AMERISAFE INC

Previous wording

Management believes that the most critical accounting policies relate to the reporting of reserves for loss and loss adjustment expenses, including losses that have occurred but have not been reported prior to the reporting date, amounts recoverable from reinsurers, premiums receivable, assessments, deferred policy acquisition costs, deferred income taxes, credit losses on investment securities, and share-based compensation. These critical accounting policies are more fully described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2024.

Current wording

Management believes that the most critical accounting policies relate to the reporting of reserves for loss and loss adjustment expenses, including losses that have occurred but have not been reported prior to the reporting date, amounts recoverable from reinsurers, premiums receivable, assessments, deferred policy acquisition costs, deferred income taxes, credit losses on investment securities, and share-based compensation. These critical accounting policies are more fully described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2024. We have not changed any of these policies from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

The following table summarizes our consolidated financial results for the quarter ended March 31, 2025 and 2024.

Current wording

The following table summarizes our consolidated financial results for the three and six months ended June 30, 2025 and 2024.

Previous wording

The net combined ratio is calculated by dividing the sum of loss and loss adjustment expenses incurred, underwriting and certain other operating costs, commissions, salaries and benefits, and policyholder dividends by net premiums earned in the current period.

Current wording

The net combined ratio is calculated by dividing the sum of loss and loss adjustment expenses incurred, underwriting and certain other operating costs, commissions, salaries and benefits, and policyholder dividends by net premiums earned in the current period. The net combined ratio is a key measure of underwriting performance traditionally used in the insurance industry. A net combined ratio under 100% generally reflects profitable underwriting results.

Previous wording

Return on average equity is calculated by dividing the annualized net income by the average shareholders’ equity for the applicable period. Net unrealized losses on equity securities contributed to the lower quarterly return on average equity.

Current wording

Return on average equity is calculated by dividing the annualized net income by the average shareholders’ equity for the applicable period.

Previous wording

Gross Premiums Written. Gross premiums written for the quarter ended March 31, 2025 were $83.8 million, compared to $80.1 million for the same period in 2024, an increase of 4.6%. The increase was attributable to a $5.1 million increase in annual premiums on voluntary policies written during the period partially offset by a $1.3 million decrease in premiums resulting from payroll audits and related premium adjustments for policies written in previous quarters.

Current wording

Gross Premiums Written. Gross premiums written for the quarter ended June 30, 2025 were $79.7 million, compared to $76.4 million for the same period in 2024, an increase of 4.3%. The increase was attributable to a $8.5 million increase in voluntary premiums on policies written during the period and a $0.5 million increase in residual market premiums. These increases were partially offset by a $5.8 million decrease in premiums resulting from payroll audits and related premium adjustments for policies written in previous quarters.

Previous wording

Net Premiums Written. Net premiums written for the quarter ended March 31, 2025 were $79.6 million, compared to $76.1 million for the same period in 2024, an increase of 4.5%. The increase was primarily attributable to the increase in gross premiums written. As a percentage of gross premiums earned, ceded premiums were 5.7% for the quarter ended March 31, 2025, compared to 5.4% for the same period in 2024. The increase in ceded premiums as a percentage of gross premiums earned is a result of a change in our 2025 reinsurance treaties. For additional information, see Item 1, “Business—Reinsurance” in our Annual Report on Form 10-K for the year ended December 31, 2024.

Current wording

Net Premiums Written. Net premiums written for the quarter ended June 30, 2025 were $75.5 million, compared to $72.4 million for the same period in 2024, an increase of 4.3%. The increase was primarily attributable to the increase in gross premiums written. As a percentage of gross premiums earned, ceded premiums were 5.7% for the second quarter of 2025 compared to 5.5% for the second quarter of 2024. The increase in ceded premiums as a percentage of gross premiums earned is a result of a change in our 2025 reinsurance treaties. For additional information, see Item 1, “Business—Reinsurance” in our Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

Net Premiums Earned. Net premiums earned for the first quarter of 2025 were $68.9 million, compared to $68.4 million for the same period in 2024, an increase of 0.6%. The increase was primarily attributable to the increase in net premiums written during the reported period.

