Atlantic American(AAME) - 2019 Q2 - Quarterly Report

Financial Performance - For the three-month period ended June 30, 2019, net income was a loss of $4.4 million, or $0.22 per diluted share, compared to net income of $3.2 million, or $0.15 per diluted share for the same period in 2018[88]. - The total revenue for the three-month period ended June 30, 2019, was $43.1 million, down from $49.4 million in the same period in 2018[85]. - The operating loss for the three-month period increased by $0.9 million compared to the same period in 2018, primarily due to unfavorable loss experience in life and health operations[88]. - Unrealized losses on equity securities were $5.3 million for the three-month period ended June 30, 2019, compared to unrealized gains of $4.1 million in the same period in 2018[85]. - The Parent's insurance subsidiaries reported a statutory net loss of $1.7 million for the six months ended June 30, 2019, compared to a statutory net loss of $1.0 million for the same period in 2018[108]. Revenue and Premiums - Premium revenue for the three-month period increased by $2.6 million, or 6.1%, to $45.5 million from $42.8 million in the comparable period in 2018[88]. - Gross written premiums at American Southern increased by $4.1 million, or 14.3%, during the three-month period ended June 30, 2019, compared to the same period in 2018[91]. - Net earned premiums increased by $1.2 million, or 8.9%, during the three-month period ended June 30, 2019, compared to the same period in 2018[93]. - Bankers Fidelity's net earned premium revenue increased by $1.4 million, or 4.8%, for the three months ended June 30, 2019, and by $2.9 million, or 4.9%, for the six months ended June 30, 2019, compared to the same periods in 2018[97]. - Gross earned premiums from the Medicare supplement line increased by $4.3 million, or 10.6%, for the three months ended June 30, 2019, and by $9.4 million, or 11.9%, for the six months ended June 30, 2019, due to successful new business strategies[97]. Loss Ratios and Underwriting - The combined ratio for American Southern was 97.2% for the three-month period ended June 30, 2019, compared to 93.9% for the same period in 2018, indicating an underwriting loss[91]. - The loss ratio for American Southern was 66.8% for the three-month period ended June 30, 2019, compared to 64.2% for the same period in 2018[91]. - The loss ratio for Bankers Fidelity was 79.1% for the three months ended June 30, 2019, down from 80.3% in the same period in 2018, while the six-month loss ratio increased to 81.9% from 80.8%[98]. - Underwriting expenses at American Southern rose by $0.5 million, or 11.5%, for the three months ended June 30, 2019, and by $1.3 million, or 17.3%, for the six months ended June 30, 2019, compared to the same periods in 2018[96]. - Underwriting expenses as a percentage of earned premiums increased to 29.2% for the three months ended June 30, 2019, compared to 26.8% in the same period in 2018[99]. Investments and Cash Flow - Investment income decreased by $0.2 million, or 8.8%, for the three months ended June 30, 2019, primarily due to a decrease in equity earnings from real estate partnerships[101]. - The Company reported net realized investment gains of $0.6 million for the three months ended June 30, 2019, compared to net realized investment losses of $0.1 million in the same period in 2018[102]. - As of June 30, 2019, cash and cash equivalents decreased to $11.5 million from $12.6 million at December 31, 2018, primarily due to net cash used in operating activities of $7.2 million[114]. - The Company expects to meet its liquidity requirements through existing cash balances and potential future financing arrangements[115]. Debt and Equity - The Company has $18.0 million and $15.7 million of Junior Subordinated Debentures maturing on December 4, 2032, and May 15, 2033, respectively, with an effective interest rate of 6.57% as of June 30, 2019[111]. - The Company intends to meet its obligations under the Junior Subordinated Debentures using existing cash balances, dividends, and tax-sharing payments from subsidiaries[112]. - The Company has 55,000 shares of Series D Preferred Stock outstanding, with a stated value of $100 per share and annual dividends accruing at a rate of $7.25 per share[113]. - The total number of shares repurchased during the three months ended June 30, 2019, was 8,345 shares at an average price of $2.56 per share[123]. - The Company suspended its stock repurchase plan in May 2019 and plans to evaluate a replacement plan in the future[121]. Regulatory and Control - At June 30, 2019, American Southern had a statutory surplus of $42.0 million, while Bankers Fidelity had a statutory surplus of $28.0 million[109]. - There have been no material changes to off-balance sheet arrangements as of June 30, 2019[116]. - Management believes that current disclosure controls and procedures are effective as of the end of the reporting period[117]. - No changes in internal control over financial reporting have materially affected the Company during the reporting period[118].