Exhibit 13.1

Inside Front Cover :
Corporate Profile

   Atlantic   American   Corporation  is  an  insurance  holding  company  whose
subsidiary companies are involved in well-defined specialty markets of the life,
health, property and casualty insurance industries.


<PAGE>

SELECTED FINANCIAL DATA

(Dollars in thousands, expect per share data)

                                                 Year Ended December 31,
                                       --------------------------------------
                                      1999     1998     1997     1996     1995
                                      ------------------------------------------
  Insurance premiums              $107,594  $ 91,292   $88,682 $ 86,025 $43,373
  Investment income                 12,877    11,499    11,256   11,151   6,566
  Other income                       1,172       366       201      306       -
  Realized investment gains, net     2,831     2,909     1,076    1,589   1,731
                                    -------------------------------------------
    Total revenue                  124,474   106,066   101,215   99,071  51,670
                                    --------------------------------------------

  Insurance benefits and losses
       incurred                     77,563    60,845    61,018   54,281  24,689
  Other expenses                    42,989    36,518    32,026   36,975  23,897
                                   --------------------------------------------
    Total benefits and expenses    120,552    97,363    93,044   91,256  48,586
                                    --------------------------------------------
                                     3,922     8,703     8,171    7,815   3,084
  Income tax (benefit) provision    (6,988)      145       138      204     (34)
                                    --------------------------------------------
    Income from continuing
         operations                 10,910     8,558     8,033    7,611   3,118
    Loss from discontinued
             operations,net              -         -         -   (4,447)(10,094)
                                        ----------------------------------------

     Net income (loss)             $10,910   $ 8,558  $  8,033   $3,164 $(6,976)
                                    ============================================

  Basic net income (loss)
     per common share:
   Income from continuing
     operations                     $  .48   $   .37 $     .35   $  .33  $ .15

    Loss from discontinued
            operations               $   -    $    -  $      -   $  (.24)$(.54)
                                ------------------------------------------------
      Net income (loss)             $  .48    $  .37   $   .35   $  .09  $(.39)
                                -----------------------------------------------
  Diluted net income (loss) per
        common share:
    Income from continuing
        operations                  $  .46   $   .37 $     .35   $  .32   $ .15

    Loss from discontinued
            operations                   -         -         -     (.23) $ (.54)
                                  ----------------------------------------------

      Net income (loss)             $  .46   $   .37   $   .35 $    .09  $ (.39)
                                ------------------------------------------------

  Book value per common share   $     3.12 $    3.60 $    3.27 $   2.29 $   1.61
  Common shares outstanding         21,027    19,120    18,907   18,684   18,679
  Total assets                  $  351,144 $ 273,131 $ 271,860 $252,994 $245,494
  Total long-term debt           $  51,000 $  23,600 $  27,600 $ 25,994 $ 31,569
  Total debt                       $51,000 $  26,000 $  28,600 $ 35,611 $ 44,921

  Total shareholders'
    equity before accumulated
    other comprehensive income    $ 71,112 $  53,431 $  48,685 $ 41,423 $ 30,889

  Total shareholders'
    equity after accumulated
    other comprehensive income    $ 78,948 $  82,217 $  78,183  $ 59,136 $46,478

  Operating return on
      beginning equity *             15.1%     11.6%     16.8%   19.5%   5.7%

  * Operating  return on equity is  calculated by dividing  total  shareholders'
equity  before  accumulated  other  comprehensive  income  into net income  from
continuing operations less realized gains.

                                         1
<PAGE>

President's Message

To Our Shareholders:


      Looking back, 1999 was a year of challenges  faced and milestones  reached
for Atlantic American.  Our regional property and casualty operations  weathered
the battering of the soft pricing  environment  prevalent in our  industry,  and
successfully  began  adjusting  our  pricing  upward,  while our life and health
insurance  operations  have never had a more  successful year in terms of growth
and profitability.  On a consolidated basis Atlantic American reported fair, but
profitable results, and was able to continue to grow both internally and through
acquisition.

      To  briefly  summarize  the  results  for the year,  consolidated  revenue
increased  to over $124.4  million,  an increase of over 17%. Net income for the
year was $10.9 million  compared to $8.6 million in 1998.  However,  the current
year  was  favorably  impacted  by an  adjustment  to  the  valuation  allowance
established  against our deferred  tax asset;  excluding  this tax benefit,  net
income was $3.9  million.  Book value per share  declined to $3.12 from $3.60 in
1998,  as  incresing  interest  rates and  declines  in the  securities  markets
adversely impacted our investment portfolio.

      On July 1, we completed the acquisition of Association  Casualty Insurance
Company, an "A-" A.M. Best rated workers' compensation  specialist in Texas, and
its affiliate,  Association Risk Management General Agency, Inc., together known
as  "Association  Casualty."  With  the  addition  of these  companies,  we have
expanded our regional  underwriting  focus into Texas and the Southwest.  Harold
Fischer,  the  founder,  President  and  principal  shareholder  of  Association
Casualty,  has  continued  with  the  companies  and has  joined  our  board  of
directors.  We are extremely  pleased to have him on board. All of the remaining
management of the companies,  most notably Dianne Morris and Evelyn Hickey,  COO
and CFO,  respectively,  has  continued  under  our new  ownership.  Association
Casualty was one of the first  companies to return to the workers'  compensation
market in Texas after reforms were enacted in the early 1990s,  and it has built
a solid book of business  throughout the state. This acquisition roughly doubles
our regional, commercial book of business and gives us much greater underwriting
flexibility  by  allowing  us to pair  Association  Casualty's  filings and rate
structures with that of Georgia Casualty. In 2000,  Association Casualty will be
expanding its underwriting  capacity in order to write all lines of its clients'
insurance  accounts.  We believe that this expanded  underwriting  capacity will
allow the company to  significantly  grow its  premiums  and protect its book of
business. The acquisition of Association Casualty is our sixth acquisition since
1995 and our second largest,  after the acquisition of American  Southern at the
end of  1995.  I am  certain  that  it will  also  prove  to be one of our  most
successful.

      It is always a  significant  event when someone new joins the senior ranks
of a company's  management,  and it is  certainly  true with the addition of Bob
Kitchen as the new president of Georgia  Casualty.  Bob is a dynamic  individual
who brings a  tremendous  amount of industry  experience  to Atlantic  American.
Prior to joining us in May 1999,  Bob had spent his entire  career with  Safeco,
most recently serving as Vice President,  Safeco Commercial  Insurance.  He also
served as their national  director of workers'  compensation  from 1992

                                        2

<PAGE>

to 1997.Since joining Atlantic  American,  Bob has worked  diligently to improve
Georgia Casualty's  market  position,   coordinate  its  relationship  with
Association Casualty,  and hone its focus to create the premier,  regional
insurance carrier in the Southeast.  We expect great things from Bob and the
new Georgia  Casualty he is fashioning.

      American  Southern,  our single largest  property and casualty  operation,
specializes in large  account,  program  business  throughout the United States.
Unlike our other property and casualty  operations,  American  Southern does not
concentrate  its operations  geographically,  but instead  focuses on individual
accounts which are large enough that they can be uniquely  priced,  underwritten
and  reinsured.  Currently,  the vast  majority of American  Southern's  book of
business consists of commercial  automobile  accounts,  but the company has many
smaller  accounts  in other  lines of  business.  Due to the longer  terms of an
average contract, American Southern has not been directly impacted by short-term
price swings.  American  Southern has a long tradition of correctly  pricing its
accounts,  and consequently, continues to report  successful  results and steady
premium  income in line with its prior  experience.  This year also saw American
Southern complete the initial phase of its joint venture with the AAA Motor Club
of the Carolinas,  offering personal automobile coverage to club members. We are
particularly  optimistic  about this joint  venture as a model for future growth
and American  Southern's current  opportunity to significantly grow this account
during the upcoming year.

      Our life and health operations, represented by Bankers Fidelity, completed
one of its most successful  years ever in 1999.  Total premiums  written grew by
20% and total  revenue grew by 19% to $48 million.  An  initiative to streamline
our  operations and reduce our cost structure  produced  significant  results in
Bankers  Fidelity and we  anticipate  close to $1 million in cost  reductions in
this  company  alone,  which we believe we can bring to the bottom line in 2000.
Gene Choate,  the president of Bankers  Fidelity since 1987 and Anthony Chapman,
the company's chief marketing  officer since 1993, have been quite successful in
expanding our regional sales distribution network, most notably this year in the
mid-Atlantic and midwest  regions.  As we begin 2000, a new network of dedicated
professionals  is in place in our western region and we expect this expansion to
lead the way in new business production in the coming year. In April we received
final  regulatory  approval  for the merger of  Bankers  Fidelity  and  American
Independent  Life  Insurance  Company,  which we acquired in 1997,  with Bankers
Fidelity  being  the  surviving   entity.   This  merger,  in  tandem  with  our
restructuring efforts, should help to reduce our operating costs going forward.

     Atlantic  American  was also  active  this year in  enhancing  its capital
structure.  In June, the company  issued $25.0 million in Taxable  Variable Rate
Demand  Bonds,  maturing  in 2009,  to  replace a portion of our  existing  bank
facility. The bonds are backed by a letter of credit issued by Wachovia Bank. In
conjunction  with the  issuance of these  bonds,  Atlantic  American  repaid and
terminated its prior credit  facility,  which would have matured on December 31,
2000. Further, to finance a portion of the acquisition of Association  Casualty,
we entered into a $30 million  revolving credit facility with Wachovia Bank. The
revolver has a five-year term and requires no principal payments until maturity.
At year-end,  the company had drawn down $26 million of the available  facility,
but in the first  quarter of 2000 we  elected to repay $1 million in  principal,
leaving total debt at $50 million as of the date of this letter.


                                        3

<PAGE>

      In  addition,  at its  final  meeting  of 1999,  the  board  of  directors
authorized  the  acquisition  of up to an additional  500,000 shares of Atlantic
American's  issued and  outstanding  common  stock  pursuant  to our  previously
authorized  stock  repurchase  program.  As in the  past,  the  shares  will  be
repurchased  periodically  based upon prevailing  market  conditions and held as
treasury shares primarily to satisfy our obligations to various employee benefit
programs.  With the new  authorization,  Atlantic American is able to repurchase
approximately 620,000 additional shares.

      In January,  we received  the news that our "A-" group rating was affirmed
by Standard & Poor's and was  extended  to cover  Association  Casualty.  We are
gratified by this  affirmation,  especially in light of the  difficult  year our
industry has had in 1999.

      At the beginning of 1999, many were  predicting  disaster for our industry
as it looked to overcome the  challenge  of  converting  to Year 2000  compliant
computer systems. Thanks to the dedication and hard work of our entire staff, in
particular Clark Berryman,  the head of Atlantic American's Information Services
Department, and his associates in all of our subsidiaries, the year 2000 arrived
without any  disruption  in our  operations  or to our  customers.  Further,  we
encountered  no problems  from our vendors or the systems or services  that they
provide our Company.

      As you will note by our cover design for this report,  we have refined our
"double A" Atlantic  American  corporate logo. The new look is being extended to
many of our  subsidiary  companies to give them a unified  brand  identification
with Atlantic  American  Corporation.  As we continue to expand our underwriting
capacity,   regional   distribution  and  product  offerings,   this  new  brand
identification  will help us to capitalize on our strong  relationships with our
agents and  customers  and will aid our  efforts  to create new  cross-marketing
opportunities among our operating entities.

      In spite of the extremely  competitive insurance  marketplace,  we look to
the upcoming  year with  confidence.  One of the  advantages of being a regional
insurance  operation  is that we can move  quickly  to  address  changes  in the
marketplace and,  consequently,  we believe that we will report improved results
in 2000.  Atlantic  American  has never  before  had the  depth of  intellectual
capital and the underwriting capacity that we have today. We can assure you that
we are all working hard each and every day to build on the  resources we have in
place and to create an ever  stronger  company - a company built to last - which
will serve the needs of our customers and  shareholders  alike for many years to
come.

      Thank you for your trust and confidence.


        /s/                                     /s/
 -----------------                        --------------------
J. Mack Robinson                          Hilton H. Howell, Jr.
Chairman of the Board                     President & CEO

                               4


<PAGE>

American  Southern  Insurance  Company and American  Safety  Insurance  Company,
collectively   referred  to  as  "American   Southern,"  are  a  consistent  and
significant  contributor of revenue and profit to Atlantic American Corporation.
A specialty  marketer of automobile  liability and physical damage  insurance to
large  commercial  policyholders,   American  Southern's  book  of  business  is
comprised  primarily of large,  long-term  contracts.  Both companies  under the
American Southern umbrella are rated "A-" ("Excellent") by A.M. Best Company.

Marketing through independent agents, the company is licensed in 24 states. Most
of the  company's  business,  however,  comes from Georgia,  South  Carolina and
Florida.

Through a joint venture with the AAA of the Carolinas Motor Club,  American Auto
Club  Insurance  Agency,   American  Southern  underwrites  standard  automobile
business  to members  of the  association.  The  increase  in written  and gross
premiums  reported  by the company  during 1999 was due, in large part,  to this
joint venture, in which American Southern holds a 50% interest.

In addition  to the joint  venture,  American  Southern  produces a  significant
amount of business through contracts with various states and  municipalities and
underwrites  coverage on modular  buildings  such as  temporary  facilities  for
housing and storage at schools, construction sites and sports venues.

Despite intense competition,  the company has been successful in maintaining and
renewing  most  of its  long-term  contracts.  The  possibility  always  exists,
however,  that  competitors  may  submit  unprofitable  bids in  order  to win a
contract.  Because American Southern has no intention of pricing at unprofitable
levels,  contracts up for renewal are particularly  vulnerable.  To increase the
number of programs  underwritten  by the company and thereby  reduce the risk


                                    5

<PAGE>

of exposure that could result from the loss of a large contract,  American
Southern hired a new marketing representative in 1999 to develop additional
programs.



Based upon the quality relationships and confidence exhibited by their customers
and the quality service and unique programs  offered,  American Southern remains
positioned to grow and to continue to be a significant  contributor  to Atlantic
American for many years to come.

Association  Casualty  Insurance Company and Association Risk Management General
Agency,  collectively known as "Association  Casualty," are the latest additions
to the Atlantic American  portfolio of companies.  Though licensed in Texas, New
Mexico and  Oklahoma,  Association  Casualty  specializes  in  writing  workers'
compensation  insurance in the state of Texas. The company  maintains  contracts
with approximately 130 independent agents located throughout the state.

Until  enactment  of a new law in 1991,  workers'  compensation  in the state of
Texas had traditionally been a loss leader. Once the more conservative  approach
to workers'  compensation  went into effect,  ACIC began to aggressively  market
this line of  coverage.  Due to limited  competition,  the  company  was able to
quickly establish a strong  relationship with a core group of outstanding agents
that put profitable  business on the books. The company continues to maintain an
excellent relationship with these same agents today.

Association  Casualty  underwrites  a variety of business  classes  ranging from
country clubs to car dealers.  The common thread  between these  businesses is a
low to moderate risk hazard,  free from  catastrophic and  occupational  disease
exposure.

In an environment of decreasing rates due to competitive  market pressures,  the
company  experienced  an  underwriting  loss in 1999,  the first  such loss in a
number of years. While the company's underwriting composite of 107%, on a twelve
month statutory basis, did not meet  expectations,  it compares favorably to the
industry composite of 118%. With the company's frequency ratio the lowest it has
been in the past six years,  rate increases are currently  being  implemented to
bring premiums to a level that will support loss activity.

