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<SEC-DOCUMENT>0000008177-10-000022.txt : 20100806
<SEC-HEADER>0000008177-10-000022.hdr.sgml : 20100806
<ACCEPTANCE-DATETIME>20100806132442
ACCESSION NUMBER:		0000008177-10-000022
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20100630
FILED AS OF DATE:		20100806
DATE AS OF CHANGE:		20100806

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:		10997459

	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>form10q2nd10.htm
<DESCRIPTION>CURRENT REPORT
<TEXT>

<html>
<head>
<title>
Form 10-Q 2nd Quarter 2010
</title>
</head>
<body>
<BR><BR>
<HR width=100% 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>

<p align=center><font face="Times New Roman, Serif" size=3><b>FORM 10-Q</b></font></p>


<p><font size=2 face="times new roman, serif">|X| &nbsp;&nbsp;&nbsp;QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</font></p>

<p><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the quarterly period ended June 30, 2010</font></p>

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

<p><font size=2 face="times new roman, serif">|_| &nbsp;&nbsp;&nbsp;TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</font></p>



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


<p align=center><font size=4 face="times new roman, serif"><b>ATLANTIC AMERICAN CORPORATION<BR></b></font>
                          <font size=2 face="times new roman, serif"><i>(Exact name of registrant as specified in its charter)</i></font></p>






<table width=90% align=center cellspacing=0 cellpadding=8 border=0>
<tr>
<td width=50%></td>
<td width=50%></td>
</tr>

<tr>
<td align=center><font size=2 face="times new roman, serif"><b>Georgia</b><BR>
<i> (State or other jurisdiction of<BR>incorporation or organization)</i><BR><BR>
<B>4370 Peachtree Road, N.E.,<BR>Atlanta, Georgia<BR></b><i> (Address of principal executive offices)</i></font></td>

<td align=center><font size=2 face="times new roman, serif"><b>58-1027114</b><BR><i>(I.R.S. Employer<BR>Identification No.)</i><BR><BR>
<b>30319</b><BR><i>(Zip Code)</i></font></td>

</tr>
</table>



<p align=center><font size=2 face="times new roman, serif"> <b>(404) 266-5500</b><BR>
                              <i>(Registrant's telephone number, including area code)</i></font></p>



<P><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><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><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><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><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 August 6, 2010,
was 22,282,701.</FONT></P>

<HR width=100% 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>
June 30, 2010 and December 31, 2009</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 and six months ended June 30, 2010 and 2009</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>
Six months ended June 30, 2010 and 2009 </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>
Six months ended June 30, 2010 and 2009</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">17</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">Signatures</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 par value)</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>June 30,<BR> 2010</font><hr noshade size=1></td>
<td align=center><font size=2 face="times new roman, serif">December 31,<BR>2009</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 $14,701 and<BR>&nbsp;&nbsp;&nbsp; $14,697</font></td>
<td align=right><font size=2 face="times new roman, serif"> $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;47,203</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;20,129</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: $161,425 and $189,111)</font></td>
<td align=right><font size=2 face="times new roman, serif">165,651</font></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">184,060</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: $8,631 and $8,631)</font></td>
<td align=right><font size=2 face="times new roman, serif">7,427</font></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">6,914</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align=left> <font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;Other invested assets (cost: $1,000 and $1,021)</font></td>
<td align=right> <font size=2 face="times new roman, serif">1,000</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">1,021</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">2,133</font></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">2,139</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">177,487</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">195,410</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">11,594</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">11,489</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;&nbsp;Other (net of allowance for doubtful accounts: $562 and $533)</font></td>
<td align=right> <font size=2 face="times new roman, serif">6,069</font></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">6,023</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">2,541</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">6,041</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">20,229</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">19,453</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">1,308</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">1,413</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">$&nbsp;&nbsp;&nbsp;&nbsp;268,559</font><hr noshade size=3></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;262,086</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;59,900</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;58,981</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">20,082</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">18,130</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">50,848</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">50,112</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">1,422</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">1,990</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">132,252</font></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">129,213</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">11,131</font></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">14,165</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">184,621</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right> <font size=2 face="times new roman, serif">184,616</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 10)</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;$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;<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares outstanding: 22,282,701 and 22,291,310</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">57,129</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">57,129</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">3,643</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">3,404</font></td>
</tr>




<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive income (loss)</font></td>
<td align=right> <font size=2 face="times new roman, serif">838</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(5,405)</font></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Treasury stock, at cost: 91,199 and 82,590
shares<BR></font></td>
<td align=right> <font size=2 face="times new roman, serif">(116)</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(102)</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">83,938</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">77,470</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;268,559</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;262,086</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=640 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=55%>&nbsp;</td>
<td width=10.5%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10.5%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10.5%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10.5%>&nbsp;</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>June 30,</font><HR NOSHADE SIZE=1></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee" align=center colspan=3><font size=2 face="times new roman, serif">Six Months Ended<BR>June 30,</font><HR NOSHADE SIZE=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2010</font><HR NOSHADE SIZE=1></td>
<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">2010</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</font><HR NOSHADE SIZE=1></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Revenue:</font></td>
<td colspan=4>&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">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24,387</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22,941</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;47,745</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;45,738</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">2,576</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">2,708</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">5,133</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">5,443</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Realized investment gains (losses), 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">(26)</font></td>
<td>&nbsp;</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">(13)</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">111</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">84</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">159</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">151</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">27,087</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">25,707</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">53,050</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">51,319</font><HR NOSHADE SIZE=1></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Benefits and expenses:</font></td>
<td colspan=4>&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">17,425</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">15,033</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">32,815</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">29,913</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">6,827</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">7,412</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">13,967</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">14,930</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">653</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">694</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">1,295</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">1,415</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">2,119</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">2,618</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">4,336</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">4,804</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">27,024</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">25,757</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">52,413</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">51,062</font><HR NOSHADE SIZE=1></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Income (loss) before income taxes</font></td>
<td align=right><font size=2 face="times new roman, serif">63</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(50)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">637</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">257</font></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Income tax expense (benefit)</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">(62)</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">144</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(11)</font><HR NOSHADE SIZE=1></td>
</tr>

<tr>
<td><font size=2 face="times new roman, serif">Net income</font></td>
<td align=right><font size=2 face="times new roman, serif">76</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">12</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">493</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">268</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">(127)</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(254)</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(254)</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">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(51)</font><HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(115)</font><HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;239</font><HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14</font><HR NOSHADE SIZE=2></td>
</tr>


<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Net income (loss) per common share (basic and diluted)
</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font><HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.01)</font><HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.01</font><HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</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>&nbsp;<BR>Six Months Ended June 30, 2010</font><hr noshade size=1></td>
<td align=center><font size=1 face="times new roman, serif">&nbsp;<BR>&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>&nbsp;<BR>Common<BR>Stock</font><hr noshade size=1></td>
<td align=center><font size=1 face="times new roman, serif">&nbsp;<BR>&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>&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<BR>Other<BR>Comprehensive<BR>Income (Loss)</font><hr noshade size=1></td>
<td align=center><font size=1 face="times new roman, serif">&nbsp;<BR>&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>&nbsp;<BR>Total</font><hr noshade size=1></td>
</tr>
<tr>
<td><font size=1 face="times new roman, serif">Balance, December 31, 2009</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;70</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;22,374</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;57,129</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,404</font></td>

<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5,405)</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(102)</font></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;77,470</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 align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">493</font></td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">493</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 gains</font></td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">9,790</font></td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">9,790</font></td>
</tr>
<tr valign=bottom>
<td><font size=1 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Fair value adjustment to derivative financial<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
instrument</font></td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>(186)</font></td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>(186)</font></td>
</tr>



<tr bgcolor="#eeeeee" >
<td valign=top><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 income&nbsp;<BR></font></td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">(3,361)&nbsp;<BR></font></td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>(3,361)</font><hr noshade size=1></td>
</tr>
<tr>
<td><font size=1 face="times new roman, serif">Total comprehensive income</font></td>
<td colspan=6>&nbsp;</td>

<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>6,736</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 align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">(254)</font></td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">(254)</font></td>
</tr>
<tr>
<td><font size=1 face="times new roman, serif">Purchase of shares for treasury</font></td>
<td valign=bottom align=right>&nbsp;-<hr noshade size=1></td>
<td valign=bottom align=right>&nbsp;-<hr noshade size=1></td>
<td valign=bottom align=right>&nbsp;-<hr noshade size=1></td>
<td valign=bottom align=right>&nbsp;-<hr noshade size=1></td>
<td valign=bottom align=right>&nbsp;-<hr noshade size=1></td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>(14)</font><hr noshade size=1></td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>(14)</font><hr noshade size=1></td>
</tr>

<tr valign=top bgcolor="#eeeeee">
<td><font size=1 face="times new roman, serif">Balance, June 30, 2010</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">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;57,129</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,643</font><hr noshade size=2></td>

<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;838</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(116)</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;83,938</font><hr noshade size=2></td>
</tr>
<tr valign=bottom>
<td><font size=1 face="times new roman, serif">Six Months Ended June 30, 2009</font><hr noshade size=1></td>
<td colspan=8>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=1 face="times new roman, serif">Balance, December 31, 2008</font></td>
<td align=right><font size=1 face="times new roman, serif">$&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;&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>
<td><font size=1 face="times new roman, serif">Comprehensive income:</font></td>
<td colspan=8>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=1 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net income</font></td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">268</font></td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">268</font></td>
</tr>
<tr>
<td><font size=1 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Decrease in unrealized investment losses</font></td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">2,230</font></td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">2,230</font></td>
</tr>
<tr valign=bottom bgcolor="#eeeeee">
<td><font size=1 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Fair value adjustment to derivative financial<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
instrument</font></td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>503</font></td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>503</font></td>
</tr>

<tr>
<td><font size=1 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Minimum pension liability adjustment</font></td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">375</font></td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">375</font></td>
</tr>








<tr bgcolor="#eeeeee" >
<td valign=top><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 income&nbsp;<BR></font></td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">(1,088)&nbsp;<BR></font></td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>(1,088)</font><hr noshade size=1></td>
</tr>



<tr>
<td><font size=1 face="times new roman, serif">Total comprehensive income</font></td>
<td colspan=6>&nbsp;</td>

<td align=right><font size=1 face="times new roman, serif">&nbsp;<BR>2,288</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 align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">(254)</font></td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">(254)</font></td>
</tr>


<tr>
<td><font size=1 face="times new roman, serif">Amortization of unearned compensation</font></td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">22</font></td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right>-</td>
<td align=right><font size=1 face="times new roman, serif">22</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 align=right>&nbsp;-<hr noshade size=1></td>
<td valign=bottom align=right>&nbsp;-<hr noshade size=1></td>
<td valign=bottom align=right>&nbsp;-<hr noshade size=1></td>
<td valign=bottom align=right>&nbsp;-<hr noshade size=1></td>
<td valign=bottom align=right>&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, June 30, 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">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;57,129</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,133</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7,180)</font><hr noshade size=2></td>
<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(63)</font><hr noshade size=2></td>

<td align=right><font size=1 face="times new roman, serif">$&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;77,463</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">Six Months Ended<BR>
June 30,</font><HR NOSHADE SIZE=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif"> 2010</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif"> 2009</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</font></td>
<td align=right><font size=2 face="times new roman, serif"> $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;493</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;268</font></TD>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;provided by (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">4,843</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">5,203</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">(5,619)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(5,319)</font></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized investment (gains) losses</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">13</font></td>
</tr>
<tr bgcolor="#eeeeee">
<Td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase (decrease) in insurance reserves</font></td>
<td align=right><font size=2 face="times new roman, serif">3,039</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(3,467)</font></td>
</tr>

