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<SEC-DOCUMENT>0000008177-09-000016.txt : 20090514
<SEC-HEADER>0000008177-09-000016.hdr.sgml : 20090514
<ACCEPTANCE-DATETIME>20090514130511
ACCESSION NUMBER:		0000008177-09-000016
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20090331
FILED AS OF DATE:		20090514
DATE AS OF CHANGE:		20090514

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ATLANTIC AMERICAN CORP
		CENTRAL INDEX KEY:			0000008177
		STANDARD INDUSTRIAL CLASSIFICATION:	LIFE INSURANCE [6311]
		IRS NUMBER:				581027114
		STATE OF INCORPORATION:			GA
		FISCAL YEAR END:			0228

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-03722
		FILM NUMBER:		09825475

	BUSINESS ADDRESS:	
		STREET 1:		4370 PEACHTREE RD NE
		CITY:			ATLANTA
		STATE:			GA
		ZIP:			30319
		BUSINESS PHONE:		4042665500

	MAIL ADDRESS:	
		STREET 1:		4370 PEACHTREE ROAD
		CITY:			ATLANTA
		STATE:			GA
		ZIP:			30319
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>form10q1st09.htm
<DESCRIPTION>CURRENT REPORT
<TEXT>

<html>
<head>
<title>
Form 10-Q 1st Quarter 2009
</title>
</head>
<body>
<BR><BR>
<HR width=80% SIZE=2 NOSHADE>
<p align=center><font face="Times New Roman, Serif" size=2>UNITED STATES<BR>SECURITIES AND EXCHANGE COMMISSION<BR>
                                                        Washington, D.C. 20549</font></p>
<HR SIZE=1 NOSHADE WIDTH=15% ALIGN=CENTER>

<p align=center><font face="Times New Roman, Serif" size=2><b>FORM 10-Q</b></font></p>

<HR SIZE=1 NOSHADE WIDTH=15% ALIGN=CENTER>
<p align=center><font size=2 face="times new roman, serif">|X| Quarterly report pursuant to Section 13 or 15(d) of<BR>
                                     the Securities Exchange Act of 1934</font></p>

<p align=center><font size=2 face="times new roman, serif"><b>For the quarterly period ended March 31, 2009</b></font></p>

<p align=center><font size=2 face="times new roman, serif">OR</font></p>

<p align=center><font size=2 face="times new roman, serif">|_| Transition report pursuant to Section 13 or 15(d) of<BR>
                                     the Securities Exchange Act of 1934</font></p>

<HR SIZE=1 NOSHADE WIDTH=15% ALIGN=CENTER>

<p align=center><font size=2 face="times new roman, serif">Commission File Number 0-3722</font></p>


<p align=center><font size=2 face="times new roman, serif"><b>ATLANTIC AMERICAN CORPORATION<BR></b>
                          Incorporated pursuant to the laws of the State of Georgia</font></p>

<HR SIZE=1 NOSHADE WIDTH=15% ALIGN=CENTER>

<p align=center><font size=2 face="times new roman, serif">Internal Revenue Service-- Employer Identification No.<BR>
                                                 58-1027114</font></P>


<p align=center><font size=2 face="times new roman, serif">Address of Principal Executive Offices:<BR>
                              4370 Peachtree Road, N.E., Atlanta, Georgia 30319<BR>
                                               (404) 266-5500</font></p>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes |X|
No |_|</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such
files). Yes |_| No |_| </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See definitions of &#147;large accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;smaller reporting company&#148;
 in Rule 12b-2 of the Exchange Act. (Check one): </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Large Accelerated Filer |_| Accelerated Filer |_|
Non-Accelerated Filer |_| (Do not check if a smaller reporting company) Smaller Reporting Company |X|</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes |_| No |X| </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The total number of shares
of the registrant&#146;s Common Stock, $1 par value, outstanding on May 12,
2009, was 22,323,595. </FONT></P>

<HR width=80% SIZE=2 NOSHADE>
<BR><BR>



<PAGE>



<HR SIZE=2       COLOR=GRAY NOSHADE>
<H5 align="left" style="page-break-before:always"></H5>

<a name="table_of_contents"></a>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ATLANTIC
AMERICAN CORPORATION</FONT></H1>

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TABLE OF CONTENTS</FONT></H1>

<table width=680 align=center cellspacing=0 cellpadding=8 border=0>
<tr>
<td><font size=2 face="times new roman, serif"><u>Part I.</u></font></td>
<td><font size=2 face="times new roman, serif"><u> Financial Information</u></font></td>
<td align=center><font size=2 face="times new roman, serif"><u> Page No.</u></font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Item 1. </font></td>
<td><font size=2 face="times new roman, serif">Financial Statements:</font></td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td><font size=2 face="times new roman, serif"><A HREF="#consolidated_balance_sheets">Consolidated Balance Sheets</A>-<BR>
March 31, 2009 and December 31, 2008</font></td>
<td align=center><font size=2 face="times new roman, serif">2</font></td>
</tr>
<tr bgcolor="#eeeeee">

<td>&nbsp;</td>
<td><font size=2 face="times new roman, serif"><A HREF="#consolidated_statements_operations">Consolidated Statements of Operations</A>-<BR>
         Three months ended March 31, 2009 and 2008</font>  </td>
<td align=center> <font size=2 face="times new roman, serif">3</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td><font size=2 face="times new roman, serif"><A HREF="#consolidated_statements_shareholders_equity">Consolidated Statements of Shareholders' Equity</A> -<BR>
         Three months ended March 31, 2009 and 2008 </font></td>
<td align=center><font size=2 face="times new roman, serif">4</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td>&nbsp;</td>
<td><font size=2 face="times new roman, serif"><A HREF="#consolidates_statement_cash_flows">Consolidated Statements of Cash Flows</A> -<BR>
Three months ended March 31, 2009 and 2008</font></td>
<td align=center><font size=2 face="times new roman, serif">5</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td> <font size=2 face="times new roman, serif"><A HREF="#notes_to_consolidated_statements">Notes to Consolidated Financial Statements</A></font></td>
<td align=center><font size=2 face="times new roman, serif">6</font></td>
</tr>
<tr bgcolor="#eeeeee" valign=top>
<td><font size=2 face="times new roman, serif">Item 2.</font></td>
<td><font size=2 face="times new roman, serif"><A HREF="#managements_discussion">Management's Discussion and Analysis of Financial Condition</A><BR>
and Results of Operations</font></td>
<td align=center><font size=2 face="times new roman, serif">16</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Item 3.</font></td>
<td> <font size=2 face="times new roman, serif"><A HREF="#quantitative_and_qualitative_disclosures">Quantitative and Qualitative Disclosures About Market Risk</A></font></td>
<td align=center><font size=2 face="times new roman, serif">25</font></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Item 4T.</font></td>
<td> <font size=2 face="times new roman, serif"><A HREF="#controls_and_procedures">Controls and Procedures</A></font></td>
<td align=center><font size=2 face="times new roman, serif">25</font></td>
</tr>



<tr>
<td><font size=2 face="times new roman, serif"><u>Part II.</u></font> </td>
<td><font size=2 face="times new roman, serif"><u>Other Information</u></font></td>
<td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Item 2.</font></td>
<td><font size=2 face="times new roman, serif"><A HREF="#legal_proceedings">Unregistered Sales of Equity Securities and Use of Proceeds</A></font></td>
<td align=center><font size=2 face="times new roman, serif">26</font></td>
</tr>


<tr>
<td><font size=2 face="times new roman, serif">Item 6.</font></td>
<td><font size=2 face="times new roman, serif"><A HREF="#exhibits_and_reports">Exhibits</A></font></td>
<td align=center><font size=2 face="times new roman, serif">26</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif"><A HREF="#signature">Signature</A></font></td>
<td>&nbsp;</td>
<td align=center> <font size=2 face="times new roman, serif">27</font></td>
</tr>
</table>







<PAGE>
<HR SIZE=2 NOSHADE>
<H5 align="left" style="page-break-before:always"></H5>



<a name="consolidated_balance_sheets"></a>
<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>


<p align=center><font size=2 face="times new roman, serif"><b>PART I.&nbsp;&nbsp;FINANCIAL INFORMATION</B></font></P>

<p><font size=2 face="times new roman, serif"><u>Item 1.&nbsp;  Financial Statements</u></font></p>
<p align=center><font size=2 face="times new roman, serif"><b> ATLANTIC AMERICAN CORPORATION<BR>
                                                      CONSOLIDATED BALANCE SHEETS</b><BR><i>
(Dollars in thousands, except share data)</i></font></p>
<TABLE WIDTH=630 ALIGN=CENTER CELLSPACING=0 CELLPADDING=0 BORDER=0>
<tr>
<td width=71%></td>
<td width=14%></td>
<td width=1%></td>
<td width=14%></td>
</tr>
<tr>
<td align=center colspan=4><font size=2 face="times new roman, serif"><b>ASSETS</b></font></td>

</tr>
<tr valign=bottom>
<td>&nbsp;</td>
<td align=center colspan=2> <font size=2 face="times new roman, serif"><i>Unaudited</i><BR>March 31,<BR> 2009</font><hr noshade size=1></td>
<td align=center><font size=2 face="times new roman, serif">December 31,<BR>2008</font><hr noshade size=1></td>
</tr>

<tr valign=top bgcolor="#eeeeee">
<td align=left> <font size=2 face="times new roman, serif">Cash and cash equivalents, including short-term investments of $18,725 and $21,339</font></td>
<td align=right><font size=2 face="times new roman, serif"> $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23,920</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;37,321</font><hr noshade size=1></td>
</tr>
<tr>
<td align=left> <font size=2 face="times new roman, serif">Investments:</font></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td align=left><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;Fixed maturities (cost: $178,931 and $171,265)</font></td>
<td align=right><font size=2 face="times new roman, serif">166,577</font></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">163,097</font></td>
</tr>
<tr>
<td align=left><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;Common and non-redeemable preferred stocks
(cost: $8,816 and $8,816)</font></td>
<td align=right><font size=2 face="times new roman, serif">3,754</font></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">5,291</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align=left> <font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;Other invested assets (cost: $1,403 and $1,433)</font></td>
<td align=right> <font size=2 face="times new roman, serif">1,403</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">1,433</font></td>
</tr>

<tr valign=top>
<td> <font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;Policy and student loans</font></td>
<td align=right> <font size=2 face="times new roman, serif">2,004</font></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">2,019</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td valign=top> <font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;Real estate</font></td>
<td align=right> <font size=2 face="times new roman, serif">38</font></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">38</font></td>
</tr>
<tr>
<td valign=top> <font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;Investment in unconsolidated trusts</font></td>
<td align=right> <font size=2 face="times new roman, serif">1,238</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">1,238</font><hr noshade size=1></td>
</tr>


<tr bgcolor="#eeeeee" valign=top>
<td><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total investments</font></td>
<td align=right><font size=2 face="times new roman, serif">175,014</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">173,116</font><hr noshade size=1></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif"> Receivables:</font></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td> <font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Reinsurance</font></td>
<td align=right> <font size=2 face="times new roman, serif">10,111</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">14,870</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;&nbsp;Other (net of allowance for doubtful accounts: $541 and $676)</font></td>
<td align=right> <font size=2 face="times new roman, serif">6,743</font></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">7,789</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif"> Deferred income taxes, net</font></td>
<td align=right><font size=2 face="times new roman, serif">12,501</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">10,577</font></TD>
</tr>
<tr>
<td><font size=2 face="times new roman, serif"> Deferred acquisition costs</font></td>
<td align=right><font size=2 face="times new roman, serif">19,176</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">19,160</font></TD>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif"> Other assets</font></td>
<td align=right> <font size=2 face="times new roman, serif">1,648</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">1,648</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif"> Goodwill</font></td>
<td align=right><font size=2 face="times new roman, serif">2,128</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">2,128</font><hr noshade size=1></td>
</tr>

<tr bgcolor="#eeeeee" valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets</font></td>
<td align=right> <font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;251,241</font><hr noshade size=3></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;266,609</font><hr noshade size=3></td>
</tr>
</table>


<p align=center><font size=2 face="times new roman, serif"><b>LIABILITIES AND SHAREHOLDERS' EQUITY</b></font></p>
<TABLE ALIGN=CENTER WIDTH=630 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR>
<td width=71%></td>
<td width=14%></td>
<td width=1%></td>
<td width=14%></td>
</tr>
<TR>
<TD><font size=2 face="times new roman, serif">Insurance reserves and policy funds:</font></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future policy benefits</font></td>
<td align=right width=15%><font size=2 face="times new roman, serif">$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;57,227</font></td>
<td>&nbsp;</td>
<td align=right width=15%><font size=2 face="times new roman, serif"> $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;56,827</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unearned premiums</font></td>
<td align=right><font size=2 face="times new roman, serif">18,162</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">19,542</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Losses and claims</font></td>
<td align=right><font size=2 face="times new roman, serif">47,078</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">52,499</font></td>
</tr>
<tr valign=top>
<td> <font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other policy liabilities</font></td>
<td align=right> <font size=2 face="times new roman, serif">1,513</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">1,906</font><HR NOSHADE SIZE=1></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total policy liabilities</font></td>
<td align=right><font size=2 face="times new roman, serif">123,980</font></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">130,774</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Accounts payable and accrued expenses</font></td>
<td align=right><font size=2 face="times new roman, serif">14,137</font></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">19,183</font></td>
</tr>


<tr bgcolor="#eeeeee" valign=top>
<td><font size=2 face="times new roman, serif">Junior subordinated debenture obligations</font></td>
<td align=right><font size=2 face="times new roman, serif">41,238</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">41,238</font><hr noshade size=1></td>
</tr>

<tr valign=top>
<td><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities</font></td>
<td align=right><font size=2 face="times new roman, serif">179,355</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">191,195</font><HR NOSHADE SIZE=1></td>
</tr>
<tr>
<td colspan=4>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Commitments and contingencies (Note 11)</font></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Shareholders' equity:</font></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee" valign=bottom>
<td><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred stock, $1 par, 4,000,000 shares authorized;<BR>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series D preferred, 70,000 shares issued and outstanding;<BR>
       &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$7,000 redemption value </font></td>
<td align=right><font size=2 face="times new roman, serif"> 70</font></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">70</font></td>
</tr>

<tr valign=bottom>
<td> <font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock, $1 par, 50,000,000 shares authorized;<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares issued: 22,373,900 and 22,373,900;<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares outstanding: 22,323,595 and 22,332,087</font></td>
<td align=right><font size=2 face="times new roman, serif"> 22,374</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif"> 22,374</font></td>
</tr>
<tr bgcolor="#eeeeee" >
<td><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital</font></td>
<td align=right><font size=2 face="times new roman, serif">57,124</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">57,107</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retained earnings</font></td>
<td align=right><font size=2 face="times new roman, serif">5,248</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">5,119</font></td>
</tr>




<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss</font></td>
<td align=right> <font size=2 face="times new roman, serif">(12,867)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(9,200)</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Treasury stock, at cost: 50,305 and 41,813
shares<BR></font></td>
<td align=right> <font size=2 face="times new roman, serif">(63)</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(56)</font><HR NOSHADE SIZE=1></td>
</tr>
<tr bgcolor="#eeeeee" valign=top>
<td><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total shareholders' equity</font></td>
<td align=right><font size=2 face="times new roman, serif">71,886</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">75,414</font><HR NOSHADE SIZE=1></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total liabilities and shareholders' equity</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;251,241</font><HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif"> $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;266,609</font><HR NOSHADE SIZE=2></td>
</tr>
</table>


<p align=center><font size=2  face="times new roman, serif">The accompanying notes are an integral part of these consolidated financial statements.</font></p>


<p align=center><font size=2 face="times new roman, serif">-2-</font></p>




<PAGE>

<HR SIZE=2 COLOR=GRAY NOSHADE>
<H5 align="left" style="page-break-before:always"></H5>




<a name="consolidated_statements_operations"></a>
<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>

<p align=center><font size=2 face="times new roman, serif"><B>ATLANTIC
AMERICAN CORPORATION<BR>
CONSOLIDATED
STATEMENTS OF OPERATIONS</b><BR>
<i>(Unaudited; Dollars in thousands, except per share data)</i></font></p>

<table align=center width=630 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=68%></td>
<td width=15.5%></td>
<td width=1%></td>
<td width=15.5%></td>
</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" align=center colspan=3><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31,</font><HR NOSHADE SIZE=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2008</font><HR NOSHADE SIZE=1></td>

</tr>

<tr>
<td><font size=2 face="times new roman, serif">Revenue:</font></td>
<td colspan=3>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Insurance premiums</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22,797</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;23,032</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Investment income</font></td>
<td align=right><font size=2 face="times new roman, serif">2,735</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">2,690</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Realized investment gains, net</font></td>
<td align=right><font size=2 face="times new roman, serif">13</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">24</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Other income</font></td>
<td align=right><font size=2 face="times new roman, serif">67</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">157</font><HR NOSHADE SIZE=1></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenue</font></td>
<td align=right><font size=2 face="times new roman, serif">25,612</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">25,903</font><HR NOSHADE SIZE=1></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Benefits and expenses:</font></td>
<td colspan=3>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Insurance benefits and losses incurred</font></td>
<td align=right><font size=2 face="times new roman, serif">14,880</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">13,918</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Commissions and underwriting expenses</font></td>
<td align=right><font size=2 face="times new roman, serif">7,518</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">8,309</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Interest expense</font></td>
<td align=right><font size=2 face="times new roman, serif">721</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">927</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Other</font></td>
<td align=right><font size=2 face="times new roman, serif">2,186</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">2,028</font><HR NOSHADE SIZE=1></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total benefits and expenses</font></td>
<td align=right><font size=2 face="times new roman, serif">25,305</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">25,182</font><HR NOSHADE SIZE=1></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Income from continuing operations before income taxes</font></td>
<td align=right><font size=2 face="times new roman, serif">307</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">721</font></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Income tax expense</font></td>
<td align=right><font size=2 face="times new roman, serif">51</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">297</font><HR NOSHADE SIZE=1></td>
</tr>

<tr valign=top>
<td><font size=2 face="times new roman, serif">Income from continuing operations</font></td>
<td align=right><font size=2 face="times new roman, serif">256</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">424</font></td>
</tr>

