- --------------------------------------------------------------------------------


               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549
                          -----------


                           FORM 10-Q

                          -----------

    |X| Quarterly Report pursuant to Section 13 or 15(d) of
              the Securities Exchange Act of 1934

         For the quarterly period ended March 31, 1996

                               OR

    |_| Transition report pursuant to Section 13 or 15(d) of
              the Securities Exchange Act of 1934

                          -----------

                 Commission File Number 0-3722


                 ATLANTIC AMERICAN CORPORATION
   Incorporated pursuant to the laws of the State of Georgia

                          -----------

     Internal Revenue Service-- Employer Identification No.
                           58-1027114


            Address of Principal Executive Offices:
       4370 Peachtree Road, N.E., Atlanta, Georgia 30319
                         (404) 266-5500


Indicate by check mark whether  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 |_|

The total  number of shares of the  registrant's  Common  Stock,  $1 par  value,
outstanding on May 6, 1996, was 18,690,244.

- --------------------------------------------------------------------------------









                   ATLANTIC AMERICAN CORPORATION

                               INDEX


Part 1.  Financial Information                           Page No.

Item 1.  Financial Statements:


             Consolidated Balance Sheets -
             December 31, 1995 and March 31, 1996           2


             Consolidated Statements of Operations -
             Three months ended March 31,1995 and 1996      3
             

             Consolidated Statements of Cash Flows -
             Three months ended March 31, 1995 and 1996     4
             

             Notes to Consolidated Financial Statements     5


Item 2.  Management's Discussion and Analysis of          
         Financial Condition and Results of Operations      6 - 7



Part II.  Other Information


Item 6.  Exhibits and reports of Form 8-K                   8


Signatures                                                  9





             ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS


                                 ASSETS

(In thousands, except share and per share data)
                                                  March 31, December 31,
                                                     1996      1995
                                                  --------   ---------
  Cash, including short-term investments of        
     $21,808 and $12,498                           $  26,354  $  15,069     
                                                   --------------------
  Investments:
     Bonds (Cost: $108,533 and $112,915)             108,201    113,313
     Common and preferred stocks (cost: $25,433       39,413     42,116
       and $26,925)
     Mortgage loans                                    6,924      6,952
     Policy and student loans                          3,274      5,690
     Real estate                                          46         46
                                                   ---------------------
        Total investments                            157,858    168,117
                                                   ---------------------
  Receivables:
     Reinsurance                                      23,670     22,467
     Other (net of allowance for bad debts:           
       $1,388 and $1,260)                             28,646     18,567
  Deferred acquisition costs                          15,351     14,899
  Other assets                                         4,429      4,125
  Goodwill                                             2,212      2,250
                                                   ---------------------
        Total assets                               $ 258,520  $ 245,494
                                                   =====================


                  LIABILITIES AND SHAREHOLDERS' EQUITY

  Insurance reserves and policy funds:
     Future policy benefits                        $  36,362   $ 36,305
     Unearned premiums                                36,405     24,140
     Losses and claims                                80,726     79,514
     Other policy liabilities                          3,730      3,888
                                                   ---------------------
        Total policy liabilities                     157,223    143,847
  Accounts payable and accrued expenses                7,619      8,010
  Debt payable ($6,358 and $6,358 due to              45,025     44,921
     affiliates)
  Net obligation to discontinued operations            1,224        953
  Minority interest                                    1,285      1,285
                                                   ---------------------
         Total liabilities                           212,376    199,016
                                                   ---------------------


Commitments and contingencies
Shareholders' equity:
    Preferred stock, $1 par, 4,000,000 shares
      authorized; 
      Series A preferred, 30,000 shares issued
         and outstanding, $3,000 redemption
         value                                            30         30
      Series B preferred, 134,000 shares issued
         and outstanding, $13,400 redemption 
         value                                           134        134
    Common stock, $1 par, 30,000,000 shares
      authorized; 18,712,167 shares issued in
      1996 and 1995                                   18,712     18,712
    Additional paid-in capital                        46,151     46,531
    Accumulated deficit                              (32,476)   (34,446)
    Net unrealized investment gains                   13,648     15,589
    Treasury stock, at cost, 24,524 shares in           
      1996 and 32,767 shares in 1995                     (55)       (72)
                                                   ---------------------
         Total shareholders' equity                   46,144     46,478
                                                   ---------------------
             Total liabilities and                      
               shareholders' equity                $ 258,520  $ 245,494
                                                   ====================





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

                                  -2-



                ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                          Three Months Ended
                                               March 31,
                                          ------------------
 (In thousands, except per share data)      1996     1995
                                           ------- --------

Revenue:
  Insurance premiums                     $ 21,385  $10,225
  Investment income                         2,680    1,618
  Realized investment gains, net              670       68
  Other income                                 38        -
                                         ------------------
      Total revenue                        24,773   11,911
                                         ------------------

Benefits and expenses:
  Insurance benefits and losses incurred   14,088    6,270
  Commissions and underwriting expenses     6,392    3,535
  Interest expense                            923      572
  Other                                     1,393    1,306
                                         ------------------
      Total benefits and expenses          22,796   11,683
                                         ------------------

Income before income tax expense and
   discontinued operations                  1,977      228
Income tax expense                              -      (9)
                                         ------------------
Income from continuing operations           1,977      219
Income from discontinued operations             -      225
                                         ------------------
              Net income                 $  1,977 $    444
                                         ==================

Net income per common share data:
  Continuing operations                  $    .08 $   0.01
  Discontinued operations                      --     0.01
                                         ------------------
              Net income                 $    .08 $   0.02
                                         ==================

Weighted average common shares             
outstanding                                18,808   18,560




















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

                                       -3-



                 ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                   Three Months Ended
                                                        March 31,
                                                   ------------------
                                                     1996     1995
                                                   -------- --------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:

   Net income                                       $ 1,977  $   444
   Adjustments to reconcile net income to net
    cash used in operating activities:
      Amortization of deferred acquisition costs        864    1,056
      Acquisition costs deferred                     (1,316)    (874)
      Realized investment gains                        (670)     (68)
      Increase in insurance reserves                 13,263      964
      Gain from discontinued operations                   -     (225)
      Depreciation and amortization                     280      128
      Minority interest                                   -       (7)
      Increase in receivables, net                  (13,906)    (333)
      (Decrease) increase in other liabilities       (1,644)     335
      Other, net                                       (762)     134
                                                    -----------------
         Net cash (used in) provided by continuing  
           operations                                (1,914)   1,554
         Net cash used in discontinued operations         -   (1,679)
                                                    -----------------
         Net cash used in operating activities       (1,914)    (125)
                                                    -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:

   Proceeds from investments sold or matured         34,769    7,246
   Investments purchased                            (21,254)  (3,569)
   Additions to property and equipment                 (224)    (342)
                                                    -----------------
         Net cash provided by continuing operations  13,291    3,335
         Net cash used in discontinued operations         -     (867)
                                                    -----------------
         Net cash provided by investing activities   13,291    2,468
                                                    -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:

   Preferred stock dividends                            (79)     (79)
   Proceeds from exercise of stock options                9       25
   Purchase of treasury shares                          (22)       -
                                                    -----------------
         Net cash used in continuing operations         (92)     (54)
         Net cash provided by discontinued            
           operations                                     -    2,204
                                                    -----------------
         Net cash (used in) provided by financing     
           activities                                   (92)   2,150
                                                    -----------------

Net increase in cash and cash equivalents            11,285    4,493

Cash and cash equivalents at beginning of period:
    Continuing operations                            15,069    4,016
    Discontinued operations                               -    2,383
                                                    -----------------
         Total                                       15,069    6,399
                                                    -----------------

Cash and cash equivalents at end of period:
    Continuing operations                            26,354    8,851
    Discontinued operations                               -    2,041
                                                    -----------------
         Total                                      $26,354  $10,892
                                                    =================

SUPPLEMENTAL CASH FLOW INFORMATION:

   Cash paid for interest                           $   642  $    50
                                                    =================

   Cash paid for income taxes                       $     -  $   128
                                                    =================



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

                                       -4-



                ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


Note 1.    Basis of presentation.

    The accompanying  unaudited condensed consolidated financial statements have
been prepared in accordance with generally  accepted  accounting  principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation  S-X.  Accordingly,  they do not include all of the information
and footnotes required by generally accepted accounting  principles for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been included. All significant  intercompany accounts and transactions have been
eliminated in consolidation and the interests of minority shareholders have been
recognized.  Operating  results for the three month period ended March 31, 1996,
are not necessarily  indicative of the results that may be expected for the year
ended  December  31,  1996.  These operating results  include  American Southern
Insurance  Company  for  the  first  quarter  of  1996 whereas  comparable  1995
operating  results do not.  For  further  information,  refer to  the  financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1995.










































                                     -5-





                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                      OF FINANCIAL CONDITION AND RESULTS OF
                                   OPERATIONS

   Atlantic  American  Corporation's  (the "Company") net income from continuing
operations  for the first quarter of 1996 was $2.0  million,  or $.08 per share,
compared to net income of $219,000,  or $.01 per share, for the first quarter of
1995.  Increased  earnings  in the first  quarter of 1996 were due mainly to the
acquisition of American Southern Insurance Company  ("American  Southern") which
was  completed  December  31,  1995.  The  first  quarter  of 1996 is the  first
reporting period that American  Southern is included in the Company's  earnings,
and American Southern  accounted for $1.5 million of the $2.0 million net income
for the quarter.

   The Company announced on February 21, 1996 its intention to sell its interest
in Leath  Furniture  Inc. and its  subsidiaries;  therefore,  beginning with the
fourth  quarter  of 1995  the  Company  began  reporting  the  results  from its
furniture operations as discontinued operations.  First quarter of 1996 earnings
(which  reflect Leath operations through January of 1996) required no adjustment
to the provision made in the fourth quarter of 1995 for discontinued operations.
The sale of Leath  Furniture, Inc. was completed on April 8, 1996. Final results
of  discontinued  operations,  which  are  anticipated  to  be  a loss,  will be
reflected  in  the  second  quarter  of  1996.  The results  of the discontinued
operations for the first quarter of 1995 showed  net income of $225 thousand, or
$.01 per share.

     At March 31, 1996 the Company had a net  cumulative  deferred  tax asset of
zero.  The net  cumulative  deferred  tax asset  consists  of $28.3  million  of
deferred tax assets,  offset by $8.9 million of deferred tax liabilities,  and a
$19.4 million  valuation  allowance.  The Company's  ability to generate taxable
income from  operations  is dependent  upon various  factors,  many of which are
beyond  management's  control.  Accordingly,  there can be no assurance that the
Company will generate future taxable income.  Therefore,  the realization of the
deferred tax assets will be assessed periodically based on the Company's current
and anticipated results of operations.

   Georgia Casualty & Surety Company ("Georgia Casualty") earned $717,000 in the
first quarter of 1996 compared to $293,000 in 1995. This improvement in earnings
is mainly due to increased premiums of $923,000; in addition claims and expenses
increased only $309,000 due to improved underwriting results.

