##### Table of Contents





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

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    December 31, 2008oro

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

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

30319(Zip code)   (Registrants
    telephone number, including area code)
 (404)
    266-5500
  Securities
    registered pursuant to section 12(b) of the Act:
    None
  Securities registered pursuant to Section 12(g) of the
    Act:
  Common
    Stock, $1.00 par value
    (Title of class)
      o þ
  o þ
  þ o
  Regulation S-K 10-K Form 10-K. o
  Rule 12b-2
 Large Accelerated Filer o

Accelerated Filer o

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

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




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##### 





TABLE OF
    CONTENTS
  
  PagePART IItem 1.


Business


2The Company


2Marketing


3Underwriting


4Policyholder and Claims Services


5Reserves


6Reinsurance


11Competition


11Ratings


12Regulation


12NAIC Ratios


13Risk-Based Capital


13Investments


14Employees


15Financial Information by Industry
    Segment


15Available Information


15Executive Officers of the
    Registrant


16Forward-Looking Statements


16Item 1A.


Risk Factors


17Item 1B.


Unresolved Staff Comments


22Item 2.


Properties


22Item 3.


Legal Proceedings


22Item 4.


Submission of Matters to a Vote of Security
    Holders


22PART IIItem 5.


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


23Item 6.


Selected Financial Data


26Item 7.


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


27Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


42Item 8.


Financial Statements and Supplementary Data


44Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


79Item 9A(T).


Controls and Procedures


79Item 9B.


Other Information


79PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


79Item 11.


Executive Compensation


79Item 12.


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


79Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


79Item 14.


Principal Accounting Fees and Services


79PART IVItem 15.


Exhibits and Financial Statement Schedules


80EX-3.1EX-3.2EX-10.11EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1   1




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##### Table of Contents



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




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Year Ended December 31,2008


2007


2006


2005


2004(In thousands)Automobile liability

$
10,904


$
10,936


$
16,163


$
16,723


$
18,944Automobile physical damage


6,628



8,105



9,698



11,002



11,187General liability


7,996



10,349



11,394



11,767



10,102Property


2,374



3,005



3,187



3,692



3,862Surety


8,356



9,180



10,218



8,263



3,967Total

$
36,258


$
41,575


$
50,660


$
51,447


$
48,062   Life
    and Health Operations
      Year Ended December 31,2008


2007


2006


2005


2004(In thousands)Life insurance

$
10,357


$
10,615


$
10,960


$
11,600


$
12,934Medicare supplement


41,402



41,786



44,919



51,414



49,575Other accident and health


3,364



3,848



3,041



2,890



2,933Total health insurance


44,766



45,634



47,960



54,304



52,508Total

$
55,123


$
56,249


$
58,920


$
65,904


$
65,442   Life Insurance
  Medicare Supplement Insurance
  Other Accident and Health Insurance
 Marketing  Property
    and Casualty Operations
   3




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




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##### Table of Contents



and/or
  Life
    and Health Operations
    and/or
 Policyholder
    and Claims Services  24-hour
    Property
    and Casualty Operations
  on-site
  Life
    and Health Operations
   5




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Reserves    2008


2007


2006(In thousands)Balance at January 1

$
51,704


$
55,291


$
53,817Less: Reinsurance recoverables


(13,004
)


(12,266
)


(12,829
)Net balance at January 1


38,700



43,025



40,988Incurred related to:Current year


62,569



65,274



73,167Prior years(1)


(8,723
)


(11,517
)


(9,926
)Total incurred


53,846



53,757



63,241Paid related to:Current year


40,249



41,687



46,355Prior years


14,668



16,395



14,849Total paid


54,917



58,082



61,204Net balance at December 31


37,629



38,700



43,025Plus: Reinsurance recoverables


14,870



13,004



12,266Balance at December 31

$
52,499


$
51,704


$
55,291   (1)
    
    Favorable loss development from property and casualty operations
    for the years ended December 31, 2008, 2007 and 2006 was
    $8.0 million, $8.6 million and $6.7 million,
    respectively. See Note 4 of Notes to Consolidated Financial
    Statements.   6




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7




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Case


IBNR


Total(In thousands)Business automobile

$
10,195


$
9,805


$
20,000Personal automobile/physical damage


966



559



1,525General & other liability


4,846



10,102



14,948Other lines (including life)


2,755



5,469



8,224Medicare supplement


208



5,342



5,550Unallocated loss adjustment reserves






2,252



2,252Total reserves for losses and claims

$
18,970


$
33,529


$
52,499     Property
    and Casualty Operations
  case-by-case
     8




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and/or
 9




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##### Table of Contents



Year Ended December 31,2008


2007


2006


2005


2004


2003


2002


2001


2000


1999


1998(In thousands)Reserve for Losses and LAE

$
44,928


$
43,994


$
45,655


$
43,593


$
42,310


$
39,042


$
44,428


$
46,242


$
48,350


$
48,764


$
46,972Cumulative paid as of:One year later






11,630



18,010



14,254



16,521



13,772



15,825



18,093



20,682



18,267



14,643Two years later










24,793



23,967



24,217



22,202



23,933



26,194



31,687



30,143



25,802Three years later














27,235



28,775



26,673



28,487



31,257



35,865



37,938



31,491Four years later


















31,019



28,645



31,398



33,683



37,223



39,972



34,987Five years later






















30,257



32,820



35,134



38,616



40,816



36,064Six years later


























34,238



35,610



39,166



42,006



36,464Seven years later






























36,814



39,538



42,079



37,528Eight years later


































39,603



42,352



37,595Nine years later






































42,375



37,868Ten years later










































37,891Ultimate losses and LAE reestimated as of:End of year


44,928



43,994



45,655



43,593



42,310



39,042



44,428



46,242



48,350



48,764



46,972One year later






33,663



35,590



34,897



37,280



35,706



42,235



39,628



46,778



45,866



41,834Two years later










34,163



32,929



34,108



34,779



40,099



40,249



43,104



46,065



40,502Three years later














31,560



33,338



31,710



39,260



38,877



42,208



44,800



41,175Four years later


















33,370



31,224



37,163



39,339



41,503



43,792



40,295Five years later






















31,049



37,133



39,067



41,490



43,775



39,621Six years later


























36,914



39,484



41,600



43,674



39,518Seven years later






























39,331



41,822



43,738



39,453Eight years later


































41,652



43,884



39,524Nine years later






































43,762



39,710Ten years later










































39,651Cumulative redundancy (deficiency)





$
10,331


$
11,492


$
12,033


$
8,940


$
7,993


$
7,514


$
6,911


$
6,698


$
5,002


$
7,32123.5
%


25.2
%


27.6
%


21.1
%


20.5
%


16.9
%


14.9
%


13.9
%


10.3
%


15.6
%   and/or
 10




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##### Table of Contents



Life
    and Health Operations
   Reinsurance    Property
    and Casualty Operations
    Life
    and Health Operations
   Competition    Property
    and Casualty Operations
   11




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




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NAIC
    Ratios       Risk-Based
    Capital  Level Risk-Based
 13




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##### Table of Contents



Investments    December 31,2008


2007


2006Amount


Percent


Amount


Percent


Amount


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

$
120,572



62.0
%

$
127,073



63.1
%

$
117,127



55.9
%States, municipalities and political subdivisions


409



0.2



412



0.2



414



0.2Public utilities


9,050



4.7







0.0







0.0All other corporate bonds


25,605



13.2



29,628



14.7



33,792



16.2Redeemable preferred stock


7,361



3.8



10,714



5.3



12,949



6.2Certificates of deposit


100



0.0



100



0.0



100



0.0Total fixed maturities(1)


163,097



83.9



167,927



83.3



164,382



78.5Common and non-redeemable preferred stocks(2)


5,291



2.7



5,335



2.7



22,476



10.7Mortgage, policy and student loans(3)


2,019



1.0



1,958



1.0



3,328



1.6Other invested assets(4)


1,433



0.7



1,563



0.8



1,735



0.8Real estate


38







38







38



Investments in unconsolidated trusts


1,238



0.7



1,238



0.6



1,238



0.6Short-term investments(5)


21,339



11.0



23,432



11.6



16,191



7.8Total investments

$
194,455



100.0
%

$
201,491



100.0
%

$
209,388



100.0
%   (1)
    
    Fixed maturity securities are carried on the balance sheet at
    estimated fair value. Certain fixed maturity securities do not
    have publicly quoted prices, and are carried at estimated fair
    value as determined by management. Total cost of fixed maturity
    securities was $171.3 million as of December 31, 2008,
    $168.7 million as of December 31, 2007, and
    $163.1 million as of December 31, 2006.(2)
    
    Equity securities are carried on the balance sheet at estimated
    fair value. Total cost of equity securities was
    $8.8 million as of December 31, 2008,
    $5.4 million as of December 31, 2007, and
    $7.5 million as of December 31, 2006.(3)
    
    Mortgage, policy and student loans are valued at historical cost.(4)
    
    Investments in other invested assets are accounted for using the
    equity method. Total cost of other invested assets was
    $1.4 million as of December 31, 2008,
    $1.6 million as of December 31, 2007, and
    $1.8 million as of December 31, 2006.(5)
    
    Short-term investments are valued at cost, which approximates
    market value at the measurement date.   14




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Year Ended December 31,2008


2007


2006(Dollars in thousands)Average investments(1)

$
201,372


$
199,614


$
199,236Net investment income


11,688



11,603



11,822Average yield on investments


5.80
%


5.81
%


5.93
%Realized investment gains (losses), net(2)


(3,995
)


12,627



3,084   (1)
    
    Calculated as the average of the balances at the beginning of
    the year and at the end of each of the succeeding four quarters.(2)
    
    Includes a $4.0 million impairment charge in 2008 primarily
    related to the write-down in the value of certain bonds,
    preferred and common stocks. See Note 3 of Notes to
    Consolidated Financial Statements.   Employees   Financial
    Information by Industry Segment   Available
    Information  Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330. http://www.sec.gov. http://www.atlam.com.
 15




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Executive
    Officers of the Registrant    Director orName

Age

Positions with the Company

Officer SinceJ. Mack Robinson


85


Chairman Emeritus


1974Hilton H. Howell, Jr.


