##### Table of Contents





UNITED STATES 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, 2009oro

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

58-1027114(State or other jurisdiction
    of
    incorporation or organization)

(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-T o o
  Regulation S-K 10-K Form 10-K. o
  Rule 12b-2
  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.




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##### 





TABLE OF
    CONTENTS
  PagePART IItem 1.

Business

2The Company

2Marketing

4Underwriting

5Policyholder and Claims Services

5Reserves

6Reinsurance

11Competition

11Ratings

12Regulation

12NAIC Ratios

13Risk-Based Capital

13Investments

14Employees

15Financial Information by Industry
    Segment

15Available Information

15Executive Officers of the
    Registrant

15Forward-Looking Statements

16Item 1A.

Risk Factors

16Item 1B.

Unresolved Staff Comments

16Item 2.

Properties

16Item 3.

Legal Proceedings

17Item 4.

Reserved

17PART IIItem 5.

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

18Item 6.

Selected Financial Data

19Item 7.

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

19Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk

31Item 8.

Financial Statements and Supplementary Data

32Item 9.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure

64Item 9A(T).

Controls and Procedures

64Item 9B.

Other Information

64PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance

64Item 11.

Executive Compensation

64Item 12.

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

64Item 13.

Certain Relationships and Related Transactions,
    and Director Independence

64Item 14.

Principal Accountant Fees and Services

64PART IVItem 15.

Exhibits and Financial Statement Schedules

65EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1   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
  Surety Bonds
   2




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##### Table of Contents



Year Ended December 31,2009


2008


2007(In thousands)Automobile liability

$
12,299


$
10,904


$
10,936Automobile physical damage


6,679



6,628



8,105General liability


6,008



7,996



10,349Property


2,442



2,374



3,005Surety


6,872



8,356



9,180Total

$
34,300


$
36,258


$
41,575   Life
    and Health Operations
      Year Ended December 31,2009


2008


2007(In thousands)Life insurance

$
10,616


$
10,357


$
10,615Medicare supplement


42,679



41,402



41,786Other accident and health


3,867



3,364



3,848Total health insurance


46,546



44,766



45,634Total

$
57,162


$
55,123


$
56,249   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
        and/or
   4




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##### Table of Contents



and/or
   Underwriting  Property
    and Casualty Operations
    and/or
  Life
    and Health Operations
  accept-or-reject
  and/or
 Policyholder
    and Claims Services  24-hour state-of-the-art
 5




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##### Table of Contents



Property
    and Casualty Operations
  on-site
  Life
    and Health Operations
   Reserves    2009


2008(In thousands)Balance at January 1

$
52,499


$
51,704Less: Reinsurance recoverables


(14,870
)


(13,004
)Net balance at January 1


37,629



38,700Incurred related to:Current year


65,093



62,569Prior years(1)


(7,620
)


(8,723
)Total incurred


57,473



53,846Paid related to:Current year


42,335



40,249Prior years


14,144



14,668Total paid


56,479



54,917Net balance at December 31


38,623



37,629Plus: Reinsurance recoverables


11,489



14,870Balance at December 31

$
50,112


$
52,499   (1)
    
    Favorable loss development from property and casualty operations
    for the years ended December 31, 2009 and 2008 was
    $6.7 million and $8.0 million, respectively. See
    Note 3 of Notes to Consolidated Financial Statements.   6




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7




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##### Table of Contents



Case


IBNR


Total(In thousands)Business automobile

$
9,375


$
9,118


$
18,493Personal automobile/physical damage


1,034



340



1,374General & other liability


4,784



9,596



14,380Other lines (including life)


3,173



5,508



8,681Medicare supplement


209



5,351



5,560Unallocated loss adjustment reserves






1,624



1,624Total reserves for losses and claims

$
18,575


$
31,537


$
50,112     Property
    and Casualty Operations
  case-by-case
   8




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and/or
 9




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##### Table of Contents



Year Ended December 31,2009


2008


2007


2006


2005


2004


2003


2002


2001


2000


1999(In thousands)Reserve for Losses and LAE

$
42,248


$
44,928


$
43,994


$
45,655


$
43,593


$
42,310


$
39,042


$
44,428


$
46,242


$
48,350


$
48,764Cumulative paid as of:One year later






13,627



11,630



18,010



14,254



16,521



13,772



15,825



18,093



20,682



18,267Two years later










21,187



24,793



23,967



24,217



22,202



23,933



26,194



31,687



30,143Three years later














29,338



27,235



28,775



26,673



28,487



31,257



35,865



37,938Four years later


















29,179



31,019



28,645



31,398



33,683



37,223



39,972Five years later






















31,594



30,257



32,820



35,134



38,616



40,816Six years later


























30,447



34,238



35,610



39,166



42,006Seven years later






























34,288



36,814



39,538



42,079Eight years later


































36,854



39,603



42,352Nine years later






































39,627



42,375Ten years later










































42,390Ultimate losses and LAE reestimated as of:End of year


42,248



44,928



43,994



45,655



43,593



42,310



39,042



44,428



46,242



48,350



48,764One year later






31,649



33,663



35,590



34,897



37,280



35,706



42,235



39,628



46,778



45,866Two years later










29,903



34,163



32,929



34,108



34,779



40,099



40,249



43,104



46,065Three years later














33,499



31,560



33,338



31,710



39,260



38,877



42,208



44,800Four years later


















32,043



33,370



31,224



37,163



39,339



41,503



43,792Five years later






















33,090



31,049



37,133



39,067



41,490



43,775Six years later


























31,203



36,914



39,484



41,600



43,674Seven years later






























37,008



39,331



41,822



43,738Eight years later


































39,405



41,652



43,884Nine years later






































41,735



43,762Ten years later










































43,799Cumulative redundancy





$
13,279


$
14,091


$
12,156


$
11,550


$
9,220


$
7,839


$
7,420


$
6,837


$
6,615


$
4,96529.6
%


32.0
%


26.6
%


26.5
%


21.8
%


20.1
%


16.7
%


14.8
%


13.7
%


10.2
%   and/or
 10




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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
   11




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Life
    and Health Operations
   Ratings      American Southern.
  Bankers Fidelity.
 Regulation   12




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NAIC
    Ratios       Risk-Based
    Capital  Level Risk-Based
 13




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##### Table of Contents



Investments    December 31,2009


2008Amount


Percent


Amount


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

$
124,392



59.2
%

$
120,572



62.0
%States, municipalities and political subdivisions










409



0.2Public utilities


9,910



4.7



9,050



4.7All other corporate bonds


41,776



19.9



25,605



13.2Redeemable preferred stock


7,882



3.8



7,361



3.8Certificates of deposit


100



0.0



100



0.0Total fixed maturities(1)


184,060



87.6



163,097



83.9Common and non-redeemable preferred stocks(2)


6,914



3.3



5,291



2.7Mortgage, policy and student loans(3)


2,139



1.0



2,019



1.0Other invested assets(4)


1,021



0.5



1,433



0.7Real estate


38



0.0



38



0.0Investments in unconsolidated trusts


1,238



0.6



1,238



0.7Short-term investments(5)


