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, 2025, American Southern Insurance Company had two ratios that were outside the usual range, the change in net premiums written and the two-year reserve development to policyholders’ surplus. The change in net premiums written ratio was primarily attributable to a significant rate increase in a governmental program. The two-year reserve development to policyholders’ surplus ratio was due primarily to continued reserve strengthening in the commercial automobile liability line of business.

American Safety Insurance Company had no IRIS ratios outside the usual ranges.

Bankers Fidelity Assurance Company (“BFAC”) had four ratios outside the normal range, mainly due to a net loss driven by federal income taxes, despite operating income. This led to a lower surplus and a deferred tax asset, with a portion non-admitted. The surplus relief ratio for BFAC triggered because the ratio of commission and expense allowances to capital exceeds 100%. BFAC writes only Medicare Supplement insurance and cedes 100% of its written business to its parent, therefore the adequacy of investment income and change in product mix ratios will always produce no result.

Bankers Fidelity Life Insurance Company had no IRIS ratios outside the usual ranges.

Atlantic Capital Life Assurance Company (“ACLAC”) had six ratios outside the normal range, which are as follows:

Management does not anticipate regulatory action as a result of the 2025 IRIS ratio results for the insurance subsidiaries.