46


Chairman of the Board, President & CEO


1992John G. Sample, Jr.


52


Senior Vice President & CFO


2002     Mr. Robinson
  Mr. Howell son-in-law
  Mr. Sample
 Forward-Looking
    Statements   16




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##### Table of Contents



Item 1A.
    Risk
    Factors    The
    financial markets and global economies are undergoing a period
    of significant volatility.
    We
    operate in a highly competitive environment.
    We
    operate in a highly regulated environment.
  and/or
 17




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Our
    revenues may fluctuate with insurance market conditions for
    similar products.
    The
    insurance industry is highly cyclical.
    Our
    revenues and profitability may fluctuate with interest rates and
    investment results.
  and/or
  Changes
    in the value of our investment portfolio may have a material
    impact on our operating results.
    
    credit risk, which is the risk that our invested assets will
    decrease in value due to unfavorable changes in the financial
    prospects or a downgrade in the credit rating of an entity in
    which we have invested;
    interest rate risk, which is the risk that the value of our
    invested assets or our investment income, may decrease due to
    changes in interest rates;
    equity price risk, which is the risk that we will incur economic
    loss due to a decline in equity prices;
    duration risk, which is the risk that our invested assets may
    not adequately match the duration of our insurance liabilities; 18




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##### Table of Contents




    industry sector concentration risk, which is the risk that our
    invested assets are concentrated in a small number of investment
    sectors; and
    general economic conditions that may negatively impact the
    volume or income stream from our invested amounts or require
    that we recognize losses on certain investments.    Our
    operating results may be affected if incurred losses differ from
    our loss reserve estimates.
    Rapidly
    changing benefit costs could have a material impact on our
    operations.
  and/or and/or and/or
  If
    market conditions cause reinsurance to be more costly or
    unavailable, we may be required to assume increased risk or
    reduce the level of our underwriting commitments.
   19




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##### Table of Contents



We
    cannot guarantee that our reinsurers will pay in a timely
    fashion, if at all, and, as a result, we could experience
    losses.
    The
    guaranty fund assessments that we are required to pay to state
    guaranty associations may increase and our results of operations
    and financial condition could suffer as a result.
    The
    unpredictability of court decisions could have a material impact
    on our operations.
    The
    passage of tort reform or other legislation, and the subsequent
    review of such laws by the courts, could have a material impact
    on our operations.
   20




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Catastrophic
    events could have a material adverse effect on our business,
    consolidated operating results, financial condition and/or
    liquidity.
  and/or and/or and/or
  If we
    are unable to maintain favorable financial strength ratings, it
    may be more difficult for us to write new business or renew our
    existing business.
  and/or
  Our
    business could be adversely affected by the loss of independent
    agents.
    Our
    business could be adversely affected by the loss of one or more
    key employees.
    We are
    a holding company and are dependent on dividends and other
    payments from our operating subsidiaries, which are subject to
    dividend restrictions.
    A
    majority of our common stock is held directly and indirectly by
    one family.
   21




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##### Table of Contents



Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties  Leased Properties.
    Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   22




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##### Table of Contents



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

High


Low20081st quarter

$
1.75


$
1.232nd quarter


3.00



1.313rd quarter


1.73



1.044th quarter


1.35



0.5220071st quarter

$
4.04


$
2.902nd quarter


5.44



3.463rd quarter


4.15



2.404th quarter


2.96



1.11    23




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##### Table of Contents



Equity
    Compensation Plan Information
    Number ofsecuritiesremaining availableNumber of





for future issuancesecurities to be





under equityissued upon


Weighted-Average


compensation plansexercise of


exercise price of


(excludingoutstanding


outstanding


securitiesoptions, warrants


options, warrants


reflected in thePlan Category

and rights


and rights


first column)Equity compensation plans approved by security holders


543,500


$
1.44



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










Total


543,500


$
1.44



2,531,406   (1)
    
    All the Companys equity compensation plans have been
    approved by the Companys shareholders.  Issuer
    Purchases of Equity Securities
        TotalNumber of


MaximumShares


Number ofPurchased as


Shares thatPart of


May Yet beTotal





Publicly


PurchasedNumber of


Average


Announced


Under theShares


Price Paid


Plans or


Plans orPeriod

Purchased


per Share


Programs


ProgramsOctober 1  October 31, 2008


13,704


$
1.20



13,704



522,539November 1  November 30, 2008


3,812



1.01



3,812



518,727December 1  December 31, 2008


6,346



1.04



6,346



512,381Total


23,862


$
1.13



23,862  24




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##### Table of Contents



Stock
    Performance Graph
    Total
    Return Performance
  
  Period EndingIndex


12/31/03



12/31/04



12/31/05



12/31/06



12/31/07



12/31/08Atlantic American Corporation



100.00




103.33




90.00




98.67




46.67




24.73Russell 2000 Index



100.00




118.33




123.72




146.44




144.15




95.44SNL Insurance Index



100.00




115.43




135.02




148.40




149.33




79.72NASDAQ Insurance Index



100.00




119.78




130.87




146.72




145.55




128.58Insurance Peer Group*



100.00




144.82




192.67




259.21




296.81




225.69   *
    Insurance Peer Group includes: American Safety Insurance
    Holdings Ltd. (ASI), Donegal Group Inc. (DGICA), National
    Security Group, Inc.(NSEC), Meadowbrook Insurance Group, Inc.
    (MIG), Horace Mann Educators Corp.(HMN), Unico American Corp.
    (UNAM) and Covanta Holding Corp. (CVA).  form 10-K.
 25




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##### Table of Contents



Item 6.
    Selected
    Financial Data  Year Ended December 31,2008


2007


2006


2005


2004(In thousands, except per share data)Insurance premiums

$
91,381


$
97,824


$
109,580


$
117,351


$
113,504Investment income


11,814



11,722



11,926



10,828



10,071Other income


531



799



768



1,105



1,049Realized investment gains (losses), net(1)


(3,995
)


12,627



3,084



(7,303
)


1,154Total revenue


99,731



122,972



125,358



121,981



125,778Insurance benefits and losses incurred


56,830



58,701



65,460



71,201



70,622Other expenses


43,893



45,173



50,274



51,394



47,466Total benefits and expenses


100,723



103,874



115,734



122,595



118,088Income (loss) before income taxes


(992
)


19,098



9,624



(614
)


7,690Income tax expense (benefit)


(526
)


7,513



2,458



(1,746
)


(149
)Income (loss) from continuing operations


(466
)


11,585



7,166



1,132



7,839Income (loss) from discontinued operations, net of tax(2)


(3,417
)


(4,333
)


1,770



(4,307
)


(2,822
)Net income (loss)

$
(3,883
)

$
7,252


$
8,936


$
(3,175
)

$
5,017Basic income (loss) per common share:Income (loss) from continuing operations

$
(.09
)

$
.46


$
.27


$



$
.31Income (loss) from discontinued operations


(.16
)


(.20
)


.09



(.21
)


(.13
)Net income (loss)

$
(.25
)

$
.26


$
.36


$
(.21
)

$
.18Diluted income (loss) per common share:Income (loss) from continuing operations

$
(.09
)

$
.45


$
.27


$



$
.31Income (loss) from discontinued operations


(.16
)


(.20
)


.06



(.21
)


(.13
)Net income (loss)

$
(.25
)

$
.25


$
.33


$
(.21
)

$
.18Tangible book value per common share(3)

$
2.97


$
2.98


$
3.30


$
3.00


$
3.42Common shares outstanding


22,332



21,817



21,481



21,383



21,213Total assets

$
266,609


$
458,254


$
459,152


$
461,366


$
471,274Total long-term debt

$
41,238


$
52,988


$
52,988


$
49,738


$
51,488Total debt

$
41,238


$
53,988


$
53,988


$
51,488


$
53,238Total shareholders equity

$
75,414


$
87,794


$
94,188


$
80,453


$
88,960   (1)
    
    Includes a $4,014 impairment charge in 2008 primarily related to
    the write-down in the value of certain bonds, preferred and
    common stocks. Includes a $12,896 realized gain in 2007 from the
    disposition of the Companys investment in equity
    securities of Wachovia Corporation. Includes a $7,198 impairment
    charge in 2005 for automotive sector fixed maturity investments.
    See Note 3 of Notes to Consolidated Financial Statements.(2)
    
    See Note 2 of Notes to Consolidated Financial Statements.(3)
    
    Excludes goodwill. 26




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations        Critical
    Accounting Policies
    Unpaid loss and loss adjustment expenses
 27




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##### Table of Contents



Future policy benefits
  Deferred acquisition costs
  Receivables
  Cash and investments
 28




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##### Table of Contents



Deferred income taxes
   29




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##### Table of Contents



Overall
    Corporate Results
  Year Ended December 31,2008


2007


2006(In thousands)RevenueProperty and Casualty:American Southern

$
40,466


$
47,046


$
56,593Life and Health:Bankers Fidelity


58,805



74,658



67,443Corporate and Other


460



1,268



1,322Total revenue

$
99,731


$
122,972


$
125,358Income (loss) from continuing operations before income
    taxesProperty and Casualty:American Southern

$
5,817


$
9,462


$
10,625Life and Health:Bankers Fidelity


1,431



16,105



6,754Corporate and Other


(8,240
)


(6,469
)


(7,755
)Income (loss) from continuing operations before income taxes

$
(992
)

$
19,098


$
9,624Income (loss) from discontinued operations, net of tax

$
(3,417
)

$
(4,333
)

$
1,770Net income (loss)

$
(3,883
)