<tr>
<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">-</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">22</font></td>
</tr>
<tr bgcolor="#eeeeee">
<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">206</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">136</font></td>
</tr>
<tr>
<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">138</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(11)</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;(Increase) decrease in receivables, net</font></td>
<td align=right><font size=2 face="times new roman, serif">(151)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">4,342</font></td>
</tr>
<tr>
<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">(2,474)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(6,699)</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">66</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">3</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 provided by (used in) operating activities</font></td>
<td align=right><font size=2 face="times new roman, serif">528</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(5,509)</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">32,376</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">76,684</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">(5,801)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(79,411)</font></td>
</tr>
<tr valign=top>
<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">(15)</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(90)</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 provided by (used in) investing activities</font></td>
<td align=right><font size=2 face="times new roman, serif">26,560</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(2,817)</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 valign=top>
<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">(14)</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(7)</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">(14)</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(7)</font><HR NOSHADE SIZE=1></td>
</tr>


<tr>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Net increase (decrease) in cash and cash equivalents</font></td>
<td align=right><font size=2 face="times new roman, serif">27,074</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(8,333)</font></td>
</tr>
<tr valign=top bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents at beginning of period</font></td>
<td align=right><font size=2 face="times new roman, serif">20,129</font><HR NOSHADE SIZE=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">37,321</font><HR NOSHADE SIZE=1></td>
</tr>

<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents at end of period</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;47,203</font><HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;28,988</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">$&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;1,295</font><HR NOSHADE SIZE=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
1,457</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
- -</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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<PAGE>
<H5 align="left" style="page-break-before:always"></H5>



<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>
                                                             June 30, 2010</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><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
with the Parent, 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 8 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by GAAP for audited financial statements. 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 included herein and these related
notes 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, 2009.
Operating results for the three month and six month periods ended June 30, 2010
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2010 or for any other future period. </FONT></P>

<P><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><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><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January 2010, the
Financial Accounting Standards Board (&#147;FASB&#148;) issued Accounting
Standards Update (&#147;ASU&#148;) No. 2010-6, Fair Value Measurements and
Disclosures (Topic 820) &#150; Improving Disclosures about Fair Value
Measurements (&#147;ASU 2010-6&#148;), which requires entities to make
disclosures about recurring and nonrecurring fair value measurements. In
accordance with ASU 2010-6, the reporting entity should disclose separately the
amounts of significant transfers in and out of Level 1 and Level 2 fair value
measurements and describe the reasons for the transfers. ASU 2010-6 also
requires an entity to present separately information about purchases, sales,
issuances, and settlements in the reconciliation of fair value measurements
using significant unobservable inputs (Level 3). The disclosures in ASU 2010-6
are effective for interim and annual reporting periods beginning after December
15, 2009, except for purchases, sales, issuances, and settlements in the roll
forward activity in Level 3 fair value measurements. Those disclosures are
effective for fiscal years beginning after December 15, 2010 and for interim
periods within those fiscal years. See Note 11, Investments, for expanded
interim disclosures. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&#160;2009, the FASB
issued amendments to Accounting Standards Codification (&#147;ASC&#148;) 810-10
(&#147;ASC 810-10&#148;), which amend the consolidation guidance applicable to
variable interest entities (&#147;VIEs&#148;). Pursuant to these amendments, an
entity would consolidate a VIE, as the primary beneficiary, when the entity has
both of the following: (a)&#160;the power to direct the activities of a VIE that
most significantly impact the entity&#146;s economic performance and
(b)&#160;the obligation to absorb losses of the entity that could potentially be
significant to the VIE or the right to receive benefits from the entity that
could potentially be significant to the VIE. Ongoing reassessment of whether an
enterprise is the primary beneficiary of a VIE is required. The amendments to
ASC 810-10 eliminate the quantitative approach previously required for
determining the primary beneficiary of a VIE. The amendments to ASC 810-10 are
effective for fiscal years and interim periods beginning after November&#160;15,
2009. The Company adopted the amendments to ASC 810-10 on January&#160;1, 2010.
Adoption of the amendments to ASC 810-10 did not have a material impact on the
Company&#146;s financial condition or results of operations. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&#160;2009, the FASB
issued an amendment to ASC 860. The amendment to ASC 860 amends the
derecognition guidance and eliminates the concept of a qualifying special
purpose entity. The amendment to ASC 860 is effective for fiscal years and
interim periods beginning after November&#160;15, 2009. Early adoption of the
amendment to ASC 860 was prohibited. The Company adopted the amendment to ASC
860 on January&#160;1, 2010. Adoption of the amendment to ASC 860 did not have a
material impact on the Company&#146;s financial condition or results of
operations. </FONT></P>







<BR><BR>

<p align=center><font face="times new roman, serif" size=2>-6-</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><font face="times new roman, serif" size=2><b><u>Note 3.</u></b>&nbsp;&nbsp;Segment Information</font></p>


<P><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 sets forth the revenue and pre-tax
income (loss) for each business unit for the three month and six month periods
ended June 30, 2010 and 2009. </FONT></P>


<table width=630 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=37%></td>
<td width=15%></td>
<td width=1%></td>
<td width=15%></td>
<td width=1%></td>
<td width=15%></td>
<td width=1%></td>
<td width=15%></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif"><b>&nbsp;<BR>Revenues</b></font></td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Three Months Ended<BR>June 30,
</font><hr noshade size=1></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Six Months Ended<BR>June 30,
</font><hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2010</font><hr noshade size=1></td>
<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">2010</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</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">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,927</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,027</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19,099</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20,279</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">17,006</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">15,542</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">33,652</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">30,784</font></td>
</tr>
<tr bgcolor="#eeeeee" valign=top>
<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">154</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">138</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">299</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">256</font><hr noshade size=1></td>
</tr>

<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenue</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;27,087</font>
<hr size=2 noshade></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25,707</font>
<hr size=2 noshade></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;53,050</font>
<hr size=2 noshade></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;51,319</font>
<hr size=2 noshade></td>
</tr>
</table>
<BR>

<table width=630 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=37%></td>
<td width=15%></td>
<td width=1%></td>
<td width=15%></td>
<td width=1%></td>
<td width=15%></td>
<td width=1%></td>
<td width=15%></td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif"><b>&nbsp;<BR>Income (loss) before income taxes
</b></font></td>
<td bgcolor="#eeeeee" align=center colspan=3><font size=2 face="times new roman, serif">Three Months Ended<BR>June 30,</font>
<hr noshade size=1></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee" align=center colspan=3><font size=2 face="times new roman, serif">Six Months Ended<BR>June 30,</font>
<hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2010</font><hr noshade size=1></td>
<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">2010</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</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">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;633</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;760</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,872</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,365</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">343</font></td>
<td>&nbsp;</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">1,247</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">1,116</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">(913)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(1,531)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(2,482)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(3,224)</font><hr noshade size=1></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income (loss) before income taxes</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;63</font>
<hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(50)</font>
<hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;637</font>
<hr noshade size=2></td>
<td>&nbsp;</td>
<td valign=top align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;257</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; 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><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June 29, 2010, the
Company and Wells Fargo Bank, National Association (&#147;Wells Fargo&#148;),
successor-by-merger to Wachovia Bank, National Association
(&#147;Wachovia&#148;) entered into the third amendment (the
&#147;Amendment&#148;) to that certain Credit Agreement, dated as of December
22, 2006, by and between the Company and Wachovia (as amended, the &#147;Credit
Agreement&#148;). The Amendment provides for, among other things, the extension
of the term of the Credit Agreement to June 30, 2011 (the &#147;Extension
Period&#148;); availability under the revolving credit facility during the
Extension Period of up to $5,000; and an Applicable Margin (as defined therein)
on London Interbank Offered Rate (&#147;LIBOR&#148;) based borrowings thereunder
of 2.00%. In accordance with the terms of the Credit Agreement, the Company is able
to, subject to the terms and conditions thereof, borrow or reborrow up to $5,000
thereunder. 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) LIBOR determined on an interest period of 1-month, 2-months,
3-months or 6-months plus 2.00%. 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, Wells Fargo may terminate the Credit Agreement and
declare all amounts outstanding due and payable in full. During the six month
period ended June 30, 2010, there was no balance outstanding under this Credit
Agreement and the Company was in compliance with all terms of the Credit
Agreement.</FONT></P>







<p align=center><font face="times new roman, serif" size=2>-7-</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><b><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Junior Subordinated Debentures</i></b></font></p>


<P><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 June 30, 2010 was as follows:</font></p>



<table width=100% cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=45%></td>
<td width=22.5%></td>
<td width=22.5%></td>
</tr>
<tr>
<td>&nbsp;</td>
<TD><font face="times new roman, serif" size=2>Atlantic American<BR>Statutory Trust I</font><hr noshade size=1></td>

<TD><font face="times new roman, serif" size=2>Atlantic American<BR>Statutory Trust II</font><hr noshade size=1></td>
</tr>
<tr>
<td><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><font face="times new roman, serif" size=2>
Principal amount owed</font></TD>
<td><font face="times new roman, serif" size=2>$&nbsp;&nbsp;18,042</font></td>
<td><font face="times new roman, serif" size=2>$&nbsp;&nbsp;23,196</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>
Balance June 30, 2010</font></TD>
<td><font face="times new roman, serif" size=2>
&nbsp;&nbsp;&nbsp;&nbsp;18,042</font></td>
<td><font face="times new roman, serif" size=2>
&nbsp;&nbsp;&nbsp;&nbsp;23,196</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>
Balance December 31, 2009</font></TD>
<td><font face="times new roman, serif" size=2>
&nbsp;&nbsp;&nbsp;&nbsp;18,042</font></td>
<td><font face="times new roman, serif" size=2>
&nbsp;&nbsp;&nbsp;&nbsp;23,196</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>
Coupon rate</font></TD>
<td><font face="times new roman, serif" size=2>LIBOR + 4.00%</font></td>
<td><font face="times new roman, serif" size=2>LIBOR + 4.10%</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>
Interest payable</font></TD>
<td><font face="times new roman, serif" size=2>Quarterly</font></td>
<td><font face="times new roman, serif" size=2>Quarterly</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>
Maturity date</font></TD>
<td><font face="times new roman, serif" size=2>December 4, 2032</font></td>
<td><font face="times new roman, serif" size=2>May 15, 2033</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>
Redeemable by issuer on or after</font></TD>
<td><font face="times new roman, serif" size=2>December 4, 2007</font></td>
<td><font face="times new roman, serif" size=2>May 15, 2008</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>
TRUST PREFERRED SECURITIES</font></TD>
<TD COLSPAN=2>&nbsp;</TD>
</TR>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>
Issuance date</font></TD>
<td><font face="times new roman, serif" size=2>December 4, 2002</font></td>
<td><font face="times new roman, serif" size=2>May 15, 2003</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>
Securities issued</font></TD>
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;17,500</font></td>
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;22,500</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>
Liquidation preference per security</font></TD>
<td><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1</font></td>
<td><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>
Liquidation value</font></TD>
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;17,500</font></td>
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;22,500</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>
Coupon rate</font></TD>
<td><font face="times new roman, serif" size=2>LIBOR + 4.00%</font></td>
<td><font face="times new roman, serif" size=2>LIBOR + 4.10%</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>
Distribution payable</font></TD>
<td><font face="times new roman, serif" size=2>Quarterly</font></td>
<td><font face="times new roman, serif" size=2>Quarterly</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>
Distribution guaranteed by<sup>(3)</sup></font></TD>
<td><font face="times new roman, serif" size=2>Atlantic American Corporation</font></td>
<td><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 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 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><font face="times new roman, serif" size=2><b><u>Note 5.</u></b>&nbsp;&nbsp;Derivative Financial Instruments</font></p>
<p><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 Well Fargo, as successor-by-merger 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 Wells Fargo under the zero cost rate
collar have continued. While the Company may be exposed to counterparty risk
should Wells Fargo fail to perform, based on the current level of interest
rates, and coupled with the current macroeconomic outlook, the Company believes
that its current counterparty risk exposure is minimal.</font></p>
<p><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 June
30, 2010 was a liability of approximately $1,733 with a corresponding decrease
in accumulated other comprehensive income in shareholders&#146; equity, net of
deferred tax. </font></p>







