================================================================================
                   SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                           ------------------------

                                   FORM 10-K

           |X|  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the Fiscal Year Ended December 31, 1996
                                            -----------------
                                      or
           | |  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             (I.R.S. employer
        incorporation or organization)             identification no.)

          4370 Peachtree Road, N.E.,
               Atlanta, Georgia                           30319
         -------------------------------           ------------------
      (Address of principal executive offices)         (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)
                       8% Convertible Subordinated Notes
                               (Title of class)
                      ----------------------------------

      Indicate by check mark whether the  registrant (1) has filed all reports
required  to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act
of 1934 during the  preceding 12 months (or for such  shorter  period that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
Yes  X .  No    .
    ---     ---
      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this 10-K or any amendment to this Form
10-K. |X|
                           ------------------------

      The  aggregate  market value of common stock held by  non-affiliates  of
the  registrant as of March 7, 1997, was  $17,454,169.  On March 7, 1997 there
were 18,691,026  shares of the  registrant's  common stock,  par value $1.00 per
share, outstanding.
                           ------------------------

                      DOCUMENTS INCORPORATED BY REFERENCE

  1. Portions of registrant's  Annual Report to Shareholders  for the year ended
December 31, 1996 - Parts I, II and IV.

  2.  Portions  of  registrant's  Proxy  Statement  for the Annual  Meeting of
Shareholders, to be held on May 6, 1997, have been incorporated in Items 10, 11,
12 and 13 of Part III of this Form 10-K.
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<PAGE>

                              TABLE OF CONTENTS
PART I                                                                  Page
    Item  1. Business.................................................    3
                Insurance Operations..................................    4
                   Glossary of Selected Insurance Terms...............    4
                   Background.........................................    6
                   Life Companies.....................................    6
                   Georgia Casualty...................................   12
                   American Southern..................................   13
                   Marketing..........................................   13
                   Underwriting.......................................   15
                   Operating Results..................................   17
                   Premiums to Surplus Ratio..........................   18
                   NAIC Ratios........................................   18
                   Risk Based Capital.................................   18
                   Policyholder Services and Claims...................   19
                   Reserves...........................................   20
                   Reinsurance........................................   23
                   Competition........................................   24
                   Rating.............................................   24
                   Regulation.........................................   25
                   Investments........................................   27
                   Employees..........................................   28
                 Services Provided to Subsidiaries....................   28
                 Financial Information by Industry Segment............   28
                 Executive Officers of the Registrant.................   29
    Item  2. Properties...............................................   29
    Item  3. Legal Proceedings........................................   30
    Item  4. Submission of Matters to a Vote of Security Holders......   30

PART II
    Item  5. Market for the Registrant's Common Equity and
                Related Shareholder Matters...........................   31
    Item  6. Selected Financial Data..................................   32
    Item  7. Management's Discussion and Analysis of Financial Condition
                and Results of Operations.............................   32
    Item  8. Financial Statements and Supplementary Data..............   32
    Item  9. Changes in and Disagreements with Accountants on Accounting
                and Financial Disclosure..............................   32

PART III
    Item 10. Directors and Executive Officers of the Registrant.......   33
    Item 11. Executive Compensation...................................   33
    Item 12. Security Ownership of Certain Beneficial Owners and
                Management............................................   33

    Item 13. Certain Relationships and Related Transactions...........   33

PART IV
    Item 14. Exhibits, Financial Statement Schedules and Reports on
                Form 8-K..............................................   33


                                      2
<PAGE>

                                    PART I


ITEM 1.  BUSINESS

    The Company

     Atlantic American  Corporation (the "Company" or the "Parent") is a Georgia
holding  company which during 1996 engaged  primarily in the insurance  business
through the following  subsidiaries:  Atlantic  American Life Insurance  Company
("Atlantic  American Life"),  Bankers Fidelity Life Insurance  Company ("Bankers
Fidelity Life") (jointly,  the "Life  Companies"),  American Southern  Insurance
Company and its wholly owned  subsidiary,  American  Safety  Insurance  Company,
(collectively,  "American  Southern")  and  Georgia  Casualty  & Surety  Company
("Georgia   Casualty"  and  together  with  American  Southern,   the  "Casualty
Division").  As of January 1, 1997  Atlantic  American  Life was merged with and
into  Bankers  Fidelity  Life,  and the  business  and  operations  of the  Life
Companies are now consolidated in Bankers Fidelity Life.

     The Company was  incorporated  as a Georgia  corporation in 1968 and during
that year acquired  Georgia  Casualty,  which was incorporated in 1947. In 1970,
the Company acquired  Atlantic  American Life, which was incorporated in Georgia
in 1946, and in 1976 Bankers Fidelity Life, a Georgia  corporation  incorporated
in 1955. In 1991, the Company acquired  substantially  all of the stock of Leath
Furniture,  Inc. ("Leath"),  an Atlanta-based  furniture retailer which operates
full-line,  full-service retail furniture stores throughout the Midwest, Alabama
and Florida.  On April 8, 1996, the Company sold its  approximately 88% interest
in  Leath.  Leath is  reflected  as  discontinued  operations  in the  Company's
financial  statements  for all periods  presented.  On December  31,  1995,  the
Company acquired American Southern, which was incorporated in Georgia in 1936.

     As used herein,  unless the context otherwise requires,  the term "Company"
means  the  Parent  holding  company  and its  consolidated  subsidiaries  as of
December 31, 1996. On April 1, 1996, the Company  completed a merger in which it
acquired the remaining publicly-held interest in Bankers Fidelity Life. Pursuant
to that merger, the public  shareholders of Bankers Fidelity Life received $6.25
in cash per  share,  and their  shares of stock in  Bankers  Fidelity  Life were
canceled.  On November  26,  1996,  the  Company  completed a merger in which it
acquired the remaining  publicly-held interest in Georgia Casualty.  Pursuant to
that merger, the public  shareholders of Georgia Casualty received $9.00 in cash
per share,  and their shares of stock in Georgia  Casualty were  canceled.  As a
result  of those  two  transactions,  the  Company  now owns 100% of each of its
subsidiaries.

     The balance sheets of American  Southern were  consolidated at December 31,
1996 and 1995;  however,  the results of  operations  are included and discussed
only as related to 1996.

     The executive  offices for the Company and each of its  subsidiaries,  with
the exception of American  Southern,  are located at 4370 Peachtree Road,  N.E.,
Atlanta,  Georgia 30319. American Southern is located at 3175 Northside Parkway,
Building 400, 8th Floor, Atlanta, Georgia 30327.

                                      3
<PAGE>


INSURANCE OPERATIONS

     Glossary of Selected Insurance Terms

Combined Ratio.................      The  sum of the  expense  ratio  and  the
                                     loss ratio.  A combined  ratio under 100%
                                     indicates  an  underwriting  profit and a
                                     combined  ratio  over 100%  indicates  an
                                     underwriting loss.

Deferred Acquisition Costs.....      The  portion  of  costs  associated  with
                                     the acquisition  of  business,  including
                                     agents'  and  brokers'  commissions   and
                                     marketing expenses that are deferred.

Earned Premium.................      The  portion  of  premium  that is due or
                                     received applicable to the current year.

Expense Ratio..................      The  ratio of  underwriting  expenses  to
                                     premiums earned.

Lapse Ratio....................      For  a   specific   group  of   insurance
                                     policies,  the  ratio  of (i) the  dollar
                                     amount   of   gross   written    premiums
                                     in-force  at the  beginning  of a  period
                                     (before  reinsurance  ceded, if any) less
                                     gross  written  premiums  in-force at the
                                     end of the  period  over (ii) the  dollar
                                     amount   of   gross   written    premiums
                                     in-force at the  beginning  of the period
                                     (before reinsurance ceded, if any).

Loss Adjustment Expenses ("LAE")     The   estimated  expenses   of   settling
                                     claims, including  legal  and other  fees
                                     and expenses.

Loss Ratio.....................      The  ratio  of net  incurred  losses  and
                                     loss    adjustment    expenses   to   net
                                     premiums    earned.    Incurred    losses
                                     include  an   estimated   provision   for
                                     claims  which have been  incurred but not
                                     reported to the insurer ("IBNR").

NAIC Ratios....................      The  NAIC  was   established  to  provide
                                     guidelines   to  assess   the   financial
                                     strength  of  insurance   companies   for
                                     state  regulatory   purposes.   The  NAIC
                                     conducts    annual    reviews    of   the
                                     financial  data  of  insurance  companies
                                     primarily  through the  application of 13
                                     financial    ratios    prepared    on   a
                                     statutory  basis.  The annual  statements
                                     are   submitted   to   state    insurance
                                     departments    to    assist    them    in
                                     monitoring  insurance  companies in their
                                     states,  and set forth a desirable  range
                                     in which  companies  should  fall in each
                                     such ratio.

Net Premiums Written...........      Premiums    retained   by   an   insurer,
                                     including   assumed    premiums,    after
                                     deducting     premiums     on    business
                                     reinsured with others.

                                      4
<PAGE>

Reinsurance....................      A procedure  whereby an original  insurer
                                     remits  or   "cedes"  a  portion  of  the
                                     premium  to  a  reinsurer  as  payment to
                                     the  reinsurer  for assuming a portion of
                                     the related risk.

Risk Based Capital.............      Risk  Based  Capital  ("RBC")  is  a  new
                                     method  of   measuring   the   amount  of
                                     capital  appropriate  for  a  company  to
                                     support  its overall  business  operation
                                     with   respect   to  its  size  and  risk
                                     profile.   There  are  four  major  risks
                                     that  are  used  to  measure  RBC.   They
                                     are:   1)  Asset  Risk  -  measures   the
                                     quality  of a  company's  investment.  2)
                                     Insurance  Risk -  involves  the  pricing
                                     and  exposure of a  company's  insurance.
                                     3)  Interest  Rate  Risk -  vulnerability
                                     of  a  company  to  changes  in  interest
                                     rates.     4)     Business     Risk     -
                                     vulnerability    of   the    company   to
                                     external events.

Statutory Accounting Practices.      Recording   transactions   and  preparing
                                     financial  statements in accordance  with
                                     the rules and  procedures  prescribed  or
                                     permitted  by   regulatory   authorities.
                                     The   principal    differences    between
                                     statutory  accounting  practices  ("SAP")
                                     and   generally    accepted    accounting
                                     principles   ("GAAP"),   the   method  by
                                     which the Company  generally  reports its
                                     financial   results,   are   that   under
                                     statutory  accounting  (i) certain assets
                                     that   are    nonadmitted    assets   are
                                     eliminated  from the balance sheet;  (ii)
                                     acquisition   costs   are   expensed   as
                                     incurred,  while  they are  deferred  and
                                     amortized  over  the  estimated  life  of
                                     the   policies   under  GAAP;   (iii)  no
                                     provision  is made  for  deferred  income
                                     taxes;   (iv)  the  factors  utilized  in
                                     establishing    certain    reserves    is
                                     different  than under  GAAP;  (v) certain
                                     notes  are   considered   surplus  rather
                                     than  debt;  (vi)  valuation   allowances
                                     are  established   against   investments,
                                     and (vii)  goodwill  is limited to 10% of
                                     an  insurer's   surplus,   subject  to  a
                                     10-year amortization period.

Statutory Capital and Surplus..      The sum remaining  after all  liabilities
                                     are subtracted  from all assets  applying
                                     statutory   accounting   practices.    An
                                     insurance  company must maintain  minimum
                                     levels of  statutory  capital and surplus
                                     under  state  insurance   regulations  in
                                     order  to  provide  financial  protection
                                     to   policyholders   in  the   event  the
                                     company     suffers     unexpected     or
                                     catastrophic losses.

Underwriting...................      The  process  whereby an insurer  reviews
                                     applications   submitted   for  insurance
                                     coverage and  determines  whether it will
                                     accept  all  or  part  of  the   coverage
                                     being  requested and what the  applicable
                                     premiums should be.

Underwriting Expenses..........      The  aggregate  of  the  amortization  of
                                     deferred  acquisition  costs  and general
                                     and      administrative          expenses
                                     attributable to insurance operations.

                                      5

<PAGE>

     Background

     Through its insurance  subsidiaries,  the Company offers life, accident and
health insurance ("A&H"),  which includes Medicare  supplement and other medical
care policies, as well as property and casualty insurance. In 1996, accident and
health  (including  Medicare   supplement)  and  life  insurance  accounted  for
approximately  30% of the Company's total net earned premiums,  and property and
casualty  insurance  accounted for approximately 70% of such premiums.  Medicare
supplement  insurance  accounted for  approximately  13% of the Company's  total
earned premiums in 1996. The insurance  subsidiaries are licensed to do business
in a total of 28 states, although 87.2% of the Company's earned premiums in 1996
were  derived  from  the  states  of  Florida,   Georgia,   Indiana,   Kentucky,
Mississippi, Missouri, North Carolina, Tennessee, Texas and West Virginia.

     Accident and health  insurance lines are offered through the Life Companies
and include Medicare supplement, cancer, hospital indemnity,  short-term nursing
home care, accident expense,  medical indemnity,  and disability insurance.  The
Life Companies also offer ordinary whole life and term-life  insurance policies.
The Company's life, accident and health insurance is sold by approximately 2,500
independent  agents primarily in the Southeast.  Property and casualty insurance
lines are offered  through  Georgia  Casualty and American  Southern and include
workers' compensation,  automobile insurance,  and to a lesser extent,  business
automobile,  general liability and property coverage. The Georgia Casualty lines
are sold  through a total of 72  independent  agents  primarily in the states of
Mississippi and Georgia. The American Southern lines are sold through a total of
175 independent agents primarily in the Southeast and Midwest.


     Life Companies

     Atlantic  American  Life and Bankers  Fidelity Life are legal reserve stock
life insurance  companies which engage in sales of accident and health insurance
as well as ordinary,  term, and group life  insurance.  The Life Companies offer
nonparticipating  individual life insurance  policies with a number of available
riders and options including double  indemnity,  waiver or reduction of premium,
reducing or increasing term,  intensive care, annuity,  family term, payor death
benefits, waiver of skilled nursing home benefit, terminal illness payout rider,
and an additional  coverage amount enhancement  option not requiring  additional
underwriting.   The  accident  and  health   insurance  lines  include  Medicare
supplement  insurance in two classes (standard and preferred) as well as cancer,
accident expense, disability income, hospital/surgical insurance, and short-term
care (under one year). The Company still receives premiums from the discontinued
lines of medical surgical and convalescent care.

     In  addition,  the Life  Companies  write a small  amount of  special  risk
accident and health insurance  policies.  Substantially  all of the accident and
health policies offer guaranteed renewals in that the policies are automatically
renewable at the option of the  policyholder,  although the Life  Companies have
the right, on a  state-by-state  basis, to adjust premium rates on each class of
policies  (see  "Regulation").  The insured may elect to pay  premiums  monthly,
quarterly,  semi-annually or annually.  Policies lapse if premiums are more than
45 days overdue.