Due to the  company's  high quality,  liquid  investment  portfolio,  its strong
reserve position and a consistent,  conservative  underwriting  philosophy,  the
A.M. Best Company reaffirmed  Association  Casualty's "A-" (Excellent) rating in
1999.

                                        6

<PAGE>


Looking  forward,   Association  Casualty  is  poised  to  build  on  its  solid
foundation.  During  2000,  the company  will expand  into  commercial  property
casualty lines to compliment its workers'  compensation  expertise and diversify
the  company's  risk basis.  Licensing is  proceeding  in a number of new
states, principally in the gulf, southeastern and mid-atlantic regions.

Bankers  Fidelity  Life  Insurance  Company,  the  flagship  company of Atlantic
American's life and health operations, is an established leader in the marketing
of  products  designed  to meet the needs of the senior  market.  Core  products
include  Medicare  supplement,  final expense life insurance and short-term care
coverage.  The  company  maintains  a network of regional  sales  directors  who
recruit and manage  independent  agents  utilizing a proprietary lead generation
system. At year-end 1999,  Bankers Fidelity Life had approximately  2,800 active
agents principally located in second-tier cities and rural areas. The company is
licensed in 35 states.

Building on the positive  momentum of recent years,  Bankers Fidelity Life again
reported strong growth and profitability during 1999. Total premium increased by
20.4% to $41.5  million,  while net income  increased to $3.9  million,  a 12.7%
gain. As testament to Bankers  Fidelity  Life's  positive  results,  the company
received a rating  upgrade  from "B+" (Very  Good) to "B++" (Very Good) from the
A.M. Best Company.  This was the  company's  second Best's Rating  upgrade since
1995.

The primary factors  attributable  to Bankers  Fidelity's  continued  growth are
expansion into previously untapped geographic regions and unwavering  commitment
to its distribution system and core product lines. In addition,  the company has
made a concerted effort to reduce its expense structure.

During  1999,  the  company   continued  its   successful   expansion  into  the
mid-atlantic and western regions.  Through targeted  advertising and direct mail
campaigns in year 2000, the company plans to intensify agent recruiting  efforts
and increase market penetration in those areas.

At a time when many  competitors  have  withdrawn  from the Medicare  supplement
market because of unprofitable  results,  Bankers Fidelity remains  committed to
this line of business.  The company has great  confidence  in its  philosophy of
realistic pricing, competitive commissions and stringent underwriting.

                                7

<PAGE>

In 1999, the company  announced a reduced,  yet  competitive,  commission
structure  and implemented rate increases on all new and existing Medicare
supplement policies. In spite of these  changes,  which might be perceived as
negatives by agents and consumers, the Medicare supplement line of business
accounted for more than $1.7 million in income from operations. Also critical
to the company' success in 1999 was a 42% increase in the sale of its core final
expense  product,  LP95.  Going forward,  the  marketing  plan calls for a
continued  focus on  increasing  life sales. In an effort to capitalize on niche
market  opportunities that arise from time to time, the company also entered
into a strategic  marketing alliance with an  established  marketing
organization  to  sell  its  products  via  payroll deduction.


During  1999,  Bankers  Fidelity  completed   distribution  of  its  proprietary
prescription  drug  discount  card  -  MatureRX  - to  existing  customers.  The
complimentary  card is provided to new policyowners at the time of policy issue.
At year-end,  nearly 87,000 MatureRX  identification cards had been distributed.
Total  prescriptions  filled  under the program  during 1999  totaled  more than
206,000.  Savings to customers  amounted to more than $1.3 million.  The company
believes that such value-added  benefits help to differentiate  Bankers Fidelity
from the competition, build brand loyalty and improve persistency.

Focusing on its expense structure, the company undertook, through an independent
consulting  firm,  a  rigorous  review of  operating  expenses,  procedures  and
personnel  allocation.  As a result of that study,  numerous  efficiencies  were
identified,  including the reduction of full time home office  employees from 71
to 60. The staff reduction was  accomplished  through a combination of attrition
and job  consolidation.  Also  contributing to the company's success in reducing
expenses  was the  successful  merger of  American  Independent  Life  Insurance
Company with Bankers Fidelity.

Looking to 2000 and beyond,  Bankers Fidelity Life has a well-defined  marketing
plan to produce  consistent  growth through new sales.  The  cornerstone of that
plan  is  a  commitment  to  continue  its  geographic   expansion  through  the
recruitment of new regional sales  directors and an emphasis on the sale of life
products.  The company also  anticipates  having the ability to market  selected
products  via the  Internet  as early as  mid-2000.  Bankers  Fidelity  looks to
strengthen  its  position as a  recognized  leader in the senior  market via the
delivery of quality and value-added services through its network of professional
regional sales directors and qualified, career agents.

Georgia  Casualty  and Surety  Company,  a  significant  component  of  Atlantic
American's   portfolio  of  companies,   is  a  leading   provider  of  workers'
compensation, commercial property, general liability and automobile insurance in

                                       8

<PAGE>

the  Southeastern  United  States.  The company is licensed to do business in 13
states.  Georgia Casualty's  principal  marketing  territories  include Georgia,
Florida, North Carolina, South Carolina,  Mississippi and Tennessee. At year-end
1999, the company had 105 independent agents under contract.

Georgia  Casualty,  along  with  the  entire  property  casualty  industry,  was
challenged by suppressed  premiums and increased losses,  resulting in depressed
earnings.   Despite   these   industry-wide   trends,   the   company's   strong
capitalization  position  paved the way for an  affirmation  of its "B++"  (Very
Good)  rating from the A.M.  Best  Company.  In  addition,  Atlantic  American's
portfolio of companies as a whole received an "A-" (Strong) rating from Standard
& Poor's for the second consecutive year.

Traditionally,   Georgia   Casualty  has   specialized  in  providing   workers'
compensation  coverage  for the pulpwood  logging,  mechanized  woodworking  and
habitational  contractor  industries.  The  company  has made  great  strides in
diversifying  its  business  mix by gearing its product and service  development
toward lower hazard risk  industries.  Targeted  markets  include  "main street"
businesses as well as the retail, light manufacturing and service industries. To
facilitate   this  business   transition,   the  company  is  working  to  build
relationships with agencies that specialize in these niche markets.  Recognizing
that the key to attracting  quality agents and quality business is a competitive
product line,  the company has  introduced a number of product  enhancements  on
targeted business classes as well as technological  improvements to better serve
agent constituents.

As a result of an extensive study by an independent consulting firm, a number of
staff and organizational efficiencies were implemented in 1999. Among those were
the  reassignment  of  existing  personnel  and  the  addition  of  experienced,
qualified  individuals in the areas of  underwriting,  claims,  loss control and
sales. At year-end 1999, the number of home office  employees stood at 44, a net
increase of three compared to 1998.

Creating  long-term  relationships with both agents and customers is the core of
Georgia  Casualty's  business  philosophy.  Those  relationships  are  built and
nurtured by providing  value-added  services  that help to set Georgia  Casualty
apart from the competition. For example, the risk management department provides
customized consultative services to help customers reduce losses, enhance worker
productivity  and improve their company  image.  In addition,  a 24-7-365  claim
reporting  system allows Georgia  Casualty to promptly  respond to client needs.
On-staff  registered  nurse case managers  ensure that employees  return to work
quickly,   thus  eliminating  lost  production  time  and  minimizing   workers'
compensation costs.

Georgia  Casualty  continues  to  offer  exciting  sales  incentives,  including
exceptional  conferences,  along with  competitive  profit sharing programs that
reward the most  productive and profitable  agents.  The company is committed to
the continued  development of staff,  products and services that make it easy to
do business with Georgia Casualty.

The new millennium  offers many challenges,  yet many  opportunities for Georgia
Casualty,  its agents and their customers.  The company will continue to deliver
its  traditional  exemplary  service  through  exceptional  people  and  quality
products.  Georgia  Casualty is proud of its past,  confident  of its future and
committed to being the premier property casualty carrier in the Southeast.

                                      9

<PAGE>

                                  DIRECTORS

                               J. MACK ROBINSON
                                    Chairman

                          Atlantic American Corporation

                             HILTON H. HOWELL, JR.
                      President and Chief Executive Officer

                          Atlantic American Corporation

                         THE HONORABLE EDWARD E. ELSON
                         Former United States Ambassador

                            to the Kingdom of Denmark

                               HAROLD K. FISCHER
                                    President

                     Association Casualty Insurance Company

                               SAMUEL E. HUDGINS
                                   Consultant

                               D. RAYMOND RIDDLE
                 Retired Chairman and Chief Executive Officer

                        National Service Industries, Inc.

                             HARRIETT J. ROBINSON
                     Director, Delta Life Insurance Company

                               SCOTT G. THOMPSON
                      President and Chief Financial Officer

                       American Southern Insurance Company

                                 MARK C. WEST
                      Chairman and Chief Executive Officer

                                 Genoa Companies

                            WILLIAM H. WHALEY, M.D.
                    William H. Whaley, M.D., P.C., F.A.C.P.

                                 DOM H. WYANT
                  Retired Partner, Jones, Day, Reavis & Pogue

                                    OFFICERS

                               J. MACK ROBINSON
                                    Chairman

                             HILTON H. HOWELL, JR.
                      President and Chief Executive Officer

                              EDWARD L. RAND, JR.
                  Vice President and Chief Financial Officer

                               CLARK W. BERRYMAN
                      Vice President, Information Services

                              MICHAEL J. BRASSER
                         Vice President, Internal Audit

                                 JANIE L. RYAN
                               Corporate Secretary

                               BARBARA B. SNYDER
                 Vice President and Director, Human Resources




<PAGE>

                              CONSOLIDATED BALANCE SHEETS

 (Dollars in thousands,  except  per share data)

                                                               December31,
                                                             1999       1998
                                                        -----------------------
                                     ASSETS

Cash and cash  equivalents,
including  short-term  investments  of $22,471 and       $ 34,306     $ 32,385
$ 24,068 in 1999 and 1998, respectively

Investments                                               198,841      173,335

Receivables:
  Reinsurance                                              39,287       22,772

  Other, net of allowance for doubtful accounts
      of $1,717 and $1,377 in 1999 and 1998,
        respectively                                       28,478       18,912

Deferred income taxes, net                                  4,299            -

Deferred acquisition costs                                 20,398       16,881

Other assets                                                5,074        4,507

Goodwill                                                   20,461        4,339
                                                     -------------------------


    Total assets                                     $    351,144    $ 273,131
                                                   ===========================


                      LIABILITIES AND SHAREHOLDERS' EQUITY

Insurance reserves and policyholder funds            $    205,145    $ 152,659
Accounts payable and accrued expenses                      16,051       12,255

Debt payable                                               51,000       26,000
                                                     -------------------------

    Total liabilities                                     272,196      190,914
                                                     -------------------------

Commitments and contingencies  (Note 8)

Shareholders' equity:

  Preferred stock,  $1 par,  4,000,000  shares
    authorized; Series B preferred, 134,000
    shares issued and outstanding,
    $13,400 redemption value                                  134          134

  Common stock, $1 par,  30,000,000 shares
    authorized;  21,412,138 shares issued
    in  1999  and  19,405,753  shares
    issued  in  1998  and  21,026,786  shares
    outstanding in 1999 and 19,120,185
    shares outstanding in 1998                             21,412       19,406

  Additional paid-in capital                               55,677       50,406

  Accumulated deficit                                      (4,558)     (15,213)

  Accumulated other comprehensive income                    7,836       28,786

  Treasury stock, at cost,
     385,352 shares in 1999
     and 285,568 shares in 1998
                                                           (1,553)      (1,302)
                                                     -------------------------

    Total shareholders' equity                             78,948       82,217
                                                     -------------------------

      Total liabilities and shareholders' equity     $    351,144     $273,131
                                                   ===========================

                  The accompanying  notes are an integral part of these
                              consolidated financial statements.
                                        10
<PAGE>

                              CONSOLIDATED STATEMENTS OF OPERATIONS

 (Dollars in thousands, except per share data)

                                                    Year Ended December 31,
                                                    1999      1998      1997
                                                  --------------------------

Revenue:
  Insurance premiums                            $107,594  $ 91,292   $ 88,682
  Investment income                               12,877    11,499     11,256
  Other income                                     1,172       366        201
  Realized investment gains, net                   2,831     2,909      1,076
                                               ------------------------------

    Total revenue                                124,474   106,066    101,215
                                               ------------------------------

Benefits and expenses:
  Insurance benefits and losses incurred          77,563    60,845     61,018
  Commissions and underwriting expenses           28,720    27,160     23,012
  Interest expense                                 2,819     2,146      2,902
  Other                                           11,450     7,212      6,112
                                               ------------------------------

    Total benefits and expenses                  120,552    97,363     93,044
                                               ------------------------------

    Income before income tax (benefit)
         provision                                 3,922     8,703      8,171

    Income tax (benefit) provision                (6,988)      145        138
                                                 ----------------------------

        Net income before preferred
         stock dividends                          10,910     8,558      8,033

Preferred stock dividends                         (1,206)   (1,521)    (1,521)
                                               ------------------------------

    Net income applicable to common stock      $   9,704   $ 7,037   $  6,512
                                               ==============================

Basic earnings per common share                   $  .48  $    .37   $    .35
                                               ==============================

Diluted earnings per common share                $   .46  $    .37   $    .35
                                               ==============================

  The accompanying  notes are an integral part of these  consolidated
                       financial statements.
                                 11
<PAGE>

<TABLE>
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Dollars In Thousands)
                                                                                         Accumulated

                                                           Additional                        Other
                                Preferred       Common      Paid-In     Accumulated     Comprehensive    Treasury
                                  Stock         Stock       Capital       Deficit           Income        Stock          Total
<S><C>                          <C>            <C>         <C>         <C>             <C>              <C>             <C>
Balance, December 31, 1996      $   164     $  18,712     $ 54,062      $(31,426)         $17,713        $  (89)        $59,136
 Comprehensive income:
  Net income                          -             -            -         8,033                -             -           8,033
  Increase in unrealized
        investment gains              -             -            -             -           11,785             -          11,785
                                                                                                                        -------
    Total comprehensive income                                                                                           19,818

 Cash dividends paid

        on preferred stock            -             -         (315)            -                -             -            (315)
 Dividends accrued

       on preferred stock             -             -       (1,206)            -                -             -          (1,206)
 Purchase of 213,089
       shares for treasury            -             -            -             -                -          (735)           (735)
 Issuance of 157,578 shares for
      employee benefit plans
      and stock options               -             -            3          (260)               -           530             273
 Issuance of 278,561 shares for
    acquisition of Self-Insurance
    Administrators, Inc.              -           209          772             -                -           231           1,212
                                   --------------------------------------------------------------------------------------------

Balance, December 31, 1997          164        18,921       53,316       (23,653)          29,498           (63)         78,183
 Comprehensive income:
    Net income                        -             -            -         8,558                -             -           8,558
 Decrease in unrealized
   investment gains                   -             -            -             -             (712)            -            (712)
                                                                                                                          -----
    Total comprehensive income                                                                                            7,846

 Cash dividends paid

     on preferred stock               -             -         (315)            -                -             -            (315)
 Dividends accrued

     on preferred stock               -             -       (1,206)            -                -             -          (1,206)
 Purchase of 349,879
     shares for treasury              -             -            -             -                -        (1,592)         (1,592)
 Issuance of 77,475
     shares for employee
     benefit plans and
     stock options                    -             -            -          (118)               -           353             235
 Preferred stock redeemed
    including issuance
    of 469,760 common shares        (30)          470       (1,440)            -                -             -          (1,000)

