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") for the years ended December 31, 2024 and 2023. This discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere herein. Operating results achieved in any historical period are not necessarily indicative of results to be expected in any future period.

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") in the property and casualty insurance industry, and Bankers Fidelity Life Insurance Company, Bankers Fidelity Assurance Company and Atlantic Capital Life Assurance Company (together known as "Bankers Fidelity") in the life and health insurance industry. Each operating company is managed separately, offers different products and is evaluated on its individual performance.

Critical Accounting Policies

The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America ("GAAP") and, in management's belief, conform to general practices within the insurance industry. The following is an explanation of the Company's accounting policies and the resultant estimates considered most significant by management. These accounting policies inherently require significant judgment and assumptions and actual operating results could differ significantly from management's estimates determined using these policies. Atlantic American does not expect that changes in the estimates determined using these policies will have a material effect on the Company's financial condition or liquidity, although changes could have a material effect on its consolidated results of operations.

Cash and investmentscomprised 68% of the Company's total assets at December 31, 2024. Substantially all of the Company's investments are in bonds and common and preferred stocks, the values of which are subject to significant market fluctuations. The Company carries all fixed maturities, which includes bonds and redeemable preferred stocks, as available for sale, and equity securities, which includes common and non-redeemable preferred stocks, at their estimated fair values.

On January 1, 2023, the Company adopted accounting standards update ("ASU") 2016-13, Financial Instruments-Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), using a modified retrospective approach. Under ASU 2016-13, for securities in an unrealized loss position, a credit loss is recognized in earnings within realized investment gains (losses) when it is anticipated that the amortized cost will not be recovered. When either: (i) the Company has the intent to sell the security; or (ii) it is more likely than not that the Company will be required to sell the security before recovery, the reduction of amortized cost and the loss recognized in earnings is the entire difference between the security's amortized cost and estimated fair value. If neither of these conditions exists, the difference between the amortized cost of the security and the present value of projected future cash flows expected to be collected is recognized as a credit loss by establishing an ACL with a corresponding charge to earnings in realized investment gains (losses). However, the ACL is limited by the amount that the fair value is less than the amortized cost. This limitation is known as the "fair value floor." If the estimated fair value is less than the present value of projected future cash flows expected to be collected, this portion of the decline in value related to other-than-credit factors ("noncredit loss") is recorded in OCI.

The Company determines the fair values of certain financial instruments based on the fair value hierarchy established in Accounting Standards Codification ("ASC") 820-10-20, Fair Value Measurements and Disclosures("ASC 820-10-20"). The fair values of fixed maturities and equity securities are largely determined by nationally quoted market prices, when available, or independent broker quotations. See Note 2 and Note 3 of Notes to Consolidated Financial Statements with respect to assets and liabilities carried at fair value and information about the inputs used to value those financial instruments, by hierarchy level, in accordance with ASC 820-10-20.

Future policy benefitscomprised 34% of the Company's total liabilities at December 31, 2024. These liabilities relate primarily to life insurance products and are based upon assumed future investment yields, mortality rates, and lapse rates after giving effect to possible risks of adverse deviation. The assumed mortality and lapse rates are based upon the Company's experience modified as necessary to reflect anticipated trends and are generally established at contract inception. If actual results differ from the initial assumptions, the amount of the Company's recorded liability could require adjustment.