$
7,252


$
8,936      30




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##### Table of Contents



Underwriting
    Results
  American
    Southern
    Year Ended December 31,2008


2007


2006(Dollars in thousands)Gross written premiums

$
43,129


$
42,351


$
55,539Ceded premiums


(6,250
)


(6,379
)


(9,265
)Net written premiums

$
36,879


$
35,972


$
46,274Net earned premiums

$
36,258


$
41,575


$
50,660Net losses and loss adjustment expenses


16,746



18,399



23,440Underwriting expenses


17,903



19,185



22,528Underwriting income

$
1,609


$
3,991


$
4,692Loss ratio


46.2
%


44.3
%


46.3
%Expense ratio


49.4



46.1



44.4Combined ratio


95.6
%


90.4
%


90.7
%          31




---



##### Table of Contents



Year Ended December 31,2008


2007


2006(In thousands)Automobile liability

$
10,904


$
10,936


$
16,163Automobile physical damage


6,628



8,105



9,698General liability


7,996



10,349



11,394Property


2,374



3,005



3,187Surety


8,356



9,180



10,218Total earned premium

$
36,258


$
41,575


$
50,660        32




---



##### Table of Contents



Bankers
    Fidelity
    Year Ended December 31,2008


2007


2006(In thousands)Medicare supplement

$
41,402


$
41,786


$
44,919Other health products


3,364



3,848



3,041Life insurance


10,357



10,615



10,960Total earned premiums


55,123



56,249



58,920Insurance benefits and losses


40,084



40,302



42,020Underwriting expenses


17,290



18,251



18,669Total expenses


57,374



58,553



60,689Underwriting loss

$
(2,251
)

$
(2,304
)

$
(1,769
)    33




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##### Table of Contents



Investment
    Income and Realized Gains
   34




---



##### Table of Contents



2008


2007


2006(In thousands)Corporate securities

$
932


$
123


$
Redeemable preferred stocks

$
2,342


$



$
Common and non-redeemable preferred stocks

$
666


$



$
Other invested assets

$
74


$
123


$
   and/or
  Interest
    Expense
      Other
    Expenses
   35




---



##### Table of Contents



Income
    Taxes
    Liquidity
    and Capital Resources
    and/or
     36




---



##### Table of Contents



1-month, 2-months, 3-months 6-months,
         37




---



##### Table of Contents



New
    Accounting Pronouncements
   38




---



##### Table of Contents



39




---



##### Table of Contents



40




---



##### Table of Contents



Quoted Pricesin Active


SignificantMarkets


Other


Significantfor Identical


Observable


UnobservableAssets


Inputs


Inputs(Level 1)


(Level 2)


(Level 3)


Total(In thousands)Fixed maturity securities

$



$
161,168


$
1,929


$
163,097Equity securities






5,291







5,291Short-term investments


21,339











21,339Total

$
21,339


$
166,459


$
1,929


$
189,727   Impact of
    Inflation
    Off-Balance
    Sheet Arrangements
    Contractual
    Obligations
    Payments Due By PeriodLess than


1-3


3-5


More thanTotal


1 Year


Years


Years


5 Years(In thousands)Junior Subordinated Debentures

$
41,238


$



$



$



$
41,238Interest payable(1)


71,032



2,941



5,881



5,881



56,329Operating leases


900



867



33







Purchase commitments(2)


8,094



8,094











Losses and claims(3)


52,499



26,309



17,709



5,281



3,200Future policy benefits(4)


56,827



8,521



16,308



15,194



16,804Unearned premiums(5)


9,849



5,517



2,913



896



523Other policy liabilities


1,906



1,906











Total

$
242,345


$
54,155


$
42,844


$
27,252


$
118,094   (1)
    
    Interest payable is based on interest rates as of
    December 31, 2008 and assumes that all debt remains
    outstanding until its stated contractual maturity. The interest
    on Junior Subordinated Debentures is at various rates of
    interest.(2)
    
    Represents balances due for goods and/or services which have
    been contractually committed as of December 31, 2008. To
    the extent contracts provide for early termination with notice
    but without penalty, only the amounts contractually due during
    the notice period have been included. 41




---



##### Table of Contents



(3)
    
    Losses and claims include case reserves for reported claims and
    reserves for claims IBNR. While payments due on claim reserves
    are considered contractual obligations because they relate to
    insurance policies issued by the Company, the ultimate amount to
    be paid to settle both case reserves and IBNR reserves is an
    estimate, subject to significant uncertainty. The actual amount
    to be paid is not determined until the Company reaches a
    settlement with any applicable claimant. Final claim settlements
    may vary significantly from the present estimates, particularly
    since many claims will not be settled until well into the
    future. In estimating the timing of future payments by year, the
    Company has assumed that its historical payment patterns will
    continue. However, the actual timing of future payments will
    likely vary materially from these estimates due to, among other
    things, changes in claim reporting and payment patterns and
    large unanticipated settlements. Amounts reflected do not
    include reinsurance amounts which may also be recoverable based
    on the level of ultimate sustained loss.(4)
    
    Future policy benefits relate to life insurance policies on
    which the Company is not currently making payments and will not
    make future payments unless and until the occurrence of an
    insurable event, such as a death or disability, or the
    occurrence of a payment triggering event, such as a surrender of
    a policy. Occurrence of any of these events is outside the
    control of the Company and the payment estimates are based on
    significant uncertainties such as mortality, morbidity,
    expenses, persistency, investment returns, inflation and the
    timing of payments. For regulatory purposes, the Company does
    perform cash flow modeling of such liabilities, which is the
    basis for the indicated disclosure; however, due to the
    significance of the assumptions used, the amount presented could
    materially differ from actual results.(5)
    
    Unearned premiums represent potential future revenue for the
    Company; however, under certain circumstances, such premiums may
    be refundable with cancellation of the underlying policy.
    Significantly all unearned premiums will be earned within the
    following twelve month period as the related future insurance
    protection is provided. Significantly all costs related to such
    unearned premiums have already been incurred and paid and are
    included in deferred acquisition costs; however, future losses
    related to the unearned premiums have not been recorded. The
    contractual obligations related to unearned premiums reflected
    in the table represent the average loss ratio applied to the
    year end unearned premium balances, with loss payments projected
    in comparable proportions to the year end loss and claims
    reserves. Projecting future losses is subject to significant
    uncertainties and the projected payments will most likely vary
    materially from these estimates as a result of differences in
    future severity, frequency and other anticipated and
    unanticipated factors. Amounts reflected do not take into
    account reinsurance amounts which may be recoverable based on
    the level of ultimate sustained loss.  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest
    Rate and Market Risk
      +200bp


+100bp


Fair value


−100bp


−200bp(In thousands)December 31, 2008

$
143,082


$
152,414


$
163,097


$
175,121


$
188,977December 31, 2007

$
148,943


$
157,692


$
167,927


$
178,626


$
191,200  42




---



##### Table of Contents



+20%


+10%


Fair Value


−10%


−20%(In thousands)December 31, 2008  Total equity holdings

$
6,349


$
5,820


$
5,291


$
4,762


$
4,233December 31, 2007  Total equity holdings

$
6,402


$
5,869


$
5,335


$
4,802


$
4,268     Interest Expense





Interest Expense+200bp


+100bp


Debt


−100bp


−200bp(In thousands)December 31, 2008

$
800


$
400


$
41,238


$
(400
)

$
(800
)December 31, 2007

$
1,055


$
528


$
53,988


$
(528
)

$
(1,055
)    43




---



##### Table of Contents



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


45Consolidated Balance Sheets as of
    December 31, 2008 and 2007


46Consolidated Statements of Operations for each of
    the three years in the period ended December 31, 2008


47Consolidated Statements of Shareholders
    Equity for each of the three years in the period ended
    December 31, 2008


48Consolidated Statements of Cash Flows for each of
    the three years in the period ended December 31, 2008


49Notes to Consolidated Financial Statements


50   44




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            BDO SEIDMAN LLP
  Atlanta, Georgia
 March 30, 2009
 45




---



##### Table of Contents



ATLANTIC
    AMERICAN CORPORATION
 CONSOLIDATED
    BALANCE SHEETS  December 31,2008


2007(Dollars in thousands, except per share data)ASSETSCash and cash equivalents, including short-term investments of
    $21,339 and $23,432 in 2008 and 2007, respectively

$
37,321


$
36,909Investments


173,116



178,059Receivables:Reinsurance


14,870



13,004Other, net of allowance for doubtful accounts of $676 and $728
    in 2008 and 2007, respectively


7,789



6,912Deferred income taxes, net


10,577



3,929Deferred acquisition costs


19,160



18,830Other assets


1,648



2,069Goodwill


2,128



2,388Assets of discontinued operations (Note 2)






196,154Total assets

$
266,609


$
458,254LIABILITIES AND SHAREHOLDERS EQUITYInsurance reserves and policyholder funds

$
130,774


$
128,078Accounts payable and accrued expenses


19,183



36,047Debt payable


41,238



53,988Liabilities of discontinued operations (Note 2)






152,347Total liabilities


191,195



370,460Commitments and contingencies (Note 9)Shareholders equity:Preferred stock, $1 par, 4,000,000 shares authorized;Series B preferred, 134,000 shares issued and
    outstanding in 2007; $13,400 redemption value in 2007
    (Note 11)






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


70



70Common stock, $1 par, 50,000,000 shares authorized;22,373,900 shares issued in 2008 and
    21,816,999 shares issued in 2007 and 22,332,087 shares
    outstanding in 2008 and 21,816,999 shares outstanding in
    2007


22,374



21,817Additional paid-in capital


57,107



56,414Retained earnings


5,119



10,530Accumulated other comprehensive loss


(9,200
)


(1,171
)Treasury stock, at cost, 41,813 shares in 2008


(56
)


Total shareholders equity


75,414



87,794Total liabilities and shareholders equity

$
266,609


$
458,254    46




---



##### Table of Contents



ATLANTIC
    AMERICAN CORPORATION
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2008


