UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☑
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

or

☐
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)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
  
Trading Symbol(s)
  
Name of each exchange on which registered
Common Stock, par value $1.00 per share
  
AAME
  
NASDAQ Global Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☑   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☐   Accelerated filer  ☐   Non-accelerated filer  ☑  Smaller reporting company  ☑   Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐   No  ☑

The total number of shares of the registrant’s Common Stock, $1 par value, outstanding on July 31, 2024 was 20,399,758.
 
ATLANTIC AMERICAN CORPORATION
TABLE OF CONTENTS

 
2
     
Part I.
Financial Information
  
     
Item 1.
3
     
 
3
     
 
4
     
 
5
     
 
6
     
 
7
     
 
8
     
Item 2.
21
     
Item 4.
27
     
Part II.
Other Information
  
     
Item 2.
28
     
Item 5.
28
     
Item 6.
28
     
 
29

FORWARD-LOOKING STATEMENTS

This report contains and references certain information that constitutes forward-looking statements as that term is defined in the federal securities laws. Forward-looking statements are all statements other than those of historical fact. Such forward-looking statements are made based upon management’s current assessments of various risks and uncertainties, as well as assumptions made in accordance with the “safe harbor” provisions of the federal securities laws. Forward-looking statements are inherently subject to various risks and uncertainties and the Company’s actual results could differ materially from the results expressed in or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and other subsequent filings made by the Company from time to time with the Securities and Exchange Commission. In addition, other risks and uncertainties not known by us, or that we currently determine to not be material, may materially adversely affect our financial condition, results of operations or cash flows. The Company undertakes no obligation to update any forward-looking statement as a result of subsequent developments, changes in underlying assumptions or facts, or otherwise, except as may be required by law.

2
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ATLANTIC AMERICAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

   
Unaudited
June 30,
2024
    
December 31,
2023
  
ASSETS
  
Cash and cash equivalents
  
$
21,213
    
$
28,301
  
Investments:
                
Fixed maturities, available-for-sale, at fair value (amortized cost: $241,238 and $238,626; no allowance for credit losses)
    
216,636
      
218,219
  
Equity securities, at fair value (cost: $4,939 and $4,936)
    
9,545
      
9,413
  
Other invested assets (cost: $6,982 and $6,982)
    
6,063
      
6,381
  
Policy loans
    
1,792
      
1,778
  
Real estate
    
38
      
38
  
Investment in unconsolidated trusts
    
1,238
      
1,238
  
Total investments
    
235,312
      
237,067
  
Receivables:
                
Reinsurance (net of allowance for expected credit losses of $54 and $61)
    
22,496
      
21,103
  
Insurance premiums and other (net of allowance for expected credit losses of $219 and $217)
    
34,220
      
23,690
  
Deferred income taxes, net
    
17,236
      
15,682
  
Deferred acquisition costs
    
43,837
      
43,850
  
Other assets
    
9,149
      
9,028
  
Intangibles
    
2,544
      
2,544
  
Total assets
  
$
386,007
    
$
381,265
  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
  
Insurance reserves and policyholder funds:
                
Future policy benefits
  
$
95,545
    
$
92,495
  
Unearned premiums
    
38,038
      
31,317
  
Losses and claims
    
90,624
      
87,478
  
Other policy liabilities
    
1,045
      
1,132
  
Total insurance reserves and policyholder funds
    
225,252
      
212,422
  
Accounts payable and accrued expenses
    
22,321
      
24,811
  
Revolving credit facility
     4,024       3,019  
Junior subordinated debenture obligations, net
    
33,738
      
33,738
  
Total liabilities
    
285,335
      
273,990
  
                 
Commitments and contingencies (Note 12)            
Shareholders’ equity:
                
Preferred stock, $1 par, 4,000,000 shares authorized; Series D preferred, 55,000 shares issued and outstanding; $5,500 redemption value
    
55
      
55
  
Common stock, $1 par, 50,000,000 shares authorized; shares issued: 22,400,894; shares outstanding: 20,399,758 and 20,402,288
    
22,401
      
22,401
  
Additional paid-in capital
    
57,425
      
57,425
  
Retained earnings
    
47,641
      
50,929
  
Accumulated other comprehensive loss
    
(19,435
)
    