<p align=center><font face="times new roman, serif" size=2>-8-</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 6.</u></b>&nbsp;&nbsp;Reconciliation of Other Comprehensive Income (Loss)</font></p>





<table width=630 cellspacing=0 cellpadding=2 border=0>
<tr>
<td width=45%></td>
<td width=13%></td>
<td width=1%></td>
<td width=13%></td>
<td width=1%></td>
<td width=13%></td>
<td width=1%></td>
<td width=13%></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>June 30,
</font><hr noshade size=1></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Six Months Ended,<BR>June 30,
</font><hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2010</font><hr noshade size=1></td>
<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">2010</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</font><hr noshade size=1></td>
</tr>
<tr valign=bottom bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Net realized gains (losses) on investments included <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in net income<BR>&nbsp;</font></td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
13</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;(26)</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
13</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(13)</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 gains 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">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,232</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7,926</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,803</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,217</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">26</font><hr noshade size=1></td>
<td>&nbsp;</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">13</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 gains on investments <BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;recognized in other comprehensive income</font></td>
<td align=right valign=bottom><font size=2 face="times new roman, serif">5,219</font></td>
<td valign=bottom>&nbsp;</td>
<td align=right valign=bottom><font size=2 face="times new roman, serif">7,952</font></td>
<td valign=bottom>&nbsp;</td>
<td align=right valign=bottom><font size=2 face="times new roman, serif">9,790</font></td>
<td valign=bottom>&nbsp;</td>
<td align=right valign=bottom><font size=2 face="times new roman, serif">2,230</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">(98)</font></td>
<td valign=bottom>&nbsp;</td>
<td align=right valign=bottom><font size=2 face="times new roman, serif">422</font></td>
<td valign=bottom>&nbsp;</td>
<td align=right valign=bottom><font size=2 face="times new roman, serif">(186)</font></td>
<td valign=bottom>&nbsp;</td>
<td align=right valign=bottom><font size=2 face="times new roman, serif">503</font></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Minimum pension liability adjustment</font></td>
<td align=right><font size=2 face="times new roman, serif">-</font></td>
<td valign=bottom>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">375</font></td>
<td valign=bottom>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">-</font></td>
<td valign=bottom>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">375</font></td>
</tr>

<tr valign=bottom>
<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 income<BR>&nbsp;</font></td>
<td align=right><font size=2 face="times new roman, serif">(1,792)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(3,062)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(3,361)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(1,088)</font><hr noshade size=1></td>
</tr>
<tr valign=bottom bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Change in accumulated other comprehensive <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;loss</font></td>
<td align=right><font size=2 face="times new roman, serif">3,329</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">5,687</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">6,243</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">2,020</font></td>
</tr>
<tr valign=bottom>
<td><font size=2 face="times new roman, serif">Accumulated other comprehensive loss beginning<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of period<BR>&nbsp;
</font></td>
<td align=right><font size=2 face="times new roman, serif">(2,491)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(12,867)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(5,405)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(9,200)</font><hr noshade size=1></td>
</tr>
<tr valign=bottom bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Accumulated other comprehensive income (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>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;838</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7,180)</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;838</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7,180)</font><hr noshade size=2></td>
</tr>
</table>






<p><font face="times new roman, serif" size=2><u><b>Note 7.</b></u>&nbsp;&nbsp;Earnings (Loss) 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 (loss) 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>June 30, 2010</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 Loss Per Common Share:</i></font></td>
<td colspan=3>&nbsp;</td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Net income</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;
76</font></td>
<td align=right><font size=2 face="times new roman, serif">22,286</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss applicable to common shareholders</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;(51)</font><hr noshade size=2></Td>
<td align=right valign=top><font size=2 face="times new roman, serif">&nbsp;<BR>22,286</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;-</font><hr noshade size=2></Td>
</tr>
</table>
<BR><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>







<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>June 30, 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 Loss Per Common Share:</i></font></td>
<td colspan=3>&nbsp;</td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Net income</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;
12</font></td>
<td align=right><font size=2 face="times new roman, serif">22,313</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss applicable to common shareholders</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;(115)</font><hr noshade size=2></Td>
<td align=right valign=top><font size=2 face="times new roman, serif">&nbsp;<BR>22,313</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">Six Months Ended<BR>June 30, 2010</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">Net income</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;
493</font></td>
<td align=right><font size=2 face="times new roman, serif">22,288</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">(254)</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income applicable to common shareholders</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;
239</font></td>
<td align=right valign=top><font size=2 face="times new roman, serif">&nbsp;<BR>22,288</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;.01</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=bottom>
<td><font size=2 face="times new roman, serif">Effect of dilutive stock options<BR>&nbsp;</font></td>
<td align=right>&nbsp;<hr noshade size=1></td>
<td align=right valign=bottom><font size=2 face="times new roman, serif">25</font><hr noshade size=1></td>
<td>&nbsp;</td>
</tr>


<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income applicable to common shareholders </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;239</font><hr noshade size=2></Td>
<td align=right valign=top><font size=2 face="times new roman, serif">&nbsp;<BR>22,313</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;.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">Six Months Ended<BR>June 30, 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 Earnings Per Common Share:</i></font></td>
<td colspan=3>&nbsp;</td>
</tr>
<tr>
<td><font size=2 face="times new roman, serif">Net income</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;
268</font></td>
<td align=right><font size=2 face="times new roman, serif">22,305</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">(254)</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income applicable to common shareholders</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;
14</font></td>
<td align=right valign=top><font size=2 face="times new roman, serif">&nbsp;<BR>22,305</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=bottom>
<td><font size=2 face="times new roman, serif">Effect of dilutive stock options<BR>&nbsp;</font></td>
<td align=right>&nbsp;<hr noshade size=1></td>
<td align=right valign=bottom><font size=2 face="times new roman, serif">209</font><hr noshade size=1></td>
<td>&nbsp;</td>
</tr>


<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income applicable to common shareholders </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;&nbsp;14</font><hr noshade size=2></Td>
<td align=right valign=top><font size=2 face="times new roman, serif">&nbsp;<BR>22,514</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 size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The assumed conversion of
the Company&#146;s Series D Preferred Stock was excluded from the earnings
(loss) per common share calculation for all periods presented since its impact
would have been antidilutive. All outstanding stock options were excluded from
the earnings (loss) per common share calculation for the three month periods
ended June 30, 2010 and 2009, respectively, since their impact also would have
been antidilutive. </font></p>
















<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><b><u>Note 8.</u></b>&nbsp;&nbsp;Income Taxes</font></p>


<P><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 (benefit) is as follows:</FONT></P>


<table width=80% cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=49%></td>
<td width=12%></td>
<td width=1%></td>
<td width=12%></td>
<td width=1%></td>
<td width=12%></td>
<td width=1%></td>
<td width=12%></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>June 30,
</font><hr noshade size=1></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Six Months Ended<BR>June 30,
</font><hr noshade size=1></td>
</tr>

<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2010</font><hr noshade size=1></td>
<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">2010</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</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">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(17)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;223</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;90</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">(43)</font></td>
<td>&nbsp;</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">(92)</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(118)</font></td>
</tr>


<tr valign=top 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><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">9</font><hr noshade size=1></td>
<td>&nbsp;</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">17</font><hr noshade size=1></td>
</tr>

<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax expense (benefit)</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(13)</font>
<hr size=2 noshade></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(62)</font>
<hr size=2 noshade></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;144</font>
<hr size=2 noshade></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(11)</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 (benefit) were: </font></p>



<table width=80% cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=37%></td>
<td width=15%></td>
<td width=1%></td>
<td width=15%></td>
<td width=1%></td>
<td width=15%></td>
<td width=1%></td>
<td width=15%></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>June 30,
</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Six Months Ended<BR>June 30,
</font><hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2010</font><hr noshade size=1></td>
<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">2010</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</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">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</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">(19)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(62)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">138</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(11)</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;Total</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(13)</font>
<hr size=2 noshade></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;(62)</font>
<hr size=2 noshade></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;144</font>
<hr size=2 noshade></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(11)</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 primary differences
between the effective tax rate and the federal statutory income tax rate for the
three month and six month periods ended June 30, 2010 and 2009, respectively,
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, actual
distributions from these investments as well as appropriate levels of taxable
income. </font></p>


<p><font face="times new roman, serif" size=2><b><u>Note 9.</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 froze all benefits related to its qualified pension plan, as well as its
supplemental executive retirement plan (&#147;SERP&#148;). In May 2009, the
Company terminated the SERP and distributed the accumulated benefits to those
participating employees. On March 11, 2010, the Company received a determination
letter from the Internal Revenue Service approving the termination of the
Company&#146;s qualified pension plan. In May 2010, the Company distributed the
accumulated benefits to participating employees, and terminated the qualified
pension plan. In connection with the termination and settlement of the qualified
pension plan, the Company incurred a non-recurring charge of $319.</FONT></P>

<p><font face="times new roman, serif" size=2><u><b>Note 10.</b></u>&nbsp;&nbsp;Commitments and Contingencies</font></p>
<p><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>-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><u><b>Note 11.</b></u>&nbsp;&nbsp;Investments</font></p>
<p><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following tables set
forth the carrying value, gross unrealized gains, gross unrealized losses and
amortized cost of the Company&#146;s investments, aggregated by type and
industry, as of June 30, 2010 and December 31, 2009.</FONT></P>

<p align=justify><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investments were comprised of the following:</FONT></P>





<table width=90% cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=55%>&nbsp;</td>
<td width=10.5%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10.5%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10.5%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10.5%>&nbsp;</td>
</tr>

<tr>
<td>&nbsp;</td>
<td colspan=7 align=center bgcolor="#eeeeee"><font face="times new roman, serif" size=2>June 30, 2010</font><hr noshade size=1></td>
</tr>

<tr>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>&nbsp;<BR>Carrying<BR>Value</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Gross<BR>Unrealized<BR>Gains</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Gross<BR>Unrealized<BR>Losses</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>&nbsp;<BR>Amortized<BR>Cost</font><hr noshade size=1></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Fixed Maturity Securities:</font></td>
<td colspan=7>&nbsp;</td>
</tr>

<tr>
<td valign=top><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasury securities and obligations of<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Government agencies and authorities</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;100,668</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,169</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;97,499</font><hr noshade size=1></td>
</tr>


