AMERISAFE INC

Previous wording

The financial and business analysis below provides information which the Company believes is relevant to an assessment and understanding of its consolidated financial position, results of operations and cash flows. The following discussion should be read in conjunction with the accompanying unaudited consolidated financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q, together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. This discussion includes forward-looking statements that are not guarantees of future performance and are not necessarily indicative of future operating results. See “Forward-Looking Statements” in Part I above for further discussion.

Current wording

The financial and business analysis below provides information which the Company believes is relevant to an assessment and understanding of its consolidated financial position, results of operations and cash flows. The following discussion should be read in conjunction with the accompanying unaudited consolidated financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q, together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. This discussion includes forward-looking statements that are not guarantees of future performance and are not necessarily indicative of future operating results. See “Cautionary Statement Regarding Forward-Looking Statements” in Part I above for further discussion.

Previous wording

AMERISAFE is a holding company that markets and underwrites workers’ compensation insurance through its insurance subsidiaries. Workers’ compensation insurance covers statutorily prescribed benefits that employers are obligated to provide to their employees who are injured in the course and scope of their employment. Our business strategy is focused on providing this coverage to small to mid-sized employers engaged in hazardous industries, principally construction, trucking, logging and lumber, agriculture, manufacturing, maritime, and telecommunications. Employers engaged in hazardous industries typically pay substantially higher than average rates for workers’ compensation insurance compared to employers in other industries, as measured per payroll dollar. These higher premium rates are due to the nature of the work performed and the inherent workplace danger of our target employers. Hazardous industry employers also tend to have less frequent but more severe claims as compared to employers in other industries due to the nature of their businesses. We provide proactive safety reviews of most employers’ workplaces. These safety reviews are a vital component of our underwriting process and are aimed at promoting safer workplaces. We utilize intensive claims management practices that we believe permit us to effectively manage the overall cost of our claims. In addition, our audit services ensure that our policyholders pay the appropriate premiums required under the terms of their policies and enable us to monitor payroll patterns that cause underwriting, safety or fraud concerns. We believe that the higher premiums typically paid by our policyholders, together with our disciplined underwriting and safety, claims and audit services, provide us with the opportunity to earn attractive returns for our shareholders.

Current wording

We are a holding company that markets and underwrites workers’ compensation insurance through its insurance subsidiaries. Workers’ compensation insurance covers statutorily prescribed benefits that employers are obligated to provide to their employees who are injured in the course and scope of their employment. Our business strategy is focused on providing this coverage to small to mid-sized employers engaged in hazardous industries, principally construction, trucking, logging and lumber, agriculture, services, manufacturing, and maritime. Employers engaged in hazardous industries typically pay substantially higher than average rates for workers’ compensation insurance compared to employers in other industries, as measured per payroll dollar. These higher premium rates are due to the nature of the work performed and the inherent workplace danger of our target policyholders. Hazardous industry employers also tend to have less frequent but more severe claims as compared to employers in other industries due to the nature of their businesses. We provide proactive safety reviews of most employers’ workplaces. These safety reviews are a vital component of our underwriting process and are aimed at promoting safer workplaces. We utilize proactive claims management practices that we believe permit us to effectively manage the overall cost of our claims. In addition, our premium audit services calculate the appropriate premiums for our policyholders under the terms of their policies and enable us to monitor payroll patterns that cause underwriting, safety or fraud concerns. We believe that the higher premiums typically paid by our policyholders, together with our disciplined underwriting, safety, claims, and audit services, provide us with the opportunity to earn attractive returns on equity.

Previous wording

We actively market our insurance in 27 states through independent agencies (including retail and wholesale brokers and agents), as well as through our wholly owned insurance agency subsidiary. We are also licensed in an additional 20 states, the District of Columbia, and the U.S. Virgin Islands.

Current wording

We actively market our insurance in 27 states through independent agencies (including retail and wholesale brokers and agents), as well as through our wholly owned insurance agency subsidiary, Amerisafe General Agency, Inc. We are also licensed in an additional 20 states, the District of Columbia, and the U.S. Virgin Islands.

Previous wording

Understanding our accounting policies is key to understanding our financial statements. Management considers some of these policies to be very important to the presentation of our financial results because they require us to make significant estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. Some of the estimates result from judgments that can be subjective and complex and, consequently, actual results in future periods might differ from these estimates.