(16,121
)
Unearned stock grant compensation
    
(7
)
    
(13
)
Treasury stock, at cost: 2,001,136 and 1,998,606 shares
    
(7,408
)
    
(7,401
)
Total shareholders’ equity
    
100,672
      
107,275
  
Total liabilities and shareholders’ equity
  
$
386,007
    
$
381,265
  

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

3
ATLANTIC AMERICAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; Dollars in thousands, except per share data)

   
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2024
    
2023
     2024     2023  
Revenue:
                        
Insurance premiums, net
  
$
44,993
    
$
46,060
     $ 89,545     $ 92,160  
Net investment income
    
2,416
      
2,559
       4,972       5,100  
Realized investment gains, net
     13       70       13       70  
Unrealized gains (losses) on equity securities, net
    
243
      
494
       129       (1,881 )
Other income
    
3
      
5
       6       8  
Total revenue
    
47,668
      
49,188
       94,665       95,457  
                                 
Benefits and expenses:
                                
Insurance benefits and losses incurred
    
31,807
      
29,365
       63,732       59,825  
Commissions and underwriting expenses
    
11,584
      
12,848
       24,250       25,766  
Interest expense
    
867
      
807
       1,722       1,557  
Other expense
    
4,259
      
3,951
       8,316       7,910  
Total benefits and expenses
    
48,517
      
46,971
       98,020       95,058  
Income (loss) before income taxes
    
(849
)
    
2,217
       (3,355 )     399  
Income tax expense (benefit)
    
(165
)
    
473
       (673 )     101  
Net income (loss)
    
(684
)
    
1,744
       (2,682 )     298  
Preferred stock dividends
    
(100
)
    
(100
)
     (199 )     (199 )
Net income (loss) applicable to common shareholders
  
$
(784
)
  
$
1,644
     $ (2,881 )   $ 99  
Earnings (loss) per common share (basic)
  $ (0.04 )   $ 0.08     $ (0.14 )   $ —  
Earnings (loss) per common share (diluted)
   $ (0.04 )   $ 0.08     $ (0.14 )   $ —  

The accompanying notes are an integral part of these condensed consolidated financial statements.
 
4
ATLANTIC AMERICAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited; Dollars in thousands)

   
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2024
    
2023
     2024     2023  
Net income (loss)
  
$
(684
)
  
$
1,744
     $ (2,682 )   $ 298  
Other comprehensive income (loss):
                                
Available-for-sale fixed maturity securities:
                                
Gross unrealized holding gains (losses) arising in the period
    
(1,694
)
    
(3,167
)
     (4,182 )     1,566  
Related income tax effect
    
356
      
665
       878       (329 )
Subtotal
    
(1,338
)
    
(2,502
)
     (3,304 )     1,237  
Less: reclassification adjustment for net realized gains included in net income (loss)
     (13 )     (70 )     (13 )     (70 )
Related income tax effect
     3       15       3       15  
Subtotal
     (10 )     (55 )     (10 )     (55 )
Total other comprehensive income (loss), net of tax
    
(1,348
)
    
(2,557
)
     (3,314 )     1,182  
Total comprehensive income (loss)  
$
(2,032
)
  
$
(813
)
   $ (5,996 )   $ 1,480  

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

5
ATLANTIC AMERICAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited; Dollars in thousands except share data)

   
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2024
    
2023
     2024     2023  
Preferred stock:
                        
Balance, beginning of period
  
$
55
    
$
55
     $ 55     $ 55  
Balance, end of period
    
55
      
55
       55       55  
Common stock:
                                
Balance, beginning of period
    
22,401
      
22,401
       22,401       22,401  
Balance, end of period
    
22,401
      
22,401
       22,401       22,401  
Additional paid-in capital:
                                
Balance, beginning of period
    
57,425
      
57,425
       57,425       57,425  
Balance, end of period
    
57,425
      
57,425
       57,425       57,425  
Retained earnings:
                                
Balance, beginning of period
    
48,425
      
50,362
       50,929       51,982  
Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2023
     —       —       —       (75 )
Net income (loss)
    
