AAME 10-K & 10-Q changes, risk factors and insider trading

The following is management’s discussion and analysis of the financial condition and results of operations of Atlantic American Corporation (“Atlantic American” or the “Parent”) and its subsidiaries (collectively with the Parent, the “Company”) for the years ended December 31, 20232024 and 2022.2023. This discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere herein. Operating results achieved in any historical period are not necessarily indicative of results to be expected in any future period.

Receivables are amounts due from reinsurers, insureds and agents, and any sales of investment securities not yet settled, and comprised 12%13% of the Company’s total assets at December 31, 2023.2024. Insured and agent balances are evaluated periodically for collectibility. collectability. Annually, the Company performs an analysis of the creditworthiness of the reinsurers with whom the Company contracts using various data sources. Failure of reinsurers to meet their obligations due to insolvencies, disputes or otherwise could result in uncollectible amounts and losses to the Company. Allowances for uncollectible amounts are established, as and when a loss has been determined probable, against the related receivable. Losses are recognized by the Company when determined on a specific account basis and a general provision for loss is made based on the Company’s historical experience.

A reconciliation of net income,loss, the most directly comparable GAAP measure, to operating income (loss) is as follows:

On a consolidated basis, the Company had net loss of $0.2$4.3 million, or $0.03$(0.23) per diluted share, in 2023,2024, compared to net incomeloss of $1.5$0.2 million, or $0.06$(0.03) per diluted share, in 2022.2023. The decrease increase in net incomeloss was primarily due to aan decreaseunfavorable loss experience in earnedthe premiums,property and casualty operations due to the frequency and severity of claims in the automobile liability line of business as well as an increase in lossesclaims costs andin expensesthe asautomobile aphysical percentagedamage line of premiums.business. Also contributing to the decreaseincrease in net incomeloss iswas an increase in debt serviceadministrative costs duerelated to rising interestthe rates.growth in the group lines of business within the life and health operations. Partially offsetting this decrease was aan declineincrease in unrealizednet lossesrealized oninvestment equitygains securities.mainly due to gains of $1.2 million from the sale of the Company's interest in a certain limited liability company as well as gains from the sale of a number of the Company's investments in fixed maturities.

Total revenue was $188.2 million in 2024 as compared to $186.8 million in 2023 as compared to $187.9 million in 2022.2023. Premium revenue decreased slightly to $178.7 million in 2024 from $178.8 million in 2023 from $185.4 million in 2022.2023. The decrease in premium revenue was primarily attributable to a decrease in Medicare supplement insurance premiums within the life and health operations. Also contributing to the decrease in premium revenue was primarily attributable to a decrease in earned premiums in the automobile physical damage line of business due to a reductiondecline in demand within the numbertrucking ofindustry programs.within the property and casualty operations. Partially offsetting the decrease in premium revenue was an increase in earned premiums in the automobilegroup liabilityaccident lineand health, group life and the other individual health lines of business due mainly to ratenew increasessales within the life and ahealth retrospective premium adjustment in a governmental program.operations.

Gross written premiums at American Southern decreased $1.7$3.9 million, or 2.1%,5.0%, during 20232024 as compared to 2022.2023. The decrease in gross written premiums was primarily attributable to the decrease in premiums written in the automobile liability line of business due to the non-renewal of a program, as well as a decrease in premiums written in the automobile physical damage line of business due to a reductiondecline in demand within the numbertrucking ofindustry. agencies.Also Partiallycontributing offsettingto the decrease in gross written premiums was ana increasedecrease in premiums written in the automobile liabilitysurety line of business resultingdue fromto newconstruction business,slowdowns ratein increases,certain and retrospective premium adjustments.regions.

Ceded premiums decreasedincreased $0.6$0.1 million, or 9.9%,1.3%, during 20232024 as compared to 2022.2023. American Southern’s ceded premiums are typically determined as a percentage of earned premiums and generally increase or decrease as earned premiums increase or decrease.decrease or retentions levels change. The decreaseincrease in ceded premiums was primarily attributable to thean decreaseincrease in earned premiums in the automobile physical damage linelines of business,business aswith well as decreasedhigher ceding rates due to increased retention.rates.

Net earned premiums decreased $1.8$0.8 million, or 2.6%,1.1%, during 20232024 as compared to 2022.2023. The decrease in net earned premiums was primarily attributable to a decrease in earned premiums in the automobile physical damage line of business due to a reductiondecline in demand within the numbertrucking of agenciesindustry as previously mentioned. Also contributing to the decrease was a decline in earned premiums in the inland marine line of business resulting from reduced cargo production. Partially offsetting the decrease in net earned premiums was an increase in earned premiums in the automobile liability line of business due mainly to rate increases and a retrospectivenew premiumgovernment adjustmentprogram which began in athe governmental program.fourth quarter of 2023. Premiums are earned ratably over their respective policy terms and therefore premiums earned in the current year are related to policies written during both the current year and immediately preceding year.