Current wording

Net Premiums Earned. Net premiums earned for the second quarter of 2025 were $69.4 million, compared to $68.6 million for the same period in 2024, an increase of 1.1%. The increase was primarily attributable to the increase in net premiums written during the period.

Previous wording

Net Investment Income. Net investment income for the quarter ended March 31, 2025 was $6.7 million, compared to $7.4 million for the same period in 2024, a decrease of 9.7%. The decrease was due to lower average invested asset balances in the reported period compared to the prior year. Average invested assets, including cash and cash equivalents, were $835.5 million in the quarter ended March 31, 2025 compared to $902.9 million for the same period in 2024, a decrease of 7.5%. The pre-tax investment yield on our investment portfolio was 3.2% per annum during the quarter ended March 31, 2025 compared to 3.3% per annum during the same period in 2024. The tax-equivalent yield on our investment portfolio was 3.8% per annum for the quarter ended March 31, 2025 and 3.7% for the same period in 2024. The tax-equivalent yield is calculated using the effective interest rate and the appropriate marginal tax rate.

Current wording

Net Investment Income. Net investment income for the quarter ended June 30, 2025 was $6.7 million, compared to $7.4 million for the same period in 2024, a decrease of 10.2%. The decrease was due to lower average invested asset balances in the period compared to the same period in the prior year. Average invested assets, including cash and cash equivalents, were $813.1 million in the quarter ended June 30, 2025 compared to an average of $888.7 million for the same period in 2024, a decrease of 8.5%. The pre-tax investment yield on our investment portfolio was 3.3% per annum during each of the quarters ended June 30, 2025 and 2024. The tax-equivalent yield on our investment portfolio was 3.9% per annum for the quarter ended June 30, 2025 compared to 3.8% per annum for the same period in 2024. The tax-equivalent yield is calculated using the effective interest rate and the appropriate marginal tax rate.

Previous wording

Net Realized Gains (Losses) on Investments. Net realized gains on investments for the three months ended March 31, 2025 were immaterial compared to net realized losses of $0.2 million for the same period in 2024. Net realized losses in the first quarter of 2024 were mostly attributable to sales of fixed maturity securities classified as available-for-sale.

Current wording

Net Realized Gains (Losses) on Investments. Net realized gains on investments for the three months ended June 30, 2025 were $3.1 million compared to net realized losses of $0.1 million for the same period in 2024. Both net realized gains in the second quarter of 2025 and net realized losses in the second quarter of 2024 were mostly attributable to sales of equity and fixed maturity securities classified as available-for-sale.

Previous wording

Net Unrealized Gains (Losses) on Equity Securities. Net unrealized losses on our equity securities was $3.2 million for the quarter ended March 31, 2025 compared to net unrealized gains of $4.8 million for the same period in 2024.

Current wording

Net Unrealized Gains (Losses) on Equity Securities. The market value of our equity securities increased by $1.8 million for the three months ended June 30, 2025 compared to a decrease of $0.1 million for the same period in 2024.

Previous wording

Loss and Loss Adjustment Expenses Incurred. Loss and loss adjustment expenses (LAE) incurred totaled $40.2 million for the three months ended March 31, 2025, compared to $40.0 million for the same period in 2024, an increase of $0.2 million, or 0.4%. The current accident year loss and LAE incurred were $48.9 million compared to $48.6 million for the same period in 2024. Our initial estimate of the loss and LAE ratio for accident year 2025 remains unchanged at 71.0% of net premiums earned, consistent with the estimate initially set for accident year 2024, and is based on long-term claim frequency and severity trends, as well as medical inflation. We recorded favorable prior accident year development of $8.7 million in the first quarter of 2025, compared to favorable prior accident year development of $8.6 million in the same period of 2024, as further discussed below in “Prior Year Development.” Our net loss ratio was 58.3% in the first quarter of 2025, compared to 58.4% for the same period of 2024.