 Issuance of 15,265
    shares for final consideration
    of Self-Insurance

    Administrators, Inc.              -            15           51             -                -             -              66
                                   --------------------------------------------------------------------------------------------

Balance, December 31, 1998          134        19,406       50,406       (15,213)          28,786        (1,302)         82,217
 Comprehensive loss:
  Net income                          -             -            -        10,910                -             -          10,910
  Decrease in unrealized
   investment gains                   -             -            -             -          (16,731)            -         (16,731)
  Deferred income tax
   attributable to

   other comprehensive loss           -             -            -             -           (4,219)            -          (4,219)
                                                                                                                   ------------
  Total comprehensive loss                                                                                              (10,040)

 Dividends accrued on

   preferred stock                    -             -       (1,206)            -                -             -          (1,206)
 Purchase of 213,392
   shares for treasury                -             -            -             -                -          (779)           (779)
 Issuance of 113,608
   shares for employee
   benefit  plans and
   stock options                      -             -            -          (255)               -           528             273
  Issuance of 2,006,385
   shares for acquisition of
   Association Casualty

   Insurance Company                  -         2,006        6,477             -                -             -           8,483
                                   --------------------------------------------------------------------------------------------
Balance, December 31, 1999      $   134     $  21,412    $  55,677     $  (4,558)   $       7,836       $(1,553)     $   78,948
                                ===============================================================================================

     The accompanying notes are an integral part of these consolidated  financial
statements.
                                        12
</TABLE>


<PAGE>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                       Year Ended December  31,
(Dollars In Thousands)                                1999      1998       1997
                                                   ----------------------------
Cash flows from operating activities:

  Net income                                     $ 10,910   $  8,558   $ 8,033
  Adjustments to reconcile net income
      to net cash provided by operating
      activities:
    Amortization of deferred acquisition costs     11,947     10,595     9,704
  Acquisition costs deferred                      (14,003)   (11,087)  (11,008)
    Realized investment gains                      (2,831)    (2,909)   (1,076)
  Increase (decrease) in
    insurance reserves and policyholder funds      14,036     (1,941)      618
  Depreciation and amortization                     1,435      1,368     1,121
    Deferred income tax benefit                    (6,997)         -         -
  (Increase) decrease in receivables, net          (8,404)       950     1,114
  Increase in other liabilities                        73        291        13
    Other, net                                       (768)      (350)       98
                                                   ---------------------------
      Net cash provided by operating activities     5,398      5,475     8,617
                                                   ---------------------------

Cash flows from investing activities:

  Proceeds from investments sold                    8,482      8,723     7,748
  Proceeds from investments matured,
  called or redeemed                               35,594     55,665    52,074
  Investments purchased                           (53,211)   (82,981)  (53,544)
  Acquisition of minority interest                      -          -      (101)
  Additions to property and equipment                (829)      (394)     (733)
  Acquisition of American Independent,
   net of $1,946 cash acquired                        198       (483)     (719)
  Acquisition of Association Casualty,
   net of $6,270 cash acquired                    (18,205)         -         -
  Acquisition of SIA, Inc.                              -          -        25
    Bulk reinsurance transactions, net                  -        608         -
                                                   ---------------------------
      Net cash (used in) provided
        by investing activities                   (27,971)   (18,862)    4,750
                                                  -----------------------------
Cash flows from financing activities:

  Proceeds from issuance of bank financing         51,000          -     5,617
  Preferred stock dividends                             -       (315)     (315)
  Proceeds from exercise of stock options             273         90        62
  Purchase of treasury shares                        (779)    (1,447)     (558)
  Repayments of debt                              (26,000)    (2,600)  (12,628)
  Redemption of preferred stock                         -     (1,000)        -
                                                   ---------------------------
      Net cash provided by (used in)
         financing activities                      24,494     (5,272)  ( 7,822)
                                                ------------------------------
      Net increase  (decrease)  in
         cash and cash equivalents                  1,921    (18,659)    5,545
                                                   ---------------------------
  Cash and cash equivalents at beginning of year   32,385     51,044    45,499
                                                   ---------------------------
  Cash and cash equivalents at end of year        $34,306  $  32,385  $ 51,044
                                                 =============================

Supplemental cash flow information:

  Cash paid for interest                          $ 2,510  $   2,143 $   2,958
                                                  ==============================
  Cash paid for income taxes                         $131  $     330  $     85
                                                   ===========================


       The accompanying  notes  are  an  integral  part  of  these
          consolidated  financial statements.
                                13
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1999, 1998 AND 1997
                 (Dollars in thousands, except per share data)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

   The  accompanying  consolidated  financial  statements  have been prepared in
conformity  with  generally  accepted  accounting  principles  ("GAAP").   These
financial  statements include the accounts of Atlantic American Corporation (the
"Company")  and its  wholly-owned  subsidiaries.  All  significant  intercompany
accounts and transactions have been eliminated in consolidation.

   At December 31, 1999, the Company had five insurance subsidiaries,  including
Bankers Fidelity Life Insurance Company ("Bankers Fidelity"),  American Southern
Insurance  Company and its  wholly-owned  subsidiary,  American Safety Insurance
Company (together known as "American Southern"),  Association Casualty Insurance
Company ("ACIC") and Georgia Casualty & Surety Company ("Georgia Casualty"),  in
addition to two  non-risk  bearing  subsidiaries,  Association  Risk  Management
General Agency,  Inc. ("ARMGA") and Self-Insurance  Administrators,  Inc. ("SIA,
Inc.").  SIA, Inc. was acquired on October 28, 1997 and ACIC and ARMGA (together
known as  "Association  Casualty") were acquired on July 1, 1999. The results of
operations  of  Association  Casualty  and SIA,  Inc.  are  included  from their
respective dates of acquisition.

   Assets and  liabilities  are not  classified in accordance  with  insurance
industry  practice.

Premium Revenue and Cost Recognition

   Life insurance premiums are recognized as revenues when due, whereas accident
and health premiums are recognized over the premium paying period.  Benefits and
expenses  are  associated  with  premiums  as they are earned so as to result in
recognition  of profits over the lives of the  contracts.  This  association  is
accomplished  by the  provision  of a future  policy  benefits  reserve  and the
deferral  and  subsequent  amortization  of the  costs  of  acquiring  business,
"deferred policy acquisition  costs"  (principally  commissions,  premium taxes,
advertising and other expenses of issuing policies).  Traditional life insurance
and  long-duration  health  insurance  deferred  policy  acquisition  costs  are
amortized over the estimated premium-paying period of the related policies using
assumptions consistent with those used in computing policy benefit reserves. The
deferred  policy  acquisition  costs for  property and  casualty  insurance  and
short-duration  health  insurance are amortized over the effective period of the
related insurance policies.  Deferred policy acquisition costs are expensed when
such  costs  are  deemed  not  to  be  recoverable  from  future  premiums  (for
traditional  life and  long-duration  health  insurance)  and  from the  related
unearned   premiums  and  investment  income  (for  property  and  casualty  and
short-duration health insurance).

   Property and casualty  insurance  premiums are recognized as revenue  ratably
over the contract period. The Company provides for insurance benefits and losses
on  accident,  health,  and casualty  claims  based upon  estimates of projected
ultimate losses.

Goodwill

   Goodwill  is  amortized  over a period of  fifteen to forty  years  using the
straight-line  method.  The Company  periodically  evaluates  whether events and
circumstances have occurred that indicate the remaining estimated useful life of
goodwill  may  warrant  revision.  Should  factors  indicate  that  goodwill  be
evaluated for possible  impairment,  the Company will compare the recoverability
of goodwill to a projection of the acquired  companies'  undiscounted  cash flow
over the  estimated  remaining  life of the  goodwill in  assessing  whether the
goodwill is recoverable.

Investments

   All of the Company's  debt and equity  securities are classified as available
for sale and are carried at market  value.  Mortgage  loans,  policy and student
loans, and real estate are carried at historical cost. Other invested assets are
comprised of investments in limited  partnerships,  limited liability companies,
and real estate joint  ventures;  those which are publicly traded are carried at
estimated  market value,  and all others are carried at historical  cost. If the
value of a common stock,  preferred  stock,  other invested  asset,  or publicly
traded bond declines  below its cost or amortized  cost, and is considered to be
other than  temporary,  a realized loss is recorded to reduce the carrying value
of the investment to its estimated net realizable  value,  which becomes the new
cost basis.  Premiums and  discounts  related to  investments  are  amortized or
accreted over the life of the related investment as an adjustment to yield using
the effective interest method. Dividends and interest income are recognized when
earned or declared.

   The cost of securities sold is based on specific  identification.  Unrealized
gains  (losses) in the value of invested  assets,  are accounted for as a direct
increase (decrease) in accumulated other  comprehensive  income in shareholders'
equity and, accordingly, have no effect on net income.

Income Taxes

   Deferred income taxes represent the expected future tax consequences when the
reported  amounts of assets and  liabilities  are recovered or paid.  They arise
from  differences  between the  financial  reporting and tax basis of assets and
liabilities  and are  adjusted  for  changes  in tax laws and tax rates as those

                                14

<PAGE>


NOTE. 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

changes are enacted.  The provision for income taxes represents the total amount
of income  taxes due  related to the current  year,  plus the change in deferred
taxes during the year.

Earnings Per Common Share

   Basic  earnings per common share are based on the weighted  average number of
common shares outstanding during each period.  Diluted earnings per common share
are based on the weighted  average  number of common shares  outstanding  during
each period,  plus common shares calculated for stock options  outstanding using
the treasury stock method, and in 1999 and 1998 include common shares calculated
for the assumed  conversion of the Series B Preferred  Stock.  Unless  otherwise
indicated, earnings per common share amounts are presented on a diluted basis.

Cash and Cash Equivalents

   Cash  and  cash  equivalents  consist  of  cash on hand  and  investments  in
short-term,  highly liquid  securities  which have original  maturities of three
months or less from date of purchase.

Impact of Recently Issued Accounting Standards

   The  Financial   Accounting   Standards  Board  has  issued   Statement  133,
"Accounting  for Derivative  Instruments and Hedging  Activities"  ("SFAS 133").
SFAS 133 provides a  comprehensive  and consistent  standard for the recognition
and  measurement  of  derivatives  and hedging  activity.  SFAS 133 requires all
derivatives  to be recorded on the balance  sheet at fair value and  establishes
specific accounting methods for hedges. Changes in the value of most derivatives
and hedges will be  included in earnings in the period of the change.  SFAS 133,
as amended by SFAS 137, is effective  for years  beginning  after June 15, 2000.
The Company  intends to adopt SFAS 133 on January 1, 2001.  Management  does not
believe the  adoption of SFAS 133 will have a material  effect on the  Company's
financial condition or results of operations.

Use of Estimates in the  Preparation of Financial  Statements

         The  preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities.  These estimates and assumptions also
affect  disclosure of contingent assets and liabilities at the date of the
financial statements and the  reported  amounts of revenues  and expenses
during the  reporting  period. Actual results could differ from those
estimates.

Reclassifications

   Certain  prior  period  amounts  have been reclassified  to  conform
to the 1999 presentation.


NOTE 2.  INVESTMENTS

   Investments are comprised of the following:
                                                    1999

                                              Gross      Gross
                                  Carrying Unrealized Unrealized Amortized

                                     Value     Gains    Losses     Cost

Bonds:

U. S. Treasury Securities and
 Obligations of
 U. S. Government Corporations
   and Agencies                  $ 104,217  $    137  $  5,551  $ 109,631
 Obligations of states and
   political subdivisions            4,078         2        62      4,138

  Corporate securities              26,106       116       796     26,786
  Mortgage-backed securities
   (government guaranteed)           2,599         -        66      2,665
                               --------------------------------------------
                                   137,000       255     6,475    143,220

Common and preferred stocks         48,684    22,226     4,725     31,183
Other invested assets                5,717       774         -      4,943
Mortgage loans
 (estimated fair value of $4,237)    3,645                          3,645
Policy and student loans             3,749                          3,749
Real estate                             46                             46
                               ---------------------------------------------
Investments                        198,841    23,255    11,200    186,786
Short-term investments              22,471         -         -     22,471
                                ------------------------------------------
   Total investments              $221,312 $  23,255   $11,200  $ 209,257
                                 ========================================



                                                      1998

                                              Gross      Gross
                                 Carrying Unrealized Unrealized Amortized

                                    Value     Gains    Losses   Cost
Bonds:

  U. S. Treasury Securities
     and Obligations of
  U. S. Government Corporations
     and Agencies                $  85,784     $ 976    $  188  $  84,996

  Obligations of states and
    political subdivisions           2,714       116         -      2,598
  Corporate securities              10,092       507       375      9,960
  Mortgage-backed securities
   (government guaranteed)             751        19         -        732
                                   --------------------------------------
                                    99,341     1,618       563     98,286

Common and preferred stocks         61,007    29,345     1,454     33,116
Other invested assets                4,822         -       160      4,982
Mortgage loans
  (estimated fair value of $4,949)   3,851                          3,851

Policy and student loans             4,268                          4,268
Real estate                             46                             46
                                 ----------------------------------------
  Investments                      173,335    30,963     2,177    144,549
Short-term investments              24,068         -         -     24,068
                               ------------------------------------------
   Total investments             $ 197,403  $ 30,963 $   2,177 $  168,617
                                   ======================================

   Bonds and cash  having an  amortized  cost of  $16,241  and  $14,836  were on
deposit with  insurance  regulatory  authorities  at December 31, 1999 and 1998,
respectively, in accordance with statutory requirements.

                                        15


<PAGE>

NOTE 2.  INVESTMENTS (continued)

   The amortized cost and carrying value of bonds and short-term  investments at
December 31, 1999 by contractual maturity are as follows.  Actual maturities may
differ from contractual  maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.

                                               Carrying Amortized

                                                   Value        Cost
--------------------------------------------------------------------
Due in one year or less                   $    26,273   $    26,300
Due after one year through five years          19,501        19,678
Due after five years through ten years         99,189       104,685
Due after ten years                            14,054        14,569
Varying maturities                                454           459
                                        ----------------------------
   Totals                                  $  159,471   $   165,691
                                       =============================

Investment income was earned from the following sources:
                                                1999      1998      1997
------------------------------------------------------------------------
Bonds                                        $ 8,600  $  6,363  $  6,906
Common and preferred stocks                    2,388     1,903     1,373
Mortgage loans                                   352       373       554
CDs and commercial paper                         933     2,004     2,130
Other                                            604       856       293
                                             ----------------------------
    Total investment income                   12,877    11,499    11,256
Less investment expenses                        (290)     (332)     (340)
                                             -----------------------------
    Net investment income                   $ 12,587   $11,167  $ 10,916
                                             =============================

A summary of realized investment gains (losses) follows:

--------------------------------------------------------------------
                                         1999

--------------------------------------------------------------------
                                               Other

                      Stocks       Bonds      Invested      Total
                                               Assets

--------------------------------------------------------------------
Gains                $   2,526     $     10   $     585   $   3,121
Losses                     (52)        (238)          -        (290)
--------------------------------------------------------------------
  Total realized

 investment gains   $    2,474    $    (228)  $     585    $  2,831
   (losses) net
====================================================================


                                         1998

--------------------------------------------------------------------
                                               Other

                      Stocks       Bonds     Invested      Total
                                              Assets

--------------------------------------------------------------------
Gains               $    3,832     $    11    $      -     $ 3,843
Losses                    (735)       (199)          -        (934)
--------------------------------------------------------------------
  Total realized

 investment gains   $    3,097    $   (188)   $      -    $  2,909
   (losses) net
====================================================================

                                         1997

--------------------------------------------------------------------
                                               Other

                      Stocks       Bonds     Invested      Total
                                              Assets

--------------------------------------------------------------------
Gains                $    1,597     $    16      $    2     $ 1,615
Losses                     (104)       (435)          -        (539)
--------------------------------------------------------------------
  Total realized

 investment gains    $    1,493   $   (419)      $    2     $ 1,076
   (losses) net
====================================================================


   Proceeds  from the sale of  common  and  preferred  stocks,  bonds  and other
investments are as follows:

                                                      1999    1998   1997
                                                      --------------------
      Common and preferred stocks                  $ 5,960  $6,999 $ 6,393
      Bonds                                          1,379       -       -
      Student loans                                    519   1,024   1,262
      Other investments                                624     700      93
                                                     ----------------------
       Total proceeds                              $ 8,482  $8,723  $7,748
                                               =============================

   The Company's  investment in the common stock of Wachovia Corporation exceeds
10% of  shareholders'  equity at December 31, 1999.  The carrying  value of this
investment at December 31, 1999 was $18,890 with a cost basis of $3,032.