(684
)
    
1,744
       (2,682 )     298  
Dividends on common stock
    
—
      
—
       (407 )     —  
Dividends accrued on preferred stock
    
(100
)
    
(100
)
     (199 )     (199 )
Balance, end of period
    
47,641
      
52,006
       47,641       52,006  
Accumulated other comprehensive loss:
                                
Balance, beginning of period
    
(18,087
)
    
(18,410
)
     (16,121 )     (22,149 )
Other comprehensive income (loss), net of tax
    
(1,348
)
    
(2,557
)
     (3,314 )     1,182  
Balance, end of period
    
(19,435
)
    
(20,967
)
     (19,435 )     (20,967 )
Unearned stock grant compensation:
                                
Balance, beginning of period
    
(8
)
    
(59
)
     (13 )     (132 )
Amortization of unearned compensation
    
1
      
26
       6       99  
Balance, end of period
    
(7
)
    
(33
)
     (7 )     (33 )
Treasury stock:
                                
Balance, beginning of period
    
(7,408
)
    
(7,395
)
     (7,401 )     (7,389 )
Net shares acquired related to employee share-based compensation plans
     —       (6 )     (7 )     (12 )
Balance, end of period
    
(7,408
)
    
(7,401
)
     (7,408 )     (7,401 )
                                 
Total shareholders’ equity
  
$
100,672
    
$
103,486
     $ 100,672     $ 103,486  
Dividends declared on common stock per share
  
$
—
    
$
—
     $ 0.02     $ —  
                                 
Common shares outstanding:
                                
Balance, beginning of period
     20,399,758       20,404,699       20,402,288       20,407,229  
Net shares acquired under employee share-based compensation plans     —       (2,411 )     (2,530 )     (4,941 )
Balance, end of period     20,399,758       20,402,288       20,399,758       20,402,288  

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

6
ATLANTIC AMERICAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; In thousands)

   
Six Months Ended
June 30,
  
   
2024
    
2023
  
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net (loss) income
  
$
(2,682
)
  
$
298
  
Adjustments to reconcile net (loss) income to net cash used in operating activities:
                
Amortization of acquisition costs, net
    
13
      
1,070
  
Realized investment gains, net
     (13 )     (70 )
Unrealized investment (gains) losses, net
     (129 )     1,881  
Losses from equity method investees
     318       16  
Compensation expense related to share awards
    
6
      
99
  
Provision for credit losses
     (5 )     27  
Depreciation and amortization
    
238
      
357
  
Deferred income tax benefit
    
(673
)
    
(1,300
)
Increase in receivables, net
     (11,918 )    
(11,814
)
Increase in insurance reserves and policyholder funds
    
12,830
      
6,653
  
Decrease in accounts payable and accrued expenses
    
(2,689
)
    
(3,246
)
Other, net
    
(199
)
    
1,133
  
Net cash used in operating activities
    
(4,903
)
    
(4,896
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Proceeds from investments sold
    
—
      
3,685
  
Proceeds from investments matured, called or redeemed
    
5,935
      
7,675
  
Investments purchased
    
(8,612
)
    
(12,000
)
Additions to property and equipment
    
(94
)
    
(68
)
Net cash used in investing activities
    
(2,771
)
    
(708
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Payment of dividends on common stock
     (407 )     —  
Treasury stock acquired — net employee share-based compensation
     (7 )     (12 )
Proceeds from revolving credit facility, net
     1,000       1,000  
Net cash provided by financing activities
    
586
      
988
  
                 
Net decrease in cash and cash equivalents
    
(7,088
)
    
(4,616
)
Cash and cash equivalents at beginning of period
    
28,301
      
28,863
  
Cash and cash equivalents at end of period
  
$
21,213
    
$
24,247
  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:
                
Cash paid for interest
  
$
1,723
    
$
1,547
  
Cash paid for income taxes
   $ 580     $ 776  

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

7
ATLANTIC AMERICAN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; Dollars in thousands, except per share amounts)
Note 1.
Basis of Presentation and Significant Accounting Policies