     Prior to 1983, the Life Companies  primarily wrote life  insurance.  In May
1983, the Life Companies introduced a Medicare supplement policy in order to add
additional product lines. The Life Companies  determined that they were not well
positioned to achieve  significant  growth in sales of life  insurance.  For the
next five years the Life  Companies  focused the majority of their  resources on
marketing  Medicare  supplement  insurance.  As legislative  changes reduced the
attractiveness  of writing  Medicare  supplement  insurance,  the Life Companies
placed a greater emphasis on offering other products.  This resulted in a steady
decrease in Medicare  supplement  sales.  Beginning in 1986,  the Life Companies
broadened their product base to include various supplemental health products. In
September  1986, the Life Companies  introduced a convalescent-care  policy that
provided for payment of benefits for confinement in a licensed  nursing facility
following a minimum

                                      6

<PAGE>

three  day  hospital  stay.  The  Life  Companies  discontinued  the sale of the
convalescent-care  policy in 1992, when states  required  companies to eliminate
the minimum three day hospital stay. The Life  Companies'  experience  indicated
that the minimum three day hospital stay was a key to prohibiting  excessive use
or  over-utilization  based on medical necessity.  Net premiums for that product
peaked at $5.1 million in 1988; after discontinuing the sale of new policies for
that product,  earned  premiums have declined to $955,000 in 1996. In 1987,  the
Life Companies  introduced an individual  disability income product.  The policy
provides  disability  income benefits in periods of one and two years and offers
an optional daily hospital  indemnity rider. In January 1988, the Life Companies
introduced an accident  expense policy which provides for payment of benefits at
predetermined rates for accidental injury or death. Accident expense  premium in
1988 was $500,000,  increased to $2.1 million in 1990, and decreased to $677,000
in 1996. Also in 1988, the Life Companies introduced a new cancer benefit policy
that provides for a lump-sum cash payment upon diagnosis of cancer.  Premium for
that product was $3.4 million in 1988 but decreased to $2.0 million in 1996.

     In 1990, the Life Companies  updated the life product  portfolio.  The Life
Companies implemented several new life products to penetrate niche markets where
these products have greater appeal and where less competition  exists.  In 1991,
the companies introduced the Debt Management Program, designed to allow insureds
to  accumulate  funds for the future  repayment  of college  tuition  debt.  The
program's major components consist of a 10-Pay Whole Life Policy with an Annuity
Rider.  This program  updated the outdated  Student Loan Program  which began in
1986.  The Life  Companies  also  introduced  a new life  product for the senior
market to enhance a portfolio  of  products  that are sold  exclusively  in that
market. The senior market life product's  portfolio was revised in 1993 with the
introduction of the Senior  Security Life program with products  marketed as the
Senior Security Series. The revised program is comprised of whole life with both
standard and preferred  underwriting and joint whole life providing  replacement
of lost social  security  income.  The life products have preferred and standard
rates for males and  females.  Sales in this market  increased  in both 1995 and
1996,  and the Life Companies  expect to see continued  growth in 1997 and 1998.
Designed in 1995 and  implemented in 1996,  the Life Companies  marketed two new
level  term  products  identified  as Term Ten and Term Ten  Plus.  Designed  to
replace  an  old  existing  term   product,   these   products  were   developed
strategically to generate appeal in the individual payroll markets. The Term Ten
is a standard  level term product that is renewable at term and  convertible  to
any  whole  life  product  offered  by the  companies.  Term  Ten Plus is also a
standard  level term policy that is renewable  and  convertible  and includes an
option that allows  policyholders  to increase their coverage  amount during the
second to the ninth policy years.  Premium rates for the additional coverage are
determined by the age of the policyholder at the time coverage originally began,
not at their current age. The Life Companies have seen increased  sales in other
life  products  that are sold in  concert  with the new  senior  life  products.
Renewed  emphasis on life sales produced an increase in life sales over the past
four years.  Additionally,  the Life  Companies  began  updating  their array of
supplemental health products in 1993.

     The Life Companies  introduced four new or updated health products in 1994.
The first product introduced was a short-term care product that provides nursing
home  coverage  for 90, 180, 270 or 360 days.  This product  enhanced the senior
citizen  portfolio  and was  designed to target  individuals  who cannot  afford
long-term care insurance. The second product introduced was a new cancer product
to be sold on an individual basis and in the payroll market.  The cancer product
benefits were strategically designed to be flexible,  thus providing individuals
with the ability to tailor their insurance programs to fit their specific needs.
The third product introduced was an enhanced hospital  indemnity  product.  This
product was also designed to be sold on an  individual  basis and in the payroll
market.  As with the  cancer  product,  the  hospital  indemnity  benefits  were
strategically  designed to be  flexible,  thus  providing  individuals  with the
ability to tailor their  insurance  programs to fit their  specific  needs.  The
fourth product  introduced in 1994 was a dual disability  product.  This product
provides  disability  benefits if the insured becomes disabled before age 65 and
benefits for nursing facility  coverage after age 65. The Life Companies believe
this is the first  product  introduced  with  these  benefits.  This  product is
marketed  on an  individual  and  payroll  basis.  The  implementation  of these
products advances the Life

                                       7


<PAGE>

Companies' plans for a more diversified  portfolio,  thus enabling it to compete
effectively in niche markets.  They also allow greater expansion of sales in the
list bill (billing for more than one insured) and payroll deduction markets.  To
increase product revenues, the Life Companies will continue to place emphasis on
the entire line of products and not rely on any one individual  product. In 1995
and 1996,  the Companies  developed and introduced a new list bill product which
pays a limited  doctor  benefit for a limited amount of time plus a flat $500 or
$1,000 for  deductibles  and  copayments.  This product is for the list bill and
payroll  deduction  market and is designed to enhance the  existing  small group
voluntary  products area. Also in 1995,  Bankers  Fidelity Life introduced a low
premium  Medicare  product  to be sold  jointly  with our  senior  citizen  life
products. Sales through 1996 were successful and this product will be introduced
to all other states where the Life Companies operate.

     The following  table sets forth annual  premium  information  regarding the
Life Companies' policies offered as of January 1, 1997:
                                                      Range of Premium
                                                      ----------------
  Medicare Supplement..........................       $300  to  $ 2,923
  Short-Term Care (1)..........................       $  9  to  $   399
  Other Accident and Health Policies...........       $  7  to  $ 1,440
  Ordinary Life (2)............................       $  3  to  $   372


     The following table summarizes,  for the periods indicated,  the allocation
of the Life  Companies'  net premiums  earned for each of its principal  product
lines and is followed by a summary of the various policies offered.

                                        Year Ended December 31,
                           --------------------------------------------------
                               1996      1995       1994      1993      1992
                               ----      ----       ----      ----      ----
                                              (in thousands)
                                              --------------
Ordinary Life..............$  8,937  $  7,037   $  6,716   $  5,130  $  4,362
Mass Market Life...........   1,303     1,260      1,395      1,541     1,769
                           --------  --------   --------   --------  --------
  Total Life...............  10,240     8,297      8,111      6,671     6,131
                           --------  --------   --------   --------  --------

Medicare Supplement........  11,560    11,882     13,347     15,052    17,212
Convalescent Care/Short-
  Term Care ...............     955     1,191      1,385      1,628     2,064
Medical Surgical...........     160       211        289        389       565
Cancer ....................   1,982     2,221      2,457      2,726     3,033
Hospital Indemnity.........     282       337        414        508       592
Accident Expense...........     677       790        892        992     1,210
Disability.................     122       142        155        154       139
                           --------  --------   --------   --------  --------
  Total Accident
    and Health.............  15,738    16,774     18,939     21,449    24,815
                           --------  --------   --------   --------  --------

     Total Life and
      Accident and Health  $ 25,978  $ 25,071   $ 27,050   $ 28,120  $ 30,946
                           ========  ========   ========   ========  ========





 -----------------
   (1) Per $10 daily benefit.
   (2) Per thousand of face amount.



                                       8
<PAGE>

     Medicare Supplement. The Company currently markets 7 of the 10 standardized
Medicare supplement policies created under the Omnibus Budget Reconciliation Act
of 1990, known as "OBRA 1990" (P.L.  101-508).  The Company's  existing Medicare
supplement  policies  written before November 6, 1991 ("pre-OBRA 1990 policies")
are not subject to the standardized  Medicare  Supplement  policy  provisions of
OBRA 1990.

     The Company's  pre-OBRA 1990 policies consist of 4 complete  supplements to
Part A, and 16  alternative supplements  to  Part B were  grandfathered.  The 16
alternative  Part  B  supplements  are  essentially   differentiated   by  their
deductible  amounts ($0, $100 or $200) and by the  percentage of benefits  which
apply to Medicare approved charges (20%, 70%, 80% or 100%). The Company believes
that the range of benefits  under its pre-OBRA 1990 Part B  supplements  exceeds
those of the typical Part B supplements  that were available  before November 6,
1991.

     While a charge must be approved by Medicare before any benefit is paid, the
amount of the benefit is based upon the Medicare allowable charge. Approximately
54% of the Company's Medicare supplement business in-force on December 31, 1996,
provided  more than the  minimum 20%  coinsurance  coverage.  Until  1991,  such
policies were more difficult to rate and incorporated  more risk for the Company
because  physicians  and other  providers  could  increase  their  charges while
Medicare did not provide a parallel increase in allowable  charges.  The Company
would then pay the  difference  between  the actual  physician  charges  and the
amount  reimbursed by Medicare,  not to exceed the policy  limits.  Uncontrolled
increases in physician or provider  charges would adversely affect the Company's
underwriting  results.  Benefits  based on maximum  coverage  also result in the
Company's  absorption  of  reductions in Medicare  physician  payments,  such as
reductions under the  Gramm-Rudman-Hollings  Act (P.L. 99-177).  These increased
benefit costs were offset by implementing timely rate increases.

     Under  OBRA 1990,  legal caps were  established  on  physicians'  and other
providers' charges.  Capped physician charges now have a more stabilizing effect
on Medicare costs.  This, in turn, allows the Company to price its products more
effectively.  Although OBRA 1990 will not halt medical inflation in general,  it
does  limit the  uncontrolled  amount of  increases  in  provider  charges.  The
ultimate  effect from the imposed caps beginning  January 1, 1991, is lower loss
ratios  and  improved  persistency.  This in turn had a  stabilizing  effect  on
Medicare supplement rates in general. Fewer and lower overall rate increases are
necessary  in  order  to  manage  and  maintain  the  Life  Companies'  Medicare
supplement blocks of business.

     Under OBRA 1990,  a company  can only offer  Medicare  supplement  policies
which conform to one of the ten standardized policies established by the Federal
Government.  The Company  expects to continue  to market  seven of these  plans,
including  the  required  core policy with basic  benefits.  The three plans not
marketed by the Company provide prescription drug benefits.

     OBRA 1990 also mandated the following provisions that significantly changed
the Company's operation:

      (1) federal certification of policies through each state;

      (2) prohibition of the sale of duplicate coverages;

      (3) a mandated  loss ratio on individual  policies with premium  credits
          and/or rebates if the standard is not met; and

      (4) a prohibition  against denying or limiting coverage on the basis of an
          applicant's  health  condition during the first six months in which an
          applicant is eligible for Medicare.

                                       9

<PAGE>

     Controlled  provider caps reduced the amount  physicians can charge,  which
has had a direct bearing on the Life Companies' claim  experience.  As a result,
the Life Companies had limited rate  increases in 1994,  1995 and 1996. The Life
Companies  also  introduced  area factors to reduce rates in various  geographic
areas.

     The technical  corrections amendment (HR 5252 Social Security Act of 1994),
effective  April 28, 1995,  gave states with yearly  legislative  sessions until
April  1996 to adopt  the  amendment  and  until  1997  for  those  states  with
alternating  year  legislative  sessions to adopt the provisions of the new act.
The act  covered  items  (2) and  (4)  above.  Item  (2) was  clarified  to mean
duplication of coverage from any other Medicare supplement policy.  Item (4) was
amended to cover Medicare beneficiaries under the age of 65.

     Convalescent  Care (Long-Term  Care).  The Life Companies  discontinued the
sale of this product in 1992 as each state passed  legislation  eliminating  the
required  minimum three day hospital stay. It was the Company's  experience that
the minimum three day hospital stay was the key to prohibiting  excessive use or
over utilization based on medical necessity.

     Cancer,  Cancer  PLUS and New  Cancer.  The Life  Companies  offer  several
policies  providing for payment of benefits in connection  with the treatment of
diagnosed  cancer.  The  traditional  cancer  policies  provide for fixed dollar
payments  pursuant  to a  scheduled  benefit  chart and  provide  benefits on an
individual,  joint, or family basis. The Cancer PLUS policy, introduced in 1988,
includes a lump-sum payment upon diagnosis of internal  cancer.  In late 1994, a
higher limit cancer policy,  Cancer Care Solution,  was introduced to complement
the existing cancer portfolio and to improve benefits to this market. A modified
version of Cancer Care Solution is also used in the payroll market.

     Hospital/Surgical.  In 1992,  the Life  Companies  introduced a new limited
benefit hospital/surgical  indemnity policy. It is intended for the market where
consumers  have  difficulty  in affording  major medical  coverage.  Due to this
product's  moderate  cost, it is considered to have potential  effective  market
penetration.  During 1992 through 1994, the Federal Government offered subsidies
to lower income  persons for the purpose of buying  health  insurance.  This was
also at a time when state and federal  governments  and the  insurance  industry
were concerned about the lack of affordable  health-care  products.  This policy
was designed to qualify for the government  subsidy and be  affordable.  In 1994
the subsidy was eliminated;  the product was then updated to be more flexible by
providing options on benefits,  such as daily hospital  confinement,  and making
other benefits  optional  instead of mandatory to meet the needs of the insuring
public.  Each  benefit is subject to a maximum,  designed to protect the Company
against excessive claims. This product is also used in the payroll market.

     Medical  Indemnity.  In 1995,  the Life  Companies  designed a new  Medical
Indemnity product.  The policy provides an indemnity for visits to a physician's
office or emergency room and a benefit for a routine physical examination once a
year for each insured person. The benefits are available in a variety of pre-set
levels.  Optional  benefits are available to provide a lump-sum  benefit  and/or
daily  indemnity  for  hospital  confinement.  This  voluntary  health  product,
intended  for  both  the  individual  and  payroll  markets,  fills  the gaps in
coverage, such as deductibles and copayments, left by more comprehensive medical
policies.

     Accident  Expense.  In January  1988,  the Company  introduced  an accident
expense policy which provides death or dismemberment  benefits due to accidental
injury.  In addition,  the policy offers  compensation for lost wages,  hospital
indemnity, and emergency medical service within prescribed limits. Policyholders
may elect full or half coverage.  Past revisions to the benefits available under
this policy and premium increases implemented in 1991 and 1992 made this product
profitable.  Management believes that this product line will continue to grow as
traditional   health   policies   become  more   expensive  and  consumers  seek
supplemental  policies as a replacement  for  expensive  health  insurance.  The
Company will  continue to place  greater  emphasis on these  policies as well as
expand the product line. This product is also used in the payroll market.

                                       10
<PAGE>

     Short-Term  Care  (Nursing Home Coverage With Benefits Less Than One Year).
In the first quarter of 1994,  the Life  Companies  developed a short-term  care
product.  This product  serves that part of the market that cannot afford to buy
the higher priced mandated  coverage of long-term care products.  When long-term
care  mandates  are fully  implemented,  it appears  that even a tax  deductible
premium would not reduce long-term care rates to a level affordable to more than
a minority of the available  market.  Statistics show that  approximately 75% of
nursing home stays are for less than one year. However, short-term care coverage
allows time to plan for payment of long-term  confinement  with existing  family
assets.  More states  realize that  Medicaid,  which pays  approximately  50% of
present  nursing home care,  is the fastest  growing  part of the state  budget.
Future  spending cuts on Medicaid are likely;  this will reduce  long-term  care
coverage and increase the need for private  coverage.  Short-term  care coverage
will then be an affordable alternative product.