   Atlantic  American Life Insurance Company and Bankers Fidelity Life Insurance
Company (the "Life and Health  Division")  had earnings of $565,000 in the first
quarter of 1996  compared  to  $393,000  in 1995.  This  increase in earnings is
mainly due to an aggregate increase in realized investment gains of $422,000.


RESULTS OF OPERATIONS

   Total revenue  increased to $24.8 million in 1996 from $11.9 million in 1995.
Revenue increased due to an increase in premiums of $11.2 million, of which $9.9
million was  attributable  to American  Southern  which was not  included in the
Company's earnings for the first quarter of 1995. The balance of the increase in
revenue  was made up of $1.1  million  from  investment  income,  $602,000  from
realized  investment  gains and  $38,000  from other  income.  The  increase  in
insurance  premiums,  in addition to the $9.9 million of premiums  from American
Southern,  came from an increase in Georgia  Casualty  premiums of $923,000  and
increased  premiums  in  the  Life  and  Health   Division   of  $331,000.   The
Company's increase in premium is mainly in the worker's compensation  market and
its new niche market with American  Southern  which is engaged  primarily in the
sale of  commercial  automobile  insurance  coverages  for state  and  municipal
government  agencies.  The increase in the Life and Health Division's premium is
mainly in the  senior  life  line of  business.  Accident  and  health  premiums
declined  $426,000  and Life  premiums  increased  by  $757,000.  The decline in
accident  and health  premiums  resulted  primarily  from a decrease in Medicare
supplement  insurance  premiums.  Overall,  the Life  and  Health  Division  has
experienced  a  decline  in  accident  and  health   premiums  as  a  result  of
management's  decision to move premiums to a more  diversified  product mix with
more emphasis on life insurance.

   The increase in investment  income of $1.1 million is principally  due to the
addition of American Southern,  which accounted for $1.0 million of the increase
in the  investment  portfolio's  earnings.  Management  continues  its  focus on
increasing  the Company's  investments  in short and medium  maturity  bonds and
common and convertible  preferred stocks.  The carrying value of funds available
for investment on March 31, 1996 (which include cash and short-term investments,
bonds and common and  preferred  stocks)  increased  approximately  $3.5 million
mainly due to the cash received from the sale of student loans of $2.4 million.

   Insurance  benefits and losses have  increased to $14.1  million in 1996 from
$6.3 million in 1995. This increase is due to a $7.3 million increase in Georgia
Casualty and American Southern  (collectively known as the "Casualty  Division")
and a $527,000 increase in the Life and Health Division. The Casualty Division's
increase is due to a $7.0 million addition from American 

                                     -6-



Southern  and  increased   premiums  in  Georgia   Casualty,   which  led  to  a
corresponding increase in reserving.  The Life and Health Division's increase is
due to an  increase  in  premiums  and  higher  claims  experience  in the first
quarter.  As a  percentage  of premium  revenue,  insurance  benefits and losses
incurred  have  increased  to 65.9% in 1996  from  61.3% in 1995.  In 1996,  the
percentage  of  insurance  benefits  and losses  incurred to premium for Georgia
Casualty was 66.4% compared to 73.8% in 1995. American Southern's  percentage in
the first quarter of 1996 was 70.5%. For the Life and Health Division, the ratio
of losses to premium revenue was 58.3% in 1996 compared to 52.8% in 1995.

    Commission and underwriting  expenses increased to $6.4 million in 1996 from
$3.5 million in 1995. The main reason for this increase was the addition of $2.5
million   attributable   to  American   Southern.   Comparable   commission  and
underwriting  expenses  increased $386,000 in 1996. This increase was made up of
an increase in commissions of $276,000 and an increase of underwriting  expenses
of $110,000.

    Interest expense  increased in 1996 to $923,000 from $572,000 in 1995 due to
an increase in the  Company's  debt  payable  from the  acquisition  of American
Southern offset by the decrease in interest  caused by the Company's  conversion
of $13.4 million of debt to  preferred stock which occurred  simultaneously with
the American Southern acquisition.


LIQUIDITY AND CAPITAL RESOURCES

   The Company's insurance  subsidiaries reported a combined statutory income of
$2.1 million for the first  quarter of 1996 versus  $693,000 in 1995.  Increased
statutory  earnings  are  mainly  due to  American Southern's  $1.5  million  of
statutory earnings.  The Life and Health Division's statutory earnings decreased
$269,000 and Georgia Casualty's increased $220,000.

   The  primary  sources  of  funds  for the  Company  are  dividends  from  its
subsidiaries  and management fees and borrowings from affiliates of the Company.
The Company believes that additional  funding would be available from certain of
its affiliates to meet any additional liquidity needs,  although currently there
are no other arranged sources of unused borrowing.

   The Company provides certain administrative and other services to each of its
insurance  subsidiaries.  The amounts charged to and paid by the subsidiaries in
1996 remained approximately the same as 1995. The Company believes that the fees
and  charges to its  subsidiaries,  dividends  and, if needed,  borrowings  from
affiliates  will enable the Company to meet its liquidity  requirements  for the
foreseeable future. In addition,  the Company has a formal tax-sharing agreement
between the Company and its insurance subsidiaries.  It is anticipated that this
agreement  will  provide  the  Company  with  additional  funds from  profitable
subsidiaries due to the subsidiaries' use of the Company's tax loss carryforward
which totaled approximately $60.4 million at March 31, 1996. Approximately 94.3%
of  the  investment  assets  of the  insurance  subsidiaries  are in  marketable
securities  that can be converted into cash, if required;  however,  use of such
assets by the  Company  is  limited  by state  insurance  regulations.  Dividend
payments  to the  Company  by its  insurance  subsidiaries  are  limited  to the
accumulated  statutory  earnings of the individual  insurance  subsidiaries.  At
March 31,  1996  Georgia  Casualty  had $6.8  million of  accumulated  statutory
earnings, American Southern had $17.6 million, Bankers Fidelity had $6.1 million
and Atlantic American Life had an accumulated statutory deficit of $1.1 million.
American  Southern  paid the Company  dividends  totaling  $900,000 in the first
quarter  of 1996.  Management  is not aware of any  current  recommendations  by
regulatory  authorities  which,  if implemented,  would have a material  adverse
effect on the Company's liquidity, capital resources or operations.

   Net cash used in operating activities from continuing operations totaled $1.9
million in 1996,  compared to net cash provided by operating  activities of $1.5
million in 1995.  This decrease in operating cash flows is due mainly to Georgia
Casualty's  operating cash flows.  Georgia Casualty's decrease in operating cash
flows  is  due  to an increase  in  claims paid of $905,000;in addition, Georgia
Casualty  had  no change  in collected premium in 1996 whereas in 1995 collected
premium increased $1.2 million. Cash and short-term  investments increased  from
$15.0 million at December 31, 1995 to $26.3  million  at March 31, 1996,  mainly
due to the net proceeds of American Southern's  investment  activities  of $10.7
million, the majority  of  which  included  American  Southern's tax exempt bond
portfolio.  Total investments (excluding short-term  investments)  decreased  to
$158.0 million at March 31, 1996 from  $168.1  million at December  31, 1995 due
primarily  to American Southern's net investment activities.




                                     -7-





          ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES

                    PART II. OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K.
- ------------------------------------------

   (a)The following exhibits are filed herewith:

      Exhibit 3.1.  Restated and Amended Articles of Incorporation
                    of Atlantic American Corporation.

      Exhibit 11.   Computation of net income per common share.

   (b)Reports on Form 8-K:


      1) On January 12,  1996,  under Item 2, the Company  filed a current
         report on Form 8-K  regarding  the Company's  acquisition  of American
         Southern Insurance  Company and,  under Item 5, the Company's  merger
         agreement with its subsidiary Bankers Fidelity Life Insurance Company.

      2) On March 6, 1996 the Company filed Form 8-K/A regarding the Company's 
         Form 8-K which was filed on January 12, 1996. This Form 8-K/A included
         the financial statements of American Southern Insurance Company and pro
         forma information.




























                                -8-





                            SIGNATURES
                            ----------


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.





                   ATLANTIC AMERICAN CORPORATION
                   -----------------------------
                           (Registrant)





Date:  May 15, 1996       By:     /s/
       ------------          -------------------------------------
                             John W. Hancock
                             Senior Vice President-Treasurer
                             (Principal Financial Officer)




                          By:     /s/
                             -------------------------------------    
                             John C. Hall, Jr.
                             Controller
                             (Principal Accounting Officer)




















                                -9-



                                                        Exhibit 3.1


                        RESTATED AND AMENDED
                      ARTICLES OF INCORPORATION
                                 OF
                    ATLANTIC AMERICAN CORPORATION


                                   ARTICLE I.

           The name of the corporation is Atlantic American Corporation.

                                   ARTICLE II.

           The  corporation  is organized  pursuant to the Business  Corporation
 Code of the State of Georgia.

                                  ARTICLE III.

           The duration of the corporation shall be perpetual.

                                   ARTICLE IV.

           The purposes for which the corporation are organized is as follows:

           (a) To  generally  engage  in the  business  of  buying,  selling  or
otherwise dealing in notes, accounts, bonds, debentures,  securities,  choses in
action,  coupons and other negotiable instruments and evidences of debt, and any
and all other  forms of real,  personal  or mixed  property;  to form,  promote,
subsidize  and  assist  companies,  corporations,  syndicates,  joint  ventures,
partnerships and business enterprises of all kinds; to guarantee,  become surety
upon  or  endorse  the  contracts  or  obligations  of  any  other  corporation,
individual or business entity,  whether purely accommodation or not, and whether
the  corporation  has any direct interest in the subject matter so guaranteed or
endorsed;  to lend the capital of the corporation and such other funds as it may
from time to time lawfully  acquire upon such security as may be agreed;  and to
generally  carry on and  undertake  any  business  undertaking,  transaction  or
operation  commonly  carried on in  connection  with the  operation of a general
business, industrial, investment, and lending finance operation.

           (b) To purchase,  acquire, hold, pledge,  exchange and otherwise deal
in,  either alone or in  conjunction  with others,  stocks,  bonds,  debentures,
rights, warrants, and any other kinds or types of securities of any sort or kind
of any  corporation,  association,  partnership,  syndicate,  entity,  person or
authority,  domestic  or  foreign;  to  create  and  issue,  whether  or  not in
connection with the issue and sale of any shares of stock or other securities of
the corporation, rights or options, entitling



the holder  thereof to  purchase  shares of stock or any other  security  of the
corporation on such terms as may be provided,  so long as shares of stock with a
par value to be received on the exercise of such rights or options shall be paid
for at a price at least equal to the par value thereof.

           (c) To buy, own, hold,  mortgage,  lease,  encumber,  sell, exchange,
assign, transfer,  acquire by gift, device or otherwise and otherwise to deal in
generally  real,  personal and  intangible  property of whatsoever  kind or sort
wherever situated.

           (d)  Generally  to do any and all  things  necessary,  convenient  or
appropriate  which  are  incidental  or  connected  with  any  of  the  business
activities mentioned above.

                                   ARTICLE V.