Insurance benefits incurred at American Southern increased $3.8$4.8 million, or 8.1%,9.3%, during 20232024 as compared to 2022.2023. As a percentage of premiums, insurance benefits and losses incurred were 74.5% 82.4% in 20232024 as compared to 67.1%74.5% in 2022.2023. The increase in the loss ratio was mainly due to overallan inflationincrease onin claimsthe frequency and increased severity of lossesclaims reported from certain governmental programs withinin the automobile liability line of business. Also contributing to the increase in the loss ratio werewas increasedan lossesincrease in the generalautomobile liabilityphysical damage line of business fromdue artisanto contractoran business.increase in claims costs. Partially offsetting the increase in the loss ratio was a decrease in lossesthe relatedgeneral to the automobile physical damageliability line of business due to afavorable decreaseclaim reserve in exposure.development.

Commissions and underwriting expenses decreased $3.4$1.2 million, or 16.9%,7.1%, during 20232024 as compared to 2022.2023. As a percentage of premiums, these expenses were 23.0% in 2024 as compared to 24.5% in 2023 as compared to 28.7% in 2022.2023. The decrease in the expense ratio was primarily due to the decrease in fixed and variable commissions. Fixed commissions decreased as a result of the decline in written premiums during 2023. Also contributing to the decrease in expense ratio was American Southern’s use of a variable commission structure with certain agents, which compensates the participating agents in relation to the loss ratios of the business they write. During periods in which the loss ratio decreases, commissions and underwriting expenses will generally increase, and conversely, during periods in which the loss ratio increases, commissions and underwriting expenses will generally decrease. In 2023,2024, variable commissions at American Southern decreased $1.4$1.1 million as compared to 20222023 due to an increase inunfavorable loss ratiosexperience from certain accounts subject to variable commissions.

NetGross earned premium revenuepremiums at Bankers Fidelity decreased $4.8$2.1 million, or 4.2%,1.3%, during 20232024 as compared to 2022.2023. GrossThe decrease in gross earned premiums was primarily attributable to the decrease in gross earned premiums from the Medicare supplement line of business decreased $15.4 million, or 10.4 %, in 2023 as compared to 2022, due primarily to non-renewals exceeding the level of new business writings as the existing block of business has incurred rate increases. OtherAlso health product premiums increased $2.0 million, or 16.0%, during 2023 as comparedcontributing to 2022, primarily as a result of new sales of the company’sdecrease groupin health and individual cancer products. Grossgross earned premiums from the life insurance line of business increased $2.8 million, or 17.6%, in 2023 from 2022 due to an increase in the group life product premiums. Partially offsetting this increase was a decrease in gross earned premiums in the individual life productsline premium,of business, resulting from the redemption and settlement of existing individual life policy obligations exceeding the level of new individual life sales. PremiumsPartially cededoffsetting decreasedthe $5.8decrease million,were or 9.5%,increases in 2023the fromgroup 2022.accident Theand decreasehealth, ingroup cededlife premiumsand wasother individual health lines of business due to anew decrease in Medicare supplement premiums subject to reinsurance.sales.

Insurance benefits and losses incurred decreased $4.8$1.4 million, or 6.3%,2.0%, during 20232024 as compared to 2022.2023. As a percentage of premiums, benefits and losses were 63.1% in 2024 as compared to 64.8% in 2023 as compared to 66.2% in 2022.2023. The decrease in the loss ratio was primarily due to improved rateloss adequacy and a decrease in the number of incurred claimsexperience within the Medicaregroup supplementlife line of business as well as the other individual health line of business. AlsoThese contributingdecreases towere thepartially decreaseoffset inby losshigher ratio was anincurred improvementclaims in the other health lines profitability. These decreases were offset by higher incurred claims on our life linesline of business.

Commissions and underwriting expenses increased $4.1$3.9 million, or 12.0%,10.2%, during 20232024 as compared to 2022.2023. As a percentage of earned premiums, these expenses were 34.4%37.7% in 2023 2024 as compared to 29.5% 34.4% in 2022.2023. The increase in the expense ratio was primarily due to an increase in administrative costs related to the growth in the group and individual health lines of business,business. coupledPartially withoffsetting increasedthe increase in the expense ratio was a decrease in commission expenses primarily attributable to a decrease in the Medicare supplement servicingline costs.of business as a result of non-renewals exceeding the level of new business writings, as previously mentioned.