14,697



7.0



21,339



11.0Total investments

$
210,107



100.0
%

$
194,455



100.0
%   (1)
    
    Fixed maturity securities are carried on the balance sheet at
    estimated fair value. Certain fixed maturity securities do not
    have publicly quoted prices, and are carried at estimated fair
    value as determined by management. Total cost of fixed maturity
    securities was $189.1 million as of December 31, 2009
    and $171.3 million as of December 31, 2008.(2)
    
    Equity securities are carried on the balance sheet at estimated
    fair value. Total cost of equity securities was
    $8.6 million as of December 31, 2009 and
    $8.8 million as of December 31, 2008.(3)
    
    Mortgage, policy and student loans are valued at historical cost.(4)
    
    Investments in other invested assets are accounted for using the
    equity method. Total cost of other invested assets was
    $1.0 million as of December 31, 2009 and
    $1.4 million as of December 31, 2008.(5)
    
    Short-term investments are valued at cost, which approximates
    market value at the measurement date.      Year Ended December 31,2009

2008(Dollars in thousands)Average investments(1)

$
201,003


$
201,372Net investment income


10,554



11,688Average yield on investments


5.25
%


5.80
%Realized investment gains (losses), net(2)


273



(3,995
)   (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. 14




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##### Table of Contents



(2)
    
    Includes impairment charges of $0.1 million and
    $4.0 million in 2009 and 2008, respectively, primarily
    related to the write-down in the value of certain bonds,
    preferred and common stocks. See Note 2 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


86


Chairman Emeritus


1974Hilton H. Howell, Jr.


47


Chairman of the Board, President & CEO


1992John G. Sample, Jr.


53


Senior Vice President & CFO


2002     Mr. Robinson
  Mr. Howell
 15




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##### Table of Contents



son-in-law
  Mr. Sample
 Forward-Looking
    Statements    Item 1A.
    Risk
    Factors  Rule 12b-2 Regulation S-K,
  Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties  Leased Properties.
 16




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Item 3.
    Legal
    Proceedings    Item 4.
    Reserved 17




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##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Shareholder Matters
    and Issuer Purchases of Equity Securities    Year Ended December 31,

High


Low20091st quarter

$
0.97


$
0.462nd quarter


0.99



0.453rd quarter


1.20



0.644th quarter


1.72



1.0020081st quarter

$
1.75


$
1.232nd quarter


3.00



1.313rd quarter


1.73



1.044th quarter


1.35



0.52     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


543,500


$
1.44



2,531,406Equity compensation plans not approved by security holders(1)










Total


543,500


$
1.44



2,531,406   (1)
    
    All the Companys equity compensation plans have been
    approved by the Companys shareholders. 18




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##### Table of Contents



Issuer
    Purchases of Equity Securities
        TotalNumber of


MaximumShares


Number ofPurchased as


Shares thatPart of


May Yet beTotal





Publicly


PurchasedNumber of


Average


Announced


Under theShares


Price Paid


Plans or


Plans orPeriod

Purchased


per Share


Programs


ProgramsOctober 1  October 31, 2009


22,800


$
1.25



22,800



473,604November 1  November 30, 2009


2,000



1.31



2,000



471,604December 1  December 31, 2009














471,604Total


24,800


$
1.25



24,800   Stock
    Performance Graph
  Rule 12b-2 Regulation S-K,
  Item 6.
    Selected
    Financial Data  Rule 12b-2 Regulation S-K,
  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations       19




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##### Table of Contents



Critical
    Accounting Policies
    Unpaid loss and loss adjustment expenses
  Future policy benefits
  Deferred acquisition costs
 20




---



##### Table of Contents



Receivables
  Cash and investments
  820-10-20, Fair Value Measurements and Disclosures 820-10-20).
 21




---



##### Table of Contents



820-10-20.
    Quoted Pricesin Active


SignificantMarkets


Other


Significantfor Identical


Observable


UnobservableAssets


Inputs


Inputs(Level 1)


(Level 2)


(Level 3)


Total(In thousands)Fixed maturity securities

$



$
182,281


$
1,779


$
184,060Equity securities






6,914







6,914Short-term investments


14,697











14,697Total

$
14,697


$
189,195


$
1,779


$
205,671       Quoted Pricesin Active


SignificantMarkets


Other


Significantfor Identical


Observable


UnobservableAssets


Inputs


Inputs(Level 1)


(Level 2)


(Level 3)


Total(In thousands)Fixed maturity securities

$



$
161,168


$
1,929


$
163,097Equity securities






5,291







5,291Short-term investments


21,339











21,339Total

$
21,339


$
166,459


$
1,929


$
189,727       FixedMaturity


DerivativeSecurities


(Liability)(In thousands)Balance, January 1, 2008

$
3,000


$
(740
)Total unrealized losses included in other comprehensive loss


(1,071
)


(1,345
)Balance, December 31, 2008


1,929



(2,085
)Total unrealized gains (losses) included in other comprehensive
    loss


(150
)


538Balance, December 31, 2009

$
1,779


$
(1,547
)    22




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##### Table of Contents



Deferred income taxes
    Overall
    Corporate Results
  Year Ended December 31,2009


2008(In thousands)RevenueProperty and Casualty:American Southern

$
39,172


$
40,466Life and Health:Bankers Fidelity


63,075



58,805Corporate and Other


463



460Total revenue

$
102,710


$
99,731Income (loss) from continuing operations before income
    taxesProperty and Casualty:American Southern

$
4,782


$
5,817Life and Health:Bankers Fidelity


2,984



1,431Corporate and Other


(6,416
)


(8,240
)Income (loss) from continuing operations before income taxes

$
1,350


$
(992
)Loss from discontinued operations, net of tax

$



$
(3,417
)Net loss

$
(1,207
)

$
(3,883
)    23




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##### Table of Contents



Underwriting
    Results
  American
    Southern
    Year Ended December 31,2009


2008(Dollars in thousands)Gross written premiums

$
39,066


$
43,129Ceded premiums


(6,207
)


(6,250
)Net written premiums

$
32,859


$
36,879Net earned premiums

$
34,300


$
36,258Net losses and loss adjustment expenses


18,829



16,746Underwriting expenses


15,561



17,903Underwriting (loss) income

$
(90
)

$
1,609Loss ratio


54.9
%


46.2
%Expense ratio


45.4



49.4Combined ratio


100.3
%


95.6
%  24




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##### Table of Contents



Year Ended December 31,2009


2008(In thousands)Automobile liability

$
12,299


$
10,904Automobile physical damage


6,679



6,628General liability


6,008



7,996Property


2,442



2,374Surety


6,872



8,356Total earned premium

$
34,300


$
36,258          25




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##### Table of Contents



Bankers
    Fidelity
    Year Ended December 31,2009


2008(In thousands)Medicare supplement

$
42,679


$
41,402Other health products


3,867



3,364Life insurance


10,616



10,357Total earned premiums


57,162



55,123Insurance benefits and losses


41,955



40,084Underwriting expenses


18,136



17,290Total expenses


60,091



57,374Underwriting loss

$
(2,929
)

