##### Table of Contents



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, 2006oro

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

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

(I.R.S. employer
    identification no.)4370 Peachtree Road,
    N.E.,Atlanta, Georgia

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)
      o þ
  o þ
  þ o
  Regulation S-K 10-K Form 10-K. o
  Rule 12b-2
  o o þ
  Rule 12b-2 o þ
            DOCUMENTS INCORPORATED BY REFERENCE
  Form 10-K.




---



##### 



TABLE OF
    CONTENTS
  
  PagePART IItem 1.


Business


2The
    Company


2Marketing


4Underwriting


6Policyholder
    and Claims Services


6Reserves


8Reinsurance


12Competition


13Ratings


14Regulation


14NAIC
    Ratios


15Risk-Based
    Capital


15Investments


16Employees


17Financial
    Information by Industry Segment


17Available
    Information


17Executive
    Officers of the Registrant


17Forward-Looking
    Statements


18Item 1A.


Risk
    Factors


18Item 1B.


Unresolved Staff
    Comments


23Item 2.


Properties


23Item 3.


Legal
    Proceedings


23Item 4.


Submission of
    Matters to a Vote of Security Holders


24PART IIItem 5.


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


24Item 6.


Selected Financial
    Data


27Item 7.


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


28Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk


46Item 8.


Financial
    Statements and Supplementary Data


47Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


78Item 9A.


Controls and
    Procedures


78Item 9B.


Other
    Information


78PART IIIItem 10.


Directors and Executive Officers
    of the Registrant


78Item 11.


Executive Compensation


78Item 12.


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


78Item 13.


Certain Relationships and Related
    Transactions


78Item 14.


Principal Accountant Fees and
    Services


78PART IVItem 15.


Exhibits and
    Financial Statement Schedules


79EX-21.1 SUBSIDIARIES OF THE REGISTRANTEX-23.1 CONSENT OF BDO SEIDMAN LLPEX-31.1 SECTION 302, CERTIFICATION OF THE PEOEX-31.2 SECTION 302, CERTIFICATION OF THE PFOEX-32.1 SECTION 906 CERTIFICATIONS OF THE PEO AND PFO   1




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##### Table of Contents



PART I  Item 1.
    Business The
    Company    and/or
  Property
    and Casualty Operations
    Workers Compensation Insurance
  Business Automobile Insurance and/or
  General Liability Insurance
  Property Insurance
  Personal Automobile Insurance and/or
  Surety Bonds
  American Southern.
 2




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##### Table of Contents



Year Ended December 31,2006


2005


2004


2003


2002(In thousands)Automobile liability

$
16,163


$
16,723


$
18,944


$
17,947


$
22,748Automobile physical damage


9,698



11,002



11,187



9,451



9,829General liability


11,394



11,767



10,102



5,777



3,647Property


3,186



3,692



3,862



3,819



3,627Surety


10,218



8,263



3,967



364



63Total

$
50,659


$
51,447


$
48,062


$
37,358


$
39,914   Georgia Casualty.
    Year Ended December 31,2006


2005


2004


2003


2002(In thousands)Workers compensation

$
8,363


$
12,909


$
11,608


$
11,071


$
10,592Business automobile


4,322



11,026



9,470



8,767



7,388General liability


2,001



434



351



2,272



1,761Property


6,532



14,901



13,246



12,209



10,003Total

$
21,218


$
39,270


$
34,675


$
34,319


$
29,744   Association Casualty.
 3




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##### Table of Contents



Year Ended December 31,2006


2005


2004


2003


2002(In thousands)Workers compensation

$
8,374


$
9,613


$
11,357


$
13,196


$
18,950Business automobile


4,899



4,265



4,119



2,307



1,811General liability


1,027



350



558



385



221Property


8,608



6,744



6,647



4,464



3,080Other


















182Total

$
22,908


$
20,972


$
22,681


$
20,352


$
24,244   Life
    and Health Operations
  Bankers Fidelity.
    Year Ended December 31,2006


2005


2004


2003


2002(In thousands)Life insurance

$
10,960


$
11,600


$
12,934


$
13,541


$
15,421Medicare supplement


44,919



51,414



49,575



46,190



42,298Cancer, accident and other health


3,041



2,890



2,933



2,952



2,878Total health


47,960



54,304



52,508



49,142



45,176Total

$
58,920


$
65,904


$
65,442


$
62,683


$
60,597   Life Insurance
  Medicare Supplement Insurance
  Cancer, Accident & Other Health Insurance
 Marketing  Property
    and Casualty Operations
  American Southern.
 4




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##### Table of Contents



Association Casualty.
  Georgia Casualty.
  Life
    and Health Operations
  Bankers Fidelity.
    and/or
   5




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##### Table of Contents



Underwriting  Property
    and Casualty Operations
    and/or
  Life
    and Health Operations
  accept-or-reject ages 45-70, ages 71-80 ages 81-85.
  and/or
 Policyholder
    and Claims Services  24-hour state-of-the-art
 6




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##### Table of Contents



Property
    and Casualty Operations
  on-site
  Life
    and Health Operations
   7




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##### Table of Contents



Reserves    Year Ended December 31,2006


2005


2004(In thousands)Balance at January 1

$
168,617


$
167,133


$
150,092Less: Reinsurance recoverables


(53,352
)


(57,429
)


(41,752
)Net balance at January 1


115,265



109,704



108,340Incurred related to:Current year


102,155



119,455



111,220Prior years


(12,432
)


(6,708
)


(1,899
)Total incurred


89,723



112,747



109,321Paid related to:Current year


56,865



68,792



67,020Prior years


38,345



38,309



41,867Total paid


95,210



107,101



108,887Acquired reserves(1)






(85
)


930Net balance at December 31


109,778



115,265



109,704Plus: Reinsurance recoverables


53,172



53,352



57,429Balance at December 31

$
162,950


$
168,617


$
167,133   (1)
    
    See Note 3 of Notes to Consolidated Financial Statements.       8




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##### Table of Contents



Case


IBNR


Total(In thousands)Workers compensation

$
36,469


$
16,225


$
52,694Business automobile


14,285



15,660



29,945Personal automobile/physical damage


3,055



1,199



4,254General & other liability


8,240



13,686



21,926Commercial multi peril


3,966



21,366



25,332Other lines (including life)


2,041



4,779



6,820Medicare supplement


247



7,928



8,175Unallocated loss adjustment
    reserves






13,804



13,804Total reserves for losses and
    claims

$
68,303


$
94,647


$
162,950    9




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##### Table of Contents



Property
    and Casualty Operations
  case-by-case
      and/or
 10




---



##### Table of Contents



Year Ended December 31,2006


2005


2004


2003


2002


2001


2000


1999


1998


1997


1996(In thousands)Reserve for losses and
    LAE

$
153,314


$
158,393


$
156,415


$
139,560


$
139,802


$
135,948


$
126,263


$
120,235


$
81,070


$
81,657


$
79,776Cumulative paid as
    of:One year later






48,498



53,752



52,420



48,628



52,644



48,780



38,957



26,357



25,799



25,925Two years later










78,614



77,924



81,083



78,654



78,496



63,496



43,749



38,756



38,330Three years later














92,956



97,438



98,580



93,599



80,824



54,408



48,330



45,073Four years later


















106,608



108,587



106,022



90,266



61,981



54,840



50,334Five years later






















114,161



111,833



100,393



66,467



58,891



53,833Six years later


























115,319



104,658



72,925



61,600



56,534Seven years later






























106,749



75,486



65,744



59,029Eight years later


































76,672



68,042



61,671Nine years later






































69,118



63,321Ten years later










































64,259Ultimate losses and LAE
    reestimated as of:End of year


153,314



158,393



156,415



139,560



139,802



135,948



126,263



120,235



81,070



81,657



79,776One year later






142,599



148,576



146,058



143,771



136,606



130,415



115,019



80,174



75,243



76,269Two years later










140,575



144,989



149,552



143,901



136,425



117,289



81,023



73,037



70,734Three years later














140,182



148,755



146,775



140,039



122,099



83,149



75,199



68,816Four years later


















145,602



147,618



143,400



125,006



83,033



76,758



70,932Five years later






















146,298



142,646



129,797



83,182



76,832



72,430Six years later


























142,304



128,299



86,132



76,886



72,243Seven years later






























127,955



85,285



77,692



72,401Eight years later


































85,628



77,574



72,144Nine years later






































77,867



72,208Ten years later










































72,323Cumulative redundancy (deficiency)





$
15,794


$
15,840


$
(622
)

$
(5,800
)

$
(10,350
)

$
(16,041
)

$
(7,720
)

$
(4,558
)

$
3,790


$
7,45310.0
%


10.1
%


−0.4
%


−4.1
%


−7.6
%


−12.7
%


−6.4
%


−5.6
%


4.6
%


9.3
%   and/or
 11




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##### Table of Contents



Life
    and Health Operations
   Reinsurance    Property
    and Casualty Operations
  American Southern.
  Association Casualty.
  Georgia Casualty.
  Life
    and Health Operations
  Bankers Fidelity.
 12




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##### Table of Contents



Competition    Property
    and Casualty Operations
  American Southern.
  Association Casualty.
  Georgia Casualty.
  Life
    and Health Operations
   13




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##### Table of Contents



Ratings      American Southern.
  Association Casualty.
  Georgia Casualty.
  Bankers Fidelity.
 Regulation       14