Current wording

Loss and Loss Adjustment Expenses Incurred. Loss and loss adjustment expenses (LAE) incurred totaled $40.7 million for the three months ended June 30, 2025, compared to $40.6 million for the same period in 2024, an increase of $0.1 million, or 0.1%. The current accident year loss and LAE incurred totaled $49.3 million for the three months ended June 30, 2025, compared to $48.7 million for the same period in 2024. As of June 30, 2025, our initial estimate for loss and LAE for accident years 2025 and 2024 remains at 71.0% of net premiums earned, and is based on long-term claim frequency and severity trends, as well as medical inflation. We recorded favorable prior accident year development of $8.6 million in the second quarter of 2025, compared to favorable prior accident year development of $8.1 million in the same period of 2024, as further discussed below in “Prior Year Development.” Our net loss ratio was 58.6% in the second quarter of 2025, compared to 59.2% for the same period of 2024.

Previous wording

Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits. Underwriting and certain other operating costs, commissions and salaries and benefits for the quarter ended March 31, 2025 were $20.6 million, compared to $18.7 million for the same period in 2024. This increase was primarily due to a $2.1 million increase in insurance related assessments, a $0.8 million increase in compensation expense and a $0.3 million increase in accounts receivable writeoffs. These increases were partially offset by a $0.9 million increase in profit sharing reinsurance commission. Our expense ratio was 29.9% in the first quarter of 2025 compared to 27.3% in the first quarter of 2024.

Current wording

Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits. Underwriting and certain other operating costs, commissions and salaries and benefits for the quarter ended June 30, 2025 were $21.7 million, compared to $20.4 million for the same period in 2024. This increase was primarily due to a $1.1 million decrease in profit sharing reinsurance commission, a $0.5 million increase in insurance related assessments, a $0.3 million increase in mandatory pooling arrangement fees, and a $0.3 million increase in commission expense. Partially offsetting these amounts was a $0.9 million decrease in professional fees. Our expense ratio was 31.3% in the second quarter of 2025 compared to 29.8% in the second quarter of 2024.

Previous wording

Income Tax Expense. Income tax expense for the three months ended March 31, 2025 was $2.3 million, compared to $3.8 million for the same period in 2024. The effective tax rate for the Company for quarter ended March 31, 2025 was 20.2% compared to 18.4% in the first quarter of 2024. The increase in the effective tax rate was due to a lower proportion of income from tax-exempt investments.

Current wording

Income Tax Expense. Income tax expense for the three months ended June 30, 2025 was $3.5 million, compared to $2.8 million for the same period in 2024. The effective tax rate for the Company for the quarter ended June 30, 2025 was 20.1% compared to 20.0% in the second quarter of 2024. The increase in the effective tax rate was due to a lower proportion of income from tax-exempt investments for the three months ended June 30, 2025 compared with the same period of 2024.

Previous wording

Net cash used in operating activities was $1.8 million for the three months ended March 31, 2025, which represented a $9.3 million decrease from $7.5 million in net cash provided by operating activities for the three months ended March 31, 2024. This decrease in operating cash flow was due to a $10.3 million increase in losses paid, a $1.4 million decrease in net investment income, and a $0.8 million decrease in reinsurance recoveries. Partially offsetting these decreases were a $2.8 million increase in premium collections and a $0.4 million decrease in underwriting expenses paid.

Current wording

Net cash used in operating activities was $10.2 million for the six months ended June 30, 2025, which represented a $15.1 million decrease from $4.9 million in net cash provided by operating activities for the six months ended June 30, 2024. This decrease in operating cash flow was due to a $19.3 million increase in losses paid, a $2.1 million decrease in net investment income and a $1.2 million decrease in reinsurance recoveries. Partially offsetting these impacts were a $4.6 million increase in premium collections, a $1.9 million decrease in underwriting expenses paid, a $0.4 million decrease in dividends paid to policyholders and a $0.4 million decrease in federal taxes paid.