<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate securities</font></td>
<td colspan=7>&nbsp;</td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Utilities and telecom</font></td>
<td align=right><font face="times new roman, serif" size=2>26,023</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>2,022</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>28</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>24,029</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial services</font></td>
<td align=right><font face="times new roman, serif" size=2>12,984</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>332</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>1,868</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>14,520</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Media</font></td>
<td align=right><font face="times new roman, serif" size=2>2,437</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>84</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>2,353</font></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;&nbsp;&nbsp;&nbsp;&nbsp;Other-diversified</font></td>
<td align=right><font face="times new roman, serif" size=2>15,438</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>1,076</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>9</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>14,371</font><hr noshade size=1></td>
</tr>
<tr valign=top>
<td><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;Total corporate securities</font></td>
<td align=right><font face="times new roman, serif" size=2>56,882</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>3,514</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>1,905</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>55,273</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;Redeemable preferred stocks</font></td>
<td colspan=7>&nbsp;</td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Utilities and telecom</font></td>
<td align=right><font face="times new roman, serif" size=2>2,679</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>179</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>2,500</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial services</font></td>
<td align=right><font face="times new roman, serif" size=2>4,361</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>17</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>665</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>5,009</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Media</font></td>
<td align=right><font face="times new roman, serif" size=2>868</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>83</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>951</font></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;&nbsp;&nbsp;&nbsp;&nbsp;Other-diversified</font></td>
<td align=right><font face="times new roman, serif" size=2>193</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>193</font><hr noshade size=1></td>
</tr>
<tr valign=top>
<td><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;Total redeemable preferred stocks</font></td>
<td align=right><font face="times new roman, serif" size=2>8,101</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>196</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>748</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>8,653</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total fixed maturity securities</font></td>
<td align=right><font face="times new roman, serif" size=2>165,651</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>6,879</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>2,653</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>161,425</font><hr noshade size=1></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>Common and non-redeemable preferred stocks:</font></td>
<td colspan=7>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial services</font></td>
<td align=right><font face="times new roman, serif" size=2>6,112</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>1,066</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>340</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>5,386</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Media</font></td>
<td align=right><font face="times new roman, serif" size=2>1,195</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>2,003</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>3,198</font></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;&nbsp;&nbsp;&nbsp;&nbsp;Other-diversified</font></td>
<td align=right><font face="times new roman, serif" size=2>120</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>73</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>47</font><hr noshade size=1></td>
</tr>
<tr valign=top>
<td><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;Total common and non-redeemable preferred stocks</font></td>
<td align=right><font face="times new roman, serif" size=2>7,427</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>1,139</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>2,343</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>8,631</font><hr noshade size=1></td>
</tr>







<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Other invested assets (fair value of $1,000)</font></td>
<td align=right><font face="times new roman, serif" size=2>1,000</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>-</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>1,000</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>Policy and student loans</font></td>
<td align=right><font face="times new roman, serif" size=2>2,133</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>-</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>2,133</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Real estate</font></td>
<td align=right><font face="times new roman, serif" size=2>38</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>-</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>38</font></td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>Investments in unconsolidated trusts</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>1,238</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>1,238</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investments</font></td>
<td align=right><font face="times new roman, serif" size=2>177,487</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>8,018</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>4,996</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>174,465</font></td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>Short-term investments</font></td>
<td align=right><font face="times new roman, serif" size=2>14,701</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>14,701</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total investments</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;192,188</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,018</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,996</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;189,166</font><hr noshade size=2></td>
</tr>
</table>







<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>






<table width=90% cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=55%>&nbsp;</td>
<td width=10.5%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10.5%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10.5%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10.5%>&nbsp;</td>
</tr>

<tr>
<td>&nbsp;</td>
<td colspan=7 align=center bgcolor="#eeeeee"><font face="times new roman, serif" size=2>December 31, 2009</font><hr noshade size=1></td>
</tr>

<tr>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>&nbsp;<BR>Carrying<BR>Value</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Gross<BR>Unrealized<BR>Gains</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Gross<BR>Unrealized<BR>Losses</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>&nbsp;<BR>Amortized<BR>Cost</font><hr noshade size=1></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Fixed Maturity Securities:</font></td>
<td colspan=7>&nbsp;</td>
</tr>

<tr>
<td valign=top><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasury securities and obligations of<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Government agencies and authorities</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;124,392</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;628</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,538</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;127,302</font><hr noshade size=1></td>
</tr>


<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate securities</font></td>
<td colspan=7>&nbsp;</td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Utilities and telecom</font></td>
<td align=right><font face="times new roman, serif" size=2>24,615</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>695</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>105</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>24,025</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial services</font></td>
<td align=right><font face="times new roman, serif" size=2>13,518</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>228</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>2,324</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>15,614</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Media</font></td>
<td align=right><font face="times new roman, serif" size=2>2,412</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>59</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>2,353</font></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;&nbsp;&nbsp;&nbsp;&nbsp;Other-diversified</font></td>
<td align=right><font face="times new roman, serif" size=2>11,241</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>259</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>182</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>11,164</font><hr noshade size=1></td>
</tr>
<tr valign=top>
<td><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;Total corporate securities</font></td>
<td align=right><font face="times new roman, serif" size=2>51,786</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>1,241</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>2,611</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>53,156</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;Redeemable preferred stocks</font></td>
<td colspan=7>&nbsp;</td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Utilities and telecom</font></td>
<td align=right><font face="times new roman, serif" size=2>2,668</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>168</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>2,500</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial services</font></td>
<td align=right><font face="times new roman, serif" size=2>4,215</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>6</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>800</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>5,009</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Media</font></td>
<td align=right><font face="times new roman, serif" size=2>806</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>145</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>951</font></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;&nbsp;&nbsp;&nbsp;&nbsp;Other-diversified</font></td>
<td align=right><font face="times new roman, serif" size=2>193</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>193</font><hr noshade size=1></td>
</tr>
<tr valign=top>
<td><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;Total redeemable preferred stocks</font></td>
<td align=right><font face="times new roman, serif" size=2>7,882</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>174</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>945</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>8,653</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total fixed maturity securities</font></td>
<td align=right><font face="times new roman, serif" size=2>184,060</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>2,043</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>7,094</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>189,111</font><hr noshade size=1></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>Common and non-redeemable preferred stocks:</font></td>
<td colspan=7>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial services</font></td>
<td align=right><font face="times new roman, serif" size=2>6,097</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>1,029</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>318</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>5,386</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Media</font></td>
<td align=right><font face="times new roman, serif" size=2>718</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>2,480</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>3,198</font></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;&nbsp;&nbsp;&nbsp;&nbsp;Other-diversified</font></td>
<td align=right><font face="times new roman, serif" size=2>99</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>52</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>47</font><hr noshade size=1></td>
</tr>
<tr valign=top>
<td><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;Total common and non-redeemable preferred stocks</font></td>
<td align=right><font face="times new roman, serif" size=2>6,914</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>1,081</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>2,798</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>8,631</font><hr noshade size=1></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Other invested assets (fair value of $1,021)</font></td>
<td align=right><font face="times new roman, serif" size=2>1,021</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>-</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>1,021</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>Policy and student loans</font></td>
<td align=right><font face="times new roman, serif" size=2>2,139</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>-</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>2,139</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Real estate</font></td>
<td align=right><font face="times new roman, serif" size=2>38</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>-</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>38</font></td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>Investments in unconsolidated trusts</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>1,238</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>1,238</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investments</font></td>
<td align=right><font face="times new roman, serif" size=2>195,410</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>3,124</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>9,892</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>202,178</font></td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>Short-term investments</font></td>
<td align=right><font face="times new roman, serif" size=2>14,697</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>14,697</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total investments</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;210,107</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,124</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,892</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;216,875</font><hr noshade size=2></td>
</tr>
</table>




<p><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The amortized cost and
carrying value of fixed maturity securities and short-term investments at June
30, 2010 by contractual maturity were as follows. Actual maturities may differ
from contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.</FONT></P>



<table width=70% cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=44%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=27%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=27%>&nbsp;</td>
</tr>

<tr bgcolor="#eeeeee" valign=bottom>
<td><font face="times new roman, serif" size=2><b>Maturities</b></font><hr noshade size=1></td>
<td>&nbsp;</td>
<td colspan=3 align=center><font face="times new roman, serif" size=2>June 30, 2010</font><hr noshade size=1></td>
</tr>

<tr>
<td colspan=2>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Carrying<BR>Value</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Amortized<BR>Cost</font><hr noshade size=1></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Due in one year or less</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17,115</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17,049</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>Due after one year through five years</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>8,394</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>7,958</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Due after five  years through ten years</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>22,186</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>20,511</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>Due after ten years</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>131,573</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>129,615</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td valign=top><font face="times new roman, serif" size=2>Varying maturities</font></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>1,084</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>993</font><hr noshade size=1></td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Totals</font></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;180,352</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;176,126</font><hr noshade size=2></td>
</tr>
</table>





<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>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 as of June 30, 2010 and
December 31, 2009.</FONT></P>




<table width=100% cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=26%>&nbsp;</td>
<td width=11.5%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=11.5%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=11.5%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=11.5%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=11.5%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=11.5%>&nbsp;</td>
</tr>

<tr>
<td>&nbsp;</td>
<td colspan=5 align=center bgcolor="#eeeeee"><font face="times new roman, serif" size=2>June 30, 2010</font><hr noshade size=1></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td colspan=5 align=center bgcolor="#eeeeee"><font face="times new roman, serif" size=2>December 31, 2009</font><hr noshade size=1></td>
</tr>

<tr>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>&nbsp;<BR>Carrying<BR>Value</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>&nbsp;<BR>Amortized<BR>Cost</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Unrealized<BR>Gains<BR>(Losses)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>&nbsp;<BR>Carrying<BR>Value</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>&nbsp;<BR>Amortized<BR>Cost</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Unrealized<BR>Gains<BR>(Losses)</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee">
<td valign=top><font face="times new roman, serif" size=2>U.S. Treasury securities and<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Government agencies</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;100,668</font></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;97,499</font></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,169</font></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;124,392</font></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;127,302</font></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2,910)</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>28,702</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>26,529</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>2,173</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>27,283</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>26,525</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>758</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>23,457</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>24,915</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>(1,458)</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>23,830</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>26,009</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>(2,179)</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>4,500</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>6,502</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>(2,002)</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>3,936</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>6,502</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>(2,566)</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td valign=top><font face="times new roman, serif" size=2>Other - diversified</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>15,751</font></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>14,611</font></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>1,140</font></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>11,533</font></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>11,404</font></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>129</font></td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>Other investments</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>4,409</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>4,409</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>4,436</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>4,436</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee" valign=top>
<td><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investments</font></td>
<td align=right valign=top><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;177,487</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;174,465</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,022</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;195,410</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;202,178</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6,768)</font><hr noshade size=2></td>
</tr>

</table>
<BR>
<table width=100% cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=2%></td>
<td width=98%></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>
Media includes related party investments in Gray Television, Inc. with an amortized cost basis of $3,198 and which had an
aggregate carrying value of $1,195 and $718 at June 30, 2010 and December 31, 2009, respectively.</font></td>
</tr>
</table>



<p><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following tables
present the Company&#146;s unrealized loss aging for securities by type and
length of time the security was in a continuous unrealized loss position as of
June 30, 2010 and December 31, 2009.</FONT></P>






<table width=95% cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=35%>&nbsp;</td>
<td width=10%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10%>&nbsp;</td>
</tr>