<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Loss from discontinued operations, net of tax (Note 3)</font></td>
<td align=right><font size=2 face="times new roman, serif">-</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(2,166)</font><HR NOSHADE SIZE=1></td>
</tr>

<tr>
<td><font size=2 face="times new roman, serif">Net income (loss)</font></td>
<td align=right><font size=2 face="times new roman, serif">256</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(1,742)</font></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Preferred stock dividends</font></td>
<td align=right><font size=2 face="times new roman, serif">(127)</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(428)</font><HR NOSHADE SIZE=1></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">Net income (loss) applicable to common stock</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;129</font><HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;(2,170)</font><HR NOSHADE SIZE=2></td>

</tr>


<tr valign=top bgcolor="#eeeeee">
<td colspan=8><font size=2 face="times new roman, serif">Basic income (loss) per common share:</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Income from continuing operations
</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.01</font>
</td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font>
</td>
</tr>

<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Loss from discontinued operations
</font></td>
<td align=right><font size=2 face="times new roman, serif">-</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(.10)</font><HR NOSHADE SIZE=1></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss) applicable to common shareholders
</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.01</font><HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.10)</font><HR NOSHADE SIZE=2></td>
</tr>



<tr valign=top bgcolor="#eeeeee">
<td colspan=8><font size=2 face="times new roman, serif">Diluted income (loss) per common share:</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Income from continuing operations
</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.01</font>
</td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font>
</td>
</tr>

<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Loss from discontinued operations
</font></td>
<td align=right><font size=2 face="times new roman, serif">-</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(.10)</font><HR NOSHADE SIZE=1></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss) applicable to common shareholders
</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.01</font><HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.10)</font><HR NOSHADE SIZE=2></td>
</tr>
</table>

<p align=center><font size=2 face="times new roman, serif"> The accompanying notes are an
integral part of these consolidated financial statements.</font></p>
<p align=center><font size=2 face="times new roman, serif">-3-</font></p>


<HR SIZE=2 COLOR=GRAY NOSHADE>
<H5 align="left" style="page-break-before:always"></H5>


<a name="consolidated_statements_shareholders_equity"></a>
<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>


<table align="center" width="100%" cellspacing="0" cellpadding="2" border="0">
<tr>
<td width=30%></td>
<td width=10%></td>
<td width=10%></td>
<td width=10%></td>
<td width=10%></td>

<td width=12%></td>
<td width=10%></td>
<td width=10%></td>
</tr>
<tr>
<td align=center colspan=9><font size=2 face="times new roman, serif"><b>ATLANTIC AMERICAN CORPORATION<BR>
                                               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY<BR></b>
                                                      <i>(Unaudited; Dollars in thousands)</i></font></td></tr>
<tr valign=top bgcolor="#eeeeee">
<td align=left><font size=1 face="times new roman, serif">&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>Three Months Ended March 31, 2009</font><hr noshade size=1></td>
<td align=center><font size=1 face="times new roman, serif">&nbsp;<BR>&nbsp;<BR>Preferred<BR>Stock</font><hr noshade size=1></td>
<td align=center><font size=1 face="times new roman, serif">&nbsp;<BR>&nbsp;<BR>Common<BR>Stock</font><hr noshade size=1></td>
<td align=center><font size=1 face="times new roman, serif">&nbsp;<BR>Additional<BR>Paid-in<BR>Capital</font><hr noshade size=1></td>
<td align=center><font size=1 face="times new roman, serif">&nbsp;<BR>&nbsp;<BR>Retained<BR>Earnings</font><hr noshade size=1></td>

<td align=center><font size=1 face="times new roman, serif">&nbsp;<BR>Accumulated Other<BR>Comprehensive<BR>Loss</font><hr noshade size=1></td>
<td align=center><font size=1 face="times new roman, serif">&nbsp;<BR>&nbsp;<BR>Treasury<BR>Stock</font><hr noshade size=1></td>
<td align=center><font size=1 face="times new roman, serif">&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>Total</font><hr noshade size=1></td>
</tr>
<tr>
<td><font size=1 face="times new roman, serif">Balance, December 31, 2008</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;70</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;22,374</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;57,107</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,119</font></td>

<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9,200)</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(56)</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;75,414</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=1 face="times new roman, serif">Comprehensive income (loss):</font></td>
<td colspan=7>&nbsp;</td>
</tr>
<tr>
<td><font size=1 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net income</font></td>
<td colspan=3>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">256</font></td>
<td colspan=2>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">256</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=1 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Increase in unrealized investment losses</font></td>
<td colspan=4>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">(5,722)</font></td>
<td>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">(5,722)</font></td>
</tr>
<tr valign=top>
<td><font size=1 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Fair value adjustment to derivative<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
financial instrument</font></td>
<td colspan=4>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>81</font></td>
<td>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>81</font></td>
</tr>



<tr valign=top bgcolor="#eeeeee" >
<td><font size=1 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred income tax attributable to other<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
comprehensive loss<BR>&nbsp;</font></td>
<td colspan=4>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>1,974</font></td>
<td>&nbsp;</td>
<td valign=bottom align=right><font size=1 face="times new roman, serif">&nbsp;<BR>1,974</font><hr noshade size=1></td>
</tr>
<tr>
<td><font size=1 face="times new roman, serif">Total comprehensive loss<BR>&nbsp;</font></td>
<td colspan=6>&nbsp;</td>
<td valign=bottom align=right><font size=1 face="times new roman, serif">(3,411)</font><hr noshade size=1></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font size=1 face="times new roman, serif">Dividends accrued on preferred stock</font></td>
<td colspan=3>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">(127)</font></td>

<td colspan=2>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">(127)</font></td>
</tr>


<tr>
<td><font size=1 face="times new roman, serif">Amortization of unearned compensation</font></td>
<td colspan=2>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">17</font></td>
<td colspan=3>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">17</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=1 face="times new roman, serif">Purchase of shares for treasury</font></td>
<td valign=bottom>&nbsp;<hr noshade size=1></td>
<td valign=bottom>&nbsp;<hr noshade size=1></td>
<td valign=bottom>&nbsp;<hr noshade size=1></td>
<td valign=bottom>&nbsp;<hr noshade size=1></td>
<td valign=bottom>&nbsp;<hr noshade size=1></td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>(7)</font><hr noshade size=1></td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>(7)</font><hr noshade size=1></td>
</tr>

<tr valign=top>
<td><font size=1 face="times new roman, serif">Balance, March 31, 2009</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;70</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;22,374</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;57,124</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,248</font><hr noshade size=2></td>

<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;(12,867)</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(63)</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;71,886</font><hr noshade size=2></td>
</tr>
<tr valign=bottom bgcolor="#eeeeee">
<td><font size=1 face="times new roman, serif">Three Months Ended March 31, 2008</font><hr noshade size=1></td>
<td colspan=8>&nbsp;</td>
</tr>
<tr>
<td><font size=1 face="times new roman, serif">Balance, December 31, 2007</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;204</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;21,817</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;56,414</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,530</font></td>

<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,171)</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;87,794</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=1 face="times new roman, serif">Comprehensive income (loss):</font></td>
<td colspan=8>&nbsp;</td>
</tr>
<tr>
<td><font size=1 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net loss</font></td>
<td colspan=3>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">(1,742)</font></td>
<td colspan=2>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">(1,742)</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=1 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Increase in unrealized investment losses</font></td>
<td colspan=4>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">(1,722)</font></td>
<td>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">(1,722)</font></td>
</tr>
<tr valign=top>
<td><font size=1 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Fair value adjustment to derivative<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
financial instrument</font></td>
<td colspan=4>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>(665)</font></td>
<td>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>(665)</font></td>
</tr>

<tr bgcolor="#eeeeee" valign=top>
<td><font size=1 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred income tax attributable to other<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
comprehensive loss<BR>&nbsp;</font></td>
<td colspan=4>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>835</font></td>
<td>&nbsp;</td>
<td valign=bottom align=right><font size=1 face="times new roman, serif">&nbsp;<BR>835</font><hr noshade size=1></td>
</tr>
<tr>
<td><font size=1 face="times new roman, serif">Total comprehensive loss<BR>&nbsp;</font></td>
<td colspan=6>&nbsp;</td>
<td valign=bottom align=right><font size=1 face="times new roman, serif">(3,294)</font><hr noshade size=1></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font size=1 face="times new roman, serif">Dividends accrued on preferred stock</font></td>
<td colspan=3>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">(428)</font></td>

<td colspan=2>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">(428)</font></td>
</tr>


<tr>
<td><font size=1 face="times new roman, serif">Amortization of unearned compensation</font></td>
<td colspan=2>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">17</font></td>
<td colspan=3>&nbsp;</td>
<td align=right><font size=1 face="times new roman, serif">17</font></td>
</tr>

<tr bgcolor="#eeeeee">
<td valign=top><font size=1 face="times new roman, serif">Issuance of shares for employee benefit plans<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and stock options<BR>&nbsp;</font></td>
<td valign=bottom>&nbsp;<hr noshade size=1></td>

<td align=right><font face="times new roman, serif" size=1>&nbsp;<BR>40</font><hr noshade size=1></td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>21</font><hr noshade size=1></td>
<td valign=bottom>&nbsp;<hr noshade size=1></td>
<td valign=bottom>&nbsp;<hr noshade size=1></td>
<td valign=bottom>&nbsp;<hr noshade size=1></td>


<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>61</font><hr noshade size=1></td>
</tr>
<tr valign=top>
<td><font size=1 face="times new roman, serif">Balance, March 31, 2008</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;204</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;21,857</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;56,452</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,360</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2,723)</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font><hr noshade size=2></td>

<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;84,150</font><hr noshade size=2></td>
</tr>
<tr>
<td colspan=9>&nbsp;</td>
</tr>
<tr>
<td align=center colspan=9><font size=2 face="times new roman, serif">
The accompanying notes are an integral part of these consolidated financial statements.</font></td></tr>
<tr>
<td align=center colspan=9><font size=2 face="times new roman, serif">-4-</font></td></tr>
</table>





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<H5 align="left" style="page-break-before:always"></H5>




<a name="consolidates_statement_cash_flows"></a>
<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>

<p align=center></p>

<table align=center width=630 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=72%></td>
<td width=13.5%></td>
<td width=1%></td>
<td width=13.5%></td>
</tr>
<tr>
<td align=center colspan=4><font size=2 face="times new roman, serif"><b>ATLANTIC AMERICAN CORPORATION<BR>

                                                    CONSOLIDATED STATEMENTS OF CASH FLOWS</b><BR>
<i>(Unaudited; Dollars in thousands)</i></font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" align=center colspan=3><font size=2 face="times new roman, serif">Three Months Ended<BR>
March 31,</font><HR NOSHADE SIZE=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif"> 2009</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif"> 2008</font><HR NOSHADE SIZE=1></td>
</tr>

<tr bgcolor="#eeeeee" >
<td><font size=2 face="times new roman, serif"><b>CASH FLOWS FROM OPERATING ACTIVITIES:</b></font></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;Net income (loss)</font></td>
<td align=right><font size=2 face="times new roman, serif"> $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;256</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif"> $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,742)</font></TD>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;Adjustments to reconcile net income (loss) to net cash<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;used in operating activities:</font></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>

<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of deferred acquisition costs</font></td>
<td align=right><font size=2 face="times new roman, serif">2,745</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">2,738</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisition costs deferred</font></td>
<td align=right><font size=2 face="times new roman, serif">(2,761)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(2,499)</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized investment gains</font></td>
<td align=right><font size=2 face="times new roman, serif">(13)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(24)</font></td>
</tr>
<tr bgcolor="#eeeeee">
<Td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease in insurance reserves</font></td>
<td align=right><font size=2 face="times new roman, serif">(6,794)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(2,988)</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss from discontinued operations, net</font></td>
<td align=right><font size=2 face="times new roman, serif">-</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">2,166</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation expense related to share awards</font></td>
<td align=right><font size=2 face="times new roman, serif">17</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">17</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization</font></td>
<td align=right><font size=2 face="times new roman, serif">54</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">106</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income tax expense (benefit)</font></td>
<td align=right><font size=2 face="times new roman, serif">51</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(1,280)</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;Decrease in receivables, net</font></td>
<td align=right><font size=2 face="times new roman, serif">5,421</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">240</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;Decrease in other liabilities</font></td>
<td align=right><font size=2 face="times new roman, serif">(5,091)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(3,264)</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;Goodwill impairment</font></td>
<td align=right><font size=2 face="times new roman, serif">-</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">260</font></td>
</tr>

<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;Other, net</font></td>
<td align=right><font size=2 face="times new roman, serif">38</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(1,472)</font><HR NOSHADE SIZE=1></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;Net cash used in continuing operations</font></td>
<td align=right><font size=2 face="times new roman, serif">(6,077)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(7,742)</font></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;Net cash used in discontinued operations</font></td>
<td align=right><font size=2 face="times new roman, serif">-</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(3,424)</font><HR NOSHADE SIZE=1></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;Net cash used in operating activities</font></td>
<td align=right><font size=2 face="times new roman, serif">(6,077)</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(11,166)</font><HR NOSHADE SIZE=1></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif"><b>CASH FLOWS FROM INVESTING ACTIVITIES:</b></font></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from investments sold, called or matured</font></TD>
<td align=right><font size=2 face="times new roman, serif">34,801</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">36,926</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Investments purchased</font></td>
<td align=right><font size=2 face="times new roman, serif">(42,030)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(31,019)</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Net proceeds from sale of insurance subsidiaries</font></td>
<td align=right><font size=2 face="times new roman, serif">-</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">43,392</font></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Additions to property and equipment</font></td>
<td align=right><font size=2 face="times new roman, serif">(88)</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(69)</font><HR NOSHADE SIZE=1></td>
</tr>

<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash (used in) provided by continuing operations</font></td>
<td align=right><font size=2 face="times new roman, serif">(7,317)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">49,230</font></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in discontinued operations (net of $35,501 of cash<BR> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;transferred in 2008)</font></td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>-</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>(11,996)</font><HR NOSHADE SIZE=1></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash (used in) provided by investing activities</font></td>
<td align=right><font size=2 face="times new roman, serif">(7,317)</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">37,234</font><HR NOSHADE SIZE=1></td>
</tr>
<tr>
<td colspan=5>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif"><b>CASH FLOWS FROM FINANCING ACTIVITIES:</b></font></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>


<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Repayments of debt</font></td>
<td align=right><font size=2 face="times new roman, serif">-</font></td>
<td>&nbsp;</td>
<td align=right><font size="-1" face="times new roman, serif">(9,000)</font></td>
</tr>

<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Purchase of shares for treasury</font></td>
<td align=right><font size="-1" face="times new roman, serif">(7)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">-</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Financing of discontinued operations</font></td>
<td align=right><font size="-1" face="times new roman, serif">-</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">4</font><HR NOSHADE SIZE=1></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in
continuing operations</font></td>
<td align=right><font size=2 face="times new roman, serif">(7)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(8,996)</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in
discontinued operations</font></td>
<td align=right><font size=2 face="times new roman, serif">-</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(4)</font><HR NOSHADE SIZE=1></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in financing activities</font></td>
<td align=right><font size=2 face="times new roman, serif">(7)</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(9,000)</font><HR NOSHADE SIZE=1></td>
</tr>


<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Net (decrease) increase in cash and cash equivalents</font></td>
<td align=right><font size=2 face="times new roman, serif">(13,401)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">17,068</font></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td colspan=4 ><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents at beginning of period</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Continuing operations</font></td>
<td align=right><font size=2 face="times new roman, serif">37,321</font>
</td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">36,909</font>
</td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations</font></td>
<td align=right><font size=2 face="times new roman, serif">-</font>
<HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">15,424</font>
<HR NOSHADE SIZE=1></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</font></td>
<td align=right><font size=2 face="times new roman, serif">37,321</font>
<HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">52,333</font>
<HR NOSHADE SIZE=2></td>
</tr>

<tr valign=top bgcolor="#eeeeee">
<td colspan=4 ><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents at end of period</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Continuing operations</font></td>
<td align=right><font size=2 face="times new roman, serif">23,920</font>
</td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">69,401</font>
</td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations</font></td>
<td align=right><font size=2 face="times new roman, serif">-</font>
<HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">-</font>
<HR NOSHADE SIZE=1></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23,920</font>
<HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;69,401</font>
<HR NOSHADE SIZE=2></td>
</tr>






<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif"><b>SUPPLEMENTAL CASH FLOW INFORMATION:</b></font></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Cash paid for interest</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;755</font><HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
999</font><HR NOSHADE SIZE=2></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Cash paid for income taxes</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
- -</font><HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size="-1" face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
2,000</font><HR NOSHADE SIZE=2></td>
</tr>
<tr>
<td colspan=3>&nbsp;</td>
</tr>
<tr>
<td align=center colspan=4><font size=2 face="times new roman, serif">The accompanying notes are an integral part of these
 consolidated financial statements.</font></td>
</tr>
<tr>
<td colspan=3>&nbsp;</td>
</tr>
<tr>
<td align=center colspan=4><font size=2 face="times new roman, serif">-5-</font></td>
</tr>
</table>













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<a name="notes_to_consolidated_statements"></a>
<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>

<p align=center><font face="times new roman, serif" size=2><b>ATLANTIC AMERICAN CORPORATION<BR>
                                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
                                                             March 31, 2009</b><BR>
                                      <i>(Unaudited; Dollars in thousands, except per share amounts)</i></font></p>


