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

                                    FORM 10-K


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

                   For the Fiscal Year Ended December 31, 1997
                                            or
            |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
              THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                          Commission file number 0-3722
                            ------------------------

                          ATLANTIC AMERICAN CORPORATION

             (Exact name of registrant as specified in its charter)
                 Georgia                               58-1027114
           (State or other jurisdiction of          (I.R.S. employer
           incorporation or organization)          identification no.)

            4370 Peachtree Road, N.E.,
               Atlanta, Georgia                          30319
         (Address of principal executive offices)      (Zip code)

       (Registrant's telephone number, including area code) (404) 266-5500

           Securities registered pursuant to section 12(b) of the Act:
                                      None
           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $1.00 par value
                                (Title of class)

                       ----------------------------------

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this 10-K or any amendment to this Form
10-K. |_|
                            ------------------------

     The aggregate  market value of common stock held by  non-affiliates  of the
registrant  as of March 8, 1998,  was  $28,205,853.  On March 8, 1998 there were
18,915,027  shares of the registrant's  common stock, par value $1.00 per share,
outstanding.
                            ------------------------

                       DOCUMENTS INCORPORATED BY REFERENCE


     1.  Portions of  registrant's  Annual Report to  Shareholders  for the year
ended December 31, 1997 - Parts I, II and IV.
     2.  Portions of  registrant's  Proxy  Statement  for the Annual  Meeting of
Shareholders, to be held on May 5, 1998, have been incorporated in Items 10, 11,
12 and 13 of Part III of this Form 10-K.
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<PAGE>
                                TABLE OF CONTENTS
PART I                                                                    Page
    Item  1.  Business..................................................    3

                The Company..............................................   3
                  Casualty Division......................................   3
                  Life and Health Division...............................   5
                  Marketing..............................................   5
                  Underwriting...........................................   6
                  Operating Results......................................   8
                  Policyholder and Claims Services.......................   9
                  Reserves...............................................  10
                  Reinsurance............................................  12
                  Competition............................................  12
                  Rating.................................................  13
                  Regulation.............................................  13
                  NAIC Ratios............................................  14
                  Risk-Based Capital.....................................  14
                  Investments............................................  15
                  Employees..............................................  16
                Financial Information by Industry Segment................  16
                Executive Officers of the Registrant.....................  16
                Forward-Looking Statements...............................  17
    Item  2.  Properties.................................................  17
    Item  3.  Legal Proceedings..........................................  17
    Item  4.  Submission of Matters to a Vote of Security Holders........  17

PART II
    Item  5.  Market for the Registrant's Common Equity and
                Related Shareholder Matters..............................  18
    Item  6.  Selected Financial Data....................................  19
    Item  7.  Management's Discussion and Analysis of Financial Condition
                and Results of Operations................................  19
    Item  8.  Financial Statements and Supplementary Data................  19
    Item  9.  Changes in and Disagreements with Accountants on Accounting
                and Financial Disclosure.................................  19

PART III
    Item 10.   Directors and Executive Officers of the Registrant........  20
    Item 11.   Executive Compensation....................................  20
    Item 12.   Security Ownership of Certain Beneficial Owners and
                 Management..............................................  20
    Item 13.   Certain Relationships and Related Transactions............  20

PART IV

    Item 14.   Exhibits, Financial Statement Schedules and Reports
                 on Form 8-K.............................................  20


                                       2
<PAGE>


                                     PART I


ITEM 1.  BUSINESS

The Company


    Atlantic  American  Corporation,  a Georgia  Corporation  (the  "Parent"  or
"Company")  incorporated in 1968, is a holding company that operates through its
subsidiaries in well-defined specialty markets of the life, health, property and
casualty insurance  industries.  Atlantic American's principal  subsidiaries are
Georgia Casualty & Surety Company ("Georgia Casualty"), incorporated in 1947 and
acquired  in  1968,   Bankers  Fidelity  Life  Insurance  Company   ("Bankers"),
incorporated  in 1955 and  acquired in 1976,  and  American  Southern  Insurance
Company  and its wholly  owned  subsidiary  American  Safety  Insurance  Company
(collectively, "American Southern"), incorporated in 1936 and acquired in 1995.

    On January 1, 1997, the Company's wholly-owned  subsidiary Atlantic American
Life Insurance  Company  ("Atlantic  American  Life"),  incorporated in 1946 and
acquired in 1968, was merged with and into Bankers.  The business and operations
of Atlantic American Life, which were substantially similar to those of Bankers,
have been consolidated into Bankers.

    In addition, during 1997, the Company acquired 100% of the outstanding stock
of  American  Independent  Life  Insurance  Company  ("AI").  AI,  domiciled  in
Pennsylvania,  was  acquired  to  complement  the  operations  of  Bankers.  The
operations of AI were  assimilated  into the operations of Bankers shortly after
the acquisition and expanded the Company's  geographic  presence in the Life and
Health area by five states.

    During 1997,  the Company also  acquired  100% of the  outstanding  stock of
Self-Insurance  Administrators,  Inc. ("SIA").  SIA, domiciled in Georgia,  is a
third party administrator that specializes in providing  administrative services
to those companies and  organizations  that choose to self-insure their workers'
compensation  risks.  The  acquisition of SIA provides the Company with an entry
into alternative services in the property and casualty insurance marketplace.

    During 1996, the Company sold its majority interest in Leath Furniture,  LLC
(f/k/a/ Leath  Furniture,  Inc.,  "Leath").  Leath is reflected as  discontinued
operations in the Company's financial statements for 1996 and 1995.

    Together  Bankers  and AI  constitute  the "Life and  Health  Division"  and
Georgia Casualty and American Southern constitute the "Casualty Division".

    The Company's  strategy is to focus on  well-defined  niches within  various
areas of the insurance marketplace.  Each of the Company's subsidiaries operates
autonomously as the Company believes this allows each subsidiary to best exploit
its expertise.  However, the Company seeks to develop and expand cross-marketing
and joint-underwriting opportunities as they arise.

    Additional  information  concerning the Company and its  subsidiaries may be
found in  "Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of  Operations"  of the Company's  1997 Annual  Report to  Shareholders,
which is incorporated herein by reference.

    Casualty Division

    The  Casualty  Division is divided  into two  distinct  operating  entities,
American  Southern and Georgia  Casualty.  The primary  products  offered by the
Casualty  Division  are  described  below,  followed  by  an  overview  of  both
companies.

    Workers'  Compensation  insurance  policies  provide  indemnity  and medical
    ----------------------
benefits  to  insured  workers  for  injuries  sustained  in the course of their
employment.

    Business Automobile Insurance policies provide for bodily injury or property
    -----------------------------
damage liability coverage,  uninsured  motorists  coverage,  and physical damage
coverage.

    General Liability Insurance policies cover bodily injury and property damage
    ---------------------------
liability  for both  premises and  completed  operations  exposures  for general
classes of business.

    Property  insurance  policies  provide  for  payment  of  losses on real and
    --------
personal property caused by fire and other multiple perils.

                                       3
<PAGE>

    American Southern.  American Southern provides tailored fleet automobile and
long-haul physical damage insurance coverage, on a multi-year contract basis, to
state governments,  local  municipalities and other large motor pools and fleets
("block accounts") that can be specifically rated and underwritten.  The size of
the block accounts  insured by American  Southern are such that individual class
experience generally can be determined, which allows for customized policy terms
and rates.  American  Southern  produces  business in 18 of the 24 states in the
Southeast and Midwest in which it is authorized to conduct  business.  While the
majority of American  Southern's  premiums are derived from auto  liability  and
auto  physical  damage,  American  Southern  also  provides  property,   general
liability, and surety coverages.

    The following table summarizes, for the periods indicated, the allocation of
American  Southern's net earned premiums for each of its principal product lines
since its acquisition by the Company.

                                         Year Ended December 31,

                                         -----------------------
                                            (in thousands)
                                            1997        1996
                                         ----------  -----------
        Automobile Physical Damage       $  4,508     $  4,865
        Automobile Liability               30,909       30,889
        General Liability                   3,116        1,947
        Property                            3,206        3,461
        Surety                                 60           88
                                         ==========  ===========
            Total                         $41,799      $41,250
                                         ==========  ===========


    Georgia Casualty. Georgia Casualty is a property-casualty  insurance company
engaged in the sale of commercial  lines of insurance,  focusing on underwriting
workers' compensation and commercial coverages in the Southeast.

