||
Due in one year or less
|
$
|
3,148
|
$
|
3,150
|
$
|
1,653
|
$
|
1,655
|
||||||||
Due after one year through five years
|
19,055
|
19,408
|
13,738
|
14,056
|
||||||||||||
Due after five years through ten years
|
126,581
|
131,961
|
112,847
|
112,116
|
||||||||||||
Due after ten years
|
42,251
|
43,970
|
67,328
|
64,928
|
||||||||||||
Varying maturities
|
16,103
|
17,209
|
19,542
|
19,789
|
||||||||||||
Totals
|
$
|
207,138
|
$
|
215,698
|
$
|
215,108
|
$
|
212,544
|
September 30, 2018
|
||||||||||||||||||||||||
Less than 12 months
|
12 months or longer
|
Total
|
||||||||||||||||||||||
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
|||||||||||||||||||
U.S. Treasury securities and obligations of U.S. Government agencies and authorities
|
$
|
3,923
|
$
|
178
|
$
|
20,812
|
$
|
1,271
|
$
|
24,735
|
$
|
1,449
|
||||||||||||
Obligations of states and political subdivisions
|
4,402
|
135
|
-
|
-
|
4,402
|
135
|
||||||||||||||||||
Corporate securities
|
90,396
|
4,116
|
50,934
|
5,339
|
141,330
|
9,455
|
||||||||||||||||||
Total temporarily impaired securities
|
$
|
98,721
|
$
|
4,429
|
$
|
71,746
|
$
|
6,610
|
$
|
170,467
|
$
|
11,039
|
December 31, 2017
|
||||||||||||||||||||||||
Less than 12 months
|
12 months or longer
|
Total
|
||||||||||||||||||||||
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
|||||||||||||||||||
U.S. Treasury securities and obligations of U.S. Government agencies and authorities
|
$
|
12,175
|
$
|
162
|
$
|
12,737
|
$
|
349
|
$
|
24,912
|
$
|
511
|
||||||||||||
Obligations of states and political subdivisions
|
999
|
1
|
-
|
-
|
999
|
1
|
||||||||||||||||||
Corporate securities
|
40,108
|
653
|
32,667
|
2,756
|
72,775
|
3,409
|
||||||||||||||||||
Total temporarily impaired securities
|
$
|
53,282
|
$
|
816
|
$
|
45,404
|
$
|
3,105
|
$
|
98,686
|
$
|
3,921
|
Level 1 |
Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. The
Company’s financial instruments valued using Level 1 criteria include cash equivalents and exchange traded common stocks.
|
Level 2 |
Observable inputs, other than quoted prices included in Level 1, for an asset or liability or prices for similar assets or liabilities. The Company’s financial
instruments valued using Level 2 criteria include significantly all of its fixed maturities, which consist of U.S. Treasury securities and U.S. Government securities, obligations of states and political subdivisions, and certain
corporate fixed maturities, as well as its non-redeemable preferred stocks. In determining fair value measurements of its fixed maturities and non-redeemable preferred stocks using Level 2 criteria, the Company utilizes data from
outside sources, including nationally recognized pricing services and broker/dealers. Prices for the majority of the Company’s Level 2 fixed maturities and non-redeemable preferred stocks were determined using unadjusted prices
received from pricing services that utilize a matrix pricing concept, which is a mathematical technique used widely in the industry to value debt securities based on various relationships to other benchmark quoted prices.
|
Level 3 |
Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (including assumptions about risk). Fair value is based on
criteria that use assumptions or other data that are not readily observable from objective sources. The Company’s financial instruments valued using Level 3 criteria consist of a limited number of fixed maturities. As of September 30,
2018 and December 31, 2017, the value of the Company’s fixed maturities valued using Level 3 criteria was $1,018 and $1,369, respectively. The use of different criteria or assumptions regarding data may have yielded materially
different valuations.
|
Quoted Prices
in Active
Markets
for Identical
Assets
|
Significant
Other
Observable
Inputs
|
Significant
Unobservable
Inputs
|
||||||||||||||
(Level 1)
|
(Level 2)
|
(Level 3)
|
Total
|
|||||||||||||
Assets:
|
||||||||||||||||
Fixed maturities
|
$
|
-
|
$
|
206,120
|
$
|
1,018
|
(1)
|
$
|
207,138
|
|||||||
Equity securities
|
19,155
|
4,550
|
(1)
|
-
|
23,705
|
|||||||||||
Cash equivalents
|
8,653
|
-
|
-
|
8,653
|
||||||||||||
Total
|
$
|
27,808
|
$
|
210,670
|
$
|
1,018
|
$
|
239,496
|
(1) |
All underlying securities are financial service industry related.