Investment income increaseddecreased $0.1$0.3 million, or 1.3%,2.7%, in 20232024 as compared to 2022.2023. The increasedecrease in investment income was primarily attributable to ana increasenet loss in a certain investment income related to fixed maturities and equity securities. Partially offsetting this increase was a decrease in the equity in earnings from investments inwithin the Company's limited partnerships and limited liability companies of $0.6$0.4 million.

The Company had net realized investment gains of $1.2 million in 2024 as compared to net realized investment gains of $0.1 million in 2023 as compared to net realized investment gains of $0.03 million in 2022.2023. The net realized investment gains in 2024 were mainly due to gains of $1.2 million from the sale of the Company's interest in a certain limited liability company as well as gains from the sale of a number of the Company's investments in fixed maturities. The net realized investment gains in 2023 and 2022 were primarily attributable to gains from the sale of fixed maturities. Management continually evaluates the Company’s investment portfolio and, as may be determined to be appropriate, makes adjustments for impairments and/or will divest divest investments. See Note 2 of Notes to Consolidated Financial Statements.

Investments in equity securities are measured at fair value at the end of the reporting period, with any changes in fair value reported in net income during the period. The Company recognized net unrealized losses on equity securities of $2.2$1.5 million and $7.6net unrealized losses of $2.2 million during the years ended December 20232024 and 2022,2023, respectively. Changes in unrealized gainslosses on equity securities for the applicable periods are primarily the result of fluctuations in the market value of certain of the Company’s equity securities.

Interest expense increased $1.3$0.2 million, or 67.5%,4.6%, in 20232024 as compared to 2022.2023. Changes in interest expense were primarily due to changes in the Term Secured Overnight Financing Rate (“SOFR”) published by CME Group Benchmark Administration Limited (“CME”),Limited, as the interest rates on the Company’s outstanding junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) and the revolving credit facility utilize are directlySOFR related to SOFR. As expected, discontinuation of London Interbank Offered Rate (“LIBOR”) occurred on June 30, 2023 and affectedas the ratesreference used in the Company’s credit arrangements after that date. The U.S. Congress enacted the Adjustable Interest Rate LIBOR Act (the "LIBOR Act") to address LIBOR’s cessation and the Board of Governors of the Federal Reserve System issued regulations, 12 C.F.R. Part 253, “Regulations Implementing the Adjustable Interest Rate LIBOR Act (Regulation ZZ),” which relate to the LIBOR transition.rate.

The primary differencesdifference between the effective tax rate and the federal statutory income tax rate for 20222024 resulted from a permanent difference related to penaltiesmeals and fines incurred of $0.1 million.entertainment. Also contributing to differences between the effective tax rate and the federal statutory income tax rate werewas the adjustment for prior years’ estimates to actual that are generally updated at the completion of the third quarter of each each fiscal year and were $0.1$35 millionthousand in the year ended December 31, 2022.2024. OtherAnother contributing factorsfactor to the differences between the effective tax rate and the federal statutory income tax rate werewas a permanent differences difference related to meals and entertainment and the dividends-received deduction (“DRD”). The current estimated DRD is adjusted as underlying factors change and can vary from estimates based on, but not limited to, actual distributions from investments as well as the amount of the Company’s taxable income. income.2024 The primary difference between the effective tax rate and the federal statutory income tax rate for 2023 resulted from the adjustment for prior years’ estimates to actual of $0.3 million in the year ended December 31, 2023, which included the return to provision adjustment that is generally updated at the completion of the third quarter of each fiscal year and an adjustment for partnership valuation. Also contributing to the differences between the effective tax rate and the federal statutory income tax rate was a permanent difference related to meals and entertainment.

The Company has two statutory trusts which exist for the exclusive purpose of issuing trust preferred securities representing undivided beneficial interests in the assets of the trusts and investing the gross proceeds of the trust preferred securities in Junior Subordinated Debentures. The outstanding $18.0 million and $15.7 million of Junior Subordinated Debentures mature on December 4, 2032 and May 15, 2033, respectively, are callable quarterly, in whole or in part, only at the option of the Company, and have an interest rate of 3-month CME Term SOFR plus applicable tenor spread of 0.26161 percent0.26161% plus an applicable margin. The margin ranges from 4.00% to 4.10%. At December 31, 2023,2024, the effective interest rate was 9.69%.8.82%. The obligations of the Company with respect to the issuances of the trust preferred securities represent a full and unconditional guarantee by the Parent of each trust’s obligations with respect to the trust preferred securities. Subject to certain exceptions and limitations, the Company may elect from time to time to defer Junior Subordinated Debenture interest payments, which would result in a deferral of distribution payments on the related trust preferred securities. The Company has not made such an election.