    Georgia Casualty writes business for both mainstream  business  accounts and
for  industries  that are perceived to be high risk. The company is selective in
its  underwriting and focuses on insureds with stringent safety and loss control
standards, or accounts that are willing to implement such standards.

    Georgia Casualty has a diversified book of business that includes commercial
lines other than workers' compensation,  including business automobile,  general
liability,  property,  commercial  umbrella;  and, beginning in 1997, a Business
Owners Policy ("BOP") was introduced.

    Georgia  Casualty  concentrates  its efforts in those states and  industries
which  management  believes offer the greatest  opportunity  for  profitability.
Currently, Georgia Casualty is focusing the majority of its new business efforts
in Georgia and Mississippi,  states which management believes offer the greatest
opportunity for balanced,  profitable growth. Outside of its core states, at the
end of 1997,  Georgia  Casualty had  authority  to produce  business in Florida,
South  Carolina,  North Carolina and Tennessee and the company  intends to begin
writing business in some of these states in 1998.

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


                                           Year Ended December 31,
                          ------------------------------------------------------
                                             (in thousands)
                             1997       1996       1995       1994       1993
                          ------------------------------------------------------
Workers' Compensation      $12,841    $13,826    $14,954    $11,958    $ 9,890
Business Automobile          4,031      2,550      1,436      1,054        953
General Liability            1,387      1,152      1,025      1,065      1,180
Property                     1,657      1,269        887        574        801
                          ------------------------------------------------------
   Total Casualty          $19,916    $18,797    $18,302    $14,651    $12,824
                          ======================================================

                                       4
<PAGE>
Life and Health Division

    The Life and Health  Division of Atlantic  American offers a variety of life
and  supplemental  health  products with a focus on the senior and middle income
markets.  Products  offered by the Life and Health  Division  include:  ordinary
life,  Medicare  supplement,  cancer,  and other  supplemental  health products.
Medicare  supplement,  offered on both a standard and preferred basis,  accounts
for  46.5% of the Life and  Health  Division's  net  premiums.  Life  insurance,
including both whole and term life insurance policies, accounts for 38.8% of the
Life and Health Division's  premiums.  The Life and Health Division has begun to
offer  several  of its  products,  both life and  supplemental  health,  through
payroll deduction services.

    The following table summarizes, for the periods indicated, the allocation of
the Life and Health  Division's  net premiums  earned for each of its  principal
product lines followed by a brief description of the principal products.


                                         Year Ended December 31,
                         -------------------------------------------------------
                                              (in thousands)
                           1997       1996        1995        1994        1993
                         -------------------------------------------------------
Ordinary Life            $ 9,437    $ 8,937     $ 7,037     $ 6,716     $ 5,130
Mass Market Life           1,016      1,303       1,260       1,395       1,541
                         -------------------------------------------------------
  Total Life              10,453     10,240       8,297       8,111       6,671
                         -------------------------------------------------------

Medicare Supplement       12,534     11,560      11,882      13,347      15,052
Convalescent Care/
  Short-Term Care          1,141        955       1,191       1,385       1,628
Medical/Surgical             122        160         211         289         389
Cancer                     1,803      1,982       2,221       2,457       2,726
Hospital Indemnity           241        282         337         414         508
Accident Expense             523        677         790         892         992
Disability                   150        122         142         155         154
                         -------------------------------------------------------
  Total Accident and
    Health                16,514     15,738      16,774      18,939      21,449
                         -------------------------------------------------------

    Total Life and
    Accident and
    Health               $26,967    $25,978     $25,071     $27,050     $28,120
                         =======================================================

    Medicare Supplement. The Life and Health Division currently markets 7 of the
    -------------------
10 standardized  Medicare  supplement  policies created under the Omnibus Budget
Reconciliation Act of 1990 ("OBRA 1990") which are designed to provide insurance
coverage for certain  expenses not covered by the  Medicare  program,  including
copayments and deductibles.

     Cancer.  The Life and Health Division offers several policies providing for
     ------
payment of benefits in connection with the treatment of diagnosed cancer.

    Other Accident & Health Coverages.  The Life and Health Division also offers
    ---------------------------------
a number  of other  policies  including  convalescent  care,  accident  expense,
hospital/surgical and disability.

     Life  Products.  The  Life and  Health  Division  offers  non-participating
     --------------
individual  life  insurance  policies  with a number  of  available  riders  and
options.

Marketing

    Casualty Division

    American Southern.  American Southern's business is marketed through a small
number  of  specialized,   experienced   independent  agent.  Most  of  American
Southern's agents are paid a moderate up-front commission with the potential for
additional  commission by participating in a profit sharing  arrangement that is
directly linked to the profitability of the business. In addition, a significant
portion  (approximately  54% of total  written  premium) of American  Southern's
premiums are assumed from third parties.  In arrangements  similar to those with
its agents,  the premium  assumed from these parties is adjusted  based upon the
profitability of the assumed business.

                                       5
<PAGE>
    Georgia  Casualty.  Georgia  Casualty  is  represented  by  a field force of
approximately  100  independent  agents  in the  sale  and  distribution  of its
insurance  products.  Each agency is a party to a standard  agency contract that
sets forth the  commission  structure  and other terms and can be  terminated by
either party upon thirty days written  notice.  Georgia  Casualty  also offers a
contingent profit-sharing  arrangement that allows the most profitable agents to
earn  additional  commissions  when specific loss  experience and premium growth
goals  are  achieved.  Marketing  efforts,  directed  by  experienced  marketing
professionals in each state, are complemented by the underwriting, loss control,
and audit staffs of Georgia Casualty,  who are available to assist agents in the
presentation of all insurance products and services to their insureds.

    Life and Health Division

    The Life and Health  Division  markets its  policies  through  commissioned,
independent agents. In general,  the Life and Health Division enters contractual
arrangements with general agents who, in turn, contract with independent agents.
The standard agreements set forth the commission arrangements and are terminable
by either  party upon thirty days  written  notice.  General  agents  receive an
override commission on sales made by agents contracted by them.

    Management  believes utilizing direct writing experienced agents, as well as
independent  general  agents who recruit  and train  their own  agents,  is cost
effective.  All independent  agents are compensated on a pure commission  basis.
Using independent  agents also enables the Life and Health Division to expand or
contract their sales forces at any time without incurring significant additional
expense.

    The   Life  and  Health   Division  has   implemented   a  selective   agent
qualification  process,  and had  3,500  licensed  agents  in 1997.  The  agents
concentrate  their sales  activities  in either the  accident and health or life
insurance product lines.  During 1997, a total of 1,170 agents wrote policies on
behalf of the Life and Health Division,  and  approximately  20% of those agents
accounted for 80% of the Life and Health Division's annualized premium.

    Products of the Life and Health  Division  compete  directly  with  products
offered by other insurance companies,  as agents may represent several insurance
companies.  The Life and Health  Division,  in an effort to  motivate  agents to
market their  products,  offers the  following  agency  services:  a unique lead
system,  competitive  products  and  commission  structures,   efficient  claims
service,  prompt payment of  commissions,  simplified  policy issue  procedures,
periodic  sales  incentive   programs  and,  in  some  cases,   protected  sales
territories consisting of counties and/or zip codes. Additionally,  the Life and
Health  Division  has a staff  of 19  employees  whose  primary  function  is to
facilitate  the  activities  of the agents and to act as  liaisons  between  the
agents and the Life and Health Division.

    The company utilizes a distribution  sales system which is centered around a
lead generation plan that rewards qualified agents with leads in accordance with
monthly production goals. In addition,  a protected territory is established for
each qualified  agent,  which  entitles them to all leads  produced  within that
territory.  The  territories  are zip-code or county based and encompass  enough
physical  territory to produce a minimum senior  population of 12,000.  To allow
for the expense of lead  generation,  commissions  were  lowered on the Life and
Health  Division's  senior citizen life plans. In addition,  the Life and Health
Division  recruits at a general  agent level  rather than at a managing  general
agent level in an effort to reduce commission expenses further.

    The  Company  believes  this  distribution  system  solves an  agent's  most
important  dilemma -- prospecting -- and allows the Life and Health  Division to
build long-term  relationships  with individual  producers who view the Life and
Health Division as their primary company. In addition,  management believes that
the Life and Health  Division's  product line is less  sensitive  to  competitor
pricing  and  commissions  because  of the  perceived  value  of  the  protected
territory  and the lead  generation  plan.  Through this  distribution  channel,
production per agent  contracted  increased  substantially  when compared to the
Life and Health Division's general brokerage division.

