Atlantic American Corp: Form 10-K for the period ended Dec 31, 2025

The Company

Atlantic American Corporation, a Georgia corporation incorporated in 1968 (the “Parent” or “Company”), is a holding company that operates through its subsidiaries in well-defined specialty markets within the life and health and property and casualty insurance industries. The Parent’s principal operating subsidiaries are American Southern Insurance Company and American Safety Insurance Company (together known as “American Southern”) within the property and casualty insurance industry and Bankers Fidelity Life Insurance Company, Bankers Fidelity Assurance Company and Atlantic Capital Life Assurance Company (together known as “Bankers Fidelity”) within the life and health insurance industry. Each of American Southern and Bankers Fidelity is managed separately based upon the type of products it offers and is evaluated on its individual performance. The Company’s strategy is to focus on well-defined geographic, demographic and/or product niches within the insurance marketplace. Each of American Southern and Bankers Fidelity operates with relative autonomy, which structure is designed to allow for quick reaction to market opportunities.

The Parent has no significant business operations of its own and relies on fees, dividends and other distributions from its operating subsidiaries as the principal source of cash flow to meet its obligations. Additional information regarding the cash flow and liquidity needs of the Parent can be found in the Liquidity and Capital Resources section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Property and Casualty Operations

American Southern comprises the Company’s property and casualty operations and its primary product lines are as follows:

Commercial Automobile Insurance policies provide bodily injury and/or property damage liability coverage, uninsured motorist coverage and physical damage coverage for commercial accounts.

General Liability Insurance policies cover bodily injury and/or property damage liability for both premises and completed operations exposures for general classes of business.

Surety Bonds are contracts under which one party, the insurance company issuing the surety bond, guarantees to a third party that the primary party will fulfill an obligation in accordance with a contractual agreement. This obligation may involve meeting a contractual commitment, paying a debt or performing certain duties.

Inland Marine policies provide motor truck cargo coverage for commercial accounts.

American Southern provides tailored commercial automobile insurance coverage, on a multi-year contract basis, to state governments, local municipalities and other large motor pools and fleets (“block accounts”) that can be specifically rated and underwritten. The size of the block accounts insured by American Southern are generally such that individual class experience can be determined, which allows for customized policy terms and rates. American Southern is licensed to do business in 32 states and the District of Columbia. While the majority of American Southern’s premiums are derived from its automobile lines of business, American Southern also offers general liability and other lines such as inland marine coverage. Additionally, American Southern directly provides surety bond coverage for subdivision construction, school bus contracts, as well as performance and payment bonds.

The following table summarizes, for the periods indicated, the allocation of American Southern’s net earned premiums from each of its principal product lines:

(In thousands)

3

Life and Health Operations

Bankers Fidelity comprises the life and health operations of the Company and offers a variety of life and supplemental health products. Products offered by Bankers Fidelity include ordinary life insurance, Medicare Supplement and other accident and health insurance products.

Life Insurance products include non-participating, individual and group whole life insurance policies with a variety of riders and options. Policy premiums depend on several factors, including but not limited to issue age, level of coverage and any selected riders or options.

Medicare Supplement Insurance includes 8 of the 10 standardized Medicare Supplement plans that were developed in response to the requirements of the Omnibus Budget Reconciliation Act of 1990. These policies provide insurance coverage for certain expenses not covered by the Medicare program, including but not limited to, copayments and deductibles.

Other Accident and Health Insurance coverages include several individual and group policies providing for the payment of benefits that help defray the health care and other costs associated with the treatment of cancer and other critical illnesses. In addition, Bankers Fidelity offers policies that reimburse the costs associated with short-term nursing facility care, policies that provide monthly benefits in the event of a covered disability, and policies that provide cash benefits in the event of a covered accident or a covered hospital stay.

Health insurance products, primarily Medicare Supplement insurance, accounted for 84% of Bankers Fidelity’s net earned premiums in 2025 while life insurance, including both whole and term life insurance policies, accounted for the balance. In terms of the number of policies written in 2025, 83% were health insurance policies and 17% were life insurance policies.

The following table summarizes, for the periods indicated, the allocation of Bankers Fidelity’s net earned premiums from each of its principal product lines:

(In thousands)

Marketing

Property and Casualty Operations

A portion of American Southern’s business is marketed through a small number of specialized, experienced independent agents. American Southern’s agent selection process is actively managed by internal marketing personnel with oversight from management. Senior management carefully reviews all new programs prior to acceptance. Most of American Southern’s agents are paid an up-front commission with the potential for additional commissions by participating in a profit sharing arrangement that is directly linked to the profitability of the underlying business. American Southern also solicits business from governmental entities. As an experienced writer of insurance policies for certain governmental programs, the company actively pursues this market on a direct basis. Much of this business is priced by means of competitive bid situations. As a result, there can be no assurance with respect to the ultimate profitability or ability of the Company to obtain or retain such business at the time of a specific contract renewal.

Life and Health Operations

Bankers Fidelity acquires its clientele through three distribution channels spread across 46 different states and two business divisions, all of which utilize commissioned, independent agents. The three distribution channels include traditional independent agents, brokers who are typically interested in a specific product of Bankers Fidelity and brokers who focus on sales within the group/employer benefits division, Atlantic American Employee Benefits, all of which are responsible for their own marketing and sales activities. Contracting as independent agents enables Bankers Fidelity to effectively expand or contract its sales force without incurring significant expense.

Bankers Fidelity had approximately 6,565 licensed agents contracted in both the individual and group divisions as of December 31, 2025. During 2025, approximately 3,094 of these licensed agents wrote policies on behalf of Bankers Fidelity.

Bankers Fidelity’s marketing and distribution strategy revolves around five pillars: Diversification, Differentiation, Quality, Retention and Profitability.

Diversification. Through unique product offerings such as the Vantage Flex Plus®, a hospital indemnity plan, and Vantage Recovery®, a short-term care product and a group whole life product featuring a chronic illness rider, the Company is able to offer its distributors an array of products to sell that stand out from the competition. As the Company continues to expand its geographical footprint with agents and products, one of its main objectives is to have a healthy mix of all of its product lines nationwide.

Differentiation. Bankers Fidelity prides itself on the quality of customer service it offers to policyholders and agents. A dedicated agent support team is available to the field to support them in administration, underwriting, sales training, product questions and a plethora of other services which differentiates the Company from other carriers. Additionally, a customer loyalty team is available solely to serve insureds for any of their insurance needs. Bankers Fidelity prides itself on being agile, which we believe differentiates us from larger carriers and helps the Company to quickly execute senior management’s initiatives.

Quality. Bankers Fidelity is focused on being a niche carrier that delivers superior service, quality products and innovative solutions. Sophisticated technology and reporting allows the home office teams to work with the sales force to deliver a tailored experience and phenomenal customer service.

Retention. Through seasonal campaigns and customer outreach, the Company is focused on client retention and servicing its policyholders through all stages in their lives. By providing its agents with an innovative product portfolio, the Company further promotes client retention by empowering its agents to continually meet the needs of our policyholders.

Profitability. In an effort to be sustainable in the marketplace as a long-term partner, senior management is focused on diversification, differentiation, quality and retention to achieve profitability.

Underwriting

Property and Casualty Operations

American Southern specializes in underwriting various risks that are sufficiently large enough to establish separate class experience, relying upon the underwriting expertise of its agents.

During the course of the policy life, extensive use is made of risk management representatives to assist commercial underwriters in identifying and correcting potential loss exposures and to physically inspect new accounts. The underwriting results from each insured are reviewed on an individual basis periodically. If results are below expectations, management takes corrective action, which may include adjusting rates, revising underwriting standards, adjusting commissions paid to agents, and/or altering or declining to renew accounts at expiration.

Life and Health Operations

Bankers Fidelity issues a variety of products that span from the group markets to the individual markets for both life and health insurance. Products offered by Bankers Fidelity include life insurance, typically with small face amounts, Medicare Supplement and other accident and health insurance. Bankers Fidelity also provides an array of group products such as accident, cancer, critical illness, hospital indemnity and life insurance that is offered to employers who are looking to provide coverage for their employees and have the related premiums deducted through payroll deductions.

The individual products are underwritten on a non-medical basis using a simplified issue approach by which an application containing a variety of health related questions is submitted. Applications for insurance are reviewed to determine the face amount, age, medical history and any other necessary information. Bankers Fidelity utilizes information obtained directly from the insured, the medical claims data, prescription utilization reports as well as telephone interviews to determine whether an applicant meets the Company’s underwriting criteria. Bankers Fidelity may also utilize medical records and investigative services to supplement and substantiate information, as necessary.

The group products are underwritten and assessed at the group level for financial risk. The underwriting will utilize several factors to determine this risk such as the industry, demographics, enrollment strategies, employee access, locations of offices and any regulatory or legislative changes that could impact the decisions. The spread of risk is also reviewed which analyzes the content of the employees within the group which includes the spread of gender, ages, salaries and occupations. This information is used to quote an appropriate benefits package, pricing, waiting periods and rates for the group entity.

Policyholder and Claims Services

The Company believes that prompt, efficient policyholder and claims services are essential to its continued success in marketing its insurance products (see “Competition”). Additionally, the Company believes that its insureds are particularly sensitive to claims processing time and to the accessibility of qualified staff to answer inquiries. Accordingly, the Company’s policyholder and claims services seek to offer expeditious disposition of service requests by providing toll-free access for all customers, 24-hour claim reporting services, and direct computer links with some of its largest accounts. The Company also utilizes an automatic call distribution system designed to ensure that inbound calls to customer service support groups are processed efficiently. Operational data generated from this system allows management to further refine ongoing client service programs and service representative training modules.

