##### Table of Contents





SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
      Form 10-K
 þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    December 31, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission file number 0-3722
      ATLANTIC AMERICAN
    CORPORATION
 (Exact name of registrant as
    specified in its charter)
  Georgia(State or other jurisdiction
    of
    incorporation or organization)

58-1027114(I.R.S. employer
    identification no.)4370 Peachtree Road, N.E.,
    Atlanta, Georgia(Address of principal
    executive offices)

30319(Zip code)   (Registrants telephone number, including area code)
 (404) 266-5500
  Securities registered pursuant to section 12(b) of the
    Act:
 None
  Securities registered pursuant to Section 12(g) of the
    Act:
  Common Stock, $1.00 par value
 (Title of class)
      o þ
  o þ
  þ o
  Regulation S-K 10-K Form 10-K. o
    Large Accelerated
    Filer o

Accelerated
    Filer o

Non-Accelerated
    Filer o
    (Do not check if a smaller reporting company)

Smaller Reporting
    Company þ   Rule 12b-2 o þ
            DOCUMENTS INCORPORATED BY REFERENCE
  Form 10-K.




---



##### 





TABLE OF
    CONTENTS
   
  PagePART IItem 1.


Business


2The Company


2Marketing


4Underwriting


5Policyholder and Claims Services


5Reserves


6Reinsurance


10Competition


10Ratings


11Regulation


11NAIC Ratios


12Risk-Based Capital


12Investments


13Employees


14Financial Information by Industry
    Segment


14Available Information


14Executive Officers of the
    Registrant


14Forward-Looking Statements


15Item 1A.


Risk Factors


15Item 1B.


Unresolved Staff Comments


19Item 2.


Properties


19Item 3.


Legal Proceedings


20Item 4.


Submission of Matters to a Vote of Security
    Holders


20PART IIItem 5.


Market for Registrants Common Equity,
    Related Shareholder Matters and Issuer Purchases of Equity
    Securities


20Item 6.


Selected Financial Data


23Item 7.


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


24Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


36Item 8.


Financial Statements and Supplementary Data


37Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


71Item 9A.


Controls and Procedures


71Item 9B.


Other Information


71PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


71Item 11.


Executive Compensation


71Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Shareholder Matters


71Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


71Item 14.


Principal Accountant Fees and Services


71PART IVItem 15.


Exhibits and Financial Statement Schedules


72EX-10.09 STOCK PURCHASE AGREEMENTEX-10.10 LEASE AGREEMENTEX-21.1 SUBSIDIARIES OF THE REGISTRANTEX-23.1 CONSENT OF BDO SEIDMAN LLPEX-31.1 SECTION 302 CERTIFICATION OF THE PEOEX-31.2 SECTION 302 CERTIFICATION OF THE PFOEX-32.1 SECTION 906 CERTIFICATIONS OF THE PEO AND PFO   1




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##### Table of Contents



PART I  Item 1.
    Business The
    Company  and/or
      Property
    and Casualty Operations
    Business Automobile Insurance and/or
  General Liability Insurance
  Property Insurance
  Personal Automobile Insurance and/or
  Surety Bonds
   2




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##### Table of Contents



Year Ended December 31,2007


2006


2005


2004


2003(In thousands)Automobile liability

$
10,936


$
16,163


$
16,723


$
18,944


$
17,947Automobile physical damage


8,105



9,698



11,002



11,187



9,451General liability


10,349



11,394



11,767



10,102



5,777Property


3,005



3,187



3,692



3,862



3,819Surety


9,180



10,218



8,263



3,967



364Total

$
41,575


$
50,660


$
51,447


$
48,062


$
37,358   Life
    and Health Operations
      Year Ended December 31,2007


2006


2005


2004


2003(In thousands)Life insurance

$
10,615


$
10,960


$
11,600


$
12,934


$
13,541Medicare supplement


41,786



44,919



51,414



49,575



46,190Other accident and health


3,848



3,041



2,890



2,933



2,952Total health insurance


45,634



47,960



54,304



52,508



49,142Total

$
56,249


$
58,920


$
65,904


$
65,442


$
62,683   Life Insurance
  Medicare Supplement Insurance
  Other Accident and Health Insurance
 3




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##### Table of Contents



Marketing  Property
    and Casualty Operations
    Life
    and Health Operations
          and/or
 4




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##### Table of Contents



Underwriting  Property
    and Casualty Operations
    and/or
  Life
    and Health Operations
  ages 45-70, ages 71-80 ages 81-85.
  and/or
 Policyholder
    and Claims Services  24-hour
    Property
    and Casualty Operations
   5




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##### Table of Contents



on-site
  Life
    and Health Operations
   Reserves    2007


2006


2005Balance at January 1

$
55,291


$
53,817


$
53,025Less: Reinsurance recoverables


(12,266
)


(12,829
)


(12,857
)Net balance at January 1


43,025



40,988



40,168Incurred related to:Current year


65,274



73,167



76,626Prior years(1)


(11,517
)


(9,926
)


(8,370
)Total incurred


53,757



63,241



68,256Paid related to:Current year


41,687



46,355



50,922Prior years


16,395



14,849



16,514Total paid


58,082



61,204



67,436Net balance at December 31


38,700



43,025



40,988Plus: Reinsurance recoverables


13,004



12,266



12,829Balance at December 31

$
51,704


$
55,291


$
53,817   (1)
    
    See Note 4 of Notes to Consolidated Financial Statements.     6




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##### Table of Contents



Case


IBNR


Total(In thousands)Business automobile

$
9,759


$
8,802


$
18,561Personal automobile/physical damage


1,911



659



2,570General & other liability


4,483



10,984



15,467Other lines (including life)


2,667



4,455



7,122Medicare supplement


176



5,376



5,552Unallocated loss adjustment reserves






2,432



2,432Total reserves for losses and claims

$
18,996


$
32,708


$
51,704  7




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##### Table of Contents



Property
    and Casualty Operations
  case-by-case
      and/or
 8




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##### Table of Contents





Year Ended December 31,2007


2006


2005


2004


2003


2002


2001


2000


1999


1998


1997(In thousands)Reserve for losses and LAE

$
43,994


$
45,655


$
43,593


$
42,310


$
39,042


$
44,428


$
46,242


$
48,350


$
48,764


$
46,972


$
47,843Cumulative paid as of:One year later






18,010



14,254



16,521



13,772



15,825



18,093



20,682



18,267



14,643



16,983Two years later










23,967



24,217



22,202



23,933



26,194



31,687



30,143



25,802



24,600Three years later














28,775



26,673



28,487



31,257



35,865



37,938



31,491



30,690Four years later


















28,645



31,398



33,683



37,223



39,972



34,987



33,767Five years later






















32,820



35,134



38,616



40,816



36,064



34,898Six years later


























35,610



39,166



42,006



36,464



35,092Seven years later






























39,538



42,079



37,528



35,348Eight years later


































42,352



37,595



36,332Nine years later






































37,868



36,380Ten years later










































36,620Ultimate losses and LAE reestimated as of:End of year


43,994



45,655



43,593



42,310



39,042



44,428



46,242



48,350



48,764



46,972



47,843One year later






35,590



34,897



37,280



35,706



42,235



39,628



46,778



45,866



41,834



43,689Two years later










32,929



34,108



34,779



40,099



40,249



43,104



46,065



40,502



39,369Three years later














33,338



31,710



39,260



38,877



42,208



44,800



41,175



38,536Four years later


















31,224



37,163



39,339



41,503



43,792



40,295



38,884Five years later






















37,133



39,067



41,490



43,775



39,621



38,822Six years later


























39,484



41,600



43,674



39,518



38,367Seven years later






























41,822



43,738



39,453



38,426Eight years later


































43,884



39,524



38,303Nine years later






































39,710



38,348Ten years later










































38,494Cumulative redundancy (deficiency)





$
10,065


$
10,664


$
8,972


$
7,818


$
7,295


$
6,758


$
6,528


$
4,880


$
7,262


$
9,34922.0
%


24.5
%


21.2
%


20.0
%


16.4
%


14.6
%


13.5
%


10.0
%


15.5
%


19.5
%   and/or
 9




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##### Table of Contents





Life
    and Health Operations
   Reinsurance    Property
    and Casualty Operations
    Life
    and Health Operations
   Competition    Property
    and Casualty Operations
   10




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##### Table of Contents



Life
    and Health Operations
   Ratings      American Southern.
  Bankers Fidelity.
 Regulation   11




---



##### Table of Contents



NAIC
    Ratios       Risk-Based
    Capital  Level Risk-Based
 12




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##### Table of Contents



Investments    December 31,2007


2006


2005Amount


Percent


Amount


Percent


Amount


Percent(Dollars in thousands)Fixed maturities:U.S. Government agencies and authorities

$
127,073



63.1
%

$
117,127



55.9
%

$
95,085



48.7
%States, municipalities and political subdivisions


412



0.2



414



0.2



422



0.2Public utilities






0.0







0.0







0.0All other corporate bonds


29,628



14.7



33,792



16.2



33,578



17.2Redeemable preferred stock


10,714



5.3



12,949



6.2



18,154



9.3Certificates of deposit


100



0.0



100



0.0



100



0.1Total fixed maturities(1)


167,927



83.3



164,382



78.5



147,339



75.5Common and non-redeemable preferred stocks(2)


5,335



2.7



22,476



10.7



24,580



12.6Mortgage, policy and student loans(3)


1,958



1.0



3,328



1.6



4,018



2.1Other invested assets(4)


1,563



0.8



1,735



0.8



2,076



1.1Real estate


38







38







38



Investments in unconsolidated trusts


1,238



0.6



1,238



0.6



1,238



0.6Short-term investments(5)


23,432



11.6



16,191



7.8



15,744



8.1Total investments

$
201,491



100.0
%

$
209,388



100.0
%

$
195,033



100.0
%   (1)
    
    Fixed maturity securities are carried on the balance sheet at
    estimated fair value. Total cost of fixed maturity securities
    was $168.7 million as of December 31, 2007,
    $163.1 million as of December 31, 2006, and
    $144.6 million as of December 31, 2005.(2)
    