Underwriting

    Casualty Division

    American  Southern  specializes  in the handling of block  accounts  such as
states and  municipalities  that are generally  sufficiently  large to establish
separate  class  experience,  relying  upon the  underwriting  expertise  of its
agents.  In contrast,  Georgia  underwrites all of its accounts in-house and has
developed a team approach to underwriting with respect to renewal policies.  The
renewal  review  team  includes  members  of the staff from  management  and the
underwriting,  loss control, claims and finance departments. By receiving active
input from each of these departments,  the company has improved its underwriting
of the risks it continues to insure. All individuals with first-hand information
regarding an account are invited to share their information with the team.


                                       6
<PAGE>
    During the course of  the policy year, extensive use is made of loss control
representatives to assist  underwriters in identifying and correcting  potential
loss  exposures.  The results of each product line are reviewed on a stand-alone
basis.  When the results are below  expectations,  management takes  appropriate
corrective  action  which may  include  raising  rates,  reviewing  underwriting
standards,  altering  or  declining  to renew  accounts  at  expiration,  and/or
terminating agencies with an unprofitable book of business.

    American  Southern also acts as a reinsurer with respect to all of the risks
associated  with  certain  automobile  policies  issued by state  administrative
agencies,  naming the state and various local governmental entities as insureds.
Premiums written from such policies constituted 54% of American Southern's gross
premiums  written in 1997.  Premiums  assumed of $23.7 million  include a single
state contract of $15.9 million.  Management believes that its relationship with
all of its agencies is good;  however,  the loss of any one agency as a customer
could  potentially  have a material  adverse effect on the business or financial
condition of the company.

    Since September 1991,  Georgia Casualty has been a direct assignment carrier
in Georgia and is assigned  direct  workers'  compensation  policies rather than
participating in the National Workers'  Compensation  Reinsurance Pool.  Georgia
Casualty had 171 direct assignment  workers'  compensation  policies in force at
December 31, 1997 with a total net earned  premium of $0.8 million in 1997.  The
total net earned premium  Georgia  Casualty has been assigned has decreased from
$4.0 in 1995, to $2.5 in 1996, and to $0.8 in 1997.

    Georgia  Casualty  continually  evaluates the  industries in which it writes
workers'  compensation and today has a significant book of business in lines and
industries  where the cause of loss is more readily  identifiable and corrective
actions  can  be  implemented  through  loss  control  programs,  safety  plans,
drug-free  workplaces,   re-employment  drug  testing  and  various  other  risk
reduction programs.

    Life and Health Division

    The Life and Health Division  issues single premium life insurance  policies
with face amounts of not less than $1,000. All life insurance policies are fully
underwritten,  but the  majority are issued with  limited  medical  examinations
subject to maximum  policy limits ranging from $100,000 for persons under age 31
to $25,000  for  persons  under age 51.  Medical  examinations  are  required in
connection  with the  issuance  of life  insurance  policies  in excess of these
limits  and  for any  amount  on  policies  issued  to  customers  over  age 50.
Paramedical  examinations  are  ordered at age 41 for all life  applications  of
$50,000  and  above.  Approximately  95% of the net  premiums  earned  for  life
insurance  sold during 1997 were derived from life  insurance  written below the
Life and Health Division's  medical limits.  For the senior market, the Life and
Health Division issue special life products on an accept-or-reject  basis with a
face  amount  from  $15,000 at age 45 to a face  amount of $2,000 at age 85. The
Life and Health  Division only retains a maximum  amount of $50,000 with respect
to any individual life (see "Reinsurance").

    Applications  for  insurance  are  reviewed  as to the  applicant's  age and
medical history and depending upon this information,  additional information may
be  requested  including  the  "Medical  Information  Bureau  Report",   medical
examinations,  statements from doctors,  and, where  indicated,  special medical
tests.  If deemed  necessary,  the Life and Health  Division uses  investigative
services  to  supplement  and  substantiate  information.  For  certain  limited
coverages,  the Life and Health  Division  has adopted  simplified  policy issue
procedures  by which the  applicant  submits a short  application  for coverage,
typically  containing only a few health related  questions instead of presenting
the applicant's  complete medical history. At present,  approximately 20% to 30%
of the senior citizen life applications,  through age 79 on the standard product
and up to age 75 on the  preferred,  are verified by telephone.  For ages 80 and
above, 100% of the standard applicants are verified. All telephone verifications
are  made  by  the  underwriting   department.   Applications  not  meeting  the
underwriting criteria are declined or additional information is requested.

                                       7
<PAGE>
Operating Results

    The following  table sets forth, on a statutory  basis,  the incurred losses
and loss ratios for the Company's  Casualty and Life and Health Divisions during
the past five years.

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

                                1997     1996      1995         1994      1993
                             ---------------------------------------------------
                                          (dollars in thousands)
Casualty (1)
  WORKERS' COMPENSATION:
    Incurred losses          $ 6,740   $ 6,645   $ 9,733(2)   $ 7,243   $ 5,405
    Loss ratio                 52.5%     48.1%      65.1%       61.9%     54.7%
  BUSINESS AUTOMOBILE:
    Incurred losses          $27,237   $23,977   $  1,227     $    602  $   183
    Loss ratio                 69.0%     62.6%      85.5%        57.1%    19.2%
  GENERAL LIABILITY:
    Incurred losses          $ 1,428   $ 1,242   $(1,238)(2)  $  1,080  $   766
    Loss ratio                 31.3%     38.9%         -        101.3%    64.9%
  PROPERTY:
    Incurred losses          $ 1,840   $ 1,700   $    416     $    244  $   223
    Loss ratio                 37.9%     36.0%      47.0%        42.6%    27.9%
  TOTAL CASUALTY:
    Incurred losses          $37,245   $33,546   $ 10,138     $  9,169  $ 6,577
    Loss ratio                 60.3%     55.9%      55.4%        63.7%    51.3%
    Loss adjustment            13.9%     12.4%      15.2%        20.1%    19.2%
      expense ratio
    Expense ratio              25.3%     27.8%      31.4%        27.8%    43.7%
    Combined ratio             99.5%     96.1%     102.0%       111.6%   114.2%

Life and Health
  MEDICARE SUPPLEMENT:
    Incurred losses         $ 7,820    $ 7,136   $  6,688     $  7,582  $ 8,284
    Loss ratio                63.0%      61.7%      57.6%        57.8%    56.5%
  CONVALESCENT CARE:
    Incurred losses         $   867    $   710   $  1,393     $  1,486  $ 1,861
    Loss ratio                74.2%      74.3%     121.0%       110.3%   121.3%
  MEDICAL SURGICAL:
    Incurred losses         $   103    $   187   $    148     $    170  $   279
    Loss ratio                84.4%     116.6%      78.8%        61.4%    84.2%
  CANCER:
    Incurred losses         $   568    $   599   $    714     $    885  $ 1,035
    Loss ratio                31.5%      30.2%      32.9%        37.0%    39.1%
  HOSPITAL INDEMNITY:
    Incurred losses         $    72    $    54   $    171     $    206  $   215
    Loss ratio                30.3%      41.5%      52.9%        51.4%    65.8%
  ACCIDENT EXPENSE:
    Incurred losses         $    47    $   165   $    173     $    526  $   622
    Loss ratio                 9.0%      24.4%      21.9%        58.9%    62.7%
  DISABILITY INCOME:
    Incurred losses         $    90    $    37   $     72     $     84  $    90
    Loss ratio                60.0%      30.2%      50.7%        53.2%    58.5%
  TOTAL LIFE AND HEALTH:
    Incurred losses         $ 9,567    $ 8,888   $  9,359     $ 10,939  $12,386
    Loss ratio                58.3%      57.2%      57.2%        58.9%    59.6%


-----------------------

(1)  Includes American Southern for 1997 and 1996 only.
(2)  Includes adjustment to reallocate reserves to workers' compensation.

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


                                       8
<PAGE>
Policyholder and Claims Services

    The Company believes that prompt, efficient policyholder and claims services
are essential to its continued success in marketing its insurance  products (see
"Competition").  Additionally,  the  Company  believes  that  its  insureds  are
particularly  sensitive to claim  processing  time and to the  accessibility  of
qualified staff to answer inquiries. Accordingly, the Company's policyholder and
claims services include expeditious disposition of service requests by providing
toll-free access to all customers,  24-hour claim reporting services, and direct
computer  links with some of its largest  accounts.  The Company also utilizes a
state-of-the-art  automatic call distribution  system to insure timely response.
Inbound calls to customer  service  support  groups are  processed  efficiently.
Operational data generated from this system allows  management to further refine
ongoing client service programs and service representative training modules.

