Overview
The following is management's discussion and analysis of the financial condition
and results of operations of Atlantic American Corporation ("Atlantic American"
or the "Parent") and its subsidiaries (collectively with the Parent, the
"Company") as of and for the three month and six month periods ended June 30,
2022. This discussion should be read in conjunction with the unaudited condensed
consolidated financial statements and notes thereto included elsewhere herein,
as well as with the audited consolidated financial statements and notes included
in the Company's Annual Report on Form 10-K for the year ended December 31, 2021
(the "2021 Annual Report").
Atlantic American is an insurance holding company whose operations are conducted
primarily through its insurance subsidiaries: American Southern Insurance
Company and American Safety Insurance Company (together known as "American
Southern"), and Bankers Fidelity Life Insurance Company and Bankers Fidelity
Assurance Company (together known as "Bankers Fidelity"). Each operating company
is managed separately, offers different products and is evaluated on its
individual performance.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America ("GAAP") requires management
to make estimates and assumptions that affect reported amounts and related
disclosures. Actual results could differ significantly from those estimates. The
Company has identified certain estimates that involve a higher degree of
judgment and are subject to a significant degree of variability. The Company's
critical accounting policies and the resultant estimates considered most
significant by management are disclosed in the 2021 Annual Report. Except as
disclosed in Note 2 of Notes to Condensed Consolidated Financial Statements, the
Company's critical accounting policies are consistent with those disclosed in
the 2021 Annual Report.
Overall Corporate Results
The following presents the Company's revenue, expenses and net income (loss) for
the three month and six month periods ended June 30, 2022 and the comparable
periods in 2021:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Insurance premiums, net $ 47,065 $ 45,133 $ 94,146 $ 91,223
Net investment income 2,529 2,266 4,869 4,379
Realized investment gains (losses), net (62 ) 50 (72 ) 171
Unrealized gains (losses) on equity
securities, net (4,866 ) 4,003 (2,673 ) 4,747
Other income 3 5 7 12
Total revenue 44,669 51,457 96,277 100,532
Insurance benefits and losses incurred 32,753 31,703 63,922 64,975
Commissions and underwriting expenses 10,215 12,179 23,051 24,743
Interest expense
414 347 768 693
Other expense 3,402 3,474 6,855 6,914
Total benefits and expenses 46,784 47,703 94,596 97,325
Income (loss) before income taxes $ (2,115 ) $ 3,754 $ 1,681 $ 3,207
Net income (loss)
$ (1,679 ) $ 2,962 $ 1,163 $ 2,531
Management also considers and evaluates performance by analyzing the non-GAAP
measure operating income (loss), and believes it is a useful metric for
investors, potential investors, securities analysts and others because it
isolates the "core" operating results of the Company before considering certain
items that are either beyond the control of management (such as taxes, which are
subject to timing, regulatory and rate changes depending on the timing of the
associated revenues and expenses) or are not expected to regularly impact the
Company's operational results (such as any realized and unrealized investment
gains, which are not a part of the Company's primary operations and are, to a
limited extent, subject to discretion in terms of timing of realization).
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A reconciliation of net income (loss) to operating income (loss) for the three
month and six month periods ended June 30, 2022 and the comparable periods in
2021 is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
Reconciliation of Non-GAAP Financial
Measure 2022 2021 2022 2021
(In thousands)
Net income (loss) $ (1,679 ) $ 2,962 $ 1,163 $ 2,531
Income tax expense (benefit) (436 ) 792 518 676
Realized investment (gains) losses, net 62 (50 ) 72 (171 )
Unrealized (gains) losses on equity
securities, net 4,866 (4,003 ) 2,673 (4,747 )
Non-GAAP operating income (loss) $ 2,813 $ (299 ) $ 4,426 $ (1,711 )On a consolidated basis, the Company had net loss of $1.7 million, or $0.09 per
diluted share, for the three month period ended June 30, 2022, compared to net
income of $3.0 million, or $0.14 per diluted share, for the three month period
ended June 30, 2021. The Company had net income of $1.2 million, or $0.05 per
diluted share, for the six month period ended June 30, 2022, compared to net
income of $2.5 million, or $0.11 per diluted share, for the six month period
ended June 30, 2021. The decrease in net income for the three month and six
month periods ended June 30, 2022 was primarily attributable to the decrease in
unrealized gains of $8.9 million and $7.4 million, respectively, over the
comparable periods in 2021.