<p><font face="times new roman, serif" size=2><b><u>Note 1.</u></b>&nbsp;&nbsp;Basis of Presentation</font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accompanying unaudited
condensed consolidated financial statements include the accounts of Atlantic
American Corporation (the &#147;Parent&#148;) and its subsidiaries
(collectively, the &#147;Company&#148;). All significant intercompany accounts
and transactions have been eliminated in consolidation. The accompanying
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (&#147;GAAP&#148;)
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by accounting principles generally accepted in
the United States of America. In the opinion of management,
all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. The unaudited condensed
consolidated financial statements and the related notes thereto included herein
should be read in conjunction with the Company&#146;s consolidated financial
statements, and the notes thereto, that are included in the Company&#146;s
Annual Report on Form 10-K for the year ended December 31, 2008. Operating
results for the three month period ended March 31, 2009 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2009. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March 2008, the Company
completed the sale of its regional property and casualty operations, comprised
of Association Casualty Insurance Company and Association Risk Management
General Agency, Inc. (collectively known as &#147;Association Casualty&#148;)
and Georgia Casualty &amp; Surety Company (&#147;Georgia Casualty&#148;), to
Columbia Mutual Insurance Company (&#147;Columbia&#148;). Accordingly,
the results of operations of Association Casualty and Georgia Casualty have been
reflected by the Company as discontinued operations. See Note 3.</FONT></P>


<p><font face="times new roman, serif" size=2><b><u>Note 2.</u></b>&nbsp;&nbsp;Impact of Recently Issued Accounting Standards</font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April 2009, the
Financial Accounting Standards Board (&#147;FASB&#148;) issued FASB Staff
Position (&#147;FSP&#148;) No.&#160;FAS 157-4, &#147;Determining Fair Value When
the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly&#148; (&#147;FSP FAS
157-4&#148;). FSP FAS 157-4 clarifies that the measurement objective in
determining fair value when the volume and level of activity for an asset or
liability have significantly decreased is the price that would be received to
sell the asset in an orderly transaction between willing market participants
under current market conditions, and not the value in a hypothetical active
market. FSP FAS 157-4 includes additional factors for determining whether there
has been a significant decrease in the volume and level of activity for an asset
or liability compared to normal activity for that asset or liability (or similar
assets or liabilities) and provides additional guidance in estimating fair value
in those instances. FSP FAS 157-4 requires an entity to base its conclusion
about whether a transaction was not orderly on the weight of the evidence and
further requires an entity to disclose any change in valuation techniques, the
related inputs, and the effects resulting from its application.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April 2009, the FASB
issued FSP No.&#160;FAS 115-2 and No. FAS 124-2, &#147;Recognition and
Presentation of Other-Than-Temporary Impairments&#148; (&#147;FSP FAS 115-2 and
FAS 124-2&#148;). FSP FAS 115-2 and FAS 124-2 replaces the existing requirement
for debt securities, that in order for an entity to conclude impairment is not
other-than-temporary, it must have the intent and ability to hold an impaired
security for a period sufficient to allow for recovery in value of the
investment. To conclude impairment is not other-than-temporary, FSP FAS 115-2
and FAS 124-2 requires management to assert that it does not have the intent to
sell the security and that it is more likely than not it will not have to sell
the security before recovery of its cost basis. FSP FAS 115-2 and FAS 124-2 also
change the presentation in the financial statements of non-credit related
impairment amounts for instruments within its scope. When the entity asserts it
does not have the intent to sell the security and it is more likely than not it
will not have to sell the security before recovery of its cost basis, only the
credit related impairment losses are to be recorded in earnings; non-credit
related losses are to be recorded in accumulated other comprehensive income. FSP
FAS 115-2 and FAS 124-2 also expand and increase the frequency of existing
disclosures about other-than-temporary impairments for debt and equity
securities. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FSP FAS 157-4 and FSP FAS
115-2 and FAS 124-2 are effective for interim and annual reporting periods
ending after June&#160;15, 2009 with early adoption permitted for periods ending
after March 15, 2009, provided both FSPs are adopted concurrently. The Company
will adopt both FSPs beginning with the interim period ending on June&#160;30,
2009. The Company has not yet determined the effect of the adoption of these
FSPs on the Company&#146;s consolidated financial statements, but does
not believe it will be material to the results of operations. </FONT></P>







<BR><BR>

<p align=center><font face="times new roman, serif" size=2>-6-</font></p>



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<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&#160;2008, the FASB
issued Statement of Financial Accounting Standards (&#147;SFAS&#148;) SFAS
No.&#160;163, &#147;Accounting for Financial Guarantee Insurance
Contracts&#151;an interpretation of FASB Statement No.&#160;60&#148; (&#147;SFAS
163&#148;). The scope of SFAS 163 is limited to financial guarantee insurance
(and reinsurance) contracts issued by enterprises that are included within the
scope of SFAS 60 and that are not accounted for as derivative instruments. SFAS
163 excludes from its scope insurance contracts that are similar to financial
guarantee insurance such as mortgage guaranty insurance and credit insurance on
trade receivables. SFAS 163 is effective for financial statements issued for
fiscal years beginning after December&#160;15, 2008, and all interim periods
within those fiscal years, except for certain disclosures about the insurance
enterprise&#146;s risk-management activities. Except for certain disclosures,
earlier application is not permitted. The Company adopted SFAS 163 on January 1,
2009. Adoption of this statement did not have a material impact on the
Company&#146;s financial condition or results of operations.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&#160;2008, the
FASB issued SFAS No.&#160;161, &#147;Disclosures about Derivative Instruments
and Hedging Activities&#148; (&#147;SFAS 161&#148;), an amendment of FASB
Statement No.&#160;133, &#147;Accounting for Derivative Instruments and Hedging
Activities.&#148; SFAS 161 amends and expands disclosures about an entity&#146;s
derivative and hedging activities with the intent of providing users of
financial statements with an enhanced understanding of a) how and why an entity
uses derivative instruments, b) how derivative instruments and related hedged
items are accounted for under FASB Statement No. 133 and its related
interpretations, and c) how derivative instruments and related hedged items
affect an entity&#146;s financial position, financial performance, and cash
flows. SFAS 161 is effective for financial statements issued for fiscal years
and interim periods beginning after November&#160;15, 2008, with early
application encouraged. SFAS 161 encourages, but does not require, comparative
disclosures. The Company adopted SFAS 161 on January 1, 2009. Adoption of this
statement did not have a material impact on the Company&#146;s financial
condition or results of operations. </FONT></P>
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December 2007, the FASB
issued SFAS No. 141 (revised 2007), &#147;Business Combinations&#148;
(&#147;SFAS 141(R)&#148;). This statement replaces SFAS No. 141, &#147;Business
Combinations&#148; and establishes the principles and requirements for how the
acquirer in a business combination: (a) measures and recognizes the identifiable
assets acquired, liabilities assumed, and any noncontrolling interests in the
acquired entity, (b) measures and recognizes positive goodwill acquired or a
gain from bargain purchase (negative goodwill), and (c) determines the
disclosure information that is decision-useful to users of financial statements
in evaluating the nature and financial effects of the business combination. SFAS
141(R) further requires all transaction costs for an acquisition to be expensed
as incurred rather than capitalized, and changes the measurement date to the
date an acquisition closes. In December 2007, the FASB also issued SFAS No. 160,
&#147;Noncontrolling Interests in Consolidated Financial Statements&#148;
(&#147;SFAS 160&#148;). This statement amends Accounting Research Bulletin No.
51, &#147;Consolidated Financial Statements&#148; (&#147;ARB 51&#148;).
Noncontrolling interest refers to the minority interest portion of the equity of
a subsidiary that is not attributable directly or indirectly to a parent. SFAS
160 establishes accounting and reporting standards that require for-profit
entities that prepare consolidated financial statements to (a) present
noncontrolling interests as a component of equity, separate from the
parent&#146;s equity, (b) separately present the amount of consolidated net
income attributable to noncontrolling interests in the income statement, (c)
consistently account for changes in a parent&#146;s ownership interests in a
subsidiary in which the parent entity has a controlling financial interest as
equity transactions, (d) require an entity to measure at fair value its
remaining interest in a subsidiary that is deconsolidated, and (e) require an
entity to provide sufficient disclosures that identify and clearly distinguish
between interests of the parent and interests of noncontrolling owners. Both
SFAS 141(R) and SFAS 160 are effective for fiscal years beginning on or after
December 15, 2008 with earlier adoption prohibited. The Company adopted SFAS
141(R) and SFAS 160 on January 1, 2009. Adoption of these statements did not
have a material impact on the Company&#146;s financial condition or results of
operations. </FONT></P>











<p align=center><font face="times new roman, serif" size=2>-7-</font></p>
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<p><font face="times new roman, serif" size=2><b><u>Note 3.</u></b>&nbsp;&nbsp;Discontinued Operations</font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March 31, 2008, the
Company completed the sale of its regional property and casualty operations
comprised of Association Casualty and Georgia Casualty to Columbia for
approximately $41,600 in cash. Accordingly, the consolidated financial
statements reflect the operating results of Association Casualty and Georgia
Casualty as discontinued operations. </FONT></P>
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table
provides operating results from the discontinued operations of Association
Casualty and Georgia Casualty for the three month period ended March 31, 2008: </FONT></P>

<table width=450 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=75%></td>
<td width=25%></td>


</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31,
</font><hr noshade size=1></td>

</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2008</font><hr noshade size=1></td>

</tr>


<tr bgcolor="#eeeeee">
<td colspan=8><font size=2 face="times new roman, serif">Revenue:</font></td>

</tr>
<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insurance premiums</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,789</font></td>

</tr>

<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment income</font></td>
<td align=right><font size=2 face="times new roman, serif">1,400</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized investment gains, net</font></td>
<td align=right><font size=2 face="times new roman, serif">8</font></td>

</tr>
<tr bgcolor="#eeeeee">
<td valign=top><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income</font></td>
<td align=right><font size=2 face="times new roman, serif">11</font><hr noshade size=1></td>

</tr>
<tr>
<td valign=top><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenue</font></td>
<td align=right><font size=2 face="times new roman, serif">10,208</font><hr noshade size=1></td>

</tr>




<tr bgcolor="#eeeeee">
<td colspan=8><font size=2 face="times new roman, serif">Benefits and expenses:</font></td>

</tr>
<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insurance benefits and losses incurred</font></td>
<td align=right><font size=2 face="times new roman, serif">8,657</font></td>

</tr>

<tr bgcolor="#eeeeee">
<td valign=top><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commissions and underwriting expenses</font></td>
<td align=right><font size=2 face="times new roman, serif">3,800</font><hr noshade size=1></td>

</tr>
<tr>
<td valign=top><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total benefits and expenses</font></td>
<td align=right><font size=2 face="times new roman, serif">12,457</font><hr noshade size=1></td>

</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Loss from discontinued operations before taxes</font></td>
<td align=right><font size=2 face="times new roman, serif">(2,249)</font></td>

</tr>
<tr>
<td valign=top><font size=2 face="times new roman, serif">Income tax benefit</font></td>
<td align=right><font size=2 face="times new roman, serif">(815)</font><hr noshade size=1></td>

</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Loss from discontinued operations, net of tax</font></td>
<td align=right><font size=2 face="times new roman, serif">(1,434)</font></td>

</tr>
<tr>
<td valign=top><font size=2 face="times new roman, serif">Loss from sale of discontinued operations, net of tax of $415</font></td>
<td align=right><font size=2 face="times new roman, serif">(732)</font><hr noshade size=1></td>

</tr>
<tr bgcolor="#eeeeee">
<td valign=top><font size=2 face="times new roman, serif">Net loss from discontinued operations</font></td>

<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2,166)</font><hr noshade size=2></td>

</tr>
</table>
<BR>












<p><font face="times new roman, serif" size=2><b><u>Note 4.</u></b>&nbsp;&nbsp;Segment Information</font></p>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s
operating subsidiaries, American Southern Insurance Company and American Safety
Insurance Company (together known as &#147;American Southern&#148;) and Bankers
Fidelity Life Insurance Company (&#147;Bankers Fidelity&#148;), operate in two
principal business units, each focusing on a specific geographic region and/or
specific products. American Southern operates in the property and casualty
insurance market, while Bankers Fidelity operates in the life and health
insurance market. Each business unit is managed independently and is evaluated
on its individual performance. The following summary sets forth the revenue and
pre-tax income (loss) for each business unit for the three month periods ended
March 31, 2009 and 2008.</FONT></P>


<table width=500 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=51%></td>
<td width=24%></td>
<td width=1%></td>
<td width=24%></td>

</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" colspan=4 align=center><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31,
</font><hr noshade size=1></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif"><b>Revenues<BR>&nbsp;</b></font></td>
<td align=center><font size=2 face="times new roman, serif">2009</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2008</font><hr noshade size=1></td>
</tr>



<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">American Southern</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,252</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,556</font></td>

</tr>
<tr>
<td><font size=2 face="times new roman, serif">Bankers Fidelity</font></td>
<td align=right><font size=2 face="times new roman, serif">15,242</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">15,199</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Corporate and Other</font></td>
<td align=right><font size=2 face="times new roman, serif">1,816</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">2,011</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">Adjustments and Eliminations</font></td>
<td align=right><font size=2 face="times new roman, serif">(1,698)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(1,863)</font><hr noshade size=1></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Total Revenue</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25,612</font>
<hr size=2 noshade></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25,903</font>
<hr size=2 noshade></td>

</tr>
</table>
<BR>

<table width=500 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=51%></td>
<td width=24%></td>
<td width=1%></td>
<td width=24%></td>

</tr>
<tr valign=bottom>
<td>&nbsp;</td>

<td bgcolor="#eeeeee" align=center colspan=3><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31,</font>
<hr noshade size=1></td>

</tr>
<tr>
<td><font size=2 face="times new roman, serif"><b>Income (loss) before income taxes<BR>&nbsp;
</b></font></td>
<td align=center><font size=2 face="times new roman, serif">2009</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2008</font><hr noshade size=1></td>
</tr>


<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">American Southern</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,605</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,134</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Bankers Fidelity</font></td>
<td align=right><font size=2 face="times new roman, serif">395</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">416</font></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Corporate and Other</font></td>
<td align=right><font size=2 face="times new roman, serif">(1,693)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(1,829)</font><hr noshade size=1></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">Consolidated Results</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;307</font>
<hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;721</font>
<hr noshade size=2></td>
</tr>
</table>
<BR>










<p align=center><font face="times new roman, serif" size=2>-8-</font></p>
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<p><font face="times new roman, serif" size=2><b><u>Note 5.</u></b>&nbsp;&nbsp; Credit Arrangements</font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bank Debt</i></b></font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March 31, 2009, the
Company had a reducing revolving credit facility (the &#147;Credit
Agreement&#148;) with Wachovia Bank, National Association (&#147;Wachovia&#148;)
pursuant to which the Company was able to, subject to the terms and conditions
thereof, initially borrow or reborrow up to $15,000 (the &#147;Commitment
Amount&#148;). In accordance with the terms of the Credit Agreement, the
Commitment Amount is incrementally reduced every six months and was equal to
$13,000 at March 31, 2009. The interest rate on amounts outstanding under the
Credit Agreement is, at the option of the Company, equivalent to either (a) the
base rate (which equals the higher of the Prime Rate or 0.5% above the Federal
Funds Rate, each as defined) or (b) the London Interbank Offered Rate
(&#147;LIBOR&#148;) determined on an interest period of 1-month, 2-months,
3-months or 6-months, plus an Applicable Margin (as defined). The Applicable
Margin varies based upon the Company&#146;s leverage ratio (funded debt to total
capitalization, each as defined) and ranges from 1.75% to 2.50%. Interest on
amounts outstanding is payable quarterly. The Credit Agreement requires the
Company to comply with certain covenants, including, among others, ratios that
relate funded debt to both total capitalization and earnings before interest,
taxes, depreciation and amortization, as well as the maintenance of minimum
levels of tangible net worth. The Company must also comply with limitations on
capital expenditures, certain payments, additional debt obligations, equity
repurchases and certain redemptions, as well as minimum risk-based capital
levels. Upon the occurrence of an event of default, Wachovia may terminate the
Credit Agreement and declare all amounts outstanding due and payable in full.
During the three month period ended March 31, 2009, there was no balance
outstanding under this Credit Agreement. </FONT></P>



<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Junior Subordinated Debentures</i></b></font></p>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has two
unconsolidated Connecticut statutory business trusts, which exist for the
exclusive purposes of: (i) issuing trust preferred securities (&#147;Trust
Preferred Securities&#148;) representing undivided beneficial interests in the
assets of the trusts; (ii) investing the gross proceeds of the Trust Preferred
Securities in junior subordinated deferrable interest debentures (&#147;Junior
Subordinated Debentures&#148;) of Atlantic American; and (iii) engaging in only
those activities necessary or incidental thereto. </FONT></P>



<p><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial structure of each of Atlantic American Statutory Trust I and II, as of March 31, 2009 was as follows:</font></p>



<table width=85% cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=50%></td>
<td width=20%></td>
<td width=20%></td>
</tr>
<tr>
<td>&nbsp;</td>
<TD align=center><font face="times new roman, serif" size=2>Atlantic American<BR>Statutory Trust I</font><hr noshade size=1></td>