2007


2006(Dollars in thousands, exceptper share data)Revenue:Insurance premiums

$
91,381


$
97,824


$
109,580Investment income


11,814



11,722



11,926Realized investment gains (losses), net


(3,995
)


12,627



3,084Other income


531



799



768Total revenue


99,731



122,972



125,358Benefits and expenses:Insurance benefits and losses incurred


56,830



58,701



65,460Commissions and underwriting expenses


30,816



32,663



36,404Interest expense


3,298



4,160



4,605Other


9,779



8,350



9,265Total benefits and expenses


100,723



103,874



115,734Income (loss) from continuing operations before taxes


(992
)


19,098



9,624Income tax expense (benefit)


(526
)


7,513



2,458Income (loss) from continuing operations


(466
)


11,585



7,166Income (loss) from discontinued operations, net of tax
    (Note 2)


(3,417
)


(4,333
)


1,770Net income (loss)


(3,883
)


7,252



8,936Preferred stock dividends


(1,528
)


(1,691
)


(1,333
)Net income (loss) applicable to common stock

$
(5,411
)

$
5,561


$
7,603Basic income (loss) per common share:Income (loss) from continuing operations

$
(.09
)

$
.46


$
.27Income (loss) from discontinued operations


(.16
)


(.20
)


.09Net income (loss) applicable to common shareholders

$
(.25
)

$
.26


$
.36Diluted income (loss) per common share:Income (loss) from continuing operations

$
(.09
)

$
.45


$
.27Income (loss) from discontinued operations


(.16
)


(.20
)


.06Net income (loss) applicable to common shareholders

$
(.25
)

$
.25


$
.33    47




---



##### Table of Contents



ATLANTIC
    AMERICAN CORPORATIONCONSOLIDATED STATEMENTS OF SHAREHOLDERS
    EQUITY
  AccumulatedRetained


OtherAdditional


Earnings


ComprehensivePreferred


Common


Paid-In


(Accumulated


Income


TreasuryStock


Stock


Capital


Deficit)


(Loss)


Stock


Total(Dollars in thousands)Balance, December 31, 2005

$
134


$
21,412


$
48,925


$
(2,780
)

$
12,846


$
(84
)

$
80,453Comprehensive income:Net income














8,936











8,936Decrease in unrealized investment gains


















(660
)






(660
)Fair value adjustment to derivative financial instrument


















(165
)






(165
)Minimum pension liability adjustment


















216







216Deferred income tax attributable to other comprehensive income


















213







213Total comprehensive income


























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


















(743
)






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


70







6,930















7,000Dividends accrued on preferred stock










(155
)


(1,178
)










(1,333
)Deferred share compensation expense










4















4Restricted stock grants






22



(22
)














Amortization of unearned compensation










66















66Acquisition of 25,774 shares for treasury






















(70
)


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






50



84



(9
)






146



271Balance, December 31, 2006


204



21,484



55,832



4,969



11,707



(8
)


94,188Comprehensive loss:Net income














7,252











7,252Decrease in unrealized investment gains


















(19,549
)






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


















(575
)






(575
)Minimum pension liability adjustment


















312







312Deferred income tax attributable to other comprehensive loss


















6,934







6,934Total comprehensive loss


























(5,626
)Dividends on preferred stock














(1,691
)










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






227



386















613Deferred share compensation expense






10



(8
)














2Restricted stock grants






12



(12
)














Amortization of unearned compensation










66















66Acquisition of 5,655 shares for treasury






















(23
)


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






84



150











31



265Balance, December 31, 2007


204



21,817



56,414



10,530



(1,171
)






87,794Comprehensive loss:Net loss














(3,883
)










(3,883
)Increase in unrealized investment losses


















(11,538
)






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


















(1,345
)






(1,345
)Minimum pension liability adjustment (Note 10)


















531







531Deferred income tax attributable to other comprehensive loss


















4,323







4,323Total comprehensive loss


























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


(134
)






(13,266
)














(13,400
)Capital contribution (Note 11)










13,795















13,795Dividends on preferred stock














(1,528
)










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






417



91















508Restricted stock grants






29



(29
)














Amortization of unearned compensation










66















66Acquisition of 41,813 shares for treasury






















(56
)


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






111



36















147Balance, December 31, 2008

$
70


$
22,374


$
57,107


$
5,119


$
(9,200
)

$
(56
)

$
75,414    48




---



##### Table of Contents



ATLANTIC
    AMERICAN CORPORATION
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2008


2007


2006(Dollars in thousands)Cash flows from operating activities:Net income (loss)

$
(3,883
)

$
7,252


$
8,936Adjustments to reconcile net income (loss) to net cash (used in)
    provided by operating activities:Amortization of deferred acquisition costs


9,914



11,119



13,697Acquisition costs deferred


(10,244
)


(9,731
)


(11,764
)Realized investment losses (gains), net


3,995



(12,627
)


(3,084
)Increase (decrease) in insurance reserves and policyholder funds


2,696



(6,238
)


(3,497
)Loss (income) from discontinued operations, net


3,417



4,333



(1,770
)Compensation expense related to share awards


66



68



70Depreciation and amortization


318



108



871Deferred income tax (benefit) expense


(2,537
)


3,711



981Goodwill impairment


260



620



(Increase) decrease in receivables, net


(2,359
)


5,067



778(Decrease) increase in other liabilities


(1,229
)


1,507



1,429Other, net


(3,139
)


425



147Net cash (used in ) provided by continuing operations


(2,725
)


5,614



6,794Net cash used in discontinued operations


(3,424
)


(5,629
)


(6,298
)Net cash (used in) provided by operating activities


(6,149
)


(15
)


496Cash flows from investing activities:Proceeds from investments sold


606



22,538



18,384Proceeds from investments matured, called or redeemed


75,835



69,653



24,827Investments purchased


(88,669
)


(78,988
)


(59,683
)Net proceeds from sale of insurance subsidiaries


43,392







Additions to property and equipment


(150
)


(446
)


(286
)Net cash provided by (used in) continuing operations


31,014



12,757



(16,758
)Net cash (used in) provided by discontinued operations (net of
    $35,501 of cash transferred in 2008)


(11,996
)


12,301



(7,666
)Net cash provided by (used in) investing activities


19,018



25,058



(24,424
)Cash flows from financing activities:Proceeds from issuance of Series D Preferred Stock










7,000Redemption of Series B Preferred Stock


(13,400
)






Payment of dividends on Series B Preferred Stock


(1,675
)






Proceeds from exercise of stock options






19



16Purchase of treasury shares


(56
)


(23
)


(70
)Proceeds from bank financing






36,000



15,750Repayments of debt


(12,750
)


(36,000
)


(13,250
)Financing of discontinued operations


4



936



(6,560
)Net cash (used in) provided by continuing operations


(27,877
)


932



2,886Net cash (used in) provided by discontinued operations


(4
)


(936
)


6,560Net cash (used in) provided by financing activities


(27,881
)


(4
)


9,446Net (decrease) increase in cash


(15,012
)


25,039



(14,482
)Cash and cash equivalents at beginning of yearContinuing operations


36,909



17,606



24,684Discontinued operations


15,424



9,688



17,092Total


52,333



27,294



41,776Cash and cash equivalents at end of yearContinuing operations


37,321



36,909



17,606Discontinued operations






15,424



9,688Total

$
37,321


$
52,333


$
27,294Supplemental cash flow information:Cash paid for interest

$
3,393


$
4,195


$
4,711Cash paid for income taxes

$
2,150


$
460


$
609Cash received for income taxes

$



$



$
676    49




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS



(Dollars
    in thousands, except per share amounts)  Note 1.
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation
      Premium
    Revenue and Cost Recognition
    Goodwill
   50




---



##### Table of Contents



Investments
    Income
    Taxes
    Earnings
    Per Common Share
   51




---



##### Table of Contents



Cash
    and Cash Equivalents
    Impact
    of Recently Issued Accounting Standards
         52




---



##### Table of Contents



53




---



##### Table of Contents



Quoted Pricesin Active


SignificantMarkets


Other


Significantfor Identical


Observable


UnobservableAssets


Inputs


Inputs(Level 1)


(Level 2)


(Level 3)


TotalFixed maturity securities

$



$
161,168


$
1,929


$
163,097Equity securities






5,291







5,291Short-term investments


21,339











21,339Total

$
21,339


$
166,459


$
1,929


$
189,727   Use of
    Estimates in the Preparation of Financial
    Statements
    Note 2.
    Discontinued
    Operations   54




---



##### Table of Contents



Year Ended December 31,2008


2007


2006Revenue:Insurance premiums

$
8,789


$
37,031


$
44,125Investment income


1,400



6,343



6,397Realized investment gains, net


8



3,225



3,607Other income


11



26



45Total revenue


10,208



46,625



54,174Benefits and expenses:Insurance benefits and losses incurred


8,657



34,107



26,472Commissions and underwriting expenses


3,800



16,951



25,584Other






3,109



453Total benefits and expenses


12,457



54,167



52,509Income (loss) from discontinued operations before taxes


(2,249
)


(7,542
)


1,665Income tax benefit


(815
)


(3,209
)


(105
)Income (loss) from discontinued operations, net of tax


(1,434
)


(4,333
)


1,770Loss from sale of discontinued operations, net of tax of $415


(1,983
)






Net income (loss) from discontinued operations

$
(3,417
)

$
(4,333
)

$
1,770     December 31,2007Assets of Discontinued Operations:Cash and cash equivalents, including short-term investments of
    $10,585

$
15,424Investments:Fixed maturities (cost: $91,216)


91,088Common and non-redeemable preferred stocks (cost: $2,406)


3,139Other invested assets (cost: $47)