For the three month period ended June 30, 2022, premium revenue increased $1.9
million, or 4.3%, to $47.1 million from $45.1 million in the comparable period
in 2021. For the six month period ended June 30, 2022, premium revenue
increased $2.9 million, or 3.2%, to $94.1 million from $91.2 million in the
comparable period in 2021. The increase in premium revenue was primarily
attributable to an increase in business writings and price increases in certain
programs within the automobile physical damage and automobile liability lines of
business in the property and casualty operations. Also contributing to this
increase in premium revenue was an increase in the life insurance premiums in
the life and health operations. Partially offsetting this increase was a
decrease in the Medicare supplement line of business in the life and health
operations.
Operating income increased $3.1 million in the three month period ended June 30,
2022 from the three month period ended June 30, 2021. For the six month period
ended June 30, 2022, operating income increased $6.1 million from the comparable
period in 2021. The increase in operating income was primarily due to favorable
loss experience in the life and health operations, resulting from an increase in
earned premium within the group lines of business coupled with a decrease in the
number of claims incurred in the Medicare supplement line of business.
A more detailed analysis of the individual operating segments and other
corporate activities follows.
American Southern
The following summarizes American Southern's premiums, losses, expenses and
underwriting ratios for the three month and six month periods ended June 30,
2022 and the comparable periods in 2021:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(Dollars in thousands)
Gross written premiums $ 39,600 $ 33,053 $ 51,158 $ 44,515
Ceded premiums (1,722 ) (1,565 ) (3,339 ) (3,249 )
Net written premiums $ 37,878 $ 31,488 $ 47,819 $ 41,266
Net earned premiums $ 18,769 $ 16,362 $ 36,112 $ 32,977
Insurance benefits and losses incurred 14,040 10,157 24,518 21,906
Commissions and underwriting expenses 4,774 5,293 10,717 9,579
Underwriting income $ (45 ) $ 912 $ 877 $ 1,492
Loss ratio 74.8 % 62.1 % 67.9 % 66.4 %
Expense ratio 25.4 32.3 29.7 29.0
Combined ratio 100.2 % 94.4 % 97.6 % 95.4 %
Gross written premiums at American Southern increased $6.5 million, or 19.8%,
during the three month period ended June 30, 2022 and $6.6 million, or 14.9%,
during the six month period ended June 30, 2022, from the comparable periods in
2021. The increase in gross written premiums during the three month and six
month periods ended June 30, 2022 was primarily attributable to an increase in
premiums written in the automobile physical damage and automobile liability
lines of business, resulting from new business writings and price increases in
certain programs.
Ceded premiums increased $0.2 million, or 10.0%, during the three month period
ended June 30, 2022 and $0.1 million, or 2.8%, during the six month period ended
June 30, 2022, from the comparable periods in 2021. American Southern's ceded
premiums are typically determined as a percentage of earned premiums and
generally increase or decrease as earned premiums increase or decrease.
Partially offsetting the increase in ceded premiums in 2022 was a decrease in
ceding rates for two large programs in the automobile liability line of
business.
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The following presents American Southern's net earned premiums by line of
business for the three month and six month periods ended June 30, 2022 and the
comparable periods in 2021:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(In thousands)
Automobile liability $ 8,560 $ 7,276 $ 16,185 $ 15,013
Automobile physical damage 6,447 5,483 12,470 11,017
General liability 1,430 1,424 2,859 2,677
Surety 1,503 1,327 2,968 2,644
Other lines 829 852 1,630 1,626
Total $ 18,769 $ 16,362 $ 36,112 $ 32,977Net earned premiums increased $2.4 million, or 14.7%, during the three month
period ended June 30, 2022, and $3.1 million, or 9.5%, during the six month
period ended June 30, 2022, over the comparable periods in 2021. The increase in
net earned premiums was primarily attributable to an increase in business
writings and price increases in certain programs within the automobile physical
damage and automobile liability lines of business as previously mentioned.
Premiums are earned ratably over their respective policy terms, and therefore
premiums earned in the current year are related to policies written during both
the current year and immediately preceding year.
The performance of an insurance company is often measured by its combined ratio.