    The  Company  supports  a  Customer  Awareness  Program as the basis for its
customer  service  philosophy.  All  personnel  are required to attend  customer
service  classes.  Hours  have  been  expanded  in all  service  areas  to serve
customers and agents in all time zones.

    Casualty Division

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

    Georgia Casualty. Georgia Casualty controls its claims costs by utilizing an
in-house staff of adjusters to investigate, verify, negotiate and settle claims.
Upon  notification  of an  occurrence  purportedly  giving rise to a claim,  the
claims department  conducts a preliminary  investigation to determine whether an
insurable event has occurred and, if so, records the claim. This process usually
occurs  within 7 days of  notification  of the  claim.  Where  appropriate,  the
company  utilizes  independent  adjusters and appraisers to service claims which
require on-site inspections.

    Life and Health Division

    Insureds  obtain  claim  forms by  calling  the claims  department  customer
service  group.  To  shorten  claim  processing  time,  a letter  detailing  all
supporting  documents  that are  required to  complete a claim for a  particular
policy is sent to the customer  along with the correct claim form.  With respect
to life  policies,  the claim is  entered  into the Life and  Health  Division's
claims system when the proper  documentation  is received.  Properly  documented
claims are generally paid within three to nine business days of receipt.  During
1997, the Life and Health Division paid approximately 118,000 claims aggregating
$14.5 million,  of which  approximately  113,000 claims aggregating $7.8 million
were for Medicare supplement insurance.


                                       9
<PAGE>
Reserves


    The following table sets forth  information  concerning the Company's losses
and  claims  and loss  adjustment  expenses  ("LAE")  reserves  for the  periods
indicated:

                                                           1997          1996
                                                       -------------------------
           Balance at January 1                          $ 84,074     $ 79,514
           Less: Reinsurance recoverables                 (26,854)     (22,467)
                                                       -------------------------
               Net balance at January 1                    57,220       57,047
                                                       -------------------------

           Incurred related to:
               Current year                                59,655       57,481
               Prior years                                     21       (4,802)
                                                       -------------------------
                   Total incurred                          59,676       52,679
                                                       -------------------------

           Paid related to:
               Current year                                33,857       28,279
               Prior years                                 22,246       24,227
                                                       -------------------------
                   Total paid                              56,103       52,506
           Reserves acquired due to acquisition, net          764           -
                                                       -------------------------
           Net balance at December 31                      61,557       57,220
           Plus:   Reinsurance recoverables                25,164       26,854
                                                       -------------------------
           Balance at December 31                        $ 86,721     $ 84,074
                                                       =========================

    Casualty Division

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

    The  Casualty  Division  establishes  reserves  for claims  based upon:  (a)
management's estimate of ultimate liability and claim adjusters' evaluations for
unpaid  claims  reported  prior  to the  close  of the  accounting  period,  (b)
estimates of incurred but not reported claims based on past experience,  and (c)
estimates of LAE. The estimated  liability is continually  reviewed and updated,
and  changes  to the  estimated  liability  are  recorded  in the  statement  of
operations in the year in which such changes become known.

    The table on the following page sets forth the  development of balance sheet
reserves for unpaid losses and LAE for the Casualty  Division's  insurance lines
for 1987 through 1997,  including  periods  prior to the Company's  ownership of
American Southern.  The top line of the table represents the estimated amount of
losses and LAE for claims  arising  in all prior  years that were  unpaid at the
balance sheet date for each of the indicated  periods,  including an estimate of
losses that have been  incurred  but not yet  reported.  The  amounts  represent
initial reserve estimates at the respective  balance sheet dates for the current
and all prior years. The next portion of the table shows the cumulative  amounts
paid with respect to claims in each  succeeding  year.  The lower portion of the
table shows the  reestimated  amounts of previously  recorded  reserves based on
experience as of the end of each succeeding year.

    The reserve  estimates are modified as more information  becomes known about
the  frequency  and severity of claims for  individual  years.  The  "cumulative
redundancy or deficiency" for each year represents the aggregate  change in such
year's  estimates  through the end of 1997. In evaluating this  information,  it
should be noted that the amount of the  redundancy  or  deficiency  for any year
represents the cumulative  amount of the changes from initial reserve  estimates
for such  year.  Operations  for any one year are only  affected,  favorably  or
unfavorably,  by the  amount  of the  change  in the  estimate  for  such  year.
Conditions and trends that have affected development of the reserves in the past
may not necessarily  occur in the future.  Accordingly,  it is  inappropriate to
predict future redundancies or deficiencies based on the data in this table.

                                       10
<PAGE>

<TABLE>
                                                                Year ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                                   (in thousands)
                                   1997     1996     1995     1994     1993     1992     1991     1990     1989       1988    1987
------------------------------------------------------------------------------------------------------------------------------------
<S><C>                           <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>     <C>        <C>      <C>
Statutory reserve for losses
  and LAE                        $56,712  $53,496  $53,320  $50,154  $48,031  $48,485  $50,808  $52,668 $ 47,819(1)$39,036  $35,770

Cumulative paid as of:
One year later                             18,899   17,865   16,548   18,106   18,827   22,060   22,837   21,321    21,592   20,812
Two years later                                     25,821   25,280   25,914   27,731   32,560   35,278   33,507    32,352   32,975
Three years later                                            29,273   31,021   36,786   38,046   40,768   40,891    39,832   39,168
Four years later                                                      33,674   40,295   41,872   44,267   43,745    43,713   43,249
Five years later                                                               42,498   44,530   47,204   46,183    45,767   46,004
Six years later                                                                         46,523   49,000   48,056    47,880   47,727
Seven years later                                                                                50,658   49,835    49,704   49,671
Eight years later                                                                                         51,100    51,288   51,617
Nine years later                                                                                                    52,424   52,363
Ten years later                                                                                                               53,293

Ultimate losses and LAE
  reestimated as of:

             End of Year          56,712   53,496   53,320   50,154   48,031   48,485   50,808   52,668   47,819(1) 39,036   35,770
          One year later                   51,103   49,799   46,249   47,021   46,756   53,700   53,676   53,212    47,314   40,990
         Two years later                            46,952   44,850   44,043   45,999   52,670   55,919   54,438    53,998   49,569
       Three years later                                     44,138   45,568   48,446   53,040   55,865   56,064    55,313   55,752
        Four years later                                              46,638   53,064   52,326   56,514   55,707    56,255   55,511
        Five years later                                                       54,173   56,771   56,648   56,579    56,403   56,408
         Six years later                                                                57,898   60,515   56,984    57,446   56,868
       Seven years later                                                                         61,069   60,641    58,142   57,901
       Eight years later                                                                                  61,327    60,791   58,626
        Nine years later                                                                                            61,362   61,391
         Ten years later                                                                                                     61,759

Cumulative redundancy
  (deficiency)                            $ 2,393  $ 6,368  $ 6,016  $ 1,393  $(5,688) $(7,090) $(8,401)$(13,508) $(22,326)$(25,989)

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

</FN>
</TABLE>

                                       11
<PAGE>

    Life and Health Division

    The Life and Health Division  establishes future policy benefits reserves to
meet  future  obligations  under  outstanding   policies.   These  reserves  are
calculated to satisfy policy and contract obligations as they mature. The amount
of reserves for insurance  policies is calculated using assumptions for interest
rates, mortality and morbidity rates,  expenses,  and withdrawals.  Reserves are
adjusted periodically based on published actuarial tables with some modification
to reflect  actual  experience  (see Note 3 of Notes to  Consolidated  Financial
Statements for the year ended December 31, 1997).

Reinsurance

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

    Casualty Division

    American Southern. The limits of risks retained by American Southern vary by
type of policy and insured,  and amounts in excess of such limits are reinsured.
The  largest  net amount  insured in any one risk is  $100,000.  Reinsurance  is
generally  maintained  as  follows:  for fire,  inland  marine,  and  commercial
automobile physical damage,  recovery of losses over $40,000 up to $130,000. Net
retentions  for third party  losses are  generally  over $35,000 up to $100,000.
Catastrophe  coverage for all lines  except third party  liability is for 95% of
$6.6 million over $400,000.