<TD align=center><font face="times new roman, serif" size=2>Atlantic American<BR>Statutory Trust II</font><hr noshade size=1></td>
</tr>
<tr>
<td align=center><font face="times new roman, serif" size=2>
JUNIOR SUBORDINATED DEBENTURES<SUP> (1) (2)</sup></font></TD>
<TD COLSPAN=2>&nbsp;</TD>
</TR>
<tr bgcolor="#eeeeee">
<td align=center><font face="times new roman, serif" size=2>
Principal amount owed</font></TD>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
18,042</font></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
23,196</font></td>
</tr>
<tr>
<td align=center><font face="times new roman, serif" size=2>
Balance March 31, 2009</font></TD>
<td align=right><font face="times new roman, serif" size=2>
18,042</font></td>
<td align=right><font face="times new roman, serif" size=2>
23,196</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align=center><font face="times new roman, serif" size=2>
Balance December 31, 2008</font></TD>
<td align=right><font face="times new roman, serif" size=2>
18,042</font></td>
<td align=right><font face="times new roman, serif" size=2>
23,196</font></td>
</tr>
<tr>
<td align=center><font face="times new roman, serif" size=2>
Coupon rate</font></TD>
<td align=right><font face="times new roman, serif" size=2>LIBOR + 4.00%</font></td>
<td align=right><font face="times new roman, serif" size=2>LIBOR + 4.10%</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align=center><font face="times new roman, serif" size=2>
Interest payable</font></TD>
<td align=right><font face="times new roman, serif" size=2>Quarterly</font></td>
<td align=right><font face="times new roman, serif" size=2>Quarterly</font></td>
</tr>
<tr>
<td align=center><font face="times new roman, serif" size=2>
Maturity date</font></TD>
<td align=right><font face="times new roman, serif" size=2>December 4, 2032</font></td>
<td align=right><font face="times new roman, serif" size=2>May 15, 2033</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align=center><font face="times new roman, serif" size=2>
Redeemable by issuer on or after</font></TD>
<td align=right><font face="times new roman, serif" size=2>December 4, 2007</font></td>
<td align=right><font face="times new roman, serif" size=2>May 15, 2008</font></td>
</tr>
<tr>
<td align=center><font face="times new roman, serif" size=2>
TRUST PREFERRED SECURITIES</font></TD>
<TD COLSPAN=2>&nbsp;</TD>
</TR>
<tr bgcolor="#eeeeee">
<td align=center><font face="times new roman, serif" size=2>
Issuance date</font></TD>
<td align=right><font face="times new roman, serif" size=2>December 4, 2002</font></td>
<td align=right><font face="times new roman, serif" size=2>May 15, 2003</font></td>
</tr>
<tr>
<td align=center><font face="times new roman, serif" size=2>
Securities issued</font></TD>
<td align=right><font face="times new roman, serif" size=2>17,500</font></td>
<td align=right><font face="times new roman, serif" size=2>22,500</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align=center><font face="times new roman, serif" size=2>
Liquidation preference per security</font></TD>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
1</font></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
1</font></td>
</tr>
<tr>
<td align=center><font face="times new roman, serif" size=2>
Liquidation value</font></TD>
<td align=right><font face="times new roman, serif" size=2>17,500</font></td>
<td align=right><font face="times new roman, serif" size=2>22,500</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align=center><font face="times new roman, serif" size=2>
Coupon rate</font></TD>
<td align=right><font face="times new roman, serif" size=2>LIBOR + 4.00%</font></td>
<td align=right><font face="times new roman, serif" size=2>LIBOR + 4.10%</font></td>
</tr>
<tr>
<td align=center><font face="times new roman, serif" size=2>
Distribution payable</font></TD>
<td align=right><font face="times new roman, serif" size=2>Quarterly</font></td>
<td align=right><font face="times new roman, serif" size=2>Quarterly</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align=center><font face="times new roman, serif" size=2>
Distribution guaranteed by<sup>(3)</sup></font></TD>
<td align=right><font face="times new roman, serif" size=2>Atlantic American Corporation</font></td>
<td align=right><font face="times new roman, serif" size=2>Atlantic American Corporation</font></td>
</tr>

</table>
<BR>

<table width=100% cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=4%></td>
<td width=96%></td>

</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2><sup>(1)</sup></font></td>
<td><font face="times new roman, serif" size=2>
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.</font></td>
</tr>
<tr>
<td colspan=2>&nbsp;</td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2><sup>(2)</sup></font></td>
<td><font face="times new roman, serif" size=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.</font></td>
</tr>
<tr>
<td colspan=2>&nbsp;</td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2><sup>(3)</sup></font></td>
<td><font face="times new roman, serif" size=2>
 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.</font></td>
</tr>
</table>
<BR>









<p align=center><font face="times new roman, serif" size=2>-9-</font></p>

<PAGE>
<HR SIZE=2 NOSHADE>
<H5 align="left" style="page-break-before:always"></H5>
















<p><font face="times new roman, serif" size=2><b><u>Note 6.</u></b>&nbsp;&nbsp;Derivative Financial Instruments</font></p>
<p align=justify><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February 21, 2006, the
Company entered into a zero cost rate collar with Wachovia to hedge future
interest payments on a portion of the Junior Subordinated Debentures. The
notional amount of the collar was $18,042 with an effective date of March 6,
2006. The collar has a LIBOR floor rate of 4.77% and a LIBOR cap rate of 5.85%
and adjusts quarterly on the 4<SUP>th</SUP> of each March, June, September and
December through termination on March 4, 2013. The Company began making payments
to Wachovia under the zero cost rate collar on June 4, 2008. As a result of
interest rates remaining below the LIBOR floor rate of 4.77%, these payments to
Wachovia under the zero cost rate collar continued throughout 2008 and into
2009. While the Company is exposed to counterparty risk should Wachovia fail to
perform, the current level of interest rates, coupled with the current
macroeconomic outlook, would indicate that the Company&#146;s current exposure
is minimal. </font></p>
<p align=justify><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The estimated fair value
and related carrying value of the Company&#146;s interest rate collar at March
31, 2009 was a liability of approximately $2,004.</font></p>



<p><font face="times new roman, serif" size=2><b><u>Note 7.</u></b>&nbsp;&nbsp;Reconciliation of Other Comprehensive Income (Loss)</font></p>





<table width=630 cellspacing=0 cellpadding=2 border=0>
<tr>
<td width=61%></td>
<td width=19%></td>
<td width=1%></td>
<td width=19%></td>
</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31,
</font><hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2008</font><hr noshade size=1></td>
</tr>
<tr valign=bottom bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Net realized gains on investments included in<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;income from continuing operations</font></td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
13</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;24</font></td>
</tr>

<tr valign=bottom>
<td><font size=2 face="times new roman, serif">Net realized gains on investments included in<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;loss from discontinued operations<BR>&nbsp;</font></td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">8</font><hr noshade size=1></td>
</tr>

<tr valign=bottom bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Total net realized gains on investments included in<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net income (loss)<BR>&nbsp;</font></td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
13</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;32</font><hr noshade size=2></td>
</tr>


<tr>
<td><font size=2 face="times new roman, serif">Other components of comprehensive income (loss):</font></td>
<td colspan=4>&nbsp;</td>
</tr>
<tr valign=bottom bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;
Net pre-tax unrealized losses on investments <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;arising during period</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5,709)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,690)</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reclassification adjustment</font></td>
<td align=right><font size=2 face="times new roman, serif">(13)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(32)</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee">
<td valign=top><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net pre-tax unrealized losses on investments <BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;recognized in other comprehensive loss</font></td>
<td align=right valign=bottom><font size=2 face="times new roman, serif">(5,722)</font></td>
<td valign=bottom>&nbsp;</td>
<td align=right valign=bottom><font size=2 face="times new roman, serif">(1,722)</font></td>
</tr>
<tr>
<td valign=top><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value adjustment to derivative financial<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; instrument</font></td>
<td align=right valign=bottom><font size=2 face="times new roman, serif">81</font></td>
<td valign=bottom>&nbsp;</td>
<td align=right valign=bottom><font size=2 face="times new roman, serif">(665)</font></td>
</tr>
<tr valign=bottom bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income tax attributable to other<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;comprehensive
loss<BR>&nbsp;</font></td>
<td align=right><font size=2 face="times new roman, serif">1,974</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">835</font><hr noshade size=1></td>
</tr>
<tr valign=bottom>
<td><font size=2 face="times new roman, serif">Change in accumulated other comprehensive loss</font></td>
<td align=right><font size=2 face="times new roman, serif">(3,667)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(1,552)</font></td>
</tr>
<tr valign=bottom bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Accumulated other comprehensive loss<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;beginning of period<BR>&nbsp;
</font></td>
<td align=right><font size=2 face="times new roman, serif">(9,200)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(1,171)</font><hr noshade size=1></td>
</tr>
<tr valign=bottom>
<td><font size=2 face="times new roman, serif">Accumulated other comprehensive loss<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;end of period<BR>&nbsp;
</font></td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(12,867)</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2,723)</font><hr noshade size=2></td>
</tr>
</table>












<p align=center><font face="times new roman, serif" size=2>-10-</font></p>

<PAGE>
<HR SIZE=2 NOSHADE>
<H5 align="left" style="page-break-before:always"></H5>
























<p><font face="times new roman, serif" size=2><u><b>Note 8.</b></u>&nbsp;&nbsp;Earnings Per Common Share</font></p>

<p><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A reconciliation of the numerator and denominator used in the earnings per common share calculations is as follows:</font><p>


<table width=630 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=50%>&nbsp;</td>
<td width=16.66%>&nbsp;</td>
<td width=16.66%>&nbsp;</td>
<td width=16.66%>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31, 2009</font>
<hr size=1 noshade></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">&nbsp;<BR>Income</font><hr noshade size=1></td>
<td align=center><font size=2 face="times new roman, serif">Shares<BR>(In thousands)</font><hr noshade size=1></td>
<td align=center><font size=2 face="times new roman, serif">Per Share<BR>Amount</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif"><i>Basic and Diluted Earnings Per Common Share:</i></font></td>
<td colspan=3>&nbsp;</td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Income from continuing operations</font></td>
<td align=right><font size=2 face="times new roman, serif">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
256</font></td>
<td align=right><font size=2 face="times new roman, serif">22,297</font></td>
<td>&nbsp;</td>
</tr>

<tr bgcolor="#eeeeee">

<td><font size=2 face="times new roman, serif">Less preferred stock dividends<BR>&nbsp;</font></td>
<td valign=bottom align=right><font size=2 face="times new roman, serif">(127)</font><hr noshade size=1></td>
<td align=right>&nbsp;<hr noshade size=1></td>
<td>&nbsp;</td>
</tr>

<tr>
<td><font size=2 face="times new roman, serif">Income from continuing operations applicable to common<BR>&nbsp;&nbsp;&nbsp;&nbsp;shareholders <BR>&nbsp;</font></td>
<td align=right valign=top><font size=2 face="times new roman, serif">&nbsp;<BR>$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;129</font><hr noshade size=2></Td>
<td align=right valign=top><font size=2 face="times new roman, serif">&nbsp;<BR>22,297</font><hr noshade size=2></Td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.01</font><hr noshade size=2></Td>
</tr>
</table>
<BR><BR>



<table width=630 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=50%>&nbsp;</td>
<td width=16.66%>&nbsp;</td>
<td width=16.66%>&nbsp;</td>
<td width=16.66%>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31, 2008</font>
<hr size=1 noshade></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">&nbsp;<BR>Income</font><hr noshade size=1></td>
<td align=center><font size=2 face="times new roman, serif">Shares<BR>(In thousands)</font><hr noshade size=1></td>
<td align=center><font size=2 face="times new roman, serif">Per Share<BR>Amount</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif"><i>Basic Earnings Per Common Share:</i></font></td>
<td colspan=3>&nbsp;</td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Income from continuing operations</font></td>
<td align=right><font size=2 face="times new roman, serif">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
424</font></td>
<td align=right><font size=2 face="times new roman, serif">21,812</font></td>
<td>&nbsp;</td>
</tr>

<tr bgcolor="#eeeeee">

<td><font size=2 face="times new roman, serif">Less preferred stock dividends<BR>&nbsp;</font></td>
<td valign=bottom align=right><font size=2 face="times new roman, serif">(428)</font><hr noshade size=1></td>
<td align=right>&nbsp;<hr noshade size=1></td>
<td>&nbsp;</td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Loss from continuing operations applicable to common<BR>&nbsp;&nbsp;&nbsp;&nbsp;shareholders <BR>&nbsp;</font></td>
<td align=right valign=top><font size=2 face="times new roman, serif">&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(4)</font></td>
<td align=right valign=top><font size=2 face="times new roman, serif">&nbsp;<BR>21,812</font></td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font>
<hr noshade size=2></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif"><i>Diluted Earnings Per Common Share:</i></font></td>
<td colspan=3>&nbsp;</td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">Effect of dilutive stock options </font></td>
<td align=right>&nbsp;<hr noshade size=1></td>
<td align=right valign=bottom><font size=2 face="times new roman, serif">316</font><hr noshade size=1></td>
<td>&nbsp;</td>
</tr>


<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Loss from continuing operations applicable to common<BR>&nbsp;&nbsp;&nbsp;&nbsp;shareholders <BR>&nbsp;</font></td>
<td align=right valign=top><font size=2 face="times new roman, serif">&nbsp;<BR>$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)</font><hr noshade size=2></Td>
<td align=right valign=top><font size=2 face="times new roman, serif">&nbsp;<BR>22,128</font><hr noshade size=2></Td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font><hr noshade size=2></Td>
</tr>
</table>
<BR><BR>

<p><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The assumed conversion of
the Company&#146;s Series D Preferred Stock was excluded from the earnings per
common share calculation for the three month periods ended March 31, 2009 and
2008, respectively, since its impact was antidilutive. All outstanding stock
options were excluded from the earnings per common share calculation for the
three month period ended March 31, 2009 since their impact was antidilutive. The
assumed conversion of the Company&#146;s Series B Preferred Stock was excluded
from the earnings per common share calculation for the three month period ended
March 31, 2008 since its impact was antidilutive. On October 28, 2008, the
Company redeemed all of the issued and outstanding shares of Series B Preferred
Stock at the stated value of $100 per share, for an aggregate payment of
$13,400. </font><p>











<p align=center><font face="times new roman, serif" size=2>-11-</font></p>






<PAGE>
<HR SIZE=2 NOSHADE>
<H5 align="left" style="page-break-before:always"></H5>
<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>






















<p><font face="times new roman, serif" size=2><b><u>Note 9.</u></b>&nbsp;&nbsp;Income Taxes</font></p>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A reconciliation of the
differences between income taxes computed at the federal statutory income tax
rate and the income tax expense from continuing operations is as follows: </FONT></P>

<table width=550 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=61%></td>
<td width=19%></td>
<td width=1%></td>
<td width=19%></td>
</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31,
</font><hr noshade size=1></td>
</tr>

<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2008</font><hr noshade size=1></td>
        </tr>

<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Federal income tax provision at statutory rate of 35%</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;107</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;253</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Tax exempt interest and dividends received deductions</font></td>
<td align=right><font size=2 face="times new roman, serif">(64)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(54)</font></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Non-deductible goodwill</font></td>
<td align=right><font size=2 face="times new roman, serif">-</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">91</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Loss carryforward from sale of subsidiaries</font></td>
<td align=right><font size=2 face="times new roman, serif">-</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(3,519)</font></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Other permanent differences</font></td>
<td align=right><font size=2 face="times new roman, serif">8</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">7</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">Change in asset valuation allowance due to<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
change in judgment relating to realizability<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 of deferred tax assets</font></td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>&nbsp;<BR>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>&nbsp;<BR>3,519</font><hr noshade size=1></td>
</tr>


<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Income tax expense</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;51</font>
<hr size=2 noshade></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;297</font>
<hr size=2 noshade></td>
</tr>
</table>
<BR>


<p><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The components of the
income tax expense from continuing operations were: </font></p>

<table width=400 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=51%></td>
<td width=24%></td>
<td width=1%></td>
<td width=24%></td>
</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31,
</font><hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2008</font><hr noshade size=1></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Current - Federal</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,577</font></td>
</tr>

<tr valign=top>
<td><font size=2 face="times new roman, serif">Deferred - Federal</font></td>
<td align=right><font size=2 face="times new roman, serif">51</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(1,280)</font><hr noshade size=1></td>
</tr>


<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Total</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;51</font>
<hr size=2 noshade></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;297</font>
<hr size=2 noshade></td>
</tr>
</table>


<p><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A reconciliation of the
differences between income taxes computed at the federal statutory income tax
rate and the income tax benefit from discontinued operations is as follows:</font></p>





<table width=400 cellspacing=0 cellpadding=3 border=0>
<tr>
<td width=75%></td>
<td width=25%></td>
</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" align=center><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31,
</font><hr noshade size=1></td>
</tr>

<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2008</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Federal income tax provision at statutory rate of 35%</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,189)</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">Tax exempt interest and dividends received deductions</font></td>
<td align=right><font size=2 face="times new roman, serif">(41)</font><hr size=1 noshade></td>
</tr>
<tr bgcolor="#eeeeee" valign=top>
<td><font size=2 face="times new roman, serif">Income tax benefit</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,230)</font>
<hr size=2 noshade></td>
</tr>
</table>


<p><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The components of the
income tax benefit from discontinued operations were: </font></p>



<table width=400 cellspacing=0 cellpadding=3 border=0>
<tr>
<td width=75%></td>
<td width=25%></td>
</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31,
</font><hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2008</font><hr noshade size=1></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Current - Federal</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,577)</font></td>
</tr>

<tr valign=top>
<td><font size=2 face="times new roman, serif">Deferred - Federal</font></td>

<td align=right><font size=2 face="times new roman, serif">347</font><hr noshade size=1></td>
</tr>


<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Total</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,230)</font>
<hr size=2 noshade></td>
</tr>
</table>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary differences
between the effective tax rate and the federal statutory income tax rate for the
three month period ended March 31, 2009 resulted from the dividends-received
deduction (&#147;DRD&#148;). The current estimated DRD is adjusted as underlying
factors change. The actual current year DRD can vary from the estimates based
on, but not limited to, amounts of distributions from these investments as well
as appropriate levels of taxable income. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary differences
between the effective tax rate and the federal statutory income tax rate for the
three month period ended March 31, 2008 resulted from the DRD and a
non-deductible goodwill impairment charge. On March 31, 2008, the Company
completed the sale of its regional property and casualty operations to
Columbia, which resulted in an estimated loss carryforward benefit of
approximately $3.5 million. Since the Company&#146;s ability to generate taxable
income and utilize available tax planning strategies in the near term is
dependent upon various factors, many of which are beyond management&#146;s
control, management believes that this loss carryforward may not be realized.
Accordingly, during the three month period ended March 31, 2008, the Company
increased its valuation allowance by $3.5 million to reduce this deferred tax
benefit to zero. The Company continues to periodically assess the potential
realization of this and all other deferred tax benefits. </FONT></P>














<p align=center><font face="times new roman, serif" size=2>-12-</font></p>






<PAGE>
<HR SIZE=2 NOSHADE>
<H5 align="left" style="page-break-before:always"></H5>
<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>



