    Equity securities are carried on the balance sheet at estimated
    fair value. Certain non-redeemable preferred stocks do not have
    publicly quoted values, and are carried at estimated fair value
    as determined by management. Total cost of equity securities was
    $5.4 million as of December 31, 2007,
    $7.5 million as of December 31, 2006, and
    $9.0 million as of December 31, 2005.(3)
    
    Mortgage, policy and student loans are valued at historical cost.(4)
    
    Investments in other invested assets which are traded are valued
    at estimated fair value and the others are accounted for using
    the equity method. Total cost of other invested assets was
    $1.6 million as of December 31, 2007,
    $1.8 million as of December 31, 2006, and
    $2.1 million as of December 31, 2005.(5)
    
    Short-term investments are valued at cost, which approximates
    market value at the measurement date.    Year Ended December 31,2007


2006


2005(Dollars in thousands)Average investments(1)

$
199,614


$
199,236


$
188,351Net investment income


11,603



11,822



10,702Average yield on investments


5.81
%


5.93
%


5.68
%Realized investment gains (losses), net(2)


12,627



3,084



(7,303
)  13




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##### Table of Contents



(1)
    
    Calculated as the average of the balances at the beginning of
    the year and at the end of each of the succeeding four quarters.(2)
    
    Includes a $7.2 million impairment charge in 2005 related
    to the write-down in the value of certain automotive sector
    fixed maturity investments. See Note 3 of Notes to
    Consolidated Financial Statements.   Employees   Financial
    Information By Industry Segment   Available
    Information  Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330. http://www.sec.gov. http://www.atlam.com.
 Executive
    Officers of the Registrant    Director orName

Age


Positions with the Company

Officer SinceJ. Mack Robinson


84


Chairman of the Board


1974Hilton H. Howell, Jr.


45


Director, President & CEO


1992John G. Sample, Jr.


51


Senior Vice President & CFO


2002     Mr. Robinson
  Mr. Howell
 14




---



##### Table of Contents



son-in-law
  Mr. Sample
 Forward-Looking
    Statements    Item 1A.
    Risk
    Factors    We
    operate in a highly competitive environment.
   15




---



##### Table of Contents



We
    operate in a highly regulated environment.
  and/or
  Our
    revenues may fluctuate with insurance market conditions for
    similar products.
    Our
    revenues and profitability may fluctuate with interest rates and
    investment results.
  and/or
  Our
    operating results may be affected if incurred losses differ from
    our loss reserve estimates.
   16




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##### Table of Contents



Rapidly
    changing benefit costs could have a material impact on our
    operations.
  and/or and/or and/or
  If
    market conditions cause reinsurance to be more costly or
    unavailable, we may be required to assume increased risk or
    reduce the level of our underwriting commitments.
    We
    cannot guarantee that our reinsurers will pay in a timely
    fashion, if at all, and, as a result, we could experience
    losses.
    The
    guaranty fund assessments that we are required to pay to state
    guaranty associations may increase and our results of operations
    and financial condition could suffer as a result.
   17




---



##### Table of Contents



The
    unpredictability of court decisions could have a material impact
    on our operations.
    The
    passage of tort reform or other legislation, and the subsequent
    review of such laws by the courts, could have a material impact
    on our operations.
    Catastrophic
    events could have a material adverse effect on our business,
    consolidated operating results, financial condition and/or
    liquidity.
  and/or and/or and/or
  If we
    are unable to maintain favorable financial strength ratings, it
    may be more difficult for us to write new business or renew our
    existing business.
  and/or
 18




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##### Table of Contents



Our
    business could be adversely affected by the loss of independent
    agents.
    Our
    business could be adversely affected by the loss of one or more
    key employees.
    We are
    a holding company and are dependent on dividends and other
    payments from our operating subsidiaries, which are subject to
    dividend restrictions.
    A
    majority of our common stock is held directly and indirectly by
    one family.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties  Leased Properties.
     19




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##### Table of Contents



Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    Of Matters To A Vote Of Security Holders   PART II  Item 5.
    Market
    For Registrants Common Equity, Related Shareholder Matters
    And Issuer Purchases of Equity Securities    Year Ended December 31,

High


Low20071st quarter

$
4.04


$
2.902nd quarter


5.44



3.463rd quarter


4.15



2.404th quarter


2.96



1.1120061st quarter

$
3.00


$
2.522nd quarter


3.45



2.693rd quarter


3.15



2.254th quarter


3.86



2.24    20




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##### Table of Contents



Equity
    Compensation Plan Information
    Number ofsecuritiesremaining availableNumber of





for future issuancesecurities to be





under equityissued upon


Weighted-average


compensation plansexercise of


exercise price of


(excludingoutstanding


outstanding


securitiesoptions, warrants


options, warrants


reflected in thePlan Category

and rights


and rights


first column)Equity compensation plans approved by security holders


624,000


$
1.42



2,479,594Equity compensation plans not approved by security holders(1)










Total


624,000


$
1.42



2,479,594   (1)
    
    All the Companys equity compensation plans have been
    approved by the Companys shareholders.  Issuer
    Purchases of Equity Securities
     21




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##### Table of Contents



Performance
    Graph
    
    2002


2003


2004


2005


2006


2007Atlantic American Corporation



100.00




184.05




190.18




165.64




181.60




85.89Russell 2000 Index



100.00




145.37




170.08




175.73




205.60




199.96NASDAQ Insurance Index



100.00




103.61




124.11




135.59




152.01




150.81Insurance Peer Group



100.00




116.82




169.35




218.09




284.04




314.51   Factual
    material is obtained from sources believed to be reliable, but
    the publisher is not responsible for any errors or omissions
    contained herein.
    Source:
    Value Line, Inc. and Nasdaq   22




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##### Table of Contents



Item 6.
    Selected
    Financial Data  Year Ended December 31,2007


2006


2005


2004


2003(In thousands, except per share data)Insurance premiums

$
97,824


$
109,580


$
117,351


$
113,504


$
100,041Investment income


11,722



11,926



10,828



10,071



9,789Other income


799



768



1,105



1,049



776Realized investment gains (losses), net(1)


12,627



3,084



(7,303
)


1,154



696Total revenue


122,972



125,358



121,981



125,778



111,302Insurance benefits and losses incurred


58,701



65,460



71,201



70,622



64,840Other expenses


45,173



50,274



51,394



47,466



40,440Total benefits and expenses


103,874



115,734



122,595



118,088



105,280Income (loss) before income taxes


19,098



9,624



(614
)


7,690



6,022Income tax expense (benefit)


7,513



2,458



(1,746
)


(149
)


(454
)Income from continuing operations


11,585



7,166



1,132



7,839



6,476(Loss) income from discontinued operations, net of tax(2)


(4,333
)


1,770



(4,307
)


(2,822
)


368Net income (loss)

$
7,252


$
8,936


$
(3,175
)

$
5,017


$
6,844Basic income (loss) per common share:Income from continuing operations

$
.46


$
.27


$



$
.31


$
.24(Loss) income from discontinued operations


(.20
)


.09



(.21
)


(.13
)


.02Net income (loss)

$
.26


$
.36


$
(.21
)

$
.18


$
.26Diluted income (loss) per common share:Income from continuing operations

$
.45


$
.27


$



$
.31


$
.23(Loss) income from discontinued operations


(.20
)


.06



(.21
)


(.13
)


.02Net income (loss)

$
.25


$
.33


$
(.21
)

$
.18


$
.25Tangible book value per common share(3)

$
2.98


$
3.30


$
3.00


$
3.42


$
3.30Common shares outstanding


21,817



21,481



21,383



21,213



21,199Total assets

$
458,254


$
459,152


$
461,366


$
471,274


$
442,609Total long-term debt

$
52,988


$
52,988


$
49,738


$
51,488


$
53,238Total debt

$
53,988


$
53,988


$
51,488


$
53,238


$
56,238Total shareholders equity

$
87,794


$
94,188


$
80,453


$
88,960


$
86,893   (1)
    
    Includes a $7,198 impairment charge in 2005 for automotive
    sector fixed maturity investments. See Note 3 of Notes to
    Consolidated Financial Statements.(2)
    
    See Note 2 of Notes to Consolidated Financial Statements.(3)
    
    Excludes goodwill. 23




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations        Critical
    Accounting Policies
    Unpaid loss and loss adjustment expenses
 24




---



##### Table of Contents



Future policy benefits
  Deferred acquisition costs
  Receivables
  Cash and investments
  Deferred income taxes
 25




---



##### Table of Contents



Overall
    Corporate Results
  Year Ended December 31,2007


2006


2005(In thousands)RevenueProperty and Casualty:American Southern

$
47,046


$
56,593


$
52,925Life and Health:Bankers Fidelity


74,658



67,443



68,255Corporate and Other


1,268



1,322



801Total revenue

$
122,972


$
125,358


$
121,981Income (loss) from continuing operations before income
    taxesProperty and Casualty:American Southern

$
9,462


$
10,625


$
4,765Life and Health:Bankers Fidelity


16,105



6,754



2,208Corporate and Other


(6,469
)


(7,755
)


(7,587
)Income (loss) from continuing operations before income taxes

$
19,098


$
9,624


$
(614
)(Loss) from discontinued operations, net of tax

$
(4,333
)

$
1,770


$
(4,307
)Net income (loss)

$
7,252


$
8,936


$
(3,175
)    26




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##### Table of Contents



Underwriting
    Results
  American
    Southern
    Year Ended December 31,2007


2006


2005(Dollars in thousands)Gross written premiums

$
42,351


$
55,539


$
62,082Ceded premiums


(6,379
)


(9,265
)