$
(2,251
)    26




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##### Table of Contents



Investment
    Income and Realized Gains
      2009


2008(In thousands)Corporate securities

$
44


$
932Redeemable preferred stocks


43



2,342Common and non-redeemable preferred stocks


17



666Other invested assets


17



74Total

$
121


$
4,014   and/or
 27




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##### Table of Contents



Interest
    Expense
    Other
    Expenses
    Income
    Taxes
    Liquidity
    and Capital Resources
   28




---



##### Table of Contents



and/or
      1-month, 2-months, 3-months 6-months,
   29




---



##### Table of Contents



New
    Accounting Pronouncements
   30




---



##### Table of Contents



Impact of
    Inflation
    Off-Balance
    Sheet Arrangements
    Contractual
    Obligations
  Rule 12b-2 Regulation S-K,
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Rule 12b-2 Regulation S-K,
 31




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data  INDEX TO
    FINANCIAL STATEMENTS
   
 PageATLANTIC AMERICAN CORPORATIONReport of Independent Registered Public
    Accounting Firm


33Consolidated Balance Sheets as of
    December 31, 2009 and 2008


34Consolidated Statements of Operations for each of
    the two years in the period ended December 31, 2009


35Consolidated Statements of Shareholders
    Equity for each of the two years in the period ended
    December 31, 2009


36Consolidated Statements of Cash Flows for each of
    the two years in the period ended December 31, 2009


37Notes to Consolidated Financial Statements


38   32




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            BDO SEIDMAN LLP
  Atlanta, Georgia
 March 26, 2010
 33




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##### Table of Contents



ATLANTIC
    AMERICAN CORPORATIONCONSOLIDATED BALANCE SHEETS
  December 31,2009


2008(Dollars in thousands,except per share data)ASSETSCash and cash equivalents, including short-term investments of
    $14,697 and $21,339 in 2009 and 2008, respectively

$
20,129


$
37,321Investments


195,410



173,116Receivables:Reinsurance


11,489



14,870Other, net of allowance for doubtful accounts of $533 and $676
    in 2009 and 2008, respectively


6,023



7,789Deferred income taxes, net


6,041



10,577Deferred acquisition costs


19,453



19,160Other assets


1,413



1,648Goodwill


2,128



2,128Total assets

$
262,086


$
266,609LIABILITIES AND SHAREHOLDERS EQUITYInsurance reserves and policyholder funds

$
129,213


$
130,774Accounts payable and accrued expenses


14,165



19,183Debt payable


41,238



41,238Total liabilities


184,616



191,195Commitments and contingencies (Note 8)Shareholders equity:Preferred stock, $1 par, 4,000,000 shares authorized;Series D preferred, 70,000 shares issued and
    outstanding; $7,000 redemption value


70



70Common stock, $1 par, 50,000,000 shares authorized;22,373,900 shares issued; 22,291,310 shares and
    22,332,087 shares outstanding in 2009 and 2008, respectively


22,374



22,374Additional paid-in capital


57,129



57,107Retained earnings


3,404



5,119Accumulated other comprehensive loss


(5,405
)


(9,200
)Treasury stock, at cost, 82,590 shares in 2009 and
    41,813 shares in 2008


(102
)


(56
)Total shareholders equity


77,470



75,414Total liabilities and shareholders equity

$
262,086


$
266,609    34




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##### Table of Contents



ATLANTIC
    AMERICAN CORPORATION
  CONSOLIDATED STATEMENTS OF
    OPERATIONS
  Year Ended December 31,2009


2008(Dollars in thousands,except per share data)Revenue:Insurance premiums

$
91,462


$
91,381Investment income


10,688



11,814Realized investment gains (losses), net


273



(3,995
)Other income


287



531Total revenue


102,710



99,731Benefits and expenses:Insurance benefits and losses incurred


60,784



56,830Commissions and underwriting expenses


28,379



30,816Interest expense


2,756



3,298Other


9,441



9,779Total benefits and expenses


101,360



100,723Income (loss) from continuing operations before taxes


1,350



(992
)Income tax expense (benefit)


2,557



(526
)Loss from continuing operations


(1,207
)


(466
)Loss from discontinued operations, net of tax (Note 17)






(3,417
)Net loss


(1,207
)


(3,883
)Preferred stock dividends


(508
)


(1,528
)Net loss applicable to common stock

$
(1,715
)

$
(5,411
)Basic loss per common share:Loss from continuing operations

$
(.08
)

$
(.09
)Loss from discontinued operations






(.16
)Net loss applicable to common shareholders

$
(.08
)

$
(.25
)Diluted loss per common share:Loss from continuing operations

$
(.08
)

$
(.09
)Loss from discontinued operations






(.16
)Net loss applicable to common shareholders

$
(.08
)

$
(.25
)    35




---



##### Table of Contents



ATLANTIC
    AMERICAN CORPORATION
  CONSOLIDATED STATEMENTS OF SHAREHOLDERS
    EQUITY
  AccumulatedAdditional





OtherPreferred


Common


Paid-In


Retained


Comprehensive


TreasuryStock


Stock


Capital


Earnings


Loss


Stock


Total(Dollars in thousands)Balance, December 31, 2007

$
204


$
21,817


$
56,414


$
10,530


$
(1,171
)

$



$
87,794Comprehensive loss:Net loss














(3,883
)










(3,883
)Increase in unrealized investment losses


















(11,538
)






(11,538
)Fair value adjustment to derivative financial instrument


















(1,345
)






(1,345
)Minimum pension liability adjustment (Note 9)


















531







531Deferred income tax attributable to other comprehensive loss


















4,323







4,323Total comprehensive loss


























(11,912
)Preferred stock redeemed (Note 10)


(134
)






(13,266
)














(13,400
)Capital contribution (Note 10)










13,795















13,795Dividends on preferred stock














(1,528
)










(1,528
)Common stock issued in lieu of preferred stock dividend payments






417



91















508Restricted stock grants






29



(29
)














Amortization of unearned compensation










66















66Acquisition of 41,813 shares for treasury






















(56
)


(56
)Issuance of 111,106 shares for employee benefit plans and
    stock options






111



36















147Balance, December 31, 2008


70



22,374



57,107



5,119



(9,200
)


(56
)


75,414Comprehensive income:Net loss














(1,207
)










(1,207
)Decrease in unrealized investment losses


















4,925







4,925Fair value adjustment to derivative financial instrument


















538







538Minimum pension liability adjustment (Note 9)


















375







375Deferred income tax attributable to other comprehensive income


















(2,043
)






(2,043
)Total comprehensive income


























2,588Dividends on preferred stock














(508
)










(508
)Amortization of unearned compensation










22















22Acquisition of 40,777 shares for treasury






















(46
)


(46
)Balance, December 31, 2009

$
70


$
22,374


$
57,129


$
3,404


$
(5,405
)

$
(102
)

$
77,470    36




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##### Table of Contents



ATLANTIC
    AMERICAN CORPORATION
  CONSOLIDATED STATEMENTS OF CASH
    FLOWS
  Year Ended December 31,2009


2008(Dollars in thousands)Cash flows from operating activities:Net loss

$
(1,207
)