Property and Casualty Operations

American Southern controls its claims costs by utilizing an in-house staff of claims supervisors to investigate, verify, negotiate and settle claims. Upon notification of an occurrence purportedly giving rise to a claim, a claim file is established. The claims department then conducts a preliminary investigation, determines whether an insurable event has occurred and, if so, updates the file for the findings and any required reserve adjustments. Independent adjusters and appraisers are frequently utilized to service claims which require on-site inspections.

Life and Health Operations

The majority of life and health claims are filed electronically while insureds also have the ability to download claims forms and file directly. Insureds may also obtain claim forms by calling the customer service group or through Bankers Fidelity’s website. All of these claims are entered into the system immediately upon receipt and put into a pending status until the claim can be fully processed. To shorten claim processing time, a letter detailing all supporting documents that are required to complete a claim for a particular policy is sent to the customer along with the correct claim form. Properly documented claims are generally paid within five business days of receipt. With regard to Medicare Supplement policies, the claim is either directly billed to Bankers Fidelity by the provider or sent electronically through a Medicare clearing house.

Reserves

Overview - The Company establishes insurance reserves by line of business within each insurance subsidiary based on the classification of the underlying products as either short-duration or long-duration in accordance with applicable accounting guidance. The determination of insurance reserves, particularly liabilities for future policy benefits, and the liability for losses and claims, involves significant judgment and estimation uncertainty and are considered critical accounting estimates.

Short Duration Contracts

American Southern records short-duration property and casualty loss and loss adjustment expense (“LAE”) reserves. Bankers Fidelity records group accident and health policies as short duration.

Long Duration Contracts

Bankers Fidelity primarily records reserves for life and health insurance contracts, including liabilities for future policy benefits (“LFPB”) for long-duration contracts. Reserves are determined using actuarial methodologies and assumptions that reflect management’s current best estimate of future experience, without provision for adverse deviation. Key assumptions include mortality, voluntary policyholder terminations and claim costs for accident and health policies and the discount rate. These assumptions are based on Company-specific experience, industry data, and anticipated trends and are reviewed at least annually and updated when they no longer represent management’s best estimates. Actual experience is incorporated into the measurement of reserves each reporting period. Differences between actual and expected experience, as well as impacts related to changes in assumptions, are recognized in earnings. Changes in discount rates for long-duration contracts are recognized in other comprehensive income (“OCI”). Under LDTI, the Company remeasures the LFPB each reporting period to reflect actual experience and current discount rates and updates its cash flow assumptions when its periodic reviews indicate that those assumptions no longer represent management’s best estimates. Due to the inherent uncertainty in estimating insurance liabilities, particularly for long-duration obligations, actual results may differ materially from recorded estimates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” for additional discussion.

Property and Casualty Operations

Short-duration contracts. American Southern maintains short-duration property and casualty loss and claim reserves for unpaid losses and LAE. These reserves include (i) case reserves established through claim-by-claim evaluations for known, reported claims and (ii) incurred but not reported (“IBNR”) reserves, which include estimates for claims not yet reported as well as future development on reported claims. Such reserves are not discounted and represent management’s estimate, based on known facts and circumstances as of the reporting date, of amounts expected to be paid on incurred claims. Reserve estimates are influenced by, among other factors, reported claim counts and severities, paid loss emergence, case reserve adequacy, claim development patterns, expense patterns, and changes in claim settlement practices.

Longer tail exposures. Certain coverages (e.g., general liability) are subject to extended reporting and settlement patterns, which may increase estimation uncertainty due to longer development periods and variability in claim outcomes. Management considers these factors in evaluating reserve adequacy.

Life and Health Operations

Short-duration contracts. Bankers Fidelity classifies its group accident and health policies (group critical illness, group disability income, group hospital indemnity, and group accident and medical expense) as short duration because Bankers Fidelity may unilaterally terminate coverage at each policy anniversary (and may terminate certain groups of ported certificates subject to statutory notice), such that coverage can be terminated within one year. Liabilities associated with these contracts are recorded as short-duration insurance reserves, including claim liabilities, rather than as long-duration liabilities for future policy benefits.

Long-duration contracts. Bankers Fidelity classifies individual and group life policies, Medicare Supplement policies, and other individual accident and health policies as long-duration and records a LFPB. The LFPB is calculated as the present value of expected future benefits and claim-related expenses, less the present value of expected future net premiums, using cohorts that do not span more than one issue year. The locked-in discount rate is the rate established for each cohort and used to calculate interest accretion and measure changes in cash flow assumptions recognized in earnings. For policies issued after January 1, 2024 (“the Transition Date”), the locked- in discount rate is based on the current discount rate in effect during the quarter of issuance, while for policies issued prior to the Transition Date, it reflects the historical expected investment yield at policy issuance. The current discount rate is updated quarterly, with changes from the locked-in discount rate recognized in OCI. Assumptions other than the discount rate reflect management’s current best estimate of future experience and are reviewed at least annually and updated when they no longer represent best estimates. Actual experience replaces projected experience each reporting period (referred to as “retrospective unlocking”) as part of the determination of the LFPB.

Assumptions. The Net Premium Ratio (“NPR”) is updated each reporting period and capped at 100%, with any excess recognized in earnings as an increase in the LFPB. The LFPB is floored at zero for cohorts where the present value of expected future premiums exceeds expected future benefits. Changes in the LFPB resulting from updates to the current discount rate are recorded in OCI, while the liability presented on the balance sheet reflects the current discount rate. The development of long-duration reserves involves significant judgment due to the long-term nature of the underlying obligations and the sensitivity of the LFPB to changes in assumptions.

See Notes 7 and 8 of Notes to Consolidated Financial Statements for more information on future policy benefits and other insurance reserves and policyholder funds.

Reinsurance

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.

Property and Casualty Operations

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.

Life and Health Operations

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.

Competition

Competition for insurance products is based on many factors including premiums charged, terms and conditions of coverage, customer service, financial ratings assigned by independent rating agencies, claims handling, consumer recognition and reputation, perceived financial strength and the experience of the organization in the line of business being written.

Property and Casualty Operations

The businesses in which American Southern engages are highly competitive. The principal areas of competition are pricing and service. Many competing property and casualty companies have been in business longer than American Southern, offer more diversified lines of insurance and have substantially greater financial resources. Management believes, however, that the policies it sells are competitive with those providing similar benefits offered by other insurers doing business in the states in which American Southern operates. American Southern strives to develop strong relationships with its agents and, consequently, believes it is well positioned for new opportunities and programs with those agents.

Life and Health Operations

The life and health insurance business remains highly competitive and includes a large number of insurance companies, many of which are new entrants to the business of providing Medicare Supplement and other accident and health insurance products. Bankers Fidelity has established itself as a trusted carrier of choice for its customers providing quality and sustainability for over 65 years.

In order to compete, Bankers Fidelity actively seeks opportunities in niche markets, developing long-term relationships with a select number of independent marketing organizations. Additionally, Bankers Fidelity actively promotes Atlantic American Employee Benefits, the group benefits division, as well as selective association partnerships. It competes with other insurers to attract and retain the allegiance of its independent agents through commission and sales incentive arrangements, accessibility and marketing assistance, lead programs, reputation and market expertise. Bankers Fidelity successfully competes in its chosen markets by establishing relationships with independent agents and providing proprietary marketing initiatives as well as providing outstanding service to policyholders.

Ratings

Ratings are important measures within the insurance industry, and higher ratings are expected to have a favorable impact on the ability of a company to compete in the marketplace. Ratings of insurance companies are not designed for investors and do not constitute recommendations to buy, sell, or hold any security.

Each year A.M. Best Company, Inc. (“A.M. Best”) publishes Best’s Insurance Reports, which includes assessments and ratings of all insurance companies. A.M. Best’s financial strength ratings, which may be revised or revoked at any time, follow a graduated scale of rating categories and notches ranging from A++ (Superior) to F (in liquidation). A.M. Best’s ratings are based on a detailed analysis of the statutory financial condition and operations of an insurance company compared to the industry in general.

American Southern. American Southern Insurance Company and its wholly-owned subsidiary, American Safety Insurance Company, are each, as of the date of this report, rated “A-” (Excellent) by A.M. Best.

Bankers Fidelity. Bankers Fidelity Life Insurance Company and its wholly-owned subsidiaries, Bankers Fidelity Assurance Company and Atlantic Capital Life Assurance Company, are each, as of the date of this report, rated “A-” (Excellent) by A.M. Best.

Regulation

Like all domestic insurance companies, the Company’s insurance subsidiaries are subject to regulation and supervision in the jurisdictions in which they do business. Statutes typically delegate regulatory, supervisory, and administrative powers to state insurance commissioners. The method of such regulation varies, but regulation relates generally to the licensing of insurers and their agents, the nature of and limitations on investments, approval of policy forms, reserve requirements, the standards of solvency to be met and maintained, deposits of securities for the benefit of policyholders, and periodic examinations of insurers and trade practices, among other things. The Company’s products generally are subject to rate regulation by state insurance commissions, which require that certain minimum loss ratios be maintained. Certain states also have insurance holding company laws which require registration and periodic reporting by insurance companies controlled by other corporations licensed to transact business within their respective jurisdictions. The Company’s insurance subsidiaries are subject to such legislation and are registered as controlled insurers in those jurisdictions in which such registration is required. Such laws vary from state to state, but typically require periodic disclosure concerning the corporation which controls the registered insurers and all subsidiaries of such corporations, as well as prior notice to, or approval by, the state insurance commissioners of intercorporate transfers of assets (including payments of dividends by the insurance subsidiaries in excess of specified amounts) within the holding company system. The Company believes it is in compliance with all such requirements.