---



##### Table of Contents



and/or
 NAIC
    Ratios       Risk-Based
    Capital  Level Risk-Based
 15




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##### Table of Contents



Investments    December 31,2006


2005


2004Amount


Percent


Amount


Percent


Amount


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

$
178,395



55.9
%

$
141,572



46.5
%

$
125,855



41.7
%States, municipalities and
    political subdivisions


824



0.3



1,037



0.3



1,144



0.4Public utilities


4,838



1.5



4,932



1.6



5,939



2.0All other corporate bonds


59,561



18.7



61,040



20.1



71,327



23.6Redeemable preferred stock


18,598



5.8



24,889



8.2



24,900



8.2Certificates of deposit


100



0.0



100



0.0



300



0.1Total fixed maturities(1)


262,316



82.2



233,570



76.7



229,465



76.0Common and non-redeemable
    preferred stocks(2)


28,826



9.0



34,445



11.3



38,407



12.7Mortgage, policy and student
    loans(3)


3,327



1.1



4,017



1.3



5,318



1.8Other invested assets(4)


3,030



1.0



3,660



1.2



4,569



1.5Real estate


38







38







38



Investment in unconsolidated trusts


1,238



0.4



1,238



0.4



1,238



0.4Short-term investments(5)


20,188



6.3



27,726



9.1



23,073



7.6Total investments

$
318,963



100.0
%

$
304,694



100.0
%

$
302,108



100.0
%   (1)
    
    Fixed maturity securities are carried on the balance sheet at
    estimated fair value. Total cost of fixed maturity securities
    was $260.4 million as of December 31, 2006,
    $234.2 million as of December 31, 2005, and
    $226.5 million as of December 31, 2004.(2)
    
    Equity securities are carried on the balance sheet at estimated
    fair value. Certain non-redeemable preferred stocks do not have
    publicly quoted values, and are carried at estimated fair value
    as determined by management. Total cost of equity securities was
    $11.3 million as of December 31, 2006,
    $13.7 million as of December 31, 2005, and
    $14.7 million as of December 31, 2004.(3)
    
    Mortgage, policy and student loans are valued at historical cost.(4)
    
    Investments in other invested assets which are traded are valued
    at estimated fair value and the others are accounted for using
    the equity method. Total cost of other invested assets was
    $3.1 million as of December 31, 2006,
    $3.7 million as of December 31, 2005, and
    $4.6 million as of December 31, 2004.(5)
    
    Short-term investments are valued at cost, which approximates
    market value. 16




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##### Table of Contents



Year Ended December 31,2006


2005


2004(Dollars in thousands)Average investments(1)

$
306,927


$
294,411


$
290,256Net investment income


18,148



16,460



15,640Average yield on investments


5.91
%


5.59
%


5.39
%Realized investment gains
    (losses), net(2)


6,691



(10,456
)


2,199   (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 $10.7 million impairment charge in 2005 related
    to the write-down in the value of certain automotive sector
    fixed maturity investments. See Note 2 of Notes to
    Consolidated Financial Statements.   Employees   Financial
    Information By Industry Segment   Available
    Information  Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330. http://www.atlam.com.
 Executive
    Officers of the Registrant    Director orName

Age


Position with the Company

Officer SinceJ. Mack Robinson


83


Chairman of the Board


1974Hilton H. Howell, Jr.


44


Director, President & CEO


1992John G. Sample, Jr.


50


Senior Vice President &
    CFO


2002  17




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##### Table of Contents



Mr. Robinson
  Mr. Howell son-in-law
  Mr. Sample
 Forward-Looking
    Statements    Item 1A.
    Risk
    Factors   18




---



##### Table of Contents



We
    operate in a highly competitive environment.
    We
    operate in a highly regulated environment.
  and/or
  Our
    revenues may fluctuate with insurance market conditions for
    similar products.
    Our
    revenues and profitability may fluctuate with interest rates and
    investment results.
  and/or
 19




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##### Table of Contents



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.
    We
    cannot guarantee that our reinsurers will pay in a timely
    fashion, if at all, and, as a result, we could experience
    losses.
   20




---



##### Table of Contents



The
    guaranty fund assessments that we are required to pay to state
    guaranty associations may increase and 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.
    The
    geographic concentration of our regional property and casualty
    operations ties our performance to the economic, regulatory and
    demographic conditions of the southern United
    States.
   21




---



##### Table of Contents



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.
   22




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##### Table of Contents



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.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties  Leased Properties.
        Item 3.
    Legal
    Proceedings   23




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##### Table of Contents



Item 4.
    Submission
    Of Matters To A Vote Of Security Holders   PART II  Item 5.
    Market
    For Registrants Common Equity, Related Shareholder Matters
    And Issuer Purchases of Equity Securities    Year Ended December 31,

High


Low20061st quarter

$
3.00


$
2.522nd quarter


3.45



2.693rd quarter


3.15



2.254th quarter


3.86



2.2420051st quarter

$
3.27


$
2.952nd quarter


3.15



2.803rd quarter


3.06



2.504th quarter


3.00



2.50    24




---



##### 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


646,500


$
1.44



2,486,491Equity compensation plans not
    approved by security holders


(1
)



(1)


(1
)Total


646,500


$
1.44



2,486,491    (1)
    
    All the Companys equity compensation plans have been
    approved by the Companys shareholders.  Issuer
    Purchases of Equity Securities
        Total Number of


Maximum Number ofShares Purchased as


Shares That May YetTotal Number


Average


Part of Publicly


Be Purchased Underof Shares


Price Paid


Announced Plans or


the Plans orPeriod

Purchased


Per Share


Programs


ProgramsOctober 1 
    October 31, 2006


75


$
2.60



75



576,931November 1 
    November 30, 2006


125



2.77



125



576,806December 1 
    December 31, 2006


16,957



2.85



16,957



559,849Total


17,157


$
2.85



17,157  25




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##### Table of Contents



Performance
    Graph
    
    2001



2002



2003



2004



2005



2006Atlantic American


$
100.00



$
74.09



$
136.36



$
140.91



$
122.73



$
134.55Russell 2000 Index


$
100.00



$
98.14



$
101.68



$
121.80



$
133.07



$
149.19NASDAQ Insurance Index


$
100.00



$
78.42



$
114.00



$
133.38



$
137.81



$
161.24Insurance Peer Group


$
100.00



$
73.24



$
85.56



$
124.02



$
159.72



$
208.02   Factual
    material is obtained from sources believed to be reliable, but
    the publisher is not responsible for any errors or omissions
    contained herein.
    Source:
    Value Line, Inc. and Nasdaq   26




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##### Table of Contents



Item 6.
    Selected
    Financial Data  Year Ended December 31,2006


2005


2004


2003


2002(In thousands, except per share data)Insurance premiums

$
153,705


$
177,593


$
170,860


$
154,712


$
154,499Investment income


18,323



16,685



15,860



15,628



14,011Other income


813



1,263



1,183



900



1,148Realized investment gains
    (losses), net(1)


6,691



(10,456
)


2,199



360



587Total revenue


179,532



185,085



190,102



171,600



170,245Insurance benefits and losses
    incurred


91,932



115,676



113,077



102,343



109,109Other expenses


76,311



76,874



72,704



62,732



58,033Total benefits and expenses


168,243



192,550



185,781



165,075



167,142Income (loss) before income taxes
    and cumulative effect of change in accounting principle


11,289



(7,465
)


4,321



6,525



3,103Income tax expense (benefit)


2,353



(4,290
)


(696
)


(319
)


(498
)Income (loss) before cumulative
    effect of change in accounting principle


8,936



(3,175
)


5,017



6,844



3,601Cumulative effect of change in
    accounting principle(2)


















(15,816
)Net income (loss)

$
8,936


$
(3,175
)

$
5,017


$
6,844


$
(12,215
)Basic earnings (loss) per common
    share:Income (loss) before cumulative
    effect of change in accounting principle

$
.36


$
(.21
)

$
.18


$
.26


$
.10Cumulative effect of change in
    accounting principle(2)


















(.74
)Net income (loss)

$
.36


$
(.21
)

$
.18


$
.26


$
(.64
)Diluted earnings (loss) per common
    share:Income (loss) before cumulative
    effect of change in accounting principle

$
.33


$
(.21
)

$
.18


$
.25


$
.10Cumulative effect of change in
    accounting principle(2)


















(.73
)Net income (loss)

$
.33


$
(.21
)

$
.18


$
.25


$
(.63
)Tangible book value per common
    share(3)

$
3.30


$
3.00


$
3.42


$
3.30


$
2.79Common shares outstanding


21,481



21,383



21,213



21,199



21,374Total assets

$
458,632


$
460,417


$
470,511


$
443,552


$
421,524Total long-term debt

$
52,988


$
49,738


$
51,488


$
53,238


$
48,042Total debt

$
53,988


$
51,488


$
53,238


$
56,238


$
50,042Total shareholders equity

$
94,188


$
80,453


$
88,960


$
86,893


$
78,540    (1)
    
    Includes a $10,709 impairment charge in 2005 for automotive
    sector fixed maturity investments. See Note 2 of Notes to
    Consolidated Financial Statements.(2)
    
    Represents a cumulative effect of change in accounting principle
    with respect to the adoption of Statement of Financial
    Accounting Standards No. 142 regarding goodwill.(3)
    
    Excludes goodwill. 27




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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
 28