Unpaid loss and loss adjustment expensescomprised 32% of the Company's total liabilities at December 31, 2024. This liability includes estimates for: (1) unpaid losses on claims reported prior to December 31, 2024, (2) future development on those reported claims, (3) unpaid ultimate losses on claims incurred prior to December 31, 2024 but not yet reported and (4) unpaid loss adjustment expenses for reported and unreported claims incurred prior to December 31, 2024. Quantification of loss estimates for each of these components involves a significant degree of judgment and estimates may vary, materially, from period to period. Estimated unpaid losses on reported claims are developed based on historical experience with similar claims by the Company. Development on reported claims, estimates of unpaid ultimate losses on claims incurred prior to December 31, 2024 but not yet reported, and estimates of unpaid loss adjustment expenses are developed based on the Company's historical experience, using actuarial methods to assist in the analysis. The Company's actuaries develop ranges of estimated development on reported and unreported claims as well as loss adjustment expenses using various methods, including the paid-loss development method, the reported-loss development method, the paid Bornhuetter-Ferguson method and the reported Bornhuetter-Ferguson method. Any single method used to estimate ultimate losses has inherent advantages and disadvantages due to the trends and changes affecting the business environment and the Company's administrative policies. Further, external factors, such as legislative changes, medical cost inflation, and others may directly or indirectly impact the relative adequacy of liabilities for unpaid losses and loss adjustment expenses. The Company's approach is to select an estimate of ultimate losses based on comparing results of a variety of reserving methods, as opposed to total reliance on any single method. Unpaid loss and loss adjustment expenses are reviewed periodically for significant lines of business, and when current results differ from the original assumptions used to develop such estimates, the amount of the Company's recorded liability for unpaid loss and loss adjustment expenses is adjusted. In the event the Company's actual reported losses in any period are materially in excess of the previously estimated amounts, such losses, to the extent reinsurance coverage does not exist, could have a material adverse effect on the Company's results of operations.

Receivables are amounts due from reinsurers, insureds and agents, and any sales of investment securities not yet settled, and comprised 13% of the Company's total assets at December 31, 2024. Insured and agent balances are evaluated periodically for collectability. Annually, the Company performs an analysis of the creditworthiness of the reinsurers with whom the Company contracts using various data sources. Failure of reinsurers to meet their obligations due to insolvencies, disputes or otherwise could result in uncollectible amounts and losses to the Company. Allowances for uncollectible amounts are established, as and when a loss has been determined probable, against the related receivable. Losses are recognized by the Company when determined on a specific account basis and a general provision for loss is made based on the Company's historical experience.

Deferred acquisition costscomprised 11% of the Company's total assets at December 31, 2024. Deferred acquisition costs are commissions, premium taxes, and other incremental direct costs of contract acquisition that results directly from and are essential to the contract transaction(s) and would not have been incurred by the Company had the contract transaction(s) not occurred. The deferred amounts are recorded as an asset on the balance sheet and amortized to expense in a systematic manner. Traditional life insurance and long-duration health insurance deferred policy acquisition costs are amortized over the estimated premium-paying period of the related policies using assumptions consistent with those used in computing the related liability for policy benefit reserves. Deferred acquisition costs for property and casualty insurance and short-duration health insurance are amortized over the effective period of the related insurance policies. Deferred policy acquisition costs are expensed when such costs are deemed not to be recoverable from future premiums (for traditional life and long-duration health insurance) and from the related unearned premiums and investment income (for property and casualty and short-duration health insurance). Assessments of recoverability for property and casualty and short-duration health insurance are extremely sensitive to the estimates of a subsequent year's projected losses related to the unearned premiums. Projected loss estimates for a current block of business for which unearned premiums remain to be earned may vary significantly from the indicated losses incurred in any previous calendar year.

Deferred income taxesreflect the effect of temporary differences between assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for tax purposes. These deferred income taxes are measured by applying currently enacted tax laws and rates. Valuation allowances are recognized to reduce the deferred tax asset to the amount that is deemed more likely than not to be realized. In assessing the likelihood of realization, management considers estimates of future taxable income and tax planning strategies.

Share-based transactions include employee and director share-based compensation awards. The Company determines a grant date fair value based on the price of our publicly-traded common stock and recognize the related compensation expense, adjusted for actual forfeitures, in the consolidated statement of operations on a straight-line basis over the requisite service period for the entire award. For non-employee share-based compensation awards, the Company recognizes the impact during the period of performance, and the fair value of the award is measured as of the date performance is complete, which is the vesting date.

Refer to Note 1 of Notes to Consolidated Financial Statements for details regarding the Company's significant accounting policies.

Overall Corporate Results

Management also considers and evaluates performance by analyzing the non-GAAP measure operating income or 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 income tax expense, which is 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 or unrealized investment gains or losses, 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).