47Total investments


94,274Receivables:Reinsurance


54,391Other


17,570Deferred acquisition costs


3,486Other assets


11,009Total assets

$
196,154Liabilities of Discontinued Operations:Unearned premiums

$
22,065Losses and claims


122,418Accounts payable and accrued expenses


7,864Total liabilities

$
152,347  55




---



##### Table of Contents



Note 3.
    Investments    2008Gross


GrossCarrying


Unrealized


Unrealized


AmortizedValue


Gains


Losses


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

$
120,572


$
1,386


$
123


$
119,309Obligations of states and political subdivisions


409



10







399Corporate securities


34,755



41



7,128



41,842Redeemable preferred stocks


7,361



27



2,381



9,715Total fixed maturities


163,097



1,464



9,632



171,265Common and non-redeemable preferred stocks


5,291



588



4,113



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


1,433











1,433Policy and student loans


2,019











2,019Real estate


38











38Investments in unconsolidated trusts


1,238











1,238Investments


173,116



2,052



13,745



184,809Short-term investments


21,339











21,339Total investments

$
194,455


$
2,052


$
13,745


$
206,148   2007Gross


GrossCarrying


Unrealized


Unrealized


AmortizedValue


Gains


Losses


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

$
127,070


$
994


$
67


$
126,143Obligations of states and political subdivisions


412



14







398Corporate securities


29,728



314



832



30,246Mortgage-backed securities (government guaranteed)


3











3Redeemable preferred stocks


10,714



264



1,416



11,866Total fixed maturities


167,927



1,586



2,315



168,656Common and non-redeemable preferred stocks


5,335



590



621



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


1,563











1,563Policy and student loans


1,958











1,958Real estate


38











38Investments in unconsolidated trusts


1,238











1,238Investments


178,059



2,176



2,936



178,819Short-term investments


23,432











23,432Total investments

$
201,491


$
2,176


$
2,936


$
202,251    56




---



##### Table of Contents



2008Less than 12 months


12 months or longer


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


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

$
27,184


$
123


$



$



$
27,184


$
123Corporate securities


22,423



3,792



5,708



3,336



28,131



7,128Redeemable preferred stocks


2,224



276



3,196



2,105



5,420



2,381Common and non-redeemable preferred stocks


267



2,930



2,100



1,183



2,367



4,113Total temporary impaired securities

$
52,098


$
7,121


$
11,004


$
6,624


$
63,102


$
13,745   2007Less than 12 months


12 months or longer


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


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

$
8,189


$
40


$
4,241


$
27


$
12,430


$
67Corporate securities


9,801



425



5,918



407



15,719



832Redeemable preferred stocks


4,465



657



2,751



759



7,216



1,416Common and non-redeemable preferred stocks


1,980



303



928



318



2,908



621Total temporary impaired securities

$
24,435


$
1,425


$
13,838


$
1,511


$
38,273


$
2,936     2008Carrying


Amortized


UnrealizedValue


Cost


Gains (Losses)U.S. Treasury and Government Agencies

$
120,572


$
119,309


$
1,263Utilities and Telecom


19,785



20,983



(1,198
)Financial Services


21,607



28,586



(6,979
)Diversified Services


3,542



3,787



(245
)Automotive


222



222



Media(1)


1,959



6,502



(4,543
)Other


701



692



9Total

$
168,388


$
180,081


$
(11,693
)     (1)
    
    Media includes related party investments in Gray Television,
    Inc. and Triple Crown Media, Inc. which had an aggregate
    carrying value of $268 and an amortized cost basis of $3,198 at
    December 31, 2008. See Note 14. 57




---



##### Table of Contents



2008


2007


2006Corporate securities

$
932


$
123


$
Redeemable preferred stocks

$
2,342


$



$
Common and non-redeemable preferred stocks

$
666


$



$
Other invested assets

$
74


$
123


$
       2008


2007Carrying


Amortized


Carrying


AmortizedValue


Cost


Value


CostMaturitiesDue in one year or less

$
23,451


$
23,404


$
43,069


$
43,031Due after one year through five years


13,572



14,028



14,389



14,084Due after five years through ten years


13,687



14,909



13,832



13,832Due after ten years


133,726



140,263



120,066



121,138Varying maturities










3



3Totals

$
184,436


$
192,604


$
191,359


$
192,088     2008


2007


2006Fixed maturities

$
10,146


$
9,384


$
9,922Common and non-redeemable preferred stocks


356



767



948Mortgage loans






79



184Short-term investments


1,132



1,297



671Other


180



195



201Total investment income

$
11,814


$
11,722


$
11,926Less investment expenses


(126
)


(119
)


(104
)Net investment income

$
11,688


$
11,603


$
11,822  58




---



##### Table of Contents



2008Fixed


Other InvestedStocks


Maturities


Assets


TotalGains

$



$
27


$



$
27Losses


(666
)


(3,282
)


(74
)


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

$
(666
)

$
(3,255
)

$
(74
)

$
(3,995
)   2007Fixed


Other InvestedStocks


Maturities


Assets


TotalGains

$
12,905


$
21


$



$
12,926Losses






(176
)


(123
)


(299
)Realized investment gains (losses), net

$
12,905


$
(155
)

$
(123
)

$
12,627   2006Fixed


Other InvestedStocks


Maturities


Assets


TotalGains

$
1,738


$
1,201


$
654


$
3,593Losses






(509
)






(509
)Realized investment gains (losses), net

$
1,738


$
692


$
654


$
3,084     2008


2007


2006Common and non-redeemable preferred stocks

$



$
16,635


$
1,666Fixed maturities


491



5,753



15,510Student loans










128Other investments


115



150



1,080Total proceeds

$
606


$
22,538


$
18,384      59




---



##### Table of Contents



Note 4.
    Insurance
    Reserves and Policyholder Funds    Amount of InsuranceIn Force2008


2007


2008


2007Future policy benefitsLife insurance policies:Ordinary

$
45,276


$
44,187


$
242,412


$
228,780Mass market


4,228



4,586



6,167



6,985Individual annuities


285



297







49,789



49,070


$
248,579


$
235,765Accident and health insurance policies


7,038



6,47856,827



55,548Unearned premiums


19,542



18,948Losses, claims and loss adjustment expenses


52,499



51,704Other policy liabilities


1,906



1,878Total insurance reserves and policyholder funds

$
130,774


$
128,078     Future
    Policy Benefits
    Loss
    and Claim Reserves
   60




---



##### Table of Contents



2008


2007


2006Balance at January 1

$
51,704


$
55,291


$
53,817Less: Reinsurance recoverables


(13,004
)


(12,266
)


(12,829
)Net balance at January 1


38,700



43,025



40,988Incurred related to:Current year


62,569



65,274



73,167Prior years


(8,723
)


(11,517
)


(9,926
)Total incurred


53,846



53,757



63,241Paid related to:Current year


40,249



41,687



46,355Prior years


14,668



16,395



14,849Total paid


54,917



58,082



61,204Net balance at December 31


37,629



38,700



43,025Plus: Reinsurance recoverables


14,870



13,004



12,266Balance at December 31

$
52,499


$
51,704


$
55,291       2008


2007


2006Total incurred claims

$
53,846


$
53,757


$
63,241Cash surrender value and matured endowments


1,570



1,413



1,666Benefit reserve changes


1,414



3,531



553Total insurance benefits and losses incurred

$
56,830


$
58,701


$
65,460   Note 5.
    Reinsurance   61




---



##### Table of Contents



2008


2007


2006Direct premiums written

$
95,467


$
96,424


$
111,087Plus  premiums assumed


2,858



2,364



2,929Less  premiums ceded


(6,350
)


(6,729
)


(9,338
)Net premiums written


91,975



92,059



104,678Change in unearned premiums


(594
)


6,242



5,006Change in unearned premiums ceded






(477
)


(104
)Net change in unearned premiums


(594
)


5,765



4,902Net premiums earned

$
91,381


$
97,824


$
109,580Provision for benefits and losses incurred

$
60,786


$
66,641


$
70,217Reinsurance loss recoveries


(3,956
)


(7,940
)


(4,757
)Insurance benefits and losses incurred

$
56,830


$
58,701


$
65,460     2008


2007Receivable on unpaid losses

$
14,870


$
12,929Receivable on paid losses






75$
14,870


$
13,004   Note 6.
    Income
    Taxes    2008


2007


2006Tax expense (benefit) on income or loss from:Continuing operations

$
(526
)

$
7,513


$
2,458Discontinued operations


(1,230
)


(3,209
)


(105
)Total tax expense (benefit) on income or loss


(1,756
)


4,304



2,353Tax expense (benefit) on components of shareholders equity:Net unrealized gains (losses) on investment securities


(4,038
)


(6,842
)


(231
)Fair value adjustment to derivative financial instrument


(471
)


(201
)


(58
)Minimum pension liability adjustment


186



109



(325
)Total tax benefit on shareholders equity


(4,323
)


(6,934
)


(614
)Total tax expense (benefit)

$
(6,079
)

$
(2,630
)

$
1,739  62




---



##### Table of Contents



2008


2007


2006Federal income tax provision at statutory rate of 35%

$
(347
)

$
6,684


$
3,368Tax exempt interest and dividends received deductions


(207
)


(282
)


(401
)Small life deduction


(350
)


(55
)


(579
)Non-deductible goodwill


91



217



Loss carryforward from sale of subsidiaries


(5,155
)






Intercompany fees(1)


1



363



504Other permanent differences


39



38



46Change in asset valuation allowance due to change in judgment
    relating to realizability of deferred tax assets


5,155



333



(569
)Adjustment for prior years estimates to actual


247



205



80State income taxes






10



9Income tax expense (benefit)

$
(526
)

$
7,513


$
2,458     (1)
    
    Intercompany fees from discontinued operations eliminated in
    consolidated tax return.    2008


2007


2006Federal income tax provision at statutory rate of 35%

$
(1,626
)

$
(2,640
)

$
583Tax exempt interest and dividends received deductions


(41
)


(147
)


(170
)Intercompany fees(1)


(1
)


(363
)