Most states require that rate schedules and other information be filed with the state’s insurance regulatory authority, either directly or through a ratings organization with which the insurer is affiliated. The regulatory authority may disapprove a rate filing if it determines that the rates are inadequate, excessive, or discriminatory. The Company has historically experienced no significant regulatory resistance to its applications for rate adjustments; however, the Company cannot provide any assurance that it will not receive any objections to any applications in the future.

A state may require that acceptable securities be deposited for the protection either of policyholders located in those states or of all policyholders. As of December 31, 2025, the Company was in compliance with all such requirements, and securities with an amortized cost of $15.4 million were on deposit either directly with various state authorities or with third parties pursuant to various custodial agreements on behalf of the Company’s insurance subsidiaries.

Virtually all of the states in which the Company’s insurance subsidiaries are licensed to transact business require participation in their respective guaranty funds designed to cover claims against insolvent insurers. Insurers authorized to transact business in these jurisdictions are generally subject to assessments of up to 4% of annual direct premiums written in that jurisdiction to pay such claims, if any. The likelihood and amount of any future assessments cannot be estimated until an insolvency has occurred.

As of the date of this Form 10-K, Bankers Fidelity has not yet filed its annual audited statutory financial statements for the fiscal year ended December 31, 2025 or quarterly statutory financial statements for the quarter ended June 30, 2026 with the applicable state insurance regulatory authorities. Bankers Fidelity is working with its independent auditors and the state regulators to complete and file the required financial statements and intends to seek an extension if appropriate. If Bankers Fidelity is unable to file the required financial statements by the applicable deadlines (including as the same may be extended), the Company is unable to predict with any certainty what measures may be imposed by the applicable regulatory authorities.

NAIC Ratios

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:

1. Capital and surplus fell from the beginning to the end of 2025, mainly due to non-admitted agent balance advances. ACLAC’s increased advances to agents reflect industry practices as it grows new business.

2. Gross change in capital and surplus: see above explanation.

3. Net income for 2025 was negative, driven by federal taxes. Operational gains were offset by these taxes, resulting in a net loss.

4. ACLAC writes and cedes only Medicare Supplement insurance, so investment income adequacy always yields no result.

5. Non-admitted assets spiked in 2025 due to agent balances; see item 1 for details.

6. Surplus Relief ratio triggered because the ratio of commission and 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.

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

Risk-Based Capital

Risk-based capital (“RBC”) is a metric used by ratings agencies and regulators as an early warning tool to identify weakly capitalized companies for the purpose of initiating further regulatory action. The RBC calculation determines the amount of adjusted capital needed by a company to avoid regulatory action. “Authorized Control Level Risk-Based Capital” (“ACLRBC”) is calculated, and if a company’s adjusted capital is 200% or lower than ACLRBC, it is subject to regulatory action. At December 31, 2025, the Company’s insurance subsidiaries’ RBC levels exceeded the required regulatory levels.

Investments

Investment income represents a significant portion of the Company’s operating and total income. Insurance company investments are subject to state insurance laws and regulations which limit the concentration and types of investments. The following table provides information on the Company’s investments as of the dates indicated:

(In thousands)

(1) Fixed maturity securities are carried on the balance sheet at estimated fair value. Certain fixed maturity securities do not have publicly quoted prices, and are carried at estimated fair value as determined by management. Total amortized cost of fixed maturity securities was $260.2 million as of December 31, 2025 and $236.3 million as of December 31, 2024.

(2) Equity securities are carried on the balance sheet at estimated fair value. Total cost of equity securities was $4.9 million as of December 31, 2025 and 2024.

(3) Other invested assets are accounted for using the equity method. Total cost of other invested assets was $7.9 million as of December 31, 2025 and 2024.

(4) Policy loans are valued at unpaid principal balances.

Estimated fair values are determined as discussed in Note 1 of Notes to Consolidated Financial Statements.

Results of the Company’s investment portfolio for periods shown were as follows:

(Dollars in thousands)

(1) Calculated as the average of cash and investment balances (at amortized cost) at the beginning of the year and at the end of each of the succeeding four quarters.

The Company engages a global investment management firm serving the insurance industry to manage the Company’s investment portfolios. Management’s recent investment strategy has been a continued focus on quality and diversification, while improving the overall risk versus return profile of the portfolio.

Human Capital

The Company and its subsidiaries employed 166 people at December 31, 2025. Of the 166 people, 163 were full-time. We believe that our ability to attract and retain highly motivated and skilled employees with diverse backgrounds and experiences is critical to our continued success. We also believe the structure of our compensation program is aligned with the interests of our shareholders and serves to reward the performance of our employees. We monitor and evaluate the effectiveness of our human capital management efforts by seeking formal and informal feedback from our employees, including periodic surveys to obtain opinions on key topics.

We sponsor health and wellness programs in an effort to promote a healthier employee base. We also offer competitive health and wellbeing benefits to include health, dental, vision, health and flexible savings accounts, disability, life, supplemental and telemedicine. An Employee Assistance Program (“EAP”) is provided to all full-time employees and their family members at no cost. The EAP offers confidential telephonic counseling, referral services, legal and financial services and additional tools that offer support and solutions. Additionally, we offer a 401(k) retirement savings plan with an employer match as well as an annual Safe Harbor Non-Elective contribution.

We strive to provide a work environment that encourages work/life balance. Options depend on job responsibilities and may include flexible work schedules, paid time off, paid holidays and part-time employment.

We offer tuition reimbursement along with budgeted professional development opportunities in order to foster professional growth and to increase skillsets.

Financial Information by Industry Segment

The Parent’s primary insurance subsidiaries operate with relative autonomy with the oversight of the Chief Operating Decision Maker (“CODM”) and each company is evaluated based on its individual performance. Our CODM is the Company’s Chairman of the Board, President and Chief Executive Officer. American Southern operates in the property and casualty insurance market, while Bankers Fidelity operates in the life and health insurance market. Each segment derives revenue from the collection of premiums, as well as from investment income. Substantially all revenue other than that in the corporate and other segment is from external sources. For more information on segments, see Note 18 of Notes to Consolidated Financial Statements.

Available Information

The Company files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports and other information with the SEC. The SEC maintains a website at www.sec.gov (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, including the Company. In addition, as soon as reasonably practicable after such materials are filed with or furnished to the SEC by the Company, the Company makes copies available to the public, free of charge, on or through its web site at www.atlam.com (http://www.atlam.com). Neither the Company’s website, nor the information appearing on the website, is included, incorporated into, or a part of, this report.

Executive Officers of the Registrant

The table and information below set forth, for each current executive officer of the Company, their name, age (as of October 1, 2026), positions with the Company and business experience for the past five years, as well as any prior service to the Company.

Officers are elected annually and serve at the discretion of the board of directors.

Mr. Howell has been President and Chief Executive Officer of the Company since May 1995, and prior thereto served as Executive Vice President of the Company from October 1992 to May 1995. He has been a Director of the Company since October 1992 and, effective February 24, 2009, began serving as Chairman of the board of directors. He is also Executive Chairman and Chief Executive Officer of Gray Media, Inc.

As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K (a “smaller reporting company”), we have elected to comply with certain scaled disclosure reporting obligations, and therefore are not providing the information required by this Item.

Risk Management and Strategy

The Company’s operations rely on the secure processing, storage, and transmission of confidential and personal identifiable information within various technology platforms. Cybersecurity is a high priority and the Company has made significant investments in its processes and programs designed to prevent, detect, and respond to and recover from cybersecurity threats. We also have processes in place to help ensure compliance with our information security program with respect to our use of third-party service providers, including review of vendor certifications, execution of appropriate data protection agreements, and contractual security requirements. The Company is actively maturing its third-party risk management program to establish risk-based vendor tiering, due diligence standards, and ongoing monitoring controls for vendors. The Company’s cybersecurity program is structured around the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework (“CSF”), which guides our approach to identifying, protecting, detecting, responding to, and recovering from cybersecurity risks. The Company maintains an active cybersecurity roadmap aligned to NIST CSF to continuously mature its security posture and address identified risks. Such processes and programs are a part of the Company’s overall risk management and compliance programs. The Company continues to enhance its intrusion protection and detection technology, infrastructure and application firewalls, and network monitoring. The Company has also installed advanced endpoint threat protection technology and implemented a mandatory security awareness training program for all employees. The Company enforces multi-factor authentication and least-privilege access principles across critical systems. The Company has identified its current network architecture as an area of elevated risk and is actively executing a cybersecurity roadmap, aligned to the NIST CSF, to transition to a segmented, enterprise-grade network infrastructure. This initiative includes the replacement of end-of-life network equipment and the implementation of network segmentation controls to reduce lateral movement risk. This training is reinforced through periodic simulated phishing tests to assess our employees’ responses to suspicious emails.

