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.
ATLANTIC AMERICAN CORPORATION 401(K) RETIREMENT SAVINGS PLAN The following exhibits are filed herewith: Exhibit 1: Financial Statements and Supplemental Information for the years ended December 31, 2004 and 2003 together with Report of Independent Registered Public Accounting Firm. Exhibit 2: Consent of Gifford , Hillegass & Ingwersen, L.L.P. Independent Registered Public Accounting Firm.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report for the Atlantic American Corporation
401(k) Retirement Savings Plan (the "Plan") on Form 11-K for the period ended
December 31, 2004 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, John G. Sample Jr., on behalf of Atlantic
American Corporation, as Senior Vice President & CFO, certify, pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the net assets available for the benefits and changes in net assets
available for benefits of the Plan.
/s/ John G. Sample Jr.
John G. Sample Jr.
Senior Vice President & CFO for Atlantic American Corporation
June 30, 2005
Exhibit 1
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
FINANCIAL STATEMENTS
AND
SUPPLEMENTAL SCHEDULE
For the Years Ended December 31, 2004 and 2003
with
Report of Independent Registered Public Accounting Firm
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT PLAN
TABLE OF CONTENTS
December 31, 2004
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm........................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 at End of Year)...........11
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004 and 2003, and the related statement of changes
in net assets available for benefits for the year ended December 31, 2004.
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 audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (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. We were
not engaged to perform an audit of the Plan's internal control over
financial reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Plan's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also 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 audits provide 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, 2004 and 2003, and the changes in net assets available for benefits for
the year ended December 31, 2004, in conformity with accounting principles
generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental information
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 information is the
responsibility of the Plan's management. The supplemental information has
been subjected to the auditing procedures applied in the audits 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, LLP
May 18, 2005
Atlanta, Georgia
1
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
For the Years Ended December 31, 2004 and 2003
- --------------------------------------------------------------------------------
2004 2003
------------------ ------------------
Investments, at fair value
Common/Collective Trusts $ 1,652,256 $ 1,955,676
Employer Securities 1,337,690 1,403,767
Registered Investment Companies 7,121,381 5,088,693
Participant Loans 127,105 76,868
Employer Contributions Receivable - 25,063
------------------ ------------------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS $ 10,238,432 $ 8,550,067
================== ==================
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, 2004
- --------------------------------------------------------------------------------
Additions to Net Assets
Contributions:
Participants $ 750,405
Company 241,180
Rollover 77,102
-----------------
TOTAL CONTRIBUTIONS 1,068,687
Interest and dividend income 260,552
Net appreciation in fair market value of investments 592,521
-----------------
TOTAL ADDITIONS TO NET ASSETS 1,921,760
Deductions from Net Assets
Benefit payments to participants 226,954
Fees 6,441
-----------------
TOTAL DEDUCTIONS 233,395
-----------------
NET INCREASE 1,688,365
Net Assets Available for Benefits at Beginning of Year 8,550,067
-----------------
Net Assets Available for Benefits at End of Year $ 10,238,432
=================
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, 2004
- --------------------------------------------------------------------------------
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 calendar 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. Subsequent to year end, Merrill Lynch announced
plans to purchase AMVESCAP Retirement, Inc., administrator of the Plan. The
transaction is pending based on customary conditions and regulatory approvals.
Contributions: Participants may elect to contribute in 1% increments up to 25%
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. 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, 2004. The Company provides a matching contribution equal to a certain
percentage of the participant's contributions. For the year ended December 31,
2004, the Company's matching contribution equaled 50% of the first 6% of each
participant's tax deferred 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. The Company may also elect to make
additional matching and profit sharing contributions.
4
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
- --------------------------------------------------------------------------------
NOTE 1--DESCRIPTION OF THE PLAN--Continued
Vesting: Participants are always fully vested in their own contributions. Each
participant becomes vested in the company contributions based on years of
continuous service. The vesting percentage for the Company matching
contributions are as follows:
Years of service:
Less than one 0%
One 20%
Two 40%
Three 60%
Four 80%
Five 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 with a vested
balance greater than $5,000 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. Terminated participants with a vested balance less than
$5,000 will be distributed after termination. As of December 31, 2004 deferred
vested benefits to separated participants totaled $267,931.
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 Fund - Common stock of the Company
with moderate cash and/or cash equivalent holdings for liquidity purposes.
5
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
- --------------------------------------------------------------------------------
NOTE 1--DESCRIPTION OF THE PLAN--Continued
INVESCO Core Fixed Income Trust - Collective trust that seeks current
income, with a secondary objective of capital appreciation.
Fidelity Puritan - Registered investment company that seeks income
consistent with preservation of capital and invests in securities such as
common stocks, preferred stocks, and bonds.
AIM Basic Value Fund - Registered investment company 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 - Registered investment company that invests primarily in
common stocks selected for long-term growth potential.
Janus Advisor Worldwide Growth Fund - Registered investment company that
invests primarily in common stocks of companies of any size located
throughout the world.
INVESCO 500 Index Trust - Collective trust with objective to provide total
investment returns and characteristics that closely replicate those of the
S&P 500 composite stock index.