(504
)Other permanent differences


438



9



4Adjustment for prior years estimates to actual






(68
)


(26
)State income taxes










8Income tax benefit

$
(1,230
)

$
(3,209
)

$
(105
)     (1)
    
    Intercompany fees from discontinued operations eliminated in
    consolidated tax return.   63




---



##### Table of Contents



2008


2007Deferred tax liabilities:Deferred acquisition costs

$
(2,856
)

$
(2,564
)Deferred and uncollected premiums


(704
)


(672
)Other


(25
)


Total deferred tax liabilities


(3,585
)


(3,236
)Deferred tax assets:Net operating loss carryforwards


2,105



1,263Loss carryforward from sale of subsidiaries


5,155



Insurance reserves


2,918



2,819Impaired assets


3,302



1,333Alternative minimum tax credit


55



Net unrealized investment losses


4,093



266Bad debts and other


1,689



1,484Total deferred tax assets


19,317



7,165Asset valuation allowance


(5,155
)


Net deferred tax assets

$
10,577


$
3,929     2008


2007


2006Current  Federal

$
2,011


$
3,792


$
1,468Current  State






10



9Deferred  Federal


(2,537
)


3,711



981Total

$
(526
)

$
7,513


$
2,458     2008


2007


2006Current  Federal

$
(1,577
)

$
(1,662
)

$
(1,089
)Current  State










8Deferred  Federal


347



(1,547
)


976Total

$
(1,230
)

$
(3,209
)

$
(105
)        64




---



##### Table of Contents



Note 7.
    Credit
    Arrangements  Bank
    Debt
  1-month, 2-months, 3-months 6-months,
    Junior
    Subordinated Debentures
   65




---



##### Table of Contents



Atlantic American


Atlantic AmericanStatutory Trust I


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

$
18,042


$
23,196Balance December 31, 2008


18,042



23,196Balance December 31, 2007


18,042



23,196Coupon rate


LIBOR + 4.00
%


LIBOR + 4.10
%Interest payable


Quarterly



QuarterlyMaturity date


December 4, 2032



May 15, 2033Redeemable by issuer on or after


December 4, 2007



May 15, 2008TRUST PREFERRED SECURITIESIssuance dateSecurities issued


December 4, 2002 
    17,500



May 15, 2003 
    22,500Liquidation preference per security

$
1


$
1Liquidation value


17,500



22,500Coupon rate


LIBOR + 4.00
%


LIBOR + 4.10
%Distribution payable


Quarterly



QuarterlyDistribution guaranteed by(3)


Atlantic American 
    Corporation



Atlantic American
    Corporation     (1)
    
    For each of the respective debentures, the Company has the right
    at any time, and from time to time, to defer payments of
    interest on the Junior Subordinated Debentures for a period not
    exceeding 20 consecutive quarters up to the debentures
    respective maturity dates. During any such period, interest will
    continue to accrue and the Company may not declare or pay any
    cash dividends or distributions on, or purchase, the
    Companys common stock nor make any principal, interest or
    premium payments on or repurchase any debt securities that rank
    equally with or junior to the Junior Subordinated Debentures.
    The Company has the right at any time to dissolve each of the
    trusts and cause the Junior Subordinated Debentures to be
    distributed to the holders of the Trust Preferred Securities.(2)
    
    The Junior Subordinated Debentures are unsecured and rank junior
    and subordinate in right of payment to all senior debt of the
    Parent and are effectively subordinated to all existing and
    future liabilities of its subsidiaries.(3)
    
    The Parent has guaranteed, on a subordinated basis, all of the
    obligations under the Trust Preferred Securities, including
    payment of the redemption price and any accumulated and unpaid
    distributions to the extent of available funds and upon
    dissolution, winding up or liquidation.  Note 8.
    Derivative
    Financial Instruments     66




---



##### Table of Contents



Note 9.
    Commitments
    and Contingencies  Litigation
    Operating
    Lease Commitments
    Year Ending December 31,2009

$
8672010


33Thereafter


Total

$
900   Note 10.
    Employee
    Benefit Plans  Stock
    Options
  and/or and/or
 67




---



##### Table of Contents



2008


2007


2006Weighted





Weighted





WeightedAverage





Average





AverageShares

Shares


Exercise Price


Shares


Exercise Price


Shares


Exercise PriceOptions outstanding, beginning of year


624,000


$
1.42



636,500


$
1.43



649,500


$
1.44Options exercised










(7,000
)


2.68



(9,500
)


1.70Options canceled or expired


(80,500
)


1.28



(5,500
)


1.63



(3,500
)


1.44Options outstanding, end of year


543,500



1.44



624,000



1.42



636,500



1.43Options exercisable


543,500



1.44



624,000



1.42



636,500



1.43Options available for future grant


2,531,406







2,479,594







2,486,491     Outstanding and ExercisableWeighted AverageNumber of


Remaining Life


Weighted AverageRange of Exercise Price

Options


(Years)


Exercise Price$1.00 to $1.50


307,500



2.78


$
1.25$1.51 to $2.00


236,000



4.16


$
1.68543,500     401(k)
    Plan
    Defined
    Benefit Pension Plans
   68




---



##### Table of Contents



Obligation
    and Funded Status
  2008


2007Change in Benefit ObligationNet benefit obligation at beginning of year

$
6,103


$
6,190Service cost


185



204Interest cost


338



330Plan curtailment


(1,005
)


Actuarial loss


(112
)


(316
)Gross benefits paid


(991
)


(305
)Net benefit obligation at end of year


4,518



6,103Change in Plan AssetsFair value of plan assets at beginning of year


3,164



3,154Employer contributions


132



215Actual return on plan assets


(166
)


100Gross benefits paid


(991
)


(305
)Fair value of plan assets at end of year


2,139



3,164Funded Status of PlanFunded status at end of year


(2,379
)


(2,939
)Unrecognized net actuarial loss


375



1,322Unrecognized prior service cost






(7
)Additional minimum liability


(375
)


(1,315
)Net amount recognized in accrued liabilities at end of year

$
(2,379
)

$
(2,939
)       2008


2007Discount rate to determine the projected benefit obligation


5.75
%


5.75
%Projected annual salary increases


4.50
%


4.50
%    69




---



##### Table of Contents



Components
    of Net Periodic Benefit Cost
    2008


2007


2006Service cost

$
185


$
204


$
237Interest cost


338



330



314Expected return on plan assets


(217
)


(216
)


(193
)Net amortization


80



112



155$
386


$
430


$
513     2008


2007


2006Discount rate to determine the net periodic benefit cost


5.75
%


5.75
%


5.50
%Expected long-term rate of return on plan assets used to
    determine net periodic pension cost


7.00
%


7.00
%


7.00
%Projected annual salary increases


4.50
%


4.50
%


4.50
%       Expected
    Cash Flows and Payments
    Note 11.
    Preferred
    Stock   70




---



##### Table of Contents



Note 12.
    Earnings
    Per Common Share    For the Year EndedDecember 31, 2008Per ShareIncome


Shares


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

$
(466
)


21,874Less preferred stock dividends


(1,528
)


Loss from continuing operations applicable to common shareholders

$
(1,994
)


21,874


$
(.09
)   For the Year EndedDecember 31, 2007Per ShareIncome


Shares


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

$
11,585



21,606Less preferred stock dividends


(1,691
)


Income from continuing operations applicable to common
    shareholders


9,894



21,606


$
.46Diluted Earnings Per Common ShareEffect of dilutive stock options






346Income from continuing operations applicable to common
    shareholders

$
9,894



21,952


$
.45   71




---



##### Table of Contents



For the Year EndedDecember 31, 2006Per ShareIncome


Shares


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

$
7,166



21,419Less preferred stock dividends


(1,333
)


Income from continuing operations applicable to common
    shareholders


5,833



21,419


$
.27Diluted Earnings Per Common ShareEffect of dilutive stock options






330Effect of Series B and D Preferred Stock


1,333



5,112Income from continuing operations applicable to common
    shareholders

$
7,166



26,861


$
.27     Note 13.
    Statutory
    Reporting      2008


2007


2006Life and Health, net income

$
1,269


$
11,961


$
3,173Property and Casualty, net income


4,472



8,466



5,955Statutory net income

$
5,741


$
20,427


$
9,128Life and Health, surplus

$
29,876


$
33,810


$
34,467Property and Casualty, surplus


36,439



38,213



34,938Statutory surplus

$
66,315


$
72,023


$
69,405    72




---



##### Table of Contents



Note 14.
    Related
    Party and Other Transactions           73




---



##### Table of Contents



Note 15.
    Segment
    Information    American


Bankers


Corporate


AdjustmentsSouthern


Fidelity


& Other


& Eliminations


ConsolidatedDecember 31, 2008Insurance premiums

$
36,258


$
55,123


$



$



$
91,381Insurance benefits and losses incurred


16,746



40,084











56,830Expenses deferred


(8,419
)


(1,825
)










(10,244
)Amortization and depreciation expense


8,397



1,835











10,232Other expenses


17,925



17,280



16,304



(7,604
)


43,905Total expenses


34,649



57,374



16,304



(7,604
)


100,723Underwriting income (loss)


1,609



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


4,201



3,639



2,884



(2,905
)


7,819Other income


7



43



5,180



(4,699
)


531Income (loss) from continuing operations before income taxes

$
5,817


$
1,431


$
(8,240
)

$



$
(992
)Total revenues

$
40,466


$
58,805


$
8,064


$
(7,604
)

$
99,731Goodwill

$
1,350


$
778


$



$



$
2,128Total assets

$
112,547


$
118,674


$
119,423


$
(84,035
)

$
266,609   American


Bankers


Corporate


Discontinued


AdjustmentsSouthern


Fidelity


& Other


Operations


& Eliminations


ConsolidatedDecember 31, 2007Insurance premiums

$
41,575


$
56,249


$







$



$
97,824Insurance benefits and losses incurred


18,399



40,302















58,701Expenses deferred


(8,398
)