The combined ratio represents the percentage of losses, loss adjustment expenses
and other expenses that are incurred for each dollar of premium earned by the
company. A combined ratio of under 100% represents an underwriting profit while
a combined ratio of over 100% indicates an underwriting loss. The combined ratio
is divided into two components, the loss ratio (the ratio of losses and loss
adjustment expenses incurred to premiums earned) and the expense ratio (the
ratio of expenses incurred to premiums earned).
Insurance benefits and losses incurred at American Southern increased $3.9
million, or 38.2%, during the three month period ended June 30, 2022, and
increased $2.6 million, or 11.9%, during the six month period ended June 30,
2022, over the comparable periods in 2021. As a percentage of earned premiums,
insurance benefits and losses incurred were 74.8% in the three month period
ended June 30, 2022, compared to 62.1% in the three month period ended June 30,
2021. For the six month period ended June 30, 2022, this ratio increased to
67.9% from 66.4% in the comparable period in 2021. The increase in the loss
ratio during the three month and six month periods ended June 30, 2022 was
mainly due to severity of losses reported from programs within the automobile
liability line of business. Partially offsetting this increase was a decrease
in the frequency of claims in the automobile physical damage line of business.
Commissions and underwriting expenses decreased $0.5 million, or 9.8%, during
the three month period ended June 30, 2022, and increased $1.1 million, or 11.9%
during the six month period ended June 30, 2022, over the comparable periods in
2021. As a percentage of earned premiums, underwriting expenses were 25.4% in
the three month period ended June 30, 2022, compared to 32.3% in the three month
period ended June 30, 2021. For the six month period ended June 30, 2022, this
ratio increased to 29.7% from 29.0% in the comparable period in 2021. The
decrease in the expense ratio during the three month period ended June 30, 2022
was primarily due to American Southern's use of a variable commission structure
with certain agents, which compensates the participating agents in relation to
the loss ratios of the business they write. During periods in which the loss
ratio decreases, commissions and underwriting expenses will generally increase,
and conversely, during periods in which the loss ratio increases, commissions
and underwriting expenses will generally decrease. During the three month
period ended June 30, 2022, variable commissions decreased by $0.7 million from
the comparable period in 2021 due to less favorable loss experience from
accounts subject to variable commissions. During the six month period ended June
30, 2022, variable commissions increased by $0.4 million, respectively, from the
comparable period in 2021 due to favorable loss experience from accounts subject
to variable commissions.
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Bankers Fidelity
The following summarizes Bankers Fidelity's earned premiums, losses, expenses
and underwriting ratios for the three month and six month periods ended June 30,
2022 and the comparable periods in 2021:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(Dollars in thousands)
Medicare supplement $ 37,276 $ 40,866 $ 75,247 $ 81,858
Other health products 2,949 2,368 5,922 4,755
Life insurance 3,570 2,450 8,087 5,337
Gross earned premiums 43,795 45,684 89,256 91,950
Ceded premiums (15,499 ) (16,913 ) (31,222 ) (33,704 )
Net earned premiums 28,296 28,771 58,034 58,246
Insurance benefits and losses incurred 18,713 21,546 39,404 43,069
Commissions and underwriting expenses 7,373 8,756 16,119 18,640
Total expenses
26,086 30,302 55,523 61,709
Underwriting income (loss) $ 2,210 $ (1,531 ) $ 2,511 $ (3,463 )
Loss ratio 66.1 % 74.9 % 67.9 % 73.9 %
Expense ratio 26.1 30.4 27.8 32.0
Combined ratio 92.2 % 105.3 % 95.7 % 105.9 %
Net earned premium revenue at Bankers Fidelity decreased $0.5 million, or 1.7%,
during the three month period ended June 30, 2022, and $0.2 million, or 0.4%,
during the six month period ended June 30, 2022, from the comparable periods in
2021. Gross earned premiums from the Medicare supplement line of business
decreased $3.6 million, or 8.8%, during the three month period ended June 30,
2022, and $6.6 million, or 8.1%, during the six month period ended June 30,
2022, due primarily to non-renewals exceeding the level of new business
writings. Other health product premiums increased $0.6 million, or 24.5%, during
the three month period ended June 30, 2022, and $1.2 million, or 24.5%, during
the six month period ended June 30, 2022, over the comparable periods in 2021,
primarily as a result of new sales of the company's group health and individual
cancer products. Gross earned premiums from the life insurance line of business
increased $1.1 million, or 45.7%, during the three month period ended June 30,
2022, and increased $2.8 million, or 51.5%, during the six month period ended
June 30, 2022, over the comparable periods in 2021, primarily due to an increase
in the group life products premium. Partially offsetting this increase was a
decrease in individual life products premium, resulting from the redemption and
settlement of existing individual life policy obligations exceeding the level of
new individual life sales. Premiums ceded decreased $1.4 million, or 8.4%,
during the three month period ended June 30, 2022 and $2.5 million, or 7.4%,
during the six month period ended June 30, 2022. The decrease in ceded premiums
for the three month and six month periods ended June 30, 2022 was due to a
decrease in Medicare supplement premiums subject to reinsurance.