The accompanying unaudited condensed consolidated financial statements include the accounts of Atlantic American Corporation (the “Parent”) and its subsidiaries (collectively with the Parent, the “Company”). The Parent’s primary operating subsidiaries, American Southern Insurance Company and American Safety Insurance Company (together known as “American Southern”) and Bankers Fidelity Life Insurance Company, Bankers Fidelity Assurance Company and Atlantic Capital Life Assurance Company (together known as “Bankers Fidelity”), operate in two principal business units. American Southern operates in the property and casualty insurance market, while Bankers Fidelity operates in the life and health insurance market. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for audited annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The unaudited condensed consolidated financial statements included herein and these related notes should be read in conjunction with the Company’s consolidated financial statements, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”). For more information regarding Significant Accounting Policies, see the “Summary of Significant Accounting Policies” section of Note 1 of Notes to Consolidated Financial Statements in the 2023 Annual Report. The Company’s financial condition and operating results as of and for the three month and six month periods ended June 30, 2024 are not necessarily indicative of the financial condition or results of operations and cash flows that may be expected for the year ending December 31, 2024 or for any other future period.



The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.  To the extent that the Company changes its accounting for, or presentation of, items in the financial statements, the presentation of such amounts in prior periods is changed to conform to the current period presentation, if appropriate, and disclosed, if material.

Note 2.
Recently Issued Accounting Standards


Future Adoption of New Accounting Standards



For more information regarding accounting standards that the Company has not yet adopted, see the “Recently Issued Accounting Standards - Future Adoption of New Accounting Standards” section of Note 1 of Notes to Consolidated Financial Statements in the 2023 Annual Report.

8
Note 3.
Investments
   

The following tables set forth the estimated fair value, gross unrealized gains, gross unrealized losses, allowance for credit losses (“ACL”) and cost or amortized cost of the Company’s investments in fixed maturities and equity securities, aggregated by type and industry, as of June 30, 2024 and December 31, 2023.
  

Fixed maturities were comprised of the following:
 
   
June 30, 2024
  
   
Estimated
Fair Value
    
Gross
Unrealized
Gains
    
Gross
Unrealized
Losses
    
Allowance for
Credit Losses
    
Cost or
Amortized
Cost
  
Fixed maturities:
                              
Bonds:
                              
U.S. Treasury securities and obligations of U.S. Government agencies and authorities
  
$
48,335
    
$
49
    
$
4,855
     $ —    
$
53,141
  
Obligations of states and political subdivisions
     7,710
       2
       1,426
       —       9,134
  
Corporate securities:
                                        
Utilities and telecom
     22,879
       81
       3,175
       —       25,973
  
Financial services
     60,263
       515
       5,365
       —       65,113
  
Other business – diversified
     33,977
       172
       4,099
       —       37,904
  
Other consumer – diversified
     43,248
       19
       6,551
       —       49,780
  
Total corporate securities
     160,367
       787
       19,190
       —       178,770
  
Redeemable preferred stocks:
                                        
Other consumer – diversified
     224
       31
       —
       —       193
  
Total redeemable preferred stocks
     224
       31
       —
       —       193
  
Total fixed maturities
   $ 216,636     $ 869     $ 25,471     $ —     $ 241,238  

   
December 31, 2023
  
   
Estimated
Fair Value
    
Gross
Unrealized
Gains
    
Gross
Unrealized
Losses
    
Allowance for
Credit Losses
      
Cost or
Amortized
Cost
  
Fixed maturities:
                              
Bonds:
                              
U.S. Treasury securities and obligations of U.S. Government agencies and authorities
  
$
50,059
    
$
63
    
$
4,944
    
$
—
     $ 54,940  
Obligations of states and political subdivisions
     8,106       15
       1,424
       —       9,515  
Corporate securities:
                                        
Utilities and telecom
     21,309       143       2,582       —       23,748  
Financial services
     59,584       560       4,931       —       63,955  
Other business – diversified
     34,386       403       2,940       —       36,923  
Other consumer – diversified
     44,570       87       4,870       —       49,353  
Total corporate securities
     159,849       1,193       15,323       —       173,979  
Redeemable preferred stocks:
                                        