A reconciliation of net loss, the most directly comparable GAAP measure, to operating income (loss) is as follows:

On a consolidated basis, the Company had net loss of $4.3 million, or $(0.23) per diluted share, in 2024, compared to net loss of $0.2 million, or $(0.03) per diluted share, in 2023. The increase in net loss was primarily due to an unfavorable loss experience in the property and casualty operations due to the frequency and severity of claims in the automobile liability line of business as well as an increase in claims costs in the automobile physical damage line of business. Also contributing to the increase in net loss was an increase in administrative costs related to the growth in the group lines of business within the life and health operations. Partially offsetting this decrease was an increase in net realized investment gains mainly due to gains of $1.2 million from the sale of the Company's interest in a certain limited liability company as well as gains from the sale of a number of the Company's investments in fixed maturities.

Total revenue was $188.2 million in 2024 as compared to $186.8 million in 2023. Premium revenue decreased slightly to $178.7 million in 2024 from $178.8 million in 2023. The decrease in premium revenue was primarily attributable to a decrease in earned premiums in the automobile physical damage line of business due to a decline in demand within the trucking industry within the property and casualty operations. Partially offsetting the decrease in premium revenue was an increase in earned premiums in the group accident and health, group life and the other individual health lines of business due to new sales within the life and health operations.

Operating loss was $5.0 million in 2024 as compared to operating income of $1.5 million in 2023. The decrease in operating income was primarily due to an unfavorable loss experience in the property and casualty operations due to the frequency and severity of claims in the automobile liability line of business as well as an increase in claims costs in the automobile physical damage line of business as discussed above. Also contributing to the decrease in operating income was an increase in administrative costs related to the growth in the group lines of business within the life and health operations.

A more detailed analysis of the operating companies and other corporate activities follows.

UNDERWRITING RESULTS

American Southern

The following table summarizes, for the periods indicated, American Southern's premiums, losses, expenses and underwriting ratios:

Gross written premiums at American Southern decreased $3.9 million, or 5.0%, during 2024 as compared to 2023. The decrease in gross written premiums was primarily attributable to the decrease in premiums written in the automobile liability line of business due to the non-renewal of a program, as well as a decrease in premiums written in the automobile physical damage line of business due to a decline in demand within the trucking industry. Also contributing to the decrease in gross written premiums was a decrease in premiums written in the surety line of business due to construction slowdowns in certain regions.

Ceded premiums increased $0.1 million, or 1.3%, during 2024 as compared to 2023. 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 or retentions levels change. The increase in ceded premiums was primarily attributable to an increase in lines of business with higher ceding rates.

The following table summarizes, for the periods indicated, American Southern's net earned premiums by line of business:

Net earned premiums decreased $0.8 million, or 1.1%, during 2024 as compared to 2023. The decrease in net earned premiums was primarily attributable to a decrease in earned premiums in the automobile physical damage line of business due to a decline in demand within the trucking industry as previously mentioned. Partially offsetting the decrease in net earned premiums was an increase in earned premiums in the automobile liability line of business due mainly to a new government program which began in the fourth quarter of 2023. 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 a property and casualty 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 incurred at American Southern increased $4.8 million, or 9.3%, during 2024 as compared to 2023. As a percentage of premiums, insurance benefits and losses incurred were 82.4% in 2024 as compared to 74.5% in 2023. The increase in the loss ratio was mainly due to an increase in the frequency and severity of claims in the automobile liability line of business. Also contributing to the increase in the loss ratio was an increase in the automobile physical damage line of business due to an increase in claims costs. Partially offsetting the increase in the loss ratio was a decrease in the general liability line of business due to favorable claim reserve development.

Commissions and underwriting expenses decreased $1.2 million, or 7.1%, during 2024 as compared to 2023. As a percentage of premiums, these expenses were 23.0% in 2024 as compared to 24.5% in 2023. The decrease in the expense ratio 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. In 2024, variable commissions at American Southern decreased $1.1 million as compared to 2023 due to an unfavorable loss experience from accounts subject to variable commissions.

Bankers Fidelity

The following summarizes, for the periods indicated, Bankers Fidelity's premiums, losses and expenses:

Gross earned premiums at Bankers Fidelity decreased $2.1 million, or 1.3%, during 2024 as compared to 2023. The decrease in gross earned premiums was primarily attributable to the decrease in gross earned premiums from the Medicare supplement line of business due primarily to non-renewals exceeding the level of new business writings as the existing block of business has incurred rate increases. Also contributing to the decrease in gross earned premiums was a decrease in gross earned premiums in the individual life line of business, resulting from the redemption and settlement of existing individual life policy obligations exceeding the level of new individual life sales. Partially offsetting the decrease were increases in the group accident and health, group life and other individual health lines of business due to new sales.