(1,333
)














(9,731
)Amortization and depreciation expense


9,460



1,767















11,227Other expenses


18,123



17,817



16,515







(8,778
)


43,677Total expenses


37,584



58,553



16,515







(8,778
)


103,874Underwriting income (loss)


3,991



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


5,450



18,351



4,372







(3,824
)


24,349Other income


21



58



5,674







(4,954
)


799Income (loss) from continuing operations before income taxes

$
9,462


$
16,105


$
(6,469
)





$



$
19,098Total revenues

$
47,046


$
74,658


$
10,046






$
(8,778
)

$
122,972Goodwill

$
1,350


$
778


$
260






$



$
2,388Total assets

$
116,473


$
129,968


$
110,465


$
196,154


$
(94,806
)

$
458,254   74




---



##### Table of Contents



American


Bankers


Corporate


Discontinued


AdjustmentsSouthern


Fidelity


& Other


Operations


& Eliminations


ConsolidatedDecember 31, 2006Insurance premiums

$
50,660


$
58,920


$







$



$
109,580Insurance benefits and losses incurred


23,440



42,020















65,460Expenses deferred


(11,087
)


(677
)














(11,764
)Amortization and depreciation expense


12,523



2,045















14,568Other expenses


21,092



17,301



17,710







(8,633
)


47,470Total expenses


45,968



60,689



17,710







(8,633
)


115,734Underwriting income (loss)


4,692



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


5,914



8,450



4,341







(3,695
)


15,010Other income


19



73



5,614







(4,938
)


768Income (loss) from continuing operations before income taxes

$
10,625


$
6,754


$
(7,755
)





$



$
9,624Total revenues

$
56,593


$
67,443


$
9,955






$
(8,633
)

$
125,358Goodwill

$
1,350


$
778


$
880






$



$
3,008Total assets

$
122,292


$
128,246


$
113,837


$
194,248


$
(99,471
)

$
459,152   Note 16.
    Disclosures
    About Fair Value of Financial Instruments  and/or
  2008


2007Carrying


Estimated


Carrying


EstimatedAmount


Fair Value


Amount


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

$
37,321


$
37,321


$
36,909


$
36,909Fixed maturities


163,097



163,097



167,927



167,927Common and non-redeemable preferred stocks


5,291



5,291



5,335



5,335Policy and student loans


2,019



2,019



1,958



1,958Other invested assets


1,433



1,433



1,563



1,563Real estate


38



38



38



38Investments in unconsolidated trusts


1,238



1,238



1,238



1,238Liabilities:Debt payable to bank










12,750



12,750Junior Subordinated Debentures


41,238



41,238



41,238



41,238    75




---



##### Table of Contents



Fixed Maturity


DerivativeSecurities


(Liability)Balance, January 1, 2008

$
3,000


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


(1,071
)


(1,345
)Balance, December 31, 2008

$
1,929


$
(2,085
)         Cash
    and Cash Equivalents, including Short-term
    Investments
    Fixed
    Maturities, Common and Non-Redeemable Preferred Stocks and
    Publicly Traded Other Invested Assets
    Non-publicly
    Traded Invested Assets
    Debt
    Payable and Junior Subordinated Debentures
   76




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##### Table of Contents



Note 17.
    Reconciliation
    of Other Comprehensive Income (Loss)    December 31,2008


2007


2006Net realized gains (losses) on investment securities included in
    income (loss) from continuing operations

$
(3,995
)

$
12,627


$
3,084Net realized gains (losses) on investment securities included in
    income (loss) from discontinued operations


8



3,225



3,607Total net realized gains (losses) on investment securities
    included in net income (loss)

$
(3,987
)

$
15,852


$
6,691Other components of comprehensive income (loss):Net pre-tax unrealized gains (losses) on investment securities
    arising during year

$
(15,525
)

$
(3,697
)

$
6,031Reclassification adjustment for net realized (gains) losses on
    investment securities


3,987



(15,852
)


(6,691
)Net pre-tax unrealized losses on investment securities
    recognized in other comprehensive income (loss)


(11,538
)


(19,549
)


(660
)Fair value adjustment to derivative financial instrument


(1,345
)


(575
)


(165
)Minimum pension liability adjustment


531



312



(928
)Deferred income tax attributable to other comprehensive income
    (loss)


4,323



6,934



614$
(8,029
)

$
(12,878
)

$
(1,139
)  77




---



##### Table of Contents



Note 18.
    Quarterly
    Financial Information (Unaudited)    2008


2007First


Second


Third


Fourth


First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


QuarterRevenue

$
25,903


$
25,569


$
25,616


$
22,643
(1)

$
28,287


$
27,753


$
28,516


$
38,416
(3)Income (loss) from continuing operations before income taxes

$
721


$
1,070


$
(64
)

$
(2,719
)(1)

$
891


$
1,305


$
2,432


$
14,470
(3)Income tax expense (benefit)


297



285



102



(1,210
)


475



686



656



5,696Income (loss) from continuing operations


424



785



(166
)


(1,509
)


416



619



1,776



8,774Income (loss) from discontinued operations, net of tax


(2,166
)










(1,251
)(2)


435



(185
)


30



(4,613
)(4)Net income (loss)

$
(1,742
)

$
785


$
(166
)

$
(2,760
)

$
851


$
434


$
1,806


$
4,161Per common share data:Income (loss) from continuing operations

$



$
.02


$
(.03
)

$
(.08
)

$



$
.01


$
.06


$
.38Income (loss) from discontinued operations


(.10
)










(.06
)


.02



(.01
)






(.21
)Basic income (loss) per share

$
(.10
)

$
.02


$
(.03
)

$
(0.14
)

$
.02


$



$
.06


$
.17Income (loss) from continuing operations

$



$
.02


$
(.03
)

$
(.08
)

$



$
.01


$
.06


$
.32Income (loss) from discontinued operations


(.10
)










(.06
)


.02



(.01
)






(.17
)Diluted income (loss) per share

$
(.10
)

$
.02


$
(.03
)

$
(.14
)

$
.02


$



$
.06


$
.15   (1)
    
    Includes a $3.6 million impairment charge primarily related
    to the write-down in the value of certain bonds, preferred and
    common stocks in the fourth quarter of 2008. See Note 3.(2)
    
    Results from a charge related to disputed items and a subsequent
    mutual settlement. See Note 2.(3)
    
    Includes a $12.9 million realized gain from the disposition
    of the Companys investment in equity securities of
    Wachovia Corporation in the fourth quarter of 2007.(4)
    
    Includes a $3.3 million pre-tax adjustment to adjust the
    carrying value of the discontinued operations to their estimated
    fair value. 78




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A(T).
    Controls
    and Procedures  Rules 13a-15(e) 15d-15(e)
    Internal Control  Integrated Framework. Rule 13a-15(f)
      Item 9B.
    Other
    Information   PART III   79




---



##### Table of Contents



Form 10-K
 PART IV  Item 15.
    Exhibits and
    Financial Statement Schedules                    Exhibits*:
  3
.1



Restated Articles of Incorporation of the registrant, as amended.3
.2



Bylaws of the registrant, as amended.10
.01



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



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



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



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



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



Atlantic American Corporation 2002 Stock Incentive Plan
    [incorporated by reference to Exhibit 4.1 to the
    registrants
    Form S-8
    filed on August 2, 2002].10
.07**



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



Credit Agreement, dated as of December 22, 2006 between
    Atlantic American Corporation and Wachovia Bank, National
    Association [incorporated by reference to Exhibit 10.1 to
    the registrants
    Form 8-K
    dated December 22, 2006]. 80




---



##### Table of Contents



10
.09



First Amendment to Credit Agreement and Pledge Agreement, dated
    as of December 22, 2006 between Atlantic American
    Corporation and Wachovia Bank, National Association
    [incorporated by reference to Exhibit 10.1 to the
    registrants
    Form 10-Q
    for the quarter ended March 31, 2008].10
.10



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



First Amendment to Stock Purchase Agreement, dated as of
    March 17, 2009, between Atlantic American Corporation and
    Columbia Mutual Insurance Company.10
.12



Lease Agreement between Georgia Casualty & Surety
    Company, Bankers Fidelity Life Insurance Company, Atlantic
    American Corporation and Delta Life Insurance Company dated as
    of November 1, 2007 [incorporated by reference to
    Exhibit 10.10 to the registrants
    Form 10-K
    for the year ended December 31, 2007].10
.13



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



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



Form of Redemption Letter Agreement entered into by
    registrant and each holder of Series B Preferred Stock
    [incorporated by reference to Exhibit 10.2 to the
    registrants
    Form 8-K
    dated October 31, 2008].14
.1



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



Subsidiaries of the registrant.23
.1



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



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



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



Certifications pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.   *
    
    The registrant agrees to furnish to the Commission upon request
    a copy of any instruments defining the rights of securityholders
    of the registrant that may be omitted from filing in accordance
    with the Commissions rules and regulations.**
    
    Management contract, compensatory plan or arrangement required
    to be filed pursuant to, Part IV, Item 15(c) of
    Form 10-K
    and Item 601 of
    Regulation S-K. 81




---



##### Table of Contents



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

Title

Date/s/  J.
    Mack RobinsonJ.
    Mack Robinson

Chairman Emeritus

March 31, 2009/s/  Hilton
    H. Howell, Jr.Hilton
    H. Howell, Jr.

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

March 31, 2009/s/  John
    G. Sample, Jr.John
    G. Sample, Jr.