(9,099
)Net written premiums

$
35,972


$
46,274


$
52,983Net earned premiums

$
41,575


$
50,660


$
51,447Net losses and loss adjustment expenses


18,399



23,440



24,827Underwriting expenses


19,185



22,528



23,333Underwriting income

$
3,991


$
4,692


$
3,287Loss ratio


44.3
%


46.3
%


48.2
%Expense ratio


46.1



44.4



45.4Combined ratio


90.4
%


90.7
%


93.6
%        27




---



##### Table of Contents



Year Ended December 31,2007


2006


2005(In thousands)Automobile liability

$
10,936


$
16,163


$
16,723Automobile physical damage


8,105



9,698



11,002General liability


10,349



11,394



11,767Property


3,005



3,187



3,692Surety


9,180



10,218



8,263Total earned premium

$
41,575


$
50,660


$
51,447        28




---



##### Table of Contents



Bankers
    Fidelity
    Year Ended December 31,2007


2006


2005(In thousands)Medicare supplement

$
41,786


$
44,919


$
51,414Other health products


3,848



3,041



2,890Life insurance


10,615



10,960



11,600Total earned premiums


56,249



58,920



65,904Insurance benefits and losses


40,302



42,020



46,374Underwriting expenses


18,251



18,669



19,673Total expenses


58,553



60,689



66,047Underwriting loss

$
(2,304
)

$
(1,769
)

$
(143
)            29




---



##### Table of Contents



Investment
    Income And Realized Gains
      2007


2006


2005(In thousands)Corporate bonds

$
123


$



$
6,380Redeemable preferred stocks

$



$



$
875Other invested assets

$
123


$



$
   and/or
  Interest
    Expense
     30




---



##### Table of Contents



Other
    Expenses
      Liquidity
    And Capital Resources
         31




---



##### Table of Contents



1-month, 2-months, 3-months 6-months,
         32




---



##### Table of Contents



New
    Accounting Pronouncements
     33




---



##### Table of Contents



05-1, (SOP 05-1). SOP 05-1 SOP 05-1 SOP 05-1
  Impact Of
    Inflation
   34




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
    Contractual
    Obligations
    Payments Due By PeriodLess than


1-3


3-5


More thanTotal


1 Year


Years


Years


5 Years(In thousands)Bank debt payable

$
12,750


$
1,000


$
11,750


$



$
Junior Subordinated Debentures


41,238















41,238Interest payable(1)


93,294



4,077



8,969



7,232



73,016Operating leases


4,015



1,098



1,673



1,244



Purchase commitments(2)


9,676



9,676











Losses and claims(3)


51,704



30,192



16,568



3,751



1,193Future policy benefits(4)


55,548



8,275



15,841



14,910



16,522Unearned premiums(5)


13,474



6,045



2,883



1,220



3,326Other policy liabilities


1,878



1,878











Total

$
283,577


$
62,241


$
57,684


$
28,357


$
135,295   (1)
    
    Interest payable is based on interest rates as of
    December 31, 2007 and assumes that all debt remains
    outstanding until its stated contractual maturity.(2)
    
    Represents balances due for goods and/or services which have
    been contractually committed as of December 31, 2007. To
    the extent contracts provide for early termination with notice
    but without penalty, only the amounts contractually due during
    the notice period have been included.(3)
    
    Losses and claims include case reserves for reported claims and
    reserves for claims incurred but not reported
    (IBNR). While payments due on claim reserves are
    considered contractual obligations because they relate to
    insurance policies issued by the Company, the ultimate amount to
    be paid to settle both case reserves and IBNR reserves is an
    estimate, subject to significant uncertainty. The actual amount
    to be paid is not determined until the Company reaches a
    settlement with any applicable claimant. Final claim settlements
    may vary significantly from the present estimates, particularly
    since many claims will not be settled until well into the
    future. In estimating the timing of future payments by year, the
    Company has assumed that its historical payment patterns will
    continue. However, the actual timing of future payments will
    likely vary materially from these estimates due to, among other
    things, changes in claim reporting and payment patterns and
    large unanticipated settlements. Amounts reflected do not
    include reinsurance amounts which may also be recoverable based
    on the level of ultimate sustained loss.(4)
    
    Future policy benefits relate to life insurance policies on
    which the Company is not currently making payments and will not
    make future payments unless and until the occurrence of an
    insurable event, such as a death or disability, or the
    occurrence of a payment triggering event, such as a surrender of
    a policy. Occurrence of any of these events is outside the
    control of the Company and the payment estimates are based on
    significant uncertainties such as mortality, morbidity,
    expenses, persistency, investment returns, inflation and the
    timing of payments. For regulatory purposes, the Company does
    perform cash flow modeling of such liabilities, which is the
    basis for the indicated disclosure; however, due to the
    significance of the assumptions used, the amount presented could
    materially differ from actual results.(5)
    
    Unearned premiums represent potential future revenue for the
    Company; however, under certain circumstances, such premiums may
    be refundable with cancellation of the underlying policy.
    Significantly all unearned premiums will be earned within the
    following twelve month period as the related future 35




---



##### Table of Contents



insurance protection is provided. Significantly all costs
    related to such unearned premiums have already been incurred and
    paid and are included in deferred acquisition costs; however,
    future losses related to the unearned premiums have not been
    recorded. The contractual obligations related to unearned
    premiums reflected in the table represent the average loss ratio
    applied to the year end unearned premium balances, with loss
    payments projected in comparable proportions to the year end
    loss and claims reserves. Projecting future losses is subject to
    significant uncertainties and the projected payments will most
    likely vary materially from these estimates as a result of
    differences in future severity, frequency and other anticipated
    and unanticipated factors. Amounts reflected do not take into
    account reinsurance amounts which may be recoverable based on
    the level of ultimate sustained loss.  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest
    Rate And Market Risk
      +200bp


+100bp


Fair value


−100bp


−200bp(In thousands)December 31, 2007

$
148,943


$
157,692


$
167,927


$
178,626


$
191,200December 31, 2006

$
144,531


$
153,875


$
164,382


$
176,216


$
189,604     +20%


+10%


Fair Value


−10%


−20%(In thousands)December 31, 2007  Total equity holdings

$
6,402


$
5,869


$
5,335


$
4,802


$
4,268December 31, 2006Investment in Wachovia Corporation

$
20,474


$
18,768


$
17,062


$
15,356


$
13,650Other equity holdings


6,497



5,956



5,414



4,872



4,331Total equity holdings

$
26,971


$
24,724


$
22,476


$
20,228


$
17,981     Interest Expense





Interest Expense+200bp


+100bp


Debt


−100bp


−200bp(In thousands)December 31, 2007

$
1,055


$
528


$
53,988


$
(528
)

$
(1,055
)December 31, 2006

$
1,055


$
528


$
53,988


$
(528
)

$
(1,055
)    36




---



##### 



Item 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  INDEX TO
    FINANCIAL STATEMENTS
  
  PageATLANTIC AMERICAN CORPORATIONReport of Independent Registered Public
    Accounting Firm


38Consolidated Balance Sheets as of
    December 31, 2007 and 2006


39Consolidated Statements of Operations for each of
    the three years in the period ended December 31, 2007


40Consolidated Statements of Shareholders
    Equity for each of the three years in the period ended
    December 31, 2007


41Consolidated Statements of Cash Flows for each of
    the three years in the period ended December 31, 2007


42Notes to Consolidated Financial Statements


43   37




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            BDO SEIDMAN LLP
  Atlanta, Georgia
 March 27, 2008
 38




---



##### Table of Contents



ATLANTIC
    AMERICAN CORPORATION
 CONSOLIDATED
    BALANCE SHEETS  December 31,2007


2006(Dollars in thousands,except per share data)ASSETSCash and cash equivalents, including short-term investments of
    $23,432 and $16,191 in 2007 and 2006, respectively

$
36,909


$
17,606Investments


178,059



193,197Receivables:Reinsurance


13,004



12,266Other, net of allowance for doubtful accounts of $728 and $752
    in 2007 and 2006, respectively


6,912



14,267Deferred income taxes, net


3,929



1,627Deferred acquisition costs


18,830



20,218Other assets


2,069



2,715Goodwill


2,388



3,008Assets of discontinued operations (Note 2)


196,154



194,248Total assets

$
458,254


$
459,152LIABILITIES AND SHAREHOLDERS EQUITYInsurance reserves and policyholder funds

$
128,078


$
134,316Accounts payable and accrued expenses


36,047



33,200Debt payable


53,988



53,988Liabilities of discontinued operations (Note 2)


152,347



143,460Total liabilities


370,460



364,964Commitments and contingencies (Note 9)Shareholders equity:Preferred stock, $1 par, 4,000,000 shares authorized;Series B preferred, 134,000 shares issued and
    outstanding; $13,400 redemption value


134



134Series D preferred, 70,000 shares issued and
    outstanding; $7,000 redemption value


70



70Common stock, $1 par, 50,000,000 shares authorized;21,816,999 shares issued in 2007 and 21,484,440 shares
    issued in 2006 and 21,816,999 shares outstanding in 2007 and
    21,481,413 shares outstanding in 2006


21,817



21,484Additional paid-in capital


56,414



55,832Retained earnings


10,530



4,969Accumulated other comprehensive (loss) income


(1,171
)


11,707Treasury stock, at cost, 3,027 shares in 2006






(8
)Total shareholders equity


87,794



94,188Total liabilities and shareholders equity

$
458,254


$
459,152    39




---



##### Table of Contents



ATLANTIC
    AMERICAN CORPORATION
 CONSOLIDATED
    STATEMENTS OF OPERATIONS  Year Ended December 31,2007


2006


2005(Dollars in thousands, exceptper share data)Revenue:Insurance premiums

$
97,824


$
109,580


$
117,351Investment income


11,722



11,926



10,828Realized investment gains (losses), net


12,627



3,084



(7,303
)Other income


799



768



1,105Total revenue


122,972



125,358



121,981Benefits and expenses:Insurance benefits and losses incurred


58,701



65,460



71,201Commissions and underwriting expenses


32,663



36,404



38,221Interest expense


4,160



4,605



3,611Other


8,350



9,265



9,562Total benefits and expenses


103,874



115,734



122,595Income (loss) from continuing operations before taxes


19,098



9,624



(614
)Income tax expense (benefit)


7,513



2,458



(1,746
)Income from continuing operations


11,585



7,166



1,132(Loss) income from discontinued operations, net of tax
    (Note 2)


(4,333
)


1,770



(4,307
)Net income (loss)


7,252



8,936



(3,175
)Preferred stock dividends


(1,691
)


(1,333
)


(1,206
)Net income (loss) applicable to common stock

$
5,561


$
7,603


$
(4,381
)Basic income (loss) per common share:Income from continuing operations

$
.46


$
.27


$
(Loss) income from discontinued operations


(.20
)