On May 12, 2021, the Company entered into a revolving credit agreement (“Revolving Credit Agreement (the “Credit Agreement”) with Truist Bank as the lender (the “Lender”). The Revolving Credit Agreement provides for an unsecured $10.0 million revolving credit facility that maturesoriginally matured on April 12, 2024. UnderOn theMarch Credit22, Agreement,2024, the Company paidentered into a First Amendment (the "Amendment") to its Revolving Credit Agreement (as amended, the “Credit Agreement”) with the Lender. The Amendment, among other things, (a) updates the interest rate provisions to memorialize that the Company pays interest on the unpaid principal balance of outstanding revolving loans at 1-monththe Adjusted Term SOFR rate (as defined in the Credit Agreement), plus a2.00%, spread(b) adjustmentextends the maturity date of 0.11448%the plus 2.00%,revolving subjectcredit facility to aMarch SOFR22, floor2027, rate(c) requires the monthly payment of 1.00%.an unused commitment fee of 0.2% of the unused facility amount, and (d) requires that the Company maintain a consolidated net worth of not less than $64.2 million. Except as modified by the Amendment, the existing terms of the original Credit Agreement remain in effect.

The Credit Agreement requires the Company to comply with certain covenants, including a debt to capital ratio that restricts the Company from incurring consolidated indebtedness that exceeds 35% of the Company’s consolidated capitalization at any time.time and maintaining a minimum consolidated net worth, as previously mentioned. The Credit Agreement also contains customary representations and warranties and events of default. Events of default include, among others, (a) the failure by the Company to pay any amounts owed under the Credit Agreement when due, (b) the failure to perform and not timely remedy certain covenants, (c) a change in control of the Company and (d) the occurrence of bankruptcy or insolvency events. Upon an event of default, the Lender may, among other things, declare all obligations under the Credit Agreement immediately due and payable and terminate the revolving commitments. As of December 31, 2024 and 2023, the Company had outstanding borrowings of $4.0 million and $3.0 million under the Credit Agreement.

The following is management’s discussion and analysis of the financial condition and results of operations of Atlantic American Corporation (“Atlantic American” or the “Parent”) and its subsidiaries (collectively with the Parent, the “Company”) as of and for the three month and sixnine month periods ended JuneSeptember 30, 2025. This discussion should be read in conjunction with the unaudited condensed consolidated financial statements and and notes thereto included elsewhere herein, as well as with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”).

The following presents the Company’s revenue, expenses and net income (loss) for the three month and sixnine month periods ended JuneSeptember 30, 2025 and the comparable periods in 2024:

A reconciliation of net income (loss) to operating income (loss) for the three month and sixnine month periods ended JuneSeptember 30, 2025 and the comparable periods in 2024 is as follows:

On a consolidated basis, the Company had net income of $3.3$0.6 million, or $0.15$0.02 per diluted share, for the three month period ended JuneSeptember 30, 2025, compared to net loss of $0.7$2.0 million, or $(0.040.10) per diluted share, for the three month period ended JuneSeptember 30, 2024. The Company had net income of $4.1$4.7 million, or $0.19$0.22 per diluted share, for the sixnine month period ended JuneSeptember 30, 2025, compared to net loss of $2.7$4.7 million, or $(0.140.24) per diluted share, for the sixnine month period ended JuneSeptember 30, 2024. The increase in net income for the three month and sixnine month periods ended JuneSeptember 30, 2025 was primarily the result of increases in premium revenue within the theautomobile liability, inland marine lineand automobile physical damage lines of business in the property and casualty operations, as well as increases in the Medicare supplement and group accident and health lines of business within the life and health operations. Also contributing to the increase in net income was an increase in unrealized gains on equity securities during the three month and sixnine month periods ended JuneSeptember 30, 2025. Also contributing to the increase in net income for the three month and six month periods ended June 30, 2025 was favorable development in the Medicare supplement line of business in the life and health operations.

For the three month period ended JuneSeptember 30, 2025, premium revenue increased $5.2$8.2 million, or 11.5%,18.7%, to $50.1$52.0 million from $45.0$43.8 million in the comparable period in 2024. For the sixnine month period period ended JuneSeptember 30, 2025, premium revenue increased $7.5$15.7 million, or 8.4%,11.8%, to $97.1$149.0 million from $89.5$133.3 million in the comparable period in 2024. The increase in premium revenue during the three month and sixnine month periods ended June September 30, 2025 was primarily attributable to increasesthe increase in premiumearned revenuepremiums inwithin the inlandautomobile marineliability line of business, as well as increases in earned premiums in the inland marine and automobile physical damage linelines of business, due to increases in premium writings in the property and casualty operations. Also contributing to the increase in premium revenue was increases in the Medicare supplement and group accident and health lines of business due to new sales within the life and health operations.