|
Quoted Prices
in Active
Markets
for Identical
Assets
|
Significant
Other
Observable
Inputs
|
Significant
Unobservable
Inputs
|
||||||||||||||
(Level 1)
|
(Level 2)
|
(Level 3)
|
Total
|
|||||||||||||
Assets:
|
||||||||||||||||
Fixed maturities
|
$
|
-
|
$
|
213,739
|
$
|
1,369
|
(1)
|
$
|
215,108
|
|||||||
Equity securities
|
17,973
|
5,382
|
(1)
|
-
|
23,355
|
|||||||||||
Cash equivalents
|
13,855
|
-
|
-
|
13,855
|
||||||||||||
Total
|
$
|
31,828
|
$
|
219,121
|
$
|
1,369
|
$
|
252,318
|
(1) |
All underlying securities are financial service industry related.
|
Fixed
Maturities
|
||||
Balance, December 31, 2017
|
$
|
1,369
|
||
Total unrealized losses included in other comprehensive loss
|
(30
|
)
|
||
Balance, March 31, 2018
|
1,339
|
|||
Total unrealized gains included in other comprehensive loss
|
7
|
|||
Balance, June 30, 2018
|
1,346
|
|||
Total realized gains included in earnings
|
208
|
|||
Total unrealized losses included in other comprehensive loss
|
(53
|
)
|
||
Settlements
|
(483
|
)
|
||
Balance, September 30, 2018
|
$
|
1,018
|
Fixed
Maturities
|
||||
Balance, December 31, 2016
|
$
|
1,264
|
||
Total unrealized gains included in other comprehensive income
|
38
|
|||
Balance, March 31, 2017
|
1,302
|
|||
Total unrealized gains included in other comprehensive income
|
30
|
|||
Balance, June 30, 2017
|
1,332
|
|||
Total unrealized gains included in other comprehensive income
|
19
|
|||
Balance, September 30, 2017
|
$
|
1,351
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Gross gains
|
$
|
484
|
$
|
539
|
$
|
1,101
|
$
|
2,879
|
||||||||
Gross losses
|
-
|
-
|
(304
|
)
|
(61
|
)
|
||||||||||
Realized investment gains, net
|
$
|
484
|
$
|
539
|
$
|
797
|
$
|
2,818
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Net gains recognized during the period on equity securities
|
$
|
1,355
|
$
|
-
|
$
|
1,025
|
$
|
-
|
||||||||
Less: Net losses recognized during the period on equity securities sold during the period
|
(272
|
)
|
-
|
(272
|
)
|
-
|
||||||||||
Net unrealized gains recognized during the reporting period on equity securities still held at the
reporting date
|
$
|
1,083
|
$
|
-
|
$
|
753
|
$
|
-
|
Note 4.
|
Fair Values of Financial Instruments
|
September 30, 2018
|
December 31, 2017
|
|||||||||||||||||||
Level in
Fair
Value
Hierarchy (1)
|
Carrying
Amount
|
Estimated
Fair Value
|
Carrying
Amount
|
Estimated
Fair Value
|
||||||||||||||||
Assets:
|
||||||||||||||||||||
Cash and cash equivalents
|
Level 1
|
$
|
10,038
|
$
|
10,038
|
$
|
24,547
|
$
|
24,547
|
|||||||||||
Fixed maturities
|
(1)
|
|
207,138
|
207,138
|
215,108
|
215,108
|
||||||||||||||
Equity securities
|
(1)
|
|
23,705
|
23,705
|
23,355
|
23,355
|
||||||||||||||
Other invested assets
|
Level 3
|
10,817
|
10,817
|
5,626
|
5,626
|
|||||||||||||||
Policy loans
|
Level 2
|
2,084
|
2,084
|
2,146
|
2,146
|
|||||||||||||||
Real estate
|
Level 2
|
38
|
38
|
38
|
38
|
|||||||||||||||
Investment in unconsolidated trusts
|
Level 2
|
1,238
|
1,238
|
1,238
|
1,238
|
|||||||||||||||
Liabilities:
|
||||||||||||||||||||
Junior subordinated debentures, net
|
Level 2
|
33,738
|
33,738
|
33,738
|
33,738
|
(1) |
See Note 3 for a description of the fair value hierarchy as well as a disclosure of levels for classes of these financial assets.
|
Note 5.