.09



(.21
)Net income (loss) applicable to common shareholders

$
.26


$
.36


$
(.21
)Diluted income (loss) per common share:Income from continuing operations

$
.45


$
.27


$
(Loss) income from discontinued operations


(.20
)


.06



(.21
)Net income (loss) applicable to common shareholders

$
.25


$
.33


$
(.21
)    40




---



##### Table of Contents



ATLANTIC
    AMERICAN CORPORATION
 CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY  AccumulatedRetained


OtherAdditional


Earnings


ComprehensivePreferred


Common


Paid-In


(Accumulated


Income


TreasuryStock


Stock


Capital


Deficit)


(Loss)


Stock


Total(Dollars in thousands)Balance, December 31, 2004

$
134


$
21,412


$
50,347


$
462


$
17,207


$
(602
)

$
88,960Comprehensive loss:Net loss














(3,175
)










(3,175
)Decrease in unrealized investment gains


















(6,549
)






(6,549
)Minimum pension liability adjustment


















(160
)






(160
)Deferred income tax attributable to other comprehensive loss


















2,348







2,348Total comprehensive loss


























(7,536
)Dividends accrued on preferred stock










(1,206
)














(1,206
)Deferred share compensation expense










(201
)


(40
)






240



(1
)Restricted stock grants










(66
)










66



Amortization of unearned compensation










66















66Acquisition of 45,619 shares for treasury






















(132
)


(132
)Issuance of 194,026 shares for employee benefit plans and
    stock options










(15
)


(27
)






344



302Balance, December 31, 2005


134



21,412



48,925



(2,780
)


12,846



(84
)


80,453Comprehensive income:Net income














8,936











8,936Decrease in unrealized investment gains


















(660
)






(660
)Fair value adjustment to derivative financial instrument


















(165
)






(165
)Minimum pension liability adjustment


















216







216Deferred income tax attributable to other comprehensive income


















213







213Total comprehensive income


























8,540Minimum pension liability adjustment due to adoption of
    SFAS 158, net of tax


















(743
)






(743
)Issuance of 70,000 shares of preferred stock


70







6,930















7,000Dividends accrued on preferred stock










(155
)


(1,178
)










(1,333
)Deferred share compensation expense










4















4Restricted stock grants






22



(22
)














Amortization of unearned compensation










66















66Acquisition of 25,774 shares for treasury






















(70
)


(70
)Issuance of 102,009 shares for employee benefit plans and
    stock options






50



84



(9
)






146



271Balance, December 31, 2006

$
204


$
21,484


$
55,832


$
4,969


$
11,707


$
(8
)

$
94,188Comprehensive loss:Net income














7,252











7,252Decrease in unrealized investment gains


















(19,549
)






(19,549
)Fair value adjustment to derivative financial instrument


















(575
)






(575
)Minimum pension liability adjustment


















312







312Deferred income tax attributable to other comprehensive loss


















6,934







6,934Total comprehensive loss


























(5,626
)Dividends on preferred stock














(1,691
)










(1,691
)Common stock issued in lieu of preferred stock dividend payments






227



386















613Deferred share compensation expense






10



(8
)














2Restricted stock grants






12



(12
)














Amortization of unearned compensation










66















66Acquisition of 5,655 shares for treasury






















(23
)


(23
)Issuance of 102,239 shares for employee benefit plans and
    stock options






84



150











31



265Balance, December 31, 2007

$
204


$
21,817


$
56,414


$
10,530


$
(1,171
)

$



$
87,794    41




---



##### Table of Contents



ATLANTIC
    AMERICAN CORPORATION
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Year Ended December 31,2007


2006


2005(Dollars in thousands)Cash flows from operating activities:Net income (loss)

$
7,252


$
8,936


$
(3,175
)Adjustments to reconcile net income (loss) to net cash (used in)
    provided by operating activities:Amortization of deferred acquisition costs


11,119



13,697



14,167Acquisition costs deferred


(9,731
)


(11,764
)


(13,291
)Realized investment (gains) losses, net


(12,627
)


(3,084
)


7,303(Decrease) increase in insurance reserves and policyholder funds


(6,238
)


(3,497
)


3,460Loss (income) from discontinued operations, net


4,333



(1,770
)


4,307Compensation expense related to share awards


68



70



65Depreciation and amortization


108



871



949Deferred income tax expense (benefit)


3,711



981



(2,959
)Decrease in receivables, net


5,067



778



801Increase in other liabilities


1,507



1,429



784Goodwill impairment


620







Other, net


425



147



11Net cash provided by continuing activities


5,614



6,794



12,422Net cash used in discontinued activities


(5,629
)


(6,298
)


(1,155
)Net cash (used in) provided by operating activities


(15
)


496



11,267Cash flows from investing activities:Proceeds from investments sold


22,538



18,384



28,715Proceeds from investments matured, called or redeemed


69,653



24,827



33,414Investments purchased


(78,988
)


(59,683
)


(66,038
)Additions to property and equipment


(446
)


(286
)


(644
)Net cash provided by (used in) continuing operations


12,757



(16,758
)


(4,553
)Net cash provided by (used in) discontinued operations


12,301



(7,666
)


(4,048
)Net cash provided by (used in) investing activities


25,058



(24,424
)


(8,601
)Cash flows from financing activities:Proceeds from issuance of Series D Preferred Stock






7,000



Proceeds from exercise of stock options


19



16



34Purchase of treasury shares


(23
)


(70
)


(132
)Proceeds from bank financing


36,000



15,750



Repayments of debt


(36,000
)


(13,250
)


(1,750
)Financing of discontinued operations


936



(6,560
)


(4,200
)Net cash provided by (used in) continuing operations


932



2,886



(6,048
)Net cash (used in) provided by discontinued operations


(936
)


6,560



4,200Net cash (used in) provided by financing activities


(4
)


9,446



(1,848
)Net increase (decrease) in cash


25,039



(14,482
)


818Cash and cash equivalents at beginning of yearContinuing operations


17,606



24,684



22,863Discontinued operations


9,688



17,092



18,095Total


27,294



41,776



40,958Cash and cash equivalents at end of yearContinuing operations


36,909



17,606



24,684Discontinued operations


15,424



9,688



17,092Total

$
52,333


$
27,294


$
41,776Supplemental cash flow information:Cash paid for interest

$
4,195


$
4,711


$
3,470Cash paid for income taxes

$
460


$
609


$
317Cash received for income taxes

$



$
676


$
    42




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS



(Dollars
    in thousands, except per share amounts)  Note 1.
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation
      Premium
    Revenue and Cost Recognition
    Goodwill
   43




---



##### Table of Contents



Investments
    Income
    Taxes
    Earnings
    Per Common Share
    Stock
    Options
   44




---



##### Table of Contents



Cash
    and Cash Equivalents
    Impact
    of Recently Issued Accounting Standards
     45




---



##### Table of Contents



05-1, (SOP 05-1). SOP 05-1 SOP 05-1 SOP 05-1
  Use of
    Estimates in the Preparation of Financial
    Statements
   46




---



##### Table of Contents



Note 2.
    Discontinued
    Operations      Year Ended December 31,2007


2006


2005Revenue:Insurance premiums

$
37,031


$
44,125


$
60,242Investment income


6,343



6,397



5,857Realized investment gains (losses), net


3,225



3,607



(3,153
)Other income


26



45



158Total revenue


46,625



54,174



63,104Benefits and expenses:Insurance benefits and losses incurred


34,107



26,472



44,474Commissions and underwriting expenses


16,951



25,584



22,716Other


3,109



453



2,765Total benefits and expenses


54,167



52,509



69,955(Loss) income from discontinued operations before taxes


(7,542
)


1,665



(6,851
)Income tax benefit


(3,209
)


(105
)


(2,544
)Net (loss) income from discontinued operations

$
(4,333
)

$
1,770


$
(4,307
)  47




---



##### Table of Contents



December 31,2007


2006Assets of Discontinued Operations:Cash and cash equivalents, including short-term investments of
    $10,585
    and $3,997 in 2007 and 2006, respectively

$
15,424


$
9,688Investments:Fixed maturities (cost: $91,216 and $97,278)


91,088



97,933Common and non-redeemable preferred stocks (cost: $2,406 and
    $3,733)


3,139



6,350Other invested assets (cost: $47 and 1,330)


47



1,295Total investments


94,274



105,578Receivables:Reinsurance


54,391



42,227Other


17,570



20,709Deferred acquisition costs


3,486



4,200Other assets


11,009



11,846Total assets

$
196,154


$
194,248Liabilities of Discontinued Operations:Unearned premiums

$
22,065


$
25,532Losses and claims


122,418



107,658Accounts payable and accrued expenses


7,864



10,270Total liabilities

$
152,347


$
143,460  48




---



##### Table of Contents



Note 3.
    Investments    2007Gross


GrossCarrying


Unrealized


Unrealized


AmortizedValue


Gains


Losses


CostFixed Maturities:U.S. Treasury securities and obligations of U.S. Government
    agencies and authorities

$
127,070


$
994


$
67


$
126,143Obligations of states and political subdivisions


412



14







398Corporate securities


29,728



314



832



30,246Mortgage-backed securities (government guaranteed)


3











3Redeemable preferred stocks


10,714



264



1,416



11,866Total fixed maturities


167,927



1,586



2,315



168,656Common and non-redeemable preferred stocks


5,335



590



621



5,366Other invested assets (fair value of $1,563)


1,563











1,563Policy and student loans


1,958











1,958Real estate


38











38Investments in unconsolidated trusts


1,238











1,238Investments


178,059



2,176



2,936



178,819Short-term investments


23,432











23,432Total investments

$
201,491


$
2,176


$
2,936


$
202,251   2006Gross


GrossCarrying


Unrealized


Unrealized


AmortizedValue


Gains


Losses


CostFixed Maturities:U.S. Treasury securities and obligations of U.S. Government
    agencies and authorities

$
117,120


$
99


$
1,660


$
118,681Obligations of states and political subdivisions


414



18







396Corporate securities


33,892



2,597



297



31,592Mortgage-backed securities (government guaranteed)