     Ordinary  Life.  The Life  Companies  offer  various  whole life  insurance
policies.  The cost of a whole life policy is averaged  over the  policyholder's
expected  lifetime,  costing  more  than  comparable  term  insurance  when  the
policyholder is younger but less as the  policyholder  grows older. A whole life
policy  combines  protection  with a savings  plan that  gradually  increases in
amount over time. The  policyholder  may borrow against the cash value or use it
as collateral for a loan. Policy loans typically are at a rate of interest lower
than rates  available  from other lending  sources.  The  policyholder  may also
choose to surrender the policy and receive the cash value rather than continuing
the insurance  protection.  The Life  Companies  expanded  their product line by
offering a preferred product and continued to monitor  experience and update the
application as needed. These revisions and updates resulted in increased sales.

     Term Life  Insurance.  The Life  Companies  offer  several  term  policies,
including an annual  renewable  term; a 5, 10, and 20-year  level;  a decreasing
term  policy;  and a 10, 15, and 30-year  mortgage  term at  amortized  interest
rates. In 1995 and 1996, the Life Companies developed two 10-year term products.
One product was developed for  individuals  who are  interested in a low premium
product.  The second product allows the insured to purchase additional insurance
at their original issue age.

     Disability  Products.  Since 1987 the Life Companies have offered a one and
two year  disability  product  with  benefits  up to  $1,000 of  monthly  income
beginning  after 30 days of continuous  disability.  Policies are available on a
list bill and/or payroll  deduction,  as well as on an individual basis.  During
1994, a new type of  disability  product  with larger  benefits was designed for
utilization in the payroll market. The dual disability product transforms at age
65 to the short-term  care product at reduced rates.  Disability  products cover
both sickness and accident.  The dual disability benefits range from 6 months to
age 65;  additional  benefit periods  include 1 year, 2 years,  and 5 years with
elimination periods of 30, 60, 90, 180, and 360 days.

     Group Term Life. New term products will be used with group  underwriting in
the payroll deduction program, including yearly renewable term and 10-year term.

     Mass Market Life.  Prior to 1984, the Company  actively  marketed,  through
extensive  newspaper and radio  advertising,  guaranteed  issue life policies to
persons aged 40 through 80, subject to maximum policy limits paying from $20,100
at age 40 to $3,420 at age 80. The Company presently receives approximately $1.1
million of annualized premiums from existing policyholders who subscribed to the
mass marketed life policies.

                                       11

<PAGE>

    Georgia Casualty

     Georgia Casualty is a  property-casualty  insurance  company engaged in the
sale of specific lines of commercial insurance. Georgia Casualty focuses much of
its marketing efforts on the workers'  compensation  insurance line. However, as
part of a  diversification  plan, the company altered the industries it targets;
as a result,  significant  premium volume is written in other commercial  lines.
Specifically,  Georgia  Casualty  now  has a  significant  book of  business  in
manufacturing  industries where the cause of loss is more easily  identified and
corrective actions are implemented through loss control programs,  safety plans,
drug-free  workplaces,  re-employment  drug testing and various other  programs.
Georgia Casualty also provides a significant volume of coverage for service type
industries and artisan  contractors.  Georgia Casualty no longer issues policies
in high risk industries and in certain geographic areas where the regulatory and
legal environment is less favorable to casualty  insurers.  In 1996, the company
issued new  policies to customers  in the wood  products  industry for the first
time since 1991, doing so only through selected agencies. The company was highly
selective in renewing  existing  accounts in that  industry by focusing  only on
insureds with  stringent  safety and loss control  standards.  Although  Georgia
Casualty  writes  some  monoline  accounts,  the company  makes every  effort to
provide  each  insured  with  a  full  range  of  coverages  including  workers'
compensation,  business  automobile,  general  liability and property  insurance
coverage.  In addition,  Georgia Casualty provides a commercial  umbrella policy
for limits up to $5,000,000.

     Georgia  Casualty's  premium rates are  determined  in accordance  with the
factors promulgated by the National Council on Compensation Insurance and by the
Insurance  Services  Office.  In most cases,  loss cost  multipliers,  which are
modified  by Georgia  Casualty  to  reflect  its own loss  experience,  and cost
expense factors are used to produce a final premium rate.

     The following table summarizes,  for the periods indicated,  the allocation
of Georgia  Casualty's  net premiums  earned for each of its  principal  product
lines:

                                          Year Ended December 31,
                               ---------------------------------------------
                               1996     1995      1994      1993       1992
                               ----     ----      ----      ----       ----
                                             (in thousands)
                                             --------------
Workers'
   Compensation............  $ 13,826 $ 14,954   $ 11,958 $  9,890  $  8,640
Business
   Automobile..............     2,550    1,436      1,054      953       974
General
   Liability...............     1,152    1,025      1,065    1,180     1,842
Property...................     1,269      887        574      801       362
                             -------- --------   -------- --------  --------

    Total Property-Casualty  $ 18,797 $ 18,302   $ 14,651 $ 12,824  $ 11,818
                             ======== ========   ======== ========  ========

Workers'  Compensation.  Georgia Casualty offers workers' compensation insurance
policies  that provide  indemnity  and medical  benefits to insured  workers for
injuries  sustained  in the  course  of their  employment.  All  other  lines of
business primarily are written in connection with workers' compensation.

Business Automobile.  Georgia Casualty offers a business automobile policy which
provides for bodily  injury or property  damage  liability  coverage,  uninsured
motorists coverage, and physical damage coverage.

General  Liability.  Georgia Casualty offers general liability policies covering
bodily  injury and property  damage  liability  for both  premises and completed
operations exposures for general classes of business.

Property.  Georgia  Casualty offers property  insurance  policies for payment of
losses on real and personal property caused by fire and other multiple perils.

     Georgia  Casualty  concentrated  its efforts in those states and industries
which management  believes offer the greatest  opportunity for return on equity.
Specifically, Georgia

                                       12


<PAGE>

Casualty is concentrating  its efforts for new business in the states of Georgia
and  Mississippi,  which offer the greatest  opportunity  for future growth.  In
prior years, the workers'  compensation line was subject to large assessments in
most states from the National Council on Compensation Insurance for the Residual
Market  Reinsurance  Pool. This was particularly  true in the states of Alabama,
Louisiana and Florida where Georgia Casualty elected to discontinue  writing all
workers' compensation exposures.  The last voluntary insurance policies in these
three states expired in 1995.

     During 1992,  Georgia  Casualty  entered into agreements with the states of
Florida,  South  Carolina,  Tennessee and Texas to limit writings to a specified
amount or voluntarily  discontinue  writing.  In 1996, this restriction to limit
writings in South Carolina was withdrawn,  and Georgia Casualty may now commence
writing business again in that state. At the end of 1993, the company elected to
discontinue  writing  any  business in the state of Alabama  effective  March 1,
1994, due to the legal environment in the state.

   American Southern

     American  Southern  is a  multiple-line  property  and  casualty  insurance
company primarily engaged in the sale of automobile insurance. American Southern
specializes  in block  accounts,  such as states and  municipalities,  which are
sufficiently large to establish separate class experience.

     American  Southern is licensed in 18 states in the Southeast and Midwest to
write all forms of property and casualty insurance except workers' compensation.
It is authorized to write  business on a surplus line basis in seven  additional
states.  During the past five years,  American  Southern derived at least 85% of
its premium  revenue from auto  liability  and auto  physical  damage  coverage.
However, due to recent competitive declines in physical damage pricing, American
Southern has been focusing on auto liability coverage.

     The following table summarizes 1996 premiums by product line:

                             Year Ended December 31,
                             -----------------------
                                      1996
                                      ----
                                 (in thousands)
                                 --------------
Automobile Physical Damage...       $  4,865
Automobile Liability.........         30,889
General Liability............          1,947
Property.....................          3,461
Surety.......................             88
                                    --------
    Total....................       $ 41,250
                                    ========

   Marketing


     Life Companies.  The Life Companies' policies are marketed by commissioned,
independent  agents.  In  general,  the Life  Companies  enter into  contractual
arrangements with general agents who, in turn, contract with independent agents.
The standard agreements set forth the commission arrangements and are terminable
by either  party upon thirty days  notice.  General  agents  receive an override
commission on sales made by agents associated with them.

     The Life Companies believe utilizing direct writing  experienced agents, as
well as independent  general  agents who recruit and train their own agents,  is
cost effective.  All independent  agents are compensated on a commission  basis,
administered by the Life Companies.  Using  independent  agents also enables the
Life  Companies to expand  their sales  forces at any time  without  significant
additional expense.

     The number of independent agents varied from approximately 2,700 in 1983 to
approximately 12,000 in 1987 and approximately 2,500 presently.  This decline is
the result of a more  selective  agent  selection  process  established in 1988.
During 1993, emphasis was placed on recruiting more independent agents who would
write life insurance and other lines of

                                       13



<PAGE>

business  directly with the Life Companies.  The agents  concentrate their sales
activities in either the accident and health or life insurance  product lines. A
majority of the agents  concentrated on marketing  supplemental health insurance
policies prior to 1993.  Beginning in 1993, emphasis was placed on marketing the
new expanded  senior  citizen life product  portfolio;  as a result,  the senior
citizen life product sales were a large part of the sales  increase for the Life
Companies.  During 1996, a total of 1,105 agents wrote policies on behalf of the
Life Companies, and 22% of those agents accounted for 81% of the Life Companies'
annualized premium.

     Products of the Life Companies  compete  directly with products  offered by
other insurance companies,  as agents may represent several insurance companies.
The Life Companies,  in an endeavor to motivate agents to market their products,
offer the following agency services: a unique lead system,  competitive products
and  commission  structures,   efficient  claims  service,   prompt  payment  of
commissions,   simplified  policy  issue  procedures,   annual  sales  incentive
programs,  and in some cases protected sales territories  consisting of counties
and/or zip codes. From 1990 through 1996, several new marketing programs such as
education and retirement funding, packaged marketing, and payroll deduction were
implemented  to  promote  the  sales of  updated  policies  offered  by the Life
Companies. Management believes that sales of those products will produce greater
life  insurance  premium  growth  because  they  better  meet  the  needs of the
insureds. Additionally, the Life Companies have a combined staff of 16 employees
whose primary  function is to facilitate the activities of the agents and to act
as liaisons between the agents and the Life Companies.

     A distribution  sales system was implemented  with the  introduction of the
Life  Companies'  Senior  Security  Series whole life plans.  This  distribution
system is centered around a lead generation plan that rewards  qualified  agents
with direct mail leads in accordance with monthly  production  requirements.  In
addition,  a protected  territory is established for each qualified agent, which
entitles them to all leads produced within that  territory.  The territories are
zip-code or county based and encompass  enough  physical  territory to produce a
minimum senior populace of 12,000.  To allow for the expense of lead generation,
commissions  were lowered on the Life  Companies'  senior citizen life plans. In
addition,  the Life Companies  recruit at a general agent level rather than at a
managing general agent level in an effort to reduce commission expenses further.
The Life Companies' domicile state of Georgia was used as a test market for this
new distribution and lead generation system. The results were above expectations
and  distribution is expanding to include all states in which the Life Companies
are approved.

     This  distribution  system  solves an  agent's  most  important  dilemma --
prospecting  -- and allows the  company to build a long-term  relationship  with
individual  producers who view the Life Companies as their primary  company.  In
addition,  the Life  Companies'  product line is less  sensitive  to  competitor
pricing and commissions because of the perceived value of the protected area and
the lead generation  plan. The company believes life sales will increase through
this  distribution  channel because of the need for agents to place all of their
business  with the  company  in order to  obtain  the  maximum  number of leads.
Through this  distribution  channel,  production per agent contracted  increased
substantially when compared to the Life Companies' general brokerage division.

     Georgia Casualty.  Georgia Casualty's marketing efforts are directed by two
marketing  representatives  for the states of  Georgia  and  Mississippi.  These
representatives  work  with  agents  in the sale  and  distribution  of  Georgia
Casualty's  insurance  products.  Marketing  efforts  are  complemented  by  the
underwriting,  loss  control,  and audit  staffs  which are  available to assist
agents in the  presentation  of all  insurance  products  and  services to their
insureds.

     Georgia Casualty operates through a field force of 72 independent agencies.
Each  agency  is a party to a  standard  agency  contract  that  sets  forth the
commission  structure and other terms and can be terminated by either party upon
thirty days notice. Georgia Casualty also offers a profit-sharing arrangement to
its highest performing agents that allows agents to earn additional  commissions
when specific loss experience and premium

                                       14

<PAGE>

growth  goals  are  achieved.   Currently,   54  agencies   participate  in  the
profit-sharing arrangement.

     American  Southern.   American  Southern's  business  is  marketed  through
independent agents. The premium on some of the larger accounts is adjusted based
on each account's loss ratio.  American Southern's auto physical damage business
consists  primarily of long-haul  physical damage  insurance  produced by agents
specializing in trucking insurance.  These accounts are subject to retrospective
commission agreements which provide that a portion of the commission paid to the
agent is determined by the profitability of the business produced.

   Underwriting

     Life Companies.  The Life Companies issue life insurance policies with face
amounts of no less than $1,000.  Life policies,  excluding Senior Citizen Market
Life  products,  are issued  without  medical  examinations,  subject to maximum
policy  limits  ranging from  $100,000  for persons  under age 31 to $25,000 for
persons under age 51. Medical  examinations  are required in connection with the
issuance of life insurance policies in excess of these limits and for any amount
on  policies  issued to  customers  over age 50.  Paramedical  examinations  are
ordered at age 41 for all life applications of $50,000 and above.  Approximately
95% of the net premiums  earned for life insurance sold during 1996 were derived
from life insurance  written below the Life Companies'  medical limits.  For the
senior  market,   the  Life   Companies   issue  special  life  products  on  an
accept-or-reject  basis  with a face  amount  from  $15,000  at age 45 to a face
amount of  $2,000  at age 85.  The Life  Companies  retain a  maximum  amount of
$50,000 with respect to an individual life (see "Reinsurance").

     The Life Companies use collective underwriting practices.  Applications for
insurance are reviewed to determine any additional  information required to make
an underwriting  decision,  depending on the amount of insurance applied for and
the applicant's age and medical history. Such additional information may include
the "Medical Information Bureau Report";  medical examinations;  statements from
doctors who treated the applicant in the past;  and,  where  indicated,  special
medical  tests.  If  deemed  necessary,  the Life  Companies  use  investigative
services  to  supplement  and  substantiate  information.  For  certain  limited
coverages,  the Life Companies  adopted  simplified  policy issue  procedures by
which  the  applicant  submits  a  short  application  for  coverage,  typically
containing  only a few  health  related  questions  instead  of  presenting  the
applicant's  complete medical history.  At present,  approximately 20% to 30% of
the senior citizen life applications, through age 79 on the standard product and
up to age 75 on the preferred, are verified by telephone. For ages 80 and above,
100% of the standard  applicants are verified.  All telephone  verifications are
made by the underwriting  department.  Applications not meeting the underwriting
criteria are declined or additional information is requested.