The Company maintains backup and recovery capabilities designed to help enable us to resume business in the event of a disaster or cybersecurity incident. The Company has identified resilience and recovery as a key area of focus within its cybersecurity roadmap and is actively working toward implementing cloud-enabled Business Continuity and Disaster Recovery (“BCDR”) with validated, tested recovery objectives designed to meet applicable BCDR compliance requirements. Through recurring internal audits, controls are regularly reviewed, tested, and enhanced to promote best practices. The Company recognizes ransomware and software supply chain compromises as significant threat vectors and is implementing controls including vendor integrity validation, and rapid isolation protocols as part of its evolving incident response capabilities. The Company has augmented our information security program through a partnership with a leading global cybersecurity service provider to review and implement additional services such as Security Event Monitoring, Advanced Endpoint Threat Detection, Incident Management Retainer Services, and Strategic Advisory Services focused on Chief Information Officer (“CIO”) duties such as counter-threat intelligence.

Our information security program also includes a cybersecurity Incident Response Plan (“IRP”) that is designed to help protect the integrity, availability and confidentiality of information, prevent loss of service, and comply with legal requirements. The IRP specifies the process for identifying and reporting an incident, initial investigation, risk classification, documentation and communication of incidents, responder procedures, incident reporting, and ongoing training. The IRP also includes processes for determining the materiality of the incident, including the assessment of relevant qualitative and quantitative factors. Upon identifying a potential cybersecurity incident, the Company follows a structured assessment process to determine materiality and, where applicable, fulfill its obligation to disclose such incident in accordance with SEC rules. In the event we identify a potential cybersecurity, privacy or other data security issue, we have defined procedures for responding to such issues, including procedures that address when and how to engage with Company management, our board of directors, third-party advisors and other stakeholders.

The Company also maintains dedicated cyber liability insurance for breach event costs including: post breach event remediation costs; cybercrime coverage (including financial fraud, telecommunications fraud, and phishing attacks); and coverage for system failure, bricking loss, and physical damage. The policy also provides coverage for lost revenue due to a damaged reputation from a cyber breach.

While no cybersecurity incidents have materially affected or are reasonably likely to materially affect our operations to date, there can be no assurance that future incidents will not have a material impact on the Company’s business, financial condition, or results of operations.

Governance

Our board of directors recognizes the important role of information security and mitigating cybersecurity and other data security threats. Although our full board of directors maintains ultimate responsibility with respect to risk management oversight, our board of directors has delegated oversight of the Company’s information security program and matters of cybersecurity to the Audit Committee of the board of directors. The Audit Committee receives regular briefings from the CIO on the state of the cybersecurity program, emerging threats, and the Company’s risk mitigation progress against its cybersecurity roadmap. The Company’s senior officers, including its CIO, are responsible for the operation of the information security program and regularly communicate with the Audit Committee on the state of the program, risks faced by the Company and the Company’s risk mitigation efforts related thereto. The Company’s CIO, supported by a dedicated information security team, is responsible for the day-to-day management of the information security program and regularly briefs the Audit Committee on cybersecurity risks, program status, and risk mitigation efforts.

In addition, the Company’s information technology environment is managed by an experienced team of professionals who follow an extensive set of policies and procedures related to data security. Our data security employees have backgrounds in cybersecurity and data protection, including prior relevant experience in the industry and industry standard certifications.

Leased Properties. The Company leases space for its principal offices and for some of its insurance operations in an office building located in Atlanta, Georgia under a lease which continues until either party provides written notice of cancellation at least twelve months in advance of the actual termination date (as amended, the “Lease Agreement”). The lease, which commenced on November 1, 2007, provides for rent adjustments on every fifth anniversary of the commencement date. Under the current terms of the lease, the Company occupies approximately 49,586 square feet of office space. The owner of the building, 4370 Peachtree LLC, is controlled by an affiliate of the Company.

On December 26, 2024, the Company, and its subsidiary, Bankers Fidelity Life Insurance Company, entered into a Second Amendment to Lease Agreement (the “Second Amendment”) with 4370 Peachtree LLC. Pursuant to the Second Amendment, the Lease Agreement was modified to increase the base rent payable by the Company, beginning January 1, 2025. The Second Amendment also provides for rent adjustment on January 1, 2027, January 1, 2030 and each five years thereafter.

American Southern leases space for its office in a building located in Atlanta, Georgia. The lease term expired September 30, 2026. The lease was amended on April 2, 2026 to extend the lease, commencing on October 1, 2026 and expiring on July 31, 2037. Under the terms of the lease, American Southern occupies approximately 17,014 square feet.

American Southern has a second lease for additional office space in Columbia, South Carolina. The original term was three years and renewed for an additional three years, effective August 1, 2025 with a termination date on July 31, 2028. The rate used in determining the present value of lease payments is based upon an estimate of the Company’s incremental secured borrowing rate commensurate with the term of the underlying lease. The leased space is approximately 2,720 square feet.

The Company believes that its current properties are in good condition and are sufficient for the operations of its business.

From time to time, the Company and its subsidiaries are, and expect to continue to be, involved in various claims and lawsuits arising in the ordinary course of business, both as a liability insurer defending third-party claims brought against insureds and as an insurer defending coverage claims brought against it, and in various regulatory proceedings in the states in which we do business. The Company accounts for such exposures through the establishment of loss and loss adjustment expense reserves and accrued expenses. We currently do not expect that the ultimate liability, if any, with respect to such ordinary-course claims litigation or regulatory proceedings, after consideration of provisions made for probable losses and costs of defense, will be material to the Company’s consolidated financial condition, although the results of such matters could be material to the consolidated results of operations for any given period.

The following is management’s discussion and analysis of the financial condition and results of operations of Atlantic American Corporation (“Atlantic American” or the “Parent”) and its subsidiaries (collectively with the Parent, the “Company”) for the years ended December 31, 2025 and 2024. This discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere herein. Operating results achieved in any historical period are not necessarily indicative of results to be expected in any future period.

Atlantic American is an insurance holding company whose operations are conducted primarily through its insurance subsidiaries: American Southern Insurance Company and American Safety Insurance Company (together known as “American Southern”) in the property and casualty insurance industry, and Bankers Fidelity Life Insurance Company, Bankers Fidelity Assurance Company and Atlantic Capital Life Assurance Company (together known as “Bankers Fidelity”) in the life and health insurance industry. Each operating company is managed separately, offers different products and is evaluated on its individual performance.

Revision of Previously Issued Financial Statements

In connection with the preparation of the Company’s consolidated financial statements for the year ended December 31, 2025, management identified errors relating to the recognition of due-premium receivables and related premium revenue within the Company’s group whole life and group accident and health business.

Management evaluated the errors in accordance with ASC Topic 250, Accounting Changes and Error Corrections, and SEC Staff Accounting Bulletins No. 99, Materiality, and No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements. Management considered the errors under both the rollover and iron-curtain methods and evaluated relevant quantitative and qualitative factors, both individually and in the aggregate with other identified misstatements.

Based on this evaluation, management concluded that the errors were not material, individually or in the aggregate, to any of the Company’s previously issued annual or interim financial statements.

Management further concluded that correcting the cumulative errors entirely in the consolidated statement of operations for the year ended December 31, 2025 would materially misstate the Company’s 2025 results of operations. Accordingly, the Company has revised the 2024 financial information presented in this Annual Report on Form 10-K to reflect the correction of the errors in the appropriate prior periods.

The revisions did not change management’s conclusion that the Company’s previously issued annual or interim financial statements were fairly presented, in all material respects, in accordance with accounting principles generally accepted in the United States. The Company has not amended its previously filed Annual Report on Form 10-K for the year ended December 31, 2024. All 2024 amounts presented in this Management’s Discussion and Analysis of Financial Condition and Results of Operations reflect the revised amounts unless otherwise indicated.

Nature of the Errors

Management identified deficiencies in the design and operating effectiveness of controls over the recording and reconciliation of premium receivables and the application of premium payments held in suspense within the Company’s group whole life and group accident and health business.

The Company did not design and maintain effective controls to timely and accurately reconcile enrollment, billing and cash receipt information at the individual policyholder level and to resolve differences among third-party enrollment data, the policy administration system and the general ledger.

As a result, the Company did not maintain controls operating at a sufficient level of precision to determine whether recorded premium receivables were valid, whether amounts held in suspense should be applied to individual policyholders or otherwise recognized, and whether the related amounts were recorded in the appropriate period and were appropriately classified in the consolidated financial statements. As a result, the Company has revised its previously reported 2024 financial information to remove the affected receivables and premium revenue.

Effect of the Corrections

The revisions to the Company’s consolidated financial statements as of and for the year ended December 31, 2024 principally resulted in:

• a $5.580 million reduction in insurance premiums and other receivables;
• a $1.172 million increase in deferred income taxes, net;
• a $2.923 million reduction in accounts payable and accrued expenses;
• a $1.485 million reduction in retained earnings;
• a $0.351 million reduction in 2024 insurance premiums, net and income (loss) before income taxes; and
• a $0.277 million increase in 2024 net loss

The revisions did not affect the Company’s cash and cash equivalents or total net cash provided by operating activities for the year ended December 31, 2024. The revisions affected certain components of the reconciliation of net income to net cash provided by operating activities but did not affect total net cash provided by operating activities.