Current wording

Understanding our accounting policies is key to understanding our financial statements. Management considers some of these policies to be very important to the presentation of our financial results because they require us to make significant estimates and assumptions. These estimates and assumptions affect the reported amounts of our assets, liabilities, revenues and expenses, and related disclosures. Some of the estimates result from judgments that can be subjective and complex and, consequently, actual results in future periods might differ from these estimates.

Previous wording

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

Current wording

The following table summarizes our consolidated financial results for the three months ended March 31, 2026 and 2025.

Previous wording

Gross Premiums Written. Gross premiums written for the quarter ended September 30, 2025 were $80.3 million, compared to $74.9 million for the same period in 2024, an increase of 7.2%. The increase was attributable to a $7.3 million increase in voluntary premiums on policies written during the period. The increase was partially offset by a $1.5 million decrease in premiums resulting from payroll audits and related premium adjustments for policies written in previous quarters and a $0.4 million decrease in residual market premiums.

Current wording

Gross Premiums Written. Gross premiums written for the quarter ended March 31, 2026 were $88.5 million, compared to $83.8 million for the same period in 2025, an increase of 5.6%. The increase was attributable to a $6.3 million increase in voluntary premiums on policies written during the period. The increase was partially offset by a $1.4 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 September 30, 2025 were $76.0 million, compared to $71.0 million for the same period in 2024, an increase of 7.0%. 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 third quarter of 2025 compared to 5.6% for the third 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.

Current wording

Net Premiums Written. Net premiums written for the quarter ended March 31, 2026 were $84.4 million, compared to $79.6 million for the same period in 2025, an increase of 6.1%. The increase was primarily attributable to the increase in gross premiums written. As a percentage of gross premiums earned, ceded premiums were 5.1% for the first quarter of 2026 compared to 5.7% for the first quarter of 2025. The decrease in ceded premiums as a percentage of gross premiums earned is a result of a change in our 2026 reinsurance treaties. For additional information, see Item 1, “Business—Reinsurance” in our Annual Report on Form 10-K for the year ended December 31, 2025.

Previous wording

Net Premiums Earned. Net premiums earned for the third quarter of 2025 were $71.2 million, compared to $67.1 million for the same period in 2024, an increase of 6.2%. The increase was primarily attributable to the increase in net premiums written during the period.

Current wording

Net Premiums Earned. Net premiums earned for the first quarter of 2026 were $75.1 million, compared to $68.9 million for the same period in 2025, an increase of 9.0%. 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 September 30, 2025 was $6.6 million, compared to $7.5 million for the same period in 2024, a decrease of 12.3%. 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 $811.2 million in the quarter ended September 30, 2025 compared to an average of $893.3 million for the same period in 2024, a decrease of 9.2%. The pre-tax investment yield on our investment portfolio was 3.2% per annum during the quarter ended September 30, 2025 compared to 3.4% per annum for the same period in 2024. The tax-equivalent yield on our investment portfolio was 3.9% per annum for the quarter ended September 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.

Current wording

Net Investment Income. Net investment income for the quarter ended March 31, 2026 was $6.6 million, compared to $6.7 million for the same period in 2025, a decrease of 0.8%. The decrease was due to slightly 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 $790.6 million in the quarter ended March 31, 2026 compared to an average of $835.5 million for the same period in 2025, a decrease of 5.4%. The pre-tax investment yield on our investment portfolio was 3.4% per annum during the quarter ended March 31, 2026 compared to 3.2% per annum for the same period in 2025. The tax-equivalent yield on our investment portfolio was 3.9% per annum for the quarter ended March 31, 2026 compared to 3.8% per annum for the same period in 2025. 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 in the quarter ended September 30, 2025 were immaterial compared to net realized gains of $0.2 million for the same period in 2024. The net realized gains in the third quarter of 2024 were mostly attributable to the redemption of fixed maturity securities.

Current wording

Net Realized Gains (Losses) on Investments. Net realized losses in the quarter ended March 31, 2026 were immaterial, compared to immaterial net realized gains for the same period in 2025. Net realized results for both periods were attributable to the sales of fixed maturity securities classified as available-for-sale and redemption of fixed maturity securities.

Previous wording

Net Unrealized Gains on Equity Securities. The market value of our equity securities increased by $4.1 million for the three months ended September 30, 2025 compared to an increase of $3.9 million for the same period in 2024.