           The total number of shares of capital stock of the corporation  shall
be 34,000,000,  which shall consist of (a) 30,000,000  shares of common stock of
the par value of $1.00 per share ("Common  Stock"),  and (b) 4,000,000 shares of
Preferred  Stock of the par  value of $1.00 per share  ("Preferred  Stock"),  of
which  Preferred  Stock (i)  30,000  shares  shall be  designated  as  "Series A
Convertible   Preferred  Stock"  having  the  powers,   preferences  and  rights
heretofore  designated as part of these Restated Articles of Incorporation,  and
(ii) 134,000 shares shall be designated as "Series B Preferred Stock" having the
powers, preferences and rights set forth in the Statement of Relative Rights and
Preferences  of the Series B Preferred  Stock  attached  hereto as Exhibit A and
                                                                   ---------
made a part of the Corporation's Restated Articles of Incorporation.

           The following is a statement  fixing certain of the  designations and
the powers, voting powers, preferences and relative, participating,  optional or
other rights of the Preferred Stock and the Common Stock of the corporation, and
the qualifications,  limitations or restrictions  thereof,  and of the authority
with  respect  thereto  expressly  granted  to the  Board  of  Directors  of the
corporation to fix any such provisions not fixed hereby:


                A.    Preferred Stock

           The Board of Directors is hereby  expressly vested with the authority
to adopt a resolution or  resolutions  providing for the issue of authorized but
unissued shares of Preferred Stock, which shares may be issued from time to time
in one or more series and in such amounts as may be  determined  by the Board of
Directors  in  such  resolution  or  resolutions.  The  powers,  voting  powers,
designations,  preferences  and  relative,  participating,  optional,  or  other
special   rights,   if  any,  of  each  series  of   Preferred   Stock  and  the
qualifications,  limitations or restrictions, if any, of such preferences and/or
rights

                                       2


(collectively, the "Series Terms"), shall be such as are stated and expressed in
the  resolution or  resolutions  providing the issue of such series of Preferred
Stock (the "Series Terms  Resolution")  adopted by the Board of  Directors.  The
powers  of the  Board  of  Directors  with  respect  to the  Series  Terms  of a
particular  series  (any of  which  powers  may by  resolution  of the  Board of
Directors be specifically delegated to one or more of its committees,  except as
prohibited by law) shall be limited to determination of the following:

                (1)  The number of shares constituting that series
           and the distinctive designation of that series;

                (2) The rate of dividend  on the shares of the  series,  whether
           such dividends, if any, shall be cumulative,  and, if so, the date or
           dates from which dividends  payable on such shares shall  accumulate,
           and the relative rights of priority,  if any, of payment of dividends
           on shares of that series;

                (3) Whether that series shall have voting rights, in addition to
           any voting  rights  provided  by law,  and,  if so, the terms of such
           voting rights;

                (4) Whether that series shall have  conversion  privileges  with
           respect  to shares of any other  class or  classes of stock or of any
           other  series  of any  class of  stock,  and,  if so,  the  terms and
           conditions of such conversion,  including provision for adjustment of
           the  conversion  rate upon  occurrence of such events as the Board of
           Directors shall determine;

                (5) Whether the shares of that series shall be redeemable,  and,
           if so, the terms and conditions of such  redemption,  including their
           relative rights of priority, if any, of redemption, the date or dates
           upon or after which they shall be  redeemable,  provisions  regarding
           redemption  notices,  and the  amount  per share  payable  in case of
           redemption,  which amount may vary under different  conditions and at
           different redemption dates;

                (6)  Whether  that  series  shall  have a  sinking  fund for the
           redemption  or  purchase  of shares of that  series,  and, if so, the
           terms and amount of such sinking fund; and

                (7) The  rights  of the  shares  of that  series in the event of
           voluntary or  involuntary  liquidation  of the  corporation,  and the
           relative  rights of  priority,  if any,  of payment of shares of that
           series.

           Any of the Series Terms,  including voting rights,  of any series may
be dependent upon facts ascertainable outside the

                                       3


Articles of  Incorporation  and the Series Terms  Resolution,  provided that the
manner in which such facts shall  operate  upon such Series Terms is clearly and
expressly  set forth in the  Articles of  Incorporation  or in the Series  Terms
Resolution.


                B.    Common Stock

                1. Dividends.  Subject to the rights of the holders of shares of
                   ----------
any series of  Preferred  Stock set forth in any Series  Terms  Resolution,  the
Board of Directors may, in its  discretion,  out of funds legally  available for
the payment of dividends  and at such times and in such manner as  determined by
the Board of  Directors,  declare and pay  dividends  on the Common Stock of the
corporation.

                2. Liquidation. In the event of any liquidation,  dissolution or
                   ------------
winding up of the corporation,  whether voluntary or involuntary,  after payment
or  provision  for  the  payment  of the  debts  and  other  liabilities  of the
corporation  and the payment or setting  aside for  payment of any  preferential
amount  due to the  holders  of shares of any  series of  Preferred  Stock,  the
holders of Common  Stock,  subject to the rights of the holders of any shares of
any class of stock or series  ranking on a parity  with the  Common  Stock as to
payments or  distributions  in such event,  shall be entitled to receive ratably
any and all assets of the corporation remaining to be paid or distributed.

                3. Voting Rights. Subject to the rights of the holders of shares
                   --------------
of any series of Preferred Stock set forth in any Series Terms  Resolution,  the
holders of the Common Stock of the corporation shall be entitled at all meetings
of stockholders to one vote for each share of such stock held by them.


                C.    Retirement of Shares

           Unless  otherwise  provided in a Series Terms Resolution with respect
to a  particular  series of  Preferred  Stock,  all  shares of  Preferred  Stock
redeemed or acquired by the corporation (as a result of conversion or otherwise)
shall be retired and restored to the status of authorized but unissued shares.


                D.    No Preemptive Rights

           Unless  otherwise  provided  with respect to a  particular  series of
Preferred  Stock in a Series  Terms  Resolution,  no holder of shares of capital
stock of the  corporation  shall have any  preemptive or other right,  except as
such rights are expressly provided by contract,  to purchase or subscribe for or
receive  any shares of any class,  or series  thereof,  of capital  stock of the
corporation,  whether now or hereafter  authorized,  or any  warrants,  options,
bonds, debentures or other securities

                                       4


convertible into,  exchangeable for or carrying any right to purchase any shares
of any class, or series thereof, of capital stock of the corporation.


                                   ARTICLE VI.

           The principal  office of the  corporation  shall be located in DeKalb
County, Georgia.


                                  ARTICLE VII.

           A director of the corporation  shall not be personally  liable to the
corporation  or its  stockholders  for monetary  damages for breach of fiduciary
duty as a director, except for liability (i) for any appropriation, in violation
of his duties, of any business opportunity of the corporation,  (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for the types of liability set forth in Section 14-2-154
of the  Georgia  Business  Corporation  Code,  as  amended,  and  its  successor
provisions,  or (iv) for any  transaction  from  which the  director  derived an
improper personal benefit.


                                  ARTICLE VIII.

           All shares previously  reacquired by the corporation  pursuant to the
power of the corporation to purchase its own shares  conferred  generally by law
(and not heretofore cancelled by action of the Board of Directors or resold) and
all  shares  hereafter  so  reacquired  shall  become  treasury  shares  of  the
corporation,  and shall  remain such  unless and until  resold or  cancelled  by
action of the Board of Directors.

                                       5




                              EXHIBIT A
                              ---------


                 RELATIVE RIGHTS AND PREFERENCES OF
             THE SERIES A CONVERTIBLE PREFERRED STOCK OF
                    ATLANTIC AMERICAN CORPORATION


      Pursuant  to  authority  granted  in the  Articles  of  Incorporation,  as
amended, of the Corporation,  the Board of Directors of the Corporation has been
authorized to issue in series  4,000,000 shares of the  Corporation's  Preferred
Stock of the par value of $1.00 per share,  and to designate by  resolution  the
relative rights and preferences of each series so established.  By resolution of
the  Board of  Directors,  the  Corporation  has  established  a series  of such
Preferred  Stock  consisting of 30,000 shares and has designated  said series as
the "Series A Convertible Preferred Stock."

      For the  purposes of this  statement,  "Corporation"  shall mean  Atlantic
American Corporation, a Georgia corporation;

      "Board of Directors" shall mean the board of directors of
the Corporation;

      "Series  A  Preferred  Stock"  shall  mean the  30,000  shares of Series A
Convertible  Preferred  Stock  of the  par  value  of  $1.00  per  share  of the
Corporation;

      "Common Stock" shall mean the common stock of the par value
of $1.00 per share of the Corporation; and

      "Original  Issue  Date"  shall  mean the date on which the first  share of
Series A Preferred Stock was originally issued.

      The voting powers, preferences, and the relative, participating,  optional
and other rights granted to and imposed upon the Series A Preferred Stock are as
follows:

           (a)  Dividend  Rights.  From and after the  issuance  of the Series A
                -----------------
Preferred  Stock,  the holders of  outstanding  shares of the Series A Preferred
Stock shall be entitled to receive,  and shall be paid,  when and as declared by
the Board of Directors,  out of funds  legally  available  therefor,  cumulative
dividends at the annual rate of Ten Dollars and Fifty Cents  ($10.50) per share,
payable in arrears  quarterly on March 15, June 15, September 15 and December 15
of each year, commencing March 15, 1988, to stockholders of record on a date not
more than  twenty (20) days prior to the date on which such cash  dividends  are
payable,  said dividends to commence  accrual on the Original  Issue Date.  Such
dividends  shall be prior and in preference to any declaration of payment of any
dividend  on the Common  Stock and any other  class or series of  capital  stock
ranking junior to the

                                       A-1


Series  A  Preferred  Stock  in  respect  of  dividends  or  distributions  upon
liquidation.  Such dividends shall be cumulative and shall accrue whether or not
declared  by the  Board of  Directors.  No cash  dividends  shall be paid on the
Common Stock or any other junior stock (except  stock  dividends of Common Stock
or any other  junior  stock),  until all  dividends  accrued on any  outstanding
shares of the Series A Preferred  Stock and all other series of preferred  stock
ranking on a parity with the Series A Preferred Stock,  whether or not declared,
have been set apart and fully paid. No accumulation of dividends on the Series A
Preferred Stock shall bear interest.

      In the event cash dividends are not paid in full on all outstanding shares
of the Series A Preferred  Stock and any other series of preferred stock ranking
on a parity with the Series A Preferred Stock,  shares of the Series A Preferred
Stock and shares of such other  series of  preferred  stock shall be entitled to
proportionate  amounts  of the funds  available  for their  respective  dividend
requirements  based  upon  the  payments  required  to be made on the  Series  A
Preferred Stock and each such other series of preferred stock then outstanding.