<tr>
<td>&nbsp;</td>
<td colspan=11 align=center><font face="times new roman, serif" size=2>June 30, 2010</font><hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center colspan=3 bgcolor="#eeeeee"><font face="times new roman, serif" size=2>Less than 12 months</font><hr noshade size=1></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align=center colspan=3 bgcolor="#eeeeee"><font face="times new roman, serif" size=2>12 months or longer</font><hr noshade size=1></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align=center colspan=3 bgcolor="#eeeeee"><font face="times new roman, serif" size=2>Total</font><hr noshade size=1></td>
</tr>

<tr>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Fair<BR>Value</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Unrealized<BR>Losses</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Fair<BR>Value</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Unrealized<BR>Losses</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Fair<BR>Value</font><hr noshade size=1></td>
<td>&nbsp;</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>Corporate securities</font></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,975</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;45</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,669</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,860</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,644</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,905</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>Redeemable preferred stocks</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>-</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>4,712</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>748</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>4,712</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>748</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td valign=top><font face="times new roman, serif" size=2>Common and non-redeemable preferred stocks</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>4,138</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>2,343</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>4,138</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>2,343</font><hr noshade size=1></td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total temporarily impaired securities</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,975</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;45</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15,519</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,951</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18,494</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,996</font><hr noshade size=2></td>
</tr>
</table>

<table width=95% cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=35%>&nbsp;</td>
<td width=10%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10%>&nbsp;</td>
<td width=1%>&nbsp;</td>
<td width=10%>&nbsp;</td>
</tr>

<tr>
<td>&nbsp;</td>
<td colspan=11 align=center><font face="times new roman, serif" size=2>December 31, 2009</font><hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center colspan=3 bgcolor="#eeeeee"><font face="times new roman, serif" size=2>Less than 12 months</font><hr noshade size=1></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align=center colspan=3 bgcolor="#eeeeee"><font face="times new roman, serif" size=2>12 months or longer</font><hr noshade size=1></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align=center colspan=3 bgcolor="#eeeeee"><font face="times new roman, serif" size=2>Total</font><hr noshade size=1></td>
</tr>

<tr>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Fair<BR>Value</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Unrealized<BR>Losses</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Fair<BR>Value</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Unrealized<BR>Losses</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Fair<BR>Value</font><hr noshade size=1></td>
<td>&nbsp;</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>U.S. Treasury securities and obligations of<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Government agencies and authorities</font></td>
<td align=right><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;96,977</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,300</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,772</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;238</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;101,749</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>&nbsp;<BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,538</font></td>
</tr>
<tr>
<td><font face="times new roman, serif" size=2>Corporate securities</font></td>
<td align=right><font face="times new roman, serif" size=2>12,894</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>609</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>7,525</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>2,002</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>20,419</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>2,611</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Redeemable preferred stocks</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>-</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>4,515</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>945</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>4,515</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>945</font></td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>Common and non-redeemable preferred stocks</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>-</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>3,683</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>2,798</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>3,683</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>2,798</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;&nbsp;&nbsp;Total temporarily impaired securities</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;109,871</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,909</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20,495</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,983</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;130,366</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,892</font><hr noshade size=2></td>
</tr>
</table>


<p align=center><font face="times new roman, serif" size=2>-14-</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, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary
of investment impairments the Company recorded due to other than temporary
declines in values for the three month and six month periods ended June 30, 2010
and 2009. </FONT></P>



<table width=80% cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=37%></td>
<td width=15%></td>
<td width=1%></td>
<td width=15%></td>
<td width=1%></td>
<td width=15%></td>
<td width=1%></td>
<td width=15%></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>June 30,
</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Six Months Ended<BR>June 30,
</font><hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2010</font><hr noshade size=1></td>
<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">2010</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</font><hr noshade size=1></td>
</tr>

<tr bgcolor="#eeeeee">
<td><font size=2 face="times new roman, serif">Redeemable preferred stocks</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;44</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;44</font></td>
</tr>


<tr valign=top>
<td><font size=2 face="times new roman, serif">Other invested assets</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">17</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>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">17</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;Total</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font>
<hr size=2 noshade></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;61</font>
<hr size=2 noshade></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</font>
<hr size=2 noshade></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;61</font>
<hr size=2 noshade></td>
</tr>
</table>





<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the three month
period ended June 30, 2009, the Company recorded a $61 realized loss due to
other than temporary impairments in its investment in redeemable preferred
securities of General Motors Corporation and certain other invested assets.
There were no impairments recorded during the three month and six month periods
ended June 30, 2010. </FONT></P>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The evaluation for an other
than temporary impairment 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, among other things, 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 a potential
impairment, the Company considers, among other factors, the intent and ability
to hold these securities until price recovery, the nature of the investment and
the prospects for the issuer and its industry, the issuer&#146;s continued
satisfaction of the investment obligations in accordance with their contractual
terms, and management&#146;s expectation as to the issuer&#146;s ability and
intent to continue to do so, as well as ratings actions that may affect the
issuer&#146;s credit status.   </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of June 30, 2010,
securities in an unrealized loss position were primarily related to the
Company&#146;s investments in fixed maturity securities, and common and
non-redeemable preferred stocks, within the financial services and media
sectors, which have experienced significant price deterioration and continue to
be impacted by current economic conditions. The media sector includes related
party investments in Gray Television, Inc. which had unrealized losses of $2,003
as of June 30, 2010 and accounted for the majority of the unrealized loss
position in that sector. During the six month period ended June 30, 2010, net
pre-tax unrealized gains on investment securities of $3,022 recognized in other
comprehensive income increased in value by $9,790 from net pre-tax unrealized
losses on investment securities of $6,768 as of December 31, 2009. The decline
in unrealized losses during the six month period ended June 30, 2010 was
primarily due to the increase in fair value of the Company&#146;s holdings in
U.S. Government agency bonds as well as utility and telecom securities. The Company does not intend to sell nor does it expect to be
required to sell the securities referenced previously. In addition, the Company
asserts its intent and ability to retain the above equity securities until price
recovery. Furthermore, based upon the Company&#146;s expected continuation of
receipt of contractually required principal and interest payments, the Company
has deemed these securities to be temporarily impaired as of June 30, 2010.</FONT></P>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following describes the
fair value hierarchy and provides information as to the extent to which the
Company uses fair value to measure financial instruments and information about
the inputs used to value those financial instruments. The fair value hierarchy
prioritizes the inputs in the valuation techniques used to measure fair value
into three broad levels.</FONT></P>


<table width=100% cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=10%></td>
<td width=90%></td>

</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>Level 1</font></td>
<td><font face="times new roman, serif" size=2>Observable inputs that reflect quoted prices for identical assets or
liabilities in active markets that the Company has the ability to access at the
measurement date. The Company&#146;s Level 1 instruments consist of short-term
investments.</font></td>
</tr>
<tr>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>Level 2</font></td>
<td><font face="times new roman, serif" size=2>
Observable inputs, other than quoted prices included in Level 1, for the asset
or liability or prices for similar assets or liabilities. 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. In determining Level 2 fair value measurements,
the Company utilizes various external pricing services.</font></td>
</tr>
<tr>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>Level 3</font></td>
<td><font face="times new roman, serif" size=2>
Valuations that are derived from techniques in which one or more of the
significant inputs are unobservable (including assumptions about risk). The
Company&#146;s Level 3 financial instruments include certain fixed maturity
securities and a zero cost interest rate collar. Fair value is based on criteria
that use assumptions or other data that are not readily observable from
objective sources. As of June 30, 2010, the value of the Company&#146;s fixed
maturity securities valued using Level 3 criteria was $1,948 and the value of
the zero cost interest rate collar was a liability of $1,733 (See Note 5). The
use of different criteria or assumptions regarding data may have yielded
different valuations.</font></td>
</tr>
</table>

<p align=center><font face="times new roman, serif" size=2>-15-</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;As of June 30, 2010, investments carried at fair value were measured on a recurring basis as 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;163,703</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,948</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;165,651</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>7,427</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>7,427</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>14,701</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>14,701</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>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,701</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;171,130</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,948</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;187,779</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;As of December 31, 2009, investments carried at fair value were measured on a recurring basis as 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;182,281</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,779</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;184,060</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>6,914</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>6,914</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>14,697</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>14,697</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>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,697</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;189,195</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,779</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;205,671</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 following is a
roll-forward of the financial instruments measured at fair value on a recurring
basis using significant unobservable inputs (Level 3) for the three month and
six month periods ended June 30, 2010.</font></p>


<table width=60% cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=65%>&nbsp;</td>
<td width=17%>&nbsp;</td>
<td>&nbsp;</td>
<td width=17%>&nbsp;</td>
</tr>

<tr>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>Fixed<BR>Maturity<BR>Securities</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font face="times new roman, serif" size=2>&nbsp;<BR>Derivative<BR>(Liability)</font><hr noshade size=1></td>
</tr>


<tr bgcolor="#eeeeee">
<td><font face="times new roman, serif" size=2>Balance, December 31, 2009</font></td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,779</font></td>
<td>&nbsp;</td>
<td align=right><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,547)</font></td>
</tr>

<tr>
<td valign=top><font face="times new roman, serif" size=2>Total unrealized gains (losses) included in other<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;comprehensive income</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>14</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>(88)</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee">
<td valign=top><font face="times new roman, serif" size=2>Balance, March 31, 2010</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>1,793</font></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>(1,635)</font></td>
</tr>
<tr>
<td valign=top><font face="times new roman, serif" size=2>Total unrealized gains (losses) included in other<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;comprehensive income</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>155</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>&nbsp;<BR>(98)</font><hr noshade size=1></td>
</tr>
<tr bgcolor="#eeeeee">
<td valign=top><font face="times new roman, serif" size=2>Balance, June 30, 2010</font></td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,948</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right valign=bottom><font face="times new roman, serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,733)</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;The Company&#146;s fixed
maturity securities valued using Level 3 inputs consist solely of issuances of
pooled debt obligations of multiple, smaller financial services companies. They
are not actively traded and valuation techniques used to measure fair value are
based on future estimated cash flows discounted at a reasonably estimated rate
of interest. Other qualitative and quantitative information received from the
original underwriter of the pooled offerings is also considered, as applicable.
As the derivative is an interest rate collar, changes in valuation are more
closely correlated with changes in interest rates and, accordingly, values are
estimated using projected cash flows at current interest rates discounted at a
reasonably estimated rate of interest. Fair value quotations are also obtained
from the counterparty to the transaction. </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><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 with the Parent, the
&#147;Company&#148;) for the three month and six month periods ended June 30,
2010. 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, 2009.</FONT></P>

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

<P><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><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 28% of the Company&#146;s total liabilities at
June 30, 2010. This liability includes estimates for: 1) unpaid losses on claims
reported prior to June 30, 2010, 2) future development on those reported claims,
3) unpaid ultimate losses on claims incurred prior to June 30, 2010 but not yet
reported and 4) unpaid loss adjustment expenses for reported and unreported
claims incurred prior to June 30, 2010. 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 June 30, 2010 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 actuaries develop 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><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 June 30,
2010. 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>