Insurance benefits and losses incurred decreased $2.8 million, or 13.1%, during
the three month period ended June 30, 2022, and $3.7 million, or 8.5%, during
the six month period ended June 30, 2022, from the comparable periods in 2021.
As a percentage of earned premiums, benefits and losses were 66.1% in the three
month period ended June 30, 2022, compared to 74.9% in the three month period
ended June 30, 2021. For the six month period ended June 30, 2022, this ratio
decreased to 67.9% from 73.9% in the comparable period in 2021. The decrease in
the loss ratio for the three month and six month periods ended June 30, 2022 was
primarily due to a decrease in the loss ratio in the Medicare supplement line of
business as a result of improved rate adequacy, as well as a decrease in the
loss ratio in the group lines of business.
Commissions and underwriting expenses decreased $1.4 million, or 15.8%, during
the three month period ended June 30, 2022, and $2.5 million, or 13.5%, during
the six month period ended June 30, 2022, over the comparable periods in 2021.
As a percentage of earned premiums, underwriting expenses were 26.1% in the
three month period ended June 30, 2022, compared to 30.4% in the three month
period ended June 30, 2021. For the six month period ended June 30, 2022, this
ratio decreased to 27.8% from 32.0% in the comparable period in 2021. The
decrease in the expense ratio for the three month and six month periods ended
June 30, 2022 was primarily due to the level of additions to deferred
acquisition costs ("DAC") exceeding the amortization of DAC.
Net Investment Income and Realized Gains (Losses)
Investment income increased $0.3 million, or 11.6%, during the three month
period ended June 30, 2022, and $0.5 million, or 11.2%, during the six month
period ended June 30, 2022, over the comparable periods in 2021. The increase in
investment income was primarily attributable to prepayment income of $0.3
million in each of the three month and six month periods ended June 30, 2022,
from the comparable periods in 2021, related to the redemption of certain fixed
maturities. Also, contributing to the increase in investment income was an
increase in the equity in earnings from investments in the Company's limited
liability companies of $0.04 million and $0.1 million, respectively.
The Company had net realized investment losses of $0.1 million during the three
month period ended June 30, 2022, compared to net realized investment gains of
$0.1 during the three month period ended June 30, 2021. The Company had net
realized investment losses of $0.1 million during the six month period ended
June 30, 2022 and net realized investment gains of $0.2 during the six month
period ended June 30, 2021. The net realized investment losses during the three
month and six month periods ended June 30, 2022 resulted primarily from the
redemption of several of the Company's investments in fixed maturity securities.
The net realized investment gains during the three month and six month periods
ended June 30, 2021 resulted from the disposition of several of the Company's
investments in fixed maturity securities. Management continually evaluates the
Company's investment portfolio and makes adjustments for impairments and/or
divests investments as may be determined to be appropriate.
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Unrealized Gains (Losses) on Equity Securities
Investments in equity securities are measured at fair value at the end of the
reporting period, with any changes in fair value reported in net income during
the period, with certain exceptions. The Company recognized net unrealized
losses on equity securities of $4.9 million during the three month period ended
June 30, 2022 and unrealized gains on equity securities of $4.0 million during
the three month period ended June 30, 2021. The Company recognized net
unrealized losses on equity securities of $2.7 million during the six month
period ended June 30, 2022 and unrealized gains on equity securities of $4.7
million during the six month period ended June 30, 2021. Changes in unrealized
gains on equity securities for the applicable periods are primarily the result
of fluctuations in the market value of certain of the Company's equity
securities.