7











7Redeemable preferred stocks


12,949



656



153



12,446Total fixed maturities


164,382



3,370



2,110



163,122Common and non-redeemable preferred stocks


22,476



14,960



30



7,546Other invested assets (fair value of $1,735)


1,735







34



1,769Mortgage loans (fair value of $1,564)


1,379











1,379Policy and student loans


1,949











1,949Real estate


38











38Investments in unconsolidated trusts


1,238











1,238Investments


193,197



18,330



2,174



177,041Short-term investments


16,191











16,191Total investments

$
209,388


$
18,330


$
2,174


$
193,232  49




---



##### Table of Contents



2007Less than 12 months


12 months or longer


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


LossesU.S. Treasury securities and obligations of U.S. Government
    agencies and authorities

$
8,189


$
40


$
4,241


$
27


$
12,430


$
67Corporate securities


9,801



425



5,918



407



15,719



832Redeemable preferred stocks


4,465



657



2,751



759



7,216



1,416Common and non-redeemable preferred stocks


1,980



303



928



318



2,908



621Total temporary impaired securities

$
24,435


$
1,425


$
13,838


$
1,511


$
38,273


$
2,936   2006Less than 12 months


12 months or longer


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


LossesU.S. Treasury securities and obligations of U.S. Government
    agencies and authorities

$
23,091


$
175


$
71,819


$
1,485


$
94,910


$
1,660Corporate securities


3,885



52



5,054



245



8,939



297Redeemable preferred stocks










5,637



153



5,637



153Common and non-redeemable preferred stocks


594



24



994



6



1,588



30Other invested assets


1,735



34











1,735



34Total temporary impaired securities

$
29,305


$
285


$
83,504


$
1,889


$
112,809


$
2,174   1 3
    2007


2006


2005Corporate securities(1)

$
123


$



$
6,380Redeemable preferred stocks(1)

$



$



$
875Other invested assets

$
123


$



$
     (1)
    
    Includes automotive sector impairments of $7,198 in 2005,
    primarily from holdings in General Motors and related entities. 50




---



##### Table of Contents



2007


2006Carrying


Amortized


Carrying


AmortizedValue


Cost


Value


Cost(In thousands)MaturitiesDue in one year or less

$
43,069


$
43,031


$
39,592


$
39,587Due after one year through five years


14,389



14,084



12,936



12,644Due after five years through ten years


13,832



13,832



22,751



22,081Due after ten years


120,066



121,138



105,287



104,994Varying maturities


3



3



7



7Totals

$
191,359


$
192,088


$
180,573


$
179,313     2007


2006


2005Fixed maturities

$
9,384


$
9,922


$
8,205Common and non-redeemable preferred stocks


767



948



1,386Mortgage loans


79



184



250Short-term investments


1,297



671



598Other


195



201



389Total investment income

$
11,722


$
11,926


$
10,828Less investment expenses


(119
)


(104
)


(126
)Net investment income

$
11,603


$
11,822


$
10,702     2007Fixed


Other InvestedStocks


Maturities


Assets


TotalGains

$
12,905


$
21


$



$
12,926Losses






(176
)


(123
)


(299
)Realized investment gains (losses), net

$
12,905


$
(155
)

$
(123
)

$
12,627   51




---



##### Table of Contents



2006Fixed


Other InvestedStocks


Maturities


Assets


TotalGains

$
1,738


$
1,201


$
654


$
3,593Losses






(509
)






(509
)Realized investment gains (losses), net

$
1,738


$
692


$
654


$
3,084   2005Fixed


OtherStocks


Maturities


Invested Assets


TotalGains

$
715


$
81


$



$
796Losses


(384
)


(7,715
)






(8,099
)Realized investment gains (losses), net

$
331


$
(7,634
)

$



$
(7,303
)     2007


2006


2005Common and non-redeemable preferred stocks

$
16,635


$
1,666


$
11,884Fixed maturities


5,753



15,510



16,021Student loans






128



245Other investments


150



1,080



565Total proceeds

$
22,538


$
18,384


$
28,715      52




---



##### Table of Contents



Note 4.
    Insurance
    Reserves and Policyholder Funds    Amount of InsuranceIn Force2007


2006


2007


2006Future policy benefitsLife insurance policies:Ordinary

$
44,187


$
43,046


$
228,780


$
224,401Mass market


4,586



4,908



6,985



7,667Individual annuities


297



332







49,070



48,286


$
235,765


$
232,068Accident and health insurance policies


6,478



3,73355,548



52,019Unearned premiums


18,948



25,190Losses and claims


51,704



55,291Other policy liabilities


1,878



1,816Total insurance reserves and policyholder funds

$
128,078


$
134,316     Future
    Policy Benefits
    Loss
    and Claim Reserves
   53




---



##### Table of Contents



2007


2006


2005Balance at January 1

$
55,291


$
53,817


$
53,025Less: Reinsurance recoverables


(12,266
)


(12,829
)


(12,857
)Net balance at January 1


43,025



40,988



40,168Incurred related to:Current year


65,274



73,167



76,626Prior years


(11,517
)


(9,926
)


(8,370
)Total incurred


53,757



63,241



68,256Paid related to:Current year


41,687



46,355



50,922Prior years


16,395



14,849



16,514Total paid


58,082



61,204



67,436Net balance at December 31


38,700



43,025



40,988Plus: Reinsurance recoverables


13,004



12,266



12,829Balance at December 31

$
51,704


$
55,291


$
53,817       2007


2006


2005Total incurred claims

$
53,757


$
63,241


$
68,256Cash surrender value and matured endowments


1,413



1,666



1,663Benefit reserve changes


3,531



553



1,282Total insurance benefits and losses incurred

$
58,701


$
65,460


$
71,201   Note 5.
    Reinsurance   54




---



##### Table of Contents



2007


2006


2005Direct premiums written

$
89,766


$
104,253


$
118,184Plus  premiums assumed


9,022



9,763



9,655Less  premiums ceded


(6,729
)


(9,338
)


(9,290
)Net premiums written


92,059



104,678



118,549Change in unearned premiums


6,242



5,006



(1,269
)Change in unearned premiums ceded


(477
)


(104
)


71Net change in unearned premiums


5,765



4,902



(1,198
)Net premiums earned

$
97,824


$
109,580


$
117,351Provision for benefits and losses incurred

$
66,641


$
70,217


$
79,462Reinsurance loss recoveries


(7,940
)


(4,757
)


(8,261
)Insurance benefits and losses incurred

$
58,701


$
65,460


$
71,201     2007


2006Receivable on unpaid losses

$
12,929


$
12,266Receivable on paid losses


75



$
13,004


$
12,266   Note 6.
    Income
    Taxes    2007


2006


2005Tax expense (benefit) on income or loss from:Continuing operations

$
7,513


$
2,458


$
(1,746
)Discontinued operations


(3,209
)


(105
)


(2,544
)Total tax expense (benefit) on income or loss


4,304



2,353



(4,290
)Tax (benefit) expense on components of shareholders equity:Net unrealized gains (losses) on investment securities


(6,842
)


(231
)


(2,292
)Fair value adjustment to derivative financial instrument


(201
)


(58
)


Minimum pension liability adjustment


109



(325
)


(56
)Total tax benefit on shareholders equity


(6,934
)


(614
)


(2,348
)Total tax (benefit) expense

$
(2,630
)

$
1,739


$
(6,638
)  55




---



##### Table of Contents



2007


2006


2005Federal income tax provision at statutory rate of 35%

$
6,684


$
3,368


$
(215
)Tax exempt interest and dividends received deductions


(282
)


(401
)


(444
)Small life deduction


(55
)


(579
)


(534
)Non-deductible goodwill


217







Intercompany fees(1)


363



504



Other permanent differences


38



46



39Change in asset valuation allowance due to change in judgment
    relating to realizability of deferred tax assets


333



(569
)


(125
)Adjustment for prior years estimates to actual


205



80



(474
)State income taxes


10



9



7Income tax expense (benefit)

$
7,513


$
2,458


$
(1,746
)     (1)
    
    Intercompany fees from discontinued operations eliminated in
    consolidated tax return.    2007


2006


2005Federal income tax provision at statutory rate of 35%

$
(2,640
)

$
583


$
(2,398
)Tax exempt interest and dividends received deductions


(147
)


(170
)


(257
)Intercompany fees(1)


(363
)


(504
)


Other permanent differences


9



4



10Adjustment for prior years estimates to actual


(68
)


(26
)


101State income taxes






8



Income tax benefit

$
(3,209
)

$
(105
)

$
(2,544
)     (1)
    
    Intercompany fees from discontinued operations eliminated in
    consolidated tax return.   56




---



##### Table of Contents



2007


2006Deferred tax liabilities:Deferred acquisition costs

$
(2,564
)

$
(2,874
)Net unrealized investment gains






(5,655
)Deferred and uncollected premiums


(672
)


(657
)Total deferred tax liabilities


(3,236
)


(9,186
)Deferred tax assets:Net operating loss carryforwards


1,957



4,161Insurance reserves


2,819



3,148Impaired assets


1,333



1,247Alternative minimum tax credit






1,125Net unrealized investment losses


266



Bad debts and other


1,484



1,493Total deferred tax assets


7,859



11,174Asset valuation allowance


(694
)


(361
)Net deferred tax assets

$
3,929


$
1,627     2007


2006


2005Current  Federal

$
3,792


$
1,468


$
1,206Current  State


10



9



7Deferred  Federal


3,711



981



(2,959
)Total

$
7,513


$
2,458


$
(1,746
)     2007


2006


2005Current  Federal

$
(1,662
)

$
(1,089
)

$
(1,228
)Current  State






8



Deferred  Federal


(1,547
)


976



(1,316
)Total

$
(3,209
)

$
(105
)

$
(2,544
)    57




---



##### Table of Contents



Note 7.  Credit
    Arrangements
  Bank
    Debt
  1-month, 2-months, 3-months 6-months,
  Junior
    Subordinated Debentures
   58