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<P><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 June 30, 2010.
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><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 June 30, 2010. 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, disputes or otherwise 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><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash and investments</i>
comprised 84% of the Company&#146;s total assets at June 30, 2010. Substantially
all of the Company&#146;s 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, but had an estimated fair value as
determined by management of $1.9 million at June 30, 2010. 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 an other than temporary impairment. The evaluation for an
other than temporary impairment 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, among other things, 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 a potential
impairment, the Company considers, among other factors, the intent and ability
to hold these securities until price recovery, the nature of the investment and
the prospects for the issuer and its industry, the issuer&#146;s continued
satisfaction of the obligations in accordance with the contractual terms of the
investment, and management&#146;s expectation as to the issuer&#146;s ability
and intent to continue to do so, as well as ratings actions that may affect the
issuer&#146;s credit status. If an other than 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><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company determines the
fair values of certain financial instruments based on the fair market hierarchy
established in Accounting Standards Codification (&#147;ASC&#148;) 820-10-20,
Fair Value Measurements and Disclosures (&#147;ASC 820-10-20&#148;). The fair
values for fixed maturity and equity securities are largely determined by either
independent methods prescribed by the National Association of Insurance
Commissioners, which do not differ materially from nationally quoted market
prices, when available, or independent broker quotations. See Note 11 of the
accompanying notes to consolidated financial statements with respect to assets
and liabilities carried at fair value and information about the inputs used to
value those financial instruments, by hierarchy level, in accordance with ASC
820-10-20. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred income taxes</i> comprised approximately 1% of the Company&#146;s total assets at June
30, 2010. 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 align=center><font face="times new roman, serif" size=2>-18-</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><font face="times new roman, serif" size=2><b>Recently
Issued Accounting Standards</b></font></p>

<P><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><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 $0.1 million, or nil per diluted share, for the
three month period ended June 30, 2010, compared to net income of $12,000, or a
loss of $0.01 per diluted share, for the three month period ended June 30, 2009.
The Company had net income of $0.5 million, or $0.01 per diluted share, for the
six month period ended June 30, 2010, compared to net income of $0.3 million, or
nil per diluted share, for the six month period ended June 30, 2009. Premium
revenue for the three month period ended June 30, 2010 increased $1.4 million,
or 6.3%, to $24.4 million. For the six month period ended June 30, 2010, premium
revenue increased $2.0 million, or 4.4%, to $47.7 million. The increase in
premiums was primarily attributable to new business generated by the
Company&#146;s life and health operations as a result of increased marketing
initiatives. Partially offsetting the increase in the life and health premiums
during the three month and six month periods ended June 30, 2010 was a decline
in property and casualty premiums. The increase in net income during the three
month and six month periods ended June 30, 2010 was primarily due to a decrease
in compensation accruals.</FONT></P>


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

<P><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 and six month periods
ended June 30, 2010 and the comparable periods in 2009 (in thousands):</FONT></P>

<table width=630 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=30%></td>
<td width=16.75%></td>
<td width=1%></td>
<td width=16.75%></td>
<td width=1%></td>
<td width=16.75%></td>
<td width=1%></td>
<td width=16.75%></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>June 30,</font>
<hr noshade size=1></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Six Months Ended<BR>June 30,</font>
<hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2010</font><hr noshade size=1></td>
<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">2010</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</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">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12,859</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,373</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20,953</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;22,250</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">(1,331)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(1,636)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(2,640)</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">(3,302)</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">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11,528</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11,737</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18,313</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18,948</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">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,789</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,834</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16,846</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;17,820</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;Gross written premiums at
American Southern decreased $0.5 million, or 3.8%, during the three month period
ended June 30, 2010, and $1.3 million, or 5.8%, during the six month period
ended June 30, 2010, from the comparable periods in 2009. The decrease in gross
written premiums during the three month and six month periods ended June 30,
2010 was primarily attributable to the continued decline in the general
liability line of business resulting from continued weakness in the construction
industry as well as a decrease in the commercial automobile line of business.
Also contributing to the decrease in gross written premiums were decreases in
business writings from certain targeted agencies due to the strengthening of the
company&#146;s underwriting guidelines. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ceded premiums decreased
$0.3 million, or 18.6%, during the three month period ended June 30, 2010, and
$0.7 million, or 20.0%, during the six month period ended June 30, 2010, from
the comparable periods in 2009. The decrease in ceded premiums during the three
month and six month periods ended June 30, 2010 was primarily due to the decline
in written premiums and lower cession rates resulting from a new reinsurance
agreement which incepted in the fourth quarter of 2009.</FONT></P>





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






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<P><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 and six month periods ended June 30, 2010 and the comparable periods in
2009 (in thousands): </font></p>

<table width=630 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=30%></td>
<td width=16.75%></td>
<td width=1%></td>
<td width=16.75%></td>
<td width=1%></td>
<td width=16.75%></td>
<td width=1%></td>
<td width=16.75%></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>June 30,</font>
<hr noshade size=1></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Six Months Ended<BR>June 30,</font>
<hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2010</font><hr noshade size=1></td>
<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">2010</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</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">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,415</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,963</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,020</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;9,654</font></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">1,282</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">1,535</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">2,593</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">3,193</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">609</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">591</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">1,215</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">1,206</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">1,483</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">1,745</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">3,018</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">3,767</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;Total</font></td>

<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,789</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,834</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;16,846</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;17,820</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 slightly during the three month period ended June 30, 2010, and $1.0
million, or 5.5%, during the six month period ended June 30, 2010, from the
comparable periods in 2009. The decrease in net earned premiums was primarily
due to the decline in the general liability and surety lines of business
resulting from continued weakness in the construction industry.</FONT></P>

<P><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 and six
month periods ended June 30, 2010 and for the comparable periods in 2009:</FONT></P>


<table width=630 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=20%></td>
<td width=20%></td>
<td width=1%></td>
<td width=20%></td>
<td width=1%></td>
<td width=20%></td>
<td width=1%></td>
<td width=20%></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>June 30,</font>
<hr noshade size=1></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Six Months Ended<BR>June 30,</font>
<hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2010</font><hr noshade size=1></td>
<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">2010</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</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">64.1%</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">53.9%</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">59.8%</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">51.0%</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">41.6%</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">51.0%</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">42.5%</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">49.5%</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;Combined ratio</font></td>
<td align=right><font size=2 face="times new roman, serif">105.7%</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">104.9%</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">102.3%</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">100.5%</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;
The loss ratio for the
three month period ended June 30, 2010 increased to 64.1% from 53.9% in the
three month period ended June 30, 2009 and to 59.8% in the six month period
ended June 30, 2010 from 51.0% in the comparable period of 2009. The increase in
the loss ratio for the three month and six month periods ended June 30, 2010 was
primarily attributable to several large claims in the surety line of business,
specifically related to subdivision bonds. In addition, during the three month
period ended June 30, 2010, American Southern had an increase in losses in the
commercial automobile line of business as compared to the same period in 2009.</FONT></P>
<P><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 June 30, 2010 decreased to 41.6% from 51.0% in the
three month period ended June 30, 2009 and to 42.5% in the six month period
ended June 30, 2010 from 49.5% in the comparable period of 2009. The decrease in
the expense ratio in the three month and six month periods ended June 30, 2010
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 increases, commissions
and underwriting expenses will decrease and conversely in periods where the loss
ratio decreases, commissions and underwriting expenses will increase. Partially
offsetting the decrease in the expense ratio in the three month and six month
periods ended June 30, 2010 was a non-recurring charge of $0.3 million which
resulted from the termination and final settlement of the company&#146;s
qualified pension plan. In the three month and six month periods ended June 30,
2009, American Southern incurred a similar non-recurring charge of $0.4 million
due to the termination of its supplemental executive retirement plan
(&#147;SERP&#148;). </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><font face="times new roman, serif" size=2><b>Bankers Fidelity</b></font></p>

<P><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 and six month
periods ended June 30, 2010 and the comparable periods in 2009 (in thousands):</FONT></P>

<table width=630 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=20%></td>
<td width=20%></td>
<td width=1%></td>
<td width=20%></td>
<td width=1%></td>
<td width=20%></td>
<td width=1%></td>
<td width=20%></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>June 30,</font>
<hr noshade size=1></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Six Months Ended<BR>June 30,</font>
<hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2010</font><hr noshade size=1></td>
<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">2010</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</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">$&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;11,441</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,434</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;22,798</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;20,758</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">1,180</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">942</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">2,303</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">1,841</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">2,977</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">2,731</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">5,798</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">5,319</font><hr noshade size=1></td>
</tr>
<tr valign=top>
<td><font size=2 face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15,598</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,107</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30,899</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;27,918</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;Premium revenue at Bankers
Fidelity increased $1.5 million, or 10.6%, during the three month period ended
June 30, 2010, and $3.0 million, or 10.7%, during the six month period ended
June 30, 2010, over the comparable periods in 2009, primarily due to successful
marketing initiatives, recruiting of new agents, and effective utilization of
the company&#146;s proprietary lead program. Premiums from the Medicare
supplement line of business increased $1.0 million, or 9.7%, during the three
month period ended June 30, 2010, and $2.0 million, or 9.8%, during the six
month period ended June 30, 2010, while premiums from the life insurance line of
business increased $0.2 million and $0.5 million, respectively, during the same
comparable periods. The other health products premiums increased during the
three month and six month periods ended June 30, 2010, over the comparable
periods in 2009 due primarily to an increase in sales of short-term care
products and increased business activities with group associations. </FONT></P>



<P><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 and six month
periods ended June 30, 2010 and the comparable periods in 2009 (in thousands):</FONT></P>




 <table width=630 cellspacing=0 cellpadding=0 border=0>
<tr>
<td width=20%></td>
<td width=20%></td>
<td width=1%></td>
<td width=20%></td>
<td width=1%></td>
<td width=20%></td>
<td width=1%></td>
<td width=20%></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>June 30,</font>
<hr noshade size=1></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee" colspan=3 align=center><font size=2 face="times new roman, serif">Six Months Ended<BR>June 30,</font>
<hr noshade size=1></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2010</font><hr noshade size=1></td>
<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">2010</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=center><font size=2 face="times new roman, serif">2009</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">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11,791</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,273</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22,748</font></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20,825</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">4,871</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">4,548</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">9,656</font><hr noshade size=1></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">8,843</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;Total expenses</font></td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16,662</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,821</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32,404</font><hr noshade size=2></td>
<td>&nbsp;</td>
<td align=right><font size=2 face="times new roman, serif">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;29,668</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;Benefits and losses
increased $1.5 million, or 14.8%, during the three month period ended June 30,
2010, and $1.9 million, or 9.2%, during the six month period ended June 30,
2010, over the comparable periods in 2009. As a percentage of premiums, benefits
and losses increased to 75.6% in the three month period ended June 30, 2010 from 72.8%
 in the three month period ended June 30, 2009.  For the six month period ended June 30, 2010, this ratio decreased to 73.6% from 74.6% in the comparable period in 2009.
 The increase in the 2010 second quarter loss ratio was primarily due
to increased claims in the Medicare supplement line of business, reserve
increases on new life business and the continued aging of the older life
business; however, for the six month period ended June 30, 2010, the company had
more favorable loss experience in the Medicare supplement line of business as
compared to the same period in 2009, resulting in the decrease in the 2010 year
to date loss ratio. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commissions and other
expenses increased $0.3 million, or 7.1%, during the three month period ended
June 30, 2010, and $0.8 million, or 9.2%, during the six month period ended June
30, 2010, over the comparable periods in 2009. The increase in commissions and
other expenses for the three month and six month periods ended June 30, 2010 was
primarily due to increases in both underwriting and data processing expense.
Also contributing to the increase in commissions and other expenses for the 2010
year to date period were increases in agency related expenses which resulted
from the company&#146;s increased marketing initiatives. As a percentage of
premiums, these expenses decreased to 31.2% in the three month period ended June 30, 2010 from 32.2% in the three month period ended June 30, 2009.
  For the six month period ended June 30, 2010, this ratio decreased to 31.3% from 31.7% in the comparable period in 2009. The decrease in the 2010 expense ratios was
primarily attributable to the increase in earned premiums coupled with a
relatively consistent level of fixed expenses. </FONT></P>









