SIGNATURES THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
Table of Contents - ----------------- ATLANTIC AMERICAN CORPORATION 401(K) RETIREMENT SAVINGS PLAN The following exhibits are filed herewith: Exhibit 1: Financial Statements and Schedules as of December 31, 2001 and 2000 together with auditor's report. Exhibit 2: Consent of Gifford , Hillegas & Ingwersen, P.C.
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
Financial Statements and Supplemental Schedule
For the Years Ended December 31, 2001 and 2000
with
Report of Independent Auditors
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT PLAN
TABLE OF CONTENTS
December 31, 2001 and 2000
- --------------------------------------------------------------------------------
Independent Auditors' Report...................................................1
Statements of Net Assets Available for Benefits................................2
Statement of Changes in Net Assets Available for Benefits......................3
Notes to Financial Statements..................................................4
Supplemental Schedule:
Schedule H, Line 4i: Schedule of Assets Held for Investment Purposes
INDEPENDENT AUDITORS' REPORT
To the Plan Administrator and Plan Participants of Atlantic American
Corporation 401(k) Retirement Savings Plan:
We have audited the accompanying statements of net assets available for
benefits of the Atlantic American Corporation 401(k) Retirement Savings
Plan as of December 31, 2001, and the related statement of changes in net
assets available for benefits for the year ended December 31, 2001. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based
on our audit. The financial statements of Atlantic American Corporation
401(k) Retirement Savings Plan as of December 31, 2000 were audited by
other auditors, whose report dated June 1, 2001 expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of the
Atlantic American Corporation 401(k) Retirement Savings Plan as of December
31, 2001, and the changes in net assets available for benefits for the year
then ended in conformity with accounting principles generally accepted in
the United States.
Our audit of the Plan's financial statements as of and for the year ended
December 31, 2001 was performed for the purpose of forming an opinion on
the basic financial statements taken as a whole. The supplemental schedule
listed in the index is presented for the purpose of additional analysis and
is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974. The supplemental schedule is the
responsibility of the Plan's management. The supplemental information has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
GIFFORD, HILLEGASS & INGWERSEN, P.C.
Atlanta, Georgia
May 31, 2002
1
ATLANTIC AMERICAN CORPORATION 401(k) RETIREMENT SAVINGS
PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
For the Years Ended December 31, 2001 and 2000
- --------------------------------------------------------------------------------
2001 2000
------------------ ------------------
Investments, at fair value $ 4,325,844 $ 4,834,695
Cash 34,876 1,547
Participant Contributions Receivable - 28,721
Employer Contributions Receivable - 33,314
------------------ ------------------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS $ 4,360,720 $ 4,898,277
================== ==================
The accompanying notes are an integral part of these
financial statements.
2
ATLANTIC AMERICAN CORPORATION 401(k) RETIREMENT SAVINGS
PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the Year Ended December 31, 2001
- --------------------------------------------------------------------------------
Additions to Net Assets
Investment income:
Interest and dividend income $ 107,510
-----------------
TOTAL INVESTMENT INCOME 107,510
Contributions:
Participants 442,959
Company 158,292
Rollover -
-----------------
TOTAL CONTRIBUTIONS 601,251
-----------------
TOTAL ADDITIONS TO NET ASSETS 708,761
Deductions from Net Assets
Benefit payments to participants (399,711)
Net depreciation in fair market value of investments (846,607)
-----------------
TOTAL DEDUCTIONS (1,246,318)
-----------------
Net Decrease in Benefits (537,557)
Net Assets Available for Benefits at Beginning of Year 4,898,277
-----------------
Net Assets Available for Benefits at End of Year $ 4,360,720
=================
The accompanying notes are an integral part of these
financial statements.
3
ATLANTIC AMERICAN CORPORATION 401(k) RETIREMENT SAVINGS
PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
- --------------------------------------------------------------------------------
NOTE 1--DESCRIPTION OF THE PLAN
The following description of the Atlantic American Corporation 401(k) Retirement
Savings Plan (the "Plan") provides only general information. Participating
members ("Participants") should refer to the Plan document for a more complete
description of the Plan's provisions. Information with regard to eligibility,
contributions, distributions, vesting, withdrawals, restoration, loans, fund
redistribution, and definitions of all terms are contained in that document.
General: The Plan is a defined contribution plan available to all U.S. employees
of Atlantic American Corporation (the "Company"). All employees of the Company,
except collective bargaining employees, nonresident aliens, and leased employees
are eligible to participate on the first day of the upcoming quarter in which
the individual became an employee of the Company. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), as
amended.
Plan Administration: AMVESCAP National Trust Company (the "Trustee") is the
Trustee of the Plan and has custodial responsibility for the Plan's assets,
except for company stock that is held by State Street Bank and Trust Company,
including the authority and power to, among other things, invest the principal
and income of the Plan's assets.