$
(3,883
)Adjustments to reconcile net loss to net cash used in operating
    activities:Amortization of deferred acquisition costs


9,656



9,914Acquisition costs deferred


(9,949
)


(10,244
)Realized investment (gains) losses, net


(273
)


3,995(Decrease) increase in insurance reserves and policyholder funds


(1,561
)


2,696Loss from discontinued operations, net






3,417Compensation expense related to share awards


22



66Depreciation and amortization


323



318Deferred income tax expense (benefit)


2,493



(2,537
)Goodwill impairment






260Decrease (increase) in receivables, net


4,762



(2,359
)Decrease in other liabilities


(5,105
)


(1,229
)Other, net


71



(3,139
)Net cash used in continuing operations


(768
)


(2,725
)Net cash used in discontinued operations






(3,424
)Net cash used in operating activities


(768
)


(6,149
)Cash flows from investing activities:Proceeds from investments sold


9,335



606Proceeds from investments matured, called or redeemed


102,960



75,835Investments purchased


(128,066
)


(88,669
)Net proceeds from sale of insurance subsidiaries






43,392Additions to property and equipment


(99
)


(150
)Net cash (used in) provided by continuing operations


(15,870
)


31,014Net cash used in discontinued operations (net of $35,501 of cash
    transferred in 2008)






(11,996
)Net cash (used in) provided by investing activities


(15,870
)


19,018Cash flows from financing activities:Redemption of Series B Preferred Stock






(13,400
)Payment of dividends on Series B Preferred Stock






(1,675
)Payment of dividends on Series D Preferred Stock


(508
)


Purchase of treasury shares


(46
)


(56
)Repayments of debt






(12,750
)Financing of discontinued operations






4Net cash used in continuing operations


(554
)


(27,877
)Net cash used in discontinued operations






(4
)Net cash used in financing activities


(554
)


(27,881
)Net decrease in cash


(17,192
)


(15,012
)Cash and cash equivalents at beginning of yearContinuing operations


37,321



36,909Discontinued operations






15,424Total


37,321



52,333Cash and cash equivalents at end of yearContinuing operations


20,129



37,321Discontinued operations






Total

$
20,129


$
37,321Supplemental cash flow information:Cash paid for interest

$
2,811


$
3,393Cash paid for income taxes

$



$
2,150Cash received for income taxes

$
6


$
    37




---



##### 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
   38




---



##### Table of Contents



Investments
  available-for-sale
  Income
    Taxes
    Earnings
    Per Common Share
   39




---



##### Table of Contents



Cash
    and Cash Equivalents
    Impact
    of Recently Issued Accounting Standards
  105-10-05, Generally Accepted Accounting Principles,
  No. 2009-5, Fair Value Measurements and Disclosures (Topic
    820)  Measuring Liabilities at Fair Value 2009-5), 2009-5
  No. 2009-4, Accounting for Redeemable Equity Instruments 2009-4), 480-10-S99, Distinguishing Liabilities from Equity 2009-4 Presentation in
    Financial Statements of Redeemable Preferred Stocks 2009-4
  810-10 810-10), 810-10 810-10 810-10
    855-10, Subsequent Events 855-10). 855-10
 40




---



##### Table of Contents



855-10
  820-10-65, Transition Related to FASB Staff Position
    FAS 157-4,
    Determining Fair Value When the Volume and Level of Activity for
    the Asset or Liability Have Significantly Decreased and
    Identifying Transactions That Are Not Orderly 820-10-65). 820-10-65, 820-10-65
  320-10-65, Transition Related to FSP
    No. FAS 115-2
    and
    No. FAS 124-2,
    Recognition and Presentation of
    Other-Than-Temporary
    Impairments 320-10-65). 320-10-65 other-than-temporary, other-than-temporary, 320-10-65 320-10-65 320-10-65 other-than-temporary 320-10-65 320-10-65
  815-10-65, Transition and Effective Date Related to FASB Statement
    No. 161, Disclosures about Derivative Instruments and
    Hedging Activities  an amendment of FASB Statement
    No. 133 815-10-65). 815-10-65 815-10-65 815-10-65
  Use of
    Estimates in the Preparation of Financial
    Statements
   41




---



##### Table of Contents



Note 2.
    Investments      2009Gross


GrossCarrying


Unrealized


Unrealized


AmortizedValue


Gains


Losses


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

$
124,392


$
628


$
3,538


$
127,302Corporate securitiesUtilities and telecom


24,615



695



105



24,025Financial services


13,518



228



2,324



15,614Media


2,412



59







2,353Other-diversified


11,241



259



182



11,164Total corporate securities


51,786



1,241



2,611



53,156Redeemable preferred stocksUtilities and telecom


2,668



168







2,500Financial services


4,215



6



800



5,009Media


806







145



951Other-diversified


193











193Total redeemable preferred stocks


7,882



174



945



8,653Total fixed maturities


184,060



2,043



7,094



189,111Common and non-redeemable preferred stocks:Financial services


6,097



1,029



318



5,386Media


718







2,480



3,198Other-diversified


99



52







47Total common and non-redeemable preferred stocks


6,914



1,081



2,798



8,631Other invested assets (fair value of $1,021)


1,021











1,021Policy and student loans


2,139











2,139Real estate


38











38Investments in unconsolidated trusts


1,238











1,238Investments


195,410



3,124



9,892



202,178Short-term investments


14,697











14,697Total investments

$
210,107


$
3,124


$
9,892


$
216,875   42




---



##### Table of Contents



2008Gross


GrossCarrying


Unrealized


Unrealized


AmortizedValue


Gains


Losses


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

$
120,572


$
1,386


$
123


$
119,309Obligations of states and political subdivisions


409



10







399Corporate securitiesUtilities and telecom


17,260



27



1,251



18,484Financial services


16,301



14



4,718



21,005Media


1,194







1,159



2,353Other-diversified














Total corporate securities


34,755



41



7,128



41,842Redeemable preferred stocksUtilities and telecom


2,525



27



2



2,500Financial services


3,924







1,925



5,849Automotive


222











222Media


498







454



952Other-diversified


192











192Total redeemable preferred stocks


7,361



27



2,381



9,715Total fixed maturities


163,097



1,464



9,632



171,265Common and non-redeemable preferred stocks:Financial services


4,927



539



1,183



5,571Media


268







2,930



3,198Other-diversified


96



49







47Total common and non-redeemable preferred stocks


5,291



588



4,113



8,816Other invested assets (fair value of $1,433)


1,433











1,433Policy and student loans


2,019











2,019Real estate


38











38Investments in unconsolidated trusts


1,238











1,238Investments


173,116



2,052



13,745



184,809Short-term investments


21,339











21,339Total investments

$
194,455


$
2,052


$
13,745


$
206,148    43




---



##### Table of Contents



2009


2008


2009


2008Carrying


Amortized


Carrying


Amortized


Unrealized


UnrealizedValue


Cost


Value


Cost


Gains (Losses)


Gains (Losses)U.S. Treasury securities and U.S. Government agencies

$
124,392


$
127,302


$
120,572


$
119,309


$
(2,910
)