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

March 31, 2009/s/  Edward
    E. ElsonEdward
    E. ElsON

Director

March 31, 2009/s/  Samuel
    E. HudginsSamuel
    E. Hudgins

Director

March 31, 2009/s/  D.
    Raymond RiddleD.
    Raymond Riddle

Director

March 31, 2009/s/  Harriett
    J. RobinsonHarriett
    J. Robinson

Director

March 31, 2009/s/  Scott
    G. ThompsonScott
    G. Thompson

Director

March 31, 2009/s/  Mark
    C. WestMark
    C. West

Director

March 31, 2009 82




---



##### Table of Contents



Signature

Title

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

Director

March 31, 2009/s/  Dom
    H. WyantDom
    H. Wyant

Director

March 31, 2009/s/  Harold
    K. FischerHarold
    K. Fischer

Director

March 31, 2009  83




---



##### Table of Contents



SCHEDULE II
    Page 1 of 3
  CONDENSED
    FINANCIAL INFORMATION OF REGISTRANT
  ATLANTIC
    AMERICAN CORPORATION
    (Parent Company Only)
  BALANCE
    SHEETS
  December 31,2008


2007(In thousands)ASSETSCash and short-term investments

$
20,966


$
9,220Investment in subsidiaries


84,035



94,654Investments in unconsolidated trusts


1,238



1,238Deferred tax asset, net


9,917



3,268Income taxes receivable from subsidiaries


3,264



4,888Other assets


2,699



1,380Net investment in discontinued operations






43,807Total assets

$
122,119


$
158,455LIABILITIES AND SHAREHOLDERS EQUITYOther payables

$
5,467


$
16,673Debt payable to bank






12,750Junior subordinated debentures


41,238



41,238Total liabilities


46,705



70,661Shareholders equity


75,414



87,794Total liabilities and shareholders equity

$
122,119


$
158,455  II-1




---



##### Table of Contents



SCHEDULE II
    
    Page 2 of 3
  CONDENSED
    FINANCIAL INFORMATION OF REGISTRANT
  ATLANTIC
    AMERICAN CORPORATION
    (Parent Company Only)
  STATEMENTS
    OF OPERATIONS
  Year Ended December 31,2008


2007


2006(In thousands)REVENUEFee income from subsidiaries

$
4,699


$
4,954


$
4,939Distributed earnings from subsidiaries


5,496



5,576



7,786Other


212



656



745Total revenue


10,407



11,186



13,470GENERAL AND ADMINISTRATIVE EXPENSES


9,104



7,429



8,989INTEREST EXPENSE


3,298



4,160



4,605(1,995
)


(403
)


(124
)INCOME TAX BENEFIT(1)


2,692



526



997697



123



873EQUITY IN UNDISTRIBUTED EARNINGS (LOSSES) OF CONTINUING
    OPERATIONS, NET


(1,163
)


11,462



6,293EQUITY IN EARNINGS (LOSSES) OF DISCONTINUED OPERATIONS, NET


(3,417
)


(4,333
)


1,770NET INCOME (LOSS)

$
(3,883
)

$
7,252


$
8,936   (1)
    
    Under the terms of its tax-sharing agreement with its
    subsidiaries, income tax provisions for the individual companies
    are computed on a separate company basis. Accordingly, the
    Companys income tax benefit results from the utilization
    of the parent company separate return loss to reduce the
    consolidated taxable income of the Company and its subsidiaries. II-2




---



##### Table of Contents



SCHEDULE II
    Page 3 of 3
  CONDENSED
    FINANCIAL INFORMATION OF REGISTRANT
  ATLANTIC
    AMERICAN CORPORATION
    (Parent Company Only)
  STATEMENTS
    OF CASH FLOWS
  Year Ended December 31,2008


2007


2006(In thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)

$
(3,883
)

$
7,252


$
8,936Adjustments to reconcile net income (loss) to net cash (used in)
    provided by operating activities:Realized investment losses (gains)


622



(533
)


(439
)Depreciation and amortization


308



702



692Compensation expense related to share awards


66



68



70Equity in undistributed (earnings) losses of continuing
    operations


1,163



(11,462
)


(6,293
)Equity in (earnings) losses of discontinued operations


3,417



4,333



(1,770
)Decrease (increase) in intercompany taxes


1,624



(3,502
)


1,696Deferred income tax (benefit) expense


(2,537
)


3,711



981Increase (decrease) in other liabilities


2,139



(1,607
)


291Other, net


(2,977
)


249



163Net cash (used in ) provided by operating activities


(58
)


(789
)


4,327CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from investments sold


2







Investments purchased


(3,532
)






Net proceeds from sale of insurance subsidiaries


43,392







Capital contribution to subsidiaries


(96
)






Additions to property and equipment


(85
)


(411
)


(173
)Net cash provided by (used in) investing activities


39,681



(411
)


(173
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuance of Series D Preferred Stock










7,000Redemption of Series B Preferred Stock


(13,400
)






Payment of dividends on Series B Preferred Stock


(1,675
)






Purchase of treasury shares


(56
)


(23
)


(70
)Proceeds from bank financing






36,000



15,750Repayments of debt


(12,750
)


(36,000
)


(13,250
)Proceeds from exercise of stock options






19



16Financing of discontinued operations


4



1,036



(6,560
)Net cash (used in) provided by financing activities


(27,877
)


1,032



2,886Net increase (decrease) in cash


11,746



(168
)


7,040Cash at beginning of year


9,220



9,388



2,348Cash at end of year

$
20,966


$
9,220


$
9,388Supplemental disclosure:Cash paid for interest

$
3,393


$
4,195


$
4,711Cash (received) paid for income taxes

$
2,150


$
450


$
(76
)  II-3




---



##### Table of Contents



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





Other PolicyDeferred


Claims and Loss


Unearned


Claims andSegment

Acquisition Costs


Reserves


Premiums


Benefits Payable(In thousands)December 31, 2008:Bankers Fidelity

$
15,793


$
64,398


$
3,305


$
1,906American Southern


3,367



44,928



16,237$
19,160


$
109,326
(1)

$
19,542


$
1,906December 31, 2007:Bankers Fidelity

$
15,644


$
63,258


$
3,332


$
1,878American Southern


3,186



43,994



15,616$
18,830


$
107,252
(2)

$
18,948


$
1,878December 31, 2006:Bankers Fidelity

$
16,024


$
61,655


$
3,494


$
1,816American Southern


4,194



45,655



21,696$
20,218


$
107,310
(3)

$
25,190


$
1,816   (1)
    
    Includes future policy benefits of $56,827 and losses and claims
    of $52,499.(2)
    
    Includes future policy benefits of $55,548 and losses and claims
    of $51,704.(3)
    
    Includes future policy benefits of $52,019 and losses and claims
    of $55,291. III-1




---



##### Table of Contents



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


AmortizationNet


Claims, Losses


of Deferred


Other


CasualtyPremium


Investment


and Settlement


Acquisition


Operating


PremiumsSegment

Revenue


Income


Expenses


Costs


Expenses


Written(In thousands)December 31, 2008:Bankers Fidelity

$
55,123


$
5,810


$
40,084


$
1,676


$
15,614


$
American Southern


36,258



5,277



16,746



8,238



9,665



36,879Other






601











8,700



$
91,381


$
11,688


$
56,830


$
9,914


$
33,979


$
36,879December 31, 2007:Bankers Fidelity

$
56,249


$
6,091


$
40,302


$
1,713


$
16,538


$
American Southern


41,575



5,497



18,399



9,406



9,779



35,972Other






15











7,737



$
97,824


$
11,603


$
58,701


$
11,119


$
34,054


$
35,972December 31, 2006:Bankers Fidelity

$
58,920


$
6,097


$
42,020


$
1,610


$
17,059


$
American Southern


50,660



5,516



23,440



12,087



10,441



46,274Other






209











9,077



$
109,580


$
11,822


$
65,460


$
13,697


$
36,577


$
46,274  III-2




---



##### Table of Contents



SCHEDULE IV
  ATLANTIC
    AMERICAN CORPORATION AND SUBSIDIARIES
  REINSURANCE
  Ceded To


Assumed





Percentage ofDirect


Other


From Other


Net


Amount AssumedAmount


Companies


Companies


Amounts


To Net(In thousands)Year ended December 31, 2008:Life insurance in force

$
280,909


$
(32,330
)

$



$
248,579Premiums Bankers Fidelity

$
54,998


$
(100
)

$
225


$
55,123



0.4
%American Southern


39,481



(6,250
)


3,027



36,258



8.3
%Total premiums

$
94,479


$
(6,350
)

$
3,252


$
91,381



3.6
%Year ended December 31, 2007:Life insurance in force

$
272,308


$
(36,543
)

$



$
235,765Premiums Bankers Fidelity

$
56,340


$
(350
)

$
259


$
56,249



0.5
%American Southern


45,624



(6,856
)


2,807



41,575



6.8
%Total premiums

$
101,964


$
(7,206
)

$
3,066


$
97,824



3.1
%Year ended December 31, 2006:Life insurance in force

$
269,306


$
(37,238
)

$



$
232,068Premiums Bankers Fidelity

$
58,692


$
(73
)

$
301


$
58,920



0.5
%American Southern


57,369



(9,369
)


2,660



50,660



5.3
%Total premiums

$
116,061


$
(9,442
)

$
2,961


$
109,580



2.7
%  IV-1




---



##### Table of Contents



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


Amortization


Paid ClaimsDeferred











Net


Incurred Related To


of Deferred


and ClaimPolicy





Unearned


Earned


Investment


Current


Prior


Acquisition


Adjustment


PremiumsYear Ended

Acquisition


Reserves


Premium


Premium


Income


Year


Years


Costs


Expenses


Written(In thousands)December 31, 2008

$
3,367


$
44,928


$
16,237


$
36,258


$
5,277


$
24,740


$
(7,994
)

$
8,238


$
17,753


$
36,879December 31, 2007

$
3,186


$
43,994


$
15,616


$
41,575


$
5,497


$
27,009


$
(8,610
)

$
9,406


$
20,723


$
35,972December 31, 2006

$
4,194


$
45,655


$
21,696


$
50,660


$
5,516


$
30,174


$
(6,734
)

$
12,087


$
20,815


$
46,274  VI-1