Interest Expense
Interest expense increased $0.1 million, or 19.3%, during the three month period
ended June 30, 2022, and $0.1 million, or 10.8%, during the six month period
ended June 30, 2022, from the comparable periods in 2021. Changes in interest
expense were primarily due to changes in the London Interbank Offered Rate
("LIBOR"), as the interest rates on the Company's outstanding junior
subordinated deferrable interest debentures ("Junior Subordinated Debentures")
are directly related to LIBOR. The Company is preparing for the expected
discontinuation of LIBOR by identifying, assessing and monitoring risks
associated with LIBOR transition. Preparation includes taking steps to update
operational processes to support alternative reference rates and models, as well
as evaluating legacy contracts for any changes that may be required, including
the determination of applicable fallbacks.
Liquidity and Capital Resources
The primary cash needs of the Company are for the payment of claims and
operating expenses, maintaining adequate statutory capital and surplus levels,
and meeting debt service requirements. Current and expected patterns of claim
frequency and severity may change from period to period but generally are
expected to continue within historical ranges. The Company's primary sources of
cash are written premiums, investment income and proceeds from the sale and
maturity of its invested assets. The Company believes that, within each
operating company, total invested assets will be sufficient to satisfy all
policy liabilities and that cash inflows from investment earnings, future
premium receipts and reinsurance collections will be adequate to fund the
payment of claims and operating expenses as needed.
Cash flows at the Parent are derived from dividends, management fees, and
tax-sharing payments, as described below, from the subsidiaries. The principal
cash needs of the Parent are for the payment of operating expenses, the
acquisition of capital assets and debt service requirements, as well as the
repurchase of shares and payments of any dividends as may be authorized and
approved by the Company's board of directors from time to time. At June 30,
2022, the Parent had approximately $4.4 million of unrestricted cash and
investments.
The Parent's insurance subsidiaries reported statutory net income of $2.2
million for the six month period ended June 30, 2022, compared to statutory net
income of $1.5 million for the six month period ended June 30, 2021. Statutory
results are impacted by the recognition of all costs of acquiring business. In
periods in which the Company's first year premiums increase, statutory results
are generally lower than results determined under GAAP. Statutory results for
the Company's property and casualty operations may differ from the Company's
results of operations under GAAP due to the deferral of acquisition costs for
financial reporting purposes. The Company's life and health operations'
statutory results may differ from GAAP results primarily due to the deferral of
acquisition costs for financial reporting purposes, as well as the use of
different reserving methods.
Over 90% of the invested assets of the Parent's insurance subsidiaries are
invested in marketable securities that can be converted into cash, if required;
however, the use of such assets by the Company is limited by state insurance
regulations. Dividend payments to a parent corporation by its wholly owned
insurance subsidiaries are subject to annual limitations and are restricted to
10% of statutory surplus or statutory earnings before recognizing realized
investment gains of the individual insurance subsidiaries. At June 30, 2022,
American Southern had $52.5 million of statutory capital and surplus and Bankers
Fidelity had $35.9 million of statutory capital and surplus. In 2022, dividend
payments by the Parent's insurance subsidiaries in excess of $5.6 million would
require prior approval. Through June 30, 2022, the Parent received dividends of
$3.0 million from its subsidiaries.
The Parent provides certain administrative and other services to each of its
insurance subsidiaries. The amounts charged to and paid by the subsidiaries
include reimbursements for various shared services and other expenses incurred
directly on behalf of the subsidiaries by the Parent. In addition, there is in
place a formal tax-sharing agreement between the Parent and its insurance
subsidiaries. As a result of the Parent's tax loss, it is anticipated that the
tax-sharing agreement will continue to provide the Parent with additional funds
from profitable subsidiaries to assist in meeting its cash flow obligations.
The Company has two statutory trusts which exist for the exclusive purpose of
issuing trust preferred securities representing undivided beneficial interests
in the assets of the trusts and investing the gross proceeds of the trust
preferred securities in Junior Subordinated Debentures. The outstanding $18.0
million and $15.7 million of Junior Subordinated Debentures mature on December
4, 2032 and May 15, 2033, respectively, are callable quarterly, in whole or in
part, only at the option of the Company, and have an interest rate of
three-month LIBOR plus an applicable margin. The margin ranges from 4.00% to
4.10%. At June 30, 2022, the effective interest rate was 5.56%. The obligations
of the Company with respect to the issuances of the trust preferred securities
represent a full and unconditional guarantee by the Parent of each trust's
obligations with respect to the trust preferred securities. Subject to certain
exceptions and limitations, the Company may elect from time to time to defer
Junior Subordinated Debenture interest payments, which would result in a
deferral of distribution payments on the related trust preferred securities. As
of June 30, 2022, the Company has not made such an election.