     Georgia Casualty.  During recent years,  Georgia Casualty  concentrated its
underwriting efforts only in states with reasonable probability of profit. These
efforts are showing very positive  results.  Also, the company  developed a team
approach  to  underwriting  with  respect to both new  submissions  and  renewal
policies. The new submission team generally includes agents, underwriting staff,
loss  control  staff,  the  claims  staff,  and the  accounting  department.  By
receiving active input from each of these departments,  the company improved its
underwriting  risk.  Georgia  Casualty  also uses the team  approach  in renewal
reviews.  All accounts are reviewed by underwriting,  loss control,  accounting,
and claims personnel.  All individuals with first-hand  information regarding an
account are invited to share their  information  with the group.  The results of
these changes are seen in the improvement in underwriting profit.

     During the course of the policy year, extensive use is made of loss control
representatives to assist  underwriters in identifying and correcting  potential
loss  exposures.  The results of each product line are reviewed on a stand-alone
basis.  When the results are below  expectations,  management takes  appropriate
corrective action which may

                                       15


<PAGE>

include raising rates, reviewing underwriting  standards,  altering or declining
to  renew  accounts  at  expiration,   and/or   terminating   agencies  with  an
unprofitable book of business.

     Until  September  30, 1991,  Georgia  Casualty was a member of the National
Workers' Compensation Reinsurance Pool, a national reinsurance fund for policies
allocated to insurers under various states' workers'  compensation assigned risk
laws for companies that cannot otherwise  obtain  coverage.  Losses sustained by
the pool are allocated to  participating  members.  In September  1991,  Georgia
Casualty was asked to collateralize  that liability to the pool but declined and
withdrew from the pool.

     On December  30,  1994,  Georgia  Casualty  reached an  agreement  with the
National  Council on  Compensation  Insurance,  Inc.  (NCCI) to settle  workers'
compensation  liabilities with the workers'  compensation  pool. This settlement
released $13.7 million in workers'  compensation  pool reserves from the balance
sheet and provided a one-time reduction of $4.8 million in the loss provision in
the statement of operations.  The credit received in 1994 represented the income
effect  for  accident  years  1991 and prior.  The  settlement  had no impact on
earnings in either 1995 or 1996.

     Since September 1991, Georgia Casualty has been a direct assignment carrier
in Georgia and is assigned direct workers'  compensation policies from the state
rather than  participating  in the National  Workers'  Compensation  Reinsurance
Pool. Georgia Casualty has 263 direct assignment workers'  compensation policies
in force with a total net  earned  premium  of $2.5  million  in 1996.  The loss
experience on the direct  assignment  business is significantly  better than the
loss  experience on policies that the company was assigned  through the National
Workers' Compensation Reinsurance Pool.

     American Southern.  American Southern  specializes in the handling of block
accounts  such as states  and  municipalities  which are  sufficiently  large to
establish  separate class  experience.  All of American  Southern's  business is
marketed  through  independent  agents.  The  premium on the larger  accounts is
adjusted based on each account's loss ratio.  American  Southern's auto physical
damage  business  consists  primarily  of long haul  physical  damage  insurance
produced by agents  specializing  in insurance for truckers.  These accounts are
subject to retrospective  commission  agreements which provide that a portion of
the  commission  paid to the agent is  determined  by the  profitability  of the
business produced.

                                       16


<PAGE>

   Operating Results


     The following table sets forth, on a statutory  basis,  the incurred losses
and loss  ratios for the  Company's  Accident & Health  insurance  lines and the
incurred loss and expense ratios and combined ratios for the Company's  casualty
business during the past five years:


                                            Year Ended December 31,
                                      --------------------------------------

                                      1996    1995       1994    1993    1992
                                      ----    ----       ----    ----    ----
                                               (dollars in thousands)
                                               ----------------------

Accident and Health Insurance
   MEDICARE SUPPLEMENT:
      Incurred losses...............$ 7,136 $ 6,688     $ 7,582 $ 8,284  $10,403
      Loss ratio.................... 61.73%   57.6%       57.8%   56.6%    61.8%
   CONVALESCENT CARE:
      Incurred losses...............$   710 $ 1,393     $ 1,486 $ 1,861  $ 2,404
      Loss ratio.................... 74.33%  121.0%      110.3%  121.3%   124.8%
   MEDICAL SURGICAL:
      Incurred losses...............$   187 $   148     $   170 $   279  $   408
      Loss ratio....................116.59%   78.8%       61.4%   84.2%    81.0%
   CANCER:
      Incurred losses...............$   599 $   714     $   885 $ 1,035  $ 1,218
      Loss ratio.................... 30.20%   32.9%       37.0%   39.1%    41.4%
   HOSPITAL INDEMNITY
      Incurred losses...............$    54 $   171     $   206 $   215  $   266
      Loss ratio.................... 41.46%   52.9%       51.4%   65.8%    48.5%
   ACCIDENT EXPENSE:
      Incurred losses...............$   165 $   173     $   526 $   622  $ 1,204
      Loss ratio.................... 24.40%   21.9%       58.9%   62.7%    99.7%
   DISABILITY INCOME:
      Incurred losses...............$    37 $    72     $    84 $    90  $    39
      Loss ratio.................... 30.21%   50.7%       53.2%   58.5%    26.2%
    TOTAL ACCIDENT AND HEALTH:
      Incurred losses...............$ 8,888 $ 9,359     $10,939 $12,386  $15,942
      Loss ratio.................... 57.02%   57.2%       58.9%   59.6%    66.1%


Property and Casualty (1) 
   WORKERS' COMPENSATION:
      Incurred losses...............$ 9,117 $12,152     $ 4,884 $ 8,709  $13,606
      Loss ratio.................... 65.95%   81.3%       41.7%   88.6%   145.9%
   BUSINESS AUTOMOBILE:
      Incurred losses...............$28,088 $ 1,373     $   737 $   250  $   576
      Loss ratio....................  73.38   95.6%       70.0%   26.2%    59.1%
   GENERAL LIABILITY:
      Incurred losses...............$ 1,618 $(1,177)(2) $ 1,431 $ 1,015  $ 1,054
      Loss ratio....................  50.8%    -         134.5%   86.0%    57.2%
   PROPERTY:
      Incurred losses...............$ 2,215 $   573     $   275 $   227  $   359
      Loss ratio....................  46.8%   64.6%       47.2%   33.4%   134.8%
    TOTAL PROPERTY AND CASUALTY:
      Incurred losses...............$41,038 $12,921     $ 7,327 $10,201  $15,595
      Loss ratio.................... 68.31%   70.6%       50.9%   79.5%   123.5%
      Expense ratio................. 27.49%   30.6%       29.8%   33.1%    32.3%
      Combined ratio................ 95.80%  102.4%      114.0%  112.6%   155.8%
   -----------------------

   (1)  Includes American Southern for 1996 only.
   (2)  Includes adjustment to reallocate reserves to workers' compensation.


   See "Reserves" for analysis of loss development and reserves.

                                       17
<PAGE>

  Premiums to Surplus Ratio

     The following  table shows the statutory  ratios of net premiums  earned to
statutory  capital and surplus for Georgia Casualty.  Guidelines  established by
the NAIC provide that this ratio for property and casualty  insurance  companies
should not be greater than 300% (see "NAIC Ratios").

                                             Year ended December 31,
                                      ---------------------------------------
                                       1996    1995    1994    1993     1992
                                       ----    ----    ----    ----     ----
                                               (dollars in thousands)
                                               ----------------------
Georgia Casualty
   Net premiums earned............  $18,797 $18,302  $14,651 $12,824  $11,818
   Statutory capital and
     surplus......................  $13,616 $11,687  $ 9,663 $ 5,740  $ 5,293
   Premiums to surplus ratio......     138%    157%     152%    223%     223%

   NAIC Ratios

     The NAIC was  established  to provide  guidelines  to assess the  financial
strength of insurance companies for state regulatory purposes. The NAIC conducts
annual reviews of the financial data of insurance  companies  primarily  through
the application of 13 financial ratios prepared on a statutory basis. The annual
statements  are  submitted  to state  insurance  departments  to assist  them in
monitoring  insurance  companies  in their  states and to set forth a  desirable
range in which companies should fall in each such ratio.

     The NAIC  suggests  that  insurance  companies  which  fall  outside of the
"usual" range in four or more financial  ratios are those most likely to require
analysis by state  regulators.  However,  according  to the NAIC,  it may not be
unusual for a  financially  sound  company to have  several  ratios  outside the
"usual"  range,  and in normal  years the NAIC  expects 15% of the  companies it
tests to be outside the "usual" range in four or more categories.

     Life  Companies.  For the year ended December 31, 1996,  Atlantic  American
Life and  Bankers  Fidelity  Life were within the NAIC  "usual"  range in all 13
financial ratios.

     Georgia  Casualty.  For the year ended December 31, 1996,  Georgia Casualty
was outside the NAIC "usual"  range for only one ratio - the  estimated  current
reserve deficiency to surplus ratio.

     American Southern.  For the year ended December 31, 1996, American Southern
was within the NAIC "usual" range in all 13 financial ratios.

   Risk-Based Capital

     RBC is used by rating  agencies and  regulators as an early warning tool to
identify  weakly  capitalized  companies for the purpose of  initiating  further
regulatory action. The RBC calculation determines the amount of Adjusted Capital
needed  by a company  to avoid  regulatory  action.  "Authorized  Control  Level
Risk-Based  Capital" ("ACL") is calculated;  if a company"s  adjusted capital is
200% or lower than ACL, it is subject to  regulatory  action.  At  December  31,
1996, all of the Company's  insurance  subsidiaries  exceeded the RBC regulatory
levels.

                                       18


<PAGE>

Policyholder Services and Claims

     The Company  believes  that  prompt,  efficient  policyholder  services are
essential to its  continued  success in marketing  its  insurance  products (see
"Competition").  Additionally,  the Company  believes  that  persons to whom the
Company  markets its  insurance  products  are  particularly  sensitive to claim
processing  time and to the  accessibility  of  insurers  to  answer  inquiries.
Accordingly,  the Company's policyholder and claims services include expeditious
disposition of service  requests by providing  toll-free  home office  telephone
numbers to all customers.  In 1996, the Company  augmented its telephone support
system by installing a state-of-the-art automatic call distribution enhancement.
Inbound  calls  to  customer  service  support  groups  are now  processed  more
efficiently.  Operational  data generated from this system allows  management to
further  refine  ongoing  client  service  programs  and service  representative
training modules.

     During  1995 and  1996,  the  Company  completed  the  installation  of and
conversion to a new AS400 client server system.  All department  representatives
were trained to perform their  respective  responsibilities  in maintaining  and
building the Company's client database.  As a result of improved system software
efficiency,  the Company significantly  increased  responsiveness to its clients
and agents.

     In 1995, a Customer  Awareness  Program was  implemented  company-wide  and
became the basis for the Company's  customer service  philosophy.  All personnel
were required to attend  customer  service  classes.  Hours were expanded in all
service  areas in the first  quarter  of 1995 to serve  customers  and agents in
other time zones.

     Life Companies.  While the computer software system was being  implemented,
several  other  changes  were  taking  place  within the Life  Companies.  A new
department  was  established in the second quarter of 1994 to ensure that agents
receive  prompt  service.  This  allows the  marketing  team to  concentrate  on
building  production and achieving the Life  Companies'  production  goals.  The
claims  department for the Life Companies  consists of  approximately  16 people
located at the Company's home office in Atlanta.  Insureds obtain claim forms by
calling  the  claims  department   customer  service  group.  To  shorten  claim
processing time, a letter  detailing all support  documents that are required to
complete a claim for a particular  policy is sent to the customer along with the
correct claim form. With respect to life policies, the claim is entered into the
Life Companies'  claims system when the  proper  documentation is received.  The
computerized  claims system was enhanced to enable the Life Companies to pay all
properly documented claims within three to nine business days of receipt. During
1996, the Life Companies paid  approximately  102,000 claims  aggregating  $14.0
million, of which approximately  97,000 claims aggregating $7.2 million were for
Medicare  supplement  insurance.  The total  amount of claims  paid  represented
approximately  51.5% of total  accident  and  health  and  life  earned  premium
revenue, and Medicare supplement claims paid represented 27.6% of total accident
and health and life  earned  premium  revenue.  The Life  Companies  continually
monitor their claims  backlog and  implement  appropriate  corrective  action to
maintain an average five-day payment period.

     Georgia Casualty.  In 1996, Georgia Casualty completed  implementation of a
new  property-casualty  software  package  that  should  enable  the  company to
streamline  and reduce  underwriting  expenses in 1997 although no impact of the
new system was recognized in 1996.  Efficiency and  productivity  should improve
with the new computer system, lowering operating expenses and the combined ratio
in 1997. Additionally,  the company positioned itself to provide strong customer
service to its  policyholders in 1997 by increased  staffing in its underwriting
department.  The claims  department  of Georgia  Casualty  consists of 16 people
located at the home  office in Atlanta.  Georgia  Casualty  controls  its claims
costs by  utilizing  an in-house  staff of  adjusters  to  investigate,  verify,
negotiate and settle  claims.  Upon  notification  of an occurrence  purportedly
giving rise to a claim, the claims

                                       19

<PAGE>

department  conducts  a  preliminary   investigation  to  determine  whether  an
insurable event has occurred and, if so, records the claim. This process usually
occurs  within 7 days of  notification  of the  claim.  Where  appropriate,  the
company  utilizes  independent  adjusters and appraisers to service claims which
require on-site  inspections.  Georgia Casualty  believes that its prompt claims
service provides a favorable basis for competition.

     In  1994,   Georgia   Casualty   implemented  a  new  loss  prevention  and
rehabilitation service called Early Case Management. This program proved to be a
sound strategy in reducing insurance claim costs for the employers and insurance
company and in providing better medical treatment for the injured  employee.  In
1995 and 1996,  the claims  department  was increased by three case managers who
are responsible for administration of the case management program.

     American Southern. American Southern controls its claims costs by utilizing
its in-house staff of claim  supervisors to investigate,  verify,  negotiate and
settle claims.  Upon notification of an occurrence  purportedly giving rise to a
claim, the claims department  conducts a preliminary  investigation,  determines
whether an insurable event has occurred and, if so, records the claim.  American
Southern  frequently  utilizes  independent  adjusters and appraisers to service
claims which require on-site inspections.

   Reserves

     The following table sets forth information  concerning the Company's losses
and claims and LAE reserves for the periods indicated:

                                                   1996              1995
                                                   ----              ----
     Balance at January 1...............         $79,514           $40,730

     Less: Reinsurance recoverables.....         (22,467)          (12,334)
                                                 --------          --------
         Net balance at January 1.......          57,047            28,396
                                                 --------          --------

     Incurred related to:
         Current year...................          57,481            17,017
         Prior years....................          (4,802)            5,364
                                                 --------          --------
             Total incurred.............          52,679            22,381
                                                 --------          --------

     Paid related to:
         Current year...................          28,279            13,743
         Prior years....................          24,227             8,398
                                                 --------          --------
             Total paid.................          52,506            22,141
                                                 --------          --------
     Reserves acquired due to acquisition,
       net..............................              -             28,411
                                                 --------          --------
     Net balance at December 31.........          57,220            57,047
     Plus:  Reinsurance recoverables....          26,854            11,893
            Reinsurance recoverables acquired
              due to acquisition........              -             10,574
                                                 --------          --------
     Balance at December 31.............         $84,074           $79,514
                                                 ========          ========


                                       20

<PAGE>

     Life  Companies.  The  Life  Companies  establish  future  policy  benefits
reserves to meet future obligations under outstanding  policies.  These reserves
are  calculated to satisfy policy and contract  obligations as they mature.  The
amount of reserves for insurance  policies is calculated  using  assumptions for
interest  rates,  mortality  and morbidity  rates,  expenses,  and  withdrawals.
Reserves are adjusted periodically based on published actuarial tables with some
modification  to reflect actual  experience (see Note 3 of Notes to Consolidated
Financial Statements for the year ended December 31, 1996).