<p><font face="times new roman, serif" size=2><b><u>Note 10.</u></b>&nbsp;&nbsp;Employee Retirement Plans</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective May 31, 2008, the
Company decided to freeze all benefits related to the qualified pension plan, as
well as the supplemental executive retirement plan (&#147;SERP&#148;). The
Company intends to terminate the qualified plan pending governmental approval.
Upon approval, the Company will distribute the accumulated benefits to its
participating employees. The Company intends to terminate the SERP in May 2009
and distribute the accumulated benefits to those employees participating in the
SERP. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January 1, 2009,
the Company initiated a safe harbor employees&#146; savings plan qualified under
Section 401(k) of the Internal Revenue Code (the &#147;Plan&#148;) which
replaced the Company&#146;s previous 401(k) plan. The Plan will cover all of the
Company&#146;s employees. Under the Plan, employees may defer up to 50% of their
compensation, not to exceed the statutory maximum allowed contribution. The
Company&#146;s matching contribution is equal to 100% of the first 4% of such
contributions. </FONT></P>


 <p><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table
provides the components of the net periodic benefit cost for all defined benefit
pension plans of the Company for the three month period ended March 31, 2008: </font></p>

<table width=300 cellspacing=0 cellpadding=2 border=0>
<tr>
<td width=70%>&nbsp;</td>
<td width=30%>&nbsp;</td>


</tr>
<tr bgcolor="#eeeeee">
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Three Months<BR>Ended<BR>March 31,</font><hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2  face="times new roman, serif">2008</font><hr noshade size=1></td>


</tr>
<tr bgcolor="#eeeeee">
<td><font size=2  face="times new roman, serif">Service cost</font></td>
<td align=right><font size=2  face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;46</font></td>
</tr>
<tr>
<td><font size=2  face="times new roman, serif">Interest cost</font></td>
<td align=right><font size=2  face="times new roman, serif">84</font></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font size=2  face="times new roman, serif">Expected return on plan assets</font></td>
<td align=right><font size=2  face="times new roman, serif">(54)</font></td>
</tr>
<tr valign=top>
<td><font size=2  face="times new roman, serif">Net amortization</font></td>
<td align=right><font size=2  face="times new roman, serif">20</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee" valign=top>
<td><font size=2  face="times new roman, serif">Net periodic benefit cost</font></td>
<td align=right><font size=2  face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;96</font><hr noshade size=1></td>
</tr>
</table>


<p><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The weighted-average
assumptions used to determine the net periodic benefit cost for the three month
period ended March 31, 2008 were as follows: </font></p>

<table width=300 cellspacing=0 cellpadding=3 border=0>
<tr>
<td width=70%>&nbsp;</td>
<td width=30%>&nbsp;</td>
</tr>



<tr bgcolor="#eeeeee">
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Three Months<BR>Ended<BR>March 31,</font><hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>2008</font><hr noshade size=1></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Discount rate</font></td>
<td align=center><font face="times new roman, serif" size=2>5.75%</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>Expected return on plan assets</font></td>
<td align=center><font face="times new roman, serif" size=2>7.00%</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Projected annual salary increases</font></td>
<td align=center><font face="times new roman, serif" size=2>4.50%</font></td>
</tr>
</table>

<p><font face="times new roman, serif" size=2><u><b>Note 11.</b></u>&nbsp;&nbsp;Commitments and Contingencies</font></p>
<p align=justify><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, the
Company is involved in various claims and lawsuits incidental to and in the
ordinary course of its businesses. In the opinion of management, any such known
claims are not expected to have a material effect on the business or financial
condition of the Company.</FONT></P>


<p align=center><font face="times new roman, serif" size=2>-13-</font></p>










<PAGE>
<HR SIZE=2 NOSHADE>
<H5 align="left" style="page-break-before:always"></H5>




<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>








<p><font face="times new roman, serif" size=2><u><b>Note 12.</b></u>&nbsp;&nbsp;Investments</font></p>
<p align=justify><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the three month
period ended March 31, 2009, the carrying value of the Company&#146;s
investments in fixed maturity securities, non-redeemable preferred stocks and
common stocks decreased as a result of numerous macroeconomic factors which
impacted significantly all of the United States financial
markets. The following table sets forth the carrying value, amortized cost, and
net unrealized gains or losses of the Company&#146;s investments aggregated by
industry type as of March 31, 2009.  </FONT></P>


<table width=550 cellspacing=0 cellpadding=2 border=0>
<tr>
<td width=55%>&nbsp;</td>
<td width=15%>&nbsp;</td>
<td width=15%>&nbsp;</td>
<td width=15%>&nbsp;</td>


</tr>
<tr bgcolor="#eeeeee">
<td>&nbsp;</td>
<td colspan=3 align=center><font face="times new roman, serif" size=2>March 31, 2009</font><hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Carrying<BR>Value</font><hr noshade size=1></td>

<td align=center><font face="times new roman, serif" size=2>Amortized<BR>Cost</font><hr noshade size=1></td>
<td align=center><font face="times new roman, serif" size=2>Unrealized<BR>Gains (Losses)</font><hr noshade size=1></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>U.S. Treasury and<BR>Government Agencies</font></td>
<td align=right><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;120,808</font></td>
<td align=right><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;120,357</font></td>
<td align=right><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;451</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>Utilities and Telecom</font></td>
<td align=right><font face="times new roman, serif" size=2>23,986</font></td>
<td align=right><font face="times new roman, serif" size=2>25,558</font></td>
<td align=right><font face="times new roman, serif" size=2>(1,572)</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Financial Services</font></td>
<td align=right><font face="times new roman, serif" size=2>18,318</font></td>
<td align=right><font face="times new roman, serif" size=2>29,629</font></td>
<td align=right><font face="times new roman, serif" size=2>(11,311)</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>Diversified Services</font></td>
<td align=right><font face="times new roman, serif" size=2>3,224</font></td>
<td align=right><font face="times new roman, serif" size=2>3,787</font></td>
<td align=right><font face="times new roman, serif" size=2>(563)</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Automotive</font></td>
<td align=right><font face="times new roman, serif" size=2>183</font></td>
<td align=right><font face="times new roman, serif" size=2>222</font></td>
<td align=right><font face="times new roman, serif" size=2>(39)</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>Media<SUP>(1)</sup></font></td>
<td align=right><font face="times new roman, serif" size=2>2,110</font></td>
<td align=right><font face="times new roman, serif" size=2>6,502</font></td>
<td align=right><font face="times new roman, serif" size=2>(4,392)</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td valign=top><font face="times new roman, serif" size=2>Other</font></td>
<td align=right><font face="times new roman, serif" size=2>1,702</font><hr noshade size=1></td>
<td align=right><font face="times new roman, serif" size=2>1,692</font><hr noshade size=1></td>
<td align=right><font face="times new roman, serif" size=2>10</font><hr noshade size=1></td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</font></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;170,331</font><hr noshade size=2></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;187,747</font><hr noshade size=2></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;(17,416)</font><hr noshade size=2></td>
</tr>
</table>

<p align=justify><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup>&nbsp;Media  includes  related  party  investments  in Gray  Television,  Inc. and Triple Crown Media, Inc.  which had an aggregate
carrying value of $306 and an amortized cost basis of $3,198 at March 31, 2009.</FONT></P>

<p align=justify><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the three month
period ended March 31, 2009, net pre-tax unrealized losses recognized in other
comprehensive loss increased $5,722 from net pre-tax unrealized losses of
$11,694 valued as of December 31, 2008. Of the $5,722 increase, $4,331 was due
to the decrease in value of the Company&#146;s holdings in financial services
entities which continue to be impacted by current macroeconomic conditions. As
of March 31, 2009, management does not believe that there are any unrecognized
other than temporary impairments in the value of these investments. </FONT></P>

<p align=justify><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s
investments in the fixed maturity securities of General Motors (automotive) and
General Motors Acceptance Corporation (financial services) exceeded 10% of
shareholders&#146; equity at March 31, 2009. The following table sets forth the
carrying value, amortized cost, and unrealized losses for each of these
investments as of March 31, 2009. </FONT></P>


<table width=550 cellspacing=0 cellpadding=2 border=0>
<tr>
<td width=55%>&nbsp;</td>
<td width=15%>&nbsp;</td>
<td width=15%>&nbsp;</td>
<td width=15%>&nbsp;</td>


</tr>
<tr bgcolor="#eeeeee">
<td>&nbsp;</td>
<td colspan=3 align=center><font face="times new roman, serif" size=2>March 31, 2009</font><hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Carrying<BR>Value</font><hr noshade size=1></td>

<td align=center><font face="times new roman, serif" size=2>Amortized<BR>Cost</font><hr noshade size=1></td>
<td align=center><font face="times new roman, serif" size=2>Unrealized<BR>Losses</font><hr noshade size=1></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>GMAC bonds</font></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,811</font></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,779</font></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2,968)</font></td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>GMAC and GM redeemable<BR>&nbsp;&nbsp;and non-redeemable<BR>&nbsp;&nbsp;&nbsp;&nbsp;preferred stocks</font></td>
<td align=right><font face="times new roman, serif" size=2>&nbsp;<BR>&nbsp;<BR>613</font><hr noshade size=1></td>
<td align=right><font face="times new roman, serif" size=2>&nbsp;<BR>&nbsp;<BR>1,298</font><hr noshade size=1></td>
<td align=right><font face="times new roman, serif" size=2>&nbsp;<BR>&nbsp;<BR>(685)</font><hr noshade size=1></td>
</tr>

<tr bgcolor="#eeeeee">
<td valign=top><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</font></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,424</font><hr noshade size=2></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,077</font><hr noshade size=2></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3,653)</font><hr noshade size=2></td>
</tr>
</table>














<p align=center><font face="times new roman, serif" size=2>-14-</font></p>












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<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>



<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective January 1, 2008,
on a prospective basis, the Company determines the fair values of certain
financial instruments based on the fair market hierarchy established in
SFAS No.&#160;157,
&#147;Fair Value Measurements&#148; (&#147;SFAS 157&#148;). SFAS 157 defines
fair value, establishes a framework for measuring fair value under accounting
principles generally accepted in the United States, and
enhances disclosures about fair value measurements. Fair value is defined as the
exchange price at which an asset could be sold or a liability settled in the
principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. SFAS 157
provides guidance on measuring fair value when required under existing
accounting standards and establishes a hierarchy that prioritizes the inputs to
valuation techniques. The first level of such hierarchy determines fair value at
the quoted price (unadjusted) in active markets for identical assets (Level 1).
The second level determines fair value using valuation methodology including
quoted prices for similar assets and liabilities in active markets and other
inputs that are observable for the asset or liability, either directly or
indirectly for substantially similar terms (Level 2). The third level for
determining fair value utilizes inputs to valuation methodology which are
unobservable for the asset or liability (Level 3). Such values inherently
involve a greater degree of judgment and uncertainty and therefore ultimately
greater price volatility. A financial asset&#146;s or liability&#146;s
classification within the hierarchy is determined based on the lowest level
input that is significant to the fair value measurement. The fair values for
fixed maturity and equity securities are largely determined by either
independent methods prescribed by the National Association of Insurance
Commissioners (&#147;NAIC&#148;), which do not differ materially from nationally
quoted market prices, when available, or independent broker quotations. </FONT></P>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's Level 1 instruments consist of short-term investments.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Level 2
instruments include most of its fixed maturity securities, which consist of U.S.
Treasury securities and U.S. government securities, municipal
bonds, and certain corporate fixed maturity securities as well as its common and
non-redeemable preferred stocks. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Level 3
instruments include certain fixed maturity securities and a zero cost rate
collar. Fair value is based on criteria that use assumptions or other data that
are not readily observable from objective sources. As of March 31, 2009, the
Company&#146;s fixed maturity securities valued using Level 3 criteria totaled
$1,808 and the zero cost rate collar was a liability of $2,004 (See
Note 6).  </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assets measured at fair value, as of March 31, 2009, on a recurring basis are summarized below:</font></p>



<table width=630 cellspacing=0 cellpadding=2 border=0>
<tr>
<td width=29%>&nbsp;</td>
<td width=17%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=17%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=17%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=17%>&nbsp;</td>
</tr>

<tr bgcolor="#eeeeee">
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Quoted Prices<BR>in Active<BR>Markets<BR>for Identical<BR>Assets<BR>(Level 1)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>&nbsp;<BR>Significant<BR>Other<BR>Observable<BR>Inputs<BR>(Level 2)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>&nbsp;<BR>&nbsp;<BR>Significant<BR>Unobservable<BR>Inputs<BR>(Level 3)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>&nbsp;<BR>
&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>Total</font><hr noshade size=1></td>
</tr>

<tr>
<td><font face="times new roman, serif" size=2>Fixed maturity securities</font></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;164,769</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,808</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;166,577</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Equity securities</font></td>
<td align=right><font face="times new roman, serif" size=2>-</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>3,754</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>-</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>3,754</font></td>
</tr>
<tr valign=top>
<td><font face="times new roman, serif" size=2>Short-term investments</font></td>
<td align=right><font face="times new roman, serif" size=2>18,725</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>18,725</font><hr noshade size=1></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</font></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18,725</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;168,523</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,808</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;189,056</font><hr noshade size=2></td>
</tr>
</table>


<p align=center><font face="times new roman, serif" size=2>-15-</font></p>












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<a name="managements_discussion"></a>
<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>






<p><font face="times new roman, serif" size=2><u>Item 2.</u></font></p>
<p align=center>
<font face="times new roman, serif" size=2><b>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION<BR>
                                                       AND RESULTS OF OPERATIONS</b></font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is
management&#146;s discussion and analysis of the financial condition and results
of operations of Atlantic American Corporation (&#147;Atlantic American&#148; or
the &#147;Parent&#148;) and its subsidiaries (collectively, the
&#147;Company&#148;) for the three month period ended March 31, 2009. This
discussion should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere herein, as well as with the
consolidated financial statements and notes included in the Company&#146;s
Annual Report on Form 10-K for the year ended December 31, 2008. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Atlantic American is an
insurance holding company whose operations are conducted primarily through its
insurance subsidiaries: American Southern Insurance Company and American Safety
Insurance Company (together known as &#147;American Southern&#148;) and Bankers
Fidelity Life Insurance Company (&#147;Bankers Fidelity&#148;). Each operating
company is managed separately, offers different products and is evaluated on its
individual performance. </FONT></P>
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December 2007, the
Company entered into an agreement for the sale of its regional property and
casualty operations, Association Casualty Insurance Company and Association Risk
Management General Agency, Inc. (together known as &#147;Association
Casualty&#148;) and Georgia Casualty &amp; Surety Company (&#147;Georgia
Casualty&#148;) to Columbia Mutual Insurance Company. This transaction was
completed on March 31, 2008. In accordance with generally accepted accounting
principles, the consolidated financial statements included in this quarterly
report reflect the operating results of the regional property and casualty
operations as discontinued operations. Accordingly, unless otherwise noted,
amounts and analyses contained herein reflect the continuing operations of the
Company and exclude the regional property and casualty operations. References to
income and loss from operations are identified as continuing operations or
discontinued operations, while references to net income or net loss reflect the
consolidated net results of both continuing and discontinued operations. </FONT></P>

<p><font face="times new roman, serif" size=2><b>Critical Accounting Policies</b></font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accounting and
reporting policies of the Company are in accordance with accounting principles
generally accepted in the United States of America and, in
management&#146;s belief, conform to general practices within the insurance
industry. The following is an explanation of the Company&#146;s accounting
policies and the resultant estimates considered most significant by management.
These accounting policies inherently require significant judgment and
assumptions and actual operating results could differ significantly from
management&#146;s initial estimates determined using these policies. Atlantic
American does not expect that changes in the estimates determined using these
policies will have a material effect on the Company&#146;s financial condition
or liquidity, although changes could have a material effect on its consolidated
results of operations. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unpaid loss and loss
adjustment expenses</i> comprised 26% of the Company&#146;s total liabilities at
March 31, 2009. This obligation includes estimates for: 1) unpaid losses on
claims reported prior to March 31, 2009, 2) development on those reported
claims, 3) unpaid ultimate losses on claims incurred prior to March 31, 2009 but
not yet reported and 4) unpaid loss adjustment expenses for reported and
unreported claims incurred prior to March 31, 2009. Quantification of loss
estimates for each of these components involves a significant degree of judgment
and estimates may vary, materially, from period to period. Estimated unpaid
losses on reported claims are developed based on historical experience with
similar claims by the Company. Development on reported claims, estimates of
unpaid ultimate losses on claims incurred prior to March 31, 2009 but not yet
reported, and estimates of unpaid loss adjustment expenses, are developed based
on the Company&#146;s historical experience, using actuarial methods to assist
in the analysis. The Company&#146;s actuary develops ranges of estimated
development on reported and unreported claims as well as loss adjustment
expenses using various methods including the paid-loss development method, the
reported-loss development method, the paid Bornhuetter-Ferguson method and the
reported Bornhuetter-Ferguson method. Any single method used to estimate
ultimate losses has inherent advantages and disadvantages due to the trends and
changes affecting the business environment and the Company&#146;s administrative
policies. Further, a variety of external factors, such as legislative changes,
medical cost inflation, and others may directly or indirectly impact the
relative adequacy of liabilities for unpaid losses and loss adjustment expenses.
The Company&#146;s approach is to select an estimate of ultimate losses based on
comparing results of a variety of reserving methods, as opposed to total
reliance on any single method. Unpaid loss and loss adjustment expenses are
reviewed periodically for significant lines of business, and when current
results differ from the original assumptions used to develop such estimates, the
amount of the Company&#146;s recorded liability for unpaid loss and loss
adjustment expenses is adjusted. In the event the Company&#146;s actual reported
losses in any period are materially in excess of the previous estimated amounts,
such losses, to the extent reinsurance coverage does not exist, could have a
material adverse effect on the Company&#146;s results of operations. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Future policy benefits</i>
comprised 32% of the Company&#146;s total liabilities at March 31,
2009. These liabilities relate primarily to life insurance products and are
based upon assumed future investment yields, mortality rates, and withdrawal
rates after giving effect to possible risks of adverse deviation. The assumed
mortality and withdrawal rates are based upon the Company&#146;s experience. If
actual results differ from the initial assumptions, the amount of the
Company&#146;s recorded liability could require adjustment.</FONT></P>









<p align=center><font face="times new roman, serif" size=2>-16-</font></p>







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<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>






