AIM International Core Equity Fund - Registered investment company that
invests primarily in the stocks of larger-capitalization foreign companies
with a record of stable earnings or dividends.
AIM Core Stock Fund - Registered investment company that invests in
primarily large-cap stocks that are expected to produce income and
consistent, stable returns.
AIM Dynamics Fund - Registered investment company that invests in
medium-sized companies.
AIM Total Return Fund - Registered investment company that invests in a
broadly diversified portfolio of stocks and bonds.
AIM Small Company Growth Fund - Registered investment company that invests
in small-sized companies.
6
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
- --------------------------------------------------------------------------------
NOTE 1--DESCRIPTION OF THE PLAN--Continued
AIM Income Fund - Registered investment company that invests primarily in
fixed-rate corporate debt and government obligations.
AIM Capital Development Fund - Registered investment company that invests
in small and mid-cap stocks.
Janus Mid Cap Value Fund - Registered investment company that invests in
mid-sized companies.
American Washington Mutual Investors Fund - Registered investment company
that seeks to provide current income and the opportunity for growth through
common stocks.
American Funds Growth Fund of America - Registered investment company that
seeks to provide long-term growth of capital through a diversified
portfolio of common stocks.
Baron Growth Fund - Registered investment company that invests in small-cap
growth companies.
Fidelity Advisor Mid Cap Fund - Registered investment company with
objective to seek long-term growth of capital.
INVESCO Structured Small Cap Equity Trust - Collective trust with goal of
long-term capital appreciation.
American Century Ultra - Registered investment company that may only
purchase securities of companies that have operated continuously for three
or more years.
INVESCO Stable Value Trust - Funds are invested in a collective trust that
invests in various high quality fixed income investments that will provide
stable account values.
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. Forfeitures: Amounts
forfeited from nonvested accounts are used to reduce future employer
contributions.
7
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
- --------------------------------------------------------------------------------
NOTE 1-DESCRIPTION OF THE PLAN-Continued
Forfeitures: Amounts forfeited from nonvested accounts are used to reduce future
employer contributions. Forfeitures of $33,295 were used in 2004 to reduce
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.
Administrative Expenses: The Company pays all separately charged administrative
expenses of the Plan, including trustee fees. Fees resulting from individual
participant transactions, such as loan origination and benefit payments, are
paid by the participant and are included in the fee amount on the statement of
changes in net assets available for benefits.
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.
8
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
- --------------------------------------------------------------------------------
NOTE 2--ACCOUNTING POLICIES--Continued
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 appreciation in fair
market value of investments.
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, 2004 are as follows:
Atlantic American Corporation common stock $ 1,337,690
INVESCO 500 Index Trust 542,234
INVESCO Stable Value Trust 1,009,608
AIM Core Stock Fund 524,585
AIM Dynamics Fund 626,963
Baron Growth Fund 638,410
Janus Twenty Fund 537,371
American Balanced Fund 641,479
Fidelity Puritan Fund 767,567
Fidelity Advisor Mid Cap Fund 613,847
Net appreciation in fair market value of investments by major investment type
for the year ended December 31, 2004 is as follows:
Common stock - Atlantic American Corporation $ 37,831
Mutual funds 554,690
-----------
$ 592,521
===========
NOTE 4--NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets as of December 31, 2004 and the significant
components of the change in net assets for the year then ended relating to the
Company's common stock (nonparticipant-directed investments) is as follows:
9
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
- --------------------------------------------------------------------------------
NOTE 4--NONPARTICIPANT-DIRECTED INVESTMENTS--Continued
Net Assets:
Common Stock - Atlantic American Corporation $ 382,117
===========
Changes in Net Assets:
Contributions - employer $ 134,900
Net appreciation in fair value of common stock 12,918
Benefits paid to partially vested former
employees (14,255)
Transfers to participant-directed investments (212,382)
-----------
Total activity $ (78,819)
===========
NOTE 5-TAX STATUS
The Internal Revenue Service has determined and informed the Sponsor by letter
dated June 3, 2003, that the Plan and related trust are designed in accordance
with applicable sections of the Internal Revenue Code ("IRC"). Accordingly, no
provision for income taxes has been made in the accompanying financial
statements.
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-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 2004:
Employee contributions per the financial statements $ 750,405
Add 2003 employee contribution receivable 25,063
------------------
Employee contributions per the Form 5500 $ 775,468
==================
10
SUPPLEMENTAL INFORMATION
ATLANTIC AMERICAN CORPORATION
401(k) RETIREMENT SAVINGS PLAN
PLAN NUMBER 001
58-1027114
SCHEDULE H, LINE 4i--SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2004
- --------------------------------------------------------------------------------
Exhibit 2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-89891) pertaining to the Atlantic American Corporation 401(k)
Retirement Savings Plan of our report dated May 18, 2005, with respect to the
financial statements and schedule of Atlantic American Corporation 401(k)
Retirement Savings Plan included in this Annual Report (Form 11-K) for the year
ended December 31, 2004.
GIFFORD, HILLEGASS & INGWERSEN, L.L.P.
Atlanta, Georgia
June 23, 2005