<p align=center>
<font face="times new roman, serif" size=2>-21-</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><font face="times new roman, serif" size=2><u><b>INVESTMENT INCOME AND REALIZED GAINS (LOSSES)</b></U></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment income decreased
$0.1 million, or 4.9%, during the three month period ended June 30, 2010, and
$0.3 million, or 5.7%, during the six month period ended June 30, 2010, from the
comparable periods in 2009. The decrease in investment income for the three
month and six month periods ended June 30, 2010 was primarily due to a decrease
in interest rates. The average yield on the Company&#146;s invested assets
decreased in the six month period ended June 30, 2010 as compared to same period
in 2009. Also during the three month period ended June 30, 2010, a large number
of securities held by the Company were redeemed by the issuers in accordance
with the contractual terms thereof, the proceeds from which the Company was not
able to reinvest at equivalent rates. </FONT></P>

<P><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 six month period ended June 30,
2010, compared to net realized investment losses of $13,000 in the six month
period ended June 30, 2009. The Company recorded a realized loss of $0.1 million
due to other than temporary impairments in its investment in redeemable
preferred securities of General Motors Corporation and certain other invested
assets in the three month period ended June 30, 2009. There were no impairments
recorded during the six month period ended June 30, 2010. Management continually
evaluates the Company&#146;s investment portfolio and, as may be determined to
be appropriate, makes adjustments for impairments and/or will divest
investments. </FONT></P>


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

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense decreased
slightly during the three month period ended June 30, 2010, and $0.1 million, or
8.5%, during the six month period ended June 30, 2010, from the comparable
periods in 2009. The decrease in interest expense for the three month and six
month periods ended June 30, 2010 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. </FONT></P>







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

<P><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 $1.1 million,
or 10.8%, during the three month period ended June 30, 2010, and $1.4 million,
or 7.3%, during the six month period ended June 30, 2010, from the comparable
periods in 2009. The decrease in other expenses for the three month and six
month periods ended June 30, 2010 was primarily attributable to a $0.6 million
decrease in compensation accruals and a reduction in profit sharing commissions
at American Southern. During the three month period ended June 30, 2010, profit
sharing commissions at American Southern decreased $0.5 million from the three
month period ended June 30, 2009 due to the inversely higher loss ratios. For
the six month period ended June 30, 2010, profit sharing commissions decreased
$0.9 million from the comparable period of 2009. The majority of American
Southern&#146;s business is structured in a way that agents are compensated
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. In addition, during the
three month period ended June 30, 2010, the Company terminated its qualified
pension plan and distributed the accumulated benefits to participating
employees. In connection with the termination and final settlement of the
qualified pension plan, the Company incurred a non-recurring charge of $0.3
million. In the three month period ended June 30, 2009, the Company incurred a
similar non-recurring charge of $0.4 million due to the termination of its SERP.
On a consolidated basis, as a percentage of earned premiums, other expenses
decreased to 36.7% in the three month period ended June 30, 2010 from 43.7% in
the three month period ended June 30, 2009. For the six month period ended June
30, 2010, this ratio decreased to 38.3% from 43.1% in the comparable period in
2009. The decrease in the expense ratio for the three month and six month
periods ended June 30, 2010 was primarily due to the decrease in compensation
accruals and the reduction in profit sharing commissions described above. Also
contributing to the decrease in the expense ratio was the increase in earned
premiums coupled with a relatively consistent level of fixed expenses. </FONT></P>

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

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary differences
between the Company&#146;s effective tax rate and the federal statutory income
tax rate for the three month and six month periods ended June 30, 2010 and 2009,
respectively, 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,
actual distributions from these investments as well as appropriate levels of
taxable income. </FONT></P>






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

<P><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><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, as
described below, from the subsidiaries. The cash needs of the Parent are for the
payment of operating expenses, the acquisition of capital assets and debt
service requirements. At June 30, 2010, the Parent had approximately $24.0
million of unrestricted cash and investments. The Company believes that
traditional funding sources of the Parent, combined with current cash and
investments, should provide sufficient liquidity for the Company and/or the
Parent for the foreseeable future. </FONT></P>

<P><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 $2.7 million for the six month
period ended June 30, 2010 compared to statutory net income of $3.6 million for
the six month period ended June 30, 2009. 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;).
Statutory results for the Company&#146;s property and casualty operations may
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 may 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><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Over 90% of the invested
assets of the Parent&#146;s insurance subsidiaries are invested 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 a parent corporation 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 June 30, 2010, American
Southern had $38.4 million of statutory surplus and Bankers Fidelity had $32.2
million of statutory surplus. </FONT></P>

<P><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 $6.2 million at June 30,
2010. </FONT></P>
<P><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
with Wells Fargo Bank, National Association (&#147;Wells Fargo&#148;). On June
29, 2010, the Company and Wells Fargo, successor-by-merger to Wachovia Bank,
National Association (&#147;Wachovia&#148;) entered into the third amendment
(the &#147;Amendment&#148;) to the Credit Agreement with Wachovia (as amended,
the &#147;Credit Agreement&#148;). The Amendment provides for, among other
things, the extension of the term of the Credit Agreement to June 30, 2011 (the
&#147;Extension Period&#148;); availability under the revolving credit facility
during the Extension Period of up to $5.0 million; and an Applicable Margin (as
defined therein) on LIBOR based borrowings thereunder of 2.00%. In accordance
with the terms of the Credit Agreement, the Company is able to, subject to the terms
and conditions thereof, borrow or reborrow up to $5.0 million thereunder. 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) LIBOR determined on an interest period of 1-month, 2-months, 3-months or
6-months plus 2.00%. 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, Wells Fargo may terminate the Credit Agreement and
declare all amounts outstanding due and payable in full. During the six month
period ended June 30, 2010, there was no balance outstanding under this Credit
Agreement and the Company was in compliance with all terms of the Credit
Agreement. </FONT></P>


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<P><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 date 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 June 30, 2010, the effective
interest rate was 4.54%. 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. The Company has not made such an
election. </FONT></P>



<P><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 Wells
Fargo, as successor-by-merger 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 Wells Fargo under the zero cost rate collar have
continued. While the Company may be exposed to counterparty risk should Wells
Fargo fail to perform, based on the current level of interest rates, and coupled
with the current macroeconomic outlook, the Company believes that its current
exposure to nonperformance risks is minimal.</FONT></P>



<P><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 existing cash balances, dividend and tax sharing payments from
the operating subsidiaries, or from potential future financing arrangements.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At June 30, 2010, 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 June 30, 2010, the Company had accrued, but unpaid, dividends on
the Series D Preferred Stock totaling $0.3 million. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by operating activities was $0.5 million in the six month period ended June 30,
2010, compared to net cash used in operating activities of $5.5 million in the
six month period ended June 30, 2009. Cash and short-term investments increased
from $20.1 million at December 31, 2009 to $47.2 million at June 30, 2010. The
increase in cash and short-term investments during the six month period ended
June 30, 2010 was primarily due to a large number of called securities exceeding
investment purchases. During the six month period ended June 30, 2009, the
Company distributed accumulated benefits of $2.8 million resulting from the
termination of its SERP and paid a $1.8 million final settlement to Columbia
Mutual Insurance Company in connection with the 2008 sale of its regional
property and casualty operations. </FONT></P>

<P><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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<a name="quantitative_and_qualitative_disclosures"></a>

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

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in
Item 10(f)(1) of Regulation S-K, we have elected to comply with certain scaled
disclosure reporting obligations, and therefore are not required to provide the
information requested by this Item.</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><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><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><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, 2009, subsequent quarterly reports on Form 10-Q 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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<a name="legal_proceedings"></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>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><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><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><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 June 30, 2010. </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">April 1 - April 30, 2010</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;750</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;1.78</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;750</font></td>
<td align=center><font size=2  face="times new roman, serif">468,254</font></td>
</tr>
<tr valign=bottom bgcolor="#eeeeee">
<td><font size=2  face="times new roman, serif">May 1 - May 31, 2010</font></td>
<td align=center><font size=2  face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,559</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;1.71</font></td>

<td align=center><font size=2  face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,559</font></td>
<td align=center><font size=2  face="times new roman, serif">464,695</font></td>
</tr>


<tr valign=top>
<td><font size=2  face="times new roman, serif">June 1 - June 30, 2010</font></td>
<td align=center><font size=2  face="times new roman, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,700</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;1.47</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;1,700</font><hr noshade size=1></td>
<td align=center><font size=2  face="times new roman, serif">462,995</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;6,009&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;1.65</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;6,009</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 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>
<A HREF="thirdamendment2010.htm">Third Amendment to Credit Agreement between registrant and Wells Fargo Bank, National Association.</A></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_31110.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_31210.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_32110.htm">
Certifications
pursuant to Section 906 of the Sarbanes Oxley&#150;Act of 2002.</a></font></td>
</tr>
</table>























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<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>SIGNATURES</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> August 6, 2010</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>
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<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;10.1</FONT></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<BR><A HREF="thirdamendment2010.htm">Third Amendment to Credit Agreement between registrant and Wells Fargo Bank, National Association.</A></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_31110.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_31210.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_32110.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>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>thirdamendment2010.htm
<DESCRIPTION>THIRD AMENDMENT TO CREDIT AGREEMENT
<TEXT>
<html>
<head>
<title>
Second Amendment
</title>
</head>
<body>

<P align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><u>EXHIBIT 10.1</u></b></font></p>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>THIRD AMENDMENT TO<BR><u>
CREDIT AGREEMENT</u></b></font></p>

<table align=center width=90% cellspacing=0 cellpadding=8 border=0>
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<td width=10%></td>
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<td width=10%></td>
<td width=70%></td>
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<td colspan=4 align=justify>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS
THIRD AMENDMENT TO CREDIT AGREEMENT (this &#147;Amendment&#148;) is made as of
the 29th day of June, 2010, between ATLANTIC AMERICAN CORPORATION, a Georgia
corporation (the &#147;Borrower&#148;) and WELLS FARGO BANK, NATIONAL
ASSOCIATION, successor-in-interest by merger to Wachovia Bank National
Association (the &#147;Bank&#148;).</FONT></td>
</tr>
</table>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>Recitals:</u></font></p>

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<td colspan=4 align=justify>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Borrower and the Bank have entered into that certain Credit Agreement dated as
of December&#160;22, 2006, as amended by that certain First Amendment to Credit
Agreement and Pledge Agreement dated March 28, 2008, and as further amended by
that certain Second Amendment to Credit Agreement dated October 28, 2008 (as so
amended the &#147;Credit Agreement&#148;). The Borrower and the Bank
desire&#160;to amend the Credit Agreement in certain respects, as hereinafter
provided.</FONT></td>
</tr>

<tr>
<td colspan=4 align=justify>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, in consideration of the Recitals and the mutual promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Bank,
intending to be legally bound hereby, agree as follows:</FONT></td>
</tr>
<tr>
<td colspan=4>

