ATLANTIC AMERICAN CORP

The National Association of Insurance Commissioners (the “NAIC”) was established to, among other things, provide guidelines to assess the financial strength of insurance companies for state regulatory purposes. The NAIC conducts annual reviews of the financial data of insurance companies primarily through the application of financial ratios prepared on a statutory basis. Annual statements are required to be submitted to state insurance departments to assist them in monitoring insurance companies in their state and to allow such states to determine a desirable range for each such ratio with which companies should comply.

The NAIC developed the Insurance Regulatory Information System (“IRIS”) to help state regulators identify companies that may require regulatory attention. Financial examiners review annual financial statements and the results of key financial ratios based on year-end data with the goal of identifying insurers that appear to require immediate regulatory attention. Each ratio has an established “usual range” of results. A ratio result falling outside the usual range, however, is not necessarily considered adverse; rather, unusual values are used as part of the regulatory early monitoring system. Furthermore, in some years, it may not be unusual for financially sound companies to have several ratios with results outside the usual ranges. Generally, an insurance company may become subject to regulatory scrutiny or, depending on the company’s financial condition, regulatory action if certain of its key IRIS ratios fall outside the usual ranges and the insurer’s financial condition is trending downward.

For the year ended December 31, 2024, American Southern Insurance Company had one ratio that was outside the usual range, the two-year reserve development to policyholders’ surplus, which was primarily due to adverse reserve developments on prior year claims in the commercial automobile liability line of business.

Bankers Fidelity Assurance Company (“BFAC”) had three ratios outside the normal range, primarily the result of a net loss for the year, certain surplus ratios and non-admitted assets to admitted assets. The net loss is primarily related to federal income taxes incurred which resulted in a corresponding decrease in surplus levels for the year as well as a deferred tax asset which is non-admitted. The surplus relief ratio for BFAC triggered because the ratio of commission & expense allowances to capital exceeds 100%. BFAC writes only Medicare supplement insurance and cedes 100% of its written business to its parent, therefore the change in product mix ratio will always produce no result.

Bankers Fidelity Life Insurance Company had two ratios outside the normal range. Both the first and second ratios were unusual because capital and surplus fell greater than 10% from 2023 to 2024. The decrease in capital was due primarily to the extraordinary dividend paid to its parent. Other contributing factors are a lower net income in 2024 versus 2023 and an increase in unrealized loss on our invested bond portfolio.

Atlantic Capital Life Assurance Company (“ACLAC”) had one ratio outside the normal range, ratio 8 Surplus Relief. The surplus relief ratio for ACLAC triggered because the ratio of commission & expense allowances to capital exceeds 100%. ACLAC writes only Medicare supplement insurance and cedes 100% of its written business to its parent, therefore the change in product mix ratio will always produce no result.

American Safety Insurance Company had no IRIS ratios outside the usual ranges. Management does not anticipate regulatory action as a result of the 2024 IRIS ratio results for the insurance subsidiaries.