Operating income increased $2.7$2.3 million in the three month period ended JuneSeptember 30, 2025 from the three month period ended JuneSeptember 30, 2024. For the sixnine month period ended JuneSeptember 30, 2025, operating operating income increased $5.4$7.7 million from the comparable period in 2024. The increase in operating income for the three month and sixnine month periods ended JuneSeptember 30, 2025 was primarily the result of increases in premium revenue withinin the theautomobile liability, inland marine line and automobile physical damage lines of business inwithin the property and casualty operations, as well as increases in the Medicare supplement and group accident and health lines of business within the life and health operations, as previously mentioned.

The following summarizes American Southern’s premiums, losses, expenses and underwriting ratios for the three month and sixnine month periods ended JuneSeptember 30, 2025 and the comparable periods in 2024:

Gross written premiums at American Southern increased $15.8$1.7 million, or 43.3%,19.4%, during the three month period ended JuneSeptember 30, 2025 and $16.7$18.3 million, or 37.0%,34.2%, during the sixnine month period ended ended JuneSeptember 30, 2025, from the comparable periods in 2024. The increase in gross written premiums during the three month and sixnine month periods ended JuneSeptember 30, 2025 was primarily attributable to an increase in premiums written in the automobile automobile liability line of business due to the renewal of a program, which included a rate increase. Also contributing to the increase in gross written premiums were increases in premiums written in the inland marine line of business due to a new new program written by an existing agency, as well as an increase in premiums written in the automobile physical damage line of business resulting from an increase in writings from existing agents.

Ceded premiums remained constant during the three month period ended JuneSeptember 30, 2025 and increased $0.1 million, or 4.0%,2.3%, during the sixnine month period ended ended JuneSeptember 30, 2025, from the comparable periods in 2024. American Southern’s ceded premiums are typically determined as a percentage of earned premiums and generally fluctuate as earned premiums subject to reinsurance increase or decrease or retentions levels change.

The following presents American Southern’s net earned premiums by line of business for the three month and sixnine month periods ended JuneSeptember 30, 2025 and the comparable periods in 2024:

Net earned premiums increased $3.6$6.3 million, or 20.5%,38.8%, during the three month period ended JuneSeptember 30, 2025, and $4.1$10.3 million, or 11.4%,20.0%, during the sixnine month period ended JuneSeptember 30, 2025, over the comparable periods in 2024. The increase in net earned premiums during the three month periodand nine month periods ended JuneSeptember 30, 2025 was mainly due to a rate increase upon renewal of a program within the automobile liability line of business, as well as increases in earned premiums in the inland marine lineand of business, as well as the earning out of premium within the automobile liability line of business. The increase in net earned premiums during the six month period ended June 30, 2025 was primarily attributable to increases in earned premiums in the inland marine line of business, as well as the automobile physical damage linelines of business, due to increases in premium writings, as previously mentioned. Premiums are earned ratably over their respective policy terms, and therefore premiums earned in the current year are related to policies written during both the current year and immediately preceding year.

Insurance benefits and losses incurred at American Southern increased $1.8$4.0 million, or 12.5%,28.4%, during the three month period ended JuneSeptember 30, 2025, and $3.6$7.5 million, or 13.2%,18.4%, during the sixnine month month period ended JuneSeptember 30, 2025, over the comparable periods in 2024. As a percentage of earned premiums, insurance benefits and losses incurred were 75.7%79.8% in the three month period ended JuneSeptember 30, 2025, compared to 81.1%86.2% in the three month period ended JuneSeptember 30, 2024. For the sixnine month period ended JuneSeptember 30, 2025, this ratio increaseddecreased to 77.5%78.4% from 76.3%79.5% in the comparable period in 2024. The decrease in the loss ratioratios during the three month periodand nine month periods ended JuneSeptember 30, 2025 was due to an increase in premium growth exceeding the increase in insurance benefits and losses incurred. The increase in the loss ratio during the six month period ended June 30, 2025 was mainly due to an increase in losses within the automobile physical damage line of business and the inland marine line of business.