           (b)  Liquidation   Rights.   In  the  event  of  liquidation  of  the
                ---------------------
Corporation,  whether  voluntary  or  involuntary,  the holders of shares of the
Series A Preferred  Stock will be  entitled  to receive,  from the assets of the
Corporation  available for distribution to stockholders,  an amount equal to One
Hundred Dollars  ($100.00) per share,  plus all accrued but unpaid  dividends on
such shares,  whether or not declared,  before any distribution shall be made or
set apart for  holders of Common  Stock or any other  class or series of capital
stock ranking junior to the Series A Preferred  Stock in respect of dividends or
distributions upon liquidation. The holders of Series A Preferred Stock shall be
entitled to no further participation in any remaining assets of the Corporation.
If, upon any liquidation of the Corporation,  the assets of the Corporation,  or
proceeds  thereof,  distributable  among the  holders  of shares of the Series A
Preferred  Stock and any other class or series of preferred  stock  ranking on a
parity with the Series A Preferred  Stock shall be  insufficient  to pay in full
the preferential  amount  aforesaid,  then such assets, or the proceeds thereof,
shall  be  distributed  among  such  holders  ratably  in  accordance  with  the
respective  amounts that would be payable on such shares if all amounts  payable
thereon  were  paid  in  full.  Neither  the  consolidation  or  merger  of  the
Corporation with or into any other corporation or corporations,  nor the sale or
lease  of all or  substantially  all of the  assets  of the  Corporation,  shall
constitute a liquidation as used in this Section (b).

           (c)  Voting Rights.  Except as required by law or
                --------------
indicated below, the holders of shares of the Series A Preferred
Stock shall have no voting rights.

                                       A-2


      Whenever  dividends  on the Series A Preferred  Stock are in arrears in an
amount equal to or exceeding six (6) quarterly dividends, then during the period
commencing with such time and ending with the time when all arrears in dividends
on the  Series A  Preferred  Stock have been paid and the full  dividend  on the
Series A Preferred Stock for the current quarterly dividend period has been paid
or  declared  and set aside for  payment,  the holders of the Series A Preferred
Stock,  voting together as a class, shall be entitled to vote on all matters put
to a vote of the stockholders of the Corporation and shall otherwise have voting
rights and powers  equal to the  voting  rights and powers of the Common  Stock,
with each share of Series A Preferred  Stock entitling the holder thereof to one
(1) vote.

      In addition to any other rights  provided by law, so long as any shares of
the Series A Preferred  Stock shall be outstanding,  the Corporation  shall not,
without first obtaining the  affirmative  vote or written consent of the holders
of not less than a majority  of such  outstanding  shares of Series A  Preferred
Stock,  voting together as a class, amend or repeal any provision of, or add any
provision to, the Corporation's Articles of Incorporation or Bylaws, as amended,
or file any certificate of designations, preferences and rights of any series of
preferred  stock,  if such action  would  materially  and  adversely  affect the
preferences,  rights,  privileges or powers of, or the restrictions provided for
the benefit of, the Series A Preferred Stock.  Nothing herein shall be deemed to
restrict  the Board of  Directors  from  amending  the terms hereof prior to the
issuance of any shares of the Series A Preferred Stock.

           (d)  Conversion.  The holders of the Series A Preferred
                -----------
Stock shall have conversion rights as follows:

           (1)  Right to Convert.
                -----------------

                (A)  Each  share  of the  Series  A  Preferred  Stock  shall  be
           convertible,  at the option of the holder thereof,  at any time after
           the date of issuance  of such share at the office of the  Corporation
           or any transfer  agent for the Series A Preferred  Stock,  into fully
           paid  and  nonassessable  shares  of  Common  Stock  at  the  initial
           conversion  rate of  Sixteen  and Six  Hundred  and  Sixty-Seven  One
           Thousandths  (16.667) fully paid and  nonassessable  shares of Common
           Stock for each share of Series A Preferred Stock,  subject,  however,
           to the adjustments  described  below.  The number of shares of Common
           Stock  into  which  each  share of  Series A  Preferred  Stock may be
           converted is hereinafter referred to as the "Conversion Rate."

                (B) No  fractional  shares of Common  Stock shall be issued upon
           conversion of Series A Preferred  Stock and if any shares of Series A
           Preferred  Stock  surrendered  by a  holder,  in the  aggregate,  for
           conversion would

                                       A-3


           otherwise  result in a fractional  share of Common  Stock,  then such
           fractional  share shall be redeemed at the then effective  Conversion
           Price (as  hereinafter  defined)  per share,  payable as  promptly as
           possible when funds are legally available therefor.

                (C) The right of  conversion  with respect to shares of Series A
           Preferred Stock called for redemption shall terminate at the close of
           business  on the fifth  business  day  preceding  the date  fixed for
           redemption,  or, if not a business day, the next succeeding  business
           day.

           (2) Mechanics of Conversion.  Before any holder of shares of Series A
               ------------------------
Preferred  Stock  shall be  entitled  to convert  the same into shares of Common
Stock,  such holder shall surrender the  certificate or  certificates  therefor,
duly endorsed and accompanied by properly  executed stock powers,  at the office
of the  Corporation or of any transfer  agent for the Series A Preferred  Stock,
shall give written notice to the Corporation at such office of the name or names
in which such holder wishes the certificate or certificates for shares of Common
Stock to be issued if  different  from the name in which the Series A  Preferred
Stock being surrendered is registered,  as shown on the books and records of the
Corporation,  and shall pay any applicable  transfer tax. Said conversion notice
shall also contain such  representations  as may  reasonably  be required by the
Corporation to the effect that the shares to be received upon conversion are not
being  acquired and will not be  transferred  in any way which might violate the
then applicable  securities laws. The Corporation  shall, as soon as practicable
thereafter,  issue and  deliver at such  office to such  holder of shares of the
Series A  Preferred  Stock,  or to the nominee or  nominees  of such  holder,  a
certificate  or  certificates  for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid.  Such conversion  shall be deemed to
have been made  immediately  prior to the close of  business on the date of such
surrender  of the shares of Series A Preferred  Stock to be  converted,  and the
person or persons  entitled to receive the shares of Common Stock  issuable upon
such  conversion  shall be treated  for all  purposes  as the  record  holder or
holders of such shares of Common Stock as of such date. All certificates  issued
upon  the  exercise  of  the  conversion   shall  contain  a  legend   governing
restrictions upon such shares imposed by applicable securities laws.

           (3) Adjustment for  Subdivisions  or Combinations of Common Stock. In
               --------------------------------------------------------------
the event the  Corporation  at any time or from time to time after the  Original
Issue Date effects a subdivision or combination of its outstanding  Common Stock
into  a  greater  or  lesser  number  of  shares  without  a  proportionate  and
corresponding  subdivision or combination of its outstanding  Series A Preferred
Stock,  then and in each such event the  Conversion  Rate shall be  increased or
decreased proportionately.

                                       A-4


           (4) Adjustments for Dividends, Distributions and Common Stock. In the
               ----------------------------------------------------------
event the  Corporation at any time or from time to time after the Original Issue
Date shall make or issue, or fix a record date for the  determination of holders
of Common Stock entitled to receive a dividend or other distribution  payable in
additional shares of Common Stock or other securities or rights convertible into
or entitling  the holder  thereof to receive  additional  shares of Common Stock
(hereinafter  referred to as "Common Stock Equivalents")  without payment of any
consideration by such holder of such Common Stock Equivalents for the additional
shares of Common Stock,  without a proportionate and  corresponding  dividend or
other distribution to holders of Series A Preferred Stock, then and in each such
event the  maximum  number of shares  (as set forth in the  instrument  relating
thereto  without  regard to any  provisions  contained  therein  for  subsequent
adjustment of such number) of Common Stock  issuable in payment of such dividend
or distribution or upon conversion or exercise of such Common Stock  Equivalents
shall be  deemed,  for  purposes  of this  Subsection  (d)(4),  to be issued and
outstanding  as of the time of such issuance or, in the event such a record date
shall have been fixed,  as of the close of business on such record date. In each
such  event,  the  Conversion  Rate  shall be  increased  as of the time of such
issuance  or, in the event such a record date shall have been  fixed,  as of the
close of business on such record date, by multiplying  the Conversion  Rate by a
fraction,

                (A) the  numerator  of which shall be the total number of shares
      of Common Stock (x) issued and outstanding or deemed pursuant to the terms
      hereof to be issued and outstanding (not including any shares described in
      clause  (y)  immediately  below),  immediately  prior  to the time of such
      issuance or the close of business on such record date, plus (y) the number
      of shares  of  Common  Stock  issuable  in  payment  of such  dividend  or
      distribution   or  upon  conversion  or  exercise  of  such  Common  Stock
      Equivalents; and

                (B) the denominator of which shall be the total number of shares
      of Common  Stock  issued  and  outstanding  or  deemed  to be  issued  and
      outstanding immediately prior to the time of such issuance or the close of
      business on such record date; and

provided,  however,  (i) if such  record  date  shall  have been  fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor,  the Conversion  Rate shall be recomputed  accordingly as of the
close of business on such record date and thereafter  the Conversion  Rate shall
be adjusted  pursuant to this Subsection (d)(4) as of the time of actual payment
of such  dividends or  distributions;  or (ii) if such Common Stock  Equivalents
provide, with the passage of time or otherwise,  for any decrease or increase in
the  number of shares of Common  Stock  issuable  upon  conversion  or  exercise
thereof (or upon the  occurrence  of a record date with  respect  thereto),  the
Conversion Rate computed upon the original issue

                                       A-5


thereof (or upon the occurrence of a record date with respect thereto),  and any
subsequent adjustments based thereon,  shall, upon any such decrease or increase
becoming  effective,  be recomputed to reflect such decrease or increase insofar
as it  affects  the  rights  of  conversion  or  exercise  of the  Common  Stock
Equivalents  then  outstanding;  or (iii) upon the  expiration  of any rights of
conversion  or exercise  under any  unexercised  Common Stock  Equivalents,  the
Conversion Rate computed upon the original issue thereof (or upon the occurrence
of a record date with respect  thereto),  and any subsequent  adjustments  based
thereon,  shall,  upon such expiration,  be recomputed as if the only additional
shares of Common  Stock issued were the shares of such stock,  if any,  actually
issued upon the conversion or exercise of such Common Stock Equivalents; or (iv)
in the event of issuance of Common Stock Equivalents which expire by their terms
not more than sixty (60) days after the date of issuance thereof, no adjustments
of the  Conversion  Rate shall be made until the  expiration  or exercise of all
such Common Stock  Equivalents,  whereupon such adjustment  shall be made in the
manner provided in this Subsection (d)(4).