The foregoing summary is not intended to present all effects of the revisions. See Note 1, Revision of Previously Issued Financial Statements, to the consolidated financial statements for a reconciliation of the amounts previously reported to the amounts as revised.

Adoption of LDTI

Certain amounts as of and for the year ended December 31, 2024 within this Form 10-K have been restated to conform with the current year accounting and presentation as a result of the Company’s required adoption of Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944)—Targeted Improvements to the Accounting for Long Duration Contracts. Refer to Note 1 of Notes to Consolidated Financial Statements for more information regarding the Company’s adoption of LDTI and the related impact to the consolidated financial statements.

Critical Accounting Estimates

The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and, in management’s belief, conform to general practices within the insurance industry. The following is an explanation of the Company’s accounting policies and the resultant estimates considered most significant by management. These accounting policies inherently require significant judgment and assumptions and actual operating results could differ significantly from management’s estimates determined using these policies. Atlantic American does not expect that changes in the estimates determined using these policies will have a material effect on the Company’s financial condition or liquidity, although changes could have a material effect on its consolidated results of operations.

Investments comprised 62% of the Company’s total assets at December 31, 2025. Substantially all of the Company’s investments are in bonds and common and preferred stocks, the values of which are subject to market fluctuations, which could be significant. The Company carries all fixed maturity securities, which includes bonds and redeemable preferred stocks, as available for sale, and equity securities, which includes common and non-redeemable preferred stocks, at their estimated fair values.

The Company determines the fair values of certain financial instruments based on the fair value hierarchy established in Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) 820-10-20, *Fair Value Measurements and Disclosures (“*ASC 820-10-20”). The fair values of fixed maturity securities and equity securities are largely determined by nationally quoted market prices, when available, or independent broker quotations. See Note 2 and Note 3 of Notes to Consolidated Financial Statements with respect to assets and liabilities carried at fair value and information about the inputs used to value those financial instruments, by hierarchy level, in accordance with ASC 820-10-20.

For fixed maturity available-for-sale securities in an unrealized loss position, a credit loss is recognized in earnings within realized investment gains (losses) when it is anticipated that the amortized cost will not be recovered. When either: (i) the Company has the intent to sell the security; or (ii) it is more likely than not that the Company will be required to sell the security before recovery, the reduction of amortized cost and the loss recognized in earnings is the entire difference between the security’s amortized cost and estimated fair value. If neither of these conditions exists, the difference between the amortized cost of the security and the present value of projected future cash flows expected to be collected is recognized as a credit loss by establishing an Allowance for Credit Losses (“ACL”) with a corresponding charge to earnings in realized investment gains (losses). However, the ACL is limited by the amount that the fair value is less than the amortized cost. This limitation is known as the “fair value floor.” If the estimated fair value is less than the present value of projected future cash flows expected to be collected, this portion of the decline in value related to other-than-credit factors (“noncredit loss”) is recorded in OCI.

Future policy benefits represented approximately 27% of total liabilities at December 31, 2025, compared to 28% at December 31, 2024. The LFPB is established under ASC Topic 944 Financial Services-Insurance for products classified as Long-Duration. The Company’s products that are so classified include Individual and group life insurance policies, Medicare Supplement policies, and other guaranteed renewable accident and health policies.

Effective January 1, 2025, the Company adopted Accounting Standards Update (“ASU”) No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, as subsequently amended by ASU Nos. 2019-09, 2020-11 and 2022-05. The Company applied LDTI using the modified retrospective transition method as of January 1, 2024 (the “Transition Date”) to its whole life, Medicare Supplement and certain guaranteed-renewable accident and health insurance products.

Under LDTI, the LFPB reflects the present value of estimated future policyholder benefits and claim settlement expenses less the present value of estimated net policyholder premiums. These estimates are based on actuarial assumptions for mortality, voluntary policyholder terminations, and claims under accident and health policies. These assumptions are developed based on an evaluation of recent experience and the then-current legal, economic, and operating environment that is conducted at least annually. Changes in the LFPB that are attributable to changes in these assumptions are recognized in earnings. Historical experience is updated each quarter through retrospective unlocking to reflect actual cash flows, and changes in the LFPB that are caused by differences between actual and expected experience are also recognized in earnings.

Under LDTI, the discount rate assumption consists of a locked in rate and a current rate. The current rate is derived from a yield curve of upper medium grade fixed income securities obtained from Bloomberg, reflecting yields across maturities ranging from one month to fifty years and based on single A rated corporate securities. For policies issued after January 1, 2024 (“the Transition Date”), the locked in rate equals the current rate in effect during the quarter of issuance, while for policies issued prior to the Transition Date, the locked in rate represents the historical expected investment yield at policy issuance. The current discount rate is updated quarterly, with changes recognized in OCI.

In addition to the normal policy activity, the year-over-year change in the liability and related AOCI balances is driven by updates to actuarial assumptions, differences between actual and expected experience, and changes in discount rates, and remains sensitive to changes in these assumptions.

For the purposes of calculating the NPR and the LFPB, insurance contracts are grouped into cohorts that do not span more than one issue year. Medicare Supplement cohorts are determined by legal entity and issue year, life insurance cohorts are established separately for individual and group policies (with further distinction for limited‑pay versus other individual life products), and other accident and health products are grouped by issue year.

The NPR is the ratio of the present value of expected future benefits and related claim expenses to the present value of expected future gross premiums. The NPR used to accrue the LFPB in each period is determined by using the historical and present value of expected future benefits and claim settlement expenses for the cohort divided by the historical and present value of expected future gross premiums for the cohort. For contracts in force at the Transition Date, the NPR reflects the applicable carrying amount under the Company’s modified retrospective transition method. For contracts issued after the Transition Date, the NPR is established based on expected benefits, related expenses and gross premiums as of the applicable contract issue date.

At each reporting date, actual experience is incorporated into the calculation, and the NPR is recalculated using actual experience and current assumptions about future cash flows. The NPR is capped at 100%. If the calculated NPR for a cohort exceeds 100%, the Company increases the LFPB by the amount necessary to reduce the NPR to 100% and recognizes the resulting loss immediately in earnings. The LFPB for an individual cohort may not be less than zero. Changes in discount rates do not affect the NPR and are recognized separately in OCI.

The liability for unpaid claims and claim adjustment expenses was $113.8 million at December 31, 2025, or approximately 36% of the Company’s total liabilities. The related reinsurance recoverable was $19.3 million, resulting in a net liability of $94.5 million. The liability is a critical accounting estimate because the ultimate amount and timing of claim payments cannot be known with certainty until claims are resolved. Relatively small changes in estimates of ultimate losses may materially affect the recorded liability and the benefits and losses recognized in the period of revision.

The Company accrues liabilities for unpaid claims and claim adjustment expenses when insured events occur. The balance includes obligations under short-duration contracts, principally property and casualty insurance products and group accident and health products, and claims that have been incurred under long-duration products, principally individual life, group whole life, Medicare Supplement and certain guaranteed-renewable individual accident and health products. For long-duration contracts, expected future benefit payments are incorporated into the liability for future policy benefits before the related insured event occurs; amounts payable for insured events that have occurred are accrued as unpaid claims. The Company separately presents the liability for unpaid claims and the liability for future policy benefits in the Consolidated Balance Sheets. Insurance liabilities are recorded gross of reinsurance, and related reinsurance recoverables are reported separately. The use of reinsurance does not relieve the Company of its obligations to policyholders.

The liability includes (i) case reserves for claims that have been reported but not fully paid, (ii) expected development on reported claims, (iii) incurred-but-not-reported claims, and (iv) allocated and unallocated claim adjustment expenses. Case reserves are established using claim adjusters’ evaluations and information available about individual claims. Estimates for future claim development, incurred-but-not-reported claims and claim adjustment expenses are developed using actuarial analyses of the Company’s historical experience and other relevant information.

The Company’s actuaries estimate ultimate losses and claim adjustment expenses by significant product line and accident year using multiple methods, including paid-loss development, reported-loss development, paid Bornhuetter-Ferguson and reported Bornhuetter-Ferguson methods. The loss-development methods use historical paid or reported claim-development patterns to project ultimate losses. The Bornhuetter-Ferguson methods combine emerging claim experience with an independently selected expected loss ratio. No single method is determinative. The relative weight assigned to each method varies based on the credibility and maturity of the available data, the characteristics of the product line and current claim trends. Management selects its best estimate after evaluating the resulting range of actuarial estimates.

Significant assumptions and judgments include expected loss ratios; claim reporting, development and payment patterns; claim frequency and severity; medical cost inflation and utilization; general and social inflation; litigation and settlement trends; legislative and regulatory changes; large-loss activity; policy terms and benefit structures; changes in business and product mix; and changes in underwriting, claims administration and reserving practices. These factors can affect product lines and accident years differently, and changes in one factor may not be offset by changes in another.

The estimates are reviewed each reporting period using actual claim emergence, claim payments and current information. When experience differs from prior assumptions, or when changes in methods or assumptions are warranted, the estimated ultimate losses and claim adjustment expenses are revised. The effect of a revision is recognized in benefits and losses in the period in which the change in estimate is made. Significant changes in reserving methodologies and assumptions, if any, are described in the notes to the consolidated financial statements.

See Note 1, Summary of Significant Accounting Policies; Note 8, Other Insurance Reserves and Policyholder Funds; and Note 9, Reinsurance, in the Notes to Consolidated Financial Statements for additional information about the Company’s reserve policies, claims-development experience and reinsurance arrangements.