---



##### Table of Contents



Future policy benefits
  Deferred acquisition costs
  Receivables
  Cash and investments
  Deferred income taxes
 29




---



##### Table of Contents



Overall
    Corporate Results
  Year Ended December 31,2006


2005


2004(In thousands)RevenueProperty and Casualty:American Southern

$
56,592


$
52,925


$
53,277Association Casualty


25,899



22,626



25,278Georgia Casualty


28,274



40,480



39,046Total property and casualty


110,765



116,031



117,601Life and Health:Bankers Fidelity


67,444



68,255



71,369Corporate and Other


1,323



799



1,132Total revenue

$
179,532


$
185,085


$
190,102Income (loss) before income
    taxesProperty and Casualty:American Southern

$
10,624


$
4,765


$
8,024Association Casualty


3,907



1,342



2,094Georgia Casualty


(2,243
)


(8,191
)


(5,463
)Total property and casualty


12,288



(2,084
)


4,655Life and Health:Bankers Fidelity


6,755



2,208



5,863Corporate and Other


(7,754
)


(7,589
)


(6,197
)Total income (loss) before income
    taxes

$
11,289


$
(7,465
)

$
4,321Net income (loss)

$
8,936


$
(3,175
)

$
5,017    30




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##### Table of Contents



31




---



##### Table of Contents



Underwriting
    Results
  American
    Southern
    Year Ended December 31,2006


2005


2004(Dollars in thousands)Gross written premiums

$
55,539


$
62,081


$
60,278Ceded premiums


(9,265
)


(9,099
)


(9,268
)Net written premiums

$
46,274


$
52,982


$
51,010Net earned premiums

$
50,659


$
51,447


$
48,062Net losses and loss adjustment
    expenses


23,440



24,827



24,795Underwriting expenses


22,528



23,333



20,458Underwriting income

$
4,691


$
3,287


$
2,809Loss ratio


46.3
%


48.2
%


51.6
%Expense ratio


44.4



45.4



42.6Combined ratio


90.7
%


93.6
%


94.2
%          32




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##### Table of Contents



Year Ended December 31,2006


2005


2004(In thousands)Automobile liability

$
16,163


$
16,723


$
18,944Automobile physical damage


9,698



11,002



11,187General liability


11,394



11,767



10,102Property


3,186



3,692



3,862Surety


10,218



8,263



3,967Total earned premium

$
50,659


$
51,447


$
48,062            33




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##### Table of Contents



Association
    Casualty
    Year Ended December 31,2006


2005


2004(Dollars in thousands)Direct written premiums(1)

$
35,331


$
25,077


$
22,322Assumed written premiums(2)


67



745



5,913Gross written premiums


35,398



25,822



28,235Ceded premiums(1)


(10,604
)


(5,685
)


(4,703
)Net written premiums

$
24,794


$
20,137


$
23,532Net earned premiums

$
22,908


$
20,972


$
22,681Net losses and loss adjustment
    expenses


10,029



12,410



13,785Underwriting expenses


11,963



8,874



9,399Underwriting income (loss)

$
916


$
(312
)

$
(503
)Loss ratio


43.8
%


59.2
%


60.8
%Expense ratio


52.2



42.3



41.4Combined ratio


96.0
%


101.5
%


102.2
%    (1)
    
    Excludes $16.2 million and $22.2 million in written
    premiums ceded to Georgia Casualty in 2005 and 2004,
    respectively.(2)
    
    Written premiums of $0.7 million in 2005 and
    $5.9 million in 2004 assumed from Georgia Casualty under a
    quota share reinsurance agreement and eliminated in
    consolidation. This agreement was terminated effective
    August 31, 2005.         34




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##### Table of Contents



Year Ended December 31,2006


2005


2004(In thousands)Workers compensation

$
8,374


$
9,613


$
11,357Business automobile


4,899



4,265



4,119General liability


1,027



350



558Property


8,608



6,744



6,647Total earned premium

$
22,908


$
20,972


$
22,681          35




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##### Table of Contents



Georgia
    Casualty
    Year Ended December 31,2006


2005


2004(Dollars in thousands)Gross written premiums(1)

$
20,715


$
48,388


$
65,345Ceded premiums


(8,747
)


(19,943
)


(17,479
)Ceded premiums(2)


(67
)


(745
)


(5,913
)Net written premiums

$
11,901


$
27,700


$
41,953Net earned premiums

$
21,218


$
39,270


$
34,675Net losses and loss adjustment
    expenses


16,443



32,064



28,670Underwriting expenses


14,074



16,607



15,839Underwriting loss

$
(9,299
)

$
(9,401
)

$
(9,834
)Loss ratio


77.5
%


81.6
%


82.7
%Expense ratio


66.3



42.3



45.7Combined ratio


143.8
%


123.9
%


128.4
%    (1)
    
    Includes $16.2 million and $22.2 million in written
    premiums assumed from Assocation Casualty in 2005 and 2004,
    respectively.(2)
    
    Written premiums of $0.7 million in 2005 and
    $5.9 million in 2004 ceded to Association Casualty under a
    quota share reinsurance agreement and eliminated in
    consolidation. This agreement was terminated effective
    August 31, 2005.       36




---



##### Table of Contents



Year Ended December 31,2006


2005


2004(In thousands)Workers compensation

$
8,363


$
12,909


$
11,608Business automobile


4,322



11,026



9,470General liability


2,001



434



351Property


6,532



14,901



13,246Total earned premium

$
21,218


$
39,270


$
34,675          37




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##### Table of Contents



Bankers
    Fidelity
    Year Ended December 31,2006


2005


2004(In thousands)Medicare supplement

$
44,919


$
51,414


$
49,575Other health products


3,041



2,890



2,933Life insurance


10,960



11,600



12,934Total earned premium


58,920



65,904



65,442Insurance benefits and losses


42,020



46,375



45,827Underwriting expenses


18,669



19,672



19,679Total expenses


60,689



66,047



65,506Underwriting loss

$
(1,769
)

$
(143
)

$
(64
)        38




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##### Table of Contents



Investment
    Income And Realized Gains
      2006


2005


2004(In thousands)Corporate bonds

$



$
9,492


$
Redeemable preferred stocks

$



$
1,274


$
281Common stocks

$



$



$
179   and/or
  Interest
    Expense
     39




---



##### Table of Contents



Other
    Expenses
      Liquidity
    And Capital Resources
       40




---



##### Table of Contents



1-month, 2-months, 3-months 6-months,
       41




---



##### Table of Contents



New
    Accounting Pronouncements
     42




---



##### Table of Contents



05-1, (SOP 05-1). SOP 05-1 SOP 05-1 SOP 05-1
   43




---



##### Table of Contents



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)Bank debt payable

$
12,750


$
1,000


$
3,500


$
8,250


$
Junior Subordinated Debentures


41,238















41,238Interest payable(1)


101,482



4,681



8,353



8,510



79,938Operating leases


4,557



1,095



2,172



1,183



107Purchase commitments(2)


11,900



11,849



51







Losses and claims(3)


162,950



61,302



48,527



18,375



34,746Future policy benefits(4)


52,019



8,785



17,918



17,795



7,521Unearned premiums(5)


26,535



11,940



7,742



3,631



3,222Other policy liabilities


1,816



1,816











Total

$
415,247


$
102,468


$
88,263


$
57,744


$
166,772    (1)
    
    Interest payable is based on interest rates as of
    December 31, 2006 and assumes that all debt remains
    outstanding until its stated contractual maturity. The interest
    rates on outstanding bank debt and trust preferred obligations
    are variable and are equal to three-month LIBOR plus an
    applicable predetermined margin.(2)
    
    Represents balances due for goods
    and/or
    services which have been contractually committed as of
    December 31, 2006. 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.(3)
    
    Losses and claims include case reserves for reported claims and
    reserves for claims incurred but not reported
    (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 44




---



##### Table of Contents



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.  Forward-Looking
    Statements
   45




---



##### Table of Contents



ITEM 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest
    Rate and Market Risk
        +200bp


+100bp


Fair value


−100bp


−200bp(In thousands)December 31, 2006

$
232,709


$
246,666


$
262,316


$
279,888


$
299,721December 31, 2005

$
206,316


$
219,123


$
233,570


$
249,937


$
268,567     +20%


+10%


Fair Value


−10%


−20%(In thousands)December 31, 2006Investment in Wachovia Corporation

$
23,892


$
21,901


$
19,910


$
17,919


$
15,928Other equity holdings


10,699



9,808



8,916



8,024



7,133Total equity holdings

$
34,591


$
31,709


$
28,826


$
25,943


$
23,061December 31, 2005Investment in Wachovia Corporation

$
27,441


$
25,154


$
22,867


$
20,580


$
18,293Other equity holdings


13,893



12,736



11,578



10,421



9,263Total equity holdings

$
41,334


$
37,890


$
34,445


$
31,001


$
27,556     Interest Expense





Interest Expense+200bp


+100bp


Debt


−100bp


−200bp(In thousands)December 31, 2006

$
1,055


$
528


$
53,988


$
(528
)

$
(1,055
)December 31, 2005

$
1,005


$
503


$
51,488


$
(503
)

$
(1,005
)    46




---



##### 



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


48Consolidated
    Balance Sheets as of December 31, 2006 and 2005


49Consolidated
    Statements of Operations for each of the three years in the
    period ended December 31, 2006


50Consolidated
    Statements of Shareholders Equity for each of the three
    years in the period ended December 31, 2006