Contributions: Participants may elect to contribute in 1% increments up to 16%
of their annual compensation, as defined by the Plan, subject to certain
limitations under the Internal Revenue Code (the "Code") into any of the
investment funds offered by the Plan. A participant may change his or her
deferral percentage at any time, however the changes take effect once a month.
Participants may also contribute amounts representing distributions from other
qualified benefit plans. These contributions are classified as rollover
contributions in the statement of changes in net assets available for plan
benefits for the year ended December 31, 2001. The Company provides a matching
contribution equal to a certain percentage of the participant's contributions.
For the year ended December 31, 2001, the Company's matching contribution
equaled 50% of the first 6% of each participant's contribution. All Company
matching contributions are in Company common stock. A participant can elect to
transfer the Company contributions into another investment fund only after the
participant is fully vested in the Company matching contributions.
Vesting: Participants are always fully vested in their own contributions. Each
participant becomes vested in the company contributions based on years of
continuous service. Effective October 1, 2000, the vesting percentage for
company contributions was amended as follows:
4
ATLANTIC AMERICAN CORPORATION 401(k) RETIREMENT SAVINGS
PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
- --------------------------------------------------------------------------------
NOTE 1--DESCRIPTION OF THE PLAN--Continued
Prior to Effective
October 1, October 1,
2000 2000
------------------ ------------------
Years of service:
Less than one 0% 0%
One 10 20
Two 20 40
Three 30 60
Four 40 80
Five 60 100
Six 80 100
Seven or more 100 100
In addition, participants become fully vested upon retirement, death, or
disability.
Benefits: Upon termination of service due to death, disability, retirement, or
separation from service, a participant or his or her beneficiary may elect to
receive an amount equal to the value of the participant's vested interest in his
or her account. The form of payment, selected by the participant or his or her
beneficiary, is either a lump-sum distribution, an annuity to be paid in monthly
installments over a fixed number of years, or a direct rollover into a qualified
retirement plan or individual retirement account.
Participant Accounts: Individual accounts are maintained for each of the Plan's
participants and reflect the participant's contributions, employer
contributions, and the participant's share of the Plan's investment income
(loss). Allocations of income (loss) are based on the proportion that each
participant's account balance bears to the total of all participant account
balances and their investment elections.
Investment Options: Participants may direct their contributions and any related
earnings into several investment options in 1% increments. Participants may
change their investment elections at any time. The participants in the Plan can
invest in any of the following investment options:
Atlantic American Corporation Common Stock - Funds are invested in
common stock of the Company.
5
ATLANTIC AMERICAN CORPORATION 401(k) RETIREMENT SAVINGS
PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
- --------------------------------------------------------------------------------
NOTE 1--DESCRIPTION OF THE PLAN--Continued
INVESCO Cash Reserves Fund - Mutual fund that invests in short-term
obligations, such as commercial paper, U.S. government and government
agency obligations, and repurchase agreements.
INVESCO Core Equity Fund - Mutual fund that invests in dividend-paying
common and preferred stocks of large U.S. companies and in convertible
bonds, debt issues, and preferred stocks.
INVESCO Select Income Fund - Mutual fund that invests primarily in bonds
and marketable debt securities of established companies.
INVESCO Balanced Fund - Mutual fund that invests in common stocks and in
fixed income securities, including preferred stocks, convertible
securities, and bonds.
INVESCO Dynamics Fund - Mutual fund that invests in common stocks of
mid-sized companies in addition to preferred stocks, convertible
securities, and bonds.
INVESCO Small Company Growth Fund - Mutual fund which invests in
small-capitalization companies in the developing stage.
IRT 500 Index Fund - Funds are invested in a collective trust that seeks to
provide total returns that closely replicate those of the Standard and
Poor's 500 composite index.
AIM Basic Value Fund - Mutual fund that invests in under-valued securities,
investment-grade nonconvertible debt securities, U.S. government
securities, high-quality money market instruments, and foreign securities.
Janus Twenty Fund - Mutual fund that invests primarily in common stocks
selected for long-term growth potential.
Janus Advisor Worldwide Fund - Mutual fund that invests primarily in common
stocks of companies of any size located throughout the world.
Investment securities, in general, are exposed to various risks, including
interest rate, credit, and overall market volatility risks. Due to the level of
risk associated with certain investment securities, it is reasonably possible
that changes in the values of investment securities will occur in the near term
and that such changes could materially affect the amounts reported in the
statements of net assets available for plan benefits.
6
ATLANTIC AMERICAN CORPORATION 401(k) RETIREMENT SAVINGS
PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
- --------------------------------------------------------------------------------
NOTE 1--DESCRIPTION OF THE PLAN--Continued
Forfeitures: Amounts forfeited from nonvested accounts are used to reduce future
employer contributions.