|
Liabilities for Unpaid Losses, Claims and Loss Adjustment Expenses
|
Property and Casualty Insurance Products
|
Nine Months Ended
September 30,
|
|||||||
2018
|
2017
|
|||||||
Beginning liabilities for unpaid losses, claims and loss adjustment expenses, gross
|
$
|
47,997
|
$
|
49,556
|
||||
Less: Reinsurance recoverable on unpaid losses
|
(7,220
|
)
|
(9,806
|
)
|
||||
Beginning liabilities for unpaid losses, claims and loss adjustment expenses, net
|
40,777
|
39,750
|
||||||
Incurred related to:
|
||||||||
Current accident year
|
30,339
|
27,359
|
||||||
Prior accident year development (1)
|
(1,795
|
)
|
(1,480
|
)
|
||||
Total incurred
|
28,544
|
25,879
|
||||||
Paid related to:
|
||||||||
Current accident year
|
10,716
|
9,858
|
||||||
Prior accident years
|
15,693
|
13,720
|
||||||
Total paid
|
26,409
|
23,578
|
||||||
Ending liabilities for unpaid losses, claims and loss adjustment expenses, net
|
42,912
|
42,051
|
||||||
Plus: Reinsurance recoverable on unpaid losses
|
6,928
|
9,455
|
||||||
Ending liabilities for unpaid losses, claims and loss adjustment expenses, gross
|
$
|
49,840
|
$
|
51,506
|
(1) |
In establishing property and casualty reserves, the Company initially reserves for losses at the higher end of the reasonable range if no other value within the range is
determined to be more probable. Selection of such an initial loss estimate is an attempt by management to give recognition that initial claims information received generally is not conclusive with respect to legal liability, is
generally not comprehensive with respect to magnitude of loss and generally, based on historical experience, will develop more adversely as time passes and more information becomes available. Accordingly, the Company generally
experiences reserve redundancies when analyzing the development of prior year losses in a current period.
|
Medicare Supplement Insurance Products
|
Nine Months Ended
September 30,
|
|||||||
2018
|
2017
|
|||||||
Beginning liabilities for unpaid losses, claims and loss adjustment expenses, gross
|
$
|
15,859
|
$
|
11,263
|
||||
Less: Reinsurance recoverable on unpaid losses
|
(4,748
|
)
|
(990
|
)
|
||||
Beginning liabilities for unpaid losses, claims and loss adjustment expenses, net
|
11,111
|
10,273
|
||||||
Incurred related to:
|
||||||||
Current accident year
|
59,356
|
50,733
|
||||||
Prior accident year development
|
817
|
720
|
||||||
Total incurred
|
60,173
|
51,453
|
||||||
Paid related to:
|
||||||||
Current accident year
|
46,734
|
40,801
|
||||||
Prior accident years
|
11,594
|
10,445
|
||||||
Total paid
|
58,328
|
51,246
|
||||||
Ending liabilities for unpaid losses, claims and loss adjustment expenses, net
|
12,956
|
10,480
|
||||||
Plus: Reinsurance recoverable on unpaid losses
|
7,340
|
3,640
|
||||||
Ending liabilities for unpaid losses, claims and loss adjustment expenses, gross
|
$
|
20,296
|
$
|
14,120
|
Other Life and Health Insurance Products
|
Nine Months Ended
September 30,
|
|||||||
2018
|
2017
|
|||||||
Beginning liabilities for unpaid losses, claims and loss adjustment expenses, gross
|
$
|
1,833
|
$
|
1,743
|
||||
Less: Reinsurance recoverable on unpaid losses
|
-
|
-
|
||||||
Beginning liabilities for unpaid losses, claims and loss adjustment expenses, net
|
1,833
|
1,743
|
||||||
Incurred related to:
|
||||||||
Current accident year
|
6,729
|
6,226
|
||||||
Prior accident year development
|
(71
|
)
|
(104
|
)
|
||||
Total incurred
|
6,658
|
6,122
|
||||||
Paid related to:
|
||||||||
Current accident year
|
5,148
|
4,807
|
||||||
Prior accident years
|
1,663
|
1,500
|
||||||
Total paid
|
6,811
|
6,307
|
||||||
Ending liabilities for unpaid losses, claims and loss adjustment expenses, net
|
1,680
|
1,558
|
||||||
Plus: Reinsurance recoverable on unpaid losses
|
-
|
-
|
||||||
Ending liabilities for unpaid losses, claims and loss adjustment expenses, gross
|
$
|
1,680
|
$
|
1,558
|
Nine Months Ended
September 30,
|
||||||||
2018
|
2017
|
|||||||
Total incurred losses
|
$
|
95,375
|
$
|
83,454
|
||||
Cash surrender value and matured endowments
|
1,057
|
1,167
|
||||||
Benefit reserve changes
|
2,046
|
2,825
|
||||||
Total insurance benefits and losses incurred
|
$
|
98,478
|
$
|
87,446
|
Note 6.