Ceded premiums decreased $2.7 million, or 4.9%, during 2024 as compared to 2023. The decrease in ceded premiums was due to a decrease in Medicare supplement premiums subject to reinsurance.

The following table summarizes, for the periods indicated, Bankers Fidelity's net earned premiums by line of business:

Net earned premium revenue at Bankers Fidelity increased $0.7 million, or 0.6%, during 2024 as compared to 2023. The increase in net earned premiums was primarily attributable to increases in the group accident and health, group life and other individual health lines of business due to new sales as previously mentioned. Partially offsetting the increase in net earned premiums was a decrease in the Medicare supplement line of business primarily to non-renewals exceeding the level of new business writings as the existing block of business has incurred rate increases.

Insurance benefits incurred decreased $1.4 million, or 2.0%, during 2024 as compared to 2023. As a percentage of premiums, benefits and losses were 63.1% in 2024 as compared to 64.8% in 2023. The decrease in the loss ratio was primarily due to improved loss experience within the group life line of business as well as the other individual health line of business. These decreases were partially offset by higher incurred claims in the other health line of business.

Commissions and underwriting expenses increased $3.9 million, or 10.2%, during 2024 as compared to 2023. As a percentage of earned premiums, these expenses were 37.7% in 2024 as compared to 34.4% in 2023. The increase in the expense ratio was primarily due to an increase in administrative costs related to the growth in the group lines of business. Partially offsetting the increase in the expense ratio was a decrease in commission expenses primarily attributable to a decrease in the Medicare supplement line of business as a result of non-renewals exceeding the level of new business writings, as previously mentioned.

Net Investment Income and Realized Gains

Investment income decreased $0.3 million, or 2.7%, in 2024 as compared to 2023. The decrease in investment income was primarily attributable to a net loss in a certain investment within the Company's limited liability companies of $0.4 million.

The Company had net realized investment gains of $1.2 million in 2024 as compared to net realized investment gains of $0.1 million in 2023. The net realized investment gains in 2024 were mainly due to gains of $1.2 million from the sale of the Company's interest in a certain limited liability company as well as gains from the sale of a number of the Company's investments in fixed maturities. The net realized investment gains in 2023 were primarily attributable to gains from the sale of fixed maturities. Management continually evaluates the Company's investment portfolio and, as may be determined to be appropriate, makes adjustments for impairments and/or will divest investments. See Note 2 of Notes to Consolidated Financial Statements.

Unrealized Losses on Equity Securities, Net

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. The Company recognized net unrealized losses on equity securities of $1.5 million and net unrealized losses of $2.2 million during the years ended December 2024 and 2023, respectively. Changes in unrealized losses 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 $0.2 million, or 4.6%, in 2024 as compared to 2023. Changes in interest expense were primarily due to changes in the Secured Overnight Financing Rate ("SOFR") published by CME Group Benchmark Administration Limited, as the interest rates on the Company's outstanding junior subordinated deferrable interest debentures ("Junior Subordinated Debentures") and the revolving credit facility utilize SOFR as the reference rate.

Income Taxes

The primary difference between the effective tax rate and the federal statutory income tax rate for 2024 resulted from a permanent difference related to meals and entertainment. Also contributing to differences between the effective tax rate and the federal statutory income tax rate was the adjustment for prior years' estimates to actual that are generally updated at the completion of the third quarter of each fiscal year and were $35 thousand in the year ended December 31, 2024. Another contributing factor to the differences between the effective tax rate and the federal statutory income tax rate was a permanent difference related to dividends-received deduction ("DRD"). The current estimated DRD is adjusted as underlying factors change and can vary from estimates based on, but not limited to, actual distributions from investments as well as the amount of the Company's taxable income. 2024

The primary difference between the effective tax rate and the federal statutory income tax rate for 2023 resulted from the adjustment for prior years' estimates to actual of $0.3 million in the year ended December 31, 2023, which included the return to provision adjustment that is generally updated at the completion of the third quarter of each fiscal year and an adjustment for partnership valuation. Also contributing to the differences between the effective tax rate and the federal statutory income tax rate was a permanent difference related to meals and entertainment.