   The Company's bond  portfolio  included 99%  investment  grade  securities at
December  31,  1999  as  defined  by  the  National   Association  of  Insurance
Commissioners ("NAIC").


NOTE 3.  INSURANCE RESERVES AND POLICYHOLDER FUNDS

   The  following  table  presents the  Company's  reserves for life,  accident,
health and property and casualty losses as well as loss adjustment expenses.

                                                             Amount of Insurance
                                                                    in Force

------------------------------------------------------------------------------
      Future policy benefits                   1999      1998     1999    1998
      Life insurance policies:
        Ordinary                             $29,235  $27,340  $238,827 $240,642
        Mass market                            7,933    8,532    15,948   17,974
        Individual annuities                     741      711         -        -
                                          --------------------------------------
                                              37,909   36,583  $254,775 $258,616
       Accident and health
         insurance policies                    2,184    2,329 ==================
                                           ------------------
                                              40,093   38,912
      Unearned premiums                       34,293   23,253
      Losses and claims                      126,556   86,768
      Other policy liabilities                 4,203    3,726
                                          --------------------
        Total policy liabilities           $ 205,145 $152,659
                                          ====================

   Annualized  premiums for accident and health insurance  policies were $32,028
and $25,793 at December 31, 1999 and 1998, respectively.

Future Policy Benefits

   Liabilities for life insurance  future policy benefits are based upon assumed
future  investment  yields,  mortality  rates, and withdrawal rates after giving
effect to  possible  risks of  adverse  deviation.  The  assumed  mortality  and
withdrawal  rates are based upon the Company's  experience.  The interest  rates
assumed for life, accident and health are generally: (i) 2.5% to 5.5% for issues
prior to 1977, (ii) 7% graded to 5.5% for 1977 through 1979 issues, (iii) 9% for
1980 through 1987 issues, and (iv) 7% for 1988 and later issues.

                                16
<PAGE>

NOTE 3. INSURANCE RESERVES ANd POLICY FUNDS (continued)

Loss and Claim Reserves

   Loss and claim reserves represent  estimates of projected ultimate losses and
are 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 by  management  and  independent  consulting
actuaries  and updated with changes to the estimated  liability  recorded in the
statement of operations in the year in which such changes are known.


  Activity in the liability for unpaid claims and claim adjustment  expenses is
summarized as follows:

                                            1999       1998

      Balance at January 1                $86,768    $86,721
      Less:  Reinsurance recoverables     (22,625)   (24,006)
                                          -------------------
        Net balance at January 1           64,143     62,715
                                          -------------------

      Incurred related to:
        Current year                       73,056     63,030
        Prior years                         3,246     (2,606)
                                          -------------------
           Total incurred                  76,302     60,424
                                          ------------------

      Paid related to:
        Current year                       44,623     35,566
        Prior years                        27,959     23,430
                                          ------------------
           Total paid                      72,582     58,996
                                          ------------------

      Reserves acquired due to
                 acquisition               19,934          -
                                            ----------------
      Net balance at December 31           87,797     64,143
      Plus:  Reinsurance recoverables      38,759     22,625
                                          ------------------

      Balance at December 31             $126,556    $86,768
                                          ==================


   Following is a  reconciliation  of total incurred  claims to total  insurance
benefits and losses incurred:

                                             1999       1998

      Total incurred claims               $76,302    $60,424
      State residual pool refunds
        and adjustments to loss
        portfolio arrangements               (329)    (1,098)
      Cash surrender value and
       matured endowments                   1,590      1,438
      Other                                     -         81
                                          ------------------
        Total insurance benefits

              and losses incurred         $77,563  $  60,845
                                        ====================


NOTE 4.  REINSURANCE

   In accordance with general  practice in the insurance  industry,  portions of
the life,  property and casualty insurance written by the Company are reinsured;
however,  the Company  remains  contingently  liable with respect to reinsurance
ceded should any reinsurer be unable to meet its obligations.  Approximately 82%
of the reinsurance  receivables are due from three reinsurers as of December 31,
1999.   Reinsurance   receivables  of  $21,591  are  with  General   Reinsurance
Corporation, rated "AAA" by Standard & Poor's and "A++" (Superior) by A.M. Best,
$2,089 are with First Colony Life  Insurance  Company,  rated "AA" by Standard &
Poor's and "A++"  (Superior)  by A.M.  Best,  and  $8,479 are with  PMA
Reinsurance Corporation, rated "A+" (Superior) by A.M. Best.In the opinion of
management,  the Company's  reinsurers are financially stable.Allowances  for
uncollectible   amounts  are  established  against  reinsurance receivables,
if appropriate.  Premiums assumed of $24,903, $23,633, and $23,738 in 1999,1998,
and 1997 respectively,  include a state contract with premiums of $15,064,
$14,403, and $15,900. The contract premiums represent 14.0%, 15.8% and 17.9%
of net  premiums  earned  for the  years  ended  1999,  1998,  and  1997,
respectively. The following table reconciles premiums written to premiums earned
and summarizes the components of insurance benefits and losses incurred.

                                        1999     1998       1997
                                    ------------------------------

          Direct premiums written   $97,909   $76,964     $73,006
          Plus - premiums assumed    24,903    23,633      23,738
          Less - premiums ceded     (13,189)  (10,746)     (9,345)
                                    -----------------------------

            Net premiums written    109,623    89,851      87,399
                                    -----------------------------

          Change in unearned

             premiums                (1,802)    1,352       1,405
          Change in unearned
             premiums ceded            (227)       89        (122)
                                  --------------------------------
           Net change in

               unearned premiums     (2,029)    1,441       1,283
           Net premiums earned     $107,594  $ 91,292  $   88,682
                                    =============================

          Provision for benefits

            and losses incurred     $88,249 $  69,478    $ 68,043
          Reinsurance loss

            recoveries              (10,686)   (8,633)     (7,025)
                                     ----------------------------

          Insurance benefits

            and losses incurred     $77,563   $60,845   $  61,018
                                    ==============================

   Components of reinsurance receivables are as follows:

                                          1999           1998
                                         ---------------------
          Receivable on unpaid losses   $38,759      $ 22,625
          Receivable on paid losses         528           147
                                    --------------------------

                                        $39,287      $ 22,772
                                    ==========================


                                       17



<PAGE>

NOTE 5.  INCOME TAXES

   A  reconciliation  of the  differences  between  income taxes computed at the
federal  statutory income tax rate and the (benefit)  provision for income taxes
is as follows:

                                                       1999      1998      1997
                                                    ---------------------------
Federal income tax provision at
   statutory rate of 35%                             $1,373    $3,046  $  2,860
Tax exempt interest and
  dividends received deductions                        (400)     (452)     (267)
Change in asset valuation allowance due to:
  Utilization of net operating loss carryforwards      (973)   (2,594)   (2,585)
  Recognition of deferred tax liability relating
    to unrealized investment gains                   (4,219)        -         -
  Change in judgment relating to realizability of
    deferred tax assets                              (2,778)        -         -
Alternative minimum tax                                   9       145       130
                                             -----------------------------------
       Total (benefit) provision for income taxes  $ (6,988)    $ 145   $   138
                                                   =============================
   Deferred  tax  liabilities  and  assets  at  December  31,  1999 and 1998 are
comprised of the following:

                                                        1999      1998

    Deferred tax liabilities:
      Deferred acquisition costs                     $(4,646)  $(3,888)
      Net unrealized investment gains                 (4,219)  (10,075)
      Other                                             (160)        -
                                                  ---------------------


       Total deferred tax liabilities                 (9,025)  (13,963)
                                                 ---------------------

    Deferred tax assets:
      Net operating loss carryforwards                12,729    15,077
      Insurance reserves                               5,844     3,131
      Bad debts                                          601       482
      Other                                              500         -
                                                   --------------------


       Total deferred tax assets                      19,674    18,690
                                                 ---------------------

    Asset valuation allowance                         (6,350)   (4,727)
                                                     -----------------

    Net deferred tax assets                           $4,299    $    -
                                                     =================


   The components of the (benefit) provision are:

                                           1999       1998        1997
                                          ----------------------------
      Current - Federal                   $   9      $ 145     $   138
      Deferred - Federal                 (6,997)         -           -
                                          ----------------------------
        Total                           $(6,988)     $ 145      $  138
                                          ============================


   At December  31, 1999,  the Company has regular  federal net  operating  loss
carryforwards of approximately $36,400 expiring generally between 2002 and 2010.

   As of December 31, 1999 and 1998, a valuation  allowance of $6,350 and $4,727
has been established for deferred income tax benefits  relating to net operating
loss carryforwards  that may not be realized.  The increase in this allowance is
due primarily to the  recognition of deferred tax  liabilities of $4,219 arising
from  the tax  effect  of  unrealized  investment  gains  on  available-for-sale
securities,  offset by a decrease of $2,778 due to a change in judgment relating
to the  realizability  of  deferred  income  tax  benefits  attributable  to net
operating loss  carryforwards.  Until the end of 1999, the Company established a
full valuation allowance against these deferred income tax benefits as they were
not considered  realizable  from expected future  reversals of existing  taxable
temporary  differences.  The Company  believed  that it was more likely than not
that the net deferred  income tax benefits would not be realized  through future
taxable   income  prior  to  the   expiration   dates  of  net  operating   loss
carryforwards. However, with the acquisition of Association Casualty and several
years of profitability, the Company believes it is now more likely than not that
a portion of its net deferred income tax benefits relating to net operating loss
carryforwards  scheduled to expire  between 2006 and 2010 will be realized based
on future taxable income.  Management also can and would implement  tax-planning
strategies  to prevent these  carryforwards  from  expiring.  As of December 31,
1999,  a  valuation  allowance  has been  established  for  deferred  income tax
benefits  relating  to net  operating  loss  carryforwards  scheduled  to expire
between 2002 and 2003.  Since the Company's  ability to generate  taxable income
from operations and utilize available  tax-planning  strategies in the near term
is  dependent  upon  various  factors,  many of which  are  beyond  management's
control,  management  believes that it is more likely than not that the deferred
income  tax  benefits  relating  to these  carryforwards  will not be  realized.
However,  realization  of the  remaining  deferred  income tax benefits  will be
assessed  periodically based on the Company's current and anticipated results of
operations  and amounts could increase or decrease in the near term if estimates
of future taxable income change. The Company has formal  tax-sharing  agreements
and files a consolidated income tax return with its subsidiaries.


NOTE 6.  CREDIT ARRANGEMENTS

   During 1999, the Company  entered into a five-year  revolving  credit
facility that provides for borrowings up to $30,000.  The interest rate on
the borrowings under the facility may be fixed, at the Company's  option,
for a period of one,six or  twelve  months  and is based  upon the  London
Interbank  Offered  Rate ("LIBOR")  plus an  applicable  margin,  2.0% at
December 31,  1999.  The margin varies based upon the Company's leverage
ratio (debt to total capitalization, as defined)  and  ranges  from 1.00%
to 2.50%.  Interest  on the  revolving  credit facility is payable monthly.
The credit facility provides for the payment of all of the outstanding
principal balance at June 30, 2004 with no required principal payments
prior to that time. The interest rate on this facility at December 31, 1999
was 8.49%.

   During 1999,  the Company also issued  $25,000 of Series 1999,  Variable Rate
Demand Bonds (the  "Bonds") due July 1, 2009  through a private  placement.  The
Bonds,  which are redeemable at the Company's  option,  pay a variable  interest
rate that  approximates  30-day LIBOR.  The Bonds are backed by a thirteen-month
letter of credit issued by Wachovia Bank,  N.A. The cost of the letter of credit
and its  associated  fees are 1.80% making the effective rate on the Bonds LIBOR
plus 1.80% at December  31, 1999.  The interest on the Bonds is payable  monthly
and the letter of credit fees are payable  quarterly. The interest rate on the

                                        18

<PAGE>


  Bonds, along with the related fees, at December 31, 1999 was 8.29%.The Bonds
do not require the repayment of any principal prior to maturity.

   The  Company  is  required,  under  both  instruments,  to  maintain  certain
covenants  including,  among  others,  ratios that  relate  funded debt to total
capitalization   and  cash  flows  as  well  as  cash  flows  to  debt   service
requirements.   The  Company  must  also  comply  with  limitations  on  capital
expenditures and additional debt obligations. At September 30, 1999 and December
31,  1999, the  Company  was  in  violation  of  three  of its  debt  covenants,
specifically  the  ratios  of  debt to  total  capitalization,  earnings  before
interest, taxes, depreciation and amortization ("EBITDA") to interest and funded
debt to  EBITDA.  The  company  has  received a waiver of these  covenants  from
Wachovia Bank, N.A. for both periods.

   Subsequent to year-end,  the revolving  credit  facility and letter of credit
were both amended by Wachovia Bank, N.A. as a result of the Company's  operating
performance during 1999. The amendment  establishes new covenants  pertaining to
funded debt, total  capitalization,  and EBITDA.  As amended,  the margin on the
revolving  credit facility will be increased to 3.25% and the cost of the letter
of credit  will be  increased  to this same level.  The margin on the  revolving
credit  facility  and the cost of the  letter of credit  can be  reduced  if the
Company meets certain  financial  objectives during 2000. The Company expects to
be in compliance with all debt covenants for the remainder of 2000.

   At December  31,  1998,  the company  had  $26,000  outstanding  under a note
payable to Wachovia Bank, N.A. maturing December 31, 2000.  $25,000 of this note
was paid off with the proceeds from the bonds. The remaining $1,000 was paid off
using  proceeds from the  revolving  credit  facility.  There were no prepayment
penalties or other costs associated with the disposition of the note.



NOTE 7.  ACQUISITIONS

  On July 1, 1999, the Company  acquired 100% of the  outstanding  stock of ACIC
and ARMGA for a combined price of $32,958 with $8,483 of the purchase price paid
in the form of common  stock of the Company and the  remaining  $24,475  paid in
cash obtained from borrowings under the Company's revolving credit facility. The
acquisition of both ACIC and ARMGA were accounted for using the purchase  method
of accounting. Accordingly, the Company has preliminarily allocated the purchase
price of the  companies  based on the fair  value  of the  assets  acquired  and
liabilities  assumed  and  their  results  of  operations  are  included  in the
consolidated results of operations since the date of acquisition.

  The  following   summarizes  the  Company's  pro-forma  unaudited  results  of
operations  for the years ended December 31, 1999 and 1998 assuming the purchase
of ACIC and ARMGA had been consummated as of January 1, 1998:

                             Consolidated
                            1999      1998
                         ---------------------
Revenue                    $136,459  $121,268
Net income                  $ 9,656   $11,426
Per common share data
  Basic earnings per         $  .40    $  .48
    common share
  Diluted  earnings  per     $  .39    $  .45
    common share

  This  pro-forma  financial  information  has been  prepared for  informational
purposes only and is not necessarily indicative of the results of operations had
the  transaction  been  consummated  on January 1, 1998, nor is it indicative of
results of operations that may be obtained in the future.