Other consumer – diversified
     205       13       —       —       192  
Total redeemable preferred stocks
     205       13       —       —       192  
Total fixed maturities
   $ 218,219     $ 1,284     $ 21,691     $ —     $
 238,626  
  

Bonds having an amortized cost of $14,697 and $14,647 and included in the tables above were on deposit with insurance regulatory authorities as of June 30, 2024 and December 31, 2023, respectively, in accordance with statutory requirements. In addition, the Company maintains cash and cash equivalents on deposit with insurance regulatory authorities of $226 as of June 30, 2024 and December 31, 2023. Additionally, bonds having an amortized cost of $9,363 and $9,584 and included in the tables above were pledged as collateral to the Federal Home Loan Bank of Atlanta (“FHLB”) at June 30, 2024 and December 31, 2023, respectively.


9

Equity securities were comprised of the following:
   
 
June 30, 2024
  
 
Estimated
Fair Value
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Cost
  
Equity securities:
                
Common and non-redeemable preferred stocks:
                
Financial services
   $ 1,036
     $ 730
     $ —
     $ 306
  
Communications
    8,509
       3,876
       —
       4,633
  
Total equity securities
   $ 9,545
     $ 4,606
     $ —
     $ 4,939
  

 
December 31, 2023
  
 
Estimated
Fair Value
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Cost
  
Equity securities:
                
Common and non-redeemable preferred stocks:
                
Financial services
   $ 924
     $ 621
     $ —
     $ 303
  
Communications
    8,489
       3,856
       —
       4,633
  
Total equity securities
   $ 9,413
     $ 4,477
     $ —
     $ 4,936
  
    

The carrying value and amortized cost of the Company’s investments in fixed maturities at June 30, 2024 and December 31, 2023 by contractual maturity were as follows. Actual maturities may differ from contractual maturities because issuers may call or prepay obligations with or without call or prepayment penalties.
  
   
June 30, 2024
    
December 31, 2023
  
   
Carrying
Value
    
Amortized
Cost
    
Carrying
Value
    
Amortized
Cost
  
Due in one year or less
   $ 7,037
     $ 7,109
     $ 1,715
     $ 1,750
  
Due after one year through five years
     60,553
       63,194
       60,423
       62,423
  
Due after five years through ten years
     29,893
       32,847
       33,596
       36,752
  
Due after ten years
     85,810
       100,922
       86,857
       97,984
  
Asset backed securities
     33,343
       37,166
       35,628
       39,717
  
Totals
   $ 216,636
     $ 241,238
     $ 218,219
     $ 238,626
  
   

The following tables present the Company’s unrealized loss aging for securities by type and length of time the security was in a continuous unrealized loss position as of June 30, 2024 and December 31, 2023.
 
   
June 30, 2024
  
   
Less than 12 months
    
12 months or longer
    
Total
  
   
Fair
Value
    
Unrealized
Losses
    
Fair
Value
    
Unrealized
Losses
    
Fair
Value
    
Unrealized
Losses
  
U.S. Treasury securities and obligations of U.S. Government agencies and authorities
   $ 2,807     $ 41     $ 37,897     $ 4,814     $ 40,704     $ 4,855  
Obligations of states and political subdivisions
     —       —       6,699       1,426       6,699       1,426  
Corporate securities
     15,679
       661
       133,004
       18,529
       148,683
       19,190
  
Total temporarily impaired securities
   $ 18,486     $ 702     $ 177,600     $ 24,769     $ 196,086     $ 25,471  
  
   
December 31, 2023
  
   
Less than 12 months
    
12 months or longer
    
Total
  
   
Fair
Value
    
Unrealized
Losses
    
Fair
Value
    
Unrealized
Losses
    
Fair
Value
    
Unrealized
Losses
  
U.S. Treasury securities and obligations of U.S. Government agencies and authorities
   $ 5,194
     $ 37
     $ 39,476
     $ 4,907
     $ 44,670
     $ 4,944
  
Obligations of states and political subdivisions     1,145
       3
       5,936
       1,421
       7,081
       1,424
  
Corporate securities
     539
       13
       138,283
       15,310
       138,822
       15,323
  