$
1,263Utilities and telecom


27,283



26,525



19,785



20,984



758



(1,199
)Financial services


23,830



26,009



25,152



32,425



(2,179
)


(7,273
)Automotive










222



222







Media(1)


3,936



6,502



1,960



6,503



(2,566
)


(4,543
)Other  diversified


11,533



11,404



697



638



129



59Other investments


4,436



4,436



4,728



4,728







Investments

$
195,410


$
202,178


$
173,116


$
184,809


$
(6,768
)

$
(11,693
)     (1)
    
    Media includes related party investments in Gray Television,
    Inc. with an amortized cost basis of $3,198 and which had an
    aggregate carrying value of $718 and $267 at December 31,
    2009 and 2008, respectively. See Note 13.    2009Less 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

$
96,977


$
3,300


$
4,772


$
238


$
101,749


$
3,538Corporate securities


12,894



609



7,525



2,002



20,419



2,611Redeemable preferred stocks










4,515



945



4,515



945Common and non-redeemable preferred stocks










3,683



2,798



3,683



2,798Total temporarily impaired securities

$
109,871


$
3,909


$
20,495


$
5,983


$
130,366


$
9,892   2008Less 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

$
27,184


$
123


$



$



$
27,184


$
123Corporate securities


22,423



3,792



5,708



3,336



28,131



7,128Redeemable preferred stocks


2,224



276



3,196



2,105



5,420



2,381Common and non-redeemable preferred stocks


267



2,930



2,100



1,183



2,367



4,113Total temporarily impaired securities

$
52,098


$
7,121


$
11,004


$
6,624


$
63,102


$
13,745  44




---



##### Table of Contents



2009


2008Corporate securities

$
44


$
932Redeemable preferred stocks


43



2,342Common and non-redeemable preferred stocks


17



666Other invested assets


17



74Total

$
121


$
4,014         Level 1
    Observable inputs that reflect quoted prices for identical
    assets or liabilities in active markets that the Company has the
    ability to access at the measurement date. The Companys
    Level 1 instruments consist of short-term investments.Level 2
    Observable inputs, other than quoted prices included in
    Level 1, for the asset or liability or prices for similar
    assets and liabilities. The Companys Level 2
    instruments include most of its fixed maturity securities, which
    consist of U.S. Treasury securities and
    U.S. Government securities, municipal bonds, and certain
    corporate fixed maturity securities, as well as its common and
    non-redeemable preferred stocks.Level 3
    Valuations that are derived from techniques in which one or more
    of the significant inputs are unobservable (including
    assumptions about risk). The Companys Level 3
    instruments include certain fixed maturity securities and a zero
    cost interest rate collar. Fair value is based on 45




---



##### Table of Contents



criteria that use assumptions or other data that are not readily
    observable from objective sources. As of December 31, 2009,
    the value of the Companys fixed maturity securities valued
    using Level 3 criteria was $1,779 and the value of the zero
    cost interest rate collar was a liability of $1,547 (See
    Note 7 and Note 15). The use of different criteria of
    assumptions of data may have yielded different valuations.    Quoted Pricesin Active


SignificantMarkets


Other


Significantfor Identical


Observable


UnobservableAssets


Inputs


Inputs(Level 1)


(Level 2)


(Level 3)


TotalFixed maturity securities

$



$
182,281


$
1,779


$
184,060Equity securities






6,914







6,914Short-term investments


14,697











14,697Total

$
14,697


$
189,195


$
1,779


$
205,671     Quoted Pricesin Active


SignificantMarkets


Other


Significantfor Identical


Observable


UnobservableAssets


Inputs


Inputs(Level 1)


(Level 2)


(Level 3)


TotalFixed maturity securities

$



$
161,168


$
1,929


$
163,097Equity securities






5,291







5,291Short-term investments


21,339











21,339Total

$
21,339


$
166,459


$
1,929


$
189,727       2009


2008Carrying


Amortized


Carrying


AmortizedValue


Cost


Value


CostMaturitiesDue in one year or less

$
16,562


$
16,537


$
23,451


$
23,404Due after one year through five years


10,571



10,052



13,572



14,028Due after five years through ten years


14,409



13,808



13,687



14,909Due after ten years


156,260



162,418



133,726



140,263Varying maturities


955



993







Totals

$
198,757


$
203,808


$
184,436


$
192,604  46




---



##### Table of Contents



2009


2008Fixed maturities

$
9,878


$
10,146Common and non-redeemable preferred stocks


510



356Short-term investments


129



1,132Other


171



180Total investment income

$
10,688


$
11,814Less investment expenses


(134
)


(126
)Net investment income

$
10,554


$
11,688     2009Fixed


OtherStocks


Maturities


Invested Assets


TotalGains

$
179


$
509


$



$
688Losses


(16
)


(386
)


(13
)


(415
)Realized investment gains (losses), net

$
163


$
123


$
(13
)

$
273   2008Fixed


Other InvestedStocks


Maturities


Assets


TotalGains

$



$
27


$



$
27Losses


(666
)


(3,282
)


(74
)


(4,022
)Realized investment gains (losses), net

$
(666
)

$
(3,255
)

$
(74
)

$
(3,995
)     2009


2008Common and non-redeemable preferred stocks

$
415


$
Fixed maturities


8,562



491Other investments


358



115Total proceeds

$
9,335


$
606    47




---



##### Table of Contents



Note 3.
    Insurance
    Reserves and Policyholder Funds    Amount of InsuranceIn Force2009


2008


2009


2008Future policy benefitsLife insurance policies:Ordinary

$
46,942


$
45,276


$
250,604


$
242,412Mass market


3,900



4,228



5,534



6,167Individual annuities


241



285







51,083



49,789


$
256,138


$
248,579Accident and health insurance policies


7,898



7,03858,981



56,827Unearned premiums


18,130



19,542Losses, claims and loss adjustment expenses


50,112



52,499Other policy liabilities


1,990



1,906Total insurance reserves and policyholder funds

$
129,213


$
130,774     Future
    Policy Benefits
    Loss
    and Claim Reserves
   48




---



##### Table of Contents



2009


2008Balance at January 1

$
52,499


$
51,704Less: Reinsurance recoverables


(14,870
)


(13,004
)Net balance at January 1


37,629



38,700Incurred related to:Current year


65,093



62,569Prior years


(7,620
)


(8,723
)Total incurred


57,473



53,846Paid related to:Current year


42,335



40,249Prior years


14,144



14,668Total paid


56,479



54,917Net balance at December 31


38,623



37,629Plus: Reinsurance recoverables


11,489



14,870Balance at December 31

$
50,112


$
52,499       2009


2008Total incurred claims

$
57,473


$
53,846Cash surrender value and matured endowments


1,220



1,570Benefit reserve changes


2,091



1,414Total insurance benefits and losses incurred

$
60,784


$
56,830   Note 4.
    Reinsurance   49




---



##### Table of Contents



2009


2008Direct premiums written

$
92,901


$
95,467Plus  premiums assumed


3,461



2,858Less  premiums ceded


(6,312
)