           (5)  Adjustment of Conversion  Rate for Diluting  Issues.  The amount
                ----------------------------------------------------
obtained by dividing One Hundred Dollars  ($100.00) by the Conversion Rate shall
be  called  the  "Conversion  Price."  Except  as  otherwise  provided  in  this
Subsection  (d)(5),  in the event the Corporation  after the Original Issue Date
sells or issues  any Common  Stock or Common  Stock  Equivalents  at a per share
consideration  (as defined below) less than the Conversion  Price then in effect
for the Series A Preferred  Stock,  then the Conversion  Rate and the Conversion
Price then in effect  shall be adjusted as provided in  paragraphs  (A), (B) and
(C) hereof.  With  respect to the sale or issuance of Common  Stock  Equivalents
which are  convertible  into or  exchangeable  for Common Stock without  further
consideration,  the per share  consideration shall be determined by dividing the
maximum  number  of  shares  (as set forth in the  instrument  relating  thereto
without regard to any provisions contained therein for subsequent  adjustment of
such  number)  of Common  Stock  issuable  with  respect  to such  Common  Stock
Equivalents  into the aggregate  consideration  received by the Corporation upon
the sale or issuance  of such  Common  Stock  Equivalents.  With  respect to the
issuance of other Common Stock Equivalents, the per share consideration shall be
determined  by  dividing  the  maximum  number  of  shares  (as set forth in the
instrument  relating thereto without regard to any provisions  contained therein
for subsequent  adjustment of such number) of Common Stock issuable with respect
to such Common Stock  Equivalents into the aggregate  consideration  received by
the Corporation upon the sale or issuance of such Common Stock  Equivalents plus
the total  consideration  receivable by the  Corporation  upon the conversion or
exercise of such  Common  Stock  Equivalents.  The  issuance of Common  Stock or
Common Stock  Equivalents for no  consideration or for less than $1.00 per share
shall be deemed to be an  issuance  at a per share  consideration  of $1.00.  In
connection with the sale or issuance of Common Stock

                                       A-6


and/or  Common  Stock  Equivalents  for  noncash  consideration,  the  amount of
consideration shall be determined by the Board of Directors. For the purposes of
the foregoing,  the per share consideration with respect to the sale or issuance
of  Common  Stock or  Common  Stock  Equivalents  shall be the  price  per share
received by the Corporation, prior to the payment of any expenses,  commissions,
discounts and other applicable costs.

      As used in this  Subsection  (d)(5),  "Additional  Shares of Common Stock"
shall mean either shares of Common Stock issued subsequent to the Original Issue
Date or, with respect to the issuance of Common Stock Equivalents  subsequent to
the  Original  Issue  Date,  the  maximum  number of shares (as set forth in the
instrument  relating thereto without regard to any provisions  contained therein
for  subsequent  adjustment of such number) of Common Stock issuable in exchange
for, upon conversion of, or upon exercise of such Common Stock Equivalents.

                (A)  Upon  each  issuance  of  Common  Stock  for  a  per  share
      consideration less than the Conversion Price in effect on the date of such
      issuance, the Conversion Rate of the Series A Preferred Stock in effect on
      such date will be adjusted by multiplying it by a fraction:

      (x)  the  numerator of which shall be the number of shares of Common Stock
           outstanding  immediately  prior to the  issuance  of such  Additional
           Shares of Common Stock,  plus the number of such Additional Shares of
           Common Stock so issued, and

      (y)  the denominator of which shall be the number of shares
           of Common Stock outstanding immediately prior to the
           issuance of such Additional Shares of Common Stock plus
           the number of shares of Common Stock which the
           aggregate net consideration received by the Corporation
           for the total number of such Additional Shares of
           Common Stock so issued would purchase at the Conversion
           Price then in effect.

                (B) Upon each issuance of Common Stock Equivalents, exchangeable
      without  further   consideration  into  Common  Stock,  for  a  per  share
      consideration less than the Conversion Price in effect on the date of such
      issuance, the Conversion Rate of the Series A Preferred Stock in effect on
      such date will be adjusted as in paragraph (A) of this  Subsection  (d)(5)
      on the basis that the related  Additional Shares of Common Stock are to be
      treated as having been issued on the date of issuance of the Common  Stock
      Equivalents,  and the aggregate  consideration received by the Corporation
      for such Common Stock  Equivalents  shall be deemed to have been  received
      for such Additional Shares of Common Stock.

                                       A-7


           (C) Upon each issuance of Common Stock  Equivalents  other than those
described  in  paragraph  (B)  of  this  Subsection  (d)(5),  for  a  per  share
consideration  less  than the  Conversion  Price in  effect  on the date of such
issuance,  the Conversion Rate of the Series A Preferred Stock in effect on such
date will be adjusted as in paragraph (A) of this Subsection (d)(5) on the basis
that the related  Additional  Shares of Common Stock are to be treated as having
been issued on the date of issuance of such Common  Stock  Equivalents,  and the
aggregate consideration received and receivable by the Corporation on conversion
or  exercise  of such  Common  Stock  Equivalents  shall be  deemed to have been
received for such Additional Shares of Common Stock.

           (D) Once any  Additional  Shares of Common Stock have been treated as
having  been  issued for the purpose of this  Subsection  (d)(5),  they shall be
treated as issued and outstanding shares of Common Stock whenever any subsequent
calculations  must be made pursuant  hereto.  On the  expiration of any options,
warrants  or  rights  to  purchase   Additional  Shares  of  Common  Stock,  the
termination of any rights to convert or exchange for Additional Shares of Common
Stock,  the expiration of any options or rights  related to such  convertible or
exchangeable securities on account of which an adjustment in the Conversion Rate
has been made previously pursuant to this Subsection (d)(5) or the expiration or
termination  of any Common Stock  Equivalents,  then the  Conversion  Rate shall
forthwith be readjusted to such  Conversion  Rate as would have obtained had the
adjustment made upon the issuance of such options,  warrants, rights, securities
or options or rights related to such securities or Common Stock Equivalents been
made upon the basis of the issuance of only the number of shares of Common Stock
actually issued upon the exercise of such options,  warrants or rights, upon the
conversion or exchange of such securities or upon the exercise of the options or
rights  related to such  securities  or upon the  exercise  of the Common  Stock
Equivalents.  Any  readjustment  of the  Conversion  Rate  shall  also  cause an
appropriate  readjustment  of the Conversion  Price,  calculated by dividing the
readjusted Conversion Rate into the initial Conversion Price.

           (E) The foregoing  notwithstanding,  no adjustment of the  Conversion
Rate or  Conversion  Price  shall be made as a  result  of the  issuance  of the
following,  but such shares of Common  Stock  shall be deemed to be  outstanding
upon issuance for all other purposes hereof:

           (x) shares of Common  Stock  relating to (i)  outstanding  options to
      purchase 229,125 shares of Common Stock issuable to officers and employees
      of the  Corporation  pursuant to employee stock option plans or to members
      of the Board of  Directors,  and (ii)  2,742,230  shares  of Common  Stock
      issuable upon conversion of the Corporation's 8% Convertible  Subordinated
      Notes Due May 15, 1997 (all such numbers to be  appropriately  adjusted in
      the event of any recapitalization,

                                       A-8


      reorganization, stock dividend, stock split or similar event
      affecting the capital stock of the Corporation);

           (y) any shares of Common Stock pursuant to which the Conversion  Rate
      and  Conversion  Price have been adjusted  under  Subsection (3) or (4) of
      this Section (d); or

           (z) any  shares of Common  Stock  issued  pursuant  to the  exchange,
      conversion  or  exercise  of  any  Common  Stock  Equivalents  which  have
      previously been incorporated into computations  hereunder on the date when
      such Common Stock Equivalents were issued.

           (6)  Reorganization,  Merger,  Consolidation or Sale of Assets. If at
                ----------------------------------------------------------
any time or from time to time  there  shall be a capital  reorganization  of the
Common  Stock  (other  than  a  subdivision,  combination,  reclassification  or
exchange of shares  provided  for  elsewhere in this Section (d)) or a merger or
consolidation of the Corporation with or into another  corporation,  or the sale
of all or substantially  all of the  Corporation's  properties and assets to any
other  person  which is effected so that holders of Common Stock are entitled to
receive (either directly or upon subsequent  liquidation)  stock,  securities or
assets with respect to or in exchange for Common Stock,  then, as a part of such
reorganization,  merger,  consolidation or sale, provision shall be made so that
the holders of the Series A  Preferred  Stock  shall  thereafter  be entitled to
receive upon  conversion of the Series A Preferred Stock the number of shares of
stock, securities or assets of the Corporation,  or of the successor corporation
resulting from such merger or consolidation or sale, to which a holder of Common
Stock  deliverable  upon  conversion  would have been  entitled on such  capital
reorganization,  merger,  consolidation  or sale. In any such case,  appropriate
adjustment  shall be made in the  application  of the provisions of this Section
(d) with  respect to the rights of the holders of the Series A  Preferred  Stock
after  the  reorganization,  merger,  consolidation  or sale to the end that the
provisions of this Section (d) (including  adjustment of the Conversion Rate and
Conversion  Price  then in effect  and the  number of  shares  purchasable  upon
conversion of the Series A Preferred Stock) shall be applicable after that event
as nearly equivalent as may be practicable.

           (7)  No  Adjustment.   No  adjustment  to  the  Conversion  Rate  and
                ---------------
Conversion  Price shall be made if such  adjustment  would result in a change in
the Conversion  Price of less than one percent (l%). Any adjustment of less than
one (1%) percent which is not made shall be carried forward and shall be made at
the time of and together with any subsequent  adjustment  which, on a cumulative
basis,  amounts to an adjustment  of one percent (1%) or more in the  Conversion
Price.

           (8)  Certificate as to Adjustments.  Upon the
                ------------------------------
occurrence of each adjustment or readjustment of the Conversion

                                       A-9


Rate pursuant to this Section (d), the Corporation at its expense shall promptly
compute such  adjustment or readjustment in accordance with the terms hereof and
cause independent public accountants  selected by the Corporation to verify such
computation and prepare and furnish to each holder of Series A Preferred Stock a
certificate  setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or  readjustment is based.  The Corporation
shall,  upon the written request at any time of any holder of Series A Preferred
Stock,  furnish  or  cause to be  furnished  to such  holder a like  certificate
setting forth (i) such adjustments and  readjustments,  (ii) the Conversion Rate
at that time in effect,  and (iii) the number of shares of Common  Stock and the
amount,  if any, of other property which at that time would be received upon the
conversion of Series A Preferred Stock.

           (9)  Notices  of  Record  Date.  In the  event of any  taking  by the
                --------------------------
Corporation  of a record of the  holders of any class of  securities  other than
Series A Preferred  Stock for the purpose of determining the holders thereof who
are  entitled to receive any  dividend or other  distribution,  any Common Stock
Equivalents  or any right to subscribe  for,  purchase or otherwise  acquire any
shares of stock of any class or any other securities or property,  or to receive
any other right, the Corporation shall mail to each holder of Series A Preferred
Stock at least twenty (20) days prior to the date  specified  therein,  a notice
specifying  the date on which any such  record is to be taken for the purpose of
such  dividend,  distribution  or rights,  and the amount and  character of such
dividend, distribution or rights.

           (10) Reservation of Stock Issuable Upon  Conversion.  The Corporation
                -----------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Series A Preferred Stock such number of its shares of Common Stock
as shall  from  time to time be  sufficient  to  effect  the  conversion  of all
outstanding  shares  of the  Series A  Preferred  Stock;  and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to  effect  the  conversion  of all  then  outstanding  shares  of the  Series A
Preferred Stock, the Corporation shall take such corporate action as may, in the
opinion of its counsel,  be necessary  to increase its  authorized  but unissued
shares of Common Stock to such number of shares as shall be sufficient  for such
purpose.