---



##### Table of Contents



Atlantic American


Atlantic AmericanStatutory Trust I


Statutory Trust IIJUNIOR SUBORDINATED DEBENTURES(1)(2)Principal amount owed

$
18,042


$
23,196Balance December 31, 2007


18,042



23,196Balance December 31, 2006


18,042



23,196Coupon rate


LIBOR + 4.00
%


LIBOR + 4.10
%Interest payable


Quarterly



QuarterlyMaturity date


December 4, 2032



May 15, 2033Redeemable by issuer on or after


December 4, 2007



May 15, 2008TRUST PREFERRED SECURITIESIssuance date


December 4, 2002



May 15, 2003Securities issued


17,500



22,500Liquidation preference per security

$
1


$
1Liquidation value


17,500



22,500Coupon rate


LIBOR + 4.00
%


LIBOR + 4.10
%Distribution payable


Quarterly



QuarterlyDistribution guaranteed by(3)


Atlantic American
    Corporation



Atlantic American
    Corporation     (1)
    
    For each of the respective debentures, the Company has the right
    at any time, and from time to time, to defer payments of
    interest on the Junior Subordinated Debentures for a period not
    exceeding 20 consecutive quarters up to the debentures
    respective maturity dates. During any such period, interest will
    continue to accrue and the Company may not declare or pay any
    cash dividends or distributions on, or purchase, the
    Companys common stock nor make any principal, interest or
    premium payments on or repurchase any debt securities that rank
    equally with or junior to the Junior Subordinated Debentures.
    The Company has the right at any time to dissolve each of the
    trusts and cause the Junior Subordinated Debentures to be
    distributed to the holders of the Trust Preferred Securities.(2)
    
    The Junior Subordinated Debentures are unsecured and rank junior
    and subordinate in right of payment to all senior debt of the
    Parent and are effectively subordinated to all existing and
    future liabilities of its subsidiaries.(3)
    
    The Parent has guaranteed, on a subordinated basis, all of the
    obligations under the Trust Preferred Securities, including
    payment of the redemption price and any accumulated and unpaid
    distributions to the extent of available funds and upon
    dissolution, winding up or liquidation.  Note 8.
    Derivative
    Financial Instruments     59




---



##### Table of Contents



Note 9.
    Commitments
    and Contingencies  Litigation
    Operating
    Lease Commitments
    Year Ending December 31,2008

$
1,0982009


1,0182010


6552011


6222012


622Thereafter


Total

$
4,015   Note 10.
    Employee
    Benefit Plans  Stock
    Options
  and/or and/or
 60




---



##### Table of Contents



2007


2006


2005Weighted





Weighted





WeightedAverage





Average





AverageShares

Shares


Exercise Price


Shares


Exercise Price


Shares


Exercise PriceOptions outstanding, beginning of year


636,500


$
1.43



649,500


$
1.44



677,500


$
1.47Options exercised


(7,000
)


2.68



(9,500
)


1.70



(21,000
)


1.73Options canceled or expired


(5,500
)


1.63



(3,500
)


1.44



(7,000
)


3.54Options outstanding, end of year


624,000



1.42



636,500



1.43



649,500



1.44Options exercisable


624,000



1.42



636,500



1.43



649,500



1.44Options available for future grant


2,479,594







2,486,491







2,504,914     Outstanding and ExercisableWeighted AverageNumber of


Remaining Life


Weighted AverageRange of Exercise Price

Options


(Years)


Exercise Price$1.00 to $1.50


380,000



3.79


$
1.25$1.51 to $2.00


244,000



5.17


$
1.67624,000     401(k)
    Plan
    Defined
    Benefit Pension Plans
   61




---



##### Table of Contents



Obligation
    and Funded Status
  2007


2006Change in Benefit ObligationNet benefit obligation at beginning of year

$
6,190


$
5,713Service cost


204



237Interest cost


330



314Actuarial loss


(316
)


53Gross benefits paid


(305
)


(127
)Net benefit obligation at end of year


6,103



6,190Change in Plan AssetsFair value of plan assets at beginning of year


3,154



2,799Employer contributions


215



184Actual return on plan assets


100



298Gross benefits paid


(305
)


(127
)Fair value of plan assets at end of year


3,164



3,154Funded Status of PlanFunded status at end of year


(2,939
)


(3,036
)Unrecognized net actuarial loss


1,322



1,634Unrecognized prior service cost


(7
)


(7
)Unrecognized net transition obligation






Additional minimum liability


(329
)


(483
)Additional liability due to SFAS 158


(986
)


(1,144
)Net amount recognized in accrued liabilities at end of year

$
(2,939
)

$
(3,036
)       2007

2006Discount rate to determine the projected benefit obligation


5.75
%


5.50
%Projected annual salary increases


4.50
%


4.50
%     Components
    of Net Periodic Benefit Cost
    2007


2006


2005Service cost

$
204


$
237


$
177Interest cost


330



314



298Expected return on plan assets


(216
)


(193
)


(185
)Net amortization


112



155



142$
430


$
513


$
432  62




---



##### Table of Contents



2007


2006


2005Discount rate to determine the net periodic benefit cost


5.75
%


5.50
%


5.75
%Expected long-term rate of return on plan assets used to
    determine net periodic pension cost


7.00
%


7.00
%


7.00
%Projected annual salary increases


4.50
%


4.50
%


4.50
%       Expected
    Cash Flows
    Estimated
    Future Benefit Payments
    Pension Benefits2008

$
2242009

$
2242010

$
2582011

$
2892012

$
3172013  2017

$
2,371   Note 11.
    Preferred
    Stock     63




---



##### Table of Contents



Note 12.
    Earnings
    Per Common Share    For the Year EndedDecember 31, 2007Per ShareIncome


Shares


AmountBasic Earnings Per Common ShareIncome from continuing operations before preferred stock
    dividends

$
11,585



21,606Less preferred stock dividends


(1,691
)


Income from continuing operations applicable to common
    shareholders


9,894



21,606


$
0.46Diluted Earnings Per Common ShareEffect of dilutive stock options






346Income from continuing operations applicable to common
    shareholders

$
9,894



21,952


$
0.45   For the Year EndedDecember 31,2006Per ShareIncome


Shares


AmountBasic Earnings Per Common ShareIncome from continuing operations before preferred stock
    dividends

$
7,166



21,419Less preferred stock dividends


(1,333
)


Income from continuing operations applicable to common
    shareholders


5,833



21,419


$
0.27Diluted Earnings Per Common ShareEffect of dilutive stock options






330Effect of Series B and D Preferred Stock


1,333



5,112Income from continuing operations applicable to common
    shareholders

$
7,166



26,861


$
0.27   64




---



##### Table of Contents



For the Year EndedDecember 31, 2005Per ShareIncome


Shares


AmountBasic and Diluted Loss Per Common ShareIncome from continuing operations before preferred stock
    dividends

$
1,132



21,305Less preferred stock dividends


(1,206
)


Loss from continuing operations applicable to common shareholders

$
(74
)


21,305


$
     Note 13.
    Statutory
    Reporting      2007


2006


2005Life and Health, net income

$
11,961


$
3,173


$
5,135Property and Casualty, net income


8,466



5,955



6,410Statutory net income(1)

$
20,427


$
9,128


$
11,545Life and Health, surplus

$
33,810


$
34,467


$
33,881Property and Casualty, surplus


38,213



34,938



31,041Statutory surplus

$
72,023


$
69,405


$
64,922     (1)
    
    Automotive sector impairments of $7,198 were recorded in the
    first quarter of 2006 for statutory purposes.    Note 14.
    Related
    Party and Other Transactions   65




---



##### Table of Contents



Note 15.
    Segment
    Information   66




---



##### Table of Contents



American


Bankers


Corporate


Discontinued


AdjustmentsSouthern


Fidelity


& Other


Operations


& Eliminations


ConsolidatedDecember 31, 2007Insurance premiums

$
41,575


$
56,249


$







$



$
97,824Insurance benefits and losses incurred


18,399



40,302















58,701Expenses deferred


(8,398
)


(1,333
)














(9,731
)Amortization and depreciation expense


9,460



1,767















11,227Other expenses


18,123



17,817



16,515







(8,778
)


43,677Total expenses


37,584



58,553



16,515







(8,778
)


103,874Underwriting income (loss)


3,991



(2,304
)Investment income, including net realized gains


5,450



18,351



4,372







(3,824
)


24,349Other income


21



58



5,674







(4,954
)


799Income (loss) from continuing operations before income taxes

$
9,462


$
16,105


$
(6,469
)





$



$
19,098Total revenues

$
47,046


$
74,658


$
10,046






$
(8,778
)

$
122,972Goodwill

$
1,350


$
778


$
260






$



$
2,388Total assets

$
116,473


$
129,968


$
110,465


$
196,154


$
(94,806
)

$
458,254   American


Bankers


Corporate


Discontinued


AdjustmentsSouthern


Fidelity


& Other


Operations


& Eliminations


ConsolidatedDecember 31, 2006Insurance premiums

$
50,660


$
58,920


$







$



$
109,580Insurance benefits and losses incurred


23,440



42,020















65,460Expenses deferred


(11,087
)


(677
)














(11,764
)Amortization and depreciation expense


12,523



2,045















14,568Other expenses


21,092



17,301



17,710







(8,633
)


47,470Total expenses


45,968



60,689



17,710







(8,633
)


115,734Underwriting income (loss)


4,692



(1,769
)Investment income, including net realized gains


5,914



8,450



4,341







(3,695
)


15,010Other income


19



73



5,614







(4,938
)


768Income (loss) from continuing operations before income taxes

$
10,625


$
6,754


$
(7,755
)





$



$
9,624Total revenues

$
56,593


$
67,443


$
9,955






$
(8,633
)

$
125,358Goodwill

$
1,350


$
778


$
880






$



$
3,008Total assets

$
122,292


$
128,246


$
113,837


$
194,248


$
(99,471
)

$
459,152   67




---



##### Table of Contents



American


Bankers


Corporate


Discontinued


AdjustmentsSouthern


Fidelity


& Other


Operations


& Eliminations


ConsolidatedDecember 31, 2005Insurance premiums

$
51,447


$
65,904


$







$



$
117,351Insurance benefits and losses incurred


24,827



46,374















71,201Expenses deferred


(12,582
)


(709
)














(13,291
)Amortization and depreciation expense


12,715



2,401















15,116Other expenses


23,200



17,981



16,326







(7,938
)


49,569Total expenses


48,160



66,047



16,326







(7,938
)


