A.M. Best Takes Various Rating Actions on Atlantic American Group.

OLDWICK, N.J. -- A.M. Best Co. has taken various rating actions on the financial strength ratings (FSR) and issuer credit ratings (ICR) of the property/casualty and life/health subsidiaries of Atlantic American Corporation (AAME) (Atlanta, GA) [NASDAQ: AAME]. A.M. Best also has affirmed the ICR of "bbb-" of AAME. The rating outlook is negative.

Additionally, A.M. Best has downgraded the FSR to B+ (Good) from B++ (Good) and the ICR to "bbb-" from "bbb" of Georgia Casualty & Surety Company (GCSC) (Atlanta, GA). The outlook for both ratings has been revised to stable from negative. In addition, A.M. Best has affirmed the FSRs of A- (Excellent) and the ICRs "a-" of Association Casualty Insurance Company (ACIC) (Austin, TX) and American Southern Group (American Southern). American Southern consists of American Southern Insurance Company and its wholly owned subsidiary, American Safety Insurance Company (both of Atlanta, GA). The outlook for ACIC's ratings is negative, and the outlook for American Southern's ratings is stable.

Concurrently, A.M. Best has affirmed the FSR of B++ (Good) and the ICR of "bbb" of the life/health insurance company, Bankers Fidelity Life Insurance Company (Bankers Fidelity) (Atlanta, GA). The outlook for these ratings is stable. The company continues to operate profitably, primarily focusing on the increasingly competitive senior life/health insurance market.

AAME maintains reasonable unadjusted financial leverage of total debt plus preferred stock-to-total tangible capital of 26%, with unadjusted financial leverage of 38% at June 30, 2007. Interest coverage measures have weakened, primarily due to the heavy expense load associated with the ACIC and GCSC operating subsidiaries in conjunction with a significant reduction in premium income at GCSC. A.M Best expects the majority of AAME's debt service to be provided by its American Southern operating unit. Furthermore, AAME maintains a sizable cash cushion of approximately $9 million on its own balance sheet in support of its fixed obligations.

The ratings of GCSC reflect its continued poor underwriting results, heavy cost structure relative to a reduced level of premium income (due to the company's withdrawal from catastrophe-prone coastal regions), and history of adverse loss reserve development. These rating factors are somewhat offset by GCSC's solid capitalization and the support afforded by AAME.

ACIC's ratings recognize its adequate capitalization, improved underwriting and operating performance through year-end 2006 and initiatives taken in recent years to diversify geographically throughout the southern region, along with its product mix. These positive rating factors are offset by ACIC's anticipated weakness in 2007 earnings due to competitive market conditions and lack of scale relative to fixed expenses, and historic adverse loss reserve development during the 2001 through 2004 period.

The rating affirmations of American Southern are based on the group's excellent capitalization, solid operating performance and conservative management philosophy. However, the company's ability to retain earnings has been hampered by considerable stockholder dividends, which historically have been used to service the debt held at AAME.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.