Commissions and underwriting expenses increased $1.8$0.3 million, or 50.7%,6.6%, during the three month period ended JuneSeptember 30, 2025, and $1.4$1.7 million, or 17.3%13.9% during the sixnine month period ended June September 30, 2025, over the comparable periods in 2024. As a percentage of earned premiums, underwriting expenses were 25.3%18.1% in the three month period ended JuneSeptember 30, 2025, compared to 20.2%23.6% in the three month period ended JuneSeptember 30, 2024. For the sixnine month period ended JuneSeptember 30, 2025, this ratio increaseddecreased to 24.0%21.9% from 22.8%23.1% in the comparable period in 2024. The increase in the expense ratio during the three month and six month periods ended June 30, 2025 was primarily due to American Southern’sSouthern use ofuses a variable commission structure with certain agents, which compensates the participating agents in relation to the loss ratios of the business they write. During periods in which the loss ratio decreases, commissions and underwriting expenses will generally increase, and conversely, during periods in which the loss ratio increases, commissions and underwriting expenses will generally decrease. DuringHowever, during the three month and sixnine month periods ended JuneSeptember 30, 2025, variable commissions at American Southern increased by $1.2 million and $0.7 million, respectively, from the comparableexpense periodsratio indecreased 2024primarily due to favorablean lossincrease experiencein frompremiums accountson subjectprograms tothat do not participate in the variable commissions.commission structure.

The following summarizes Bankers Fidelity’s earned premiums, losses, expenses and underwriting ratios for the three month and sixnine month periods ended JuneSeptember 30, 2025 and the comparable periods in in 2024:

Gross earned premiums increased $3.2$4.7 million, or 7.9%,11.6%, during the three month period ended JuneSeptember 30, 2025, and $6.1$10.8 million, or 7.5%,8.9%, during the sixnine month period ended JuneSeptember 30, 2025, from the comparable periods in 2024. The increase in gross earned premiums was primarily attributable to the increase in gross earned premiums from the Medicare supplement line of business due primarily to the level of new business writings exceeding exceeding non-renewals, partially offset by lapses within the same line of business. Also contributing to the increase in gross earned premiums was an increase in gross earned premiums in the group accident and health line of business, resulting from new business sales.

Ceded premiums increased $1.7$2.8 million, or 12.7%,21.2%, during the three month period ended JuneSeptember 30, 2025, and $2.6$5.4 million, or 9.9%,13.7%, during the sixnine month period ended JuneSeptember 30, 2025, from the comparable comparable periods in 2024. The increase in ceded premiums was due to an increase in Medicare supplement premiums subject to reinsurance.

Net earned premium increased $1.6$1.9 million, or 5.7%,6.9%, during the three month period ended JuneSeptember 30, 2025, and $3.5$5.4 million, or 6.4%,6.6%, during the sixnine month period ended JuneSeptember 30, 2025, over the the comparable periods in 2024. The increase in net earned premiums was primarily attributable to increases in the Medicare supplement and group accident and health lines of business due to new sales as previously mentioned. Also contributing to the the increase in net earned premiums was an increase in the other individual accident and health line of business due to new business growth.

Insurance benefits and losses incurred increased $0.1$0.7 million, or 0.3%,4.4%, during the three month period ended JuneSeptember 30, 2025, and decreased $1.7$1.0 million, or 4.7%,1.9%, during the sixnine month period ended ended JuneSeptember 30, 2025, from the comparable periods in 2024. As a percentage of earned premiums, benefits and losses were 60.8%59.4% in the three month period ended JuneSeptember 30, 2025, compared to 64.0%60.9% in the three month period ended JuneSeptember 30, 2024. For the six nine month period ended JuneSeptember 30, 2025, this ratio decreased to 60.7%60.3% from 67.8%65.5% in the comparable period in 2024. The decrease in the loss ratio for the three month and sixnine month periods ended JuneSeptember 30, 2025 was primarily due to rate increases on renewals and lower utilization within the Medicare supplement line of business.

Commissions and underwriting expenses decreasedincreased $0.8 million, or 8.1%,8.5%, during the three month period ended JuneSeptember 30, 2025, and $0.4 million, or 2.1%,1.3%, during the six nine month period ended June September 30, 2025, over the comparable periods in 2024. As a percentage of earned premiums, underwriting expenses were 33.1%36.7% in the three month period ended JuneSeptember 30, 2025, compared to 38.0%36.2% in the three month period ended June September 30, 2024. For the sixnine month period ended JuneSeptember 30, 2025, this ratio decreased to 35.3%35.8% from 38.4%37.6% in the comparable period in 2024. The increase in the expense ratio for the three month period ended September 30, 2025 was primarily due to an increase in commissions and underwriting expenses due to premium growth. The decrease in the expense ratio for the threenine month and six month periodsperiod ended JuneSeptember 30, 2025 was mainlyprimarily due to growth in premiums coupled with a decline in underwriting expenses, primarily from lower variable expenses related to the group lines of business.expenses.

