ATLANTIC AMERICAN CORP

The Company’s insurance subsidiaries from time-to-time purchase reinsurance from unaffiliated insurers and reinsurers to reduce their potential liability on individual risks and to protect against catastrophic losses. In a reinsurance transaction, an insurance company transfers, or “cedes,” at least a portion of its exposure on insurance policies to a reinsurer. The reinsurer assumes the exposure in return for a portion of the premiums collected from policyholders. Reinsurance arrangements do not legally discharge the insurer from primary liability for the full amount of the policies written by it, and the ceding company will incur a loss if the reinsurer fails to meet its obligations under the reinsurance agreement. In order to qualify for reinsurance accounting treatment, there must be risk transfer.

American Southern’s basic reinsurance treaties generally cover all claims in excess of specified per occurrence limitations. Limits per occurrence within the reinsurance treaties are as follows: inland marine and automobile physical damage - $225,000 excess of $125,000 retention; and automobile liability and general liability - excess coverage of $2.0 million less retentions that may vary from $100,000 to $700,000 depending on the account. American Southern maintains a property catastrophe treaty with a $5.5 million limit excess of $500,000 retention.

Bankers Fidelity has entered into reinsurance contracts ceding the excess of its life retention. The maximum retention by Bankers Fidelity on any one individual life insurance policyholder is $200,000. As of December 31, 2025, $5.7 million of the $1,040.3 million of life insurance in force at Bankers Fidelity was reinsured under a combination of coinsurance and yearly renewable term agreements. Certain prior year reinsurance agreements also remain in force although they no longer provide reinsurance for new business.

Bankers Fidelity has also entered into a reinsurance contract ceding excess new Medicare Supplement business to General Re Life Corporation. Ceding thresholds are set for all policies issued in a given calendar year. During 2025, the liability of the reinsurer was 71% of all Medicare Supplement business issued by the Company that year. This percentage is calculated based on a cession percentage of 50% on amounts of new business of up to $30 million of annualized premium, and 100% of all new Medicare Supplement business in excess of $30.0 million of annualized premiums. Accordingly, $36.9 million of the Company’s $51.9 million of new annualized Medicare Supplement premium was ceded.