In connection with the  acquisitions of ACIC and ARMGA the following  assets and
liabilities were acquired.

Cash,including

short-term investments     $   6,270
Investments                   30,276
Goodwill                      16,914
Receivables                   17,773
Other assets                   2,691
                           ---------
    Total assets              73,924
                           ---------
Insurance reserves  and
  policy funds                38,450
Other liabilities              2,516
                           ---------
    Total liabilities         40,966
                           ---------
        Purchase price     $  32,958
                            ========

  On October 1, 1997,  the Company  acquired  100% of the  outstanding  stock of
American  Independent  Life  Insurance  Company  ("American   Independent")  for
approximately  $2,700 in cash. During 1999, American Independent was merged into
the Company's other life and health insurance  company,  Banker's  Fidelity.  On
October 28, 1997,  the Company  acquired 100% of the  outstanding  stock of SIA,
Inc. for  approximately  $1,300 in common  stock of the Company.  The results of
operations  of  American   Independent   and  SIA,  Inc.  are  included  in  the
consolidated  results  of  operations  as of  their  dates of  acquisition.  The
acquisitions of American Independent and SIA, Inc. were both accounted for using
the  purchase  method  of  accounting  and were not  material  to the  financial
position or results of  operations  of the Company in 1997.  Had both  companies
been included in the  consolidated  financial  statements  for the earliest year
presented, their impact on the consolidated results of operations would not have
been material.


NOTE 8.  COMMITMENTS AND CONTINGENCIES

Litigation

   The Company and its subsidiaries  are parties to litigation  occurring in the
normal course of business.  In the opinion of management,  such  litigation will
not have a  material  adverse  effect on the  Company's  financial  position  or
results of operations.

Operating Lease Commitments

   The Company's rental expense,  including  common area charges,  for operating
leases was $1,271, $1,188, and $1,178 in 1999, 1998, and 1997 respectively.  The
Company's future minimum lease obligations under non-cancelable operating leases
are as follows:

                           Year Ending December 31,

                      2000                   $ 1,291
                      2001                     1,025
                      2002                       825
                      2003                       735
                      2004                       723
                      Thereafter               1,752
                      ------------------------------
                      Total                  $ 6,351
                      ===============================

                                             19

<PAGE>

NOTE 9.  Employee benefit plans

Stock Options

   In accordance  with the Company's 1992 Incentive Plan, the Board of Directors
may grant up to 1,800,000 stock options or share awards.  The Board of Directors
may grant:  (a) incentive stock options within the meaning of Section 422 of the
Internal Revenue Code; (b) non-qualified  stock options;  (c) performance units;
(d) awards of restricted shares of the Company's common stock; or (e) all or any
combination  of the  foregoing to officers and key  employees.  Options  granted
under this plan expire five years from the date of grant.  Vesting occurs at 50%
upon  issuance  of an  option,  and  the  remaining  portion  is  vested  at 25%
increments in each of the following two years.  In accordance with the Company's
1996  Director  Stock  Option Plan,  a maximum of 200,000  stock  options may be
granted  that fully vest six months  after the grant date.  As of  December  31,
1999, an aggregate of sixty-seven employees, officers and directors held options
under the two plans.

   A summary of the status of the  Company's  stock option plans at December 31,
1999 and 1998, is as follows:

                                     1999                 1998

                                        Weighted Avg.             Weighted Avg.
                        Shares         Exercise Price   Shares   Exercise Price

Options outstanding,
 beginning of year   1,154,900          $  3.20          870,400     $ 3.11
Options granted        129,500             3.89          338,000       3.80
Options exercised      (74,500)            1.92          (50,000)      2.24
Options canceled or
       expired         (39,900)            3.56           (3,500)      3.93
                      -------------                    -----------
Options outstanding,
        end of year  1,170,000             3.34        1,154,900       3.20
                     =============                   ===========
Options exercisable  1,026,750             3.28          900,525       3.04
                     =============                   ===========
Options available

  for future grant     519,150                           608,750
                     =============                     =========

   The  Company  does not  recognize  compensation  cost since the option  price
approximates  fair  value on the date of grant.  If  compensation  cost had been
recognized,  the  Company's net income and earnings per share would have been as
follows:

                                  1999   1998      1997
                             --------------------------

      Net income:
        As reported        $ 10,910   $ 8,558   $ 8,033
        Pro forma            10,477     8,082     7,787
      Basic earnings per
        common share:
        As reported         $   .48  $    .37  $    .35
        Pro forma               .46       .35       .34

      Diluted earnings
        per common share:
        As reported          $  .46     $ .37     $ .35
        Pro forma               .44       .35       .34

   The resulting pro forma  compensation  cost may not be representative of that
to be expected in future years.


                               Outstanding                Exercisable
                        --------------------------  -------------------------
  Range of    Number of  Weighted      Weighted     Number of     Weighted
  Exercise     Options    Average       Average      Options      Average
    Price                Remaining     Exercise                   Exercise
                           Life          Price                     Price
-----------------------------------------------------------------------------
 $2.00 to $2.50  340,000    1.03         $2.42         340,000     $2.42

 $2.51 to $3.00   15,000    2.45         $3.00          15,000     $3.00

 $3.01 to $3.50   67,500    2.01         $3.22          67,500     $3.22

 $3.51 to $4.00  731,500    3.55         $3.77         593,250     $3.76

 $4.01 to $4.50   11,000    3.87         $4.27           6,000     $4.44

$ 4.51 to $5.00    5,000    3.57         $4.94           5,000     $4.94
                ----------                            ----------
                1,170,000                             1,026,750
               ==========                            ==========


   The weighted  average fair value of options  granted is estimated on the date
of grant using the  Black-Scholes  option  pricing model and was $1.73 and $1.67
for grants in 1999 and 1998, respectively.  Fair value determinations were based
on  expected  dividend  yields  of zero,  expected  lives of 5 years,  risk free
interest rates of 6.36% and 4.56%, and expected volatility of 39.97% and 42.61%,
for the years ended December 31, 1999 and 1998, respectively.

401(k) Plan

   The Company initiated an employees'  savings plan under Section 401(k) of the
Internal  Revenue  Code in May 1995.  The plan covers  substantially  all of the
Company's  employees,  except  employees of American  Southern  and  Association
Casualty.  The Company  previously  had a profit  sharing plan for its employees
which was  subsequently  amended and restated to comply with the Section  401(k)
provisions.  Under the plan,  employees  generally may elect to contribute up to
16% of their compensation to the plan. The Company makes a matching contribution
to  each  employee  in  an  amount  equal  to  50%  of  the  first  6%  of  such
contributions.  The Company's matching contribution is in Company stock and with
a value  of  approximately  $133,  $125,  and  $103 in  1999,  1998,  and  1997,
respectively.  Association  Casualty  has a  comparable  savings  plan  covering
substantially all of its employees.

Defined Benefit Pension Plans

   The Company has two defined  benefit  pension plans covering the employees of
American  Southern.  The  Company's  general  funding  policy  is to  contribute
annually the maximum amount that can be deducted for income tax purposes.

                                        20

<PAGE>


   Net periodic pension cost for American Southern's qualified and non-qualified
defined  benefit  plans for the years ended  December 31, 1999,  1998,  and 1997
included the following components:

                                      1999       1998       1997
                                    ------------------------------
      Service cost                   $134       $131        $102
      Interest cost                   232        241         221
      Expected return on plan assets (219)      (198)       (187)
      Net amortization                (27)        19           9
                                    ----------------------------
                                     $120       $193        $145
                                    ============================


   The  following  assumptions  were  used  to  measure  the  projected  benefit
obligation for the benefit plans at December 31, 1999, 1998, and 1997:

                                                     1999    1998   1997
                                                  ----------------------
      Discount rate to determine
         the projected benefit obligation            8.00%   6.75%  7.25%
      Expected long-term rate of return
         on plan assets used to
        determine net periodic pension cost          8.00%   8.00%  8.00%
      Projected annual salary increases              4.50%   4.50%  6.00%

   The following  table sets forth the benefit  plans' funded status at December
31, 1999 and 1998:

                                                 1999  1998

Change in Benefit Obligation

   Net benefit obligation

       at beginning of year                 $   3,452 $  3,280

   Service cost                                   134      131
   Interest cost                                  232      241
   Actuarial (gain) loss                         (699)    (132)
   Gross benefits paid                           (196)     (68)
                                            -------------------
Net benefit obligation at end of year       $   2,923  $ 3,452
                                            ===================

Change in Plan Assets

   Fair value of plan assets
        at beginning of year                $  2,778   $ 2,508
   Actual return on plan assets                  (36)      338
   Gross benefits paid                           (66)      (68)
                                            -------------------
Fair value of plan assets at end of year    $  2,676    $2,778
                                            ==================

Funded Status of Plan

   Funded status at end of year             $  (247)   $  (674)
   Unrecognized net actuarial loss             (201)       213
   Unrecognized prior service cost             (327)      (363)
   Unrecognized net transition obligation       330        368
                                            ------------------
Net amount recognized at end of year        $  (445)    $ (456)
                                            ===================

Amounts recognized in the statement of financial position consist of:

    Prepaid benefit cost                    $     -        $30
    Accrued benefit cost                       (445)      (486)
    Additional minimum liability                  -        (29)
                                            ------------------
Net amount recognized at end of year        $  (445)     $(485)
                                            ==================


   Included in the above is one plan which is unfunded.  The  projected  benefit
obligation,  accumulated  benefit  obligation  and fair value of plan assets for
this plan were $445, $256, and $0 respectively as of December 31, 1999 and $761,
$515, and $0 as of December 31, 1998.




NOTE 10.  PREFERRED STOCK

  Annual  dividends on the Series B Preferred  Stock are $9.00 per share and are
cumulative.  The Series B Preferred Stock is not currently convertible,  but may
become  convertible  into shares of the  Company's  common  stock under  certain
circumstances.  In such event, the Series B Preferred Stock would be convertible
into an aggregate  of  approximately  3,358,000  shares of the common stock at a
conversion  rate of $3.99 per share.  The Series B Preferred Stock is redeemable
at the option of the Company.

NOTE 11.  EARNINGS PER COMMON SHARE

A  reconciliation  of the numerator and  denominator  of the earnings per common
share calculations are as follows:

                                    For the Year Ended December 31,

                                                  1999

                                   -----------------------------------
                                                            Per Share

                                    Income       Shares      Amount
                                   -----------------------------------
Basic Earnings Per Common
Share

Net income before preferred
stock divdends                     $ 10,910        20,030

Less preferred dividends             (1,206)            -
                                   -----------------------
Net income available to common                             $    .48
shareholders                           9,704       20,030
                                                           -----------
Diluted Earnings Per
Common Share

Effect of dilutive stock                   -          122
options

Effect of Series B
Preferred Stock                        1,206        3,358
                                   -----------------------
Net income available to common

shareholders

  plus assumed conversions         $ 10,910        23,510    $  .46
                                   ===================================



                                    For the Year Ended December 31,
                                                  1998

                                   -----------------------------------
                                                           Per Share

                                    Income       Shares      Amount
                                   -----------------------------------
Basic Earnings Per Common
Share

Net income before preferred        $  8,558    18,803
stock dividends
Less preferred dividends             (1,521)        -
                                   -----------------------
Net income available to common                                $  .37
shareholders                          7,037    18,803      -----------

Diluted Earnings Per
Common Share

Effect of dilutive stock
options                                   -       271

Effect of Series B Preferred Stock    1,206     3,358
                                   -----------------------
Net income available to common
shareholders

  plus assumed conversions         $  8,243    22,432        $  .37
                                ===================================

                                    For the Year Ended December 31,
                                                  1997

                                   -----------------------------------
                                                           Per Share

                                    Income       Shares      Amount
                                   -----------------------------------
Basic Earnings Per Common
Share

Net income before preferred
stock dividends                     $ 8,033    18,667
Less preferred dividends             (1,521)        -
                                     -----------------
                                      6,512    18,667
Net income available to common                               $  .35
shareholders                                       ----------------
Diluted Earnings Per Common Share

Effect of dilutive stock                  -       175
options                         ---------------------
Net income available to common
shareholders plus assumed
conversions                     $     6,512    18,842       $  .35

                                ===================================

                                21

<PAGE>

Outstanding  stock options of 748,000 were excluded from the earnings per common
share  calculation  in 1999 since  their  impact was  antidilutive.  The assumed
conversion of the Series A Preferred  Stock was excluded from the above earnings
per  common  share   calculations  for  1998  and  1997  since  its  impact  was
antidilutive.  The  assumed  conversion  of the  Series B  Preferred  Stock  was
excluded  from the  earnings  per common  share  calculation  for 1997 since its
impact was antidilutive.

NOTE 12.  STATUTORY REPORTING

   The assets,  liabilities  and results of operations have been reported on the
basis  of  GAAP,  which  varies  from  statutory  accounting  practices  ("SAP")
prescribed  or permitted  by insurance  regulatory  authorities.  The  principal
differences between SAP and GAAP are that under SAP: (i) certain assets that are
non-admitted  assets are  eliminated  from the balance sheet;  (ii)  acquisition
costs for  policies  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 timing of  establishing  certain
reserves  is  different  than  under  GAAP;  and (v)  valuation  allowances  are
established against investments.

   The amount of statutory net income and surplus (shareholders' equity) for the
insurance subsidiaries for the years ended December 31 were as follows:

                                                   1999   1998      1997
                                               -------------------------
            Life and Health, net income        $2,866   $1,477   $ 2,523

            Property and Casualty, net income   3,909    7,098     6,694
                                               -------------------------
                Statutory net income           $6,775   $8,575   $ 9,217
                                               =========================

            Life and Health, surplus          $26,462 $ 25,998 $  26,517
           Property and Casualty, surplu       62,145*  49,492    48,032
                                               -------------------------

                Total surplus                  $88,607  $75,490  $74,549
                                               =========================


[FN]
*Includes $16,018 attributable to ACIC, which was acquired in 1999.

</FN>

   Under  the  insurance  code of the state of  jurisdiction  under  which  each
insurance subsidiary operates, dividend payments to the Company by its insurance
subsidiaries  are subject to certain  limitations  without the prior approval of
the Insurance Commissioner.  The Company received dividends of $5,406 and $7,054
in 1999 and  1998,  respectively,  from  its  insurance  subsidiaries.  In 2000,
dividend  payments  by the  insurance  subsidiaries  in excess  of $6,973  would
require prior approval.


NOTE 13.  RELATED PARTY AND OTHER TRANSACTIONS

   In the normal  course of business  and,  in  management's  opinion,  at terms
comparable to those available from unrelated parties, the Company has engaged in
transactions  with its  Chairman  and his  affiliates  from time to time.  These
transactions include leasing of office space,  investing and financing.  A brief
description of each of these is discussed below.

   The Company  leases  approximately  65,489  square feet of office and covered
garage space from an affiliated  company.  In the years ended December 31, 1999,
1998, and 1997, the Company paid $898,  $895 and $900,  respectively,  under the
leases.

   Financing for the Company has been provided through affiliates of the Company
or its Chairman, in the form of the Series B Preferred Stock.