(6,350
)Net premiums written


90,050



91,975Change in unearned premiums


1,412



(594
)Net premiums earned

$
91,462


$
91,381Provision for benefits and losses incurred

$
62,129


$
60,786Reinsurance loss recoveries


(1,345
)


(3,956
)Insurance benefits and losses incurred

$
60,784


$
56,830     2009


2008Receivable on unpaid losses

$
11,489


$
14,870Receivable on paid losses






Total reinsurance receivables

$
11,489


$
14,870   Note 5.
    Income
    Taxes    2009


2008Tax expense (benefit) on income or loss from:Continuing operations

$
2,557


$
(526
)Discontinued operations (Note 17)






(1,230
)Total tax expense (benefit) on income or loss


2,557



(1,756
)Tax expense (benefit) on components of shareholders equity:Net unrealized gains (losses) on investment securities


1,724



(4,038
)Fair value adjustment to derivative financial instrument


188



(471
)Minimum pension liability adjustment


131



186Total tax expense (benefit) on shareholders equity


2,043



(4,323
)Total tax expense (benefit)

$
4,600


$
(6,079
)  50




---



##### Table of Contents



2009


2008Federal income tax provision at statutory rate of 35%

$
473


$
(347
)Tax exempt interest and dividends received deductions


(230
)


(207
)Small life deduction


(119
)


(350
)Non-deductible goodwill






91Loss carryforward from sale of subsidiaries






(5,155
)Intercompany fees(1)






1Other permanent differences


42



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


2,016



5,155Adjustment for prior years estimates to actual


381



247State income taxes


(6
)


Income tax expense (benefit)

$
2,557


$
(526
)     (1)
    
    Intercompany fees from discontinued operations eliminated in
    consolidated tax return.      2009


2008Deferred tax liabilities:Deferred acquisition costs

$
(2,999
)

$
(2,856
)Deferred and uncollected premiums


(732
)


(704
)Other


(10
)


(25
)Total deferred tax liabilities


(3,741
)


(3,585
)Deferred tax assets:Net operating loss carryforwards


2,221



2,105Insurance reserves


3,069



2,918Capital loss carryforwards


7,156



5,155Impaired assets


1,077



3,302Alternative minimum tax credit


108



55Net unrealized investment losses


2,369



4,093Bad debts and other


953



1,689Total deferred tax assets


16,953



19,317Asset valuation allowance


(7,171
)


(5,155
)Net deferred tax assets

$
6,041


$
10,577  51




---



##### Table of Contents



2009


2008Current  Federal

$
70


$
2,011Current  State


(6
)


Deferred  Federal


2,493



(2,537
)Total

$
2,557


$
(526
)         Note 6.
    Credit
    Arrangements  Bank
    Debt
  1-month, 2-months, 3-months 6-months,
   52




---



##### Table of Contents



Junior
    Subordinated Debentures
      Atlantic American

Atlantic AmericanStatutory Trust I

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

$
18,042


$
23,196Balance December 31, 2009


18,042



23,196Balance December 31, 2008


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 7.
    Derivative
    Financial Instruments   53




---



##### Table of Contents



Note 8.
    Commitments
    and Contingencies  Litigation
    Operating
    Lease Commitments
    Year Ending December 31,2010

$
7542011


3852012


3942013


4042014


415Thereafter


1,956Total

$
4,308   Note 9.
    Employee
    Benefit Plans  Stock
    Options
  and/or and/or
 54




---



##### Table of Contents



2009


2008Weighted





WeightedAverage





AverageShares

Shares


Exercise Price


Shares


Exercise PriceOptions outstanding, beginning of year


543,500


$
1.44



624,000


$
1.42Options exercised














Options canceled or expired










(80,500
)


1.28Options outstanding, end of year


543,500



1.44



543,500



1.44Options exercisable


543,500



1.44



543,500



1.44Options available for future grant


2,531,406







2,531,406     Outstanding and ExercisableWeighted AverageRange of

Number of


Remaining Life


Weighted AverageExercise Prices

Options


(Years)


Exercise Price$1.00 to $1.50


307,500



1.78


$
1.25$1.51 to $2.00


236,000



3.16


$
1.68543,500     401(k)
    Plan
    Defined
    Benefit Pension Plans
   55




---



##### Table of Contents



Obligation
    and Funded Status
  2009


2008Change in Benefit ObligationNet benefit obligation at beginning of year

$
4,518


$
6,103Distribution of accumulated SERP benefits


(2,262
)


Service cost






185Interest cost


128



338Plan curtailment






(1,005
)Actuarial gain (loss)


12



(112
)Gross benefits paid


(53
)


(991
)Net benefit obligation at end of year


2,343



4,518Change in Plan AssetsFair value of plan assets at beginning of year


2,139



3,164Employer contributions


27



132Actual return on plan assets


(19
)


(166
)Gross benefits paid


(53
)


(991
)Fair value of plan assets at end of year


2,094



2,139Funded Status of PlanFunded status at end of year


(249
)


(2,379
)Unrecognized net actuarial loss






375Additional minimum liability






(375
)Net amount recognized in accrued liabilities at end of year

$
(249
)

$
(2,379
)       2009

2008Discount rate to determine the projected benefit obligation


5.75
%


5.75
%Projected annual salary increases


4.50
%


4.50
%     Components
    of Net Periodic Benefit Cost
    2009


2008Service cost

$



$
185Interest cost


148



338Expected return on plan assets






(217
)Net amortization






80Total pension benefit expense

$
148


$
386  56




---



##### Table of Contents



2008Discount rate to determine the net periodic benefit cost


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


7.00
%Projected annual salary increases


4.50
%       Expected
    Cash Flows and Payments
    Note 10.
    Preferred
    Stock       57




---



##### Table of Contents



Note 11.
    Earnings
    (Loss) Per Common Share    For the Year EndedDecember 31, 2009Per ShareIncome


Shares


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

$
(1,207
)


22,307Less preferred stock dividends


(508
)


Loss from continuing operations applicable to common shareholders

$
(1,715
)


22,307


$
(.08
)   For the Year EndedDecember 31, 2008Per ShareIncome


Shares


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

$
(466
)


21,874Less preferred stock dividends


(1,528
)


Loss from continuing operations applicable to common shareholders

$
(1,994
)


21,874


$
(.09
)     Note 12.
    Statutory
    Reporting      2009


2008Life and Health, net income

$
2,469


$
1,269Property and Casualty, net income


5,429



4,472Statutory net income

$
7,898


$
5,741Life and Health, surplus

$
31,493


$
29,876Property and Casualty, surplus


38,854



36,439Statutory surplus

$
70,347


$
66,315    58




---



##### Table of Contents



Note 13.
    Related
    Party and Other Transactions            Note 14.
    Segment
    Information    American


Bankers


Corporate


AdjustmentsSouthern


Fidelity


& Other


& Eliminations


ConsolidatedDecember 31, 2009Insurance premiums

$
34,300


$
57,162


$



$



$
91,462Insurance benefits and losses incurred


18,829



41,955











60,784Expenses deferred


(7,434
)


(2,515
)










(9,949
)Amortization and depreciation expense


8,097



1,882











9,979Other expenses


14,898



18,769



13,780



(6,901
)