Deferred acquisition costs (“DAC”), which comprised approximately 10% of total assets at December 31, 2025, represent commissions, premium taxes and other incremental direct costs of successfully acquiring insurance contracts that would not have been incurred absent such transactions.

DAC associated with long-duration contracts is grouped on a basis consistent with the related insurance contracts and amortized on a constant-level basis over the expected term of those contracts. The expected remaining term is calculated based on assumptions of expected mortality, lapses, and other contract terminations that are consistent with the assumptions used to measure the related liability for future policy benefits. These assumptions are reviewed at least annually and are updated as warranted whenever experience changes significantly. Actual contract terminations are reflected in the amortization calculation when they occur.

DAC associated with short-duration contracts is amortized over the related coverage period in proportion to premium revenue recognized. The Company evaluates the recoverability of short-duration DAC when indications exist that expected claims, claim adjustment expenses, maintenance costs and other related expenses may exceed anticipated premium revenue. If a premium deficiency exists, DAC is reduced to the extent necessary, and an additional liability is recognized for any remaining deficiency.

Deferred income taxes reflect the effect of temporary differences between assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for tax purposes. These deferred income taxes are measured by applying currently enacted tax laws and rates. Valuation allowances are recognized to reduce the deferred tax asset to the amount that is deemed more likely than not to be realized. In assessing the likelihood of realization, management considers estimates of future taxable income and tax planning strategies.

Refer to Note 1 of Notes to Consolidated Financial Statements for details regarding the Company’s significant accounting policies.

Overall Corporate Results

(In thousands)

18

Management also considers and evaluates performance by analyzing the non-GAAP measure operating income or loss, and believes it is a useful metric for investors, potential investors, securities analysts and others because it isolates the “core” operating results of the Company before considering certain items that are either beyond the control of management (such as income tax expense, which is subject to timing, regulatory and rate changes depending on the timing of the associated revenues and expenses) or are not expected to regularly impact the Company’s operational results (such as any realized or unrealized investment gains or losses, which are not a part of the Company’s primary operations and are, to a limited extent, subject to discretion in terms of timing of realization).

A reconciliation of net income (loss), the most directly comparable GAAP measure, to operating income (loss) is as follows:

(In thousands)

On a consolidated basis, the Company had net income of $6.0 million, or $0.28 per diluted share, in 2025, compared to net loss of $1.4 million, or $(0.09) per diluted share, in 2024. The increase in net income was primarily due to an increase in net earned premiums in the property and casualty operations due to a rate increase upon renewal of a program within the automobile liability line of business, as well as increases in earned premiums in the inland marine cargo and automobile physical damage lines of business that were due to increased premium writings. Also contributing to the increase in net income was the Company’s recognition of net unrealized gains on equity securities of $4.5 million and net unrealized losses of $1.5 million during the years ended December 2025 and 2024, respectively. Another contributing factor to the increase in net income was an increase in the net earned premiums for the Medicare Supplement line of business due to new sales within the life and health operations. Partially offsetting this increase was a decrease in net earned premiums in the group life and group accident and health lines of business, as well as increases in the insurance benefits and losses incurred and the future policy benefit remeasurement gain, within the life and health operations. Also partially offsetting the increase in net income was an increase in insurance benefits and losses incurred in the property and casualty operations, primarily due to increased losses in the automobile physical damage and inland marine lines of business.

Total revenue was $210.4 million in 2025 as compared to $188.41 million in 2024. Premium revenue increased to $196.1 million in 2025 from $178.6 million in 2024. The increase in premium revenue was primarily attributable to an increase in earned premiums in the automobile liability line of business due to a rate increase upon renewal of a program within the property and casualty operations. Also contributing to the increase in premium revenue was an increase in the net earned premiums in the Medicare Supplement line of business due to new sales within the life and health operations. Partially offsetting the increase in premium revenue was a decrease in net earned premiums in the group life and group accident and health lines of business within the life and health operations, as previously mentioned.

Operating income was $3.7 million in 2025 as compared to operating loss of $1.3 million in 2024. The increase in operating income was primarily due to an increase in net earned premiums in the property and casualty operations, as well as increases in earned premiums in the inland marine cargo and automobile physical damage lines of business, as discussed above. Also contributing to the increase in operating income was an increase in the net earned premiums in the Medicare Supplement line of business due to new sales within the life and health operations, as previously mentioned.

A more detailed analysis of the operating companies and other corporate activities follows.

UNDERWRITING RESULTS

American Southern

The following table summarizes, for the periods indicated, American Southern’s premiums, losses, expenses and underwriting ratios:

(Dollars in thousands)

Gross written premiums at American Southern increased $22.9 million, or 31.1%, during 2025 as compared to 2024. The increase in gross written premiums was primarily attributable to an increase in premiums written in the automobile liability line of business due to the renewal of a program that received a substantial rate increase. Also contributing to the increase in gross written premiums were increases in inland marine cargo due to a new program written by an existing agent, as well as an increase in premiums written in the automobile physical damage line of business resulting from an increase in writings from existing agents.

Ceded premiums increased $0.2 million, or 3.1%, during 2025 as compared to 2024. American Southern’s ceded premiums are typically determined as a percentage of earned premiums and generally increase or decrease as earned premiums increase or decrease or retentions levels change. The increase in ceded premiums was primarily attributable to an increase in catastrophic exposures from increased writings of automobile physical damage and inland marine cargo.

The following table summarizes, for the periods indicated, American Southern’s net earned premiums by line of business:

(In thousands)

Net earned premiums increased $16.8 million, or 24.8% , during 2025 as compared to 2024. The increase in net earned premiums was primarily attributable to a rate increase upon renewal of a program within the automobile liability line of business, as well as increases in earned premiums in the inland marine cargo and automobile physical damage lines of business that were due to increased premium writings, as previously mentioned. Premiums are earned ratably over their respective policy terms, and therefore premiums earned in the current year are related to policies written both in the current year and the immediately preceding year.

The performance of a property and casualty insurance company is often measured by its combined ratio. The combined ratio represents the percentage of losses, loss adjustment expenses and other expenses that are incurred for each dollar of premium earned by the company. A combined ratio of under 100% represents an underwriting profit while a combined ratio of over 100% indicates an underwriting loss. The combined ratio is divided into two components, the loss ratio (the ratio of losses and loss adjustment expenses incurred to premiums earned) and the expense ratio (the ratio of expenses incurred to premiums earned).

Insurance benefits incurred at American Southern increased $9.5 million, or 17.0%, during 2025 as compared to 2024. As a percentage of premiums, insurance benefits and losses incurred were 77.2% in 2025 as compared to 82.4% in 2024. The decrease in the loss ratio was mainly due to premium growth in automobile liability and physical damage, as well as inland marine cargo that exceeded the increase in insurance benefits and losses incurred.

Commissions and underwriting expenses increased $2.9 million, or 18.9%, during 2025 as compared to 2024. As a percentage of premiums, these expenses were 21.9% in 2025 as compared to 23.0% in 2024. The decrease in the expense ratio was primarily due to American Southern’s use of a variable commission structure with certain agents, which compensates the participating agents in relation to the loss ratios of the business they write. During periods in which the loss ratio decreases, commissions and underwriting expenses will generally increase, and conversely, during periods in which the loss ratio increases, commissions and underwriting expenses will generally decrease. In 2025, variable commissions at American Southern increased $1.2 million as compared to 2024 due to a favorable loss experience from accounts subject to variable commissions. Also contributing to the decrease in the expense ratio were rate increases in various lines of business.

Bankers Fidelity

The following summarizes, for the periods indicated, Bankers Fidelity’s premiums, losses and expenses:

(In thousands)

Gross earned premiums at Bankers Fidelity increased $15.7 million, or 9.6%, during 2025 as compared to 2024. The increase in gross earned premiums was primarily attributable to the increase in gross earned premiums from the Medicare Supplement line of business due primarily to the level of new business writings exceeding non-renewals. This increase was partially offset by a decline in the group life and group accident and health lines of business, primarily due to lower policy sales.

Ceded premiums increased $15.0 million, or 28.2%, during 2025 as compared to 2024. The increase in ceded premiums was due to an increase in Medicare Supplement premiums subject to reinsurance.

The following table summarizes, for the periods indicated, Bankers Fidelity’s net earned premiums by line of business:

(In thousands)

Net earned premium revenue at Bankers Fidelity increased $0.7 million, or 0.7%, during 2025 as compared to 2024. The increase in net earned premiums was primarily due to net earned premiums in the Medicare Supplement line of business, primarily attributable to new sales, as previously discussed, and an increase in net earned premiums in the other individual health line of business due to new business growth. Partially offsetting these increase was a decline in earned premiums in the group life and group accident and health lines of business, as previously mentioned.

Insurance benefits incurred increased $4.0 million, or 5.8%, during 2025 as compared to 2024. Future policy benefit remeasurement gain arises as a result of updating assumptions in the net premium ratio (sometimes referred to as unlocking) and updating expected cash flow with actual cash flow, as of the beginning of the current reporting period. The future policy benefit remeasurement gain was $4.8 million in 2025 and $2.3 million in 2024. As a percentage of premiums, benefits and losses, which included insurance benefits and future policy benefits remeasurement gain, were 61.4% in 2025 as compared to 59.3% in 2024. The increase in the loss ratio was primarily attributable to higher insurance benefits incurred in the group life line of business in conjunction with lower earned premiums, partially offset by lower short-term care benefits incurred and improved loss experience in the Medicare Supplement line of business.