Participant Loans: Participants may borrow from their fund accounts a minimum of
$1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested
account balance. Participants may elect to have their loans disbursed from
specific investment funds. Loan terms range from six months to five years or
within a reasonable time if used for the purchase of a primary residence. The
loans are secured by the vested value of the participants' account balance and
bear interest at the prime rate of interest on the date of the loan plus 1%.
Principal and interest are paid ratably through payroll deductions of not less
than $10 per pay period or in a single lump sum.
Administrative Expenses: The Company pays all administrative expenses of the
Plan, including trustee fees.
NOTE 2--ACCOUNTING POLICIES
Basis of Accounting: The accompanying financial statements have been prepared
using the accrual basis of accounting.
Use of Estimates: The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
additions and deductions during the reporting period. Actual results could
differ from those estimates.
Valuation of Investments: All investments are stated at fair value. Securities
traded on national securities exchanges are valued at the closing price on a
daily basis. Investments traded in over-the-counter markets and listed
securities for which no sale was reported on that date are valued at the last
reported bid price. Purchases and sales of securities and mutual funds are
reflected on a trade-date basis.
Net Appreciation (Depreciation): Net realized gains (losses) and unrealized
appreciation (depreciation) are recorded in the accompanying statement of
changes in net assets available for plan benefits as net depreciation in fair
value of investments.
7
ATLANTIC AMERICAN CORPORATION 401(k) RETIREMENT SAVINGS
PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
- --------------------------------------------------------------------------------
NOTE 3--INVESTMENTS
The fair market values of individual investments that represent 5% or more of
the Plan's net assets as of December 31, 2001 and 2000 are as follows:
2001 2000
----------- ------------
Atlantic American Corporation common stock $ 691,653 $ 541,018
INVESCO Cash Reserves Fund 381,894 277,210
INVESCO Core Equity Fund 772,458 970,297
INVESCO Select Income Fund 259,570 267,618
INVESCO Balanced Fund 640,823 798,512
INVESCO Dynamics Fund 1,266,348 1,945,293
Net depreciation in fair value of investments by major investment type for the
year ended December 31, 2001 is as follows:
Common stock - Atlantic American Corporation $ (35,259)
Mutual funds (811,348)
-----------
$ (846,607)
NOTE 4--NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets as of December 31, 2001 and 2000 and the
significant components of the change in net assets for the year ended December
31, 2001 relating to the Company's common stock (nonparticipant-directed
investments) is as follows:
2001 2000
----------- ------------
Net Assets:
Common Stock - Atlantic American Corporation $ 164,362 $ 68,642
=========== ============
Changes in Net Assets:
Contributions - employer $ 103,434
Net appreciation in fair value of common stock 10,991
Benefits paid to participants (10,927)
Transfers to participant-directed investments (7,778)
-----------
$ 95,720
===========
8
ATLANTIC AMERICAN CORPORATION 401(k) RETIREMENT SAVINGS
PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
- --------------------------------------------------------------------------------
NOTE 5--TAX STATUS
The plan is a Prototype Standardized Plan developed by INVESCO. The Internal
Revenue Service issued a letter to INVESCO dated April 18, 1990 stating that the
prototype plan was in accordance with applicable plan requirements as of that
date. Therefore, the plan administrator believes that the plan was qualified and
the related trust was tax-exempt as of December 31, 2001 and 2000.
NOTE 6--PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of plan termination,
participants will become fully vested in their accounts as of the termination
date.
NOTE 7--NONEXEMPT TRANSACTIONS
During the year ended December 31, 2000, the Company failed on three occasions
to remit participant contributions to the Plan within the time required by the
Department of Labor. Such transactions represent nonexempt loans of funds to the
Company from the Plan. The Company calculated the lost earnings on the
non-timely contributions and allocated such lost earnings to affected
participants. No such transactions of this type occurred in 2001.
NOTE 8--RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for plan benefits per
the financial statements to the Form 5500 as follows for the year 2001:
SUPPLEMENTAL INFORMATION
Atlantic American Corporation 401(k) Retirement Savings Plan Schedule H, Line 4i--Schedule of Assets (Held at end of year) December 31, 2001 - --------------------------------------------------------------------------------
EXHIBIT INDEX
Exhibit Number Title
- -------------- -----
2 Consent of Independent Accountants
CONSENT OF PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated May 31, 2002, included in this Annual Report of
the Atlantic American Corporation 401(k) Retirement Savings Plan on Form 11-K
for the year ended December 31, 2001, into the Plan's previously filed
Registration Statement No. 333-89891.
GIFFORD, HILLEGASS & INGWERSEN, P.C.
Atlanta, Georgia
June 26, 2002