40,546Total expenses


34,390



60,091



13,780



(6,901
)


101,360Underwriting loss


(90
)


(2,929
)Investment income, including net realized gains


4,864



5,823



2,302



(2,028
)


10,961Other income


8



90



5,062



(4,873
)


287Income (loss) from continuing operations before income taxes

$
4,782


$
2,984


$
(6,416
)

$



$
1,350Total revenues

$
39,172


$
63,075


$
7,364


$
(6,901
)

$
102,710Goodwill

$
1,350


$
778


$



$



$
2,128Total assets

$
106,166


$
124,645


$
120,679


$
(89,404
)

$
262,086   59




---



##### Table of Contents



American


Bankers


Corporate


AdjustmentsSouthern


Fidelity


& Other


& Eliminations


ConsolidatedDecember 31, 2008Insurance premiums

$
36,258


$
55,123


$



$



$
91,381Insurance benefits and losses incurred


16,746



40,084











56,830Expenses deferred


(8,419
)


(1,825
)










(10,244
)Amortization and depreciation expense


8,397



1,835











10,232Other expenses


17,925



17,280



16,304



(7,604
)


43,905Total expenses


34,649



57,374



16,304



(7,604
)


100,723Underwriting income (loss)


1,609



(2,251
)Investment income, including net realized losses


4,201



3,639



2,884



(2,905
)


7,819Other income


7



43



5,180



(4,699
)


531Income (loss) from continuing operations before income taxes

$
5,817


$
1,431


$
(8,240
)

$



$
(992
)Total revenues

$
40,466


$
58,805


$
8,064


$
(7,604
)

$
99,731Goodwill

$
1,350


$
778


$



$



$
2,128Total assets

$
112,547


$
118,674


$
119,423


$
(84,035
)

$
266,609   Note 15.
    Disclosures
    About Fair Value of Financial Instruments  and/or
  2009


2008Carrying


Estimated


Carrying


EstimatedAmount


Fair Value


Amount


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

$
20,129


$
20,129


$
37,321


$
37,321Fixed maturities


184,060



184,060



163,097



163,097Common and non-redeemable preferred stocks


6,914



6,914



5,291



5,291Policy and student loans


2,139



2,139



2,019



2,019Other invested assets


1,021



1,021



1,433



1,433Real estate


38



38



38



38Investments in unconsolidated trusts


1,238



1,238



1,238



1,238Liabilities:Junior Subordinated Debentures


41,238



41,238



41,238



41,238    60




---



##### Table of Contents



Fixed Maturity


DerivativeSecurities


(Liability)Balance, January 1, 2008

$
3,000


$
(740
)Total unrealized losses included in other comprehensive loss


(1,071
)


(1,345
)Balance, December 31, 2008


1,929



(2,085
)Total unrealized gains (losses) included in other comprehensive
    loss


(150
)


538Balance, December 31, 2009

$
1,779


$
(1,547
)         Cash
    and Cash Equivalents, including Short-term
    Investments
    Fixed
    Maturity Securities, Common and Non-Redeemable Preferred Stocks
    and Publicly Traded Other Invested Assets
    Non-publicly
    Traded Invested Assets
    Debt
    Payable and Junior Subordinated Debentures
   61




---



##### Table of Contents



Note 16.
    Reconciliation
    of Other Comprehensive Income (Loss)    December 31,2009


2008Net realized gains (losses) on investment securities included in
    loss from continuing operations

$
273


$
(3,995
)Net realized gains (losses) on investment securities included in
    loss from discontinued operations






8Total net realized gains (losses) on investment securities
    included in net loss

$
273


$
(3,987
)Other components of comprehensive income (loss):Net pre-tax unrealized gains (losses) on investment securities
    arising during year

$
5,198


$
(15,525
)Reclassification adjustment for net realized (gains) losses on
    investment securities


(273
)


3,987Net pre-tax unrealized gains (losses) on investment securities
    recognized in other comprehensive income (loss)


4,925



(11,538
)Fair value adjustment to derivative financial instrument


538



(1,345
)Minimum pension liability adjustment


375



531Deferred income tax attributable to other comprehensive income
    (loss)


(2,043
)


4,323$
3,795


$
(8,029
)  62




---



##### Table of Contents



Note 17.
    Discontinued
    Operations      2008Revenue:Insurance premiums

$
8,789Investment income


1,400Realized investment gains, net


8Other income


11Total revenue


10,208Benefits and expenses:Insurance benefits and losses incurred


8,657Commissions and underwriting expenses


3,800Total benefits and expenses


12,457Loss from discontinued operations before taxes


(2,249
)Income tax benefit


(815
)Loss from discontinued operations, net of tax


(1,434
)Loss from sale of discontinued operations, net of tax of $415


(1,983
)Net loss from discontinued operations

$
(3,417
)     2008Federal income tax provision at statutory rate of 35%

$
(1,626
)Tax exempt interest and dividends received deductions


(41
)Intercompany fees(1)


(1
)Other permanent differences


438Income tax benefit

$
(1,230
)     (1)
    
    Intercompany fees from discontinued operations eliminated in
    consolidated tax return.    2008Current  Federal

$
(1,577
)Deferred  Federal


347Total

$
(1,230
)  63




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A(T).
    Controls
    and Procedures  Rules 13a-15(e) 15d-15(e)
    Internal Control  Integrated Framework. Rule 13a-15(f)
      Item 9B.
    Other
    Information        PART III   64




---



##### Table of Contents



Form 10-K.
 PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules                    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, 2008].3
.2



Bylaws of the registrant, as amended [incorporated by reference
    to Exhibit 3.2 to the registrants
    Form 10-K
    for the year ended December 31, 2008].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].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]. 65




---



##### Table of Contents



10
.09



First Amendment to Credit Agreement and Pledge 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 10-Q
    for the quarter ended March 31, 2008].10
.10



Stock Purchase Agreement, dated as of December 26, 2007
    between Atlantic American Corporation and Columbia Mutual
    Insurance Company [incorporated by reference to
    Exhibit 10.09 to the registrants
    Form 10-K
    for the year ended December 31, 2007].10
.11



First Amendment to Stock Purchase Agreement, dated as of
    March 17, 2009, between Atlantic American Corporation and
    Columbia Mutual Insurance Company [incorporated by reference to
    Exhibit 10.11 to the registrants
    Form 10-K
    for the year ended December 31, 2008].10
.12



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 [incorporated by reference to
    Exhibit 10.10 to the registrants
    Form 10-K
    for the year ended December 31, 2007].10
.13



First Amendment to Lease Agreement between Georgia
    Casualty & Surety Company, Bankers Fidelity Life
    Insurance Company, Atlantic American Corporation and Delta Life
    Insurance Company dated as of March 31, 2008 [incorporated
    by reference to Exhibit 10.2 to the registrants
    Form 10-Q
    for the quarter ended March 31, 2008].10
.14



Second Amendment to Credit Agreement between registrant and
    Wachovia Bank, National Association dated as of October 28,
    2008 [incorporated by reference to Exhibit 10.1 to the
    registrants
    Form 8-K
    dated October 31, 2008].10
.15



Form of Redemption Letter Agreement entered into by
    registrant and each holder of Series B Preferred Stock
    [incorporated by reference to Exhibit 10.2 to the
    registrants
    Form 8-K
    dated October 31, 2008].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. 66




---



##### 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 Emeritus

March 26, 2010/s/  Hilton
    H. Howell, Jr.Hilton
    H. Howell, Jr.

