AAME Swings to Profit on Strong Premium Growth, Assets Up 9.5%

TL;DR

**AAME is back in the black with solid premium growth, making it a compelling buy for a turnaround play.**

AI Summary

ATLANTIC AMERICAN CORP (AAME) reported a significant turnaround in its financial performance for the nine months ended September 30, 2025, achieving a net income of $4.695 million, a substantial improvement from a net loss of $4.680 million in the prior year. This positive shift was primarily driven by a robust 11.78% increase in net insurance premiums, which rose to $149.031 million from $133.327 million. Total revenue also saw a healthy increase of 14.36%, reaching $159.175 million compared to $139.184 million in 2024. The company's balance sheet strengthened, with total assets growing by 9.51% to $430.855 million from $393.428 million at December 31, 2024, and shareholders' equity increasing by 9.91% to $109.488 million. Cash and cash equivalents, however, experienced a slight decrease of 3.16% to $34.444 million. Key business changes include the ongoing preparation for the adoption of ASU 2018-12, 'Targeted Improvements to the Accounting for Long-Duration Contracts,' which is expected to materially impact financial statements, and the enactment of the 'One Big Beautiful Bill Act of 2025,' which management believes will not have a material impact. Risks include the inherent uncertainties in insurance claims and investment performance, as evidenced by unrealized gains on equity securities of $2.528 million for the nine months ended September 30, 2025, compared to a loss of $1.617 million in the prior year.

Why It Matters

This turnaround is crucial for AAME investors, signaling improved operational efficiency and a return to profitability after a challenging prior year. The significant increase in insurance premiums suggests strong market penetration and demand for their property & casualty and life & health products, potentially boosting investor confidence. For employees, a healthier financial position could mean greater job security and potential for growth. Customers benefit from a more stable insurer, ensuring claims can be met. In the broader market, AAME's performance indicates resilience in the insurance sector, especially given the competitive landscape and ongoing regulatory changes like ASU 2018-12, which could reshape how long-duration contracts are valued across the industry.

Risk Assessment

Risk Level: medium — The company faces medium risk due to the material impact expected from the adoption of ASU 2018-12, 'Targeted Improvements to the Accounting for Long-Duration Contracts,' which will significantly change financial statement disclosures and potentially affect reported equity and earnings. Additionally, while net income improved, cash and cash equivalents decreased by $1.126 million for the nine months ended September 30, 2025, indicating some liquidity management challenges despite operational profitability.

Analyst Insight

Investors should closely monitor AAME's disclosures regarding the implementation of ASU 2018-12, as it will materially impact reported financials. Given the strong premium growth and return to profitability, consider AAME for its operational improvements, but be aware of potential volatility as new accounting standards are adopted and their full impact becomes clear.

Financial Highlights

debt To Equity

2.93

revenue

$159.175M

operating Margin

N/A

total Assets

$430.855M

total Debt

$321.367M

net Income

$4.695M

eps

$0.23

gross Margin

N/A

cash Position

$34.444M

revenue Growth

+14.36%

Revenue Breakdown

Key Numbers

• $4.695M — Net income (for the nine months ended September 30, 2025, a significant improvement from a $4.680 million net loss in 2024)
• $149.031M — Net insurance premiums (increased by 11.78% from $133.327 million in the prior year)
• $159.175M — Total revenue (increased by 14.36% from $139.184 million in the prior year)
• $430.855M — Total assets (increased by 9.51% from $393.428 million at December 31, 2024)
• $109.488M — Total shareholders' equity (increased by 9.91% from $99.613 million at December 31, 2024)
• $34.444M — Cash and cash equivalents (decreased by 3.16% from $35.570 million at December 31, 2024)
• $2.528M — Unrealized gains on equity securities, net (for the nine months ended September 30, 2025, compared to a $1.617 million loss in 2024)
• $101.031M — Insurance benefits and losses incurred (for the nine months ended September 30, 2025, up from $94.492 million in 2024)
• $37.505M — Commissions and underwriting expenses (for the nine months ended September 30, 2025, up from $35.740 million in 2024)
• 20,397,228 — Common shares outstanding (as of October 31, 2025)

Key Players & Entities

• ATLANTIC AMERICAN CORP (company) — registrant
• American Southern Insurance Company (company) — primary operating subsidiary
• American Safety Insurance Company (company) — primary operating subsidiary
• Bankers Fidelity Life Insurance Company (company) — primary operating subsidiary
• Bankers Fidelity Assurance Company (company) — primary operating subsidiary
• Atlantic Capital Life Assurance Company (company) — primary operating subsidiary
• FASB (regulator) — issued ASU No. 2018-12 and ASU No. 2025-06
• U.S. (regulator) — enacted the One Big Beautiful Bill Act of 2025
• NASDAQ Global Market (regulator) — exchange where AAME common stock is registered
• Private Securities Litigation Reform Act of 1995 (regulator) — safe harbor provisions