     Casualty   Division.   The  Casualty   Division   maintains  loss  reserves
representing  estimates  of  amounts  necessary  for  payment of losses and loss
adjustment  expenses  (LAE).  Loss and LAE  reserves  are  annually  reviewed by
qualified independent  actuaries.  The Casualty Division also maintains incurred
but not reported reserves (INBR) and bulk reserves for future development. These
loss reserves are estimates,  based on known facts and  circumstances at a given
point in time,  of  amounts  the  insurer  expects  to pay on  incurred  claims.
Reserves for LAE are intended to cover the  ultimate  costs of settling  claims,
including investigation and defense of lawsuits resulting from such claims. Loss
reserves for reported claims are based on a case-by-case  evaluation of the type
of claim  involved,  the  circumstances  surrounding  the claim,  and the policy
provisions  relating to the type of loss. The LAE for claims reported and claims
not reported is based on  historical  statistical  data and  anticipated  future
development.  Inflation and other  factors  which may affect claim  payments are
implicitly  reflected in the reserving  process through  analysis of cost trends
and reviews of historical reserve results;  however,  it is difficult to measure
the effect of any one of these considerations on reserve estimates.

     The Casualty Division provides  insurance benefits on casualty claims based
upon (a)  management's  estimate  of  ultimate  liability  and claim  adjusters'
evaluations  for unpaid  claims  reported  prior to the close of the  accounting
period,  (b)  estimates  of  incurred  but not  reported  claims  based  on past
experience,  and  (c)  estimates  of loss  adjustment  expenses.  The  estimated
liability is  continually  reviewed and  updated,  and changes to the  estimated
liability  are recorded in the statement of operations in the year in which such
changes  are  known.  Some  of the  major  assumptions  about  anticipated  loss
emergence patterns have changed in the last few years.

     The following  table sets forth the  development  of balance sheet reserves
for  unpaid  losses  and  LAE  for  the  Casualty  Division's   insurance  lines
("long-tail"  lines)  for  1986  through  1996.  This  table  does  not  present
development  data on an accident or policy year basis. The top line of the table
represents  the  estimated  amount of losses and LAE for  claims  arising in all
prior years that were unpaid at the balance sheet date, including an estimate of
losses that have been  incurred  but not yet  reported.  The  amounts  represent
initial reserve estimates at the respective  balance sheet dates for the current
and all prior years. The next portion of the table shows the cumulative  amounts
paid with respect to claims in each  succeeding  year.  The lower portion of the
table shows the  reestimated  amounts of previously  recorded  reserves based on
experience as of the end of each succeeding year.

     The reserve estimates are modified as more information  becomes known about
the  frequency  and severity of claims for  individual  years.  The  "cumulative
deficiency"  for each  year  represents  the  aggregate  change  in such  year's
estimates through the end of 1996. In evaluating this information,  it should be
noted that the amount of the deficiency  for any year  represents the cumulative
amount of the changes from initial reserve  estimates for such year.  Operations
for any one year are only affected,  favorably or unfavorably,  by the amount of
the change in the  estimate  for such  year.  Conditions  and  trends  that have
affected  development of the statutory  reserves in the past may not necessarily
occur  in  the  future.  Accordingly,  it is  inappropriate  to  predict  future
redundancies or deficiencies based on the data in this table.

                                       21

<PAGE>
<TABLE>



                                                            Year ended December 31,
                     -----------------------------------------------------------------------------------------------
                     1996    1995    1994    1993    1992     1991     1990     1989        1988      1987      1986
                     ----    ----    ----    ----    ----     ----     ----     ----        ----      ----      ----
<S><C>             <C>     <C>     <C>     <C>     <C>      <C>      <C>      <C>        <C>       <C>       <C>


Reserve for losses
  and LAE          $53,496 $53,320 $50,154 $48,031 $48,485  $50,808  $52,668   $47,819(1) $ 39,036  $ 35,770  $ 28,848

Cumulative paid as of:
One year later.....         17,865  16,548  18,106  18,827   22,060   22,837    21,321      21,592    20,812    16,948
Two years later....                 25,280  25,914  27,731   32,560   35,278    33,507      32,352    32,975    27,743
Three years later..                         31,021  36,786   38,046   40,768    40,891      39,832    39,168    34,657
Four years later...                                 40,295   41,872   44,267    43,745      43,713    43,249    38,163
Five years later...                                          44,530   47,204    46,183      45,767    46,004    40,938
Six years later....                                                   49,000    48,056      47,880    47,727    42,412
Seven years later..                                                             49,835      49,674    49,671    43,750
Eight years later..                                                                         51,288    50,987    45,284
Nine years later...                                                                                   52,363    46,202
Ten years later....                                                                                             47,433

Ultimate losses and LAE reestimated as of:
End of Year........$53,496 $53,320 $50,154 $48,031 $48,485  $50,808  $52,668   $47,819(1) $ 39,036  $ 35,770  $ 28,848
One year later.....         49,799  46,249  47,021  46,756   53,700   53,676    53,212      47,314    40,990    33,083
Two years later....                 44,850  44,043  45,999   52,670   55,919    54,438      53,998    49,569    39,413
Three years later..                         45,568  48,446   53,040   55,865    56,064      55,313    55,752    46,596
Four years later...                                 53,064   52,326   56,514    55,707      56,255    55,511    51,852
Five years later...                                          56,771   56,648    56,579      56,403    56,408    51,184
Six years later....                                                   60,515    56,984      57,446    56,868    51,694
Seven years later..                                                             60,641      58,142    57,901    52,089
Eight years later..                                                                         60,791    58,626    52,972
Nine years later...                                                                                   61,391    53,339
Ten years later....                                                                                             55,241


Cumulative
deficiency.........        $ 3,521 $ 5,304 $ 2,463 $(4,579) $(5,963) $(7,847) $(12,822)   $(21,755) $(25,621) $(26,393)

<FN>
---------------------------------
(1)Restated due to adjustment of $4.7 million of structured annuities changed to reinsurance in 1990.
</FN>
</TABLE>

                                       22

<PAGE>

    Reinsurance

     The insurance  subsidiaries purchase reinsurance from unaffiliated insurers
and reinsurers to reduce  liability on individual  risks and to protect  against
catastrophic  losses.  In  a  reinsurance  transaction,   an  insurance  company
transfers,  or "cedes," a portion or all of its exposure on insurance written by
it to another  insurer.  The  reinsurer  assumes  the  exposure  in return for a
portion of the premiums.  The ceding of insurance does not legally discharge the
insurer from primary  liability  for the full amount of policies  written by it,
and  the  ceding  company  incurs  a loss if the  reinsurer  fails  to meet  its
obligations under the reinsurance agreement.  American Southern is currently the
only subsidiary of the Company that assumes reinsurance.

     Life  Companies.  The Life  Companies  entered into  reinsurance  contracts
ceding the excess of their  retention  to several  primary  reinsurers.  Maximum
retention  by the  Life  Companies  on any one  individual  in the  case of life
insurance  policies  is $50,000.  At  December  31,  1996,  the Life  Companies'
reinsured premiums totaled $10.0 million of the $288.0 million of life insurance
then in force,  generally under yearly renewable term agreements.  Two companies
accounted  for the $10.0 million of  reinsurance:  Munich  American  Reassurance
Company  ($7.0  million)  and  Optimum   Reinsurance  ($3.0  million).   Certain
reinsurance  agreements  no longer  active for new business  remain  in-force to
cover any claims on a run-off basis.

     Georgia Casualty.  Georgia Casualty continues to strengthen and improve its
reinsurance  program.  There are currently in place  treaties which apply to all
casualty lines of business. Georgia Casualty's basic treaties cover all casualty
claims in excess of  $200,000  per person per  occurrence,  up to $5.0  million.
These basic treaties are supplemented  with additional per person treaties up to
$5.0  million  per person  and  additional  catastrophe  treaties  for  workers'
compensation to a maximum of $50.0 million for any one occurrence.  The property
lines of coverage  are  protected  with an excess of loss treaty  which  affords
recovery  for  property  losses in excess of  $100,000  up to a maximum  of $2.0
million. Facultative arrangements are in place for property accounts with limits
in excess of $3.0 million per risk.

     Of the $11.8  million of net  reinsurance  recoverable  on unpaid losses by
Georgia  Casualty at December 31,  1996,  First  Colony Life  Insurance  Company
accounted  for $3.6 million,  Lloyds of London and other London based  companies
accounted for $1.0 million, and Pennsylvania Manufacturer's Associated Insurance
Company  accounted for $2.9 million.  A number of  reinsurance  companies,  both
domestic and foreign, account for the balance.

     American  Southern.  The limits of risks retained by American Southern vary
by type of  policy  and  insured,  and  amounts  in excess  of such  limits  are
reinsured.  The  largest  net  amount  insured  in any  one  risk  is  $100,000.
Reinsurance is maintained as follows:  for fire,  inland marine,  and commercial
automobile physical damage,  recovery of losses over $30,000 up to $100,000. Net
retentions  for third party  losses are  generally  over $30,000 up to $100,000.
Catastrophe  coverage for all lines  except third party  liability is for 95% of
$6.6 million over $400,000.

     American  Southern  acts as a  reinsurer  with  respect to all of the risks
associated with certain  automobile  policies  issued by a state  administrative
agency  naming the  state and various local  governmental  entities as insureds.
Premiums written from such policies  constituted between 38% and 32% of American
Southern's gross premiums written in 1992 through 1996. Management believes that
its relationship with such agency is good; however, the loss of such agency as a
customer  could have a material  adverse  effect on the  business  or  financial
condition of the company.

                                       23
<PAGE>

     Premiums  assumed of $25.8 million include a state contract for premiums of
$15.4 million  (17.9% of total earned  premiums).  The contract had a five- year
term at inception and was renewed for a second  five-year  term that will expire
January 31, 1998. The company has no assurance that the contract will be renewed
for a third term.  However,  the company's ten-year experience in servicing this
business provides an advantage that could affect renewal.

     Competition

     Life  Companies.  The life  insurance  business is highly  competitive  and
includes a large number of insurance companies, many of which have substantially
greater financial  resources and larger,  more experienced  staffs than the Life
Companies.  The Life Companies believe that the primary competitors are the Blue
Cross/Blue Shield companies,  AARP, the Prudential Insurance Company of America,
Pioneer Life Insurance Company of Illinois, AFLAC, American Travellers,  Kanawha
Life,  American  Heritage,  Bankers Life and Casualty  Company,  United American
Insurance Corporation, and Standard Life of Oklahoma. The Life Companies compete
with other insurers on the basis of premium rates, policy benefits,  and service
to policyholders. The Life Companies also compete with other insurers to attract
and  retain  the  allegiance  of  its  independent   agents  through  commission
arrangements,  accessibility and marketing assistance, lead programs, and market
expertise.  The Life Companies believe they compete  effectively on the basis of
policy benefits, services, and market expertise. The final implementation of the
AS400 computer network system greatly improved the company's  ability to service
its customers and thereby improved its ability to compete.

     Georgia Casualty.  The property and casualty  insurance  business is highly
competitive in all lines.  Georgia Casualty's  competition can be placed in four
categories:  1) companies with higher A.M. Best ratings, 2) alternative workers'
compensation  markets,  3) self-insured  funds, and 4) insurance  companies that
actively solicit workers' compensation accounts.  Georgia Casualty's efforts are
directed  in the  following  three  general  categories  where the company has a
reasonable chance of controlling  exposures and claims:  1)  manufacturing,  2 )
artisan contractors, and 3) service industries. Georgia Casualty's keys to being
competitive in these areas are writing workers'  compensation  coverages as part
of the total insurance package, a loyal network of agents and development of new
agents in key  territories,  offering quality customer service to our agents and
insureds, and providing loss control and claims management services to insureds.
Georgia  Casualty  believes  that  it will  continue  to be  competitive  in the
marketplace based on its current strategies and services.

     American Southern. All of the businesses in which American Southern engages
are highly  competitive.  The  principal  areas of  competition  are pricing and
service.  Many  competing  property  and casualty  companies  which have been in
business longer than American  Southern have available more diversified lines of
insurance  and  have  substantially  greater  financial  resources.   Management
believes,  however,  that the  policies  it sells  are  competitive  with  those
providing  similar  benefits  offered by other  insurers  doing  business in the
states where American Southern operates.

     Rating

     Each year A.M.  Best  Company,  Inc.  publishes  Best's  Insurance  Reports
("Best's")  which include  assessments  and ratings of all insurance  companies.
Best's  ratings,  which may be revised quarterly,  fall into fifteen  categories
ranging from A++ (Superior) to F (in  liquidation).  Best's ratings are based on
an analysis of the financial  condition and  operations of an insurance  company
compared  to the  industry  in  general.  These  ratings  are not  designed  for
investors and do not constitute recommendations to buy, sell, or hold any

                                       24


<PAGE>

security.  Ratings are important in the insurance industry, and improved ratings
should have a favorable impact on the ability of the companies to compete in the
marketplace.

     Life Companies. Both of the Life Companies received upgrades from A.M. Best
in both 1993 and 1994 after giving  consideration  to  improvements in financial
strength and other items.  Bankers  Fidelity  Life and  Atlantic  American  Life
obtained  ratings of "B-" (Good) in 1994.  In 1996, a B+ rating was attained due
to continued improvements in operations.

     Georgia Casualty.  In early 1997, Georgia Casualty received a Best's rating
of B+ (Very Good).  Georgia Casualty's statutory earnings increased by $567,382,
or  38.7%,  in 1996  compared  to 1995,  which  was an  outstanding  achievement
considering the soft competitive  insurance market in 1996. The surplus position
of the  company  improved  significantly  in 1996  due to  strong  earnings  and
improvements in market conditions of the equity market. These conditions,  along
with a combined ratio of 100.3%, resulted in the improved rating.

     American  Southern.  American  Southern  and its  wholly-owned  subsidiary,
American Safety Insurance  Company,  are each currently rated "A-" by A.M. Best.
These  ratings were  assigned in early 1996 and were based on statutory  results
through 1995. American Southern and its wholly-owned  subsidiary  previously had
ratings of "A+ (Superior)" but were down-graded due to the Company's acquisition
of American Southern.

     Regulation

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

     Most states require that rate schedules and other information be filed with
the state's insurance regulatory authority,  either directly or through a rating
organization with which the insurer is affiliated.  The regulatory authority may
disapprove  a rate  filing  if it  determines  that the  rates  are  inadequate,
excessive,  or  discriminatory.  The Company  has  historically  experienced  no
significant regulatory resistance to its applications for rate increases.