51Consolidated
    Statements of Cash Flows for each of the three years in the
    period ended December 31, 2006


52Notes to
    Consolidated Financial Statements


53   47




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            BDO SEIDMAN LLP
  Atlanta, Georgia
 March 28, 2007
 48




---



##### Table of Contents



ATLANTIC
    AMERICAN CORPORATION
 CONSOLIDATED
    BALANCE SHEETS  December 31,2006


2005(Dollars in thousands, except per share data)ASSETSCash and cash equivalents,
    including short-term investments of $20,188 and $27,726 in 2006
    and 2005, respectively

$
27,294


$
41,776Investments


298,775



276,968Receivables:Reinsurance


54,493



57,406Other, net of allowance for
    doubtful accounts of $1,718 and $1,501 in 2006 and 2005,
    respectively


34,976



37,643Deferred income taxes, net


5,755



7,099Deferred acquisition costs


24,418



27,835Other assets


9,913



8,682Goodwill


3,008



3,008Total assets

$
458,632


$
460,417LIABILITIES AND
    SHAREHOLDERS EQUITYInsurance reserves and
    policyholder funds

$
267,507


$
283,297Accounts payable and accrued
    expenses


42,949



38,179Payable for securities






7,000Debt payable


53,988



51,488Total liabilities


364,444



379,964Commitments and contingencies
    (Note 8)Shareholders equity:Preferred stock, $1 par,
    4,000,000 shares authorized;Series B preferred,
    134,000 shares issued and outstanding; $13,400 redemption
    value


134



134Series D preferred,
    70,000 shares issued and outstanding in 2006; $7,000
    redemption value


70



Common stock, $1 par,
    50,000,000 shares authorized;21,484,440 shares issued in
    2006 and 21,412,138 shares issued in 2005 and
    21,481,413 shares outstanding in 2006 and
    21,383,255 shares outstanding in 2005


21,484



21,412Additional paid-in capital


55,832



48,925Retained earnings (accumulated
    deficit)


4,969



(2,780
)Accumulated other comprehensive
    income


11,707



12,846Treasury stock, at cost,
    3,027 shares in 2006 and 28,883 shares in 2005


(8
)


(84
)Total shareholders equity


94,188



80,453Total liabilities and
    shareholders equity

$
458,632


$
460,417    49




---



##### Table of Contents



ATLANTIC
    AMERICAN CORPORATION
 CONSOLIDATED
    STATEMENTS OF OPERATIONS  Year Ended December 31,2006


2005


2004(Dollars in thousands, exceptper share data)Revenue:Insurance premiums

$
153,705


$
177,593


$
170,860Investment income


18,323



16,685



15,860Other income


813



1,263



1,183Realized investment gains
    (losses), net


6,691



(10,456
)


2,199Total revenue


179,532



185,085



190,102Benefits and expenses:Insurance benefits and losses
    incurred


91,932



115,676



113,077Commissions and underwriting
    expenses


56,106



58,376



56,089Interest expense


4,605



3,611



3,071Other


15,600



14,887



13,544Total benefits and expenses


168,243



192,550



185,781Income (loss) before income taxes


11,289



(7,465
)


4,321Income tax expense (benefit)


2,353



(4,290
)


(696
)Net income (loss)


8,936



(3,175
)


5,017Preferred stock dividends


(1,333
)


(1,206
)


(1,216
)Net income (loss) applicable to
    common stock

$
7,603


$
(4,381
)

$
3,801Basic earnings (loss) per common
    share:

$
.36


$
(.21
)

$
.18Diluted earnings (loss) per common
    share:

$
.33


$
(.21
)

$
.18    50




---



##### Table of Contents



ATLANTIC
    AMERICAN CORPORATION
 CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY  Retained


AccumulatedAdditional


Earnings


OtherPreferred


Common


Paid-In


(Accumulated


Comprehensive


TreasuryStock


Stock


Capital


Deficit)


Income


Stock


Total(Dollars in thousands)Balance, December 31, 2003

$
139


$
21,412


$
51,956


$
(4,457
)

$
18,293


$
(450
)

$
86,893Comprehensive income:Net income














5,017











5,017Decrease in unrealized investment
    gains


















(1,985
)






(1,985
)Fair value adjustment to derivative
    financial instrument


















445







445Minimum pension liability adjustment


















(131
)






(131
)Deferred income tax attributable to
    other comprehensive income


















585







585Total comprehensive income


























3,931Preferred stock redeemed


(5
)






(495
)














(500
)Dividends accrued on preferred stock










(1,216
)














(1,216
)Deferred share compensation expense










27















27Restricted stock grants










(158
)










158



Amortization of unearned
    compensation










176















176Acquisition of 248,290 shares
    for treasury






















(747
)


(747
)Issuance of 199,599 shares for
    employee benefit plans and stock options










57



(98
)






437



396Balance, December 31, 2004


134



21,412



50,347



462



17,207



(602
)


88,960Comprehensive loss:Net loss














(3,175
)










(3,175
)Decrease in unrealized investment
    gains


















(6,549
)






(6,549
)Minimum pension liability adjustment


















(160
)






(160
)Deferred income tax attributable to
    other comprehensive loss


















2,348







2,348Total comprehensive loss


























(7,536
)Dividends accrued on preferred stock










(1,206
)














(1,206
)Deferred share compensation expense










(201
)


(40
)






240



(1
)Restricted stock grants










(66
)










66



Amortization of unearned
    compensation










66















66Acquisition of 45,619 shares
    for treasury






















(132
)


(132
)Issuance of 194,026 shares for
    employee benefit plans and stock options










(15
)


(27
)






344



302Balance, 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







216Minimum pension liability
    adjustment due to adoption of SFAS 158


















(1,144
)






(1,144
)Deferred income tax attributable to
    other comprehensive income


















614







614Total comprehensive income


























7,797Issuance 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
)

$
94,188    51




---



##### Table of Contents



ATLANTIC
    AMERICAN CORPORATION
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Year Ended December 31,2006


2005


2004(Dollars in thousands)Cash flows from operating
    activities:Net income (loss)

$
8,936


$
(3,175
)

$
5,017Adjustments to reconcile net
    income (loss) to net cash provided by operating activities:Amortization of deferred
    acquisition costs


23,486



26,264



22,846Acquisition costs deferred


(20,069
)


(23,741
)


(25,208
)Realized investment (gains)
    losses, net


(6,691
)


10,456



(2,199
)(Decrease) increase in insurance
    reserves and policyholder funds


(15,790
)


(6,503
)


27,468Compensation expense related to
    share awards


70



65



203Depreciation and amortization


955



1,079



1,361Deferred income tax expense
    (benefit)


1,957



(4,275
)


(834
)Decrease (increase) in
    receivables, net


7,131



14,932



(26,024
)Increase (decrease) in other
    liabilities


2,344



(1,701
)


990Other, net


(1,833
)


(2,134
)


2,406Net cash provided by operating
    activities


496



11,267



6,026Cash flows from investing
    activities:Proceeds from investments sold


35,197



44,606



45,924Proceeds from investments matured,
    called or redeemed


36,234



56,778



58,645Investments purchased


(95,556
)


(109,310
)


(100,645
)Additions to property and equipment


(299
)


(675
)


(575
)Acquired insurance reserves and
    policy funds (Note 3)










1,448Net cash (used in) provided by
    investing activities


(24,424
)


(8,601
)


4,797Cash flows from financing
    activities:Proceeds from issuance of
    Series D Preferred Stock


7,000







Preferred stock redemption










(500
)Preferred stock dividends paid










(10
)Proceeds from exercise of stock
    options


16



34



154Purchase of treasury shares


(70
)


(132
)


(747
)Proceeds from bank financing


15,750







Repayments of debt


(13,250
)


(1,750
)


(3,000
)Net cash provided by (used in)
    financing activities


9,446



(1,848
)


(4,103
)Net (decrease) increase in cash
    and cash equivalents


(14,482
)


818



6,720Cash and cash equivalents at
    beginning of year


41,776



40,958



34,238Cash and cash equivalents at end
    of year

$
27,294


$
41,776


$
40,958Supplemental cash flow
    information:Cash paid for interest

$
4,711


$
3,470


$
3,189Cash (received) paid for income
    taxes

$
(67
)

$
317


$
1,218    52




---



##### 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
    Investments
  available-for-sale
 53




---



##### Table of Contents



Income
    Taxes
    Earnings
    Per Common Share
    Stock
    Options
   54




---



##### Table of Contents



2005


2004Net income (loss), as reported

$
(3,175
)

$
5,017Add: Stock-based employee
    compensation expense included in reported net income(loss), net
    of tax


42



132Deduct: Total stock-based employee
    compensation expense determined under fair value based method,
    net of tax


(144
)


(344
)Pro forma net income (loss)

$
(3,277
)

$
4,805Net income (loss) per common share:Basic  as reported

$
(.21
)

$
.18Basic  pro forma

$
(.21
)

$
.17Diluted  as reported

$
(.21
)

$
.18Diluted  pro forma

$
(.21
)

$
.17     Cash
    and Cash Equivalents
    Impact
    of Recently Issued Accounting Standards
     55




---



##### Table of Contents



05-1, (SOP 05-1). SOP 05-1 SOP 05-1 SOP 05-1
     56




---



##### Table of Contents



Use of
    Estimates in the Preparation of Financial
    Statements
    Note 2.
    Investments    2006Gross