    Georgia  Casualty.  Georgia  Casualty's  basic  treaties cover all claims in
excess of $200,000 per person,  per occurrence on casualty losses,  and per risk
on property losses,  up to $10.0 million per casualty claim and $3.0 million per
property claim. An excess  catastrophe  treaty provides coverage up to statutory
limits for any one occurrence on workers'  compenThe  property lines of coverage
are protected with an excess of loss treaty which affords  recovery for property
losses in excess  of  $250,000  up to a  maximum  of $3.0  million.  Facultative
arrangements  are in place for property  accounts  with limits in excess of $3.0
million per risk.

    Life and Health Division

    The Life and Health Division entered into  reinsurance  contracts ceding the
excess of their retention to several primary  reinsurers.  Maximum  retention by
the Life and Health Division on any one individual in the case of life insurance
policies  is  $50,000.  At  December  31,  1997,  the Life and Health  Division'
reinsured  annualized  premiums  totaled $11.8 million of the $318.6  million of
life insurance then in force,  generally under yearly renewable term agreements.
Two companies  accounted for the $11.8 million of  reinsurance:  Munich American
Reassurance  Company  ($9.6  million) and Optimum  Reinsurance  ($2.2  million).
Certain reinsurance agreements no longer active for new business remain in-force
to cover any claims on a run-off basis.

Competition

    Casualty Division

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

    Georgia Casualty.  All of Georgia  Casualty's  insurance  business is highly
competitive.  The  competition can be placed in four  categories:  (1) companies
with higher A.M. Best ratings,  (2) alternative workers'  compensation  markets,
(3)  self-insured  funds,  and (4) insurance  companies  that  actively  solicit
monoline workers' compensation accounts. Georgia Casualty's efforts are directed
in the  following  three  general  categories  where  the  company  has the best


                                       12
<PAGE>
opportunity  to control  exposures and claims:  (1)  manufacturing,  (2) artisan
contractors,  and (3)  service  industries.  Management  believes  that  Georgia
Casualty's  keys to being  competitive  in these  areas are  maintaining  strong
underwriting  standards,  loss control programs,  writing workers'  compensation
coverages as part of the total insurance package,  maintaining and expanding its
loyal network of agents and  development  of new agents in key  territories.  In
addition,  Georgia  Casualty offers quality  customer  service to its agents and
insureds, and provides rehabilitation, medical management, and claims management
services to its insureds.  Georgia Casualty believes that it will continue to be
competitive in the marketplace based on its current strategies and services.

    Life and Health Division

    The life and health insurance  business is highly competitive and includes a
large number of insurance  companies,  many of which have substantially  greater
financial  resources.  The Life and Health  Division  believes  that the primary
competitors  are the Blue  Cross/Blue  Shield  companies,  AARP,  the Prudential
Insurance Company of America, Pioneer Life Insurance Company of Illinois, AFLAC,
American Travellers,  Kanawha Life, American Heritage, Bankers Life and Casualty
Company,  United American Insurance Corporation,  and Standard Life of Oklahoma.
The Life and  Health  Division  competes  with  other  insurers  on the basis of
premium  rates,  policy  benefits,  and service to  policyholders.  The Life and
Health  Division  also  competes  with other  insurers to attract and retain the
allegiance  of  its   independent   agents  through   commission   arrangements,
accessibility and marketing assistance, lead programs, and market expertise. The
Life and Health Division  believes that it competes  effectively on the basis of
policy benefits, services, and market expertise.

Rating

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

    Casualty Division

    American Southern.  American  Southern  and  its   wholly-owned  subsidiary,
American  Safety Insurance Company, are each currently rated "A-" (Excellent) by
A.M. Best.

    Georgia Casualty.  In early 1997, Georgia Casualty received  a Best's rating
of B+ (Very Good).

    Life and Health Division

    Bankers Fidelity.  Bankers Fidelity maintains a Best's  rating  of B+ (Very
Good).

    American  Independent.  American  Independent  is currently  rated C by A.M.
Best, however,  the rating was placed under review with "positive  implications"
following its  acquisition by Atlantic  American and as of the date hereof a new
rating had not been assigned.

Regulation

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

                                       13
<PAGE>
    Most states require that rate schedules and other  information be filed with
the state's insurance regulatory authority,  either directly or through a rating
organization with which the insurer is affiliated.  The regulatory authority may
disapprove  a rate  filing  if it  determines  that the  rates  are  inadequate,
excessive,  or  discriminatory.  The Company  has  historically  experienced  no
significant regulatory resistance to its applications for rate increases.

    A  state  may  require  that  acceptable  securities  be  deposited  for the
protection   either  of  policyholders   located  in  those  states  or  of  all
policyholders.  As of December 31, 1997,  $15.7  million of  securities  were on
deposit  either  directly with various state  authorities  or with third parties
pursuant to various  custodial  agreements  on behalf of the Life and Health and
the Casualty Divisions.

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

NAIC Ratios

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

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

    For the year ended December 31, 1997,  American  Southern,  Georgia Casualty
and Bankers Fidelity were all within the NAIC "usual" range for all 13 financial
ratios.  American Independent was outside the "usual" range on three ratios; net
change in capital and surplus,  net income to total  income and surplus  relief.
These  variances  are a result of  activity  that took place  prior to  Atlantic
American's acquisition of American Independent.

Risk-Based Capital

    RBC is used by rating  agencies and  regulators  as an early warning tool to
identify  weakly  capitalized  companies for the purpose of  initiating  further
regulatory action. The RBC calculation determines the amount of Adjusted Capital
needed  by a company  to avoid  regulatory  action.  "Authorized  Control  Level
Risk-Based  Capital" ("ACL") is calculated;  if a company's  adjusted capital is
200% or lower than ACL, it is subject to  regulatory  action.  At  December  31,
1997, all of the Company's insurance subsidiaries substantially exceeded the RBC
regulatory levels.


                                       14
<PAGE>


Investments

    Investment  income  represents a significant  portion of the Company's total
income.  Insurance  company  investments are subject to state insurance laws and
regulations  which  limit  the  concentration  and  types  of  investments.  The
following  table  provides  information  on the Company's  investments as of the
dates indicated.
<TABLE>
                                                            December 31,
                                   --------------------------------------------------------------------
                                             1997                  1996                 1995
                                   --------------------------------------------------------------------
                                         Amount   Percent      Amount   Percent     Amount   Percent
                                   --------------------------------------------------------------------
<S><C>                                   <C>      <C>          <C>      <C>         <C>      <C>
                                                                 (Dollars in thousands)

Fixed maturities:

Bonds:
  U.S. Government, agencies and
    authorities                        $ 76,701     38.4%    $ 73,097   39.7%     $ 71,549   39.6%
  States, municipalities and
    political subdivisions                2,738      1.4        3,496    1.9        21,947   12.2
  Public utilities                        1,893      1.0        1,505     .8         4,110    2.3
Convertibles and bonds with
  warrants attached                          -       NIL        1,275     .7         1,188     .7

  All other corp. bonds                  10,457      5.5       11,562    6.3        12,829    7.1
  Certificates of deposit                   395      0.2          375     .2         1,690     .9
                                   --------------------------------------------------------------------
    Total fixed maturities(1)            92,184     46.5       91,310   49.6       113,313   62.8
Common and preferred stocks (2)          46,876     23.6       37,762   20.5        42,116   23.3
Mortgage, policy and student loans (3)    9,536      2.1       13,367    7.3        12,642    7.0
Investments in limited partnerships (4)   3,941      2.7           -      -             -      -
Real estate                                  46      NIL           46    NIL            46    NIL
Short-term investments (5)               46,167     23.1       41,614   22.6        12,498    6.9
                                   --------------------------------------------------------------------
    Total investments                  $198,750    100.0%    $184,099  100.0%     $180,615  100.0%
                                   ====================================================================

<FN>
   (1)  Fixed maturities are carried on the balance sheet at market value. Total
        cost of fixed maturities  was  $91.1  millio  as  of  December 31, 1997,
        $91.6 million as  of December 31, 1996, and  $112.9 million  at December
        31, 1995.
   (2)  Equity securities are valued at market.  Total cost of equity  ecurities
        was  $18.4 million as of December 31, 1997, $19.7 million as of December
        31, 1996, and $26.9 million at December 31, 1995.
   (3)  Mortgage loans and  policy  and  student loans  are valued at historical
        cost.
   (4)  Investments  in  traded  limited   partnerships  are valued at estimated
        market value; all other partnership  interests are carried at historical
        cost. Total cost of investments in limited partnerships was $4.0 million
        as of December 31, 1997.
   (5)  Short-term  investments  are valued at cost, which  approximates  market
        value.