           (e) Redemption.  The Series A Preferred Stock will not be redeemable,
               -----------
either in whole or in part, prior to March 15, 1991 unless the closing price per
share of the  Common  Stock  has been  equal to or in excess of 150% of the then
effective  Conversion  Price  for  at  least  twenty  (20)  out of  thirty  (30)
consecutive  trading days ending on the fifth day  preceding  the date notice of
redemption is given.  Subject to such restriction,  the Series A Preferred Stock
may be redeemed for cash at the option of the Corporation, either in whole or in
part, at any

                                      A-10


time or from time to time, if redeemed  from the Original  Issue Date and before
March 15,  1988,  at One Hundred and Ten Dollars and Fifty Cents  ($110.50)  per
share, and if redeemed during the twelve (12) month period beginning on March 15
of the year specified below, at the following redemption prices:

===================================================================
1988............$110.50         1993.......................$104.66
1989............$109.33         1994.......................$103.50
1990............$108.17         1995.......................$102.33
1991............$107.00         1996.......................$101.16
1992............$105.83         1997 and thereafter........$100.00
===================================================================

plus, in each case,  an amount equal to the amount of all dividends  accrued but
unpaid (whether or not declared) to the date fixed for redemption.

      Unless full cumulative dividends on all outstanding shares of the Series A
Preferred  Stock shall have been or  contemporaneously  are declared and paid or
set apart for  payment  for all past  dividend  periods,  the Series A Preferred
Stock may not be redeemed  unless all  outstanding  preferred stock is redeemed,
and  neither  the  Corporation  nor any  subsidiary  thereof  may  purchase  any
preferred  stock,  including shares of the Series A Preferred Stock, and neither
the Corporation  nor any subsidiary  thereof may redeem or purchase any class or
series of  capital  stock  ranking  junior to the  Series A  Preferred  Stock in
respect to dividends or distributions upon liquidation;  provided, however, that
the Corporation may complete the purchase or
          redemption of shares of preferred stock for which a purchase  contract
was entered into, or notice of redemption of which was initially given, prior to
such default in payment of dividends.

      If less than all of the outstanding shares of Series A Preferred Stock are
to be redeemed,  the shares to be redeemed shall be selected by the  Corporation
from outstanding shares not previously called for redemption,  pro rata, by lot,
or in such other equitable manner as the Board of Directors may determine.

      Notice of any  proposed  redemption  of Series A Preferred  Stock shall be
given by the  Corporation  by mailing a copy of such notice at least thirty (30)
days but not more  than  sixty  (60)  days  prior  to the  date  fixed  for such
redemption  to each  holder  of  record of the  shares  to be  redeemed  at such
holder's  address  appearing on the books of the  Corporation.  On and after the
date  fixed for  redemption  dividends  shall  cease to accrue on the  shares of
Series A Preferred Stock called for redemption,  whether or not the certificates
for such shares are actually surrendered for redemption.  All shares of Series A
Preferred  Stock redeemed  pursuant to this Section (e) shall be restored to the
status of authorized and unissued shares of preferred stock,  undesignated as to
series.

                                      A-11


            (f)  Notices.  Any notice  required by the  provisions  hereof to be
                 --------
given to the holders of shares of Series A Preferred Stock shall be deemed given
if deposited in the United States Postal Service, postage prepaid, and addressed
to each  holder of record at his or her  address  appearing  on the books of the
Corporation.

                                      A-12




                            STATEMENT OF
                 RELATIVE RIGHTS AND PREFERENCES OF
                   THE SERIES B PREFERRED STOCK OF
                    ATLANTIC AMERICAN CORPORATION


      Pursuant to authority  granted in the Restated  Articles of Incorporation,
as amended,  of the  Corporation,  the Board of Directors of the Corporation has
been  authorized  to issue  in  series  4,000,000  shares  of the  Corporation's
Preferred  Stock of the par  value of  $1.00  per  share,  and to  designate  by
resolution the relative rights and preferences of each series so established. By
resolution of the Board of Directors,  the  Corporation has established a series
of such Preferred  Stock  consisting of 134,000  shares and has designated  said
series as the "Series B Preferred Stock."

      For the  purposes of this  statement,  "Corporation"  shall mean  Atlantic
American Corporation, a Georgia corporation;

      "Board of Directors" shall mean the board of directors of
the Corporation;

      "Series B  Preferred  Stock"  shall  mean the  134,000  shares of Series B
Preferred Stock of the par value of $1.00 per share of the Corporation;

      "Common Stock" shall mean the common stock of the par value
of $1.00 per share of the Corporation; and

      "Original  Issue  Date"  shall  mean the date on which the first  share of
Series B Preferred Stock was deemed originally issued.

      The voting powers, preferences, and the relative, participating,  optional
and other rights granted to and imposed upon the Series B Preferred Stock are as
follows:

            (a)  Series B Stated Value.  Each share of the Series
                 ----------------------
B Preferred Stock shall have a stated value of $100.00 (the
"Series B Stated Value").

            (b)  Dividend  Rights.  From and after the  issuance of the Series B
                 -----------------
Preferred  Stock,  the holders of  outstanding  shares of the Series B Preferred
Stock shall be entitled to receive,  and shall be paid,  when and as declared by
the Board of Directors,  out of funds  legally  available  therefor,  cumulative
dividends  on each share of Series B Preferred  Stock at the annual rate of nine
percent (9%) of the Series B Stated Value, payable in arrears quarterly on March
15, June 15,  September  15 and  December  15 of each year,  said  dividends  to
commence  accrual  on  January 1,  1996.  Such  dividends  shall be prior and in
preference to any declaration of payment of any dividend on the Common Stock and
any other  class or series  of  capital  stock  ranking  junior to the  Series B
Preferred Stock in respect of dividends or distributions

                                      A-13


upon liquidation. Such dividends shall be cumulative and shall accrue whether or
not declared by the Board of Directors.  No cash dividends  shall be paid on the
Common Stock or any other junior stock (except  stock  dividends of Common Stock
or any other  junior  stock),  until all  dividends  accrued on any  outstanding
shares of the Series B Preferred  Stock and all other series of preferred  stock
ranking on a parity with the Series B Preferred Stock,  whether or not declared,
have been set apart and fully paid. No accumulation of dividends on the Series B
Preferred Stock shall bear interest.

      In the event cash dividends are not paid in full on all outstanding shares
of the Series B Preferred  Stock and any other series of preferred stock ranking
on a parity with the Series B Preferred Stock,  shares of the Series B Preferred
Stock and shares of such other  series of  preferred  stock shall be entitled to
proportionate  amounts  of the funds  available  for their  respective  dividend
requirements  based  upon  the  payments  required  to be made on the  Series  B
Preferred Stock and each such other series of preferred stock then outstanding.

      No dividends shall be paid on the Series B Preferred Stock,  although such
dividends  shall still accrue,  if the payment of such dividends would cause the
Corporation  to  violate  or  constitute  an  occurrence  of  default  under any
provision of, or result in acceleration of any obligation  under any note, loan,
agreement, instrument or other arrangement to which the Corporation is bound.

            (c)  Liquidation   Rights.  In  the  event  of  liquidation  of  the
                 ---------------------
Corporation,  whether  voluntary  or  involuntary,  the holders of shares of the
Series B Preferred  Stock will be  entitled  to receive,  from the assets of the
Corporation  available for distribution to stockholders,  an amount equal to One
Hundred Dollars  ($100.00) per share,  plus all accrued but unpaid  dividends on
such shares,  whether or not declared,  before any distribution shall be made or
set apart for  holders of Common  Stock or any other  class or series of capital
stock ranking junior to the Series B Preferred  Stock in respect of dividends or
distributions upon liquidation. The holders of Series B Preferred Stock shall be
entitled to no further participation in any remaining assets of the Corporation.
If, upon any liquidation of the Corporation,  the assets of the Corporation,  or
proceeds  thereof,  distributable  among the  holders  of shares of the Series B
Preferred  Stock and any other class or series of preferred  stock  ranking on a
parity with the Series B Preferred  Stock shall be  insufficient  to pay in full
the preferential  amount  aforesaid,  then such assets, or the proceeds thereof,
shall  be  distributed  among  such  holders  ratably  in  accordance  with  the
respective  amounts that would be payable on such shares if all amounts  payable
thereon  were  paid  in  full.  Neither  the  consolidation  or  merger  of  the
Corporation with or into any other corporation or corporations,  nor the sale or
lease of all or

                                      A-14


substantially  all  of  the  assets  of  the  Corporation,  shall  constitute  a
liquidation as used in this Section (c).

            (d)  Voting Rights.  Except as required by law or
                 --------------
indicated below, the holders of shares of the Series B Preferred
Stock shall have no voting rights.

      In addition to any other rights  provided by law, so long as any shares of
the Series B Preferred  Stock shall be outstanding,  the Corporation  shall not,
without first obtaining the  affirmative  vote or written consent of the holders
of not less than a majority  of such  outstanding  shares of Series B  Preferred
Stock,  voting together as a class, amend or repeal any provision of, or add any
provision to, the Corporation's Articles of Incorporation or Bylaws, as amended,
or file any certificate of designations, preferences and rights of any series of
preferred  stock,  if such action  would  materially  and  adversely  affect the
preferences,  rights,  privileges or powers of, or the restrictions provided for
the benefit of, the Series B Preferred Stock.  Nothing herein shall be deemed to
restrict  the Board of  Directors  from  amending  the terms hereof prior to the
issuance of any shares of the Series B Preferred Stock.

            (e)  Conversion.  Except  as set forth in the  following  paragraph,
                 -----------
shares of the Series B Preferred  Stock shall not be convertible  into shares of
Common Stock.

      In the event that (i) J. Mack Robinson,  his spouse,  lineal  descendants,
any trust  created  and  existing  solely for the  benefit of any such person or
persons, or any corporation, partnership, limited liability company or any other
entity that  controls,  is controlled by or under common  control with, or is in
any  other  way  an  affiliate  of  any  of  the  foregoing  (collectively,  the
"Affiliates"),   "beneficially  own"  (as  determined  in  accordance  with  the
provisions of Rule 13d-3 under the Securities  Exchange Act of 1934, as amended)
less than 50.1% of the Common Stock or (ii) the  Corporation  or the  Affiliates
enter into a definitive  agreement  providing for the sale or transfer of all of
the  outstanding  shares of Common Stock to a third party that does not control,
is not controlled by or is not under common control with, or is not in any other
way an affiliate  of, any of the  Affiliates,  or the merger of the  Corporation
with another entity such that after giving effect to the merger,  the Affiliates
will no longer  "beneficially  own" at least  50.1% of the voting  equity of the
surviving  corporation in the merger,  then in each such event of the holders of
the Series B Preferred Stock shall have conversion rights as follows:

            (1)  Right to Convert.
                 -----------------

                 (A)  Each  share  of the  Series  B  Preferred  Stock  shall be
            convertible,  at the option of the holder  thereof,  into fully paid
            and nonassessable  shares of Common Stock at the initial  conversion
            rate of

                                      A-15


            twenty-five   and  six   one-hundredths   (25.06)   fully  paid  and
            nonassessable  shares  of Common  Stock  for each  share of Series B
            Preferred  Stock,  subject,  however,  to the adjustments  described
            below. The number of shares of Common Stock into which each share of
            Series B Preferred Stock may be converted is hereinafter referred to
            as the "Conversion Rate."