President, Chief Executive Officer and Chairman of the Board
    (Principal Executive Officer)

March 26, 2010/s/  John
    G. Sample, Jr.John
    G. Sample, Jr.

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

March 26, 2010/s/  Edward
    E. ElsonEdward
    E. Elson

Director

March 26, 2010/s/  Samuel
    E. HudginsSamuel
    E. Hudgins

Director

March 26, 2010/s/  D.
    Raymond RiddleD.
    Raymond Riddle

Director

March 26, 2010/s/  Harriett
    J. RobinsonHarriett
    J. Robinson

Director

March 26, 2010/s/  Scott
    G. ThompsonScott
    G. Thompson

Director

March 26, 2010/s/  William
    H. Whaley, M.D.William
    H. Whaley, M.D.

Director

March 26, 2010/s/  Dom
    H. WyantDom
    H. Wyant

Director

March 26, 2010/s/  Harold
    K. FischerHarold
    K. Fischer

Director

March 26, 2010  67




---



##### Table of Contents



SCHEDULE II
    Page 1 of 3
  CONDENSED
    FINANCIAL INFORMATION OF REGISTRANT
  ATLANTIC
    AMERICAN CORPORATION
    (Parent Company Only)
  BALANCE
    SHEETS
  December 31,2009


2008(In thousands)ASSETSCash and short-term investments

$
15,887


$
20,966Investments


7,638



2,200Investment in subsidiaries


89,404



84,035Investments in unconsolidated trusts


1,238



1,238Deferred tax asset, net


5,381



9,917Income taxes receivable from subsidiaries


1,594



3,264Other assets


783



499Total assets

$
121,925


$
122,119LIABILITIES AND SHAREHOLDERS EQUITYOther payables

$
3,217


$
5,467Junior subordinated debentures


41,238



41,238Total liabilities


44,455



46,705Shareholders equity


77,470



75,414Total liabilities and shareholders equity

$
121,925


$
122,119  II-1




---



##### 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 31,2009


2008(In thousands)REVENUEFee income from subsidiaries

$
4,873


$
4,699Distributed earnings from subsidiaries


6,472



5,496Other


332



212Total revenue


11,677



10,407GENERAL AND ADMINISTRATIVE EXPENSES


8,393



9,104INTEREST EXPENSE


2,756



3,298528



(1,995
)INCOME TAX EXPENSE (BENEFIT)(1)


1,851



(2,692
)(1,323
)


697EQUITY IN UNDISTRIBUTED EARNINGS (LOSSES) OF CONTINUING
    OPERATIONS, NET


116



(1,163
)EQUITY IN LOSSES OF DISCONTINUED OPERATIONS, NET






(3,417
)NET LOSS

$
(1,207
)

$
(3,883
)   (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




---



##### 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 31,2009


2008(In thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(1,207
)

$
(3,883
)Adjustments to reconcile net loss to net cash provided by (used
    in) operating activities:Realized investment losses


7



622Depreciation and amortization


163



308Compensation expense related to share awards


22



66Equity in undistributed (earnings) losses of continuing
    operations


(116
)


1,163Equity in losses of discontinued operations






3,417Decrease in intercompany taxes


1,670



1,624Deferred income tax expense (benefit)


2,493



(2,537
)(Decrease) increase in other liabilities


(1,713
)


2,139Other, net


(359
)


(2,977
)Net cash provided by (used in) operating activities


960



(58
)CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from investments sold


2



2Investments purchased


(4,999
)


(3,532
)Net proceeds from sale of insurance subsidiaries






43,392Capital contribution to subsidiaries


(400
)


(96
)Additions to property and equipment


(88
)


(85
)Net cash (used in) provided by investing activities


(5,485
)


39,681CASH FLOWS FROM FINANCING ACTIVITIES:Redemption of Series B Preferred Stock






(13,400
)Payment of dividends on Series B Preferred Stock






(1,675
)Payment of dividends on Series D Preferred Stock


(508
)


Purchase of treasury shares


(46
)


(56
)Repayments of debt






(12,750
)Financing of discontinued operations






4Net cash used in financing activities


(554
)


(27,877
)Net (decrease) increase in cash


(5,079
)


11,746Cash at beginning of year


20,966



9,220Cash at end of year

$
15,887


$
20,966Supplemental disclosure:Cash paid for interest

$
2,811


$
3,393Cash paid for income taxes

$



$
2,150  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, 2009:Bankers Fidelity

$
16,588


$
66,845


$
3,334


$
1,990American Southern


2,865



42,248



14,796



$
19,453


$
109,093
(1)

$
18,130


$
1,990December 31, 2008:Bankers Fidelity

$
15,793


$
64,398


$
3,305


$
1,906American Southern


3,367



44,928



16,237



$
19,160


$
109,326
(2)

$
19,542


$
1,906   (1)
    
    Includes future policy benefits of $58,981 and losses and claims
    of $50,112.(2)
    
    Includes future policy benefits of $56,827 and losses and claims
    of $52,499. III-1




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##### 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, 2009:Bankers Fidelity

$
57,162


$
5,533


$
41,955


$
1,721


$
16,415


$
American Southern


34,300



4,740



18,829



7,935



7,626



32,859Other






281











6,879



$
91,462


$
10,554


$
60,784


$
9,656


$
30,920


$
32,859December 31, 2008:Bankers Fidelity

$
55,123


$
5,810


$
40,084


$
1,676


$
15,614


$
American Southern


36,258



5,277



16,746



8,238



9,665



36,879Other






601











8,700



$
91,381


$
11,688


$
56,830


$
9,914


$
33,979


$
36,879  III-2




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##### 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, 2009:Life insurance in force

$
287,056


$
(30,918
)

$



$
256,138Premiums Bankers Fidelity

$
57,073


$
(105
)

$
194


$
57,162



0.3
%American Southern


37,496



(6,207
)


3,011



34,300



8.8
%Total premiums

$
94,569


$
(6,312
)

$
3,205


$
91,462



3.5
%Year ended December 31, 2008:Life insurance in force

$
280,909


$
(32,330
)

$



$
248,579Premiums Bankers Fidelity

$
54,998


$
(100
)

$
225


$
55,123



0.4
%American Southern


39,481



(6,250
)


3,027



36,258



8.3
%Total premiums

$
94,479


$
(6,350
)

$
3,252


$
91,381



3.6
%  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 ClaimAdjustment Expenses


Amortization


Paid 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, 2009

$
2,865


$
42,248


$
14,796


$
34,300


$
4,740


$
25,576


$
(6,747
)

$
7,935


$
17,987


$
32,859December 31, 2008

$
3,367


$
44,928


$
16,237


$
36,258


$
5,277


$
24,740


$
(7,994
)

$
8,238


$
17,753


$
36,879  VI-1