GrossCarrying


Unrealized


Unrealized


AmortizedValue


Gains


Losses


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

$
176,302


$
169


$
2,411


$
178,544Obligations of states and
    political subdivisions


824



20







804Corporate securities


64,499



3,890



493



61,102Mortgage-backed securities
    (government guaranteed)


2,093



13



25



2,105Redeemable preferred stocks


18,598



938



185



17,845Total fixed maturities


262,316



5,030



3,114



260,400Common and non-redeemable
    preferred stocks


28,826



17,669



122



11,279Other invested assets (estimated
    fair value of $3,030)


3,030







69



3,099Mortgage loans (estimated fair
    value of $1,564)


1,378











1,378Policy and student loans


1,949











1,949Real estate


38











38Investment in unconsolidated trusts


1,238











1,238298,775



22,699



3,305



279,381Short-term investments


20,188











20,188Total investments

$
318,963


$
22,699


$
3,305


$
299,569   57




---



##### Table of Contents



2005Gross


GrossCarrying


Unrealized


Unrealized


AmortizedValue


Gains


Losses


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

$
139,113


$
286


$
1,919


$
140,746Obligations of states and
    political subdivisions


1,037



35







1,002Corporate securities


66,072



1,441



361



64,992Mortgage-backed securities
    (government guaranteed)


2,459



29



24



2,454Redeemable preferred stocks


24,889



200



344



25,033Total fixed maturities


233,570



1,991



2,648



234,227Common and non-redeemable
    preferred stocks


34,445



20,800



90



13,735Other invested assets (estimated
    fair value of $4,887)


3,660



1







3,659Mortgage loans (estimated fair
    value of $2,664)


1,941











1,941Policy and student loans


2,076











2,076Real estate


38











38Investment in unconsolidated trusts


1,238











1,238276,968



22,792



2,738



256,914Short-term investments


27,726











27,726Total investments

$
304,694


$
22,792


$
2,738


$
284,640       2006Less 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

$
43,189


$
365


$
99,300


$
2,071


$
142,489


$
2,436Corporate securities


9,142



75



11,409



418



20,551



493Redeemable preferred stocks










6,850



185



6,850



185Common and non-redeemable
    preferred stocks


1,201



113



1,491



9



2,692



122Other invested assets


3,030



69











3,030



69Total temporary impaired securities

$
56,562


$
622


$
119,050


$
2,683


$
175,612


$
3,305   58




---



##### Table of Contents



2005Less 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

$
85,191


$
1,215


$
36,406


$
728


$
121,597


$
1,943Corporate securities


7,044



185



5,102



176



12,146



361Redeemable preferred stocks


4,282



169



5,543



175



9,825



344Common and non-redeemable
    preferred stocks


2,795



61



794



29



3,589



90Total temporary impaired securities

$
99,312


$
1,630


$
47,845


$
1,108


$
147,157


$
2,738         2006


2005


2004Corporate bonds(1)

$



$
9,492


$
Redeemable preferred stocks(1)

$



$
1,274


$
281Common stocks

$



$



$
179     (1)
    
    Includes automotive sector impairments of $10,709 in 2005,
    primarily from holdings in General Motors and related entities.     59




---



##### Table of Contents



Carrying


AmortizedValue


CostDue in one year or less

$
58,364


$
58,367Due after one year through five
    years


31,752



31,302Due after five years through ten
    years


35,764



34,940Due after ten years


154,531



153,874Varying maturities


2,093



2,105Totals

$
282,504


$
280,588     2006


2005


2004Fixed maturities

$
15,638


$
13,026


$
13,403Common and non-redeemable
    preferred stocks


1,220



2,056



1,438Mortgage loans


184



250



285Short-term investments


944



920



329Other


337



433



405Total investment income


18,323



16,685



15,860Less investment expenses


(175
)


(225
)


(220
)Net investment income

$
18,148


$
16,460


$
15,640     2006Fixed


Other InvestedStocks


Maturities


Assets


TotalGains

$
4,454


$
1,473


$
1,227


$
7,154Losses






(463
)






(463
)Realized investment gains (losses)
    net

$
4,454


$
1,010


$
1,227


$
6,691   2005Fixed


Other InvestedStocks


Maturities


Assets


TotalGains

$
1,517


$
132


$



$
1,649Losses


(679
)


(11,426
)






(12,105
)Realized investment gains (losses)
    net

$
838


$
(11,294
)

$



$
(10,456
)   2004Fixed


Other InvestedStocks


Maturities


Assets


TotalGains

$
1,432


$
1,699


$



$
3,131Losses


(205
)


(727
)






(932
)Realized investment gains (losses)
    net

$
1,227


$
972


$



$
2,199  60




---



##### Table of Contents



2006


2005


2004Common and non-redeemable
    preferred stocks

$
5,358


$
19,942


$
14,216Fixed maturities


27,626



23,314



31,305Student loans


128



245



55Other investments


2,085



1,105



348Total proceeds

$
35,197


$
44,606


$
45,924         Note 3.
    Insurance
    Reserves and Policyholder Funds    Amount of InsuranceIn Force2006


2005


2006


2005Future policy benefitsLife insurance policies:Ordinary

$
43,046


$
41,934


$
224,401


$
235,476Mass market


4,908



5,281



7,667



8,495Individual annuities


332



639







48,286



47,854


$
232,068


$
243,971Accident and health insurance
    policies


3,733



3,50252,019



51,356Unearned premiums


50,722



60,879Losses and claims


162,950



168,617Other policy liabilities


1,816



2,445Total insurance reserves and
    policyholder funds

$
267,507


$
283,297    61




---



##### Table of Contents



Cash

$
1,448Insurance reserves and policy
    funds:Unearned premiums

$
429Losses and claims


930Other policy liabilities


89Total liabilities

$
1,448   Future
    Policy Benefits
    Loss
    and Claim Reserves
      2006


2005


2004Balance at January 1

$
168,617


$
167,133


$
150,092Less: Reinsurance recoverables


(53,352
)


(57,429
)


(41,752
)Net balance at January 1


115,265



109,704



108,340Incurred related to:Current year


102,155



119,455



111,220Prior years


(12,432
)


(6,708
)


(1,899
)Total incurred


89,723



112,747



109,321Paid related to:Current year


56,865



68,792



67,020Prior years


38,345



38,309



41,867Total paid


95,210



107,101



108,887Acquired reserves






(85
)


930Net balance at December 31


109,778



115,265



109,704Plus: Reinsurance recoverables


53,172



53,352



57,429Balance at December 31

$
162,950


$
168,617


$
167,133  62




---



##### Table of Contents



2006


2005


2004Total incurred claims

$
89,723


$
112,747


$
109,321State residual pool adjustments


(10
)


(17
)


(66
)Cash surrender value and matured
    endowments


1,666



1,663



1,318Benefit reserve changes


553



1,283



2,504Total insurance benefits and
    losses incurred

$
91,932


$
115,676


$
113,077   Note 4.
    Reinsurance      2006


2005


2004Direct premiums written

$
160,128


$
191,118


$
203,536Plus  premiums assumed


9,933



10,187



9,860Less  premiums ceded


(28,689
)


(34,919
)


(31,523
)Net premiums written


141,372



166,386



181,873Change in unearned premiums


10,157



9,385



(8,685
)Change in unearned premiums ceded


2,176



1,822



(2,328
)Net change in unearned premiums


12,333



11,207



(11,013
)Net premiums earned

$
153,705


$
177,593


$
170,860Provision for benefits and losses
    incurred

$
102,754


$
135,821


$
152,535Reinsurance loss recoveries


(10,822
)


(20,145
)


(39,458
)Insurance benefits and losses
    incurred

$
91,932


$
115,676


$
113,077     2006


2005Receivables on unpaid losses

$
53,172


$
53,352Receivables on paid losses


1,321



4,054$
54,493


$
57,406  63




---



##### Table of Contents



Note 5.
    Income
    Taxes    2006


2005


2004Federal income tax provision at
    statutory rate of 35%

$
3,951


$
(2,613
)

$
1,512Tax exempt interest and dividends
    received deductions


(571
)


(701
)


(581
)Small life deduction


(579
)


(534
)


(542
)Other permanent differences


50



49



470Change in asset valuation
    allowance due to change in judgment relating to realizability of
    deferred tax assets


(569
)


(125
)


(1,291
)Adjustment for prior years
    estimates to actual


54



(373
)


(267
)State income taxes


17



7



3Income tax expense (benefit)

$
2,353


$
(4,290
)

$
(696
)     2006


2005Deferred tax liabilities:Deferred acquisition costs

$
(4,344
)

$
(5,413
)Net unrealized investment gains


(6,788
)


(7,019
)Deferred and uncollected premium


(657
)


(698
)Other


(67
)


(86
)Total deferred tax liabilities


(11,856
)


(13,216
)Deferred tax assets:Net operating loss carryforwards


4,161



5,002Insurance reserves


8,197



9,681Impaired assets


2,028



4,277Alternative minimum tax credit


1,125



1,046Bad debts and other


2,461



1,239Total deferred tax assets


17,972



21,245Asset valuation allowance


(361
)


(930
)Net deferred tax asset

$
5,755


$
7,099     2006


2005


2004Current  Federal

$
379


$
(22
)

$
135Current  State


17



7



3Deferred  Federal


1,957



(4,275
)