   The Company has made mortgage loans to finance properties owned by its former
subsidiary,  Leath Furniture, LLC ("Leath"),  which is now owned by an affiliate
of the Chairman.  At December 31, 1999 and 1998,  the balance of mortgage  loans
owed by Leath to various of the Company's insurance  subsidiaries was $3,645 and
$3,845,  respectively.  For 1999, 1998, and 1997, interest on the mortgage loans
totaled $352, $373, and $521, respectively.

   Certain  members  of  management  are on the Board of  Directors  of Bull Run
Corporation ("Bull Run") and Gray  Communications  Systems,  Inc.  ("Gray").  At
December 31, 1999 and 1998,  the Company owned 620,000 common shares of Bull Run
and 354,060 shares of Gray Series A Common Stock and 6,000 shares of Gray Series
B Common Stock. The Company also held $1,500 in Gray 10.625% debentures at
December 31, 1999 and 1998.

   Delta Life Insurance  Company ("Delta Life"),  which is controlled by certain
affiliates of the Company,  purchases  credit life insurance  policies with face
amounts  greater  than $50 from  Bankers  Fidelity.  Bankers  Fidelity  receives
premiums  for these  policies  from Delta  Life and pays  benefits  directly  to
policyholders.  At December 31, 1999 and 1998, the face amount of these policies
was  $350  and  $586,  respectively,  and  the  reserve  balance  was $4 and $8,
respectively.

   In 1998, Georgia Casualty began assuming workers'  compensation premiums from
Delta  Fire  &  Casualty  Insurance  Company  which  is  controlled  by  certain
affiliates of the Company.  Premiums  assumed and commissions  paid in 1999 were
$1,691 and $232, respectively, and in 1998 were $456 and $62, respectively.

                                        22
<PAGE>

NOTE 14.  SEGMENT INFORMATION

   The Company's primary insurance  subsidiaries  operate with relative autonomy
and each  company is evaluated  based on its  individual  performance.  American
Southern, Association Casualty, and Georgia Casualty operate in the Property and
Casualty  insurance  market,  while  Bankers  Fidelity  operates in the Life and
Health  insurance  market.  All segments  derive  revenue from the collection of
premiums,  as well as from investment  income.  Substantially  all revenue other
than those in the corporate and other  segment are from  external  sources.  One
account at American  Southern,  with the State of South Carolina,  accounted for
approximately  $15,064,  $14,403, and $15,900 of total revenue in 1999, 1998 and
1997, respectively.

<TABLE>
<S>

                       American  Georgia  Bankers Association  Corporate  Adjustments
                       Southern Casualty Fidelity  Casualty    & Other   & Eliminations Consolidated

                       ==============================================================================
                       <C>      <C>      <C>      <C>          <C>       <C>            <C>
As of December 31,
1999

Insurance premiums      $38,166  $19,403  $41,527  $  8,498      $    -      $    -      $  107,594
Investment income,
  Including realized
 gains                    4,587    3,759    5,984     1,134         656        (412)         15,708
Other income                173       52        -       365       5,573      (4,991)          1,172
                       ----------------------------------------------------------------------------
   Total revenue         42,926   23,214   47,511     9,997       6,229      (5,403)        124,474
Insurance  benefits
and  losses incurred     26,934   16,535   28,313     5,781           -           -          77,563
Expenses deferred        (5,091)  (4,026)  (3,437)  (1,449)           -           -         (14,003)


Amortization expense      5,429    3,893    2,068     1,852         140           -          13,382
Other expenses            9,318    8,083   16,585     3,512      11,515      (5,403)         43,610
                        ---------------------------------------------------------------------------
   Total expenses        36,590   24,485   43,529     9,696      11,655      (5,403)        120,552
                       ----------------------------------------------------------------------------
Income (loss) before

    income taxes       $  6,336 $ (1,271) $ 3,982  $    301  $   (5,426) $        -        $  3,922
                       ============================================================================
Total assets           $ 99,421 $ 70,207 $100,702  $ 73,912 $   137,828  $ (130,926)      $ 351,144
                       ============================================================================

                       American Georgia  Bankers  Corporate Adjustments
                       Southern Casualty Fidelity & Other  &Eliminations  Consolidated

                       ===============================================================
As of December 31,
1998

Insurance premiums      $35,002 $ 21,813 $ 34,477 $       - $         -    $ 91,292
Investment income,
including realized
gains                     4,503    3,113    5,572     1,158          62      14,408

Other income                243       44        -     4,230      (4,151)        366
                       ------------------------------------------------------------
   Total revenue         39,748   24,970   40,049     5,388      (4,089)    106,066
Insurance  benefits
and  losses  incurred    23,135   16,216   21,494         -           -      60,845
Expenses deferred        (4,378)  (3,945)  (2,764)        -           -     (11,087)
Amortization expense      5,303    4,142    2,518         -           -      11,963
Other expenses            9,006    7,062   15,251     8,412      (4,089)     35,642
                       ------------------------------------------------------------
   Total expenses        33,066   23,475   36,499     8,412      (4,089)     97,363
                       ------------------------------------------------------------
Income (loss) before

  income taxes         $  6,682  $ 1,495 $  3,550   $(3,024)   $      -    $  8,703

                       ============================================================
Total assets           $101,522  $65,147 $102,637 $ 114,412  $ (110,587)$   273,131
                       ============================================================

As of December 31, 1997

Insurance premiums      $41,799 $ 19,916 $ 26,967   $     -     $     -    $ 88,682

Investment income,
  including realized
  gains                   4,353    2,811    5,175        47         (54)     12,332

Other income                154       45        -     3,843      (3,841)        201
                       ------------------------------------------------------------
   Total revenue         46,306   22,772   32,142     3,890      (3,895)    101,215
Insurance benefits
and losses incurred      30,182   15,260   15,576         -           -      61,018
Expenses deferred        (4,549)  (3,342)  (3,117)        -           -     (11,008)
Amortization expense      5,405    3,152    2,268         -           -      10,825
Other expenses            9,073    6,006   12,837     8,188      (3,895)     32,209
                       ------------------------------------------------------------
   Total expenses        40,111   21,076   27,564     8,188      (3,895)     93,044
                       ------------------------------------------------------------
Income (loss) before

income taxes            $ 6,195 $  1,696  $ 4,578 $  (4,298)  $       - $     8,171
Total assets           $102,529  $65,464  $99,591  $111,388   $(107,112)$   271,860
                       ============================================================
</TABLE>


                                        23

<PAGE>

NOTE 15.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

   The estimated  fair value  amounts have been  determined by the Company using
available market information and appropriate valuation  methodologies.  However,
considerable  judgment is necessary to interpret  market data and to develop the
estimates of fair value.  Accordingly,  the estimates  presented  herein are not
necessarily  indicative  of the  amounts  which the Company  could  realize in a
current  market  exchange.  The  use  of  different  market  assumptions  and/or
estimation  methodologies may have a material effect on the estimated fair value
amounts.

                                           1999                    1998
                             ---------------------------------------------------
                                    Carrying  Estimated    Carrying    Estimated
                                     Amount   Fair Value    Amount    Fair Value

Assets:
  Cash and cash equivalents,
  including short-term
  investments                     $   34,306 $   34,306      $32,385     $32,385
  Bonds                              137,000    137,000       99,341      99,341
  Common and preferred stocks         48,684     48,684       61,007      61,007
Mortgage loans                         3,645      4,237        3,851       4,949
  Policy and student loans             3,749      3,749        4,268       4,268
  Other invested assets                5,717      5,717        4,822       4,822
Liabilities:
  Debt                                51,000     51,000       26,000      26,000

   The fair  value  estimates  as of  December  31,  1999 and 1998 are  based on
pertinent  information  available  to  management  as of the  respective  dates.
Although management is not aware of any factors that would significantly  affect
the estimated  fair value  amounts,  current  estimates of fair value may differ
significantly from amounts that might ultimately be realized.

   The following  describes the methods and  assumptions  used by the Company in
estimating fair values:

   Cash and Cash Equivalents, including Short-term Investments

      The carrying amount  approximates  fair value due to the short-term nature
of the instruments.

   Bonds, Common and Preferred Stocks and Publicly Traded Other Invested Assets

      The carrying amount is determined in accordance with methods prescribed by
      the NAIC,  which do not differ  materially from  nationally  quoted market
      prices.  The fair value of certain  municipal bonds is assumed to be equal
      to amortized cost where market quotations do not exist.

   Non-publicly Traded Invested Assets

      The carrying amount approximates fair value.

   Mortgage Loans

      The fair values are  estimated  based on quoted market prices for those or
      similar investments.

   Debt Payable

      The fair value is estimated based on the quoted market prices for the same
      or similar issues or on the current rates offered for debt having the same
      or similar returns and remaining maturities.


NOTE 16.  RECONCILIATION OF OTHER COMPREHENSIVE INCOME

    The Company's  comprehensive  income  consists of net income and  unrealized
gains and losses on  securities  available for sale,  net of  applicable  income
taxes.

   Other than net income,  the other components of comprehensive  income for the
years ended December 31, 1999, 1998 and 1997 are as follows:

                                                    December 31,

                                                   1999      1998    1997

Gain on the sale of securities
      included in net income                   $  2,831  $  2,909  $ 1,076
                                               ============================

Other comprehensive income (loss):

  Net pre-tax unrealized (loss) gain arising
         during year                           $(13,900) $  2,197  $12,861
        Reclassification adjustment              (2,831)   (2,909)  (1,076)
                                                -------   -------  -------

 Net pre-tax unrealized (loss)
     gain recognized in
     other comprehensive income (loss)          (16,731)     (712)  11,785

Deferred income tax expense attributable to
  other comprehensive income (loss)              (4,219)        -        -
                                                --------------------------

Net unrealized (loss) gain recognized in
 other comprehensive income (loss)            $ (20,950)  $  (712)$ 11,785
                                             =============================

                                        24

<PAGE>

NOTE 17.  QUARTERLY FINANCIAL INFORMATION (Unaudited)


   The following table sets forth a summary of the quarterly  unaudited  results
of operations for the two years ended December 31, 1999 and 1998:

<TABLE>
<S>
                             1999                                 1998
--------------------------------------------------------------------------------------

                   First    Second     Third    Fourth    First   Second  Third    Fourth
                  Quarter  Quarter    Quarter  Quarter   Quarter Quarter Quarter   Quarter
                  <C>      <C>        <C>      <C>       <C>      <C>     <C>      <C>
                                       (1)

Revenue              $27,337  $ 27,979 $33,436  $35,722  $ 26,512 $26,039 $26,795  $ 26,720
               ============================================================================


Income (loss):
Income (loss)
 before income
 tax(provision)
 benefit          $    1,480    $  668 $  (638) $ 2,412  $  1,625 $ 1,905  $2,854   $ 2,319
 Income tax
 (provision)
  benefit                (27)      (17)    (49)   7,081       (26)   (106)      8       (21)
               -----------------------------------------------------------------------------

Net income (loss)    $ 1,453      $651   $(687)  $9,493  $  1,599  $1,799 $ 2,862 $   2,298
                      =======================================================================


Per common share data:

Basic net income

(loss) per share     $   .06      $.02 $  (.05)   $ .44   $   .06  $  .08   $ .13   $   .10
Diluted net income

 (loss) per share   $    .06     $ .02 $  (.05) $   .39   $   .06  $  .08   $ .13   $   .10
                   ==========================================================================

<FN>
(1)  Association  Casualty  was  acquired  on July 1,  1999 and is  included  in
consolidated results of operations from that date.
</FN>
</TABLE>


                      MANAGEMENT DISCUSSION AND ANALYSIS OF

                 FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

   The  following  is  management's  discussion  and  analysis of the  financial
condition and results of operations of Atlantic American Corporation  ("Atlantic
American" or the  "Company")  and its  subsidiaries  as of December 31, 1999 and
1998 and for each of the three years in the period ended December 31, 1999. This
discussion  should  be read  in  conjunction  with  the  consolidated  financial
statements and notes thereto.

   Atlantic  American is an  insurance  holding  company  whose  operations  are
conducted  through a group of regional  insurance  companies:  American Southern
Insurance  Company and American  Safety  Insurance  Company  (together  known as
"American  Southern");  Association  Casualty  Insurance Company and Association
Risk Management General Agency, Inc. (together known as "Association Casualty");
Georgia  Casualty & Surety Company  ("Georgia  Casualty");  and Bankers Fidelity
Life Insurance Company ("Bankers  Fidelity").  Each operating company is managed
separately  based  upon  the  geographic  location  or the type of  products  it
underwrites.


                                       25

<PAGE>

Overall Corporate Results
(dollars in thousands)

Revenues

                              1999        1998       1997
                             -----       -----       ----
Property and Casualty:
  American Southern      $  42,926    $ 39,748     $46,306
  Association Casualty       9,997           -           -
  Georgia Casualty          23,214      24,970      22,772
                          --------    --------   ---------
     Total  property
 and casualty               76,137      64,718      69,078



Life and Health:
  Bankers Fidelity          47,511      40,049      32,142

Corporate and Other            826       1,299          (5)
                          ---------     ----------  ------
Total Revenues        $    124,474    $106,066    $101,215
                          =========   =========   ========

Income before taxes

Property  and
Casualty:

  American Southern    $     6,336  $    6,682 $     6,195
  Association Casualty         301           -           -
  Georgia Casualty          (1,271)      1,495       1,696
                         ---------   ---------     -------
Total property
  and casualty               5,366       8,177       7,891

Life and Health:
  Bankers Fidelity           3,982       3,550       4,578

Corporate and Other         (5,426)     (3,024)     (4,298)
                           -------     -------     -------

Total  income  before
taxes                     $  3,922   $   8,703   $   8,171
                         =========   =========    =========


   On a  consolidated  basis the Company's net income for 1999 was $10.9 million
($.46 per  diluted  share)  compared  to net  income of $8.6  million  ($.37 per
diluted  share) in 1998 and net income of $8.0 million ($.35 per diluted  share)
in 1997. Net income for 1999 was favorably  impacted by a $7.0 million  deferred
tax benefit  related to the Company's  valuation  allowance  that had previously
been established  against its net deferred tax asset,  specifically  relating to
prior year net operating loss  carryforwards.  The decline in pre-tax net income
for 1999 was due  primarily to  unsatisfactory  underwriting  results in Georgia
Casualty.  Excluding  Georgia  Casualty,  all of the Company's  operating  units
reported  profitable  results.  A  more  detailed  analysis  of  the  individual
operating  entities and other corporate  activities is provided in the following
discussion.

UNDERWRITING RESULTS

American Southern

The following table  summarizes  American  Southern's  premiums and underwriting
ratios (dollars in thousands):

                            1999        1998       1997
                            -----       -----      ----

Gross written premiums    $ 44,070    $ 39,084 $    44,322
Ceded premiums              (5,540)     (5,215)     (6,040)
                           -------     -------     -------
Net written premiums      $ 38,530    $ 33,869  $   38,282
                           =======    ========      ======

Net earned premiums       $ 38,166    $ 35,002    $ 41,799
Net losses and loss
  adjustment expenses       26,934      23,135      30,182
Underwriting expenses        9,656       9,931       9,929
                             -------   -------     -------
Underwriting income

                           $ 1,576    $  1,936    $  1,688
                             =====     =======     =======


Loss ratio                    70.6%       66.1%      72.2%
Expense ratio                 25.3%       28.4%      23.8%
                               -----       -----     ------
Combined ratio                95.9%       94.5%      96.0%
                               =====       ====    =======

   Gross written  premiums at American  Southern  increased  $5.0 million during
1999  principally  as a result  of  business  produced  by  American  Auto  Club
Insurance  Agency, a joint venture between American  Southern and the AAA of the
Carolinas  Motor  Club.  American  Southern  holds a 50%  interest  in the joint
venture and underwrites the majority of the standard automobile business written
by the agency.  This program,  which began writing  business in 1999,  had gross
written premiums of approximately $5.0 million for the year.