122,595Underwriting income (loss)


3,287



(143
)Investment income, including net realized gains


4,818



5,816



3,072







(2,983
)


10,723Automotive sector investments impairment charge


(3,733
)


(3,465
)














(7,198
)Other income


393







5,667







(4,955
)


1,105Income (loss) from continuing operations before income taxes

$
4,765


$
2,208


$
(7,587
)





$



$
(614
)Total revenues

$
52,925


$
68,255


$
8,739






$
(7,938
)

$
121,981Goodwill

$
1,350


$
778


$
880






$



$
3,008Total assets

$
123,919


$
128,225


$
99,663


$
201,745


$
(92,186
)

$
461,366   Note 16.
    Disclosures
    About Fair Value of Financial Instruments  and/or
  2007


2006Carrying


Estimated


Carrying


EstimatedAmount


Fair Value


Amount


Fair ValueAssets:Cash and cash equivalents, including short-term investments

$
36,909


$
36,909


$
17,606


$
17,606Fixed maturities


167,927



167,927



164,382



164,382Common and non-redeemable preferred stocks


5,335



5,335



22,476



22,476Mortgage loans










1,379



1,564Policy and student loans


1,958



1,958



1,949



1,949Other invested assets


1,563



1,563



1,735



1,735Real estate


38



38



38



38Investments in unconsolidated trusts


1,238



1,238



1,238



1,238Liabilities:Debt payable to bank


12,750



12,750



12,750



12,750Junior Subordinated Debentures


41,238



41,238



41,238



41,238    68




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##### Table of Contents



Cash
    and Cash Equivalents, including Short-term
    Investments
    Fixed
    Maturities, Common and Non-Redeemable Preferred Stocks and
    Publicly Traded Other Invested Assets
    Non-publicly
    Traded Invested Assets
    Mortgage
    Loans
    Debt
    Payable and Junior Subordinated Debentures
    Note 17.
    Reconciliation
    of Other Comprehensive Income (Loss)    December 31,2007


2006


2005Net realized gains (losses) on investment securities included in
    income (loss) from continuing operations

$
12,627


$
3,084


$
(7,303
)Net realized gains (losses) on investment securities included in
    income (loss) from discontinued operations


3,225



3,607



(3,153
)Total net realized gains (losses) on investment securities
    included in net income (loss)

$
15,852


$
6,691


$
(10,456
)Other components of comprehensive income (loss):Net pre-tax unrealized gains (losses) on investment securities
    arising during year

$
(3,697
)

$
6,031


$
(17,005
)Reclassification adjustment for net realized (gains) losses on
    investment securities


(15,852
)


(6,691
)


10,456Net pre-tax unrealized gains (losses) on investment securities
    recognized in other comprehensive income (loss)


(19,549
)


(660
)


(6,549
)Fair value adjustment to derivative financial instrument


(575
)


(165
)


Minimum pension liability adjustment


312



(928
)


(160
)Deferred income tax attributable to other comprehensive income
    (loss)


6,934



614



2,348$
(12,878
)

$
(1,139
)

$
(4,361
)  69




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##### Table of Contents



Note 18.
    Quarterly
    Financial Information (Unaudited)    2007


2006First


Second


Third


Fourth


First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


QuarterRevenue

$
28,287


$
27,753


$
28,516


$
38,416(1
)

$
32,936


$
30,789


$
30,449


$
31,184Income from continuing operations before income taxes

$
891


$
1,305


$
2,432


$
14,470


$
2,652


$
1,703


$
2,333


$
2,936Income tax expense


475



686



656



5,696



956



787



471



244Income from continuing operations


416



619



1,776



8,774



1,696



916



1,862



2,692Income (loss) from discontinued operations, net of tax


435



(185
)


30



(4,613
)


1,798



(1,175
)


875



272Net income (loss)

$
851


$
434


$
1,806


$
4,161


$
3,494


$
(259
)

$
2,737


$
2,964Per common share data:Income from continuing operations

$



$
0.01


$
0.06


$
0.38


$
0.07


$
0.03


$
0.07


$
0.11Discontinued operations


0.02



(0.01
)






(0.21
)


0.08



(0.06
)


0.04



0.01Basic income (loss) per share

$
0.02


$



$
0.06


$
0.17


$
0.15


$
(0.03
)

$
0.11


$
0.12Income from continuing operations

$



$
0.01


$
0.06


$
0.32


$
0.07


$
0.03


$
0.07


$
0.10Discontinued operations


0.02



(0.01
)






(0.17
)


0.07



(0.06
)


0.03



0.01Diluted income (loss) per share

$
0.02


$



$
0.06


$
0.15


$
0.14


$
(0.03
)

$
0.10


$
0.11   (1)
    
    Includes a $12.9 million realized gain from the disposition
    of the Companys investment in equity securities of
    Wachovia Corporation in the fourth quarter of 2007. 70




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements With Accountants on Accounting and
    Financial Disclosure    Item 9a.
    Controls
    and Procedures  Rules 13a-15(e) 15d-15(e)
    Internal Control  Integrated Framework. Rule 13a-15(f)
      Item 9b.
    Other
    Information   PART III   71




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##### Table of Contents



Form 10-K
 PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules                Schedule VI 
    Supplemental information concerning property-casualty insurance
    operations for the three years ended December 31, 2007    Exhibits*:
  3
.1



Restated Articles of Incorporation of the registrant, as amended
    [incorporated by reference to Exhibit 3.1 to the
    registrants Form 10-K for the year ended December 31,
    2002].3
.1.1



Amendment to Restated Articles of Incorporation of the
    registrant, as amended [incorporated by reference to Exhibit 3.1
    to the registrants Form 8-K dated October 4, 2006].3
.2



Bylaws of the registrant [incorporated by reference to Exhibit
    3.2 to the registrants Form 10-K for the year ended
    December 31, 1993].3
.2.1



Amendment of Bylaws of the registrant, effective as of February
    22, 2007 [incorporated by reference to Exhibit 10.1 to the
    registrants Form 8-K dated February 28, 2007].10
.01



Management Agreement between registrant and Georgia Casualty
    & Surety Company dated April 1, 1983 [incorporated by
    reference to Exhibit 10.16 to the registrants Form 10-K
    for the year ended December 31, 1986].10
.02



Management Agreement between the registrant and Atlantic
    American Life Insurance Company and Bankers Fidelity Life
    Insurance Company dated July 1, 1993 [incorporated by reference
    to Exhibit 10.41 to the registrants Form 10-Q for the
    quarter ended September 30, 1993].10
.03



Tax allocation agreement dated January 28, 1994, between
    registrant and registrants subsidiaries [incorporated by
    reference to Exhibit 10.44 to the registrants Form 10-K
    for the year ended December 31, 1993].10
.04**



Atlantic American Corporation 1992 Incentive Plan [incorporated
    by reference to Exhibit 4 to the registrants Form S-8
    filed on November 1, 1999].10
.05**



Atlantic American Corporation 1996 Director Stock Option
    Plan [incorporated by reference to Exhibit 4 to the
    registrants Form S-8 filed on November 1, 1999].10
.06**



Atlantic American Corporation 2002 Stock Incentive Plan
    [incorporated by reference to Exhibit 4.1 to the
    registrants Form S-8 filed on August 2, 2002]. 72




---



##### Table of Contents



10
.07**



Summary Terms of Consulting Arrangement between Atlantic
    American Corporation and Samuel E. Hudgins, entered into in June
    2002 [incorporated by reference to Exhibit 10.23 to the
    registrants Form 10-K for the year ended December 31,
    2002].10
.08



Credit Agreement, dated as of December 22, 2006 between Atlantic
    American Corporation and Wachovia Bank, National Association
    [incorporated by reference to Exhibit 10.1 to the
    registrants Form 8-K dated December 22, 2006].10
.09



Stock Purchase Agreement, dated as of December 26, 2007 between
    Atlantic American Corporation and Columbia Mutual Insurance
    Company.10
.10



Lease Agreement between Georgia Casualty & Surety Company,
    Bankers Fidelity Life Insurance Company, Atlantic American
    Corporation and Delta Life Insurance Company dated as of
    November 1, 2007.14
.1



Code of Ethics [incorporated by reference to Exhibit 14.1 to the
    registrants Form 10-K for the year ended December 31,
    2003].21
.1



Subsidiaries of the registrant.23
.1



Consent of BDO Seidman LLP, Independent Registered Public
    Accounting Firm.31
.1



Certification of the Principal Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.31
.2



Certification of the Principal Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32
.1



Certifications pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.   *
    
    The registrant agrees to furnish to the Commission upon request
    a copy of any instruments defining the rights of securityholders
    of the registrant that may be omitted from filing in accordance
    with the Commissions rules and regulations.**
    
    Management contract, compensatory plan or arrangement required
    to be filed pursuant to, Part IV, Item 15(c) of
    Form 10-K
    and Item 601 of
    Regulation S-K. 73




---



##### Table of Contents



SIGNATURES
      By:
    /s/  John
    G. Sample, Jr.   Senior Vice President and Chief Financial Officer
      Signature

Title

Date/s/  J.
    Mack RobinsonJ.
    Mack Robinson

Chairman of the Board

March 31, 2008/s/  Hilton
    H. Howell, Jr.Hilton
    H. Howell, Jr.

President, Chief Executive Officer and Director (Principal
    Executive Officer)

March 31, 2008/s/  John
    G. Sample, Jr.John
    G. Sample, Jr.

Senior Vice President and Chief Financial Officer (Principal
    Financial and Accounting Officer)

March 31, 2008/s/  Edward
    E. ElsonEdward
    E. Elson

Director

March 31, 2008/s/  Samuel
    E. HudginsSamuel
    E. Hudgins

Director

March 31, 2008/s/  D.
    Raymond RiddleD.
    Raymond Riddle

Director

March 31, 2008/s/  Harriett
    J. RobinsonHarriett
    J. Robinson

Director

March 31, 2008/s/  Scott
    G. ThompsonScott
    G. Thompson

Director

March 31, 2008/s/  Mark
    C. WestMark
    C. West

Director

March 31, 2008 74




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##### Table of Contents



Signature

Title

Date/s/  William
    H. Whaley, M.D.William
    H. Whaley, M.D.

