Atlantic American(AAME) - 2023 Q2 - Quarterly Report

Financial Performance - For the three months ended June 30, 2023, net income was $1.7 million, or$ 0.08 per diluted share, compared to a net loss of $1.7 million, or$ 0.09 per diluted share, for the same period in 2022[52]. - Total revenue for the three months ended June 30, 2023, was $49.2 million, an increase from$ 44.7 million in the comparable period in 2022[51]. - Operating income decreased by $1.2 million for the three months ended June 30, 2023, primarily due to ancillary costs related to a new actuarial valuation system[52]. - The Parent's insurance subsidiaries reported statutory net income of$ 4.1 million for the six months ended June 30, 2023, compared to $2.2 million for the same period in 2022[59]. Revenue and Premiums - Premium revenue decreased by$ 1.0 million, or 2.1%, to $46.1 million for the three months ended June 30, 2023, compared to$ 47.1 million in the same period in 2022[52]. - Net earned premiums decreased by $0.9 million, or 4.7%, during the three months ended June 30, 2023, primarily due to a decrease in the automobile physical damage line of business[54]. - Gross earned premiums from the Medicare supplement line decreased by$ 3.7 million, or 9.8%, for the three months ended June 30, 2023, and by $7.4 million, or 9.8%, for the six months ended June 30, 2023[56]. - Net earned premium revenue decreased by$ 0.1 million, or 0.4%, for the three months ended June 30, 2023, and by $1.0 million, or 1.7%, for the six months ended June 30, 2023, compared to the same periods in 2022[56]. Insurance Benefits and Losses - Insurance benefits and losses incurred decreased by$ 3.4 million, or 10.4%, to $29.4 million for the three months ended June 30, 2023, compared to$ 32.8 million in the same period in 2022[51]. - Insurance benefits and losses incurred decreased by $2.9 million, or 15.5%, for the three months ended June 30, 2023, and by$ 5.8 million, or 14.7%, for the six months ended June 30, 2023[56]. - The loss ratio improved to 56.1% for the three months ended June 30, 2023, down from 66.1% in the same period in 2022, and to 58.9% for the six months ended June 30, 2023, down from 67.9%[57]. Expenses - Commissions and underwriting expenses decreased by $0.4 million, or 8.2%, during the three months ended June 30, 2023, compared to the same period in 2022[54]. - Commissions and underwriting expenses increased by$ 3.5 million, or 47.1%, for the three months ended June 30, 2023, and by $5.4 million, or 33.8%, for the six months ended June 30, 2023[56]. - Interest expense increased by$ 0.4 million, or 94.9%, for the three months ended June 30, 2023, and by $0.8 million, or 102.7%, for the six months ended June 30, 2023, due to changes in LIBOR[58]. Cash and Liquidity - As of June 30, 2023, the Company had cash and cash equivalents of$ 24.2 million, down from $28.9 million at December 31, 2022, primarily due to net cash used in operating activities of$ 4.9 million[61]. - The Company believes existing cash balances and expected dividends will meet liquidity requirements for the foreseeable future[61]. - The Company has credit availability of approximately $7.8 million from the Federal Home Loan Bank of Atlanta as of June 30, 2023[61]. - The Company had outstanding borrowings of$ 3.0 million under a $10.0 million revolving credit facility as of June 30, 2023[61]. Internal Controls and Compliance - The Company identified a material weakness in internal control over financial reporting related to actuarial models, but no material misstatements were identified in financial statements[64]. - The Company has implemented enhanced controls over actuarial models and hired additional actuarial staff to improve financial reporting processes[65]. - The Credit Agreement requires compliance with a debt to capital ratio that restricts consolidated indebtedness to no more than 35% of consolidated capitalization[61]. Share Repurchase and Regulatory Matters - The Company did not repurchase any shares of common stock during the three-month period ended June 30, 2023, leaving 325,129 shares available for repurchase under its plan[68]. - The Company is not aware of any current regulatory recommendations that would materially affect its liquidity or operations[61].