Investment income increased $0.1$0.2 million, or 4.1%,6.3%, during the three month period ended JuneSeptember 30, 2025, and remained constant during the sixnine month period ended JuneSeptember 30, 2025, over the comparable comparable periods in 2024. The increase in investment income in the three month period ended JuneSeptember 30, 2025, from the comparable periods in 2024, was primarily attributable to an increase in the equity in earnings from investments in the Company’s limited partnerships and limited liability companies.

The Company had net realized investment gains of less than $0.1 million during each of the three month and sixnine month periods ended JuneSeptember 30, 2025, compared to net realized investment gains of less less than $0.1 million during each of the three month and sixnine month periods ended JuneSeptember 30, 2024. The net realized investment gains during the three month and sixnine month periods ended JuneSeptember 30, 2025 was due to the sale and redemption of several of the Company’s investments in fixed maturity securities. The net realized investment gains during the three month and sixnine month periods ended JuneSeptember 30, 2024 resulted primarily from the redemption of several of the Company’s investments in fixed maturity securities. Management continually evaluates the Company’s investment portfolio and makes adjustments for credit losses and/or divests investments as may be determined to be appropriate.

Unrealized Gains (Losses) on Equity Securities

Investments in equity securities are measured at fair value at the end of the reporting period, with any changes in fair value reported in net income during the period. The Company recognized net unrealized gainslosses on equity securities of $2.6$0.8 million during the three month period ended JuneSeptember 30, 2025 and unrealized gainslosses on equity securities of $0.2$1.7 million during the three month period ended JuneSeptember 30, 2024. The Company recognized net unrealized gains on equity securities of $3.4 million during the six month period ended June 30, 2025 and unrealized gains on equity securities of $0.1$2.5 million during the sixnine month period ended JuneSeptember 30, 2025 and unrealized losses on equity securities of $1.6 million during the nine month period ended September 30, 2024. Changes in unrealized gains gains(losses) on equity securities for the applicable periods are the result of fluctuations in the market value of the Company’s equity securities.

Interest expense decreased $0.1 million, or 10.8%,10.4%, during the three month period ended JuneSeptember 30, 2025, and $0.2$0.3 million, or 10.2%, during the sixnine month period ended JuneSeptember 30, 2025, from the the comparable periods in 2024. Changes in interest expense were primarily due to changes in the Secured Overnight Financing Rate (“SOFR”) published by CME Group Benchmark Administration Limited, as the interest rates on the Company’s outstanding junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) and the revolving credit facility utilize SOFR as the reference rate.

Cash flows at the Parent are derived from dividends, management fees, and tax-sharing payments, as described below, from the subsidiaries. The principal cash needs of the Parent are for the payment payment of operating expenses, the acquisition of capital assets and debt service requirements, as well as the repurchase of shares and payments of any dividends as may be authorized and approved by the Company’s board of directors from time to time. At June September 30, 2025, the Parent had approximately $4.4$4.7 million of unrestricted cash and investments.

The Parent’s insurance subsidiaries reported statutory net income of $4.7$8.0 million for the sixnine month period ended JuneSeptember 30, 2025, compared to statutory net lossincome of $0.4$2.0 million for the sixnine month month period ended JuneSeptember 30, 2024. Statutory results are impacted by the recognition of all costs of acquiring business. In periods in which the Company’s first year premiums increase, statutory results are generally lower than results determined under GAAP. Statutory results for the Company’s property and casualty operations may differ from the Company’s results of operations under GAAP due to the deferral of acquisition costs for financial reporting purposes. The Company’s life and health operations’ statutory results may differ from GAAP results primarily due to the deferral of acquisition costs for financial reporting purposes, as well as the use of different reserving methods.

Over 90% of the invested assets of the Parent’s insurance subsidiaries are invested in marketable securities that can be converted into cash, if required; however, the use of such assets by the Company is limited by state insurance regulations. Dividend payments to a parent corporation by its wholly owned insurance subsidiaries are subject to annual limitations and are restricted to 10% of statutory surplus or statutory earnings before recognizing realized investment gains of the individual insurance subsidiaries. At JuneSeptember 30, 2025, American Southern had $47.2$48.2 million of statutory capital and surplus and Bankers Fidelity had $34.6 million of statutory capital and surplus. In 2025, dividend payments by the Parent’s insurance subsidiaries in excess of $6.3 million would require prior approval. Through JuneSeptember 30, 2025, the Parent received dividends of $4.2$6.3 million from its subsidiaries.