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The Company intends to pay its obligations under the Junior Subordinated
Debentures using existing cash balances, dividend and tax-sharing payments from
the operating subsidiaries, or from existing or potential future financing
arrangements.
At June 30, 2022, the Company had 55,000 shares of Series D preferred stock
("Series D Preferred Stock") outstanding. All of the shares of Series D
Preferred Stock are held by an affiliate of the Company's controlling
shareholder. The outstanding shares of Series D Preferred Stock have a stated
value of $100 per share; accrue annual dividends at a rate of $7.25 per share
(payable in cash or shares of the Company's common stock at the option of the
board of directors of the Company) and are cumulative. In certain circumstances,
the shares of the Series D Preferred Stock may be convertible into an aggregate
of approximately 1,378,000 shares of the Company's common stock, subject to
certain adjustments and provided that such adjustments do not result in the
Company issuing more than approximately 2,703,000 shares of common stock without
obtaining prior shareholder approval; and are redeemable solely at the Company's
option. The Series D Preferred Stock is not currently convertible. At June 30,
2022, the Company had accrued but unpaid dividends on the Series D Preferred
Stock totaling $0.2 million.
Bankers Fidelity Life Insurance Company (''BFLIC") is a member of the Federal
Home Loan Bank of Atlanta ("FHLB"), for the primary purpose of enhancing
financial flexibility. As a member, BFLIC can obtain access to low-cost funding
and also receive dividends on FHLB stock. The membership arrangement provides
for credit availability of five percent of statutory admitted assets, or
approximately $8.2 million, as of June 30, 2022. Additional FHLB stock purchases
may be required based upon the amount of funds borrowed from the FHLB. As of
June 30, 2022, BFLIC has pledged bonds having an amortized cost of $7.9 million
to the FHLB. BFLIC may be required to post additional acceptable forms of
collateral for any borrowings that it makes in the future from the FHLB. As of
2022, BFLIC does not have any outstanding borrowings from the FHLB.
On May 12, 2021, the Company entered into a Revolving Credit Agreement (the
"Credit Agreement") with Truist Bank as the lender (the "Lender"). The Credit
Agreement provides for an unsecured $10 million revolving credit facility that
matures on April 12, 2024. Under the Credit Agreement, the Company will pay
interest on the unpaid principal balance of outstanding revolving loans at the
LIBOR Rate (as defined in the Credit Agreement) plus 2.00%, subject to a LIBOR
floor rate of 1.00%.
The Credit Agreement requires the Company to comply with certain covenants,
including a debt to capital ratio that restricts the Company from incurring
consolidated indebtedness that exceeds 35% of the Company's consolidated
capitalization at any time. The Credit Agreement also contains customary
representations and warranties and events of default. Events of default include,
among others, (a) the failure by the Company to pay any amounts owed under the
Credit Agreement when due, (b) the failure to perform and not timely remedy
certain covenants, (c) a change in control of the Company and (d) the occurrence
of bankruptcy or insolvency events. Upon an event of default, the Lender may,
among other things, declare all obligations under the Credit Agreement
immediately due and payable and terminate the revolving commitments. As of June
30, 2022, the Company had outstanding borrowings of $1.0 million under the
Credit Agreement.
Cash and cash equivalents decreased from $24.8 million at December 31, 2021 to
$15.9 million at June 30, 2022. The decrease in cash and cash equivalents during
the six month period ended June 30, 2022 was primarily attributable to net cash
used in investing activities of $5.0 million primarily as a result of investment
purchases exceeding investment sales and maturity of securities. Also
contributing to the decrease in cash and cash equivalents was net cash used in
operating activities of $4.4 million. Partially offsetting the decrease in cash
and cash equivalents was net cash provided by financing activities primarily as
a result of proceeds from bank financing of $1.0 million.
The Company believes that existing cash balances as well as the dividends, fees,
and tax-sharing payments it expects to receive from its subsidiaries and, if
needed, borrowings under its credit facilities or additional borrowings from
financial institutions, will enable the Company to meet its liquidity
requirements for the foreseeable future. Management is not aware of any current
recommendations by regulatory authorities, which, if implemented, would have a
material adverse effect on the Company's liquidity, capital resources or
operations.
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