Atlantic American Corporation Reports Second Quarter Results for 2020

Rhea-AI Summary

Atlantic American Corporation (Nasdaq: AAME) reported a net income of $6.5 million ($0.30 per diluted share) for Q2 2020, a significant recovery from a loss of $4.4 million in Q2 2019. However, for the first six months of 2020, the company faced a net loss of $1.6 million, compared to a loss of $0.3 million a year earlier. The quarterly income increase was fueled by a $7.3 million decrease in total benefits and expenses and a $6.7 million rise in unrealized gains on equity securities. Notably, the reduction in Medicare supplement claims attributed to COVID-19 shelter-in-place orders also contributed positively.

Positive

• Net income of $6.5 million for Q2 2020 compared to a loss of $4.4 million in Q2 2019.
• Operating income increased by $7.8 million in Q2 2020 compared to Q2 2019.
• Decrease in total benefits and expenses by $7.3 million in Q2 2020.
• Record sales expected from BankersWorksite® division.

Negative

• Net loss of $1.6 million for the first half of 2020, worsening from a loss of $0.3 million in the same period of 2019.
• $7.1 million in net unrealized losses on equity securities in the first half of 2020.

ATLANTA, Aug. 11, 2020 (GLOBE NEWSWIRE) -- Atlantic American Corporation (Nasdaq- AAME) today reported net income for the three month period ended June 30, 2020 of $6.5 million, or $0.30 per diluted share, as compared to net loss of $4.4 million, or $0.22 per diluted share, for the comparable period in 2019.  For the six month period ended June 30, 2020, the Company reported net loss of $1.6 million, or $0.09 per diluted share, as compared to net loss of $0.3 million, or $0.02 per diluted share, for the comparable period in 2019.  The increase in net income during the second quarter of 2020 was primarily due to a $7.3 million decrease in total benefits and expenses coupled with an increase in unrealized gains on equity securities of $6.7 million for the second quarter of 2020 as compared to the second quarter of 2019.  The net loss for the six month period ended June 30, 2020 was primarily due to $7.1 million of net unrealized losses on equity securities during the six month period ended June 30, 2020 as compared to $1.2 million of unrealized gains on equity securities during the comparable period in 2019.  Changes in unrealized gains and losses on equity securities for the applicable periods are primarily the result of fluctuations in the market values of the Company’s equity investments.

Excluding the effects of realized or unrealized gains or losses and taxes, operating income (as defined below) increased $7.8 million in the three month period ended June 30, 2020 from the three month period ended June 30, 2019.  For the six month period ended June 30, 2020, operating income increased $8.4 million over the comparable period in 2019.  The increase in operating income was primarily due to favorable loss experience in the Company’s life and health operations, resulting from a significant decrease in the number of incurred claims within the Medicare supplement line of business.  This decrease in the number of incurred claims was primarily attributable to the Company’s individual policy holders being subject to varying degrees of shelter in place orders instituted throughout the United States during the second quarter of 2020 as a result of COVID-19.

Commenting on the results, Hilton H. Howell, Jr., chairman, president and chief executive officer, stated, “I am delighted with the performance of each of our operating segments and proud to report the return to operating income for the year.  Our BankersWorksite® division is on track for a record year of new sales which will further promote our diversification efforts.  Additionally, our property and casualty operations continue to perform well and had one of the best quarters on record. Our Company remains strong and firmly committed to delivering our superior service to policyholders, employers, and agents in these unprecedented times.”

Atlantic American Corporation is an insurance holding company involved through its subsidiary companies in specialty markets of the life, health, and property and casualty insurance industries.  Its principal insurance subsidiaries are American Southern Insurance Company, American Safety Insurance Company, Bankers Fidelity Life Insurance Company and Bankers Fidelity Assurance Company.

Note regarding non-GAAP financial measure: Atlantic American Corporation presents its consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP).  However, from time to time, the Company may present, in its public statements, press releases and filings with the Securities and Exchange Commission, non-GAAP financial measures such as operating income (loss). Management believes operating income (loss) is a useful metric for investors, potential investors, securities analysts and others because it isolates the “core” operating results of the Company before considering certain items that are either beyond the control of management (such as income tax expense, which is subject to timing, regulatory and rate changes depending on the timing of the associated revenues and expenses) or are not expected to regularly impact the Company’s operating results (such as any realized and unrealized investment gains (losses), which are not a part of the Company’s primary operations and are, to a limited extent, subject to discretion in terms of timing of realization).  The financial data attached includes a reconciliation of operating income (loss) to net income (loss), the most comparable GAAP financial measure.  The Company’s definition of operating income (loss) may differ from similarly titled financial measures used by others.  This non-GAAP financial measure should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP.