   During 1998, American Southern decided to exit some smaller lines of business
where profits were below expectations,  and as a result earned premiums declined
16% in 1998. Additionally in 1998, American Southern's premiums were impacted by
a decrease in the net rate charged for one of its large block accounts.


   The  following  table  presents  a break out of  American  Southern's  earned
premiums by line of business (dollars in thousands):

                      1999      1998      1997
                      -----     -----     ----
Automobile liability $ 24,573   $23,396  $30,909


Automobile  physical
damage                  6,112     4,288    4,508

General liability       4,302     4,291    3,116
Property                3,118     2,970    3,206
Surety                     61        57       60
                       --------------------------

Total earned         $ 38,166 $  35,002 $ 41,799
premium             ======== ========= =========


   In addition to the  business  written  through  the joint  venture,  American
Southern produces much of its business through contracts with various states and
municipalities,  some of which represent  significant amounts of revenue for the
company.  These contracts are periodically subject to competitive renewal quotes
and the loss of a significant  contract could have a material  adverse effect on
the  business or financial  condition  of American  Southern and of the Company.

                                        26

<PAGE>


Specifically, one significant contract comes up for renewal in the first half of
2000.  American  Southern has prepared a  competitive  quote for this  business;
however,  given the competitive nature of the current insurance market place, it
is possible that other carriers may submit bids at unprofitable  levels in order
to obtain this business.  American Southern has no intention of pricing its bids
at an  unprofitable  level and as a result,  the potential  exists that American
Southern  will be unable to renew this  account.  In an effort to  increase  the
number of programs  underwritten  by American  Southern and to mitigate any such
loss of business,  the company has hired a new marketing  representative  who is
responsible for the development of new programs.

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

   The combined ratio for American  Southern for 1999 was 95.9% up slightly from
the 1998 combined ratio of 94.5%. The loss ratio increased to 70.6% in 1999 from
66.1% in 1998.  The  increase  in the loss  ratio  is a result  of  higher  than
anticipated losses on the personal auto line of business.  The Carolinas,  where
the personal auto business is produced, was hit by a large number of significant
storms  during  1999.  In 1998,  American  Southern  was  impacted by  favorable
development  on past  accident  years that  resulted  in a loss ratio lower than
normally  anticipated.  The expense ratio for 1999 is down from 28.4% in 1998 to
25.3%.  This  decrease  in the  expense  ratio is a direct  result  of  American
Southern's business  structure.  The majority of American Southern's business is
structured  such that the agent is  rewarded  or  penalized  based upon the loss
ratio of the business they submit to the company. By structuring its business in
this manner, American Southern provides its agents with an economic incentive to
place profitable business with the company. As a result of this arrangement,  in
periods where losses and the loss ratio  increase,  commission and  underwriting
expenses decrease.

Association Casualty

The  following  table  summarizes  Association  Casualty's  premiums  and losses
(dollars in thousands):

                                 1999

 Gross written premium        $   9,299
 Ceded premiums                    (775)
                              ----------
 Net written premiums         $   8,524
                              ==========

 Net earned premiums          $   8,498
 Net losses and loss
 adjustment expenses              5,781
 Underwriting expenses            3,915
                               ---------
 Underwriting loss            $  (1,198)
                              ============

 Loss ratio                        68.0%
 Expense ratio                     46.1%
                                --------
 Combined ratio                   114.1%
                                ==========
   Association  Casualty was acquired on July 1, 1999 and its performance  since
that date has been included in the  consolidated  operating  results of Atlantic
American.  While premium revenues were in line with expectations,  both the loss
ratio and the  expense  ratio for  Association  Casualty,  were  higher  than is
desired by management.  Since the acquisition,  the loss ratio has been impacted
by the extremely  competitive insurance market place in Texas, where Association
Casualty  operates.  In  addition,   higher  than  expected  significant  claims
contributed to the increase. The competitive market has driven down premiums and
as a result pushed up both the loss and expense ratios.

   The expense  ratio has also been  impacted by an effort to expand the product
offerings of Association Casualty. Currently, Association Casualty operates as a
monoline carrier offering primarily workers'  compensation  coverage.  Since the
acquisition,  management  has been  working  toward  offering  products  such as
general liability and property that will complement the company's  existing book
of business.


                                27
<PAGE>

Georgia Casualty

   The  following  table  summarizes  Georgia  Casualty's  premiums  and  losses
(dollars in thousands):

                            1999       1998       1997
                            -----      -----      ----
Gross written premiums    $  26,798   $ 24,468  $25,217
Ceded premiums               (5,928)    (3,203)  (2,938)
                            -------    -------   -------

Net written premiums      $  20,870    $21,265  $22,279
                           ========   ========   ======

Net earned premiums       $  19,403    $21,813  $19,916

Net losses and loss
adjustment expenses          16,535     16,216   15,260
Underwriting expenses         7,950      7,259    5,816
                             ------    -------    -----

Underwriting loss         $  (5,082)  $ (1,662) $(1,160)
                            =======   ========  =======

Loss ratio                    85.2%      74.3%    76.6%
Expense ratio                 41.0%      33.3%    29.2%
                              -----      -----    -----

Combined ratio               126.2%     107.6%   105.8%
                             ======     ======   ======


   Gross written premiums at Georgia Casualty increased $2.3 million during 1999
principally as a result of a new management team. During 1999,  Georgia Casualty
hired a new  president  to oversee  its  operations.  In  addition,  several new
experienced underwriters were added to the staff. The new business relationships
brought in by these  employees  is the primary  cause of the growth in premiums.
This increase follows a $749,000 decrease from 1998 to 1997 that was principally
caused by declining premium rates.

   The increase in gross  written  premiums at Georgia  Casualty was offset by a
$2.7 million increase in ceded premiums.  During 1999,  Georgia Casualty entered
into a stop-loss  reinsurance  program which reinsures  Georgia Casualty for all
losses in the 1999 accident year that,  in the  aggregate,  fall between 55% and
75% of net earned  premiums,  before the impact of the  premium  ceded under the
treaty.  Total premiums  ceded under this treaty in 1999 were $2.7 million.  The
treaty  was put  into  place  to help  insulate  Georgia  Casualty  against  two
underwriting  programs,  one insuring  short-haul logging truckers and the other
providing property coverage to the poultry industry. Both of these programs were
terminated  during 1999.  This treaty also served to insulate  Georgia  Casualty
from the impact of reduced premium rates on its remaining book of business.

   The decline in net earned  premiums of $2.4  million in 1999 is the result of
the decline in net  written  premiums  coupled  with the impact of the timing of
premium writings. Georgia Casualty experienced a significant increase in written
premiums in the fourth  quarter of 1999, up $763,000 over the fourth  quarter of
1998.  This increase in writings will not be fully  reflected in earned  premium
until 2000.

   The  following  table  presents  a break  out of  Georgia  Casualty's  earned
premiums by line of business (dollars in thousands):

                       1999       1998       1997
                       -----      -----      ----
Workers'
compensation         $  13,157   $  14,344  $  12,841

Business automobile      2,876       3,750      4,031
General liability        1,251       1,619      1,387
Property                 2,119       2,100      1,657
                         -----       -----      -----

Total earned premium $  19,403   $  21,813  $  19,916
                     =========   =========  =========


   The combined  ratio for Georgia  Casualty  for 1999  increased to 126.2% from
107.6% in 1998. Both  components of the combined  ratio,  the loss ratio and the
expense ratio increased over the prior year. The loss ratio increased from 74.3%
in 1998 to 85.2% in 1999.  The  increase  in the loss ratio is  principally  the
result of adverse  development  of prior year losses.  During 1999, the estimate
for losses incurred in 1998 and prior years increased $2.6 million. The increase
in the  expense  ratio  from  33.3% to 41.0% is the  result of the impact of the
stop-loss  reinsurance  treaty.  The  reduction  of  premium  as a result of the
stop-loss  reinsurance program resulted in an increase of the expense ratio from
35.9% to 41.0%.  The  remaining  increase  in the  expense  ratio  results  from
increased operating costs associated with the hiring of a new management team to
oversee the operations of Georgia Casualty.

Bankers Fidelity

   The following  summarizes Bankers  Fidelity's  premiums and operating results
(dollars in thousands):

                                    Premiums

                              1999        1998         1997
                              ------------------------ ----
Medicare supplement      $  25,822    $  19,743    $  12,534
Other health products        3,206        2,986        3,980
Life insurance              12,499       11,748       10,453
                            ------       ------       ------

Total premiums           $  41,527    $  34,477    $  26,967
                         =========    =========    =========

                               Operating Expenses

                       1999        1998               1997
                       ----------- --------------------------
Insurance benefits      $   28,313   $   21,494  $    15,576
and losses
Commissions and
underwriting expenses       15,216       15,005       11,988
                            ------       ------       ------

Total expenses         $    43,529   $   36,499   $   27,564
                       ===========   ==========   ==========


   Premium  revenue  at Bankers  Fidelity  is up 20.4%  over 1998  results.  The
largest  increase is in the Medicare  supplement  line of business,  which is up
30.8% for the year.  This  increase has come from a focused  marketing  campaign
over the past two years as well as expansion into a new sales region in 1999. In
addition,  several of Bankers  Fidelity's  competitors  have exited this line of
business  which
                                        28

<PAGE>


has increased the flow of business to Bankers  Fidelity.  During 1999, in order
to maintain  adequate  margins on its products,  Bankers Fidelity decreased
the  commission  it  pays  its  agents  on  several of its  Medicare Supplement
products.  As a result,  agents have begun placing less business with the
company  and the growth in premiums  has  slowed.  The  increase in premium
volume in 1998 was the  result  of  strong  internal  growth  compounded  by the
acquisition  of American  Independent  in late 1997 which added $3.0  million in
earned premium in 1998.  During 1999,  Bankers Fidelity also increased its focus
on its life insurance  products and as a result,  Bankers Fidelity  generated an
increase of 6.4% in this line of business.

   Insurance  benefits  and losses at Bankers  Fidelity  increased  31.7% during
1999. This increase is primarily attributable to the increase in premium volume.
However,  the growth in insurance benefits and losses has outpaced the growth in
premiums.  This is principally  the result of a delay in the  implementation  of
rate  increases,   predominately  on  Bankers  Fidelity's   Medicare  supplement
products, caused by a lengthening state approval process. As of the end of 1999,
Bankers  Fidelity had received all of the rate increases it required to maintain
a satisfactory profit on its Medicare supplement business.

   Commission  expense for the year decreased 5.3%. This decrease is a result of
a reduction in commission rates on several of Bankers  Fidelity's primary health
products.  As a percent of premium,  commission  expense declined to 11.9% from
15.1% in 1998.

   General  expenses  at  Bankers  Fidelity  are up only  4.9%.  As a percent of
premium  volume this  represents a decline from 25.4% to 22.2%.  The decrease in
general  expenses,  as a  percent  of  premiums  is the  result of an effort to
streamline  the operations at Bankers  Fidelity.  This is an ongoing effort that
has to date yielded approximately $1.0 million in annualized savings.

INVESTMENT INCOME AND REALIZED GAINS

   Investment  income for the year of $12.9  million  represents  an increase of
12.0% or $1.4 million over 1998 results.  The inclusion of Association  Casualty
in 1999 is responsible for $1.2 million of this increase. The remaining increase
is the result of an  increase in invested  assets at Atlantic  American's  other
subsidiaries.  The acquisition of Association Casualty added over $30 million to
the investment portfolio of Atlantic American. Investment income increased 2% in
1998 due to an increase in invested assets that was offset by declining interest
rates and a flat yield curve.  Management has continued to focus on investing in
short- and medium-maturity bonds of high quality, in addition to government-back
securities.  The common and  preferred  stock  portfolio  of  Atlantic  American
decreased $12.3 million during the year due to declines in the trading prices of
several  of its  investments.  As a result  of this  and the  impact  of  rising
interest  rates on the Company's bond  portfolio,  unrealized  investment  gains
declined from $28.8 million to $12.1 million during 1999.

   Realized  investment gains decreased  slightly to $2.8 million in 1999, after
increasing  $1.8  million in 1998 to $2.9  million.  Management  is  continually
evaluating  the  Company's  investment  portfolio and will  periodically  divest
appreciated investments as deemed appropriate.

INTEREST EXPENSE

   Interest expense for 1999 increased from $2.1 million in 1998 to $2.8 million
in 1999. In  conjunction  with the  acquisition  of  Association  Casualty,  the
Company  entered into a $30.0 million  revolving  credit  facility with Wachovia
Bank,  N.A. To date,  the Company has drawn down $26.0 million on this facility.
This  facility,  coupled with the $25 million  variable rate demand bonds issued
during the second quarter of 1999, brings the total debt of the Company to $51.0
million, up from $26.0 million at the end of 1998. The interest rate on both the
revolving  credit  facility and the bonds is tied to 30 day LIBOR.  During 1998,
interest  expense  decreased  $800,000  due to a reduction  in debt as well as a
decline in the interest rate on the debt.

OTHER EXPENSES

   The increase in other  operating  expenses is primarily  attributable  to the
acquisition of Association  Casualty which accounts for $2.8 million of the $4.2
million  increase.  The  remaining  increase  of $1.4  million  is the result of
several  nonrecurring  expenses  including  the hiring of a consulting  group to
assist the Company in  streamlining  its operations and the cost associated with
the search for and  relocation of a new  management  team for Georgia  Casualty.
Operating  expenses  increased  $1.1 million in 1998 due to $300,000 in expenses
relating to Year 2000  compliance and an overall  increase in general  operating
expenses.

LIQUIDITY AND CAPITAL RESOURCES

   The major  cash  needs of the  Company  are for the  payment  of  claims  and
operating expenses,  maintaining  adequate statutory capital and surplus levels,
and meeting debt service requirements. The Company's primary sources of cash are
written  premiums,  investment  income  and the sale and  maturity  of  invested
assets.  In addition,  the Company has additional  borrowing  capacity under its
revolving  credit facility.  The Company believes that,  within each subsidiary,
total invested assets will be sufficient to satisfy all policy liabilities. Cash
flows at the parent company are derived from dividends, management fees, and tax
sharing payments from the subsidiaries. The cash needs of the parent company are
for the payment of operating  expenses,  the  acquisition  of capital assets and
debt service requirements.

   Dividend payments to the Company by its insurance subsidiaries are subject to
annual  limitations and are restricted to the accumulated  statutory earnings of
the  individual  insurance  subsidiaries.  At December  31,  1999 the  Company's
insurance subsidiaries had accumulated statutory earnings $49.2 million.

   The Company  provides certain  administrative,  purchasing and other services
for each of its subsidiaries. The amount charged to and paid by the subsidiaries
was $6.7  million,  $6.5  million,  and $5.6  million in 1999,  1998,  and 1997,
respectively.  In addition,  the Company has formal  tax-sharing  agreement with
each of its insurance  subsidiaries.  A net total of $2.0 million,  $1.9 million
and $1.2  million  were paid to the Company

                                        29

<PAGE>

under the tax sharing  agreement in 1999, 1998, and 1997, respectively.
Dividends were paid to Atlantic American by one of its  subsidiaries  totaling
$3.6 million in 1999,  1998,  and 1997. As a result of the Company's  tax loss
carryforwards,  which  totaled  approximately $36.4  million at December  31,
1999,  it is  anticipated  that the tax sharing agreement will provide the
Company with additional  funds with which to meet its cash flow obligations.