<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred acquisition costs</i>
comprised 8% of the Company&#146;s total assets at March 31, 2009.
Deferred acquisition costs are commissions, premium taxes, and other costs that
vary with and are primarily related to the acquisition of new and renewal
business and are generally deferred and amortized. The deferred amounts are
recorded as an asset on the balance sheet and amortized to expense in a
systematic manner. Traditional life insurance and long-duration health insurance
deferred policy acquisition costs are amortized over the estimated
premium-paying period of the related policies using assumptions consistent with
those used in computing the related liability for policy benefit reserves. The
deferred acquisition costs for property and casualty insurance and
short-duration health insurance are amortized over the effective period of the
related insurance policies. Deferred policy acquisition costs are expensed when
such costs are deemed not to be recoverable from future premiums (for
traditional life and long-duration health insurance) and from the related
unearned premiums and investment income (for property and casualty and
short-duration health insurance). Assessments of recoverability for property and
casualty and short-duration health insurance are extremely sensitive to the
estimates of a subsequent year&#146;s projected losses related to the unearned
premiums. Projected loss estimates for a current block of business for which
unearned premiums remain to be earned may vary significantly from the indicated
losses incurred in any given previous calendar year. </FONT></P>








<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Receivables</i> are
amounts due from reinsurers, insureds and agents and comprised 7% of the
Company&#146;s total assets at March 31, 2009. Insured and agent balances are
evaluated periodically for collectibility. Annually, the Company performs an
analysis of the credit worthiness of the Company&#146;s reinsurers using various
data sources. Failure of reinsurers to meet their obligations due to
insolvencies or disputes could result in uncollectible amounts and losses to the
Company. Allowances for uncollectible amounts are established, as and when a
loss has been determined probable, against the related receivable. Losses are
recognized when determined on a specific account basis and a general provision
for loss is made based on the Company&#146;s historical experience. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash and investments</i>
comprised 79% of the Company&#146;s total assets at March 31, 2009.
Substantially all investments are in bonds and common and preferred stocks, the
values of which are subject to significant market fluctuations. The Company
carries all investments as available for sale and, accordingly, at their
estimated fair values. The Company owns certain fixed maturity securities, that
do not have publicly quoted values, with an estimated fair value as determined
by management of $1.8 million at March 31, 2009. Such values inherently involve
a greater degree of judgment and uncertainty and therefore ultimately greater
price volatility. On occasion, the value of an investment may decline to a value
below its amortized purchase price and remain at such value for an extended
period of time. When an investment&#146;s indicated fair value has declined
below its cost basis for a period of time, the Company evaluates such investment
for other than a temporary impairment. The evaluation for other than temporary
impairments is a quantitative and qualitative process, which is subject to risks
and uncertainties in the determination of whether declines in the fair value of
investments are other than temporary. The risks and uncertainties include
changes in general economic conditions, an issuer&#146;s financial condition or
near term recovery prospects and the effects of changes in interest rates. In
evaluating impairment, the Company considers, among other factors, the intent
and ability to hold these securities, the nature of the investment and the
prospects for the issuer and its industry, the issuers&#146; continued
satisfaction of the investment obligations in accordance with their contractual
terms, and management&#146;s expectation that they will continue to do so, as
well as rating actions that affect the issuer&#146;s credit status. If other
than a temporary impairment is deemed to exist, then the Company will write down
the amortized cost basis of the investment to its estimated fair value. While
such write down does not impact the reported value of the investment in the
Company&#146;s balance sheet, it is reflected as a realized investment loss in
the Company&#146;s consolidated statements of operations. </FONT></P>



<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective January 1, 2008,
on a prospective basis, the Company determines the fair values of certain
financial instruments based on the fair market hierarchy established in
Statement of Financial Accounting Standards (&#147;SFAS&#148;) No.&#160;157,
&#147;Fair Value Measurements&#148; (&#147;SFAS 157&#148;). SFAS 157 defines
fair value, establishes a framework for measuring fair value under accounting
principles generally accepted in the United States, and
enhances disclosures about fair value measurements. Fair value is defined as the
exchange price at which an asset could be sold or a liability settled in the
principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. SFAS 157
provides guidance on measuring fair value when required under existing
accounting standards and establishes a hierarchy that prioritizes the inputs to
valuation techniques. The first level of such hierarchy determines fair value at
the quoted price (unadjusted) in active markets for identical assets (Level 1).
The second level determines fair value using valuation methodology including
quoted prices for similar assets and liabilities in active markets and other
inputs that are observable for the asset or liability, either directly or
indirectly for substantially similar terms (Level 2). The third level for
determining fair value utilizes inputs to valuation methodology which are
unobservable for the asset or liability (Level 3). Such values inherently
involve a greater degree of judgment and uncertainty and therefore ultimately
greater price volatility. A financial asset&#146;s or liability&#146;s
classification within the hierarchy is determined based on the lowest level
input that is significant to the fair value measurement. The fair values for
fixed maturity and equity securities are largely determined by either
independent methods prescribed by the National Association of Insurance
Commissioners (&#147;NAIC&#148;), which do not differ materially from nationally
quoted market prices, when available, or independent broker quotations. </FONT></P>



<p align=center><font face="times new roman, serif" size=2>-17-</font></p>






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<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>








<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's Level 1 instruments consist of short-term investments.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Level 2
instruments include most of its fixed maturity securities, which consist of U.S.
Treasury securities and U.S. government securities, municipal
bonds, and certain corporate fixed maturity securities as well as its common and
non-redeemable preferred stocks. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Level 3
instruments include certain fixed maturity securities and a zero cost rate
collar. Fair value is based on criteria that use assumptions or other data that
are not readily observable from objective sources. As of March 31, 2009, the
Company&#146;s fixed maturity securities valued using Level 3 criteria totaled
$1.8 million and the zero cost rate collar was a liability of $2.0 million (See
Note 6).  </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assets measured at fair value, as of March 31, 2009, on a recurring basis are summarized below:</font></p>



<table width=630 cellspacing=0 cellpadding=2 border=0>
<tr>
<td width=29%>&nbsp;</td>
<td width=17%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=17%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=17%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=17%>&nbsp;</td>
</tr>

<tr bgcolor="#eeeeee">
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Quoted Prices<BR>in Active<BR>Markets<BR>for Identical<BR>Assets<BR>(Level 1)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>&nbsp;<BR>Significant<BR>Other<BR>Observable<BR>Inputs<BR>(Level 2)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>&nbsp;<BR>&nbsp;<BR>Significant<BR>Unobservable<BR>Inputs<BR>(Level 3)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>&nbsp;<BR>
&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>Total</font><hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center colspan=7><font face="times new roman, serif" size=2>(In thousands)</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>Fixed maturity securities</font></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;164,769</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,808</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;166,577</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Equity securities</font></td>
<td align=right><font face="times new roman, serif" size=2>-</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>3,754</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>-</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>3,754</font></td>
</tr>
<tr valign=top>
<td><font face="times new roman, serif" size=2>Short-term investments</font></td>
<td align=right><font face="times new roman, serif" size=2>18,725</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>18,725</font><hr noshade size=1></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</font></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18,725</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;168,523</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,808</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;189,056</font><hr noshade size=2></td>
</tr>
</table>




<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred income taxes</i>
comprised approximately 5% of the Company&#146;s total assets at March
31, 2009. Deferred income taxes reflect the effect of temporary differences
between assets and liabilities that are recognized for financial reporting
purposes and the amounts that are recognized for tax purposes. These deferred
income taxes are measured by applying currently enacted tax laws and rates.
Valuation allowances are recognized to reduce the deferred tax assets to the
amount that is deemed more likely than not to be realized. In assessing the
likelihood of realization, management considers estimates of future taxable
income and tax planning strategies.</FONT></P>

<p><font face="times new roman, serif" size=2><u><b>Recently
Issued Accounting Standards</b></u></font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For a discussion of
recently issued accounting standards applicable to the Company, see Note 2 of
the accompanying notes to the consolidated financial statements.</FONT></P>

<p><font face="times new roman, serif" size=2><u><b>OVERALL CORPORATE RESULTS</b></u></font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On a consolidated basis,
the Company had net income of $0.3 million, or $0.01 per diluted share, for the
three month period ended March 31, 2009, compared to a net loss of $1.7 million,
or $0.10 per diluted share, for the three month period ended March 31, 2008.
Income from continuing operations was $0.3 million in the three month period
ended March 31, 2009, compared to $0.4 million in the three month period ended
March 31, 2008. The net loss in the three month period ended March 31, 2008 was
due to the $2.2 million loss from discontinued operations. Premium revenue for
the three month period ended March 31, 2009 decreased $0.2 million, or 1.0%, to
$22.8 million from $23.0 million in the comparable period of 2008. The decrease
in premiums in the three month period ended March 31, 2009 was primarily
attributable to continued softening in the property and casualty markets
combined with the market competition in the Medicare supplement line of
business. Income before tax from continuing operations decreased $0.4 million,
or 57.4%, in the three month period ended March 31, 2009, from the comparable
period in 2008. The decrease in income before tax from continuing operations was
primarily due to several large automobile claims incurred in the Company&#146;s
property and casualty operations during the three month period ended March 31,
2009. These losses were partially offset by a reduction in the accrual for
profit sharing commissions and the related agent contracts. </FONT></P>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A more detailed analysis of the individual operating companies and other corporate activities is provided below.</FONT></P>














<p align=center><font face="times new roman, serif" size=2>-18-</font></p>






<PAGE>
<HR SIZE=2 NOSHADE>
<H5 align="left" style="page-break-before:always"></H5>



<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>






<p><font face="times new roman, serif" size=2><b>American Southern</b></font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary
of American Southern&#146;s premiums for the three month period ended March 31,
2009 and the comparable period in 2008 (in thousands):</FONT></P>

<table width=430 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=45%></td>
<td width=27%></td>
<td width=1%></td>
<td width=27%></td>
</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31,</font>
<hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2008</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Gross written premiums</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,877</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,788</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">Ceded premiums</font></td>
<td align=right><font size=2 face="times new roman, serif">(1,666)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(1,467)</font><hr noshade size=1></td>
</tr>

<tr bgcolor="#eeeeee">
<td valign=top><font size=2 face="times new roman, serif">Net written premiums</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7,211</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7,321</font><hr noshade size=2></td>
</tr>

<tr valign=top>
<td><font size=2 face="times new roman, serif">Net earned premiums</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,986</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;9,266</font><hr noshade size=2></td>
</tr>

</table>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross written premiums at
American Southern increased $0.1 million, or 1.0%, during the three month period
ended March 31, 2009 over the comparable period in 2008. The increase in gross
written premiums during the three month period ended March 31, 2009 was
primarily due to an increase in commercial automobile business marketed through
a single general agent. Partially offsetting this increase were decreases in
gross written premiums in the general liability and surety lines of business due
primarily to the weak construction industry. </FONT></P>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ceded premiums increased
$0.2 million, or 13.6%, during the three month period ended March 31, 2009 over
the comparable period in 2008. The increase in ceded premiums during the three
month period ended March 31, 2009 was primarily attributable to higher
reinsurance rates resulting from changes in the composition of business. Ceded
premiums increased disproportionately due to the higher reinsurance costs
associated with the commercial automobile business versus the reinsurance costs
in the declining lines of business. </FONT></P>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following presents
American Southern&#146;s net earned premiums by line of business for the three
month period ended March 31, 2009 and the comparable period in 2008 (in
thousands):</font></p>









<table width=430 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=45%></td>
<td width=27%></td>
<td width=1%></td>
<td width=27%></td>
</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31,</font>
<hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2008</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Commercial automobile</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,691</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,261</font></td>
<td>&nbsp;</td>
</tr>

<tr>
<td><font size=2 face="times new roman, serif">General liability</font></td>
<td align=right><font size=2 face="times new roman, serif">1,658</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">2,210</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Property</font></td>
<td align=right><font size=2 face="times new roman, serif">615</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">595</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">Surety</font></td>
<td align=right><font size=2 face="times new roman, serif">2,022</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">2,200</font><hr noshade size=1></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Total</font></td>

<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,986</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,266</font><hr noshade size=2></td>
</tr>
</table>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net earned premiums
decreased $0.3 million, or 3.0%, during the three month period ended March 31,
2009 from the comparable period in 2008, primarily due to the reasons discussed
previously. In addition, gross written premiums are earned ratably over their
respective policy terms, and therefore premiums earned in the current year are
related to policies written during both the current and prior year. </FONT></P>









<p align=center><font face="times new roman, serif" size=2>-19-</font></p>






<PAGE>
<HR SIZE=2 NOSHADE>
<H5 align="left" style="page-break-before:always"></H5>



<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>


































<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following sets forth
American Southern&#146;s loss and expense ratios for the three month period
ended March 31, 2009 and for the comparable period in 2008: </FONT></P>

<table width=430 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=45%></td>
<td width=27%></td>
<td width=1%></td>
<td width=27%></td>
</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31,</font>
<hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2008</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Loss ratio</font></td>
<td align=right><font size=2 face="times new roman, serif">48.2%</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">38.1%</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">Expense ratio</font></td>
<td align=right><font size=2 face="times new roman, serif">48.0%</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">52.8%</font><hr noshade size=1></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Combined ratio</font></td>
<td align=right><font size=2 face="times new roman, serif">96.2%</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">90.9%</font><hr noshade size=2></td>
</tr>
</table>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The loss ratio for the
three month period ended March 31, 2009 increased to 48.2% from 38.1% in the
comparable period of 2008. The increase in the loss ratio for the three month
period ended March 31, 2009 was primarily attributable to several large claims
in the commercial automobile line of business. Also, during the three month
period ended March 31, 2008, American Southern had favorable loss experience in
the property and surety lines of business which did not recur in the three month
period ended March 31, 2009. </FONT></P>
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The expense ratio for the
three month period ended March 31, 2009 decreased to 48.0% from 52.8% in the
comparable period of 2008. The decrease in the expense ratio in the three month
period ended March 31, 2009 was primarily due to American Southern&#146;s
variable commission structure, which compensates the company&#146;s agents in
relation to the loss ratios of the business they write. In periods where the
loss ratio decreases, commissions and underwriting expenses will increase and
conversely in periods where the loss ratio increases, commissions and
underwriting expenses will decrease. </FONT></P>


<p><font face="times new roman, serif" size=2><b>Bankers Fidelity</b></font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following summarizes
Bankers Fidelity&#146;s earned premiums for the three month period ended March
31, 2009 and the comparable period in 2008 (in thousands):</FONT></P>

<table width=430 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=45%></td>
<td width=27%></td>
<td width=1%></td>
<td width=27%></td>
</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31,</font>
<hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2008</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Medicare supplement</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;10,324</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,371</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Other health</font></td>
<td align=right><font size=2 face="times new roman, serif">899</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">865</font></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Life</font></td>
<td align=right><font size=2 face="times new roman, serif">2,588</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">2,530</font><hr noshade size=1></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">Total</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,811</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,766</font><hr noshade size=2></td>
</tr>
</table>
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premium revenue at Bankers
Fidelity increased slightly during the three month period ended March 31, 2009
over the comparable period in 2008. Premiums from the Medicare supplement line
of business decreased 0.5% during the three month period ended March 31, 2009,
due primarily to the non-renewal of certain policies that resulted from
increased pricing and product competition. Although premium revenues from the
Medicare supplement line of business have declined, rate increases implemented
in varying amounts by state and plan have partially offset these decreases.
Premiums from the life insurance line of business increased $0.1 million, or
2.3%, during the three month period ended March 31, 2009 over the comparable
period in 2008, due to an increase in sales related activities. The other health
products premiums increased 3.9% during the three month period ended March 31,
2009 over the comparable period in 2008 due primarily to an increase in sales of
short-term care products. </FONT></P>



<p align=center><font face="times new roman, serif" size=2>-20-</font></p>


<HR SIZE=2 NOSHADE>












<PAGE>
<H5 align="left" style="page-break-before:always"></H5>
<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>




<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following summarizes
Bankers Fidelity&#146;s operating expenses for the three month period ended
March 31, 2009 and the comparable period in 2008 (in thousands):</FONT></P>

<table width=430 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=45%></td>
<td width=27%></td>
<td width=1%></td>
<td width=27%></td>
</tr>
<tr>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Three Months Ended<BR>March 31,</font>
<hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2008</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Benefits and losses</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,552</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,385</font></td>
</tr>
<tr valign=bottom>
<td><font size=2 face="times new roman, serif">Commission and other<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;expenses<BR>&nbsp;</font></td>
<td align=right><font size=2 face="times new roman, serif">4,295</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">4,398</font><hr noshade size=1></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Total expenses</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,847</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,783</font><hr noshade size=2></td>
</tr>
</table>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Benefits and losses
increased $0.2 million, or 1.6%, during the three month period ended March 31,
2009 over the comparable period in 2008. As a percentage of premiums, benefits
and losses were 76.4% for the three month period ended March 31, 2009, compared
to 75.4% for the three month period ended March 31, 2008. The increase in the
loss ratio was primarily due to increased medical costs in the Medicare
supplement line of business. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commissions and other
expenses decreased $0.1 million, or 2.3%, during the three month period ended
March 31, 2009 from the comparable period in 2008. Bankers Fidelity has been
reasonably successful in controlling operating costs. As a percentage of
premiums, these expenses were 31.1% for the three month period ended March 31,
2009, compared to 31.9% for the three month period ended March 31, 2008. </FONT></P>

<p><font face="times new roman, serif" size=2><u><b>INVESTMENT INCOME AND REALIZED GAINS</b></U></font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment income increased
1.7% during the three month period ended March 31, 2009 over the comparable
period in 2008. The increase in investment income for the three month period
ended March 31, 2009 was primarily due to an increased level of invested assets
which resulted from the Company investing the proceeds received from the sale of
its regional property and casualty operations in the second quarter of 2008.
Also contributing to the increase in investment income for the three month
period ended March 31, 2009 was a shift from short-term investments to higher
yielding fixed maturity securities. Partially offsetting this increase in
investment income was a large number of called securities, the proceeds from
which the Company was not able to reinvest at equivalent market rates.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had net
realized investment gains of $13,000 during the three month period ended March
31, 2009, compared to net realized investment gains of $24,000 in the three
month period ended March 31, 2008. Management continually evaluates the
Company&#146;s investment portfolio and, as needed, makes adjustments for
impairments and/or will divest investments. (See Item 3 of the accompanying
consolidated financial statements for a discussion of market risks). </FONT></P>