Commissions and underwriting expenses decreased $0.8 million, or 1.8%, during 2025 as compared to 2024. As a percentage of earned premiums, these expenses were 37.7% in 2025 as compared to 37.9% in 2024. The decrease in the expense ratio was primarily attributable to lower underwriting expenses during the year. This decrease was partially offset by higher commission expenses associated with growth in the Medicare Supplement line business, as a result of the level of new business writings exceeding non-renewals, as previously mentioned.

Net Investment Income and Realized Gains (Losses)

Investment income increased $0.5 million, or 4.9%, in 2025 as compared to 2024. The increase in investment income was primarily attributable to an increase in income from equity securities in our investment portfolio.

The Company had net realized investment losses of $0.5 million in 2025 as compared to net realized investment gains of $1.2 million in 2024. The net realized investment losses in 2025 were mainly due to losses of $0.7 million, resulting primarily from an impairment of a security in the Company’s investments in fixed maturity securities. The net realized investment gains in 2024 were mainly due to gains of $1.2 million from the sale of the Company’s interest in a certain limited liability company as well as gains from the sale of a number of the Company’s investments in fixed maturity securities. Management continually evaluates the Company’s investment portfolio and, as may be determined to be appropriate, makes adjustments for impairments and/or will divest investments. See Note 2 of Notes to Consolidated Financial Statements.

Unrealized Gains (Losses) on Equity Securities, Net

Investments in equity securities are measured at fair value at the end of the reporting period, with any changes in fair value reported in net income during the period. The Company recognized net unrealized gains on equity securities of $4.5 million and net unrealized losses of $1.5 million during the years ended December 2025 and 2024, respectively. Changes in unrealized losses on equity securities for the applicable periods are primarily the result of fluctuations in the market value of certain of the Company’s equity securities.

Interest Expense

Interest expense decreased $0.3 million, or 9.9%, in 2025 as compared to 2024. Changes in interest expense were primarily due to changes in the Secured Overnight Financing Rate (“SOFR”) published by CME Group Benchmark Administration Limited, as the interest rates on the Company’s outstanding junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) and the revolving credit facility utilize SOFR as the reference rate.

Income Taxes

The Company has adopted ASU 2023-09 – Improvements to Income Tax Disclosures which requires the Company to disaggregate state income tax expense, net of the federal income tax effect.

The primary difference between the effective tax rate and the federal statutory income tax rate for 2025 resulted from a permanent difference related to meals and entertainment. Another contributing factor to the differences between the effective tax rate and the federal statutory income tax rate was a permanent difference related to dividends-received deduction (“DRD”). The current estimated DRD is adjusted as underlying factors change and can vary from estimates based on, but not limited to, actual distributions from investments as well as the amount of the Company’s taxable income.

The primary difference between the effective tax rate and the federal statutory income tax rate for 2024 resulted from a permanent difference related to meals and entertainment. Also contributing to differences between the effective tax rate and the federal statutory income tax rate was the adjustment for prior years’ estimates to actual that are generally updated at the completion of the third quarter of each fiscal year and were $35 in the year ended December 31, 2024. Another contributing factor to the differences between the effective tax rate and the federal statutory income tax rate was a permanent difference related to the DRD.

Liquidity and Capital Resources

The primary cash needs of the Company are for the payment of claims and operating expenses, maintaining adequate statutory capital and surplus levels, and meeting debt service requirements. Current and expected patterns of claim frequency and severity may change from period to period, but generally are expected to continue within historical ranges. The Company’s primary sources of cash are written premiums, investment income and proceeds from the sale and maturity of its invested assets, as well as borrowings from time to time under our revolving credit facility. The Company believes that, within each operating company, total invested assets will be sufficient to satisfy all policy liabilities and that cash inflows from investment earnings, future premium receipts and reinsurance collections will be adequate to fund the payment of claims and operating expenses as needed.

Cash flows at the Parent are derived from dividends, management fees, and tax-sharing payments from the subsidiaries, as described below. The principal cash needs of the Parent are for the payment of operating expenses, the acquisition of capital assets and debt service requirements, as well as the repurchase of shares and payments of any dividends as may be authorized and approved by the Company’s board of directors from time to time. At December 31, 2025, the Parent had approximately $4.1 million of unrestricted cash and investments.

Dividend payments to a parent corporation by its wholly-owned insurance subsidiaries are subject to annual limitations and are restricted to 10% of statutory surplus or statutory earnings before recognizing realized investment gains of the individual insurance subsidiaries. At December 31, 2025, the Parent’s insurance subsidiaries had an aggregate statutory surplus of $83.1 million. Dividends were paid to Atlantic American by its subsidiaries totaling $8.4 million and $9.0 million in 2025 and 2024, respectively.

The Parent provides certain administrative, purchasing and other services to each of its subsidiaries. The amount charged to and paid by the subsidiaries for these services was $8.7 million and $9.4 million in 2025 and 2024, respectively. In addition, the Parent has a formal tax-sharing agreement with each of its insurance subsidiaries. A net total of $1.3 million and $4.4 million were paid to the Parent under the tax sharing agreement in 2025 and 2024, respectively.

The Company has two statutory trusts which exist for the exclusive purpose of issuing trust preferred securities representing undivided beneficial interests in the assets of the trusts and investing the gross proceeds of the trust preferred securities in Junior Subordinated Debentures. The outstanding $18.0 million and $15.7 million of Junior Subordinated Debentures mature on December 4, 2032 and May 15, 2033, respectively, are callable quarterly, in whole or in part, only at the option of the Company, and have an interest rate of 3-month CME Term SOFR plus applicable tenor spread of 0.26161% plus an applicable margin. The margin ranges from 4.00% to 4.10%. At December 31, 2025, the effective interest rate was 8.13%. The obligations of the Company with respect to the issuances of the trust preferred securities represent a full and unconditional guarantee by the Parent of each trust’s obligations with respect to the trust preferred securities. Subject to certain exceptions and limitations, the Company may elect from time to time to defer Junior Subordinated Debenture interest payments, which would result in a deferral of distribution payments on the related trust preferred securities. The Company has not made such an election.

The Company intends to pay its obligations under the Junior Subordinated Debentures using existing cash balances, dividend and tax-sharing payments from the operating subsidiaries, or from existing or potential future financing arrangements.

At December 31, 2025, the Company had 55,000 shares of Series D preferred stock (“Series D Preferred Stock”) outstanding. All of the shares of Series D Preferred Stock are held by an affiliate of the Company’s controlling shareholder. The outstanding shares of Series D Preferred Stock have a redemption value of $100 per share; accrue annual dividends at a rate of $7.25 per share (payable in cash or shares of the Company’s common stock at the option of the board of directors of the Company) and are cumulative. In certain circumstances, the shares of the Series D Preferred Stock may be convertible into an aggregate of approximately 1,378,000 shares of the Company’s common stock, subject to certain adjustments and provided that such adjustments do not result in the Company issuing more than approximately 2,703,000 shares of common stock without obtaining prior shareholder approval; and are redeemable solely at the Company’s option. The Series D Preferred Stock is not currently convertible. The Company had accrued, but unpaid, dividends on the Series D Preferred Stock of $17.7 thousand at December 31, 2025 and 2024. During each of 2025 and 2024, the Company paid Series D Preferred Stock dividends of $0.4 million.

Bankers Fidelity Life Insurance Company (‘‘BFLIC”) is a member of the Federal Home Loan Bank of Atlanta (“FHLB”), for the primary purpose of enhancing financial flexibility. As a member, BFLIC can obtain access to low-cost funding and also receive dividends on FHLB stock. The membership arrangement provides for credit availability of fifteen percent of statutory admitted assets, or approximately $27.3 million, as of December 31, 2025. Additional FHLB stock purchases may be required based upon the amount of funds borrowed from the FHLB. As of December 31, 2025, BFLIC has pledged bonds having an amortized cost of $8.9 million to the FHLB. BFLIC may be required to post additional acceptable forms of collateral for any borrowings that it makes in the future from the FHLB. As of December 31, 2025, BFLIC does not have any outstanding borrowings from the FHLB.

On May 12, 2021, the Company entered into a revolving credit agreement (“Revolving Credit Agreement”) with Truist Bank as the lender (the “Lender”). The Revolving Credit Agreement provides for an unsecured $10.0 million revolving credit facility that originally matured on April 12, 2024. On March 22, 2024, the Company entered into a First Amendment (the "Amendment") to its Revolving Credit Agreement (as amended, the “Credit Agreement”) with the Lender. The Amendment, among other things, (a) updates the interest rate provisions to memorialize that the Company pays interest on the unpaid principal balance of outstanding revolving loans at the Adjusted Term SOFR rate (as defined in the Credit Agreement), plus 2.00%, (b) extends the maturity date of the revolving credit facility to March 22, 2027, (c) requires the monthly payment of an unused commitment fee of 0.2% of the unused facility amount, and (d) requires that the Company maintain a consolidated net worth of not less than $64.2 million. On May 27, 2026, July 31, 2026, October 9, 2026 and October 15, 2026, the Company and the Lender entered into amendments to the Credit Agreement, each of which had the effect of extending the then-applicable deadlines by which the Company must deliver to the Lender (i) the Company’s audited consolidated financial statements for the year ended December 31, 2025, (ii) the Company’s interim consolidated financial statements for the quarters ended March 31, 2026, June 30, 2026 and September 30, 2026, and (iii) related certificates of the Company’s compliance with financial covenants under the Credit Agreement and certain other matters. The Fifth Amendment to the Revolving Credit Agreement, dated October 15, 2026, also amended the minimum AM Best financial strength rating that must be maintained by American Southern Insurance Company to be no lower than “A-” and waived related defaults under the Credit Agreement occurring prior to such amendment. Except as modified by these amendments, the existing terms of the original Credit Agreement remain in effect.