</FN>

</TABLE>

                                       15
<PAGE>
Results of the investment portfolio for periods shown were as follows:

                                                    Year Ended December 31,
                                              ----------------------------------
                                                 1997        1996        1995
                                              ----------------------------------
                                                   (Dollars in thousands)

Average investments(1)                        $187,408    $180,816    $106,645
Net investment income                           11,117      11,005       6,142
Average yield on investments                      5.9%        6.1%        5.7%
Realized investment gains, net                 $ 1,076    $  1,589    $  1,731

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

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

Employees

    The Company and its subsidiaries at December 31, 1997 employed 176 people.

Financial Information By Industry Segment

    Financial   information   concerning   the  Company  and  its   consolidated
subsidiaries by industry segment for the three years ended December 31, 1997, is
set  forth  on page 21 of the  1997  Annual  Report  to  Shareholders,  and such
information by industry segment is incorporated herein by reference.

Executive Officers of the Registrant

    The table below and the  information  following the table set forth for each
executive  officer  of  the  Company  as  of  December  31,  1997,  (based  upon
information supplied by each of them) his name, age, positions with the Company,
principal occupation,  and business experience for the past five years and prior
service with the Company.
                                                                   Director or
       Name           Age    Position with the Company            Officer Since
--------------------------------------------------------------------------------

J. Mack Robinson       74   Chairman of the Board                      1974
Hilton H. Howell, Jr.  36   Director, President & CEO                  1992
John W. Hancock        60   Senior Vice President and Treasurer        1989

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

     Mr.  Robinson  has served as Director  and Chairman of the Board since 1974
and  served as  President  and  Chief  Executive  Officer  of the  Company  from
September 1988 to May 1995. In addition, Mr. Robinson is also a Director of Bull
Run Corporation and Gray Communications Systems, Inc.

     Mr. Howell has been  President and Chief  Executive  Officer of the Company
since May 1995,  and prior  thereto  served as Executive  Vice  President of the
Company  from  October  1192 to May 1995.  He has been a Director of the Company
since October 1992. Mr. Howell is the son-in-law of Mr.  Robinson.  He is also a
Director of Bull Run Corporation and Gray Communications Systems, Inc.

    Mr. Hancock has served as Senior Vice President and Treasurer of the Company
since November 1993 and Senior Vice President of the Life Companies since August
1997,  prior thereto  served as Senior Vice  President and Treasurer of the Life
Companies  since  November  1993,  prior  thereto  served as Vice  President and
Treasurer of the Company and each of the Life  Companies  since April 1989,  and
prior thereto served as Controller of the Life Companies since March 1988. He is
also a Director  of  American  Independent,  Bankers  Fidelity  Life and Georgia
Casualty. Prior to joining the Company in 1988, he was Vice President of Finance
with National Consultants, Inc.


                                       16
<PAGE>
Forward-Looking Statements

    Certain of the statements and subject matters  contained herein that are not
based upon historical or current facts deal with or may be impacted by potential
future circumstances and developments,  and should be considered forward-looking
and subject to various risks and uncertainties.  Such forward-looking statements
are made based upon  management's  belief,  as well as  assumptions  made by and
information  currently  available,  to  management  pursuant  to  "safe  harbor"
provisions  of the  Private  Securities  Litigation  Reform  Act of  1995.  Such
statements, and the discussion of such subject areas, involve, and therefore are
qualified  by,  the  inherent  risks  and   uncertainties   surrounding   future
expectations  generally,  and may  materially  differ from the Company's  actual
future  experience  involving any one or more of such subject areas. The Company
has attempted to identify, in context,  certain of the factors that it currently
believes may cause actual future  experience  and results to differ from current
expectations.  The Company's  operations  and results also may be subject to the
effect of other risks and  uncertainties in addition to the relevant  qualifying
factors identified elsewhere herein, including, but not limited to, locality and
seasonality  in the  industries to which the Company  offers its  products,  the
impact of competitive products and pricing,  unanticipated increases in the rate
and number of claims  outstanding,  volatility  in the capital  markets that may
have an impact on the Company's investment portfolio, the uncertainty of general
economic conditions,  and other risks and uncertainties  identified from time to
time in the Company's  periodic  reports filed with the  Securities and Exchange
Commission.  Many of such factors are beyond the Company's ability to control or
predict.  As a result,  the Company's  actual  financial  condition,  results of
operations and stock price could differ  materially  from those expressed in any
forward-looking  statements  made by the Company.  Undue reliance  should not be
placed upon  forward-looking  statements  contained herein. The Company does not
intend to publicly update any  forward-looking  statements that may be made from
time to time by, or on behalf of, the Company.

ITEM 2.  PROPERTIES

    Owned  Properties.  The  Company  owns two  parcels of  unimproved  property
consisting  of  approximately  seven  acres  located  in Fulton  and  Washington
Counties,  Georgia.  At December  31,  1997,  the  aggregate  book value of such
properties was approximately $46,000.

    Leased  Properties.  The Company (with the  exception of American  Southern)
leases space for its principal offices in an office building located in Atlanta,
Georgia, from Delta Life Insurance Company, under leases which expire at various
times from May 31, 2002 to July 31, 2005. Under the current terms of the leases,
the Company  occupies  approximately  54,000 square feet of office space.  Delta
Life  Insurance  Company,  the owner of the  building,  is controlled by J. Mack
Robinson,  Chairman of the Board of  Directors  and largest  shareholder  of the
Company.  The terms of the  leases are  believed  by  Company  management  to be
comparable  to terms  which could be  obtained  by the  Company  from  unrelated
parties for comparable rental property.

    American  Southern  leases  space for its  offices in a building  located in
Atlanta,  Georgia.  The lease term expires January 31, 2000.  Under the terms of
the lease, American Southern occupies approximately 13,700 square feet.

ITEM 3.  LEGAL PROCEEDINGS

Litigation

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

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

    There  were no matters  submitted  to a vote of the  Company's  shareholders
during the quarter ended December 31, 1997.


                                       17
<PAGE>
                                     PART II

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

    The  Company's  common  stock is traded in the  over-the-counter  market and
quoted on the Nasdaq National Market (Symbol:  AAME). As of March 8, 1998, there
were  6,586  shareholders  of  record.  The  following  table sets forth for the
periods  indicated the high and low sale prices of the Company's common stock as
reported on the Nasdaq National Market.

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

1997
     1st quarter                                   $ 3 3/4       $3 1/16
     2nd quarter                                     3 1/4        2 1/2
     3rd quarter                                     4 1/8        2 1/2
     4th quarter                                     5 1/2        4

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


    The  Company has not paid  dividends  to its common  shareholders  since the
fourth  quarter of 1988.  Payment  of  dividends  in the  future  will be at the
discretion  of the  Company's  Board  of  Directors  and  will  depend  upon the
financial condition,  capital requirements,  and earnings of the Company as well
as other  factors as the Board of Directors  may deem  relevant.  The  Company's
primary  sources of cash for the payment of  dividends  are  dividends  from its
subsidiaries.  Under  the  Insurance  Code of the State of  Georgia,  cumulative
dividend  payments  to the Parent  Company  by its  insurance  subsidiaries  are
limited to the  accumulated  statutory  earnings of the  insurance  subsidiaries
without  the  prior  approval  of  the  Insurance  Commissioner.  The  Company's
principal  insurance   subsidiaries  had  the  following  accumulated  statutory
earnings  and/or  (deficits) as of December 31, 1997:  Georgia  Casualty - $13.0
million,  American  Southern  - $19.6  million,  Bankers  Fidelity  Life - $18.0
million. The Company has elected to retain its earnings to grow its business and
does not anticipate paying cash dividends on its common stock in the foreseeable
future.

    A total of 278,561  shares of common  stock were issued in exchange for 100%
of the outstanding stock of SIA, Inc., which shares were issued in reliance upon
the exemption from  registration  provided by Section 4(2) of the Securities Act
of 1993, as amended.


                                       18
<PAGE>
ITEM 6.    SELECTED FINANCIAL DATA

    Selected  financial data of Atlantic  American  Corporation and subsidiaries
for the five year  period  December  31, 1997 is set forth on page 1 of the 1997
Annual Report to Shareholders and is incorporated herein by reference.