FAQ

Risk Factors

• Volatility in Investment Performance [medium — financial]: The company's financial results are sensitive to fluctuations in investment values. For the nine months ended September 30, 2025, unrealized gains on equity securities were $2.528 million, a significant swing from an unrealized loss of $1.617 million in the prior year. This highlights the potential for substantial swings in comprehensive income.
• Insurance Claims and Benefits [medium — operational]: The core insurance business faces inherent risks related to the timing and magnitude of claims. Insurance benefits and losses incurred increased to $101.031 million for the nine months ended September 30, 2025, up from $94.492 million in the prior year, indicating higher payouts.
• Adoption of New Accounting Standards [medium — regulatory]: Atlantic American Corp is preparing for the adoption of ASU 2018-12, 'Targeted Improvements to the Accounting for Long-Duration Contracts.' This standard is expected to materially impact financial statements, introducing complexity and potential changes in reported results.
• Commissions and Underwriting Expenses [low — operational]: Costs associated with acquiring and underwriting insurance business have increased. Commissions and underwriting expenses rose to $37.505 million for the nine months ended September 30, 2025, from $35.740 million in the prior year, impacting profitability.

Industry Context

Atlantic American Corp operates within the insurance industry, a sector characterized by intense competition, regulatory oversight, and sensitivity to economic conditions. The industry is undergoing changes driven by evolving customer expectations, technological advancements, and new accounting standards impacting financial reporting. Companies like AAME must navigate these dynamics while managing underwriting risks, investment portfolios, and operational efficiencies.

Regulatory Implications

The company is subject to state-specific insurance regulations and federal oversight. The upcoming adoption of ASU 2018-12 represents a significant regulatory-driven accounting change that will require careful implementation and may affect reported profitability and financial position. Management's assessment of the 'One Big Beautiful Bill Act of 2025' suggests no material impact, but ongoing monitoring of legislative changes is prudent.

What Investors Should Do

1. Monitor the impact of ASU 2018-12 adoption on future financial reporting and profitability metrics.
2. Analyze the sustainability of the revenue growth, particularly the increase in net insurance premiums, and its drivers.
3. Assess the company's risk management strategies concerning investment volatility and insurance claims, given the fluctuations in unrealized gains and incurred losses.
4. Evaluate the efficiency of operations by tracking trends in commissions and underwriting expenses relative to premium growth.
5. Consider the slight decrease in cash and cash equivalents in the context of overall liquidity and operational needs.

Key Dates

• 2025-09-30: Nine months ended September 30, 2025 — Reported significant net income of $4.695 million, a turnaround from a net loss in the prior year, driven by increased premiums.
• 2025-12-31: As of December 31, 2024 — Prior year-end balance sheet figures used for comparison, showing total assets of $393.428 million and shareholders' equity of $99.613 million.
• 2024-09-30: Nine months ended September 30, 2024 — Reported a net loss of $4.680 million, providing a baseline for the substantial improvement seen in 2025.

Glossary

ASU 2018-12

Accounting Standards Update 2018-12, which provides targeted improvements to the accounting for long-duration contracts, particularly for insurance entities. (This standard is expected to materially impact Atlantic American Corp's financial statements, requiring significant adjustments to how long-term insurance contracts are accounted for.)

Unearned Premiums

The portion of insurance premiums that have been paid but not yet earned by the insurer, representing coverage for future periods. (An increase in unearned premiums (from $31.178M to $36.869M) suggests growth in the company's insurance business and future revenue potential.)

Deferred Acquisition Costs (DAC)

Costs incurred in acquiring new insurance contracts that are capitalized and amortized over the expected life of the contracts. (An increase in DAC (from $44.842M to $45.759M) aligns with the growth in net insurance premiums, indicating investment in future business.)

Accumulated Other Comprehensive Loss

A component of shareholders' equity that includes unrealized gains and losses on certain investments and other items not recognized in net income. (The reduction in accumulated other comprehensive loss (from -$18.712M to -$12.824M) reflects positive changes in the fair value of available-for-sale securities, contributing to equity growth.)

Year-Over-Year Comparison

Atlantic American Corp has demonstrated a significant financial turnaround compared to the prior year. Net income shifted from a $4.680 million loss to a $4.695 million profit for the nine months ended September 30, 2025. This improvement was fueled by a robust 11.78% increase in net insurance premiums and a 14.36% rise in total revenue. Total assets grew by 9.51% and shareholders' equity by 9.91%, indicating balance sheet strengthening. However, cash and cash equivalents saw a slight decrease of 3.16%.