Note regarding Private Securities Litigation Reform Act: Except for historical information contained herein, this press release contains forward-looking statements that involve a number of risks and uncertainties.  Actual results could differ materially from those indicated by such forward-looking statements due to a number of factors and risks detailed from time to time in statements and reports that Atlantic American Corporation files with the Securities and Exchange Commission.

For further information contact:
J. Ross Franklin		Hilton H. Howell, Jr.
Chief Financial Officer		Chairman, President & CEO
Atlantic American Corporation		Atlantic American Corporation
404-266-5580		404-266-5505

Atlantic American Corporation
Financial Data

	Three Months Ended								Six Months Ended
	June 30,								June 30,
(Unaudited; In thousands, except per share data)		2020				2019				2020				2019
Insurance premiums
Life and health	$	30,675			$	30,715			$	61,303			$	61,691
Property and casualty		15,824				14,754				30,746				28,560
Insurance premiums, net		46,499				45,469				92,049				90,251
Net investment income		1,850				2,313				3,889				4,647
Realized investment gains, net		-				610				249				1,995
Unrealized gains (losses) on equity securities, net		1,355				(5,337	)			(7,100	)			1,152
Other income		33				72				60				100
Total revenue		49,737				43,127				89,147				98,145
Insurance benefits and losses incurred
Life and health		17,055				24,288				41,104				50,552
Property and casualty		10,021				9,863				19,555				18,906
Commissions and underwriting expenses		10,854				11,509				23,480				22,524
Interest expense		414				545				890				1,091
Other expense		3,112				2,511				6,064				5,376
Total benefits and expenses		41,456				48,716				91,093				98,449
Income (loss) before income taxes		8,281				(5,589	)			(1,946	)			(304	)
Income tax expense (benefit)		1,749				(1,163	)			(391	)			(40	)
Net income (loss)	$	6,532			$	(4,426	)		$	(1,555	)		$	(264	)
Earnings (loss) per common share (basic)	$	0.31			$	(0.22	)		$	(0.09	)		$	(0.02	)
Earnings (loss) per common share (diluted)	$	0.30			$	(0.22	)		$	(0.09	)		$	(0.02	)
Reconciliation of Non-GAAP Financial Measure
Net income (loss)	$	6,532			$	(4,426	)		$	(1,555	)		$	(264	)
Income tax expense (benefit)		1,749				(1,163	)			(391	)			(40	)
Realized investment gains, net		-				(610	)			(249	)			(1,995	)
Unrealized (gains) losses on equity securities, net		(1,355	)			5,337				7,100				(1,152	)
Non-GAAP Operating income (loss)	$	6,926			$	(862	)		$	4,905			$	(3,451	)
	June 30,				December 31,
Selected Balance Sheet Data		2020				2019
Total cash and investments	$	283,254			$	281,530
Insurance subsidiaries		276,585				274,730
Parent and other		6,669				6,800
Total assets		385,737				377,626
Insurance reserves and policyholder funds		204,711				201,906
Debt		33,738				33,738
Total shareholders' equity		123,894				118,394
Book value per common share		5.79				5.51
Statutory capital and surplus
Life and health		34,735				35,546
Property and casualty		45,927				45,827

FAQ

What was Atlantic American Corporation's net income for Q2 2020?

Atlantic American Corporation reported a net income of $6.5 million for Q2 2020.

How did the net loss for the first half of 2020 compare to 2019 for AAME?

For the first half of 2020, Atlantic American Corporation had a net loss of $1.6 million, compared to a loss of $0.3 million in 2019.

What contributed to the increase in operating income for AAME in Q2 2020?

The increase in operating income for Q2 2020 was primarily due to favorable loss experience and a significant decrease in incurred claims.

How did total benefits and expenses change for AAME in Q2 2020?

Total benefits and expenses decreased by $7.3 million in Q2 2020.

What is expected from the BankersWorksite® division of AAME?

The BankersWorksite® division is on track for a record year of new sales.