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

    Management's  discussion and analysis of financial  condition and results of
operations of Atlantic  American  Corporation and  subsidiaries are set forth on
pages 23 to 27 of the 1997 Annual Report to  Shareholders  and are  incorporated
herein by reference.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The consolidated  financial  statements of the Company and related notes are
set forth on pages 8 to 22 of the 1997  Annual  Report to  Shareholders  and are
incorporated herein by reference.

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

    None.


                                       19
<PAGE>


                                    PART III

With the  exception of  information  relating to the  Executive  Officers of the
Company,  which is provided in Part I hereof,  all information  required by Part
III (Items 10, 11, 12, and 13) is  incorporated  by  reference  to the  sections
entitled "Election of Directors",  "Security Ownership of Management",  "Section
16(a) Beneficial Ownership Compliance",  "Executive  Compensation",  "Employment
Agreements   With   Management",   and   "Certain   Relationships   and  Related
Transactions"  contained  in the  Company's  definitive  proxy  statement  to be
delivered in connection with the Company's  Annual Meeting of Shareholders to be
held May 5, 1998.

                                     PART IV

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

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

FINANCIAL STATEMENTS

                                                                    Page
                                                                  Reference
                                                                  ---------

Consolidated Balance Sheets as of December 31, 1997
  and December 31, 1996                                               8*
Consolidated Statements of Operations for the Three
  Years ended December 31, 1997                                       9*
Consolidated Statements of Shareholders'Equity
  for the Three Years ended December 31, 1997                        10*
Consolidated Statements of Cash Flows for the Three Years
  ended December 31, 1997                                            11*
Notes to Consolidated Financial Statements                        12-22*
Report of Independent Public Accountants                             28*


    * The page references so designated refer to page numbers in the 1997 Annual
Report  to  Shareholders  of  Atlantic  American  Corporation,  which  pages are
incorporated  herein  by  reference.  With  the  exception  of  the  information
specifically  incorporated  within  this Form 10-K,  the 1997  Annual  Report to
Shareholders  of Atlantic  American  Corporation is not deemed to be filed under
the Securities Exchange Act of 1934.



                                       20
<PAGE>
                          FINANCIAL STATEMENT SCHEDULES

             Report of Independent Public Accountants
        II - Condensed  financial  information of registrant for the three years
             ended December 31, 1997 III - Supplementary  Insurance  Information
             for the three years ended December 31, 1997
        IV - Reinsurance for the three years ended December 31, 1997
        VI - Supplemental  Information  concerning  property-casualty  insurance
             operations for the three years ended December 31, 1997

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

                                    EXHIBITS

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

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

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

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

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

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

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

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

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

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

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

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

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

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


                                       21
<PAGE>

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

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

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

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

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

13.1       -  Those portions of the  registrant's  Annual Report to Shareholders
              for  year  ended  December  31,  1997,   that   are   specifically
              incorporated by reference herein.

21.1       -  Subsidiaries of the registrant.

23.1       -  Consent of Arthur Andersen, LLP Independent Public Accountants.

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

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

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

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

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



                                       22
<PAGE>
SIGNATURES

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

                           (Registrant) ATLANTIC AMERICAN CORPORATION

                            By:    /s/
                                 John W. Hancock
                                 Senior Vice President and Treasurer
                                 Date: March 27, 1998

                            By:    /s/
                                 Edward L. Rand, Jr.
                                 Vice President and Controller
                                 Date: March 27, 1998



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

  Signature                             Title                         Date


     /s/
J. MACK ROBINSON                 Chairman of the Board            March 27, 1998

    /s/
HILTON H. HOWELL, JR.            President, Chief Executive
                                 Officer and Director
                                 (Principal Executive Officer)    March 27, 1998

    /s/
JOHN W. HANCOCK                  Senior Vice President and
                                 Treasurer (Principal Financial
                                 Officer)                         March 27, 1998

    /s/
EDWARD L. RAND, JR.              Vice President and
                                 Controller                       March 27, 1998

    /s/
SAMUEL E. HUDGINS                Director                         March 27, 1998

    /s/
D. RAYMOND RIDDLE                Director                         March 27, 1998

    /s/
HARRIETT J. ROBINSON             Director                         March 27, 1998

    /s/
SCOTT G. THOMPSON                Director                         March 27, 1998

    /s/
MARK C. WEST                     Director                         March 27, 1998

    /s/
WILLIAM H. WHALEY, M.D.          Director                         March 27, 1998

    /s/
DOM H. WYANT                     Director                         March 27, 1998


                                       23
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To the Shareholders of
Atlantic American Corporation:


     We have audited,  in accordance with generally accepted auditing standards,
the  consolidated   financial  statements  of  Atlantic  American   Corporation,
incorporated  by reference in this Form 10-K, and have issued our report thereon
dated March 20, 1998. Our audits of the financial  statements  were made for the
purpose  of  forming  an  opinion  on those  statements  taken  as a whole.  The
financial  statement  schedules listed in Item 14 (a) are the  responsibility of
the Company's  management,  are presented for the purpose of complying  with the
Securities  and  Exchange  Commission's  rules,  and are not  part of the  basic
consolidated  financial  statements.  These schedules have been subjected to the
auditing  procedures  applied  in  the  audits  of  the  consolidated  financial
statements  and, in our  opinion,  fairly  state in all  material  respects  the
financial  data  required  to be set  forth  therein  in  relation  to the basic
consolidated financial statements taken as a whole.







                                     ARTHUR ANDERSEN LLP



Atlanta, Georgia
March 20, 1998


                                       24
<PAGE>
                                                                     Schedule II
                                                                     Page 1 of 3


                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                          ATLANTIC AMERICAN CORPORATION
                              (Parent Company Only)

                                 BALANCE SHEETS
                                 (in thousands)


                                             ASSETS


                                                             December 31,

                                                         --------------------
                                                            1997       1996
                                                         ---------  ---------
     Current assets:
          Cash and short-term investments                 $    223   $    382
                                                         ---------  ---------

     Investment in insurance subsidiaries                  107,124     94,797
                                                         ---------  ---------

     Income taxes receivable from subsidiaries                 137         55
     Other assets                                            2,424      2,278
                                                         ---------  ---------
                                                          $109,908   $ 97,512
                                                         =========  =========


                      LIABILITIES AND SHAREHOLDERS' EQUITY

     Current liabilities:
          Notes payable to affiliates                     $     -    $  1,058
          Current portion of long-term debt                  1,000      8,559
          Interest payable                                      -          56
          Other payables                                     3,125      2,076
                                                         ---------  ---------

               Total current liabilities                     4,125     11,749
                                                         ---------  ---------

     Income taxes payable to subsidiaries                       -         633
     Long-term debt                                         27,600     25,994
     Shareholders' equity                                   78,183     59,136
                                                         ---------  ---------
                                                          $109,908   $ 97,512
                                                         =========  =========


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


                                      II-1
<PAGE>
                                                                     Schedule II
                                                                     Page 2 of 3


                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                          ATLANTIC AMERICAN CORPORATION
                              (Parent Company Only)

                            STATEMENTS OF OPERATIONS
                                 (in thousands)




                                                    Year Ended December 31,
                                               ---------------------------------
                                                  1997        1996        1995
                                               ----------  ----------  ---------


     REVENUE
          Fees, rentals and interest income
            from subsidiaries                   $ 3,841      $ 5,662    $ 5,968
          Distributed earnings from
            subsidiaries                         11,209        6,850      2,864
          Other                                      20           94         12
                                               ----------  ----------  ---------
               Total revenue                     15,070       12,606      8,844

     GENERAL AND ADMINISTRATIVE EXPENSES          5,305        6,073      5,555

     INTEREST EXPENSE                             2,902        3,292      2,458
                                               ----------  ----------  ---------
                                                  6,863        3,241        831
     INCOME TAX PROVISION (BENEFIT) (1)          (1,862)      (2,054)      (274)
                                               ----------  ----------  ---------
                                                  8,725        5,295      1,105
     EQUITY IN UNDISTRIBUTED EARNINGS OF
       CONSOLIDATED SUBSIDIARIES, NET              (692)       2,316      2,013
                                               ----------  ----------  ---------

       Income from continuing operations          8,033        7,611      3,118
       (Loss) from discontinued
         operations, net                             -        (4,447)   (10,094)
                                               ----------  ----------  ---------

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


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

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


                                      II-2
<PAGE>
                                                                     Schedule II
                                                                     Page 3 of 3


                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                          ATLANTIC AMERICAN CORPORATION
                              (Parent Company Only)
                            STATEMENTS OF CASH FLOWS
                                 (in thousands)