Director

March 31, 2008/s/  Dom
    H. WyantDom
    H. Wyant

Director

March 31, 2008/s/  Harold
    K. FischerHarold
    K. Fischer

Director

March 31, 2008  75




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##### Table of Contents



SCHEDULE II
    Page 1 of 3
  CONDENSED
    FINANCIAL INFORMATION OF REGISTRANT
  ATLANTIC
    AMERICAN CORPORATION
    (Parent Company Only)
  BALANCE
    SHEETS
  December 31,2007


2006(In thousands)ASSETSCash and short-term investments

$
9,220


$
9,388Investment in subsidiaries


94,654



99,294Investments in unconsolidated trusts


1,238



1,238Deferred tax asset, net


3,268



967Income taxes receivable from subsidiaries


4,888



1,386Other assets


1,380



1,742Net investment in discontinued operations


43,807



50,788Total assets

$
158,455


$
164,803LIABILITIES AND SHAREHOLDERS EQUITYOther payables

$
16,673


$
16,627Debt payable to bank


12,750



12,750Junior subordinated debentures


41,238



41,238Total liabilities


70,661



70,615Shareholders equity


87,794



94,188Total liabilities and shareholders equity

$
158,455


$
164,803  II-1




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##### Table of Contents



SCHEDULE II
    Page 2 of 3
  CONDENSED
    FINANCIAL INFORMATION OF REGISTRANT
  ATLANTIC
    AMERICAN CORPORATION
    (Parent Company Only)
  STATEMENTS
    OF OPERATIONS
  Year Ended December 31,2007


2006


2005(In thousands)REVENUEFees, rentals and interest income from subsidiaries

$
4,954


$
4,939


$
4,948Distributed earnings from subsidiaries


5,576



7,786



11,942Other


656



745



188Total revenue


11,186



13,470



17,078GENERAL AND ADMINISTRATIVE EXPENSES


7,429



8,989



9,281INTEREST EXPENSE


4,160



4,605



3,611(403
)


(124
)


4,186INCOME TAX BENEFIT(1)


526



997



6,085123



873



10,271EQUITY IN UNDISTRIBUTED EARNINGS (LOSSES) OF CONTINUING
    OPERATIONS, NET


11,462



6,293



(9,139
)EQUITY IN EARNINGS (LOSSES) OF DISCONTINUED OPERATIONS, NET


(4,333
)


1,770



(4,307
)NET INCOME (LOSS)

$
7,252


$
8,936


$
(3,175
)   (1)
    
    Under the terms of its tax-sharing agreement with its
    subsidiaries, income tax provisions for the individual companies
    are computed on a separate company basis. Accordingly, the
    Companys income tax benefit results from the utilization
    of the parent company separate return loss to reduce the
    consolidated taxable income of the Company and its subsidiaries. II-2




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##### Table of Contents



SCHEDULE II
    Page 3 of 3
  CONDENSED
    FINANCIAL INFORMATION OF REGISTRANT
  ATLANTIC
    AMERICAN CORPORATION
    (Parent Company Only)
  STATEMENTS
    OF CASH FLOWS
  Year Ended December 31,2007


2006


2005(In thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)

$
7,252


$
8,936


$
(3,175
)Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Realized investment gains


(533
)


(439
)


(72
)Depreciation and amortization


702



692



776Compensation expense related to share awards


68



70



65Equity in undistributed (earnings) losses of continuing
    operations


(11,462
)


(6,293
)


9,139Equity in (earnings) losses of discontinued operations


4,333



(1,770
)


4,307(Increase) decrease in intercompany taxes


(3,502
)


1,696



(663
)Deferred income tax expense (benefit)


3,711



981



(2,959
)(Decrease) increase in other liabilities


(1,607
)


291



406Other, net


249



163



217Net cash (used in ) provided by operating activities


(789
)


4,327



8,041CASH FLOWS FROM INVESTING ACTIVITIES:Capital contribution to subsidiaries










(50
)Additions to property and equipment


(411
)


(173
)


(153
)Net cash used in investing activities


(411
)


(173
)


(203
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuance of Series D Preferred Stock






7,000



Purchase of treasury shares


(23
)


(70
)


(132
)Proceeds from bank financing


36,000



15,750



Repayments of debt


(36,000
)


(13,250
)


(1,750
)Proceeds from exercise of stock options


19



16



34Financing of discontinued operations


1,036



(6,560
)


(4,200
)Net cash provided by (used in) financing activities


1,032



2,886



(6,048
)Net (decrease) increase in cash


(168
)


7,040



1,790Cash at beginning of year


9,388



2,348



558Cash at end of year

$
9,220


$
9,388


$
2,348Supplemental disclosure:Cash paid for interest

$
4,195


$
4,711


$
3,470Cash (received) paid for income taxes

$
450


$
(76
)

$
300  II-3




---



##### Table of Contents



SCHEDULE III
    Page 1 of 2
  ATLANTIC
    AMERICAN CORPORATION AND SUBSIDIARIES
  SUPPLEMENTARY
    INSURANCE INFORMATION
  Future PolicyBenefits, Losses,





Other PolicyDeferred


Claims and Loss


Unearned


Claims andSegment

Acquisition Costs


Reserves


Premiums


Benefits Payable(In thousands)December 31, 2007:Bankers Fidelity

$
15,644


$
63,258


$
3,332


$
1,878American Southern


3,186



43,994



15,616



$
18,830


$
107,252
(1)

$
18,948


$
1,878December 31, 2006:Bankers Fidelity

$
16,024


$
61,655


$
3,494


$
1,816American Southern


4,194



45,655



21,696



$
20,218


$
107,310
(2)

$
25,190


$
1,816December 31, 2005:Bankers Fidelity

$
16,957


$
61,580


$
4,011


$
2,445American Southern


5,194



43,593



26,185



$
22,151


$
105,173
(3)

$
30,196


$
2,445   (1)
    
    Includes future policy benefits of $55,548 and losses and claims
    of $51,704.(2)
    
    Includes future policy benefits of $52,019 and losses and claims
    of $55,291.(3)
    
    Includes future policy benefits of $51,356 and losses and claims
    of $53,817. III-1




---



##### Table of Contents



SCHEDULE III
    Page 2 of 2
  ATLANTIC
    AMERICAN CORPORATION AND SUBSIDIARIES
  SUPPLEMENTARY
    INSURANCE INFORMATION
  Benefits,


AmortizationNet


Claims, Losses


of Deferred


Other


CasualtyPremium


Investment


and Settlement


Acquisition


Operating


PremiumsSegment

Revenue


Income


Expenses


Costs


Expenses


Written(In thousands)December 31, 2007:Bankers Fidelity

$
56,249


$
6,091


$
40,302


$
1,713


$
16,538


$
American Southern


41,575



5,497



18,399



9,406



9,779



35,972Other






15











7,737



$
97,824


$
11,603


$
58,701


$
11,119


$
34,054


$
35,972December 31, 2006:Bankers Fidelity

$
58,920


$
6,097


$
42,020


$
1,610


$
17,059


$
American Southern


50,660



5,516



23,440



12,087



10,441



46,274Other






209











9,077



$
109,580


$
11,822


$
65,460


$
13,697


$
36,577


$
46,274December 31, 2005:Bankers Fidelity

$
65,904


$
5,866


$
46,374


$
1,927


$
17,746


$
American Southern


51,447



4,821



24,827



12,240



11,093



52,983Other






15











8,388



$
117,351


$
10,702


$
71,201


$
14,167


$
37,227


$
52,983  III-2




---



##### Table of Contents



SCHEDULE IV
  ATLANTIC
    AMERICAN CORPORATION AND SUBSIDIARIES
  REINSURANCE
  Ceded To


Assumed





Percentage ofDirect


Other


From Other


Net


Amount AssumedAmount


Companies


Companies


Amounts


To Net(In thousands)Year ended December 31, 2007:Life insurance in force

$
272,308


$
(36,543
)

$



$
235,765Premiums Bankers Fidelity

$
56,340


$
(350
)

$
259


$
56,249



0.5
%American Southern


38,381



(6,856
)


10,050



41,575



24.2
%Total premiums

$
94,721


$
(7,206
)

$
10,309


$
97,824



10.5
%Year ended December 31, 2006:Life insurance in force

$
269,306


$
(37,238
)

$



$
232,068Premiums Bankers Fidelity

$
58,692


$
(73
)

$
301


$
58,920



0.5
%American Southern


50,599



(9,369
)


9,430



50,660



18.6
%Total premiums

$
109,291


$
(9,442
)

$
9,731


$
109,580



8.9
%Year ended December 31, 2005:Life insurance in force

$
276,996


$
(33,025
)

$



$
243,971Premiums Bankers Fidelity

$
65,734


$
(191
)

$
361


$
65,904



0.5
%American Southern


51,935



(9,028
)


8,540



51,447



16.6
%Total premiums

$
117,669


$
(9,219
)

$
8,901


$
117,351



7.6
%  IV-1




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##### Table of Contents



SCHEDULE VI
  ATLANTIC
    AMERICAN CORPORATION AND SUBSIDIARIES
  SUPPLEMENTAL
    INFORMATION CONCERNING
 PROPERTY-CASUALTY
    INSURANCE OPERATIONS
  Claims and Claim





PaidAdjustment Expenses


Amortization


ClaimsDeferred











Net


Incurred Related To


of Deferred


and ClaimPolicy





Unearned


Earned


Investment


Current


Prior


Acquisition


Adjustment


PremiumsYear Ended

Acquisition


Reserves


Premium


Premium


Income


Year


Years


Costs


Expenses


Written(In thousands)December 31, 2007

$
3,186


$
43,994


$
15,616


$
41,575


$
5,497


$
27,009


$
(8,610
)

$
9,406


$
20,723


$
35,972December 31, 2006

$
4,194


$
45,655


$
21,696


$
50,660


$
5,516


$
30,174


$
(6,734
)

$
12,087


$
20,815


$
46,274December 31, 2005

$
5,194


$
43,593


$
26,185


$
51,447


$
4,821


$
30,037


$
(5,210
)

$
12,240


$
23,513


$
52,983  VI-1