Total temporarily impaired securities
   $ 6,878
     $ 53
     $ 183,695
     $ 21,638
     $ 190,573
     $ 21,691
  
    
10

Analysis of Securities in Unrealized Loss Positions
 

As of June 30, 2024 and December 31, 2023, there were 225 and 222 securities, respectively, in an unrealized loss position which primarily included certain of the Company’s investments in fixed maturities within the utilities and telecom, financial services, other diversified business and other diversified consumer sectors. The unrealized losses on the Company’s fixed maturity securities investments have been primarily related to general market changes in interest rates and/or the levels of credit spreads rather than specific concerns with the issuer’s ability to pay interest and repay principal.



For any of its fixed maturity securities with significant declines in fair value, the Company performs detailed analyses to identify whether the drivers of the declines are due to general market drivers, such as the recent increases in interest rates, or due to credit-related factors. Identifying the drivers of the declines in fair value helps to align and allocate the Company’s resources to securities with real credit-related concerns that could impact the ultimate collection of principal and interest. For any significant declines in fair value determined to be non-interest rate or market related, the Company performs a more focused review of the related issuers’ specific credit profile.



For corporate issuers, the Company evaluates their assets, business profile including industry dynamics and competitive positioning, financial statements and other available financial data. For non-corporate issuers, the Company analyzes all reasonably available sources of credit support, including issuer-specific factors. The Company utilizes information available in the public domain and, for certain private placement issuers, from consultations with the issuers directly. The Company also considers ratings from Nationally Recognized Statistical Rating Organizations, as well as the specific characteristics of the security it owns including seniority in the issuer’s capital structure, covenant protections, or other relevant features. From these reviews, the Company evaluates the issuers’ continued ability to service the Company’s investment through payment of interest and principal.



Assuming no credit-related factors develop, unrealized gains and losses on fixed maturity securities are expected to diminish as investments near maturity. Based on its credit analysis, the Company believes that the issuers of its fixed maturity investments in the sectors shown in the table above have the ability to service their obligations to the Company. In addition, the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.



However, from time to time the Company identifies certain available-for-sale fixed maturity securities where the amortized cost basis exceeds the present value of the cash flows expected to be collected due to credit related factors and as a result, a credit allowance will be estimated.  The Company had no ACL on its available-for-sale fixed maturities as of June 30, 2024 or December 31, 2023.



The following tables summarize realized investment gains (losses) for the three month and six month periods ended June 30, 2024 and 2023.


 
Three Months Ended
June 30, 2024
  
 
Fixed
Maturities
  
Equity
Securities
  
Other
Invested Assets
  
Total
  
Gains
  
$
15
    
$
—
    
$
—
    
$
15
  
Losses
    
(2
)
    
—
      
—
      
(2
)
Realized investment gains, net
  
$
13
    
$
—
    
$
—
    
$
13
  

 
Three Months Ended
June 30, 2023
  
 
Fixed
Maturities
  
Equity
Securities
  
Other
Invested Assets
  
Total
  
Gains
  
$
70
    
$
—
    
$
—
    
$
70
  
Losses
    
—
      
—
      
—
      
—
  
Realized investment gains, net
  
$
70
    
$
—
    
$
—
    
$
70
  


 
Six Months Ended
June 30, 2024
  
 
Fixed
Maturities
  
Equity
Securities
  
Other
Invested Assets
  
Total
  
Gains
  
$
15
    
$
—
    
$
—
    
$
15
  
Losses
    
(2
)
    
—
      
—
      
(2
)
Realized investment gains, net
  
$
13
    
$
—
    
$
—
    
$
13
  


11
 
Six Months Ended
June 30, 2023
  
 
Fixed
Maturities
  
Equity
Securities
  
Other
Invested Assets
  
Total
  
Gains
  
$
70
    
$
—
    
$
—
    
$
70
  
Losses
    
—
      
—
      
—
      
—
  
Realized investment gains, net
  
$
70
    
$
—
    
$
—
    
$
70
  



The following table presents the change in unrealized gains (losses) related to equity securities still held for the three month and six month periods ended June 30, 2024 and 2023.