(834
)Total

$
2,353


$
(4,290
)

$
(696
)    64




---



##### Table of Contents



Note 6.
    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, 2006


18,042



23,196Balance December 31, 2005


18,042



23,196Coupon rate


LIBOR + 4.00
%


LIBOR + 4.10
%Interest payable


Quarterly



QuarterlyMaturity date


December 4, 2032



May 15, 2033Redeemable by issuer on or after


December 4, 2007



May 15, 2008TRUST PREFERRED SECURITIESIssuance date


December 4, 2002



May 15, 2003Securities issued


17,500



22,500Liquidation preference per security

$
1


$
1Liquidation value


17,500



22,500Coupon rate


LIBOR + 4.00
%


LIBOR + 4.10
%Distribution payable


Quarterly



QuarterlyAtlantic American



Atlantic AmericanDistribution guaranteed by(3)


Corporation



Corporation     (1)
    
    For each of the respective debentures, the Company has the right
    at any time, and from time to time, to defer payments of
    interest on the Junior Subordinated Debentures for a period not
    exceeding 20 consecutive quarters up to the debentures
    respective maturity dates. During any such period, interest will
    continue to accrue and the Company may not declare or pay any
    cash dividends or distributions on, or purchase, the
    Companys common stock nor make any principal, interest or
    premium payments on or repurchase any debt securities that rank
    equally with or junior to the Junior Subordinated Debentures.
    The Company has the right at any time to dissolve each of the
    trusts and cause the Junior Subordinated Debentures to be
    distributed to the holders of the Trust Preferred
    Securities.(2)
    
    The Junior Subordinated Debentures are unsecured and rank junior
    and subordinate in right of payment to all senior debt of the
    Parent and are effectively subordinated to all existing and
    future liabilities of its subsidiaries.(3)
    
    The Parent has guaranteed, on a subordinated basis, all of the
    obligations under the Trust Preferred Securities, including
    payment of the redemption price and any accumulated and unpaid
    distributions to the extent of available funds and upon
    dissolution, winding up or liquidation.  Note 7.
    Derivative
    Financial Instruments     66




---



##### Table of Contents



Note 8.
    Commitments
    and Contingencies  Litigation
    Operating
    Lease Commitments
    Year Ending December 31,2007

$
1,0952008


1,0832009


1,0902010


7362011


446Thereafter


107Total

$
4,557   Note 9.
    Employee
    Benefit Plans  Stock
    Options
  and/or and/or
 67




---



##### Table of Contents



2006


2005


2004Weighted





Weighted





WeightedAverage





Average





AverageShares


Exercise Price


Shares


Exercise Price


Shares


Exercise PriceOptions outstanding, beginning of
    year


649,500


$
1.44



677,500


$
1.47



910,500


$
1.74Options exercised


(9,500
)


1.70



(21,000
)


1.73



(117,250
)


1.31Options canceled or expired


(3,500
)


1.44



(7,000
)


3.54



(115,750
)


3.80Options outstanding, end of year


636,500



1.43



649,500



1.44



677,500



1.47Options exercisable


636,500



1.43



649,500



1.44



626,125



1.46Options available for future grant


2,486,491







2,504,914







2,514,837     Outstanding and ExercisableWeighted AverageNumber of


Remaining Life


Weighted AverageRange of Exercise Price

Options


(Years)


Exercise Price$1.00 to $1.50


382,500



4.79


$
1.25$1.51 to $2.00


246,000



6.17


$
1.67$2.51 to $3.00


8,000



0.35


$
2.68636,500     401(k)
    Plan
    Defined
    Benefit Pension Plans
   68




---



##### Table of Contents



Obligation
    and Funded Status
  2006


2005Change in Benefit
    ObligationNet benefit obligation at
    beginning of year

$
5,713


$
5,166Service cost


237



177Interest cost


314



298Actuarial loss


53



236Gross benefits paid


(127
)


(164
)Net benefit obligation at end of
    year


6,190



5,713Change in Plan AssetsFair value of plan assets at
    beginning of year


2,799



2,689Employer contributions


184



203Actual return on plan assets


298



71Gross benefits paid


(127
)


(164
)Fair value of plan assets at end
    of year


3,154



2,799Funded Status of PlanFunded status at end of year


(3,036
)


(2,914
)Unrecognized net actuarial loss


1,634



1,840Unrecognized prior service cost


(7
)


(6
)Unrecognized net transition
    obligation






Additional minimum liability


(483
)


(700
)Net amount recognized in accrued
    liabilities at end of year

$
(1,892
)

$
(1,780
)       2006


2005Discount rate to determine the
    projected benefit obligation


5.50
%


5.50
%Projected annual salary increases


4.50
%


4.50
%     Components
    of Net Periodic Benefit Cost
    2006


2005


2004Service cost

$
237


$
177


$
170Interest cost


314



298



278Expected return on plan assets


(193
)


(185
)


(169
)Net amortization


155



142



81$
513


$
432


$
360  69




---



##### Table of Contents



2006


2005


2004Discount rate to determine the net
    periodic benefit cost


5.50
%


5.75
%


6.00
%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
    Estimated
    Future Benefit Payments
    Pension Benefits2007

$
1712008

$
1752009

$
1752010

$
2572011

$
2902012  2016

$
2,131   Note 10.  Preferred
    Stock
     70




---



##### Table of Contents



Note 11.  Earnings
    Per Common Share
    For the Year EndedDecember 31, 2006Per ShareIncome


Shares


AmountBasic Earnings Per Common
    ShareNet income before preferred stock
    dividends

$
8,936



21,419Less preferred stock dividends


(1,333
)


Net income applicable to common
    shareholders


7,603



21,419


$
.36Diluted Earnings Per Common
    ShareEffect of dilutive stock options






330Effect of Series B and D
    Preferred Stock


1,333



5,112Net income applicable to common
    shareholders

$
8,936



26,861


$
.33   For the Year EndedDecember 31, 2005Per ShareIncome


Shares


AmountBasic and Diluted Loss Per
    Common ShareNet loss before preferred stock
    dividends

$
(3,175
)


21,305Less preferred stock dividends


(1,206
)


Net loss applicable to common
    shareholders

$
(4,381
)


21,305


$
(.21
)   For the Year EndedDecember 31, 2004Per ShareIncome


Shares


AmountBasic Earnings Per Common
    ShareNet income before preferred stock
    dividends

$
5,017



21,216Less preferred stock dividends


(1,216
)


Net income applicable to common
    shareholders


3,801



21,216


$
.18Diluted Earnings Per Common
    ShareEffect of dilutive stock options






468Net income applicable to common
    shareholders

$
3,801



21,684


$
.18    71




---



##### Table of Contents



Note 12.  Statutory
    Reporting
      2006


2005


2004Life and Health, net income

$
3,173


$
5,135


$
4,616Property and Casualty, net income


6,540



6,675



1,692Statutory net income(1)

$
9,713


$
11,810


$
6,308Life and Health, surplus

$
34,467


$
33,881


$
35,492Property and Casualty, surplus


79,964



73,277



76,036Statutory surplus

$
114,431


$
107,158


$
111,528   (1)
    
    Automotive sector impairments of $10,709 were recorded in the
    first quarter of 2006 for statutory purposes.    Note 13.  Related
    Party and Other Transactions
           72




---



##### Table of Contents



73




---



##### Table of Contents



Note 14.  Segment
    Information
    American


Association


Georgia


Bankers


Corporate


AdjustmentsSouthern


Casualty


Casualty


Fidelity


& Other


& Eliminations


ConsolidatedDecember 31, 2006Insurance premiums

$
50,659


$
22,908


$
21,218


$
58,920


$



$



$
153,705Insurance benefits and losses 
    incurred


23,440



10,029



16,443



42,020











91,932Expenses deferred


(11,088
)


(5,344
)


(2,960
)


(677
)










(20,069
)Amortization and depreciation
    expense


12,326



5,063



5,203



1,849











24,441Other expenses


21,290



12,244



11,831



17,497



27,563



(18,486
)


71,939Total expenses


45,968



21,992



30,517



60,689



27,563



(18,486
)


168,243Underwriting income (loss)


4,691



916



(9,299
)


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


5,914



3,040



6,963



8,450



4,342



(3,695
)


25,014Other income


19



(49
)


93



74



15,467



(14,791
)


813Income (loss) before income taxes

$
10,624


$
3,907


$
(2,243
)

$
6,755


$
(7,754
)

$



$
11,289Total revenues

$
56,592


$
25,899


$
28,274


$
67,444


$
19,809


$
(18,486
)

$
179,532Goodwill

$
1,350


$



$



$
778


$
880


$



$
3,008Total assets

$
122,292


$
120,830


$
99,395


$
128,246


$
164,769


$
(176,900
)

$
458,632   American


Association


Georgia


Bankers


Corporate


AdjustmentsSouthern


Casualty


Casualty


Fidelity


& Other


& Eliminations


ConsolidatedDecember 31, 2005Insurance premiums

$
51,447


$
20,972


$
39,270


$
65,904


$



$



$
177,593Insurance benefits and losses
    incurred


24,827



12,410



32,064



46,375











115,676Expenses deferred


(12,582
)


(4,126
)


(6,324
)


(709
)










(23,741
)Amortization and depreciation
    expense


12,510



4,136



8,500



2,197











27,343Other expenses


23,405



8,864



14,431



18,184



21,210



(12,822
)