   During 1999 the Company  entered into a five year revolving  credit  facility
that provides for borrowings up to $30,000.  The interest rate on the borrowings
under the facility may be fixed, at the Company's  option,  for a period of one,
six or  twelve  months  and is based  upon the  London  Interbank  Offered  Rate
("LIBOR") plus an applicable  margin.  Interest on the revolving credit facility
is payable monthly.  The credit facility  provides for the payment of all of the
outstanding  principal  balance  at June 30,  2004  with no  required  principal
payments  prior to that time. The interest rate on this facility at December 31,
1999 was 8.49%.

   During 1999,  the Company also issued  $25,000 of Series 1999,  Variable Rate
Demand Bonds (the  "Bonds") due July 1, 2009  through a private  placement.  The
Bonds,  which are redeemable at the Company's  option,  pay a variable  interest
rate that  approximates  30-day LIBOR.  The Bonds are backed by a thirteen-month
letter of credit  issued by Wachovia  Bank,  N.A.  The  interest on the Bonds is
payable  monthly  and the  letter  of credit  fees are  payable  quarterly.  The
interest  rate on the Bonds,  along with the related  fees, at December 31, 1999
was 8.29%.  The Bonds do not require the  repayment  of any  principal  prior to
maturity.

   The  Company  is  required,  under  both  instruments,  to  maintain  certain
covenants  including,  among  others,  ratios that  relate  funded debt to total
capitalization   and  cash  flows  as  well  as  cash  flows  to  debt   service
requirements.   The  Company  must  also  comply  with  limitations  on  capital
expenditures and additional debt obligations. At September 30, 1999 and December
31,  1999  the  Company  was  in  violation  of  three  of its  debt  covenants,
specifically  the  ratios  of  debt to  total  capitalization,  earnings  before
interest,  taxes,  depreciation  and  amortization  ("EBITDA") to interest,  and
funded  debt to EBITDA.  The Company has  received a waiver of these  covenants
from Wachovia Bank, N.A. for both periods.

   Subsequent to year-end,  the revolving  credit  facility and letter of credit
were both amended by Wachovia Bank, N.A. as a result of the Company's  operating
performance during 1999. The amendment  establishes new covenants  pertaining to
funded debt,  total  capitalization  and EBITDA.  As amended,  the margin on the
revolving  credit facility will be increased to 3.25% from 2.00% and the cost of
the letter of credit will be increased to this same level from 1.80%. The margin
on the  revolving  credit  facility  and the cost of the letter of credit can be
reduced if the Company meets certain financial objectives during 2000. The
Company  expects to be in  compliance  with all debt  covenants  for the
remainder of 2000.

   The Company  intends to repay its  obligations  under both  facilities  using
dividend  and tax sharing  payments  from its  subsidiaries.  In  addition,  the
Company believes that, if necessary, at maturity, the Revolving Credit Agreement
can be refinanced with the current lender and that an additional series of bonds
could be issued when the current bonds mature.

   The Company also has  outstanding  $13.4 million of preferred stock issued to
affiliates.  The  preferred  stock  accrues a  dividend  at 9.0% per year and at
December 31, 1999 the Company had accrued but unpaid  dividends on the preferred
stock totaling $4.8 million.

   Net cash provided by operating  activities totaled $5.4 million in 1999 and
$5.5 million in 1998 and $8.6 million in 1997. Cash and short-term  investments
at December 31, 1999 were $35.7 million and are believed to be more than
sufficient to meet the Company's near-term needs.

   The Company  believes that the cash flows it receives  from its  subsidiaries
and, if needed,  borrowing  from banks and affiliates of the Company will enable
the  Company to meet its  liquidity  requirements  for the  foreseeable  future.
Management is not aware of any current recommendations by regulatory authorities
which,  if  implemented,  would have a material  adverse effect on the Company's
liquidity, capital resources or operations.

YEAR 2000 ISSUE UPDATE

   The Company did not experience any significant  malfunctions or errors in its
operating or business  systems when the date changed from 1999 to 2000. Based on
operations  since January 1, 2000,  the Company does not expect any  significant
impact to its ongoing business as a result of the "Year 2000 issue." However, it
is possible that the full impact of the date change, which was of concern due to
computer  programs using two digits instead of four digits to define years,  has
not been fully recognized. For example, it is possible that Year 2000 or similar
issues such as leap year-related problems,  may occur with billing,  payroll, or
financial closings at month,  quarterly,  or year-end. The Company believes that
any such  problems  are likely to be minor and  correctable.  In  addition,  the
Company  could still be  negatively  affected if its  customers or suppliers are
adversely  affected by the Year 2000 or similar issues. The Company currently is
not aware of any significant  Year 2000 or similar problems that have arisen for
its customers and suppliers.

   The Company expended  approximately  $500,000 on Year 2000 readiness  efforts
from  1997  through  1999.  These  efforts  included  replacing  some  outdated,
noncompliant  software and hardware as well as identifying and remediating  Year
2000 problems.

NEW ACCOUNTING PRONOUNCEMENTS

   The  Financial   Accounting   Standards  Board  has  issued   Statement  133,
"Accounting for Derivitative  Instruments and Hedging  Activities" ("SFAS 133").
SFAS 133 provides a  comprehensive  and consistent  standard for the recognition
and  measurement  of  derivatives  and hedging  activity.  SFAS 133 requires all
derivatives  to be recorded on the balance  sheet at fair value and  establishes
specific accounting methods for hedges. Changes in the value of most derivatives
and hedges will be  included in earnings in the period of the change.  SFAS 133,
as amended by SFAS 137, is effective  for years  beginning  after June 15, 2000.
The Company  intends to adopt SFAS 133 on January 1, 2001.  Management  does not
believe the  adoption of SFAS 133 will have a material  effect on the  Company's
financial condition or results of operations.

IMPACT OF INFLATION

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

INTERST RATE AND MARKET RISK

   Due to the nature of the  Company's  business it is exposed to both  interest
rate and market risk.  Changes in interest rates,  which  represents the largest
risk factor affecting the Company may result in changes in the fair value of the
Company's  investments,  cash flows and interest income and expense. To mitigate
this risk,  the Company  invests in high quality  bonds and avoids  investing in
securities that are directly linked to loans or mortgages.

     The Company is also subject to risk from changes in equity prices. Atlantic
American owned $18.9 million of common stock of Wachovia Corporation at December
31,  1999.  A 10%  decrease  in the share  price of the  common  stock  Wachovia
Corporation  would  result  in a  decrease  of  approximately  $1.2  million  to
shareholders' equity.

   The interest rate on the Company's  debt is tied to LIBOR.  A 100 point basis
increase in LIBOR  would  result in an  additional  $510,000 in interest
expense.

                                        30

<PAGE>


   The table below  summarizes  the estimated fair values that might result from
changes in interest rates of the Company's bond portfolio:

                 +200bp       +100bp    Fair value     -100bp       -200bp
                 ------       ------    ----------     ------       ------
December 31,      $122,815     $128,677    $137,000     $139,704     $143,704
1999

December 31,      $ 88,948     $ 93,243    $ 99,341     $101,323     $104,254
1998

   The Company is also subject to risk from changes in equity prices.  The table
below summarizes the effect that a change in share price would have on the value
of the Company's equity portfolio, including the Company's single largest equity
holding.

                                                 Fair
                               +20%    +10%     Value    -10%     -20%
                               -----   -----    ------   -----    ----
December 31, 1999

Investment in Wachovia
Corporation                   $22,668  $20,779  $18,890  $17,001  $15,112
Other equity holdings          35,753   32,773   29,794   26,815   23,835
                               ------   ------   ------   ------   ------

Total equity holdings

                              $58,421  $53,552  $48,684  $43,816  $38,947
                              =======  =======  =======  =======  =======

December 31, 1998

Investment in Wachovia
Corporation                   $31,247  $28,643  $26,039  $23,435  $20,831
Other equity holdings          41,962   38,465   34,968   31,471   27,974
                               ------   ------   ------   ------   ------

Total equity holdings

                              $73,209  $67,108  $61,007  $54,906  $48,805
                              =======  =======  =======  =======  =======


   The interest  rate on the Company's  debt is variable and tied to LIBOR.  The
table below  summarizes  the effect that changes in interest rates would have on
the Company's interest expense.

                      Interest Expense                Interest Expense

                     +200bp     +100bp     Debt      -100bp     -200bp

December 31, 1999       $1,020      $510    $51,000     $(510)   $(1,020)

December 31, 1998        $ 520      $260    $26,000     $(260)    $ (520)



DEFERRED TAXES

   At  December  31,  1999,  the Company  had a net  deferred  tax asset of $4.3
million  comprised  of a deferred  tax asset of $19.7  million,  a deferred  tax
liability  of $9.0  million  and a  valuation  allowance  of $6.4  million.  The
valuation  allowance was established against deferred tax assets relating to net
operating loss carryforwards that might not be realized.

   Until the end of 1999,  the Company  established a full  valuation  allowance
against  these  deferred  income  tax  benefits  as  they  were  not  considered
realizable  from  expected  future  reversals  of  existing  taxable   temporary
differences.  The Company believed that it was more likely than not that the net
deferred income tax benefits would not be realized through future taxable income
prior to the expiration dates of net operating loss carryforwards. However, with
the acquisition of Association Casualty and several years of profitability,  the
Company  believes  it is now more  likely  than not  that a  portion  of its net
deferred  income tax  benefits  relating  to net  operating  loss  carryforwards
scheduled  to  expire  between  2006 and 2010 will be  realized  based on future
taxable income.  Management also can and would implement tax-planning strategies
to prevent  these  carryforwards  from  expiring.  As of December  31,  1999,  a
valuation  allowance  has been  established  for  deferred  income tax  benefits
relating to net operating  loss  carryforwards  scheduled to expire between 2002
and 2003. Since the Company's ability to generate taxable income from operations
and utilize available tax-planning strategies in the near term is dependent upon
various  factors,  many of which are  beyond  management's  control,  management
believes  that it is more likely than not that the deferred  income tax benefits
relating to these  carryforwards will not be realized.  However,  realization of
the remaining  deferred income tax benefits will be assessed  periodically based
on the Company's current and anticipated results of operations and amounts could
increase or  decrease in the near term if  estimates  of future  taxable  income
change. The Company has formal tax-sharing  agreement,  and files a consolidated
income tax return with its subsidiaries.


                                        31

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Atlantic American Corporation:

   We have  audited the  accompanying  consolidated  balance  sheets of Atlantic
American Corporation (a Georgia corporation) and subsidiaries as of December 31,
1999  and  1998,  and  the  related   consolidated   statements  of  operations,
shareholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 1999. These financial  statements are the  responsibility  of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

   We conducted  our audits in  accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

   In our opinion,  the financial  statements  (pages 10 through 25) referred to
above  present  fairly,  in all material  respects,  the  financial  position of
Atlantic American Corporation and subsidiaries as of December 31, 1999 and 1998,
and the results of their  operations  and their cash flows for each of the three
years in the period ended  December  31, 1999,  in  conformity  with  accounting
principles generally accepted in the United States.


                             /s/ ARTHUR ANDERSEN LLP

Atlanta, Georgia
March 24, 2000



MARKET INFORMATION (UNAUDITED)

   The common stock of the Company is quoted on the Nasdaq National Market under
the symbol "AAME." As of December 31, 1999, the Company had approximately  5,040
stockholders,  including beneficial owners holding shares in nominee or "street"
name.  The  following  tables  show for the periods  indicated  the range of the
reported high and low prices of the common stock on the Nasdaq  National  Market
and the closing  price of the stock and  percent of change at  December  31. The
Company did not declare or pay cash  dividends  on its common  stock  during the
year ended December 31, 1999.  Since 1988, the Company has retained its earnings
to support the growth of its business.

                                                  1999         1998
                                   --------------------------------------------

                                             High    Low       High    Low

First quarter                           $4 5/8      $3 15/16   $5 1/2    4 5/8
Second quarter                           4 11/16     3 7/8      5 1/16   3 7/8
Third quarter                              4 1/8     2 3/8      5 1/4    4
Fourth quarter                           2 15/16     2 1/4      4 15/16  3 5/8

                                           1999  1998   1997    1996    1995
                                     -------------------------------------------
December 31,closing stock

  price close per share                $2 5/16 $4 7/8$5 1/16 $3 1/16 $2 5/16
Stock price percentage

 of change from prior year               -52.6% -3.7%  +65.3% +32.4%   +2.8%

FORWARD-LOOKING STATEMENTS

   This report  contains and references  certain  information  that  constitutes
forward-looking  statements  as that term is defined in the  Private  Securities
Litigation  Reform Act of 1995.  Those  statements,  to the extent  they are not
historical facts,  should be considered  forward-looking  and subject to various
risks and  uncertainties.  Such  forward-looking  statements are made based upon
management's  assessments  of  various  risks  and  uncertainties,  as  well  as
assumptions made in accordance with the "safe harbor"  provisions of the Private
Securities  Litigation  Reform Act of 1995.  The Company's  actual results could
differ  materially  from  the  results  anticipated  in  these   forward-looking
statements  as a  result  of  such  risks  and  uncertainties,  including  those
identified in the Company's Annual Report on Form 10-K for the fiscal year ended
December  31, 1999 and the other  filings  made by the Company from time to time
with the Securities and Exchange Commission.


                                            32
<PAGE>
Inside Back Cover:
SHAREHOLDER INFORMATION

ANNUAL MEETING

Atlantic American's annual meeting of shareholders will be held on Tuesday,  May
2, 2000, at 9:00 a.m. in the Peachtree  Insurance  Center,  4370 Peachtree Road,
N.E.,  Atlanta,  Georgia.  Holders  of  common  stock of  record at the close of
business on March 10, 2000, are entitled to vote at the meeting, and all parties
interested  in Atlantic  American  are  invited to attend.  A notice of meeting,
proxy statement and proxy were mailed to shareholders with this annual report.

Independent Accountants

Arthur Andersen LLP
Atlanta, Georgia

Legal Counsel

Jones, Day, Reavis & Pogue
Atlanta, Georgia

Stock Exchange Listing

Symbol: AAME
Quoted on the Nasdaq National Market System

Transfer Agent and Registrar

Atlantic American Corporation
Attn:  Janie L. Ryan, Corporate Secretary

P. O. Box 190720
Atlanta, Georgia 31119-0720
(800) 241-1439 or (404) 266-5532

Form 10-K and Other Information

For investors and others seeking additional dataregarding  Atlantic American
Corporation or copies of the Corporation's  annual report to the Securities
and Exchange  Commission  (Form 10-K),  please contact Janie L. Ryan
Corporate  Secretary,  (800) 241-1439 or (404)  266-5532.  Please
visit our web site at: www.atlam.com.

 Principals Officers of Subsidiaries


        Eugene Choate
        President
        Bankers Fidelity Life Insurance Company

        Harold K. Fischer
        President
        Association Risk Mangement General Agency
        Association Casualty Insurance Company

        Bob J. Kitchen, Jr.
        President,
        Georgia Casualty & Surety Company

        Andy M. Thompson
        President,
        Self-Insurance Administrators, Inc.

        Roy S. Thompson
        Chairman Emeritus,
        American Southern Insurance Company

        Scott G. Thompson
        President and Chief Financial Officer
        American Southern Insurance Company

        Calvin L. Wall
        Chairman and Chief Executive Officer
        American Southern Insurance Company




<PAGE>
(Back Cover to Anuual Report)

Atlantic
American
Corporation

4370 Peachtree Road, N.E.
Atlanta, GA 30319-3000
Telephone : 404-266-5500
Facsimile : 404-266-5702
Internet:  www.atlam.com