Previous wording

Net cash provided by investing activities was $9.9 million for the three months ended March 31, 2025, compared to net cash used in investment activities of $5.7 million for the same period in 2024. Cash provided by sales and maturities of investments totaled $20.4 million for the three months ended March 31, 2025, compared to $36.9 million for the same period in 2024. A total of $10.5 million in cash was used to purchase investments in the three months ended March 31, 2025, compared to $41.9 million in purchases for the same period in 2024. There were immaterial purchases of property and equipment in the three months ended March 31, 2025 compared to $0.7 million for the same period in 2024.

Current wording

Net cash provided by investing activities was $33.1 million for the six months ended June 30, 2025, compared to net cash provided by investment activities of $5.8 million for the same period in 2024. Cash provided by sales and maturities of investments totaled $54.3 million for the six months ended June 30, 2025, compared to $65.6 million for the same period in 2024. A total of $20.2 million in cash was used to purchase investments in the six months ended June 30, 2025, compared to $59.1 million in purchases for the same period in 2024. A total of $1.1 million in cash was used to purchase property and equipment in the six months ended June 30, 2025, compared to $0.8 million for the same period in 2024.

Previous wording

Net cash used in financing activities in the three months ended March 31, 2025 was $7.4 million compared to net cash used in financing activities of $7.1 million for the same period in 2024. In the three months ended March 31, 2025, $7.4 million of cash was used for dividends paid to shareholders compared to $7.1 million in the same period of 2024.

Current wording

Net cash used in financing activities in the six months ended June 30, 2025 was $18.4 million, compared to net cash used in financing activities of $18.8 million for the same period in 2024. In the six months ended June 30, 2025, $14.9 million of cash was used for dividends paid to shareholders compared to $14.2 million in the same period of 2024. In the six months ended June 30, 2025, there were repurchases of outstanding shares of our common stock of $2.8, million compared to $4.1 million for the same period in 2024. Share-based compensation related payroll tax withholding was $0.7 million in the six months ended June 30, 2025, compared to $0.4 million in the same period in 2024.

Previous wording

The carrying value of our investment portfolio, including cash and cash equivalents, totaled $825.8 million at March 31, 2025 compared to $832.8 million at December 31, 2024, a decrease of 0.8%. Purchases of fixed maturity securities are classified as available-for-sale or held-to-maturity at the time of purchase based on the individual security. The Company has the ability and positive intent to hold certain investments until maturity. Therefore, fixed maturity securities classified as held-to-maturity, as defined by FASB ASC Topic 320, Investments-Debt and Equity Securities, are recorded at amortized cost net of allowance for credit losses. Our equity securities and fixed maturity securities classified as available-for-sale are reported at fair value.

Current wording

The carrying value of our investment portfolio, including cash and cash equivalents, totaled $807.4 million at June 30, 2025, compared to $832.8 million at December 31, 2024, a decrease of 3.1%. Purchases of fixed maturity securities are classified as available-for-sale or held-to-maturity at the time of purchase based on the individual security. The Company has the ability and positive intent to hold certain investments until maturity. Therefore, fixed maturity securities classified as held-to-maturity, as defined by FASB ASC Topic 320, Investments-Debt and Equity Securities, are recorded at amortized cost net of allowance for credit losses. Our equity securities and fixed maturity securities classified as available-for-sale are reported at fair value.

Previous wording

Our debt securities classified as available-for-sale are “marked to market” as of the end of each calendar quarter. As of that date, unrealized gains and losses that are not credit related are recorded to accumulated other comprehensive income (loss). Any available-for-sale credit related losses would be recognized as a credit loss allowance on the balance sheet with a corresponding adjustment to earnings, limited by the amount that the fair value is less than the amortized cost basis. Both the credit loss allowance and adjustment to net income can be reversed if conditions change.