|
Junior Subordinated Debentures
|
Atlantic American
Statutory Trust I
|
Atlantic American
Statutory Trust II
|
|||||||
JUNIOR SUBORDINATED DEBENTURES (1) (2)
|
||||||||
Principal amount owed September 30, 2018
|
$
|
18,042
|
$
|
23,196
|
||||
Less: Treasury debt (3)
|
-
|
(7,500
|
)
|
|||||
Net balance September 30, 2018
|
$
|
18,042
|
$
|
15,696
|
||||
Net balance December 31, 2017
|
$
|
18,042
|
$
|
15,696
|
||||
Coupon rate
|
LIBOR + 4.00%
|
LIBOR + 4.10%
|
||||||
Interest payable
|
Quarterly
|
Quarterly
|
||||||
Maturity date
|
December 4, 2032
|
May 15, 2033
|
||||||
Redeemable by issuer
|
Yes
|
Yes
|
||||||
TRUST PREFERRED SECURITIES
|
||||||||
Issuance date
|
December 4, 2002
|
May 15, 2003
|
||||||
Securities issued
|
17,500
|
22,500
|
||||||
Liquidation preference per security
|
$
|
1
|
$
|
1
|
||||
Liquidation value
|
$
|
17,500
|
$
|
22,500
|
||||
Coupon rate
|
LIBOR + 4.00%
|
LIBOR + 4.10%
|
||||||
Distribution payable
|
Quarterly
|
Quarterly
|
||||||
Distribution guaranteed by (4)
|
Atlantic American Corporation
|
Atlantic American Corporation
|
(1) |
For each of the respective debentures, the Company has the right at any time, and from time to time, to defer payments of interest on the Junior Subordinated Debentures
for a period not exceeding 20 consecutive quarters up to the debentures’ respective maturity dates. During any such period, interest will continue to accrue and the Company may not declare or pay any cash dividends or distributions
on, or purchase, the Company’s common stock nor make any principal, interest or premium payments on or repurchase any debt securities that rank equally with or junior to the Junior Subordinated Debentures. The Company has the right
at any time to dissolve each of the trusts and cause the Junior Subordinated Debentures to be distributed to the holders of the Trust Preferred Securities.
|
(2) |
The Junior Subordinated Debentures are unsecured and rank junior and subordinate in right of payment to all senior debt of the Parent and are effectively subordinated to
all existing and future liabilities of its subsidiaries.
|
(3) |
On August 4, 2014, the Company acquired $7,500 of the Junior Subordinated Debentures.
|
(4) |
The Parent has guaranteed, on a subordinated basis, all of the obligations under the Trust Preferred Securities, including payment of the redemption price and any
accumulated and unpaid distributions to the extent of available funds and upon dissolution, winding up or liquidation.
|
Note 7.
|
Earnings (Loss) Per Common Share
|
Three Months Ended
September 30, 2018
|
|||||||||||
Income
|
Weighted
Average
Shares
(In thousands)
|
Per Share
Amount
|
|||||||||
Basic and Diluted Earnings Per Common Share:
|
|||||||||||
Net income
|
$
|
934
|
20,420
|
||||||||
Less: preferred stock dividends
|
(100
|
)
|
-
|
||||||||
Net income applicable to common
shareholders
|
$
|
834
|
20,420
|
$ | .04 |
Three Months Ended
September 30, 2017
|
|||||||||||
Income
|
Weighted
Average
Shares
(In thousands)
|
Per Share
Amount
|
|||||||||
Basic and Diluted Earnings Per Common Share:
|
|||||||||||
Net income
|
$
|
747
|
20,440
|
||||||||
Less: preferred stock dividends
|
(100
|
)
|
-
|
||||||||
Net income applicable to common
shareholders
|
$
|
647
|
20,440
|
$
|
.03 |
Nine Months Ended
September 30, 2018
|
|||||||||||
Income
|
Weighted
Average
Shares
(In thousands)
|
Per Share
Amount
|
|||||||||
Basic and Diluted Loss Per Common Share:
|
|||||||||||
Net loss
|
$
|
(905
|
)
|
20,314
|
|||||||
Less: preferred stock dividends
|