                                       25

<PAGE>

     A state  may  require  that  acceptable  securities  be  deposited  for the
protection   either  of  policyholders   located  in  those  states  or  of  all
policyholders.  As of December 31, 1996,  $13.6  million of  securities  were on
deposit  either  directly with various state  authorities  or with third parties
pursuant to various  custodial  agreements  on behalf of the Life  Companies and
Casualty Companies.

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

                                       26

<PAGE>

     Investments

     Investment income  represents a significant  portion of the Company's total
income.  Insurance  company  investments are subject to state insurance laws and
regulations  which  limit  the  concentration  and  types  of  investments.  The
following table (which includes  information on American  Southern only for 1996
and 1995)  provides  information  on the Company's  investments  as of the dates
indicated.

                                                 December 31,
                                ----------------------------------------------
                                     1996            1995            1994
                                     ----            ----            ----
                                Amount Percent  Amount Percent  Amount Percent
                                ------ -------  ------ -------  ------ -------
                                            (Dollars in thousands)
                                            ----------------------

Fixed maturities:

 Bonds:
  U.S. Government, agencies
   and authorities..........  $ 73,097  39.7% $ 71,549  39.6%  $29,017   29.3%
  States, municipalities and
   political subdivisions...     3,496   1.9    21,947  12.2     3,465    3.5
  Public utilities..........     1,505    .8     4,110   2.3     3,780    3.8
  Convertibles and bonds
   with warrants attached...     1,275    .7     1,188    .7     1,088    1.1
  All other corp. bonds.....    11,562   6.3    12,829   7.1    12,680   12.8
  Certificates of deposit...       375    .2     1,690    .9     1,445    1.6
                              -------- -----  -------- -----   -------  -----
     Total fixed maturities(1)  91,310  49.6   113,313 62.85     1,475   52.1

Common and preferred
 stocks (2).................    37,762  20.5    42,116  23.3    29,571   29.9
Mortgage, policy and
  student loans (5).........    13,367   7.3    12,642   7.0    14,277   14.4
Investments in limited
 partnerships (4)...........        -     -         -     -      1,047    1.1
Real estate.................        46   NIL        46   NIL        46    NIL
Short-term investments (3)..    41,614  22.6    12,498   6.9     2,498    2.5
                              -------- -----  -------- -----   -------  -----
     Total investments......  $184,099 100.0% $180,615 100.0%  $98,914  100.0%
                              ======== =====  ======== =====   =======  =====
  ----------------------

(1)  Fixed  maturities  are carried on the balance sheet at market value.  Total
     cost of fixed maturities was $91.6 million as of December 31, 1996,  $112.9
     million as of December 31, 1995, and $52.9 million at December 31, 1994.

(2)  Equity securities are valued at market. Total cost of equity securities was
     $19.7 million as of December 31, 1996,  $26.9 million at December 31, 1995,
     and $22.4 million at December 31, 1994.

(3)  Short-term investments are valued at cost, which approximates market value.

(4)  Investments in limited partnerships are valued at cost.

(5)  Mortgage loans and policy and student loans are valued at cost.

                                       27


<PAGE>

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

                                                Year Ended December 31,
                                                -----------------------
                                            1996        1995      1994
                                            ----        ----      ----
                                              (Dollars in thousands)
                                              ----------------------

Average investments(1).................   $180,816   $106,645   $106,549
Net investment income..................     11,005      6,142      6,163
Average yield on investments...........       6.1%       5.7%       5.8%
Realized investment gains, net.........   $  1,589   $  1,731   $    870

(1)Calculated as the average of the balances at the beginning of the year and at
     the end of each of the four segment quarters. The calculations for 1995 and
     1994 do not include American Southern's investment portfolio.

     Management's  investment  strategy is an increased  investment in short and
medium maturity bonds and common and convertible preferred stocks.

    Employees

    The Company and its subsidiaries at December 31, 1996 employed 176 people.

Services Provided to Subsidiaries

     The Parent provides investment, data processing, personnel, administrative,
insurance,  and accounting services to all of its insurance  subsidiaries except
American Southern. In addition,  all furniture,  fixtures, and most equipment is
owned by the Parent  Company  and leased to the  insurance  subsidiaries  except
American Southern.  Investment services include continuous yield analysis of the
subsidiaries'   investment   portfolios.   Data  processing   services   include
utilization  of  hardware  and  software  and  support  systems to  process  and
adjudicate  claims and maintain  historical data for all policies written by any
of the insurance subsidiaries.  Personnel services consist of hiring,  training,
and administering  benefit programs for  approximately 140 employees.  Insurance
services entail billing for group plan and general insurance. Administrative and
accounting  services entail  supplying  adequate  facilities,  accounting,  tax,
auditing,  and cost control records,  systems and procedures  appropriate to the
insurance subsidiaries' operations.

     The  Parent  has  management  fee  arrangements  with all of its  insurance
subsidiaries,  except American Southern,  regarding  investment services and the
salaries of certain management personnel.  The total of such management fees and
service charges billed to the insurance subsidiaries amounted to $5.6 million in
1996 and 1995 and $5.4 million in 1994. While  management  believes the fees and
charges  are fair and  reasonable,  there can be no  assurance  that  regulatory
authorities would not object to the amount of the fees and charges.

Financial Information By Industry Segments

     Financial   information   concerning  the  Company  and  its   consolidated
subsidiaries by industry segment for the three years ended December 31, 1996, is
set  forth  on page 28 of the  1996  Annual  Report  to  Shareholders,  and such
information by industry segment is incorporated herein by reference.


                                       28

<PAGE>

Executive Officers of the Registrant

     The table below and the information  following the table set forth for each
executive  officer  of  the  Company  as  of  December  31,  1996,  (based  upon
information supplied by each of them) his name, age, positions with the Company,
principal occupation,  and business experience for the past five years and prior
service with the Company.
                                                                  Director or
     Name              Age       Position with the Company       Officer Since
     ----              ---       -------------------------       -------------

J. Mack Robinson        73    Chairman of the Board                   1974
Hilton H. Howell, Jr.   35    Director, President & CEO               1992
John W. Hancock         59    Senior Vice President and Treasurer     1989

     Officers are elected  annually and serve at the  discretion of the Board of
Directors.

     Mr.  Robinson  served as President of the Company from September 1988 until
May 1995 and has served as a Director and  Chairman of the Board since 1974.  He
has been Chairman of the Board of Bankers  Fidelity Life since 1986 and Chairman
of the Board and  President of Georgia  Casualty  since 1988.  In addition,  Mr.
Robinson is Chairman  of the Board of Bull Run  Corporation;  a Director of Gray
Communications  Systems,  Inc.;  the General  Partner of Gulf Capital  Services,
Ltd.;  Chairman  of the Board of Leath  Furniture,  LLC;  and the  Chairman  and
President of Delta Life  Insurance  Company and Delta Fire & Casualty  Insurance
Company.

     Mr.  Howell has been a  Director  of the  Company  since  October  1992 and
President and CEO since May 1995. He served as Executive  Vice  President of the
Company  from  October 1992 until May 1995.  In  addition,  Mr.  Howell has been
Executive  Vice President and General  Counsel of Delta Life  Insurance  Company
since  November 1991 and Vice  President  and Secretary of Bull Run  Corporation
since  November 1994. He is also a Director of Bankers  Fidelity  Life,  Georgia
Casualty, Bull Run Corporation, and Gray Communications,  Inc. Prior thereto, he
was an attorney with Liddell, Sapp, Zivley, Hill and LaBoon from October 1989 to
October 1991. Mr. Howell is the son-in-law of Mr. Robinson.

     Mr.  Hancock  has served as Senior  Vice  President  and  Treasurer  of the
Company and each of the Life Companies since November 1993, prior thereto served
as Vice  President and  Treasurer of the Company and each of the Life  Companies
since April 1989,  and prior thereto  served as Controller of the Life Companies
since March 1988.  He is also a Director  of Bankers  Fidelity  Life and Georgia
Casualty. Prior to joining the Company in 1988, he was Vice President of Finance
with National Consultants, Inc.

ITEM 2.  PROPERTIES

Insurance

     Owned  Properties.  The  Company  owns two parcels of  unimproved  property
consisting  of  approximately  seven  acres  located  in Fulton  and  Washington
Counties,  Georgia.  At December  31,  1996,  the  aggregate  book value of such
properties was approximately $46,000.

     Leased  Properties.  The Company (with the exception of American  Southern)
leases space for its  principal  offices in an office  building  located at 4370
Peachtree Road, N.E.,  Atlanta,  Georgia,  from Delta Life Insurance Company and
its affiliates,  under leases which expire at various times from May 31, 2002 to
July 31,  2005.  Under the  current  terms of the leases,  the Company  occupies
approximately 54,637 square feet of office space at an annual base rental plus a
pro rata share of all real estate taxes, general maintenance,  service expenses,
and  insurance  costs  with  respect to the office  building.  Pursuant  to such
leases,  the Company's  aggregate  annual rental in 1996 (including its pro rata
expenses)

                                       29

<PAGE>

amounted  to  approximately  $14.65 per square  foot,  or  $957,000.  Delta Life
Insurance Company, the owner of the building, is controlled by J. Mack Robinson,
Chairman of the Board of Directors and principal shareholder of the Company. The
terms of the leases are believed by Company management to be comparable to terms
which could be obtained by the Company  from  unrelated  parties for  comparable
rental property.

     American  Southern  leases  space for its offices in a building  located at
3715 Northside Parkway,  Building 400, 8th Floor,  Atlanta,  Georgia.  The lease
term expires January 31, 2000. Under the terms of the lease,  American  Southern
occupies  approximately  13,746 square feet.  American  Southern's annual rental
payments for 1996 were approximately $14.19 per square foot, or $195,000.

ITEM 3.  LEGAL PROCEEDINGS

Litigation

     The  Company  and its  subsidiaries  are  involved  in  various  claims and
lawsuits  incidental to and in the ordinary course of their  businesses.  In the
opinion  of  management,  such  claims  will not have a  material  effect on the
business or financial condition of the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There were no matters  submitted  to a vote of the  Company's  shareholders
during the quarter ended December 31, 1996.


                                       30

<PAGE>

                                    PART II

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER    
           MATTERS

     The  Company's  Common Stock is traded in the  over-the-counter  market and
quoted on the NASDAQ National Market (Symbol:  AAME). As of March 7, 1997, there
were  6,730  shareholders  of  record.  The  following  table sets forth for the
periods  indicated the high and low sale prices of the Company's Common Stock as
reported on the NASDAQ National Market.

 Year Ending December 31,                    High        Low
-------------------------                    ----        ---

1996
    1st quarter............................ $3 1/4      $2 1/8
    2nd quarter............................  4           2 3/4
    3rd quarter............................  3 5/8       3
    4th quarter............................  3 5/8       3

1995
    1st quarter............................ $2 3/4      $2
    2nd quarter............................  2 1/2       2
    3rd quarter............................  2 7/8       1 7/8
    4th quarter............................  3           2 1/8


     The  Company  has not paid  dividends  since the  fourth  quarter  of 1988.
Payment of dividends in the future will be at the  discretion  of the  Company's
Board  of  Directors  and will  depend  upon the  financial  condition,  capital
requirements,  and earnings of the Company as well as other factors as the Board
of Directors may deem relevant.  The Company's  primary  sources of cash for the
payment of dividends are dividends  from its  subsidiaries.  Under the Insurance
Code of the State of Georgia,  dividend  payments  to the Parent  Company by its
insurance  subsidiaries are limited to the accumulated statutory earnings of the
insurance subsidiaries without the prior approval of the Insurance Commissioner.
The Company's  insurance  subsidiaries had the following  accumulated  statutory
earnings  and/or  (deficits)  as of December 31, 1996:  Georgia  Casualty - $8.5
million,  American  Southern - $18.4  million,  Atlantic  American  Life - ($1.4
million),  Bankers Fidelity Life - $7.0 million. The Company does not anticipate
paying cash dividends on the Common Stock in the foreseeable future.



                                     31
<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA

     Selected  financial data of Atlantic American  Corporation and subsidiaries
for the five years  ended  December  31,  1996 is set forth on the inside  front
cover of the 1996 Annual Report to Shareholders  and is  incorporated  herein by
reference.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

     Management's  discussion and analysis of financial condition and results of
operations of Atlantic  American  Corporation and  subsidiaries are set forth on
pages 25 to 30 of the 1996 Annual Report to  Shareholders  and are  incorporated
herein by reference.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated  financial statements of the Company and related notes are
set forth on pages 10 to 24 of the 1996 Annual  Report to  Shareholders  and are
incorporated herein by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     None.









                                       32

<PAGE>

                                   PART III

     With the exception of information relating to the Executive Officers of the
Company,  which is provided in Part I hereof,  all information  required by Part
III (Items 10, 11, 12, and 13) is  incorporated  by reference  to the  Company's
definitive  proxy  statement to be delivered in  connection  with the  Company's
annual meeting of shareholders to be held May 6, 1996.

                                    PART IV

ITEM 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  List of documents filed as part of this report:

FINANCIAL STATEMENTS

                                                            Page
                                                          Reference
                                                          ---------

Consolidated Balance Sheets as of December 31, 1996 and
   December 31, 1995......................................  10*
Consolidated Statements of Operations for the Three Years
   ended December 31, 1996................................  11*
Consolidated Statements of Shareholders' Equity for the
   Three Years ended December 31, 1996....................  12*
Consolidated Statements of Cash Flows for the Three Years
   ended December 31, 1996................................  13*
Notes to Consolidated Financial Statements................  14-24*
Report of Independent Public Accountants..................  31*


     * The page  references  so  designated  refer to page  numbers  in the 1996
Annual Report to Shareholders of Atlantic American Corporation,  which pages are
incorporated  herein  by  reference.  With  the  exception  of  the  information
specifically  incorporated  within  this Form 10-K,  the 1996  Annual  Report to
Shareholders  of Atlantic  American  Corporation is not deemed to be filed under
the Securities Exchange Act of 1934.

                                       33

<PAGE>

                         FINANCIAL STATEMENT SCHEDULES

            Report of Independent Public Accountants
       II - Condensed financial  information of registrant for the three years
            ended December 31, 1996
      III - Supplementary Insurance Information for the three years ended
            December 31, 1996
       IV - Reinsurance  for the  three  years  ended  December  31,  1996
       VI - Supplemental Information concerning property-casualty insurance
            operations for the three years ended December 31, 1996

          Schedules  other than those  listed  above are omitted as they are not
          required or are not applicable,  or the required  information is shown
          in the financial  statements or notes  thereto.  Columns  omitted from
          schedules  filed have been  omitted  because  the  information  is not
          applicable.
                                   EXHIBITS

3.1     - Restated and  Amended  Articles of  Incorporation  of  the  registrant
          [incorporated  by  reference to Exhibit 3.1 to the  registrant's  Form
          10-Q for the fiscal quarter ended March 31, 1996].

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].

4.1     - Indenture  between  registrant  and  Wachovia  Bank and Trust Company,
          N.A., Trustee, dated as of pril  1, 1987 relating to the  registrant's
          8% Convertible  Subordinated  Notes due May 15, 1997 [incorporated  by
          reference to Exhibit 4.1 to the  registrant's  Form  10-K for the year
          ended December 31, 1987].