<p><font face="times new roman, serif" size=2><u><b>INTEREST EXPENSE</b></U></font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense decreased
$0.2 million, or 22.2%, during the three month period ended March 31, 2009 from
the comparable period in 2008. The decrease in interest expense for the three
month period ended March 31, 2009 was due to a decrease in the London Interbank
Offered Rate (&#147;LIBOR&#148;), as the interest rates on the Company&#146;s
trust preferred obligations and outstanding bank debt are based on LIBOR. In
addition, on April 1, 2008, the Company repaid the outstanding balance of $3.8
million under the Company&#146;s credit agreement (the &#147;Credit
Agreement&#148;) with Wachovia Bank, National Association
(&#147;Wachovia&#148;), which decreased interest expense by reducing the
Company&#146;s average debt level for the three month period ended March 31,
2009 as compared to the same period in 2008. </FONT></P>







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<p><font face="times new roman, serif" size=2><u><b>OTHER EXPENSES</b></U></font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other expenses
(commissions, underwriting expenses, and other expenses) decreased $0.6 million,
or 6.1%, during the three month period ended March 31, 2009 from the comparable
period in 2008. The decrease in other expenses for the three month period ended
March 31, 2009 was primarily attributable to the reduction in profit sharing
commissions at American Southern. During the three month period ended March 31,
2009, profit sharing commissions at American Southern decreased $0.5 million
from the three month period ended March 31, 2008 due primarily to higher loss
ratios. The majority of American Southern&#146;s business is structured in a way
that agents are rewarded or penalized based upon the loss ratios of the business
they submit to the company. In periods where the loss ratio increases,
commissions and underwriting expenses will decrease and conversely in periods
where the loss ratio decreases, commissions and underwriting expenses will
increase. Also contributing to the decrease in other expenses was a $0.3 million
goodwill impairment charge taken in the three month period ended March 31, 2008
which did not recur in the three month period ended March 31, 2009. On a
consolidated basis, as a percentage of earned premiums, other expenses decreased
to 42.6% in the three month period ended March 31, 2009 from 44.9% in the three
month period ended March 31, 2008. The decrease in the expense ratio for the
three month period ended March 31, 2009 was primarily due to the reduction in
profit sharing commissions and the goodwill impairment charge discussed
previously.  </FONT></P>

<p><font face="times new roman, serif" size=2><u><b>INCOME TAXES</b></U></font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary differences
between the effective tax rate and the federal statutory income tax rate for the
three month period ended March 31, 2009 resulted from the dividends-received
deduction (&#147;DRD&#148;). The primary differences between the effective tax
rate and the federal statutory income tax rate for the three month period ended
March 31, 2008 resulted from the DRD and a non-deductible goodwill impairment
charge. The current estimated DRD is adjusted as underlying factors change. The
actual current year DRD can vary from the estimates based on, but not limited
to, amounts of distributions from these investments as well as appropriate
levels of taxable income. </FONT></P>






<p><font face="times new roman, serif" size=2><u><b>LIQUIDITY AND CAPITAL RESOURCES</b></U></font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary cash needs of the
Company are for the payment of claims and operating expenses, maintaining
adequate statutory capital and surplus levels, and meeting debt service
requirements. Current and expected patterns of claim frequency and severity may
change from period to period but generally are expected to continue within
historical ranges. The Company&#146;s primary sources of cash are written
premiums, investment income and the sale and maturity of its invested assets.
The Company believes that, within each operating company, total invested assets
will be sufficient to satisfy all policy liabilities and that cash inflows from
investment earnings, future premium receipts and reinsurance collections will be
adequate to fund the payment of claims and expenses as needed. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash flows at the Parent
are derived from dividends, management fees, and tax sharing payments from its
subsidiaries. The cash needs of the Parent are primarily for the payment of
operating expenses, the acquisition of capital assets and debt service
requirements. At March 31, 2009, the Parent had approximately $18.8 million of
cash and short-term investments. The Company believes that given traditional
funding sources of the Parent combined with current cash and short-term
investments, the current liquidity issues being faced by certain other companies
as a result of the current economic conditions and funding constraints should
not be an issue for the Company and/or the Parent for the foreseeable future. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Parent&#146;s insurance
subsidiaries reported statutory net income of $1.9 million for the three month
period ended March 31, 2009 compared to statutory net income of $2.5 million for
the three month period ended March 31, 2008. Statutory results are impacted by
the recognition of all costs of acquiring business. In a scenario in which the
Company is growing, statutory results are generally lower than results
determined under generally accepted accounting principles (&#147;GAAP&#148;).
The Parent&#146;s insurance subsidiaries reported GAAP net income of $1.8
million for the three month period ended March 31, 2009, compared to $2.0
million for the three month period ended March 31, 2008. The reasons for the
decrease in GAAP net income in the three month period ended March 31, 2009 are
discussed above under &#147;Results of Operations.&#148; Statutory results for
the Company&#146;s property and casualty operations differ from the
Company&#146;s results of operations under GAAP due to the deferral of
acquisition costs for financial reporting purposes. The Company&#146;s life and
health operations&#146; statutory results differ from GAAP results primarily due
to the deferral of acquisition costs for financial reporting purposes, as well
as the use of different reserving methods.  </FONT></P>
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Over 90% of the investment
assets of the Parent&#146;s insurance subsidiaries are in marketable securities
that can be converted into cash, if required; however, the use of such assets by
the Company is limited by state insurance regulations. Dividend payments to the
Parent by its wholly owned insurance subsidiaries are subject to annual
limitations and are restricted to the greater of 10% of statutory surplus or
statutory earnings before recognizing realized investment gains of the
individual insurance subsidiaries. At March 31, 2009, American Southern had
$34.8 million of statutory surplus and Bankers Fidelity had $28.5 million of
statutory surplus. </FONT></P>





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<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Parent provides certain
administrative and other services to each of its insurance subsidiaries. The
amounts charged to and paid by the subsidiaries include reimbursements for
various shared services and other expenses incurred directly on behalf of the
subsidiaries by the Parent. In addition, there is in place a formal tax-sharing
agreement between the Parent and its insurance subsidiaries. It is anticipated
that this agreement will provide the Parent with additional funds from
profitable subsidiaries due to the subsidiaries&#146; use of the Parent&#146;s
tax loss carryforwards, which totaled approximately $6.6 million at March 31,
2009. </FONT></P>



<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to these
internal funding sources, the Company maintains its revolving credit facility
under the Credit Agreement pursuant to which the Company was able to, subject to
the terms and conditions thereof, initially borrow or reborrow up to $15.0
million (the &#147;Commitment Amount&#148;). In accordance with the terms of the
Credit Agreement, the Commitment Amount is incrementally reduced every six
months and was equal to $13.0 million at March 31, 2009. The interest rate on
amounts outstanding under the Credit Agreement is, at the option of the Company,
equivalent to either (a) the base rate (which equals the higher of the Prime
Rate or 0.5% above the Federal Funds Rate, each as defined) or (b) the LIBOR
determined on an interest period of 1-month, 2-months, 3-months or 6-months,
plus an Applicable Margin (as defined). The Applicable Margin varies based upon
the Company&#146;s leverage ratio (funded debt to total capitalization, each as
defined) and ranges from 1.75% to 2.50%. Interest on amounts outstanding is
payable quarterly. The Credit Agreement requires the Company to comply with
certain covenants, including, among others, ratios that relate funded debt to
both total capitalization and earnings before interest, taxes, depreciation and
amortization, as well as the maintenance of minimum levels of tangible net
worth. The Company must also comply with limitations on capital expenditures,
certain payments, additional debt obligations, equity repurchases and certain
redemptions, as well as minimum risk-based capital levels. Upon the occurrence
of an event of default, Wachovia may terminate the Credit Agreement and declare
all amounts outstanding due and payable in full. During the three month period
ended March 31, 2009, there was no balance outstanding under this Credit
Agreement.</FONT></P>









<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has two
statutory trusts which exist for the exclusive purpose of issuing trust
preferred securities representing undivided beneficial interests in the assets
of the trusts and investing the gross proceeds of the trust preferred securities
in junior subordinated deferrable interest debentures (&#147;Junior Subordinated
Debentures&#148;). The outstanding $41.2 million of Junior Subordinated
Debentures have a maturity of thirty years from their original dates of
issuance, are callable, in whole or in part, only at the option of the Company
five years after their respective dates of issue and quarterly thereafter, and
have an interest rate of three-month LIBOR plus an applicable margin. The margin
ranges from 4.00% to 4.10%. At March 31, 2009, the effective interest rate was
5.30%. The obligations of the Company with respect to the issuances of the trust
preferred securities represent a full and unconditional guarantee by the Parent
of each trust&#146;s obligations with respect to the trust preferred securities.
Subject to certain exceptions and limitations, the Company may elect from time
to time to defer Junior Subordinated Debenture interest payments, which would
result in a deferral of distribution payments on the related trust preferred
securities. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2006, the Company
entered into a zero cost rate collar with Wachovia to hedge future interest
payments on a portion of the Junior Subordinated Debentures. The notional amount
of the collar was $18.0 million with an effective date of March 6, 2006. The
collar has a LIBOR floor rate of 4.77% and a LIBOR cap rate of 5.85% and adjusts
quarterly on the 4<SUP>th</SUP> of each March, June, September and December
through termination on March 4, 2013. The Company began making payments to
Wachovia under the zero cost rate collar on June 4, 2008. As a result of
interest rates remaining below the LIBOR floor rate of 4.77%, these payments to
Wachovia under the zero cost rate collar continued throughout 2008 and into
2009. While the Company is exposed to counterparty risk should Wachovia fail to
perform, the current level of interest rates, coupled with the current
macroeconomic outlook, would indicate that the Company&#146;s current exposure
is minimal. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company intends to pay
its obligations under the Credit Agreement, if any, and the Junior Subordinated
Debentures using dividend and tax sharing payments from its operating
subsidiaries, or from potential future financing arrangements. In addition, the
Company believes that, if necessary, at maturity, the Credit Agreement could be
refinanced, although there can be no assurance of the terms or conditions of
such a refinancing, or its availability. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At March 31, 2009, the
Company had 70,000 shares of Series D Preferred Stock (&#147;Series D Preferred
Stock&#148;) outstanding. All of the shares of Series D Preferred Stock are held
by an affiliate of the Company&#146;s Chairman Emeritus. The outstanding shares
of Series D Preferred Stock have a stated value of $100 per share; accrue annual
dividends at a rate of $7.25 per share (payable in cash or shares of the
Company&#146;s common stock at the option of the board of directors of the
Company) and are cumulative. In certain circumstances, the shares of the Series
D Preferred Stock may be convertible into an aggregate of approximately
1,754,000 shares of the Company&#146;s common stock, subject to certain
adjustments and provided that such adjustments do not result in the Company
issuing more than approximately 2,703,000 shares of common stock without
obtaining prior shareholder approval; and are redeemable solely at the
Company&#146;s option. The Series D Preferred Stock is not currently
convertible. At March 31, 2009, the Company had accrued, but unpaid, dividends
on the Series D Preferred Stock totaling $0.1 million.  </FONT></P>




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<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in operating
activities was $6.1 million in the three month period ended March 31, 2009,
compared to $7.7 million in the three month period ended March 31, 2008. Cash
and short-term investments decreased from $37.3 million at December 31, 2008 to
$23.9 million at March 31, 2009. The decrease in cash and short-term investments
during the three month period ended March 31, 2009 was primarily due to an
increased level of investing exceeding normal sales and maturities. Also
contributing to the decrease in cash and short-term investments during the three
month period ended March 31, 2009 was a final settlement of $1.8 million with
Columbia Mutual Insurance Company relating to a valuation matter with respect to
certain loss reserves in connection with the 2008 sale of the Company&#146;s
regional property and casualty operations.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The
Company believes that the dividends, fees, and tax-sharing payments it receives
from its subsidiaries and, if needed, additional borrowings from financial
institutions, will enable the Company to meet its liquidity requirements for the
foreseeable future. Management is not aware of any current recommendations by
regulatory authorities, which, if implemented, would have a material adverse
effect on the Company&#146;s liquidity, capital resources or operations.</FONT></P>





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<p><font face="times new roman, serif" size=2><u>Item 3. Quantitative and Qualitative Disclosures About Market Risk</u>
</font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Due
to the nature of the Company&#146;s business it is exposed to both interest rate
and market risk. Changes in interest rates, which have historically represented
the largest market risk factor affecting the Company, may result in changes in
the fair market value of the Company&#146;s investments, cash flows and interest
income and expense. The Company is also subject to risk from changes in equity
prices. During the three month period ended March 31, 2009, the Company&#146;s
investments in fixed maturities, non-redeemable preferred stocks and common
stocks decreased as a result of numerous macroeconomic factors which impacted
significantly all of the United States financial markets. In addition,
as of March 31, 2009, the carrying value of the Company&#146;s investments in
the fixed maturity securities of General Motors and General Motors Acceptance
Corporation decreased from the value as of December 31, 2008 primarily as a
result of changes in the credit risk of the issuers as well as the overall
liquidity and credit uncertainties in the financial markets. The carrying amount
of these fixed maturity investments at March 31, 2009 was $4.4 million with an
adjusted cost basis of $8.1 million. </FONT></P>



<a name="controls_and_procedures"></a>
<p><font face="times new roman, serif" size=2><u>Item 4T. Controls and Procedures</u>
</font></p>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An
evaluation was performed under the supervision and with the participation of our
management, including the Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act).
Based on that evaluation, our management, including the Chief Executive Officer
and Chief Financial Officer, concluded that our disclosure controls and
procedures were effective as of the end of the period covered by this report. We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Securities and Exchange Act of 1934
(the &#147;Exchange Act&#148;) reports is recorded, processed, summarized and
reported within the time periods specified in the SEC&#146;s rules and forms,
and that such information is accumulated and communicated to management,
including the Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. Management
necessarily applies its judgment in assessing the costs and benefits of such
controls and procedures, which, by their nature, can provide only reasonable
assurance regarding management&#146;s control objectives. The Company&#146;s
management, including the Chief Executive Officer and Chief Financial Officer,
 does not expect that our disclosure controls and procedures can prevent
all possible errors or fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. There are inherent limitations in all
control systems, including the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of simple errors or mistakes.
Additionally, controls can be circumvented by the individual acts of one or more
persons. The design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and, while our disclosure
controls and procedures are designed to be effective under circumstances where
they should reasonably be expected to operate effectively, there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Because of the inherent limitations in any control
system, misstatements due to possible errors or fraud may occur and may not be
detected. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There
have been no changes in our internal control over financial reporting that
occurred during the period covered by this report that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting. </FONT></P>



<p><font face="times new roman, serif" size=2><b>FORWARD-LOOKING STATEMENTS</b>
</font></p>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This
report contains and references certain information that constitutes
forward-looking statements as that term is defined in the federal securities
laws. Those statements, to the extent they are not historical facts, should be
considered forward-looking statements, and are subject to various risks and
uncertainties. Such forward-looking statements are made based upon
management&#146;s current assessments of various risks and uncertainties, as
well as assumptions made in accordance with the &#147;safe harbor&#148;
provisions of the federal securities laws. The Company&#146;s actual results
could differ materially from the results anticipated in these forward-looking
statements as a result of such risks and uncertainties, including those
identified in the Company&#146;s Annual Report on Form 10-K for the fiscal year
ended December 31, 2008 and the other filings made by the Company from time to
time with the Securities and Exchange Commission.</I> </FONT></P>






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<p align=center><font face="times new roman, serif" size=2><b>PART II.  OTHER INFORMATION</b>
</font></p>


<p><font face="times new roman, serif" size=2><u>Item 2. Unregistered Sales of Equity Securities and Use of Proceeds</u>
</font></p>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On
May 2, 1995, the Board of Directors of the Company approved an initial plan that
allowed for the repurchase of shares of the Company&#146;s common stock (the
&#147;Repurchase Plan&#148;). As amended since its original adoption, the
Repurchase Plan currently allows for repurchases of up to an aggregate of 2.0
million shares of the Company&#146;s common stock on the open market or in
privately negotiated transactions, as determined by an authorized officer of the
Company. Such purchases can be made from time to time in accordance with
applicable securities laws and other requirements.  </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other
than pursuant to the Repurchase Plan, no purchases of common stock of the
Company were made by or on behalf of the Company during the periods described
below.  </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The
table below sets forth information regarding repurchases by the Company of
shares of its common stock on a monthly basis during the three month period
ended March 31, 2009. </FONT></P>


<table width=100% cellspacing=0 cellpadding=3 border=0>
<tr>
<td width=30%>&nbsp;</td>
<td width=14%>&nbsp;</td>
<td width=14%>&nbsp;</td>
<td width=14%>&nbsp;</td>
<td width=14%>&nbsp;</td>
<td width=14%>&nbsp;</td>
</tr>
<tr valign=bottom bgcolor="#eeeeee">
<td align=left><font size=2  face="times new roman, serif"><b>Period</b>
</font><hr width=100% size=1></td>
<td align=center><font size=2  face="times new roman, serif"><b>Total Number<BR>of Shares<BR>Purchased</b>
</font><hr width=100% size=1></td>
<td align=center><font size=2  face="times new roman, serif"><b>Average<BR>Price Paid<BR>per Share</b>
</font><hr width=100% size=1></td>
<td align=center><font size=2  face="times new roman, serif"><b>Total Number<BR>of Shares<BR>Purchased as<BR>
Part of Publicly<BR>Announced<BR>Plans or<BR>Programs</b>
</font><hr width=100% size=1></td>
<td align=center><font size=2  face="times new roman, serif"><b>Maximum<BR>Number of<BR>Shares that<BR>
May Yet be<BR>Purchased<BR>Under the<BR>Plans or<BR>Programs</b>
</font><hr width=100% size=1></td>
</tr>
<tr valign=bottom>
<td><font size=2  face="times new roman, serif">January 1 - January 31, 2009</font></td>
<td align=center><font size=2  face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,913</font></td>
<td align=center><font size=2  face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.91</font></td>
<td align=center><font size=2  face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,913</font></td>
<td align=center><font size=2  face="times new roman, serif">506,468</font></td>
</tr>
<tr valign=bottom bgcolor="#eeeeee">
<td><font size=2  face="times new roman, serif">February 1 - February 28, 2009</font></td>
<td align=center><font size=2  face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,829</font></td>
<td align=center><font size=2  face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;.84</font></td>