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, as well as borrowings from time to time under our revolving credit facility. 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 December 31, 2024, the Parent had approximately $5.6 million of unrestricted cash and investments.

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 December 31, 2024, the Parent's insurance subsidiaries had an aggregate statutory surplus of $80.1 million. Dividends were paid to Atlantic American by its subsidiaries totaling $9.0 million and $8.4 million in 2024 and 2023, respectively.

The Parent provides certain administrative, purchasing and other services to each of its subsidiaries. The amount charged to and paid by the subsidiaries for these services was $9.4 million and $8.7 million in 2024 and 2023, respectively. In addition, the Parent has a formal tax-sharing agreement with each of its insurance subsidiaries. A net total of $4.4 million and $4.0 million were paid to the Parent under the tax sharing agreement in 2024 and 2023, respectively.

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 3-month CME Term SOFR plus applicable tenor spread of 0.26161% plus an applicable margin. The margin ranges from 4.00% to 4.10%. At December 31, 2024, the effective interest rate was 8.82%. 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. The Company has not made such an election.

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 December 31, 2024, 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 redemption 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. The Company had accrued, but unpaid, dividends on the Series D Preferred Stock of $17.7 thousand at December 31, 2024 and 2023. During each of 2024 and 2023, the Company paid Series D Preferred Stock dividends of $0.4 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 December 31, 2024. Additional FHLB stock purchases may be required based upon the amount of funds borrowed from the FHLB. As of December 31, 2024, BFLIC has pledged bonds having an amortized cost of $9.2 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 December 31, 2024, BFLIC does not have any outstanding borrowings from the FHLB.

On May 12, 2021, the Company entered into a revolving credit agreement ("Revolving Credit Agreement") with Truist Bank as the lender (the "Lender"). The Revolving Credit Agreement provides for an unsecured $10.0 million revolving credit facility that originally matured on April 12, 2024. On March 22, 2024, the Company entered into a First Amendment (the "Amendment") to its Revolving Credit Agreement (as amended, the "Credit Agreement") with the Lender. The Amendment, among other things, (a) updates the interest rate provisions to memorialize that the Company pays interest on the unpaid principal balance of outstanding revolving loans at the Adjusted Term SOFR rate (as defined in the Credit Agreement), plus 2.00%, (b) extends the maturity date of the revolving credit facility to March 22, 2027, (c) requires the monthly payment of an unused commitment fee of 0.2% of the unused facility amount, and (d) requires that the Company maintain a consolidated net worth of not less than $64.2 million. Except as modified by the Amendment, the existing terms of the original Credit Agreement remain in effect.

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 and maintaining a minimum consolidated net worth, as previously mentioned. 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 December 31, 2024 and 2023, the Company had outstanding borrowings of $4.0 million and $3.0 million under the Credit Agreement.

Cash and cash equivalents increased from $28.3 million at December 31, 2023 to $35.6 million at December 31, 2024. The increase in cash and cash equivalents during 2024 was primarily attributable to net cash provided by operating activities of $4.8 million. Also contributing to the increase in cash and cash equivalents was net cash provided by investing activities of $2.3 million primarily as a result of investment sales and maturity of securities exceeding investment purchases.

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, additional borrowings from financial institutions, will enable the Company to meet its liquidity requirements for the next 12 months and thereafter 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.

New Accounting Pronouncements

See "Recently Issued Accounting Standards" in Note 1 of Notes to Consolidated Financial Statements.

Impact of Inflation

Insurance premiums are established before the amount of losses and loss adjustment expenses, or the extent to which inflation may affect such losses and expenses, are known. Consequently, in establishing its premiums, the Company attempts to anticipate the potential impact of inflation. If, for competitive reasons, premiums cannot be increased to anticipate inflation, this cost would be absorbed by the Company. Inflation also affects the rate of investment return on the Company's investment portfolio with a corresponding effect on investment income. During 2024, inflation was a factor in increased loss experience within the Company's automobile liability line of business.