Current wording

Our debt securities classified as available-for-sale are “marked to market” as of the end of each calendar quarter. As of that date, unrealized gains and losses that are not credit related are recorded to accumulated other comprehensive loss. Any available-for-sale credit related losses would be recognized as a credit loss allowance on the balance sheet with a corresponding adjustment to earnings, limited by the amount that the fair value is less than the amortized cost basis. Both the credit loss allowance and adjustment to net income can be reversed if conditions change.

Previous wording

For our debt securities classified as held-to-maturity, non-credit related unrecognized gains and losses are not recorded in the financial statements until realized. Effective upon the adoption of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses, management is required to estimate held-to-maturity expected credit related losses and recognize a credit loss allowance on the balance sheet with a corresponding adjustment to earnings. Subsequent adjustments to the estimated expected credit related losses are recognized through earnings within the category “provision for investment related credit loss expense (benefit)”, and adjustments to the credit loss allowance.

Current wording

For our debt securities classified as held-to-maturity, non-credit related unrecognized gains and losses are not recorded in the financial statements until realized. Effective upon the adoption of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses, management is required to estimate held-to-maturity expected credit related losses and recognize a credit loss allowance on the balance sheet with a corresponding adjustment to earnings. Subsequent adjustments to the estimated expected credit related losses are recognized through earnings within the category “provision for investment related credit loss benefit” and adjustments to the credit loss allowance.

Previous wording

The Company recorded favorable prior accident year development of $8.7 million in the three months ended March 31, 2025. The table below sets forth the favorable development for the three months ended March 31, 2025 and 2024 for accident years 2020 through 2024 and, collectively, for all accident years prior to 2020.

Current wording

The Company recorded favorable prior accident year development of $8.6 million in the three months ended June 30, 2025. The table below sets forth the favorable development for the three and six months ended June 30, 2025 and 2024 for accident years 2020 through 2024 and, collectively, for all accident years prior to 2020.

Previous wording

The table below sets forth the number of open claims as of March 31, 2025 and 2024, and the number of claims reported and closed during the three months then ended.

Current wording

The table below sets forth the number of open claims as of June 30, 2025 and 2024, and the number of claims reported and closed during the three and six months then ended.

Previous wording

There were 3,840 open claims at March 31, 2025, compared to 3,812 at March 31, 2024, representing an increase of 28 open claims. At March 31, 2025, our incurred amounts for certain accident years, primarily accident years 2020 and 2021, developed more favorably than management previously expected. The revisions to the Company’s reserves reflect new information gained by claims adjusters in the normal course of adjusting claims and is reflected in the Company's financial statements when the information becomes available. It is typical for more serious claims to take several years or longer to settle and the Company continually revises estimates as more information about claimants’ medical conditions and potential disability becomes known and the claims get closer to being settled. Multiple factors can cause both favorable and unfavorable loss development. The favorable loss development we experienced across accident years was largely due to favorable case reserve development from closed claims and claims where the worker had reached maximum medical improvement.

Current wording

The number of open claims at June 30, 2025 increased by 136 claims as compared to the number of open claims at June 30, 2024. At June 30, 2025, our incurred amounts for certain accident years, primarily 2017 through 2022, developed more favorably than management previously expected. The revisions to the Company’s reserves reflect new information gained by claims adjusters in the normal course of adjusting claims and is reflected in the Company's financial statements when the information becomes available. It is typical for more serious claims to take several years or longer to settle and the Company continually revises estimates as more information about claimants’ medical conditions and potential disability becomes known and the claims get closer to being settled. Multiple factors can cause both favorable and unfavorable loss development. The favorable loss development we experienced across accident years was largely due to favorable case reserve development from closed claims and claims where the worker had reached maximum medical improvement.