The Company has two statutory trusts which exist for the exclusive purpose of issuing trust preferred securities representing undivided beneficial interests in the assets of the trusts and investing the gross proceeds of the trust preferred securities in Junior Subordinated Debentures. The outstanding $18.0 million and $15.7 million of Junior Subordinated Debentures mature on December 4, 2032 and May 15, 2033, respectively, are callable quarterly, in whole or in part, only at the option of the Company, and have an interest rate of 3-month CME Term SOFR plus applicable tenor spread of 0.26161% plus an applicable margin. The margin ranges from 4.00% to 4.10%. At JuneSeptember 30, 30, 2025, the effective interest rate was 8.64%.8.51%. The obligations of the Company with respect to the issuances of the trust preferred securities represent a full and unconditional guarantee by the Parent of each trust’s obligations with respect to the the trust preferred securities. Subject to certain exceptions and limitations, the Company may elect from time to time to defer Junior Subordinated Debenture interest payments, which would result in a deferral of distribution payments on the related related trust preferred securities. As of JuneSeptember 30, 2025, the Company has not made such an election.

At JuneSeptember 30, 2025, the Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding. All of the shares of Series D Preferred Stock are held by an affiliate of the the Company’s controlling shareholder. The outstanding shares of Series D Preferred Stock have a stated value of $100 per share; accrue annual dividends at a rate of $7.25 per share (payable in cash or shares of the Company’s common stock at the option of the board of directors of the Company) and are cumulative. In certain circumstances, the shares of the Series D Preferred Stock may be convertible into an aggregate of approximately 1,378,000 shares of the Company’s common stock, subject subject to certain adjustments and provided that such adjustments do not result in the Company issuing more than approximately 2,703,000 shares of common stock without obtaining prior shareholder approval; and are redeemable solely at the Company’s option. The Series D Preferred Stock is not currently convertible. At JuneSeptember 30, 2025, the Company had accrued but unpaid dividends on the Series D Preferred Stock totaling $0.2$0.3 million.

Bankers Fidelity Life Insurance Company (‘‘BFLIC”'BFLIC") is a member of the Federal Home Loan Bank of Atlanta (“"FHLB”"), for the primary purpose of enhancing financial flexibility. As a member, BFLIC can can obtain access to low-cost funding and also receive dividends on FHLB stock. The membership arrangement provides for credit availability of five percent of statutory admitted assets, or approximately $8.8$9.0 million, as of JuneSeptember 30, 2025. Additional FHLB stock purchases may be required based upon the amount of funds borrowed from the FHLB. As of JuneSeptember 30, 2025, BFLIC has pledged bonds having an amortized cost of $9.0 million to the FHLB. BFLIC may be required to post additional acceptable forms of collateral for any borrowings that it makes in the future from the FHLB. As of JuneSeptember 30, 2025, BFLIC does not have any outstanding borrowings from the FHLB.

The Credit Agreement requires the Company to comply with certain covenants, including a debt to capital ratio that restricts the Company from incurring consolidated indebtedness that exceeds 35% of of the Company’s consolidated capitalization at any time and maintaining a minimum consolidated net worth, as previously mentioned. The Credit Agreement also contains customary representations and warranties and events of default. Events of default default include, among others, (a) the failure by the Company to pay any amounts owed under the Credit Agreement when due, (b) the failure to perform and not timely remedy certain covenants, (c) a change in control of the Company and (d) the occurrence of bankruptcy or insolvency events. Upon an event of default, the Lender may, among other things, declare all obligations under the Credit Agreement immediately due and payable and terminate the revolving commitments. As of JuneSeptember 30, 2025 and December 31, 2024, the Company had outstanding borrowings, including accrued interest of $4.0 million in each of the respective periods, under the Credit Agreement.

Cash and cash equivalents increaseddecreased from $35.6 million at December 31, 2024 to $46.4$34.4 million at JuneSeptember 30, 2025. The increasedecrease in cash and cash equivalents during the sixnine month period ended June September 30, 2025 was primarily attributable to net cash providedused byin operatinginvesting activities of $8.6$15.9 million.million Alsoprimarily contributingas toa result of investment purchases exceeding investment sales and maturity of securities. Partially offsetting the increasedecrease in cash and cash equivalents was net cash provided by investingoperating activities of $2.7$15.2 million primarily as a result of investment sales and maturity of securities exceeding investment purchases.million.

The Company believes that existing cash balances as well as the dividends, fees, and tax-sharing payments it expects to receive from its subsidiaries and, if needed, borrowings under its credit facilities or additional borrowings from financial institutions,institutions will enable the Company to meet its liquidity requirements for the foreseeable future. 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.