<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 1.&nbsp;&nbsp;&nbsp;&nbsp;
<u>Recitals.</u>&nbsp;&nbsp;The Recitals  are  incorporated  herein by reference  and shall be deemed to be a part
of this Amendment.</font></td>
</tr>
<tr>
<td colspan=4>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 2.&nbsp;&nbsp;&nbsp;&nbsp;
<u>Definitions.</u>&nbsp;&nbsp;Capitalized terms used herein which are not  otherwise  defined  herein shall have
the respective meanings assigned to them in the Credit Agreement.</font></td>
</tr>
<tr>
<td colspan=4>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 3.&nbsp;&nbsp;&nbsp;&nbsp;
<u>Amendments to Credit Agreement.</u>&nbsp;&nbsp;The Credit Agreement is amended as set forth in this Section 3.</font></td>
</tr>


<tr>
<td colspan=4>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;
<u>Amended Definitions.</u>&nbsp;&nbsp;The following  definitions set forth in Article I of the Credit Agreement is hereby amended and restated in their entirety to read as follows:</font></td>
</tr>


<tr>
<td>&nbsp;</td>

<td colspan=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#147;Commitment&#148; means $5,000,000, as such amount may be reduced from time to time as provided in
this Agreement. </FONT>
</TD>
</TR>
<tr>
<td>&nbsp;</td>

<td colspan=3 align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Termination Date&#148; means the earlier to occur of (i) June 30, 2011, (ii) the date the
Commitment is terminated pursuant to Section 6.01 following the occurrence of an
Event of Default, or (iii) the date the Borrower terminates the Commitment
entirely pursuant to Section 2.06. </FONT>
</TD>
</TR>

<tr>
<td colspan=4 align=justify>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;
<u>Amendment to Section 2.04.</u>&nbsp;&nbsp;Section  2.04(b) of the Credit  Agreement  is hereby  amended and restated in
its entirety to read as follows:</font></td>
</tr>


<tr>
<td>&nbsp;</td>

<td colspan=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advances shall be repaid on the Termination Date.</FONT>
</TD>
</TR>

<tr>
<td colspan=4 align=justify>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;
<u>Amendment to Section 2.05(a).</u>&nbsp;&nbsp;Section 2.05(a) of the Credit  Agreement is hereby amended and restated in
its entirety to read as follows:</font></td>
</tr>


<tr>
<td>&nbsp;</td>

<td colspan=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"Applicable Margin" shall be 2.00%.</FONT>
</TD>
</TR>







<tr align=justify>
<td colspan=4 align=justify>

<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 4.&nbsp;&nbsp;&nbsp;&nbsp;
<u>No Other Amendment.</u>&nbsp;&nbsp;Except for the amendments set forth above, the text of the Credit
Agreement shall remain unchanged and in full force and effect. This Amendment is
not intended to effect, nor shall it be construed as, a novation. The Credit
Agreement and this Amendment shall be construed together as a single instrument
and any reference to the &#147;Agreement&#148; or any other defined term for the
Credit Agreement in the Credit Agreement, the Loan Documents or any certificate,
instrument or other document delivered pursuant thereto shall mean the Credit
Agreement as amended hereby and as it may be amended, supplemented or otherwise
modified hereafter. Nothing herein contained shall waive, annul, vary or affect
any provision, condition, covenant or agreement contained in the Credit
Agreement, except as herein amended, or any of the other Loan Documents nor
affect nor impair any rights, powers or remedies under the Credit Agreement, as
hereby amended or any of the other Loan Documents. The Bank does hereby reserve
all of its rights and remedies against all parties who may be or may hereafter
become secondarily liable for the repayment of the Obligations. The Borrower
promises and agrees to perform all of the requirements, conditions, agreements
and obligations under the terms of the Credit Agreement, as hereby amended, and
the other Loan Documents. The Credit Agreement, as amended, and the other Loan
Documents are hereby ratified and affirmed. The Borrower hereby expressly agrees
that the Credit Agreement, as amended, and the other Loan Documents are in full
force and effect.</font></td>
</tr>

</table>








<hr noshade size=2>
<PAGE>
<H5 align="left" style="page-break-before:always"></H5>






<table align=center width=90% cellspacing=0 cellpadding=8 border=0>
<tr>
<td width=10%></td>
<td width=10%></td>
<td width=10%></td>
<td width=70%></td>
</tr>

<tr>
<td colspan=4>

<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 5.&nbsp;&nbsp;&nbsp;&nbsp;
<u>Representations and Warranties.</u>&nbsp;&nbsp;The Borrower hereby represents and
warrants in favor of the Bank as follows:</font></td>
</tr>


<tr>
<td colspan=4 align=justify>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;
The  representations  and warranties of the Borrower  contained in Article IV of the Credit  Agreement are
true in all material  respects on and as of the date hereof (except to the extent they are made  specifically  with
reference to some other date, in which case they are true and correct as of such other date);</font></td>
</tr>

<tr>
<td colspan=4>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;
After giving  effect to this  Amendment,  no Default or Event of Default under the Credit  Agreement,  the
Pledge Agreement or any other Loan Document has occurred and is continuing on the date hereof;</font></td>
</tr>

<tr>
<td colspan=4 align=justify>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;
The Borrower has the  corporate  power and  authority to enter into this  Amendment and to do all acts and
things as are required or contemplated hereunder to be done, observed and performed by it;</font></td>
</tr>

<tr>
<td colspan=4 align=justify>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;
This  Amendment  has been duly  authorized,  validly  executed  and  delivered  by one or more  authorized
officers of the Borrower,  and this  Amendment,  the Credit  Agreement  and Pledge  Agreement,  as amended  hereby,
constitute the legal,  valid and binding  obligations  of the Borrower  enforceable  against it in accordance  with
their terms; and</font></td>
</tr>
<tr>
<td colspan=4 align=justify>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;
Neither the execution and delivery of this Amendment,  the Borrower's  performance hereunder and under the
Credit Agreement,  as amended hereby, the making of the Planned Dividend,  nor the making of the Planned Redemption
require  the  consent  or  approval  of any  regulatory  authority  or  governmental  authority  or  agency  having
jurisdiction  over the Borrower other than those which have already been obtained or given,  nor will the aforesaid
actions be in  contravention  of or in conflict with the Articles of  Incorporation  or Bylaws of the Borrower,  or
the provision of any statute, or any judgment, order or indenture,  instrument,  agreement or undertaking, to which
the Borrower is a party or by which its assets or properties are or may become bound.</font></td>
</tr>

</table>




<table align=center width=90% cellspacing=0 cellpadding=8 border=0>
<tr>
<td width=10%></td>
<td width=10%></td>
<td width=10%></td>
<td width=70%></td>
</tr>

<tr>
<td colspan=4 align=justify>

<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 6.&nbsp;&nbsp;&nbsp;&nbsp;
<u>Conditions to Effectiveness.</u>&nbsp;&nbsp;The effectiveness of this Amendment and the obligations of
the Bank hereunder are subject to the following conditions, unless the Bank
waives such conditions: </font></td>
</tr>


<tr>
<td colspan=4 align=justify>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;
receipt by the Bank from the Borrower of a duly executed counterpart of this Amendment;</font></td>
</tr>

<tr>
<td colspan=4>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;
the fact  that  the  representations  and  warranties  of the  Borrower  contained  in  Section  7 of this
Amendment shall be true on and as of the date hereof; and</font></td>
</tr>

<tr>
<td colspan=4>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;
receipt by the Bank from the Borrower of a $5,000 commitment fee.</font></td>
</tr>

<tr>
<td colspan=4 align=justify>

<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 7.&nbsp;&nbsp;&nbsp;&nbsp;
<u>Counterparts.</u>&nbsp;&nbsp;This Amendment may be executed in multiple counterparts,
each of which shall be deemed to be an original and all of which, taken
together, shall constitute one and the same agreement. </font></td>
</tr>
</table>










<p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-2-</font></p>




<hr noshade size=2>
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<H5 align="left" style="page-break-before:always"></H5>





<table align=center width=90% cellspacing=0 cellpadding=8 border=0>
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<td width=10%></td>
<td width=70%></td>
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<tr>
<td colspan=4 align=justify>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 8.&nbsp;&nbsp;&nbsp;&nbsp;
<u>Governing Law.</u>&nbsp;&nbsp;This Amendment shall be construed in accordance with and governed by
the laws of the State of Georgia.</font></td>
</tr>
<tr>
<td colspan=4 align=justify>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 9.&nbsp;&nbsp;&nbsp;&nbsp;
<u>Attorney's Fees and Expenses.</u>&nbsp;&nbsp;The Borrower hereby agrees that all
attorney&#146;s fees and expenses incurred by the Bank in connection with the
preparation, negotiation and execution of this Amendment shall be payable by the
Borrower.</font></td>
</tr>

</table>

<p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2> [Remainder of page intentionally left blank]</font></p>


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










<p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-3-</font></p>




<hr noshade size=2>
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<p align=justify><font face="Times New Roman, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed under seal by their respective authorized officers as of the day and
year first above written.</font></p>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 border=0>


<tr>
<td width=50%><font face="Times New Roman, Serif" size=2>ATTEST:</font></td>
<td align=left width=50%><font face="Times New Roman, Serif" size=2>ATLANTIC AMERICAN CORPORATION</font></td>
</tr>
<tr>
<td colspan=2>&nbsp;</td>
</tr>
<tr>
<td><font face="Times New Roman, Serif" size=2><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
/s/&nbsp;&nbsp;Casey Hudson
&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></td>
<td align=left><font face="Times New Roman, Serif" size=2>By:<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/&nbsp;&nbsp;John G. Sample, Jr.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></td>
</tr>
<tr>
<td><font face="Times New Roman, Serif" size=2>Its:<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vice President and Controller
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></td>
<td align=left><font face="Times New Roman, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name:<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;John G. Sample, Jr.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></td>
</tr>
<tr>
<td><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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[CORPORATE SEAL]</font></td>
<td align=left><font face="Times New Roman, Serif" size=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title:<u>&nbsp;&nbsp;Senior Vice President and Chief Financial Officer
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</u></font></td></tr>
<tr>
<td colspan=2>&nbsp;</td>
</tr>

<tr>
<td>&nbsp;</td>
<td align=left><font face="Times New Roman, Serif" size=2>WELLS FARGO BANK, NATIONAL<BR> ASSOCIATION,
                                                        successor-in-interest by merger<BR> to Wachovia Bank, National
                                                        Association</font></TD>
</tr>
<tr>
<td colspan=2>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=left><font face="Times New Roman, Serif" size=2>By:<u>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/&nbsp;&nbsp;
Brian L. Martin&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td align=left><font face="Times New Roman, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Name:&nbsp;<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brian L. Martin&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</u></font></td></tr>
<tr>
<td>&nbsp;</td>
<td align=left><font face="Times New Roman, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Title:&nbsp;<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Senior Vice President&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</u></font></td></tr>
<tr>
<td colspan=2>&nbsp;</td>
</tr>


</table>


<BR><BR><BR>
<p align=center><font face="Times New Roman, Serif" size=2><b><i>Signature Page to<BR>
Third Amendment to Credit Agreement</i></b></font></p>








</body>
</html>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>3
<FILENAME>exhibit_31110.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;
August 6, 2010&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>4
<FILENAME>exhibit_31210.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;
August 6, 2010&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>5
<FILENAME>exhibit_32110.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><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
June 30, 2010, 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;
August 6, 2010&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;
August 6, 2010&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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</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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