Key Financial Figures

• $1.00 — ich registered Common Stock, par value $1.00 per share AAME NASDAQ Global Market
• $1 — hares of the registrant's Common Stock, $1 par value, outstanding on October 31, 2

Filing Documents

• ef20054956_10q.htm (10-Q) — 1563KB
• ef20054956_ex31-1.htm (EX-31.1) — 13KB
• ef20054956_ex31-2.htm (EX-31.2) — 12KB
• ef20054956_ex32-1.htm (EX-32.1) — 8KB
• 0001140361-25-042275.txt ( ) — 8325KB
• aame-20250930.xsd (EX-101.SCH) — 44KB
• aame-20250930_def.xml (EX-101.DEF) — 239KB
• aame-20250930_lab.xml (EX-101.LAB) — 447KB
• aame-20250930_pre.xml (EX-101.PRE) — 256KB
• aame-20250930_cal.xml (EX-101.CAL) — 69KB
• ef20054956_10q_htm.xml (XML) — 1720KB

Forward-Looking Statements

Forward-Looking Statements 2 Part I. Financial Information Item 1.

Financial Statements

Financial Statements: 3 Condensed Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024 3 Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 2025 and 2024 (unaudited) 4 Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months and nine months ended September 30, 2025 and 2024 (unaudited) 5 Condensed Consolidated Statements of Shareholders' Equity for the three months and nine months ended September 30, 2025 and 2024 (unaudited) 6 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (unaudited) 7 Notes to Unaudited Condensed Consolidated Financial Statements 8 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 22 Item 4.

Controls and Procedures

Controls and Procedures 28 Part II. Other Information Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 30 Item 5. Other Information 30 Item 6. Exhibits 30

Signatures

Signatures 31 Table of Contents

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS Certain of the statements contained herein are forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are all statements other than those of historical fact. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, and include estimates and assumptions related to, among other things, general economic, competitive, operational and legislative developments, expectations and trends. Forward-looking statements are inherently subject to risks and uncertainties which are, in many instances, beyond the Company's control and have been made based upon management's current expectations and beliefs concerning future developments and their potential effect upon the Company. There can be no assurance that future developments will be in accordance with management's expectations or that the effect of future developments on the Company will be those anticipated by management. Actual results could differ materially from those expressed by forward-looking affecting providers or individuals, including the cost or availability of services, or the tax consequences related thereto; disruption to the financial markets; unanticipated increases in the rate, number and amounts of claims outstanding; the level of performance of reinsurance companies under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect the Company against losses; changes in the stock markets, interest rates or other financial markets, including the potential effect on the Company's stat

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements ATLANTIC AMERICAN CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) Unaudited September 30, 2025 December 31, 2024 ASSETS Cash and cash equivalents $ 34,444 $ 35,570 Investments: Fixed maturities, available-for-sale, at fair value (amortized cost: $ 251,703 and $ 236,299 ; no allowance for credit losses) 235,469 212,612 Equity securities, at fair value (cost: $ 4,943 and $ 4,939 ) 10,432 7,900 Other invested assets (cost: $ 7,946 and $ 7,946 ) 6,225 6,616 Policy loans 1,668 1,722 Real estate 38 38 Investment in unconsolidated trusts 1,238 1,238 Total investments 255,070 230,126 Receivables: Reinsurance (net of allowance for expected credit losses of $ 43 and $ 51 ) 22,694 22,942 Insurance premiums and other (net of allowance for expected credit losses of $ 209 and $ 201 ) 42,399 27,458 Deferred income taxes, net 16,089 18,118 Deferred acquisition costs 45,759 44,842 Other assets 11,856 11,828 Intangibles 2,544 2,544 Total assets $ 430,855 $ 393,428 LIABILITIES AND SHAREHOLDERS' EQUITY Insurance reserves and policyholder funds: Future policy benefits $ 103,159 $ 98,464 Unearned premiums 36,869 31,178 Losses and claims 107,713 93,707 Other policy liabilities 1,837 1,757 Total insurance reserves and policyholder funds 249,578 225,106 Accounts payable and accrued expenses 34,030 30,948 Revolving credit facility 4,021 4,023 Junior subordinated debenture obligations, net 33,738 33,738 Total liabilities 321,367 293,815 Commitments and contingencies (Notes 3 and 12) Shareholders' equity: Preferred stock, $ 1 par, 4,000,000 shares authorized; Series D preferred, 55,000 shares issued and outstanding; $ 5,500 redemption value 55 55 Common stock, $ 1 par, 50,000,000 shares authorized; shares issued: 22,400,894 ; shares outstanding: 20,397,228 and 20,399,758

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