   
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
    2024     2023
    2024
     2023  
Net realized and unrealized gains (losses) recognized during the period on equity securities
  
$
243
 
$
494
  $ 129   $ (1,881 )
Less: Net realized gains recognized during the period on equity securities sold during the period
    
—
      
—
       —       —  
Unrealized gains (losses) recognized during the reporting period on equity securities, net
  
$
243
 
$
494
  $ 129   $ (1,881 )
  

Variable Interest Entities
 

The Company holds passive interests in a number of entities that are considered to be variable interest entities (“VIEs”) under GAAP guidance. The Company’s VIE interests principally consist of interests in limited liability companies formed for the purpose of achieving diversified equity returns. The Company’s VIE interests, carried as a part of other invested assets, totaled $6,063 and $6,381 as of June 30, 2024 and December 31, 2023, respectively. The Company’s VIE interests, carried as a part of investment in unconsolidated trusts, totaled $1,238 as of June 30, 2024 and December 31, 2023.


The Company does not have power over the activities that most significantly impact the economic performance of these VIEs and thus is not the primary beneficiary. Therefore, the Company has not consolidated these VIEs. The Company’s involvement with each VIE is limited to its direct ownership interest in the VIE. The Company’s maximum loss exposure relative to these investments was limited to the carrying value of the Company’s investment in the VIEs, which amount to $7,301 and $7,619, as of June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024 and December 31, 2023, the Company had outstanding commitments totaling $4,518, respectively, whereby the Company is committed to fund these investments and may be called by the partnership during the commitment period to fund the purchase of new investments and partnership expenses.

Note 4.
Fair Values of Financial Instruments


The estimated fair values have been determined by the Company using available market information from various market sources and appropriate valuation methodologies as of the respective dates. However, considerable judgment is necessary to interpret market data and to develop the estimates of fair value. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, the estimates presented herein are not necessarily indicative of the amounts which the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.



The following describes the fair value hierarchy and provides information as to the extent to which the Company uses fair value to measure the value of its financial instruments and information about the inputs used to value those financial instruments. The fair value hierarchy prioritizes the inputs in the valuation techniques used to measure fair value into three broad levels.

Level 1
Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. The Company’s financial instruments valued using Level 1 criteria include cash equivalents and exchange traded common stocks.

Level 2
Observable inputs, other than quoted prices included in Level 1, for an asset or liability or prices for similar assets or liabilities. The Company’s financial instruments valued using Level 2 criteria include most of its fixed maturities, which consist of U.S. Treasury securities, U.S. Government securities, obligations of states and political subdivisions, and certain corporate fixed maturities, as well as its non-redeemable preferred stocks. In determining fair value measurements of its fixed maturities and non-redeemable preferred stocks using Level 2 criteria, the Company utilizes data from outside sources, including nationally recognized pricing services and broker/dealers.  Prices for the majority of the Company’s Level 2 fixed maturities and non-redeemable preferred stocks were determined using unadjusted prices received from pricing services that utilize models where the significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities) or can be corroborated by observable market data.

12
Level 3
Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (including assumptions about risk). Fair value is based on criteria that use assumptions or other data that are not readily observable from objective sources. With little or no observable market, the determination of fair values uses considerable judgment and represents the Company’s best estimate of an amount that could be realized in a market exchange for the asset or liability. The Company’s financial instruments valued using Level 3 criteria consist of one equity security.  As of June 30, 2024 and December 31, 2023, the value of the equity security valued using Level 3 criteria was $189 and $185, respectively.


As of June 30, 2024, financial instruments carried at fair value were measured on a recurring basis as summarized below:

   
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Unobservable
Inputs
(Level 3)
    
Total
  
Assets:
                        
Fixed maturities
  
$
—
    
$
216,636
    
$
—
    
$
216,636
  
Equity securities
    
9,356
      
—
      
189
      
9,545
  
Cash equivalents
    
12,137
      
—
      
—
      
12,137
  
Total
  
$
21,493
    
$
216,636
    
$
189
    
$
238,318
  


As of December 31, 2023, financial instruments carried at fair value were measured on a recurring basis as summarized below:

   
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Unobservable
Inputs
(Level 3)