<td align=center><font size=2  face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,829</font></td>
<td align=center><font size=2  face="times new roman, serif">504,639</font></td>
</tr>


<tr valign=top>
<td><font size=2  face="times new roman, serif">March 1 - March 31, 2009</font></td>
<td align=center><font size=2  face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;750</font><hr noshade size=1></td>
<td align=center><font size=2  face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.69</font><hr noshade size=1></td>
<td align=center><font size=2  face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;750</font><hr noshade size=1></td>
<td align=center><font size=2  face="times new roman, serif">503,889</font></td>
</tr>






<tr valign=top bgcolor="#eeeeee">
<td align=center><font size=2  face="times new roman, serif"><b>Total</b></font></td>
<td align=center><font size=2  face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,492&nbsp;</font><hr noshade size=2></td>
<td align=center><font size=2  face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.88</font><hr noshade size=2></td>
<td align=center><font size=2  face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,492</font><hr noshade size=2></td>
<td>&nbsp;</td>
</tr>
</table>

<a name="exhibits_and_reports"></a>
<p><font face="times new roman, serif" size=2><u>Item 6.&nbsp; Exhibits</u></font></p>

<table width=100% cellspacing=0 cellpadding=1 border=0>
<tr>
<td width=8%></td>
<td width=92%></td>

</tr>
<tr>
<td colspan=2>&nbsp;</td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>10.1 &nbsp;&nbsp;&nbsp;&#150;</font></td>
<td><font face="times new roman, serif" size=2>
First Amendment to Stock Purchase Agreement, dated as of March 17, 2009,
between Atlantic American Corporation and Columbia Mutual Insurance Company
[incorporated by reference to Exhibit 10.11 to the registrant&#146;s annual
report on Form 10-K for the year ended December 31, 2008].</font></td>
</tr>
<tr>
<td colspan=2>&nbsp;</td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>31.1 &nbsp;&nbsp;&nbsp;&#150;</font></td>
<td><font face="times new roman, serif" size=2>
<A HREF="exhibit_31109.htm">Certification of the Principal Executive Officer
pursuant to Section 302 of the Sarbanes Oxley&#150;Act of 2002.</A></font></td>
</tr>
<tr>
<td colspan=2>&nbsp;</td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>31.2&nbsp;&nbsp;&nbsp; &#150;</font></td>
<td><font face="times new roman, serif" size=2><A HREF="exhibit_31209.htm">
Certification of the Principal Financial Officer
pursuant to Section 302 of the Sarbanes Oxley&#150;Act of 2002.</a></font></td>
</tr>
<tr>
<td colspan=2>&nbsp;</td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>32.1 &nbsp;&nbsp;&nbsp;&#150;</font></td>
<td><font face="times new roman, serif" size=2><A HREF="exhibit_32109.htm">
Certifications
pursuant to Section 906 of the Sarbanes Oxley&#150;Act of 2002.</a></font></td>
</tr>
</table>























<p align=center><font face="times new roman, serif" size=2>-26-</font></p>
<HR SIZE=2 NOSHADE>








<PAGE>
<H5 align="left" style="page-break-before:always"></H5>





<a name="signature"></a>
<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>

<p align=center><font size=2 face="times new roman, serif"><u><b>SIGNATURE</b></u></font></p>

<p align=justify><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.</font></p>


<p align=center><font size=2 face="times new roman, serif"><u> ATLANTIC AMERICAN CORPORATION<BR></u>
(Registrant)</font></p>
<BR>
<BR>
<BR>


<table width=80% align=left cellspacing=0 cellpadding=0 border=0>
<tr>
<td valign=top width=45%><font size=2 face="times new roman, serif">Date:&nbsp;<u> May 14, 2009</u></font></td>
<td width=55%><font size=2 face="times new roman, serif">By:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font face="times new roman, serif" size=2>
<u>/s/ John G. Sample, Jr.</u></font> <BR>
<font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;John G. Sample, Jr.<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Senior Vice President and Chief Financial Officer
</font></td>
</tr>
</table>


<BR><BR><BR><BR><BR>

<BR><BR><BR><BR><BR>
<BR><BR><BR><BR><BR>

<p align=center>
<font face="times new roman, serif" size=2>-27-</font></p>
<HR SIZE=2 NOSHADE>







<PAGE>
<H5 align="left" style="page-break-before:always"></H5>



<p><font size=2 face="times new roman, serif"><b><A HREF="#table_of_contents">TABLE OF CONTENTS</A></b></font></p>

<p align=center><font face="times new roman, serif" size=2><b><U>EXHIBIT INDEX</U></B></FONT></P>

<table width=630 align=center cellspacing=5 cellpadding=8 border=0>
<tr>
<td><font size=2 face="times new roman, serif"><b>Exhibit<BR><u>Number</u></b></font></td>
<td colspan=2><font size=2 face="times new roman, serif"><b>&nbsp;<BR><u> Title</u></b></font></td>

</tr>



<tr>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;31.1</FONT></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<BR><A HREF="exhibit_31109.htm">Certification of the Principal Executive Officer
pursuant to Section 302 of the Sarbanes&#150;Oxley Act of 2002.</a></FONT></td>
</tr>


<tr>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;31.2 </FONT></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<BR><A HREF="exhibit_31209.htm">Certification of the Principal Financial Officer
pursuant to Section 302 of the Sarbanes&#150;Oxley Act of 2002.</a></FONT></td>
</tr>
<tr>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;32.1</FONT></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="exhibit_32109.htm">Certifications
pursuant to Section 906 of the Sarbanes&#150;Oxley Act of 2002.</a></FONT></td>
</tr>
</table>
<BR><BR><BR><BR><BR>


</body>
</html>










</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>exhibit_31109.htm
<DESCRIPTION>CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
<TEXT>
<html>
<head>
<title>
Exhibit 31.1
</title>
</head>
<body>
<A NAME="certification_executive"></A>
<p align=right><font face="times new roman, serif" size=2><b><u>EXHIBIT 31.1</u></b></font></p>

<p align=center><font size=2 face="times new roman, serif"><b>CERTIFICATION
OF THE PRINCIPAL EXECUTIVE OFFICER<BR>PURSUANT TO SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002</b></font></p>

<p><font size=2  face="times new roman, serif">I, Hilton H. Howell, Jr., certify that:</font></p>

<table align=center width=95% cellspacing=0 cellpadding=8 border=0>

<tr>

<td width=5 align=center><font face="times new roman, serif" size=2>1.</font></td>
<td colspan=2 align=justify><font size=2 face="times new roman, serif">
I have reviewed this report on Form 10-Q of Atlantic American Corporation;</font></td>
</tr>

<tr valign=top>
<td align=center><font size=2 face="times new roman, serif">2.</font></td>
<td valign=top><p align=justify><font size=2 face="times new roman, serif">
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
              necessary to make the statements made, in light of the circumstances under which such statements were made, not
              misleading with respect to the period covered by this report;</font></td>
</tr>

<tr valign=top>
<td align=center><font size=2 face="times new roman, serif">3.</font></td>
<td valign=top><p align=justify><font size=2 face="times new roman, serif">
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
              all material respects the financial condition, results of operations and cash flows of the registrant as of, and for,
              the periods presented in this report;</font></td>
</tr>

<tr valign=top>
<td align=center><font size=2 face="times new roman, serif">4.</font></td>
<td colspan=2><p align=justify><font size=2  face="times new roman, serif">
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
              procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
              defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:</font></td>
</tr>

</table>

<table align=center width=95% cellspacing=0 cellpadding=8 border=0>
<tr valign=top>
<td width=10>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>a)</font></td>
<td valign=top align=justify><font face="times new roman, serif" size=2>
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
                      supervision, to ensure that material information relating to the registrant, including its consolidated
                      subsidiaries, is made known to us by others within those entities, particularly during the period in which this
                      report is being prepared;</font></td>
</tr>
<tr valign=top>
<td width=10>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>b)</font></td>
<td valign=top align=justify><font face="times new roman, serif" size=2>
designed such internal control over financial reporting, or caused such internal control over financial reporting to be
                      designed under our supervision, to provide reasonable assurance regarding the reliability of financial
                      reporting and the preparation of financial statements for external purposes in accordance with generally
                      accepted accounting principles;
</font></td>
</tr>
<tr valign=top>
<td width=10>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>c)</font></td>
<td valign=top align=justify><font face="times new roman, serif" size=2>
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
                      conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
                      covered by this report based on such evaluation; and
</font></td>
</tr>

<tr valign=top>
<td width=10>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>d)</font></td>
<td valign=top align=justify><font face="times new roman, serif" size=2>
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
                      registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
                      report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal
                      control over financial reporting; and
</font></td>
</tr>
</table>

<table align=center width=95% cellspacing=0 cellpadding=8 border=0>

<tr valign=top>

<td width=5 align=center><font face="times new roman, serif" size=2>5.</font></td>
<td colspan=2 align=justify><font size=2 face="times new roman, serif">
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
              financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons
              performing the equivalent functions):

</font></td>
</tr>
</table>
<table align=center width=95% cellspacing=0 cellpadding=8 border=0>
<tr valign=top>
<td width=10>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>a)</font></td>
<td valign=top><p align=justify><font face="times new roman, serif" size=2>
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
                      which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
                      report financial information; and
</font></td>
</tr>
<tr valign=top>
<td width=10>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>b)</font></td>
<td valign=top><p align=justify><font face="times new roman, serif" size=2>
any fraud, whether or not material, that involves management or other employees who have a significant role in the
                      registrant's internal control over financial reporting.
</font></td>
</tr>
</table>
<table align=center width=95% cellspacing=0 cellpadding=8 border=0>





<tr>
<td width=40%>
&nbsp;
</td>
<td width=20%>
&nbsp;
</td>
<td width=40%>
&nbsp;</td>
</tr>
<tr>
<td valign=top><font size=2  face="times new roman, serif">Date:&nbsp;&nbsp;&nbsp;<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
May 14, 2009&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font>
</td>
<td>
&nbsp;
</td>
<td align=center>
<font size=2  face="times new roman, serif"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Hilton H. Howell, Jr.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hilton H. Howell, Jr.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR>
President and Chief Executive Officer</font></td>
</tr>
</table>
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>exhibit_31209.htm
<DESCRIPTION>CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
<TEXT>
<html>
<head>
<title>
Exhibit 31.2
</title>
</head>
<body>
<A NAME="certification_financial"></A>
<p align=right><font face="times new roman, serif" size=2><b><u>EXHIBIT 31.2</u></b></font></p>

<p align=center><font size=2 face="times new roman, serif"><b>CERTIFICATION
OF THE PRINCIPAL FINANCIAL OFFICER<BR>PURSUANT TO SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002</b></font></p>

<p><font size=2  face="times new roman, serif">I, John G. Sample, Jr., certify that:</font></p>

<table align=center width=95% cellspacing=0 cellpadding=8 border=0>

<tr>

<td width=5 align=center><font face="times new roman, serif" size=2>1.</font></td>
<td colspan=2 align=justify><font size=2 face="times new roman, serif">
I have reviewed this report on Form 10-Q of Atlantic American Corporation;</font></td>
</tr>

<tr valign=top>
<td align=center><font size=2 face="times new roman, serif">2.</font></td>
<td valign=top><p align=justify><font size=2 face="times new roman, serif">
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
              necessary to make the statements made, in light of the circumstances under which such statements were made, not
              misleading with respect to the period covered by this report;</font></td>
</tr>

<tr valign=top>
<td align=center><font size=2 face="times new roman, serif">3.</font></td>
<td valign=top><p align=justify><font size=2 face="times new roman, serif">
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
              all material respects the financial condition, results of operations and cash flows of the registrant as of, and for,
              the periods presented in this report;</font></td>
</tr>

<tr valign=top>
<td align=center><font size=2 face="times new roman, serif">4.</font></td>
<td colspan=2><p align=justify><font size=2  face="times new roman, serif">
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
              procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
              defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:</font></td>
</tr>

</table>

<table align=center width=95% cellspacing=0 cellpadding=8 border=0>
<tr valign=top>
<td width=10>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>a)</font></td>
<td valign=top align=justify><font face="times new roman, serif" size=2>
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
                      supervision, to ensure that material information relating to the registrant, including its consolidated
                      subsidiaries, is made known to us by others within those entities, particularly during the period in which this
                      report is being prepared;</font></td>
</tr>
<tr valign=top>
<td width=10>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>b)</font></td>
<td valign=top align=justify><font face="times new roman, serif" size=2>
designed such internal control over financial reporting, or caused such internal control over financial reporting to be
                      designed under our supervision, to provide reasonable assurance regarding the reliability of financial
                      reporting and the preparation of financial statements for external purposes in accordance with generally
                      accepted accounting principles;
</font></td>
</tr>
<tr valign=top>
<td width=10>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>c)</font></td>
<td valign=top align=justify><font face="times new roman, serif" size=2>
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
                      conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
                      covered by this report based on such evaluation; and
</font></td>
</tr>

<tr valign=top>
<td width=10>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>d)</font></td>
<td valign=top align=justify><font face="times new roman, serif" size=2>
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
                      registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
                      report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal
                      control over financial reporting; and
</font></td>
</tr>
</table>

<table align=center width=95% cellspacing=0 cellpadding=8 border=0>

<tr valign=top>

<td width=5 align=center><font face="times new roman, serif" size=2>5.</font></td>
<td colspan=2 align=justify><font size=2 face="times new roman, serif">
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
              financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons
              performing the equivalent functions):

</font></td>
</tr>
</table>
<table align=center width=95% cellspacing=0 cellpadding=8 border=0>
<tr valign=top>
<td width=10>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>a)</font></td>
<td valign=top><p align=justify><font face="times new roman, serif" size=2>
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
                      which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
                      report financial information; and
</font></td>
</tr>
<tr valign=top>
<td width=10>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>b)</font></td>
<td valign=top><p align=justify><font face="times new roman, serif" size=2>
any fraud, whether or not material, that involves management or other employees who have a significant role in the
                      registrant's internal control over financial reporting.
</font></td>
</tr>
</table>
<table align=center width=95% cellspacing=0 cellpadding=8 border=0>





<tr>
<td width=40%>
&nbsp;
</td>
<td width=20%>
&nbsp;
</td>
<td width=40%>
&nbsp;</td>
</tr>
<tr>
<td valign=top><font size=2  face="times new roman, serif">Date:&nbsp;&nbsp;&nbsp;<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
May 14, 2009&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font>
</td>
<td>
&nbsp;
</td>
<td align=center>
<font size=2  face="times new roman, serif"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ John G. Sample, Jr.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
John G. Sample, Jr.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR>
Senior Vice President and <BR>Chief Financial Officer</font></td>
</tr>
</table>
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>4
<FILENAME>exhibit_32109.htm
<DESCRIPTION>CERTIFICATION PURSUANT TO SECTION 906
<TEXT>
<html>
<head>
<title>
Exhibit 32.1
</title>
</head>
<body>




<p align=right><font size=2 face="times new roman, serif"><B><U>EXHIBIT 32.1</U></B></font></p>

<p><font size=2  face="times new roman, serif">
Certifications Pursuant to &sect;906 of the Sarbanes-Oxley Act of 2002</font></p>
<p align=justify><font size=2  face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

             Pursuant to 18 U.S.C.
&#167;1350, as adopted pursuant to &#167;906 of the Sarbanes-Oxley Act of 2002,
in connection with the filing of the Quarterly Report on Form 10-Q of Atlantic
American Corporation (the &#147;Company&#148;) for the quarterly period ended
March 31, 2009, as filed with the Securities and Exchange Commission on the date
hereof (the &#147;Report&#148;), each of the undersigned officers of the Company
certifies, that, to such officer&#146;s knowledge:</font></p>
<table width=95% cellpadding=0 cellspacing=8 border=0>
<tr valign=top>
<td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td width=5 align=center><font face="times new roman, serif" size=2>(1)</font></td>
<td colspan=2><p align=justify><font size=2 face="times new roman, serif">
The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and</font></td>
</tr>
<tr valign=top>
<td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td width=5 align=center><font face="times new roman, serif" size=2>(2)</font></td>
<td colspan=2><p align=justify><font size=2 face="times new roman, serif">
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
               operations of the Company as of the dates and for the periods expressed in the Report.</font></td>
</tr>
</table>


<table align=center width=95% cellspacing=0 cellpadding=8 border=0>
<tr>
<td width=40%>
&nbsp;
</td>
<td width=20%>
&nbsp;
</td>
<td width=40%>
&nbsp;</td>
</tr>
<tr>
<td valign=top><font size=2  face="times new roman, serif">Date:&nbsp;&nbsp;&nbsp;<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
May 14, 2009&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font>
</td>
<td>
&nbsp;
</td>
<td align=center>
<font size=2  face="times new roman, serif"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Hilton H. Howell, Jr.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hilton H. Howell, Jr.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR>
President and Chief Executive Officer</font></td>
</tr>
</table>




<table align=center width=95% cellspacing=0 cellpadding=8 border=0>
<tr>
<td width=40%>
&nbsp;
</td>
<td width=20%>
&nbsp;
</td>
<td width=40%>
&nbsp;</td>
</tr>
<tr>
<td valign=top><font size=2  face="times new roman, serif">Date:&nbsp;&nbsp;&nbsp;<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
May 14, 2009&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font>
</td>
<td>
&nbsp;
</td>
<td align=center>
<font size=2  face="times new roman, serif"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ John G. Sample, Jr.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
John G. Sample, Jr.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR>
Senior Vice President and <BR>Chief Financial Officer</font></td>
</tr>
</table>

<BR><BR><BR><BR>

<p align=justify><font size=2  face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

         A signed original of this
written statement required by Section 906, or other document authenticating,
acknowledging, or otherwise adopting the signature that appears in typed form
within the electronic version of this written statement required by Section 906,
has been provided to the Company and will be retained by the Company and
furnished to the Securities and Exchange Commission or its staff upon request.</font></p>








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