                 (B) No  fractional  shares of Common Stock shall be issued upon
            conversion of Series B Preferred Stock and if any shares of Series B
            Preferred  Stock  surrendered  by a holder,  in the  aggregate,  for
            conversion  would otherwise  result in a fractional  share of Common
            Stock,  then such  fractional  share  shall be  redeemed at the then
            effective  Conversion  Price (as  hereinafter  defined)  per  share,
            payable as  promptly as  possible  when funds are legally  available
            therefor.

            (2) Mechanics of Conversion. Before any holder of shares of Series B
                ------------------------
Preferred  Stock  shall be  entitled  to convert  the same into shares of Common
Stock,  such holder shall surrender the  certificate or  certificates  therefor,
duly endorsed and accompanied by properly  executed stock powers,  at the office
of the  Corporation or of any transfer  agent for the Series B Preferred  Stock,
shall give written notice to the Corporation at such office of the name or names
in which such holder wishes the certificate or certificates for shares of Common
Stock to be issued if  different  from the name in which the Series B  Preferred
Stock being surrendered is registered,  as shown on the books and records of the
Corporation,  and shall pay any applicable  transfer tax. Said conversion notice
shall also contain such  representations  as may  reasonably  be required by the
Corporation to the effect that the shares to be received upon conversion are not
being  acquired and will not be  transferred  in any way which might violate the
then applicable  securities laws. The Corporation  shall, as soon as practicable
thereafter,  issue and  deliver at such  office to such  holder of shares of the
Series B  Preferred  Stock,  or to the nominee or  nominees  of such  holder,  a
certificate  or  certificates  for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid.  Such conversion  shall be deemed to
have been made  immediately  prior to the close of  business on the date of such
surrender  of the shares of Series B Preferred  Stock to be  converted,  and the
person or persons  entitled to receive the shares of Common Stock  issuable upon
such  conversion  shall be treated  for all  purposes  as the  record  holder or
holders of such shares of Common Stock as of such date. All certificates  issued
upon  the  exercise  of  the  conversion   shall  contain  a  legend   governing
restrictions upon such shares imposed by applicable securities laws.


            (3)  Adjustment for Subdivisions or Combinations of
                 ----------------------------------------------
Common Stock.  In the event the Corporation at any time or from
- -------------

                                      A-16


time to time after the Original  Issue Date effects a subdivision or combination
of its  outstanding  Common  Stock  into a greater  or  lesser  number of shares
without a  proportionate  and  corresponding  subdivision  or combination of its
outstanding Series B Preferred Stock, then and in each such event the Conversion
Rate shall be increased or decreased proportionately.

            (4)  Adjustments for Dividends,  Distributions  and Common Stock. In
                 ------------------------------------------------------------
the event the  Corporation  at any time or from time to time after the  Original
Issue Date shall make or issue,  or fix a record date for the  determination  of
holders of Common  Stock  entitled to receive a dividend  or other  distribution
payable  in  additional  shares of Common  Stock or other  securities  or rights
convertible into or entitling the holder thereof to receive additional shares of
Common Stock  (hereinafter  referred to as "Common Stock  Equivalents")  without
payment of any consideration by such holder of such Common Stock Equivalents for
the additional shares of Common Stock, without a proportionate and corresponding
dividend or other  distribution to holders of Series B Preferred Stock, then and
in each such event the maximum  number of shares (as set forth in the instrument
relating  thereto  without  regard  to  any  provisions  contained  therein  for
subsequent  adjustment  of such number) of Common  Stock  issuable in payment of
such  dividend or  distribution  or upon  conversion  or exercise of such Common
Stock Equivalents shall be deemed, for purposes of this Subsection (e)(4), to be
issued and  outstanding  as of the time of such issuance or, in the event such a
record  date shall have been  fixed,  as of the close of business on such record
date. In each such event,  the Conversion Rate shall be increased as of the time
of such  issuance or, in the event such a record date shall have been fixed,  as
of the close of business on such record date, by multiplying the Conversion Rate
by a fraction,

                 (A) the  numerator of which shall be the total number of shares
      of Common Stock (x) issued and outstanding or deemed pursuant to the terms
      hereof to be issued and outstanding (not including any shares described in
      clause  (y)  immediately  below),  immediately  prior  to the time of such
      issuance or the close of business on such record date, plus (y) the number
      of shares  of  Common  Stock  issuable  in  payment  of such  dividend  or
      distribution   or  upon  conversion  or  exercise  of  such  Common  Stock
      Equivalents; and

                 (B) the  denominator  of which  shall be the  total  number  of
      shares of Common Stock issued and  outstanding  or deemed to be issued and
      outstanding immediately prior to the time of such issuance or the close of
      business on such record date; and

provided,  however,  (i) if such  record  date  shall  have been  fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor,  the Conversion  Rate shall be recomputed  accordingly as of the
close of business on such record date and thereafter  the Conversion  Rate shall
be

                                      A-17


adjusted  pursuant to this Subsection (e)(4) as of the time of actual payment of
such  dividends  or  distributions;  or (ii) if such  Common  Stock  Equivalents
provide, with the passage of time or otherwise,  for any decrease or increase in
the  number of shares of Common  Stock  issuable  upon  conversion  or  exercise
thereof (or upon the  occurrence  of a record date with  respect  thereto),  the
Conversion Rate computed upon the original issue thereof (or upon the occurrence
of a record date with respect  thereto),  and any subsequent  adjustments  based
thereon,  shall,  upon any such  decrease or  increase  becoming  effective,  be
recomputed to reflect such decrease or increase insofar as it affects the rights
of conversion or exercise of the Common Stock Equivalents then  outstanding;  or
(iii) upon the  expiration  of any rights of  conversion  or exercise  under any
unexercised  Common Stock  Equivalents,  the  Conversion  Rate computed upon the
original  issue  thereof (or upon the  occurrence  of a record date with respect
thereto),  and any  subsequent  adjustments  based  thereon,  shall,  upon  such
expiration,  be  recomputed  as if the only  additional  shares of Common  Stock
issued  were  the  shares  of such  stock,  if any,  actually  issued  upon  the
conversion or exercise of such Common Stock Equivalents; or (iv) in the event of
issuance of Common Stock  Equivalents  which expire by their terms not more than
sixty  (60) days  after the date of  issuance  thereof,  no  adjustments  of the
Conversion  Rate  shall be made until the  expiration  or  exercise  of all such
Common Stock Equivalents,  whereupon such adjustment shall be made in the manner
provided in this Subsection (e)(4).

            (5) Adjustment of Conversion  Rate for Diluting  Issues.  The amount
                ----------------------------------------------------
obtained by dividing One Hundred Dollars  ($100.00) by the Conversion Rate shall
be  called  the  "Conversion  Price."  Except  as  otherwise  provided  in  this
Subsection  (e)(5),  in the event the Corporation  after the Original Issue Date
sells or issues  any Common  Stock or Common  Stock  Equivalents  at a per share
consideration  (as defined below) less than the Conversion  Price then in effect
for the Series B Preferred  Stock,  then the Conversion  Rate and the Conversion
Price then in effect  shall be adjusted as provided in  paragraphs  (A), (B) and
(C) hereof.  With  respect to the sale or issuance of Common  Stock  Equivalents
which are  convertible  into or  exchangeable  for Common Stock without  further
consideration,  the per share  consideration shall be determined by dividing the
maximum  number  of  shares  (as set forth in the  instrument  relating  thereto
without regard to any provisions contained therein for subsequent  adjustment of
such  number)  of Common  Stock  issuable  with  respect  to such  Common  Stock
Equivalents  into the aggregate  consideration  received by the Corporation upon
the sale or issuance  of such  Common  Stock  Equivalents.  With  respect to the
issuance of other Common Stock Equivalents, the per share consideration shall be
determined  by  dividing  the  maximum  number  of  shares  (as set forth in the
instrument  relating thereto without regard to any provisions  contained therein
for subsequent  adjustment of such number) of Common Stock issuable with respect
to such Common Stock  Equivalents into the aggregate  consideration  received by
the

                                      A-18


Corporation upon the sale or issuance of such Common Stock  Equivalents plus the
total  consideration  receivable  by the  Corporation  upon  the  conversion  or
exercise of such  Common  Stock  Equivalents.  The  issuance of Common  Stock or
Common Stock  Equivalents for no  consideration or for less than $1.00 per share
shall be deemed to be an  issuance  at a per share  consideration  of $1.00.  In
connection  with the sale or  issuance  of  Common  Stock  and/or  Common  Stock
Equivalents  for noncash  consideration,  the amount of  consideration  shall be
determined by the Board of Directors. For the purposes of the foregoing, the per
share  consideration  with  respect to the sale or issuance  of Common  Stock or
Common  Stock  Equivalents  shall  be  the  price  per  share  received  by  the
Corporation,  prior to the payment of any expenses,  commissions,  discounts and
other applicable costs.

      As used in this  Subsection  (e)(5),  "Additional  Shares of Common Stock"
shall mean either shares of Common Stock issued subsequent to the Original Issue
Date or, with respect to the issuance of Common Stock Equivalents  subsequent to
the  Original  Issue  Date,  the  maximum  number of shares (as set forth in the
instrument  relating thereto without regard to any provisions  contained therein
for  subsequent  adjustment of such number) of Common Stock issuable in exchange
for, upon conversion of, or upon exercise of such Common Stock Equivalents.

                 (A)  Upon  each  issuance  of  Common  Stock  for a  per  share
      consideration less than the Conversion Price in effect on the date of such
      issuance, the Conversion Rate of the Series B Preferred Stock in effect on
      such date will be adjusted by multiplying it by a fraction:

      (x)   the numerator of which shall be the number of shares of Common Stock
            outstanding  immediately  prior to the  issuance of such  Additional
            Shares of Common Stock, plus the number of such Additional Shares of
            Common Stock so issued, and

      (y)   the denominator of which shall be the number of shares
            of Common Stock outstanding immediately prior to the
            issuance of such Additional Shares of Common Stock
            plus the number of shares of Common Stock which the
            aggregate net consideration received by the
            Corporation for the total number of such Additional
            Shares of Common Stock so issued would purchase at the
            Conversion Price then in effect.

                 (B)  Upon   each   issuance   of  Common   Stock   Equivalents,
      exchangeable  without further  consideration  into Common Stock, for a per
      share  consideration  less than the Conversion Price in effect on the date
      of such issuance,  the Conversion  Rate of the Series B Preferred Stock in
      effect  on  such  date  will  be  adjusted  as in  paragraph  (A) of  this
      Subsection  (e)(5)  on the basis  that the  related  Additional  Shares of
      Common Stock are to be treated as having been

                                      A-19


      issued on the date of issuance of the Common  Stock  Equivalents,  and the
      aggregate  consideration received by the Corporation for such Common Stock
      Equivalents  shall be  deemed to have been  received  for such  Additional
      Shares of Common Stock.

                 (C) Upon each issuance of Common Stock  Equivalents  other than
those  described in paragraph  (B) of this  Subsection  (e)(5),  for a per share
consideration  less  than the  Conversion  Price in  effect  on the date of such
issuance,  the Conversion Rate of the Series B Preferred Stock in effect on such
date will be adjusted as in paragraph (A) of this Subsection (e)(5) on the basis
that the related  Additional  Shares of Common Stock are to be treated as having
been issued on the date of issuance of such Common  Stock  Equivalents,  and the
aggregate consideration received and receivable by the Corporation on conversion
or  exercise  of such  Common  Stock  Equivalents  shall be  deemed to have been
received for such Additional Shares of Common Stock.