10.11   - Lease  Contract  between  registrant and Delta Life Insurance  Company
          dated June 1,1992  [incorporated  by reference to Exhibit 10.11 to the
          registrant's Form 10-K for the year ended December 31, 1992].

10.11.1 - First  Amendment to Lease  Contract between  registrant and Delta Life
          Insurance  Company  dated June 1, 1993  [incorporated  by reference to
          Exhibit  10.11.1 to the  registrant's  Form 10Q for the quarter  ended
          June 30, 1993].

10.11.2 - Second  Amendment to Lease  Contract between registrant and Delta Life
          Insurance  Company dated August 1, 1994  [incorporated by reference to
          Exhibit  10.11.2 to the  registrant's  Form 10Q for the quarter  ended
          September 30, 1994].

10.12   - Lease Agreement  between Georgia  Casualty & Surety  Company and Delta
          Life  Insurance  Company  dated  September  1,   1991 [incorporated by
          reference to Exhibit 10.12 to the registrant's Form 10-K  for the year
          ended December 31, 1992].

10.12.1 - First  Amendment to  Lease Agreement between Georgia Casualty & Surety
          Company  and  Delta  Life   Insurance   Company  dated  June  1,  1992
          [incorporated by reference to Exhibit 10.12.1 to the registrant's Form
          10-K for the year ended December 31, 1992].

10.16   - Management Agreement between  egistrant 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].

10.17   - Management Services  Agreement,  dated  April   9, 1991,   between the
          registrant and  Leath Furniture, Inc.  [incorporated  by  reference to
          Exhibit  10.17  to  the  registrant's  Form 10-K for  the  year  ended
          December 31, 1991].

                                       34
<PAGE>

10.17.1 - First Amendment to the Management Services Agreement, dated August 31,
          1992, between the registrant and Leath Furniture,  Inc.  [incorporated
          by reference to Exhibit 10.17.1. to the registrant's Form 10-K for the
          year ended December 31, 1992].

10.19*  - 1987  Stock Option and  Stock  Appreciation  Right Plan dated November
          3,  1987   [incorporated   by  reference  to  Exhibit   10.19  to  the
          registrant's Form 10-K for the year ended December 31, 1987].

10.21*  - Minutes of Meeting of Board of Directors of registrant  held  February
          25, 1992  adopting  registrant's  1992 Incentive  Plan together with a
          copy of  that plan, as  adopted [incorporated  by reference to Exhibit
          10.21  to  the  registrant's  Form 10-K for  the  year  ended December
          31, 1991].

10.22   - Investment Agreement, dated April 9, 1991, among the registrant, Leath
          Furniture, Inc. and the Purchasers (as defined therein)  [incorporated
          by reference to  Exhibit  10.22 to the  registrant's Form 10-K for the
          year ended December 31, 1991].

10.23   - Convertible Subordinated Promissory Note, dated April 9, 1991,  issued
          in the  principal amount  of $2,000,000  by  Leath  Furniture, Inc. in
          favor of the registrant [incorporated by reference to Exhibit 10.23 to
          the registrant's Form 10-K for the year ended December 31, 1991].

10.24   - Stockholders Agreement,  dated  April  9, 1991, among the stockholders
          of Leath Furniture,  Inc.  [incorporated by reference to Exhibit 10.24
          to the registrant's Form 10-K for the year ended December 31, 1991].

10.25*  - Consulting Agreement,  dated April 9, 1991, between  Samuel E. Hudgins
          and Leath Furniture, Inc. [incorporated by reference to Exhibit  10.25
          to the  registrant's  Form 10-K for the year ended December 31, 1991].

10.26   - Purchase and  Assignment  Agreement,  dated  May 23, 1991, among Leath
          Furniture,  Inc., Modernage Furniture, Inc.,  Wickes  Companies,  Inc.
          and Delta Life Insurance Company [incorporated by reference to Exhibit
          10.26 to the  registrant's  Form  10-K for  the  year  ended  December
          31, 1991].

10.27   - Term Note, dated January 29, 1988, of Leath Furniture, Inc.in favor of
          Wickes Companies,  Inc.  in the  principal  amount of  $3,750,000  and
          First  Amendment to Term Note,  dated May 23, 1991   [incorporated  by
          reference to Exhibit 10.27 to the  registrant's Form 10-K for the year
          ended December 31, 1991].

10.29*  - Executive Employment and  Non-Competition Agreement,  dated  April  8,
          1991,  between    Leath   Furniture,  Inc.  and   Ronald  D.  Phillips
          [incorporated  by  reference  to  Exhibit  10.29 to  the  registrant's
          Form 10-K for the year ended December 31, 1992].

10.30*  - Employment    Agreement,   dated   September   8,  1988,  between  the
          registrant and John W. Hancock  [incorporated  by reference to exhibit
          10.30 to the  registrant's  Form 10-K for the year ended  December 31,
          1992].

10.31*  - Employment  Agreement dated  September 2, 1988, between the registrant
          and Eugene Choate  [incorporated  by reference to Exhibit 10.31 to the
          registrant's Form 10-K for the year ended December 31, 1992].

10.32   - Loan  and  Security  Agreement dated  January 29, 1993, by and between
          Gulf  Capital  Services Ltd.,   Leath  Furniture,  Inc. and  Modernage
          Furniture, Inc. [incorporated by reference to Exhibit 10.32    to  the
          registrant's Form 10-K for the year ended December 31, 1992].

                                       35


<PAGE>

10.32.1 - First  Amendment  to Loan and  Security  Agreement  dated December 19,
          1994, by and between Gulf Capital  Services,  Ltd.,  Leath  Furniture,
          Inc.,  and Modernage  Furniture,  Inc.  [incorporated  by reference to
          Exhibit  10.32.1  to the  registrant's  Form  10-K for the year  ended
          December 31, 1994].

10.33   - 8% Promissory notes  between registrant  and registrant's chairman and
          his  affiliates  [incorporated  by reference  to Exhibit  10.33 to the
          registrant's Form 10-K for the year ended December 31, 1992].

10.33.1 - Amendment  to 8%  Promissory  Notes,  dated  March 24,  1993,  between
          registrant and registrant's chairman and his affiliates  [incorporated
          by reference to Exhibit 10.33.1 to the registrant's  Form 10-K for the
          year ended December 31, 1992].

10.34   - 9 1/2% Promissory  Notes  between registrant and registrant's chairman
          and his affiliates  [incorporated by reference to Exhibit 10.34 to the
          registrant's Form 10-K for the year ended December 31, 1992].

10.34.1 - Amendment to 9 1/2%   Promissory Notes,  dated March 24, 1993, between
          registrant and registrant's chairman and his affiliates  [incorporated
          by reference to Exhibit 10.34.1 to the registrant's  Form 10-K for the
          year ended December 31, 1992].

10.35   - 10%   Subordinated   notes   between   registrant   and   registrant's
          affiliates   [incorporated  by  reference  to  Exhibit  10.35  to  the
          registrant's Form 10-K for the year ended December 31, 1992].

10.35.1 - Amendment  to 10% Subordinated  Notes,  dated  March 24, 1993, between
          registrant and registrant's  affiliates  [incorporated by reference to
          Exhibit  10.35.1  to the  registrant's  Form  10-K for the year  ended
          December 31, 1992].

10.36   - 9% Promissory  notes  between  Leath Furniture,  Inc. and registrant's
          chairman  and  his  affiliates [incorporated  by  reference to Exhibit
          10.36 to the  registrant's  Form 10-K for the year ended  December 31,
          1992].

10.37   - 10% Promissory   notes between Leath Furniture,  Inc. and registrant's
          chairman  and  his affiliates [incorporated  by  reference  to Exhibit
          10.37 to the  registrant's  Form 10-K for the year ended  December 31,
          1992].

10.38   - Loan   and   Security    Agreement  dated  August  26,  1991,  between
          registrant's  three insurance subsidiaries and Leath  Furniture,  Inc.
          [incorporated  by reference  to Exhibit  10.38 to theregistrant's Form
          10-K for the year ended December 31, 1992].

10.38.1 - First  amendment  to  the amended  and  reissued  mortgage  note dated
          January 1, 1992,  [incorporated by reference to Exhibit 10.38.1 to the
          registrant's Form 10-K for the year ended December 31, 1992].

10.39   - Intercreditor   Agreement  dated   August  26,  1991,  between   Leath
          Furniture,  Inc., the registrant and the registrant's  three insurance
          subsidiaries  [incorporated  by  reference  to  Exhibit   10.39 to the
          registrant's Form 10-K for the year ended December 31, 1992].

10.41   - Management  Agreement between 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].

10.42   - 8% Promissory Notes dated  September 29, 1993, between  registrant and
          registrant's affiliates [incorporated by reference to Exhibit 10.42 in
          the Registrant's Form 10-Q for the quarter ended September 30, 1993].


                                       36


<PAGE>

10.43   - 8% Promissory  Notes dated  November 3, 1993,  between  registrant and
          registrant's affiliates [incorporated by reference to Exhibit 10.43 to
          the registrant's Form 10-K for the year ended December 31, 1993].

10.44   - 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].

10.45   -  Amendment   to  the    Promissory   Notes  dated  March  23,    1994,
          [incorporated by reference to Exhibit 10.4 5 to the Registrant's  Form
          10-K for the year ended December 31, 1993].

10.45.1 - Second  Amendment  to  the  Promissory  Notes  dated  March 27,  1995,
          [incorporated by reference to Exhibit 10.45.1 to the registrant's Form
          10-K for the year ended December 31, 1994].

10.46   - 9% Promissory  Note  dated December 16, 1994,  between  registrant and
          registrant's  ffiliate  [incorporated by reference to Exhibit 10.46 to
          the registrant's Form 10-K for the year ended December 31, 1994].

10.47   - 9%  Promissory Note dated  December 29, 1994,  between  registrant and
          registrant's affiliate  [incorporated by reference to Exhibit 10.47 to
          the registrant's Form 10-K for the year ended December 31, 1994].

10.48   - 9% Promissory Note dated  December  30, 1994,  between  registrant and
          registrant's affiliate  [incorporated by reference to Exhibit 10.48 to
          the registrant's Form 10-K for the year ended December 31, 1994].

10.49   - Prime  plus 1%  Promissory  Note dated June  28, 1994,  between  Leath
          Furniture,  Inc. and registrant's Chairman  [incorporated by reference
          to  Exhibit  10.49  to   the registrant's Form 10-K for the year ended
          December 31, 1994].

10.50   - Prime  plus 1-1/2%  Promissory  Note d ated January 23, 1995,  between
          Leath  Furniture,  Inc. and   registrant's  Chairman  [incorporated by
          reference to Exhibit 10.50 to the registrant's Form 10-K  for the year
          ended December 31, 1994].

10.51   - 9% Promissory Note dated February 3, 1995,  between  Leath  Furniture,
          Inc. and  registrant's Chairman  [incorporated by reference to Exhibit
          10.51  to  the  registrant's  Form 10-K for  the  year  ended December
          31, 1994].

10.52   - Prime  plus  1% Promissory  Note  dated  December  19,  1994,  between
          registrant  and  registrant's affiliate [incorporated  by reference to
          Exhibit  10.52  to  the  registrant's  Form  10-K for  the  year ended
          December 31, 1994].

10.53   - Certificate of designations of Series A Convertible Preferred Stock of
          Leath  Furniture,  Inc.  dated   December  16,  1994 [incorporated  by
          reference to Exhibit 10.53 to the  registrant's Form 10-K for the year
          ended December 31, 1994].

10.54   - Stock   Purchase   Agreements  by  and  between  registrant  and Fuqua
          Enterprises, Inc.  dated  as  of  October  16,  1995  [incorporated by
          reference to Exhibit 2.1 to the registrant's  Form 8-K, filed  January
          12, 1996].

10.55   - Credit  Agreement,  dated  as of December 29, 1995, between registrant
          and  Wachovia  Bank of Georgia,  N.A.  [incorporated  by  reference to
          Exhibit 99.1 to the registrant's Form 8-K, filed January 12, 1996].

13.1    - Those portions  of the registrant's  Annual Report to Shareholders for
          year ended December 31, 1996,  that are  specifically  incorporated by
          reference herein.

21.1    - Subsidiaries of the registrant.


                                       37

<PAGE>

23.1    - Consent of Independent Public Accountants.

28.1    - Form of  General Agent's Contract of Atlantic  American Life Insurance
          Company  [incorporated  by reference to Exhibit 28 to the registrant's
          Form 10-K for the year ended December 31, 1990].

28.2    - Form of  Agent's Contract of  Bankers Fidelity Life Insurance  Company
          [incorporated by reference to Exhibit 28 to the registrant's Form 10-K
          for the year ended December 31, 1990].

28.3    - Form  of  Agency  Contract  of  Georgia  Casualty  &  Surety   Company
          [incorporated by reference to Exhibit 28 to the registrant's Form 10-K
          for the year ended December 31, 1990].

29.1.1  - Schedule P from  American Safety  Insurance  Company  annual statement
          for  year  ended  December  31, 1996 (submitted in  paper format under
          cover of Form SE).

29.1.2  - Schedule P from American Southern  Insurance Company  annual statement
          for  year  ended  December  31, 1996 (submitted in  paper format under
          cover of Form SE).

29.1.3  - Schedule P from  Georgia  Casualty & Surety  Company  annual statement
          for  year  ended  December  31, 1996 (submitted in  paper format under
          cover of Form SE).

(b)       Reports on Form 8-K.  None.

*Management  contract,  compensatory  plan or  arrangement  required to be filed
pursuant to, Part IV, Item 14(C) of Form 10-K and Item 601 of Regulation S-K.

                                       38
<PAGE>

   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                    (Registrant) ATLANTIC AMERICAN CORPORATION

                        By:   /s/
                            ------------------------------------------
                            John W. Hancock
                            Senior Vice President and Treasurer

                            Date: March 27, 1997

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

       Signature                           Title                         Date
       ---------                           -----                         ----


     /s/
   ---------------------
   J. MACK ROBINSON          Chairman of the Board                March 27, 1997

     /s/
   ---------------------
   HILTON H. HOWELL, JR.     President, Chief Executive Officer   March 27, 1997
                             and Director (Principal Executive Officer)

     /s/
   ---------------------
   JOHN W. HANCOCK           Senior Vice President and Treasurer  March 27, 1997
                               (Principal Financial Officer)

     /s/
   ---------------------
   SAMUEL E. HUDGINS         Director                             March 27, 1997

     /s/
   ---------------------
   D. RAYMOND RIDDLE         Director                             March 27, 1997

     /s/
   ---------------------
   HARRIETT J. ROBINSON      Director                             March 27, 1997

     /s/
   ---------------------
   SCOTT G. THOMPSON         Director                             March 27, 1997

     /s/
   ---------------------
   CHARLES B. WEST           Director                             March 27, 1997

     /s/
   ---------------------
   WILLIAM H. WHALEY, M.D.   Director                             March 27, 1997

     /s/
   ---------------------
   DOM H. WYANT              Director                             March 27, 1997



                                       39

<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                    ----------------------------------------




To the Shareholders of
Atlantic American Corporation:


     We have audited,  in accordance with generally accepted auditing standards,
the  consolidated   financial  statements  of  Atlantic  American   Corporation,
incorporated  by reference in this Form 10-K, and have issued our report thereon
dated March 14, 1997. Our audits of the financial  statements  were made for the
purpose  of  forming  an  opinion  on those  statements  taken  as a whole.  The
financial  statement  schedules listed in Item 14 (a) are the  responsibility of
the Company's  management,  are presented for the purpose of complying  with the
Securities  and  Exchange  Commission's  rules,  and are not  part of the  basic
consolidated  financial  statements.  These schedules have been subjected to the
auditing  procedures  applied  in  the  audits  of  the  consolidated  financial
statements  and, in our  opinion,  fairly  state in all  material  respects  the
financial  data  required  to be set  forth  therein  in  relation  to the basic
consolidated financial statements taken as a whole.