The Credit Agreement requires the Company to comply with certain covenants, including a debt to capital ratio that restricts the Company from incurring consolidated indebtedness that exceeds 35% of the Company’s consolidated capitalization at any time and maintaining a minimum consolidated net worth, as previously mentioned. The Credit Agreement also contains customary representations and warranties and events of default. Events of default include, among others, (a) the failure by the Company to pay any amounts owed under the Credit Agreement when due, (b) the failure to perform and not timely remedy certain covenants, (c) a change in control of the Company and (d) the occurrence of bankruptcy or insolvency events. Upon an event of default, the Lender may, among other things, declare all obligations under the Credit Agreement immediately due and payable and terminate the revolving commitments. As of December 31, 2025 and 2024, the Company had outstanding borrowings of $5.0 million and $4.0 million under the Credit Agreement.

Cash and cash equivalents increased from $35.6 million at December 31, 2024 to $43.6 million at December 31, 2025. The increase in cash and cash equivalents during 2025 was primarily attributable to net cash provided by operating activities of $32.9 million. Partially offsetting the increase in cash and cash equivalents was net cash used in investing activities of $25.0 million primarily as a result of investment purchases exceeding investment sales and maturity of securities.

The Company believes that existing cash balances as well as the dividends, fees, and tax-sharing payments it expects to receive from its subsidiaries and, if needed, additional borrowings from financial institutions, will enable the Company to meet its liquidity requirements for the next 12 months and thereafter for the foreseeable future. Management is not aware of any current recommendations by regulatory authorities, which, if implemented, would have a material adverse effect on the Company’s liquidity, capital resources or operations.

Internal Control Over Financial Reporting

Management’s conclusion that the errors were not material to the previously issued 2024 consolidated financial statements is separate from management’s evaluation of the severity of the related deficiencies in internal control over financial reporting.

A control deficiency may constitute a material weakness even when the financial-statement errors identified were not material. As discussed in Item 9A, Controls and Procedures, management concluded that deficiencies in controls over enrollment information, policy-status maintenance, due-premium accounting, account reconciliations and related management review created a reasonable possibility that a material misstatement would not be prevented or detected on a timely basis. Management therefore concluded that these deficiencies, considered collectively, constituted a material weakness as of December 31, 2025.

Correcting the identified errors addressed the financial-statement effects but did not remediate the material weakness. Management has implemented and continues to implement the remediation measures described in Item 9A.

New Accounting Pronouncements

See “Recently Issued Accounting Standards” in Note 1 of Notes to Consolidated Financial Statements.

Impact of Inflation

Insurance premiums are established before the amount of losses and loss adjustment expenses, or the extent to which inflation may affect such losses and expenses, are known. Consequently, in establishing its premiums, the Company attempts to anticipate the potential impact of inflation. If, for competitive reasons, premiums cannot be increased to anticipate inflation, this cost would be absorbed by the Company. Inflation also affects the rate of investment return on the Company’s investment portfolio with a corresponding effect on investment income.

As a smaller reporting company, we have elected to comply with certain scaled disclosure reporting obligations, and therefore are not providing the information required by this Item.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including the Company’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of December 31, 2025, management, with the participation of the Company’s Chief Executive Officer and its Principal Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures. Based on this evaluation, management, including the Chief Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2025 because of the material weaknesses in internal control over financial reporting described below.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Furthermore, the application of any evaluations of effectiveness in future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the Internal Control – Integrated Framework (2013). Based on this assessment, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2025, because of the material weaknesses described below.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Material Weakness—Group Premium Receivables and Suspense Cash Application

Management identified deficiencies in the design and operating effectiveness of controls over the recording and reconciliation of premium receivables and the application of premium payments held in suspense within the Company’s group whole life and group accident and health business.

The Company did not design and maintain effective controls to timely and accurately reconcile enrollment, billing and cash receipt information at the individual policyholder level and to resolve differences among third-party enrollment data, the policy administration system and the general ledger.

As a result, the Company did not maintain controls operating at a sufficient level of precision to determine whether recorded premium receivables were valid, whether amounts held in suspense should be applied to individual policyholders or otherwise recognized, and whether the related amounts were recorded in the appropriate period and were appropriately classified in the Consolidated Financial Statements.

These deficiencies created a reasonable possibility that a material misstatement of premium revenue, premium receivables, accounts payable and accrued expenses and related disclosures would not be prevented or detected on a timely basis.

Accordingly, management concluded that these deficiencies, in the aggregate, constituted a material weakness in internal control over financial reporting as of December 31, 2025.

Material Weakness— Implementation of LDTI and Valuation and Accounting for Long-duration contracts

Management identified deficiencies in the design and operating effectiveness of internal controls over the adoption and implementation of Accounting Standards Update No. 2018-12, *Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (“*LDTI”).

The Company lacked sufficient personnel with the specialized technical accounting, actuarial and internal control knowledge and experience necessary to design and execute an effective implementation process for LDTI and to perform an appropriate level of review over the resulting actuarial calculations, accounting entries and financial statement disclosures.

Consequently, the Company did not design and maintain effective controls to ensure that significant LDTI data inputs, assumptions, model configurations and accounting conclusions were identified, validated and incorporated completely and accurately into the actuarial calculations, accounting records and financial statement disclosures in time to complete the year-end financial reporting process.

These deficiencies created a reasonable possibility that a material misstatement of LFPB, related remeasurement gains or losses, DAC, AOCI, income taxes and related financial statement disclosures would not be prevented or detected on a timely basis.

Accordingly, management concluded that these deficiencies, in the aggregate, constituted a material weakness in internal control over financial reporting as of December 31, 2025.

Material Weakness— Income Tax Accounting

Management identified deficiencies in the design and operating effectiveness of internal controls over the preparation, review and financial reporting of the Company’s income tax provision and current and deferred tax balances.

The Company’s controls did not operate with sufficient precision and timeliness to ensure that the tax-basis reserves, premium and LDTI transition information used in the tax provision were complete and accurate.

Consequently, the income tax provision calculations were subject to revisions and required subsequent correction or reclassification. Although management’s corrective procedures supported the final reported amounts, those subsequent procedures demonstrated that the underlying controls were not operating effectively as of December 31, 2025.

These deficiencies created a reasonable possibility that a material misstatement of income tax related balances and related financial statement disclosures would not be prevented or detected on a timely basis.

Accordingly, management concluded that these deficiencies, in the aggregate, constituted a material weakness in internal control over financial reporting as of December 31, 2025.

Remediation Activities

As further described below, management has initiated remediation activities intended to address the material weaknesses described above, which remain unremediated as of the date of this report. These activities include the following:

Material Weakness—Group Premium Receivables and Suspense Cash Application

Management’s remediation activities include or will include:

• Implementing controls to validate inbound enrollment files against approved formats and business rules;
• Establishing procedures to communicate exceptions to submitting partners and require correction before information is processed by the policy-administration system;
• Implementing documented manual validation and exception-review controls while the automated solution is being developed and tested;
• Establishing recurring policy-level reconciliations among enrollment data, billing records, cash receipts, policy status, due-premium balances, suspense balances and the general ledger; and
• Establishing formal aging, investigation, disposition and escalation requirements for due-premium and suspense balances;

Material Weakness—Implementation of LDTI and Valuation and Accounting for Long-duration contracts

Management’s remediation activities include or will include:

• Adding personnel or engaging qualified third-party resources with specialized technical accounting, actuarial and internal control expertise to support the ongoing application of LDTI;
• Enhancing controls over actuarial valuation-related data inputs, assumptions, model configurations, actuarial calculations, as well as actuarial based journal entries, account reconciliations and financial statement disclosures; and
• Establishing formal actuarial-to-accounting handoff and review controls designed to ensure that complete, accurate and timely information is provided and reviewed before completion of the financial statement close process.

Material Weakness—Income Tax Accounting

Management’s remediation activities include or will include:

• Implementing controls to reconcile final tax reserves and premium to the corresponding tax attributes used in the income tax provision; and
• Enhancing the independent review of current and deferred income tax expense, deferred tax assets and liabilities, and related equity effects using defined review criteria and thresholds, as well as model changes.

Changes in Internal Control Over Financial Reporting

We adopted new accounting guidance for insurance and reinsurance companies that issue long-duration contracts (“LDTI”) as of January 1, 2025 on a modified retrospective transition basis. As a result, we implemented changes to our relevant business processes and internal controls over financial reporting.

Except as reported above, no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) occurred during the quarter ended December 31, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

After December 31, 2025, the Company began implementing certain remediation measures with respect to the material weaknesses described above. Those post-year-end remediation activities did not affect management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2025.

Attestation Report of the Registered Public Accounting Firm

This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to certain rules of the Securities and Exchange Commission that exempt non-accelerated filers, including the Company, from such requirement.