                 (D) Once any  Additional  Shares  of  Common  Stock  have  been
treated as having been issued for the purpose of this  Subsection  (e)(5),  they
shall be treated as issued and  outstanding  shares of Common Stock whenever any
subsequent  calculations  must be made pursuant hereto. On the expiration of any
options,  warrants or rights to purchase  Additional Shares of Common Stock, the
termination of any rights to convert or exchange for Additional Shares of Common
Stock,  the expiration of any options or rights  related to such  convertible or
exchangeable securities on account of which an adjustment in the Conversion Rate
has been made previously pursuant to this Subsection (e)(5) or the expiration or
termination  of any Common Stock  Equivalents,  then the  Conversion  Rate shall
forthwith be readjusted to such  Conversion Rate as would have been obtained had
the  adjustment  made  upon the  issuance  of such  options,  warrants,  rights,
securities  or options  or rights  related to such  securities  or Common  Stock
Equivalents  been  made  upon the basis of the  issuance  of only the  number of
shares of Common  Stock  actually  issued  upon the  exercise  of such  options,
warrants or rights,  upon the conversion or exchange of such  securities or upon
the  exercise of the options or rights  related to such  securities  or upon the
exercise of the Common Stock  Equivalents.  Any  readjustment  of the Conversion
Rate shall also  cause an  appropriate  readjustment  of the  Conversion  Price,
calculated  by  dividing  the  readjusted   Conversion  Rate  into  the  initial
Conversion Price.

                 (E)  The  foregoing  notwithstanding,   no  adjustment  of  the
Conversion Rate or Conversion Price shall be made as a result of the issuance of
the following, but such shares of Common Stock shall be deemed to be outstanding
upon issuance for all other purposes hereof:

            (w)  shares of Common Stock (i) issued or issuable to
      employee benefit plans (including, but not limited to, stock

                                      A-20


      option plans,  tax-qualified employee retirement plans and current cash or
      stock bonus awards) of the  Corporation,  or to employees or beneficiaries
      pursuant  to said  plans  whether  currently  in  existence  or  hereafter
      adopted, and (ii) relating to 514,351 shares of Common Stock issuable upon
      conversion of the Corporation's 8% Convertible  Subordinated Notes Due May
      15,  1997 (such  number to be  appropriately  adjusted in the event of any
      recapitalization,  reorganization,  stock dividend, stock split or similar
      event affecting the capital stock of the Corporation);

            (x) any shares of Common Stock pursuant to which the Conversion Rate
      and  Conversion  Price have been adjusted  under  Subsection (3) or (4) of
      this Section (e);

            (y) any shares of Common  Stock  issued  pursuant  to the  exchange,
      conversion  or  exercise  of  any  Common  Stock  Equivalents  which  have
      previously been incorporated into computations  hereunder on the date when
      such Common Stock Equivalents were issued; or

            (z)  Common  Stock  issued or  issuable  with  respect  to which the
      holders of all the  outstanding  Series B  Preferred  Stock have waived in
      writing the right to any adjustment hereunder.  In such event, such waiver
      shall be binding on all subsequent holders of Series B Preferred Stock.

            (6) Reorganization,  Merger,  Consolidation or Sale of Assets. If at
                ----------------------------------------------------------
any time or from time to time  there  shall be a capital  reorganization  of the
Common  Stock  (other  than  a  subdivision,  combination,  reclassification  or
exchange of shares  provided  for  elsewhere in this Section (e)) or a merger or
consolidation of the Corporation with or into another  corporation,  or the sale
of all or substantially  all of the  Corporation's  properties and assets to any
other  person  which is effected so that holders of Common Stock are entitled to
receive (either directly or upon subsequent  liquidation)  stock,  securities or
assets with respect to or in exchange for Common Stock,  then, as a part of such
reorganization,  merger,  consolidation or sale, provision shall be made so that
the holders of the Series B  Preferred  Stock  shall  thereafter  be entitled to
receive upon  conversion of the Series B Preferred Stock the number of shares of
stock, securities or assets of the Corporation,  or of the successor corporation
resulting from such merger or consolidation or sale, to which a holder of Common
Stock  deliverable  upon  conversion  would have been  entitled on such  capital
reorganization,  merger,  consolidation  or sale. In any such case,  appropriate
adjustment  shall be made in the  application  of the provisions of this Section
(e) with  respect to the rights of the holders of the Series B  Preferred  Stock
after  the  reorganization,  merger,  consolidation  or sale to the end that the
provisions of this Section (e) (including  adjustment of the Conversion Rate and
Conversion  Price  then in effect  and the  number of  shares  purchasable  upon
conversion of the Series B

                                      A-21


Preferred  Stock) shall be applicable  after that event as nearly  equivalent as
may be practicable.

            (7)  No  Adjustment.  No  adjustment  to  the  Conversion  Rate  and
                 ---------------
Conversion  Price shall be made if such  adjustment  would result in a change in
the Conversion  Price of less than one percent (l%). Any adjustment of less than
one (1%) percent which is not made shall be carried forward and shall be made at
the time of and together with any subsequent  adjustment  which, on a cumulative
basis,  amounts to an adjustment  of one percent (1%) or more in the  Conversion
Price.

            (8)  Certificate  as to  Adjustments.  Upon the  occurrence  of each
                 --------------------------------
adjustment or  readjustment of the Conversion Rate pursuant to this Section (e),
the  Corporation  at its expense  shall  promptly  compute  such  adjustment  or
readjustment  in accordance with the terms hereof and cause  independent  public
accountants  selected by the Corporation to verify such  computation and prepare
and  furnish to each holder of Series B Preferred  Stock a  certificate  setting
forth such adjustment or readjustment and showing in detail the facts upon which
such  adjustment or  readjustment  is based.  The  Corporation  shall,  upon the
written request at any time of any holder of Series B Preferred  Stock,  furnish
or cause to be furnished  to such holder a like  certificate  setting  forth (i)
such  adjustments  and  readjustments,  (ii) the Conversion Rate at that time in
effect,  and (iii) the number of shares of Common Stock and the amount,  if any,
of other  property  which at that time would be received upon the  conversion of
Series B Preferred Stock.

            (9)  Notices  of  Record  Date.  In the  event of any  taking by the
                 --------------------------
Corporation  of a record of the  holders of any class of  securities  other than
Series B Preferred  Stock for the purpose of determining the holders thereof who
are  entitled to receive any  dividend or other  distribution,  any Common Stock
Equivalents  or any right to subscribe  for,  purchase or otherwise  acquire any
shares of stock of any class or any other securities or property,  or to receive
any other right, the Corporation shall mail to each holder of Series B Preferred
Stock at least twenty (20) days prior to the date  specified  therein,  a notice
specifying  the date on which any such  record is to be taken for the purpose of
such  dividend,  distribution  or rights,  and the amount and  character of such
dividend, distribution or rights.

            (10) Reservation of Stock Issuable Upon Conversion.  The Corporation
                 ----------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Series B Preferred Stock such number of its shares of Common Stock
as shall  from  time to time be  sufficient  to  effect  the  conversion  of all
outstanding  shares  of the  Series B  Preferred  Stock;  and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series B

                                      A-22


Preferred Stock, the Corporation shall take such corporate action as may, in the
opinion of its counsel,  be necessary  to increase its  authorized  but unissued
shares of Common Stock to such number of shares as shall be sufficient  for such
purpose.

            (f) Redemption by  Corporation.  The Series B Preferred Stock may be
                ---------------------------
redeemed for cash solely at the option of the Corporation, either in whole or in
part,  at any time or from time to time,  at One Hundred  Dollars  ($100.00) per
share,  plus an amount equal to the amount of all  dividends  accrued but unpaid
(whether or not declared) to the date fixed for redemption.

      Unless full cumulative dividends on all outstanding shares of the Series B
Preferred  Stock shall have been or  contemporaneously  are declared and paid or
set apart for  payment  for all past  dividend  periods,  the Series B Preferred
Stock may not be redeemed  unless all  outstanding  preferred stock is redeemed,
and  neither  the  Corporation  nor any  subsidiary  thereof  may  purchase  any
preferred  stock,  including shares of the Series B Preferred Stock, and neither
the Corporation  nor any subsidiary  thereof may redeem or purchase any class or
series of  capital  stock  ranking  junior to the  Series B  Preferred  Stock in
respect to dividends or distributions upon liquidation;  provided, however, that
the  Corporation  may complete the purchase or redemption of shares of preferred
stock for which a purchase contract was entered into, or notice of redemption of
which was initially given, prior to such default in payment of dividends.

      If less than all of the outstanding shares of Series B Preferred Stock are
to be redeemed,  the shares to be redeemed shall be selected by the  Corporation
from outstanding shares not previously called for redemption,  pro rata, by lot,
or in such other equitable manner as the Board of Directors may determine.

      Notice of any  proposed  redemption  of Series B Preferred  Stock shall be
given by the  Corporation  by mailing a copy of such notice at least thirty (30)
days but not more  than  sixty  (60)  days  prior  to the  date  fixed  for such
redemption  to each  holder  of  record of the  shares  to be  redeemed  at such
holder's  address  appearing on the books of the  Corporation.  On and after the
date  fixed for  redemption  dividends  shall  cease to accrue on the  shares of
Series B Preferred Stock called for redemption,  whether or not the certificates
for such shares are actually surrendered for redemption.  All shares of Series B
Preferred  Stock redeemed  pursuant to this Section (f) shall be restored to the
status of authorized and unissued shares of preferred stock,  undesignated as to
series.

            (g)  Notices.  Any notice  required by the  provisions  hereof to be
                 --------
given to the holders of shares of Series B Preferred Stock shall be deemed given
if deposited in the United States Postal Service, postage prepaid, and addressed
to each  holder of record at his or her  address  appearing  on the books of the
Corporation.


                                      A-23

                                                                      EXHIBIT 11
                ATLANTIC AMERICAN CORPORATION AND SUBSIDIARIES
                 COMPUTATIONS OF NET INCOME PER COMMON SHARE
                               SUPPORTING SCHEDULE


                                     Three Months Ended
                                         March 31,
                                     ------------------
(In thousands, except per share
data)                                   1996      1995
                                        ----      ----


Net income                           $   1,977  $    444

Less preferred dividends to           
affiliates                                (380)      (79)
                                     --------------------

Net income available to common                
shareholders                         $   1,597  $    365
                                     ====================

Weighted average common shares
outstanding                             18,808    18,560
                                     ====================

Net income per common share          $    0.08  $   0.02
                                     ====================


NOTE:  Fully diluted earnings per common share are not presented because the
effect of convertible subordinated notes and preferred stock is
anti-dilutive.















 

7 1000 3-MOS DEC-31-1996 MAR-31-1996 0 108201 108201 39413 6924 46 157858 26354 23670 15351 258520 117088 36405 3730 0 45025 0 164 18712 27268 258520 21385 2680 670 38 14088 6392 0 1977 0 1977 0 0 0 1977 0.08 0.08 0 0 0 0 0 0 0