                                            ARTHUR ANDERSEN LLP


     Atlanta, Georgia
     March 14, 1997


                                       40

<PAGE>


                                                                     Schedule II
                                                                     Page 1 of 3


                   CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                   ---------------------------------------------

                           ATLANTIC AMERICAN CORPORATION
                               (Parent Company Only)

                                  BALANCE SHEETS
                                  (in thousands)


                                      ASSETS
                                                              December 31,
                                                          --------------------
                                                          1996            1995
                                                          ----            ----
   Current assets:
       Cash and short-term investments                   $    382      $     24
                                                         --------      --------

   Investment in affiliates:
       Investment in insurance subsidiaries                94,797        90,551
       Investment in furniture subsidiary                      -         (1,965)
                                                         --------      --------

          Total investment in affiliated companies         94,797        88,586
                                                         --------      --------
   Income taxes receivable from subsidiaries                   55         1,435
   Other assets                                             2,278         2,541
                                                         --------      --------

                                                         $ 97,512      $ 92,586
                                                         ========      ========


                         LIABILITIES AND SHAREHOLDERS' EQUITY

   Current liabilities:
       Notes payable to affiliates                       $  1,058      $     -
       Current portion of long-term debt                    8,559        13,352
       Interest payable                                        56           527
       Other payables                                       2,076           660
                                                         --------      --------

          Total current liabilities                        11,749        14,539
                                                         --------      --------

   Income taxes payable to subsidiaries                       633            -
   Long-term debt                                          25,994        25,211
   Long-term debt payable to affiliates                        -          6,358
   Shareholders' equity                                    59,136        46,478
                                                         --------      --------

                                                         $ 97,512      $ 92,586
                                                         ========      ========


The notes to  consolidated  financial  statements  are an integral part of these
condensed statements.


                                      II-1

<PAGE>

                                                                     Schedule II
                                                                     Page 2 of 3

                   CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                   ---------------------------------------------

                           ATLANTIC AMERICAN CORPORATION
                               (Parent Company Only)

                             STATEMENTS OF OPERATIONS
                                  (in thousands)

                                                   Year Ended December 31,
                                                 ---------------------------
                                                    1996     1995      1994
                                                    ----     ----      ----
   REVENUE
      Fees, rentals and interest income
         from subsidiaries                        $ 5,662  $ 5,968  $ 5,952
      Distributed earnings from subsidiaries        6,850    2,864       -
      Other                                            94       12        2
                                                  -------  -------  -------

         Total revenue                             12,606    8,844    5,954

   GENERAL AND ADMINISTRATIVE EXPENSES              6,073    5,555    5,522

   INTEREST EXPENSE                                 3,292    2,458    1,968
                                                  -------  -------  -------

                                                    3,241      831   (1,536)
   INCOME TAX PROVISION (BENEFIT)                     204      (34)  (1,632)
                                                  -------  -------  -------
                                                    3,037      865       96
   EQUITY IN UNDISTRIBUTED EARNINGS OF
     CONSOLIDATED SUBSIDIARIES, NET                 4,574    2,253    8,053
                                                  -------  -------  -------

      Income from continuing operations             7,611    3,118    8,149
      (Loss) income from discontinued operations,
         net                                       (4,447) (10,094)   1,121
                                                  -------  -------  -------
      Income (loss) before extraordinary gain       3,164   (6,976)   9,270
      Extraordinary gain                               -        -       100
                                                  -------  -------  -------

      Net income (loss)                           $ 3,164  $(6,976) $ 9,370
                                                  =======  =======  =======



The notes to  consolidated  financial  statements  are an integral part of these
condensed statements.


                                      II-2


<PAGE>

                                                                     Schedule II
                                                                     Page 3 of 3

                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                  ---------------------------------------------
                          ATLANTIC AMERICAN CORPORATION
                              (Parent Company Only)
                            STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                                        Year Ended December 31,
                                                        -----------------------
                                                       1996      1995     1994
                                                       ----      ----     ----
   CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income (loss)                              $ 3,164  $ (6,976) $ 9,370
      Adjustments to reconcile net income (loss)
        to net cash provided by operating activities:
         Depreciation and amortization                   452       379      292
         Equity in undistributed earnings
           of consolidated subsidiaries               (4,574)   (2,253)  (8,053)
         Loss (income) from discontinued operations    4,447    10,094   (1,121)
         Benefit from deferred taxes                      -         -    (1,000)
         Change in intercompany taxes                  2,013        -        -
         Extraordinary gain from  extinguishment of
           debt                                           -         -      (100)
         (Decrease) increase in other liabilities       (262)     (746)     812
         Minority interest                                -       (554)     205
         Other, net                                    2,528     1,790     (268)
                                                     -------  --------  -------
            Net cash provided by operating activities  7,768     1,734      137
                                                     -------  --------  -------

   CASH FLOWS FROM INVESTING ACTIVITIES:
      Investment in subsidiaries, net                     -        (38)  (2,306)
      Proceeds from sale of Leath Furniture, net       3,645        -        -
      Acquisition  of American  Southern  Insurance
        Company                                           -    (22,770)      -
      Additions to property and equipment             (1,177)   (1,058)    (646)
                                                     -------  --------  -------
            Net cash  provided  (used) by investing
                activities                             2,468   (23,866)  (2,952)
                                                     -------  --------  -------

   CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds  from  issuance of notes  payable to
        affiliates                                        -         -     3,175
      Proceeds from issuance of bank financing        11,352    22,642       -
      Preferred   stock   dividends  to  affiliated
        shareholders                                    (315)     (315)    (315)
      Purchase of treasury shares                       (338)     (174)      -
      Retirements  and payments of  long-term  debt
        and notes payable to affiliates              (20,662)     (675)      -
      Proceeds from exercise of stock options             85       600       19
                                                     -------  --------  -------
            Net cash (used)  provided by  financing
                activities                            (9,878)  220,078    2,879
                                                     -------  --------  -------

   Net increase (decrease) in cash                       358       (54)      64
   Cash at beginning of year                              24        78       14
                                                     -------  --------  -------
   Cash at end of year                               $   382  $     24  $    78
                                                     =======  ========  =======

   Supplemental disclosure:
      Cash paid for interest                         $ 3,763  $  2,894  $   900
                                                     =======  ========  =======
      Cash paid for income taxes                     $   116  $    128  $   115
                                                     =======  ========  =======
      Long-term   debt,   payable  to   affiliates,
        converted to preferred stock                 $    -   $ 13,400  $    -
                                                     =======  ========  =======
      Debt  to  seller  for  purchase  of  American
        Southern Insurance Company                   $    -   $ 11,352  $    -
                                                     =======  ========  =======

The notes to  consolidated  financial  statements  are an integral part of these
condensed statements.
                                      II-3
<PAGE>


                                                                   Schedule III
                                                                    Page 1 of 2

                 ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                     SUPPLEMENTARY INSURANCE INFORMATION(1)
                                 (in thousands)


                                       Future
                                       Policy
                                      Benefits, 
                                       Losses,                    Other Poicy
                       Deferred        Claims                      Claims and
                     Acquisition      and Loss        Unearned       Benefits
     Segment            Costs         Reserves        Premiums        Payable
--------------------------------------------------------------------------------

December 31, 1996:
   A & H..........   $ 2,561        $  6,924         $ 2,135          $    -
   Life...........     9,676          33,686              -             1,912
   Casualty.......     2,942          79,849          22,965            1,727
--------------------------------------------------------------------------------
                     $15,179        $120,459 (2)     $25,100          $ 3,639
================================================================================

December 31, 1995:
   A & H..........   $ 3,831        $  8,907         $ 2,222          $    -
   Life...........     8,411          32,219             -              1,905
   Casualty.......     2,657          74,693          21,918            1,983
--------------------------------------------------------------------------------
                     $14,899        $115,819 (3)     $24,140          $ 3,888
================================================================================

December 31, 1994:
   A & H..........   $ 4,594        $ 11,364         $ 2,629          $    -
   Life...........     8,521          31,572             -              1,959
   Casualty.......       438          35,435           5,111              225
--------------------------------------------------------------------------------
                     $13,553        $ 78,371 (4)     $ 7,740          $ 2,184
================================================================================

_________________________  

(1) Supplementary insurance information contained above includes amounts related
    to American Southern for December 31, 1995 and 1996.
(2) Includes future policy benefits of $36,385 and losses and claims of $84,074.
(3) Includes future policy benefits of $36,305 and losses and claims of $79,514.
(4) Includes future policy benefits of $37,641 and losses and claims of $40,730.

<PAGE>
<TABLE>
        
                                                                                           Schedule III
                                                                                            Page 2 of 2

                              ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                                  SUPPLEMENTARY INSURANCE INFORMATION(1)
                                              (in thousands)
 



                                                          Benefits,      Amortization
                                           Investment   Claims,Losses    of Deferred     Other      Casualty
                             Premium        Income      and Settlement   Acquisition   Operating    Premiums
      Segment                Revenue      (Losses)*(2)     Expenses         Costs     Expenses(2)   Written
---------------------------------------------------------------------------------------------------------------
<S><C>                      <C>           <C>           <C>              <C>         <C>           <C>     
December 31, 1996:
   Life...........          $ 10,240       $ 4,210        $ 6,446        $ 1,449      $ 4,543      $    -
   Casualty.......            60,047         7,377         40,245          5,349       13,039       61,068
   A & H..........            15,738         1,234          7,590          1,386        7,565           -
   Other..........               -             225             -              -         3,644           -
---------------------------------------------------------------------------------------------------------------
                            $ 86,025       $13,046        $54,281        $ 8,184      $28,791      $61,068
===============================================================================================================

December 31, 1995:
   Life...........          $  8,297       $ 3,941        $ 4,861        $ 1,799      $ 3,546      $    -
   Casualty.......            18,302         2,989         12,356             -         6,582       19,074
   A & H..........            16,774         1,442          7,472          1,922        7,796           -
   Other..........               -             (75)            -              -         2,252           -
---------------------------------------------------------------------------------------------------------------
                            $ 43,373       $ 8,297        $24,689        $ 3,721      $20,176      $19,074
===============================================================================================================

December 31, 1994:
   Life...........          $  8,111       $ 2,964        $ 5,726        $ 1,387      $ 2,762      $    -
   Casualty.......            14,651         2,940          6,513             -         5,198       16,094
   A & H..........            18,939         1,523          9,716          1,621        8,026           -
   Other..........                -             71             -              -         1,733           -
---------------------------------------------------------------------------------------------------------------
                            $ 41,701       $ 7,498        $21,955        $ 3,008      $17,719      $16,094
===============================================================================================================

<FN>
  * Includes realized investment gains (losses).

_________________________

(1) Supplementary insurance information contained above includes amounts related
    to American  Southern for 1996 only. 
(2) Investment  income  is  allocated  based  on  the  pro  rata  percentages of 
    insurance reserves  and  policyholders' funds attributable  to each  segment  
    whereas  other operating expenses are allocated based on premiums collected.
</FN>
</TABLE> 


<PAGE>
<TABLE>
        
                                                                     Schedule IV

                 ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                                   REINSURANCE
                                 (in thousands)

                                              Ceded To      Assumed
                                   Gross        Other      From Other     Net
                                   Amount     Companies    Companies    Amount
--------------------------------------------------------------------------------
Year ended December 31, 1996:
  Life insurance in force.....   $287,963     $ 10,072     $     -      $277,891
                                 ========     ========     ======       ========

Premiums  --
  Life insurance..............   $ 10,305     $     65     $     -      $ 10,240
  Accident and health 
    insurance.................     15,738           -            -        15,738
  Property and casualty 
    insurance(1)..............     43,317        9,009       25,739       60,047
             --                  --------     --------     --------     --------
     Total premiums...........   $ 69,360     $  9,074     $ 25,739     $ 86,025
                                 ========     ========     ========     ========

Year ended December 31, 1995:
  Life insurance in force.....   $254,349     $ 10,003     $     -      $244,346
                                 ========     ========     ========     ========

Premiums  --
  Life insurance..............   $  8,378     $     81     $     -      $  8,297
  Accident and health 
    insurance.................     16,774           -            -        16,774
  Property and casualty 
    insurance(1)..............     21,258        2,956           -        18,302
                                 --------     --------     --------     --------
     Total premiums...........   $ 46,410     $  3,037     $     -      $ 43,373
                                 ========     ========     ========     ========

Year ended December 31, 1994:
  Life insurance in force.....   $252,997     $ 11,043     $     -      $241,954
                                 ========     ========     ========     ========

Premiums  --
  Life insurance..............   $  8,188     $     77     $     -      $  8,111
  Accident and health 
    insurance.................     18,939           -            -        18,939
  Property and casualty 
    insurance(1)..............     17,035        2,384           -        14,651
                                 --------     --------     --------     --------
     Total premiums...........   $ 44,162     $  2,461     $     -      $ 41,701
                                 ========     ========     ========     ========

_________________________


(1) Information  contained above includes  amounts related to American  Southern
    for 1996 only.


<PAGE>
                                                                                                                        Schedule VI

                                        ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                                               SUPPLEMENTAL INFORMATION CONCERNING

                                             PROPERTY-CASUALTY INSURANCE OPERATIONS
                                                       (in thousands)


                                                                           Claims and Claim
                                                                           Adjustment Expenses
                                                                           Incurred Related to
                                                                           --------------------
                                                                                                Amortization   Paid Claims
                    Deferred                                      Net                           of Deferred    and Claim     
                     Policy                Unearned  Earned    Investment  Current      Prior   Acquisition    Adjustment   Premiums
    Year Ended    Acquisition   Reserves   Premium   Premium     Income      Year       Years      Costs        Expenses    Written
------------------------------------------------------------------------------------------------------------------------------------
<S><C>           <C>            <C>        <C>       <C>       <C>         <C>         <C>      <C>            <C>        <C>       
   December 31, 
     1996(1)       $ 2,942      $79,849    $22,965    $60,047    $ 7,205    $44,468    $(3,403)  $ 5,349       $41,017    $61,068
====================================================================================================================================

   December 31, 
     1995          $ 2,657(1)   $74,693(1) $21,918(1) $18,302(2) $ 2,989(2) $ 7,002(2) $ 5,985   $    -        $12,923(2) $19,074(2)
====================================================================================================================================
                                                                    
   December 31, 
     1994(2)       $   438      $35,435    $ 5,111    $14,651    $ 2,940     $10,617   $(2,661)  $    -        $21,272    $16,094
====================================================================================================================================

<FN>
_________________________

(1) Includes Georgia Casualty & Surety and American Southern.
(2) Includes Georgia Casualty only.

</FN>
</TABLE>
<PAGE>