73,272Total expenses


48,160



21,284



48,671



66,047



21,210



(12,822
)


192,550Underwriting income (loss)


3,287



(312
)


(9,401
)


(143
)Investment income, including net
    realized gains


4,818



2,782



3,435



5,816



3,070



(2,983
)


16,938Automotive sector investments
    impairment charge


(3,733
)


(1,145
)


(2,366
)


(3,465
)










(10,709
)Other income


393



17



141







10,551



(9,839
)


1,263Income (loss) before income taxes

$
4,765


$
1,342


$
(8,191
)

$
2,208


$
(7,589
)

$



$
(7,465
)Total revenues

$
52,925


$
22,626


$
40,480


$
68,255


$
13,621


$
(12,822
)

$
185,085Goodwill

$
1,350


$



$



$
778


$
880


$



$
3,008Total assets

$
123,919


$
106,171


$
113,417


$
128,225


$
145,247


$
(156,562
)

$
460,417   74




---



##### Table of Contents



American


Association


Georgia


Bankers


Corporate


AdjustmentsSouthern


Casualty


Casualty


Fidelity


& Other


& Eliminations


ConsolidatedDecember 31, 2004Insurance premiums

$
48,062


$
22,681


$
34,675


$
65,442


$



$



$
170,860Insurance benefits and losses
    incurred


24,795



13,785



28,670



45,827











113,077Expenses deferred


(11,790
)


(3,937
)


(8,433
)


(1,048
)










(25,208
)Amortization and depreciation
    expense


10,858



4,207



7,282



1,860











24,207Other expenses


21,390



9,129



16,990



18,867



18,597



(11,268
)


73,705Total expenses


45,253



23,184



44,509



65,506



18,597



(11,268
)


185,781Underwriting income (loss)


2,809



(503
)


(9,834
)


(64
)Investment income, including net
    realized gains


5,215



2,571



4,263



5,927



2,331



(2,248
)


18,059Other income






26



108







10,069



(9,020
)


1,183Income (loss) before income taxes

$
8,024


$
2,094


$
(5,463
)

$
5,863


$
(6,197
)

$



$
4,321Total revenues

$
53,277


$
25,278


$
39,046


$
71,369


$
12,400


$
(11,268
)

$
190,102Goodwill

$
1,350


$



$



$
778


$
880


$



$
3,008Total assets

$
121,347


$
111,536


$
136,397


$
133,185


$
154,288


$
(186,242
)

$
470,511   Note 15.  Disclosures
    About Fair Value of Financial Instruments
    2006


2005Carrying


Estimated


Carrying


EstimatedAmount


Fair Value


Amount


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

$
27,294


$
27,294


$
41,776


$
41,776Fixed maturities


262,316



262,316



233,570



233,570Common and non-redeemable
    preferred stocks


28,826



28,826



34,445



34,445Mortgage loans


1,378



1,564



1,941



2,664Policy and student loans


1,949



1,949



2,076



2,076Other invested assets


3,030



3,030



3,660



4,887Liabilities:Debt payable to bank


12,750



12,750



10,250



10,250Junior Subordinated Debentures


41,238



41,238



41,238



41,238    75




---



##### Table of Contents



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
    Mortgage
    Loans
    Debt
    Payable and Junior Subordinated Debentures
    Note 16.  Reconciliation
    of Other Comprehensive Income (loss)
    December 31,2006


2005


2004Net realized gains (losses) on
    investment securities included in net income (loss)

$
6,691


$
(10,456
)

$
2,199Other components of comprehensive
    income (loss):Net pre-tax unrealized gains
    (losses) on investment securities arising during year

$
6,031


$
(17,005
)

$
214Reclassification adjustment for
    net realized (gains) losses on investment securities


(6,691
)


10,456



(2,199
)Net pre-tax unrealized gains
    (losses) on investment securities recognized in other
    comprehensive income (loss)


(660
)


(6,549
)


(1,985
)Fair value adjustments to
    derivative financial instrument


(165
)






445Minimum pension liability
    adjustment


(928
)


(160
)


(131
)Deferred income tax expense
    attributable to other comprehensive income (loss)


614



2,348



585$
(1,139
)

$
(4,361
)

$
(1,086
)  76




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##### Table of Contents



Note 17.  Quarterly
    Financial Information (Unaudited)
    2006


2005First


Second


Third


Fourth


First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


QuarterRevenue

$
49,085


$
43,578


$
43,575


$
43,294


$
50,273


$
50,188


$
47,787


$
36,837
(1)Income (loss) before income taxes

$
5,052


$
(252
)

$
2,949


$
3,540


$
(1,632
)

$
1,418


$
111


$
(7,362
)Income tax expense (benefit)


1,558



7



212



576



(800
)


176



(451
)


(3,215
)Net income (loss)

$
3,494


$
(259
)

$
2,737


$
2,964


$
(832
)

$
1,242


$
562


$
(4,147
)Per common share data:Basic earnings (loss) per share

$
.15


$
(.03
)

$
.11


$
.12


$
(.05
)

$
.04


$
.01


$
(.21
)Diluted earnings (loss) per share

$
.14


$
(.03
)

$
.10


$
.11


$
(.05
)

$
.04


$
.01


$
(.21
)   (1)
    
    Includes a $10.7 million impairment charge for automotive
    sector fixed maturity securities. 77




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9a.
    Controls
    and Procedures  Rules 13a-15(e)
  Item 9b.
    Other
    Information   PART III    Form 10-K
 78




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##### Table of Contents



PART IV  Item 15.
    Exhibits And
    Financial Statement Schedules  List of documents filed as part of this report:
              Schedule VI 
    Supplemental information concerning property-casualty insurance
    operations for the three years ended December 31, 2006    Exhibits*:
  3
.1



Restated Articles of Incorporation
    of the registrant, as amended [incorporated by reference to
    Exhibit 3.1 to the registrants
    Form 10-K
    for the year ended December 31, 2002].3
.11



Amendment to Restated Articles of
    Incorporation of the registrant, as amended [incorporated by
    reference to Exhibit 3.1 to the registrants
    Form 8-K
    dated October 4, 2006].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].3
.21



Amendment of Bylaws of the
    registrant, effective as of February 22, 2007 [incorporated
    by reference to Exhibit 10.1 to the registrants
    Form 8-K
    dated February 28, 2007].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 10-Q
    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 10-Q
    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]. 79




---



##### Table of Contents



10
.08



Loan and Security Agreement dated
    August 26, 1991, between registrants three insurance
    subsidiaries named therein 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
.09



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



Intercreditor Agreement dated
    August 26, 1991, between Leath Furniture, Inc., the
    registrant and the registrants three insurance
    subsidiaries named therein [incorporated by reference to
    Exhibit 10.39 to the registrants
    Form 10-K
    for the year ended December 31, 1992].10
.11



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
.12



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
.13



Indenture of Trust, dated as of
    June 24, 1999, by and between Atlantic American Corporation
    and The Bank of New York, as Trustee [incorporated by reference
    to Exhibit 10.1 to the registrants
    Form 8-K
    dated July 16, 1999].10
.14



Reimbursement and Security
    Agreement, dated as of June 24, 1999, between Atlantic
    American Corporation and Wachovia Bank of Georgia, N.A.
    [incorporated by reference to Exhibit 10.3 to the
    registrants
    Form 8-K
    dated July 16, 1999].10
.21



Amended and Restated Credit
    Agreement, dated as of June 30, 2003, between Atlantic
    American Corporation and Wachovia Bank, N.A. [incorporated by
    reference to Exhibit 10.2 to the registrants
    Form 10-Q
    for the quarter ended June 30, 2003].10
.22**



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
.23**



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
.24**



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
.25



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
.26



First Amendment, effective as of
    May 2, 2005, to Amended and Restated Credit Agreement,
    dated as of June 30, 2003, between Atlantic American
    Corporation and Wachovia Bank, N.A. [incorporated by reference
    to Exhibit 10.26 to the registrants
    Form 10-Q
    for the quarter ended June 30, 2005].10
.27



Term Loan Credit Agreement, dated
    as of February  28, 2006 between Atlantic American
    Corporation and Wachovia Bank, N.A. [incorporated by reference
    to Exhibit 10.1 to the registrants
    Form 8-K
    dated March 3, 2006].10
.28



Second Amendment, dated effective
    as of December  31, 2005, to Amended and Restated
    Credit Agreement, dated as of June 30, 2003 and First
    Amendment effective as of February 28, 2006, to Term Loan
    Credit Agreement dated as of February  28, 2006, both
    between Atlantic American Corporation and Wachovia Bank, N.A.
    [incorporated by reference to Exhibits 10.1 and 10.2,
    respectively to the registrants
    Form 8-K
    dated March 31, 2006].10
.29



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].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. 80




---



##### Table of Contents



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

Title

Date/s/  J.
    Mack
    RobinsonJ.
    Mack Robinson

Chairman of the Board

March 29, 2007/s/  Hilton
    H. Howell,
    Jr.Hilton
    H. Howell, Jr.

President, Chief Executive Officer
    and Director (Principal Executive Officer)

March 29, 2007/s/  John
    G. Sample,
    Jr.John
    G. Sample, Jr.