                                                    Year Ended December 31,
                                               ---------------------------------
                                                  1997        1996        1995
                                               ----------  ----------  ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                          $ 8,033     $ 3,164     $(6,976)
     Adjustments to reconcile net income
       (loss) to net cash  provided by
       operating activities:
         Depreciation and amortization              591         452         379
         Equity in undistributed earnings
           of consolidated subsidiaries             692      (2,316)     (2,013)
         Loss from discontinued operations           -        4,447      10,094
         Change in intercompany taxes              (715)       (245)         -
         Decrease in other liabilities             (157)       (262)       (746)
         Minority interest                           -           -         (554)
         Other, net                                (245)      2,528       1,550
                                               ----------  ----------  ---------
             Net cash provided by
               operating activities               8,199       7,768       1,734
                                               ----------  ----------  ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Investment in subsidiaries, net                 -           -          (38)
     Proceeds from sale of Leath Furniture, net      -        3,645          -
     Acquisition of American Southern
       Insurance Company                             -           -      (22,770)
     Additions to property and equipment           (536)     (1,177)     (1,058)
                                               ----------  ----------  ---------
             Net cash provided (used) by
               investing activities                (536)      2,468     (23,866)
                                               ----------  ----------  ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from issuance of bank financing     5,617      11,352      22,642
     Preferred stock dividends to affiliated       (315)       (315)       (315)
       shareholders
     Purchase of treasury shares                   (558)       (338)       (174)
     Retirements and payments of long-term
       debt and notes payable to affiliates     (12,628)    (20,662)       (675)
     Proceeds from exercise of stock options         62          85         600
                                               ----------  ----------  ---------
             Net cash (used) provided by
               financing activities              (7,822)     (9,878)    220,078
                                               ----------  ----------  ---------


Net increase (decrease) in cash                    (159)        358         (54)
Cash at beginning of year                           382          24          78
                                               ----------  ----------  ---------
Cash at end of year                             $   223     $   382     $    24
                                               ==========  ==========  =========

Supplemental disclosure:
    Cash paid for interest                      $ 2,958     $ 3,763     $ 2,894
                                               ==========  ==========  =========

    Cash paid for income taxes                  $    85     $   116     $   128
                                               ==========  ==========  =========

    Long-term debt, payable to affiliates,
      converted to preferred stock                   -           -      $13,400
                                               ==========  ==========  =========

    Debt to seller for purchase of
      American Southern Insurance Company            -           -      $11,352
                                               ==========  ==========  =========

    Issuance of stock to acquire SIA, Inc.      $ 1,212          -          -
                                               ==========  ==========  =========

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


                                      II-3
<PAGE>




                                                                    Schedule III
                                                                     Page 1 of 2

                 ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                       SUPPLEMENTARY INSURANCE INFORMATION
                                 (in thousands)
<TABLE>
                                         Future Policy
                                        Benefits, Losses,                Other Policy
                       Deferred          Claims and Loss    Unearned       Claims and
      Segment      Acquisition Costs        Reserves        Premiums    Benefits Payable
------------------------------------------------------------------------------------------
<S><C>             <C>                  <C>                 <C>         <C>
December 31, 1997:
   A & H.....            $ 1,517             $  6,890         $ 2,631          $    -
   Life......             11,895               37,180              -             2,001
   Casualty..              3,071               81,839           21,781           1,996
                         -----------------------------------------------------------------
                         $16,483             $125,909(1)       $24,412         $ 3,997
                         =================================================================

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

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


_________________________
<FN>
   (1)Includes future policy benefits of $39,188 and losses and claims of $86,721.
   (2)Includes future policy benefits of $36,385 and losses and claims of $84,074.
   (3)Includes future policy benefits of $36,305 and losses and claims of $79,514.
</FN>
</TABLE>

<PAGE>

                                                                    Schedule III
                                                                     Page 2 of 2


                 ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                     SUPPLEMENTARY INSURANCE INFORMATION(1)
                                 (in thousands)
<TABLE>
                                                     Benefits,    Amortization
                                    Investment    Claims, Losses  of Deferred     Other          Casualty
                         Premium      Income      and Settlement  Acquisition   Operating        Premiums
   Segment               Revenue    (Losses)*(2)     Expenses        Costs      Expenses(2)      Written
   -------               -------    ------------  --------------  ------------  -----------      ---------
<S><C>                  <C>         <C>           <C>             <C>           <C>              <C>
December 31, 1997:
   Life......            $10,453      $ 4,018        $ 7,022        $  540        $ 3,480        $    -
   Casualty..             61,715        7,363         45,442         7,760          7,986         60,562
   A & H.....             16,514        1,157          8,554         1,404          6,564             -
   Other.....                 -            (5)            -             -           4,292             -
                         ---------------------------------------------------------------------------------
                         $88,682      $12,533        $61,018        $9,704        $22,322        $60,562
                         =================================================================================

December 31, 1996:
   Life......            $10,240      $ 4,210        $ 6,446        $1,449        $ 4,543        $    -
   Casualty..........     60,047        7,377         40,245         5,349         13,039         61,068
   A & H.....             15,738        1,234          7,590         1,386          7,565             -
   Other.....                 -           225             -             -           3,644             -
                         ---------------------------------------------------------------------------------
                         $86,025      $13,046        $54,281        $8,184        $28,791         $61,068
                         =================================================================================

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

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

(1) Supplementary insurance information contained above includes amounts related
    to American Southern for 1996 and 1997 only.
(2) Investment  incom  is  allocated  based  on  the  pro  rata  percentages  of
    insurance reserves and  policyholders' funds  attributable  to each  segment
    whereas  other operating expenses are allocated based on premiums collected.
</FN>
</TABLE>

<PAGE>
                                                                     Schedule IV


                 ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                                   REINSURANCE
                                 (in thousands)

<TABLE>
                                                             Ceded To       Assumed
                                                Gross          Other       From Other      Net
                                               Amount        Companies      Companies     Amount
-----------------------------------------------------------------------------------------------------
<S><C>                                        <C>           <C>            <C>           <C>
Year ended December 31, 1997:
  Life insurance in force...........          $318,594         $11,767       $    -      $306,827
                                              =======================================================

Premiums  --
  Life insurance....................          $ 10,540         $    91       $    -      $ 10,449
  Accident and health insurance.....            16,518              -             -        16,518
  Property and casualty insurance(1)            43,721           8,978        26,972       61,715
                                              -------------------------------------------------------
    Total premiums.................           $ 70,779         $ 9,069       $26,972     $ 88,682
                                              =======================================================

Year ended December 31, 1996:
  Life insurance in force...........          $277,891         $10,072       $    -      $267,819
                                              =======================================================

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

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

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

<FN>
(1)  Information contained above includes amounts related to American Southern for 1996 and 1997 only.
</FN>
</TABLE>
<PAGE>
                                                                     Schedule VI


                 ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                       SUPPLEMENTAL INFORMATION CONCERNING

                     PROPERTY-CASUALTY INSURANCE OPERATIONS
                                 (in thousands)
<TABLE>
                                                                         Claims and Claim
                                                                         Adjustment Expenses
                                                                         Incurred Related to
                                                                         -------------------
                                                                                              Amortization  Paid Claims
                      Deferred                                    Net                          of Deferred   and Claim
                        Policy               Unearned  Earned  Investment Current    Prior     Acquisition   Adjustment  Premiums
  Yead Ended         Acquisition  Reserves   Premium   Premium   Income    Year      Years        Costs       Expenses   Written
  ----------         -----------  --------   -------   -------   ------   -------   --------     -------    ----------   --------
<S><C>               <C>          <C>        <C>       <C>       <C>      <C>       <C>          <C>        <C>          <C>
December 31, 1997(1)  $ 3,071     $81,839    $21,781   $61,715   $7,363   $48,562   $(3,003)     $ 7,760      $41,883     $60,562
                      =======     =======    =======   =======   ======   =======   ========     =======      =======


December 31, 1996(1)  $ 2,942     $79,849    $22,965   $60,047   $7,205   $44,468   $(3,403)     $ 5,349      $41,017     $61,068
                      =======     =======    =======   =======   ======   =======   ========     =======      =======     =======


December 31, 1995     $2,657(1)   $74,693(1) $21,918(1)$18,302(2)$2,989(2)$7,002(2) $ 5,985(2)   $    -       $12,923(2)  $19,074(2)
                      ========    =========  =======   =======   ======   ======    =======      =======      =======     =======

<FN>

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

   (2)   Includes Georgia Casualty only.
</FN>
</TABLE>