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

March 29, 2007/s/  Edward
    E. ElsonEdward
    E. Elson

Director

March 29, 2007/s/  Samuel
    E. HudginsSamuel
    E. Hudgins

Director

March 29, 2007/s/  D.
    Raymond
    RiddleD.
    Raymond Riddle

Director

March 29, 2007/s/  Harriett
    J. RobinsonHarriett
    J. Robinson

Director

March 29, 2007/s/  Scott
    G. ThompsonScott
    G. Thompson

Director

March 29, 2007/s/  Mark
    C. WestMark
    C. West

Director

March 29, 2007 82




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##### Table of Contents



Signature

Title

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

Director

March 29, 2007/s/  Dom
    H. WyantDom
    H. Wyant

Director

March 29, 2007/s/  Harold
    K. FischerHarold
    K. Fischer

Director

March 29, 2007  83




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##### Table of Contents



SCHEDULE II
    Page 1 of 3
  CONDENSED
    FINANCIAL INFORMATION OF REGISTRANT
  ATLANTIC
    AMERICAN CORPORATION
    (Parent Company Only)
  BALANCE
    SHEETS
  December 31,2006


2005(In thousands)ASSETSCash and short-term investments

$
9,388


$
2,348Investment in subsidiaries


146,814



132,385Investment in unconsolidated trusts


1,238



1,238Deferred tax asset, net


4,235



5,578Income taxes receivable from
    subsidiaries


1,386



3,082Other assets


1,742



2,148Total assets

$
164,803


$
146,779LIABILITIES AND
    SHAREHOLDERS EQUITYOther payables

$
16,627


$
14,838Debt payable to bank


12,750



10,250Junior subordinated debentures


41,238



41,238Total liabilities


70,615



66,326Shareholders equity


94,188



80,453Total liabilities and
    shareholders equity

$
164,803


$
146,779  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 31,2006


2005


2004(In thousands)REVENUEFees, rentals and interest income
    from subsidiaries

$
14,792


$
9,832


$
9,015Distributed earnings from
    subsidiaries


9,226



13,242



5,803Other


745



188



506Total revenue


24,763



23,262



15,324GENERAL AND ADMINISTRATIVE EXPENSES


18,842



14,165



12,772INTEREST EXPENSE


4,605



3,611



3,0711,316



5,486



(519
)INCOME TAX BENEFIT(1)


21



7,400



2,8321,337



12,886



2,313EQUITY IN UNDISTRIBUTED EARNINGS
    (LOSSES) OF SUBSIDIARIES, NET


7,599



(16,061
)


2,704NET INCOME (LOSS)

$
8,936


$
(3,175
)

$
5,017   (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




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##### 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 31,2006


2005


2004(In thousands)CASH FLOWS FROM OPERATING
    ACTIVITIES:Net income (loss)

$
8,936


$
(3,175
)

$
5,017Adjustments to reconcile net
    income (loss) to net cash provided by operating activities:Realized investment gains


(439
)


(72
)


(72
)Depreciation and amortization


692



776



802Compensation expense related to
    share awards


70



65



203Equity in undistributed (earnings)
    losses of consolidated subsidiaries


(7,599
)


16,061



(2,704
)Decrease (increase) in
    intercompany taxes


1,696



(663
)


1,567Deferred income tax expense
    (benefit)


1,957



(4,275
)


(834
)Increase (decrease) in other
    liabilities


291



406



(104
)Other, net


163



218



444Net cash provided by operating
    activities


5,767



9,341



4,319CASH FLOWS FROM INVESTING
    ACTIVITIES:Capital contribution to
    subsidiaries


(8,000
)


(5,550
)


(900
)Additions to property and equipment


(173
)


(153
)


(509
)Net cash used in investing
    activities


(8,173
)


(5,703
)


(1,409
)CASH FLOWS FROM FINANCING
    ACTIVITIES:Proceeds from issuance of
    Series D Preferred Stock


7,000







Preferred stock redemption










(500
)Preferred stock dividends to
    affiliated shareholders










(10
)Purchase of treasury shares


(70
)


(132
)


(747
)Proceeds from bank financing


15,750







Repayments of debt


(13,250
)


(1,750
)


(3,000
)Proceeds from exercise of stock
    options


16



34



154Net cash provided by (used in)
    financing activities


9,446



(1,848
)


(4,103
)Net increase (decrease) in cash


7,040



1,790



(1,193
)Cash at beginning of year


2,348



558



1,751Cash at end of year

$
9,388


$
2,348


$
558Supplemental disclosure:Cash paid for interest

$
4,711


$
3,470


$
3,189Cash (received) paid for income
    taxes

$
(76
)

$
300


$
1,200  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, 2006:Bankers Fidelity

$
16,024


$
61,655


$
3,494


$
1,816American Southern


4,194



45,655



21,696



Association Casualty


2,695



47,111



17,229



Georgia Casualty


1,505



60,548



8,303



$
24,418


$
214,969
(1)

$
50,722


$
1,816December 31, 2005:Bankers Fidelity

$
16,957


$
61,580


$
4,011


$
2,445American Southern


5,194



43,593



26,185



Association Casualty


2,175



44,813



13,699



Georgia Casualty


3,509



69,987



16,984



$
27,835


$
219,973
(2)

$
60,879


$
2,445December 31, 2004:Bankers Fidelity

$
18,175


$
60,604


$
4,350


$
2,516American Southern


4,852



42,307



24,578



Association Casualty


1,916



45,489



13,624



Georgia Casualty


5,415



68,619



27,712



$
30,358


$
217,019
(3)

$
70,264


$
2,516   (1)
    
    Includes future policy benefits of $52,019 and losses and claims
    of $162,950.(2)
    
    Includes future policy benefits of $51,356 and losses and claims
    of $168,617.(3)
    
    Includes future policy benefits of $49,886 and losses and claims
    of $167,133. 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, 2006:Bankers Fidelity

$
58,920


$
6,097


$
42,020


$
1,610


$
17,059


$
American Southern


50,659



5,516



23,440



12,087



10,441



46,274Association Casualty


22,908



2,768



10,029



4,825



7,138



24,794Georgia Casualty


21,218



3,558



16,443



4,964



9,110



11,901Other






209











9,077



$
153,705


$
18,148


$
91,932


$
23,486


$
52,825


$
82,969December 31, 2005:Bankers Fidelity

$
65,904


$
5,866


$
46,375


$
1,927


$
17,745


$
American Southern


51,447



4,821



24,827



12,240



11,093



52,983Association Casualty


20,972



2,497



12,410



3,867



5,007



20,137Georgia Casualty


39,270



3,261



32,064



8,230



8,377



27,700Other






15











8,388



$
177,593


$
16,460


$
115,676


$
26,264


$
50,610


$
100,820December 31, 2004:Bankers Fidelity

$
65,442


$
5,349


$
45,827


$
1,520


$
18,159


$
American Southern


48,062



4,599



24,795



10,517



9,941



51,010Association Casualty


22,681



2,284



13,785



3,867



5,532



23,532Georgia Casualty


34,675



3,397



28,670



6,942



8,897



41,953Other






11











7,329



$
170,860


$
15,640


$
113,077


$
22,846


$
49,858


$
116,495  III-2




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##### Table of Contents



SCHEDULE IV
  ATLANTIC
    AMERICAN CORPORATION AND SUBSIDIARIES
  REINSURANCE
  Ceded To


Assumed





Percentage ofDirect


Other


From Other


Net


Amount AssumedAmount


Companies


Companies


Amounts


To Net(In thousands)Year ended December  31,
    2006:Life insurance in force

$
269,306


$
(37,238
)

$



$
232,068Premiums Bankers Fidelity

$
58,692


$
(73
)

$
301


$
58,920



0.5
%American Southern


50,598



(9,369
)


9,430



50,659



18.6
%Association Casualty


31,816



(8,908
)






22,908



Georgia Casualty


23,724



(8,163
)


5,657



21,218



26.7
%Total premiums

$
164,830


$
(26,513
)

$
15,388


$
153,705



10.0
%Year ended December  31,
    2005:Life insurance in force

$
276,996


$
(33,025
)

$



$
243,971Premiums Bankers Fidelity

$
65,734


$
(191
)

$
361


$
65,904



0.5
%American Southern


51,941



(9,034
)


8,540



51,447



16.6
%Association Casualty


25,749



(4,777
)






20,972



Georgia Casualty


34,609



(19,095
)


23,756



39,270



60.5
%Total premiums

$
178,033


$
(33,097
)

$
32,657


$
177,593



18.4
%Year ended December  31,
    2004:Life insurance in force

$
288,808


$
(28,582
)

$



$
260,226Premiums Bankers Fidelity

$
65,103


$
(75
)

$
414


$
65,442



0.6
%American Southern


45,688



(9,019
)


11,393



48,062



23.7
%Association Casualty


27,095



(4,414
)






22,681



Georgia Casualty


36,393



(20,609
)


18,891



34,675



54.5
%Total premiums

$
174,279


$
(34,117
)

$
30,698


$
170,860



18.0
%  IV-1




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##### Table of Contents



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





PaidExpenses


Amortization


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, 2006

$
8,394


$
153,314


$
47,228


$
94,785


$
11,842


$
59,162


$
(9,240
)

$
21,876


$
54,821


$
82,969December 31, 2005

$
10,878


$
158,393


$
56,868


$
111,689


$
10,579


$
72,866


$
(3,548
)

$
24,337


$
63,263


$
100,820December 31, 2004

$
12,183


$
156,415


$
65,914


$
105,418


$
10,280


$
66,599


$
717


$
21,326


$
66,138


$
116,495  VI-1