Current wording

Net Unrealized Losses on Equity Securities. The market value of our equity securities decreased by $1.7 million for the three months ended March 31, 2026 compared to a decrease of $3.2 million for the same period in 2025.

Previous wording

Loss and Loss Adjustment Expenses Incurred. Loss and loss adjustment expenses (LAE) incurred totaled $41.7 million for the three months ended September 30, 2025, compared to $39.2 million for the same period in 2024, an increase of $2.5 million, or 6.5%. The current accident year loss and LAE incurred totaled $50.6 million for the three months ended September 30, 2025, compared to $47.6 million for the same period in 2024. As of September 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 $8.9 million in the third quarter of 2025, compared to favorable prior accident year development of $8.5 million in the same period of 2024, as further discussed below in “Prior Year Development.” Our net loss ratio was 58.5% in the third 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 $46.4 million for the three months ended March 31, 2026, compared to $40.2 million for the same period in 2025, an increase of $6.3 million, or 15.6%. The current accident year loss and LAE incurred totaled $54.1 million for the three months ended March 31, 2026, compared to $48.9 million for the same period in 2025. As of March 31, 2026, our initial estimate for loss and LAE for accident year 2026 is 72.0% of net premiums earned, reflective of pressure from continued rate decreases and long-term claim frequency and severity trends, as well as medical inflation. As of March 31, 2025, our initial estimate for loss and LAE for accident year 2025 was 71.0% of net premiums earned and was increased to 72.0% in the fourth quarter of 2025 largely due to the frequency of severity observed in that accident year. We recorded favorable prior accident year development of $7.6 million in the first quarter of 2026, compared to favorable prior accident year development of $8.7 million in the same period of 2025, as further discussed below in “Prior Year Development.” Our net loss ratio was 61.9% in the first quarter of 2026, compared to 58.3% for the same period of 2025.

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 September 30, 2025 were $22.1 million, compared to $21.3 million for the same period in 2024, an increase of 4.0%. This increase was primarily due to a $0.6 million increase in commission expense, a $0.5 million increase in compensation expense, and a $0.3 million increase in accounts receivable write-offs. Partially offsetting these amounts was a $0.3 million decrease in mandatory pooling arrangement fees. Our expense ratio was 31.1% in the third quarter of 2025 compared to 31.7% in the third 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 March 31, 2026 were $22.3 million, compared to $20.6 million for the same period in 2025, an increase of 8.1%. This increase was primarily due to a $0.9 million decrease in profit sharing reinsurance commission and a $0.6 million increase in commission expense. Our expense ratio was 29.7% in the first quarter of 2026 compared to 29.9% in the first quarter of 2025.

Previous wording

Income Tax Expense. Income tax expense for the three months ended September 30, 2025 was $3.7 million, compared to $3.5 million for the same period in 2024. The effective tax rate for the Company for the quarter ended September 30, 2025 was 21.0% compared to 19.5% in the third quarter of 2024. The increase in the effective tax rate was due to an increase in state income taxes for the three months ended September 30, 2025 compared with the same period of 2024.

Current wording

Income Tax Expense. Income tax expense for the three months ended March 31, 2026 was $2.0 million, compared to $2.3 million for the same period in 2025. The effective tax rate for the Company for the quarter ended March 31, 2026 was 19.8% compared to 20.2% in the first quarter of 2025. The decrease in the effective tax rate was due to a higher proportion of income from tax-exempt investments for the three months ended March 31, 2026 compared with the same period of 2025.

Previous wording

Net cash provided by operating activities was $0.4 million for the nine months ended September 30, 2025, which represented a $12.9 million decrease from $13.4 million in net cash provided by operating activities for the nine months ended September 30, 2024. This decrease in operating cash flow was due to a $20.9 million increase in losses paid and a $3.4 million decrease in net investment income. Partially offsetting these impacts were a $9.7 million increase in premium collections, a $1.0 million decrease in underwriting expenses paid and a $0.8 million decrease in federal taxes paid.

Current wording

Net cash used in operating activities was $2.7 million for the three months ended March 31, 2026, which represented a $0.9 million increase from $1.8 million in net cash used in operating activities for the three months ended March 31, 2025. This decrease in operating cash flow was due to a $2.2 million increase in underwriting expenses paid and a $1.7 million increase in losses paid, partially offset by a $2.5 million increase in premium collections and a $0.6 million increase in reinsurance recoveries.

Previous wording

Net cash provided by investing activities was $37.7 million for the nine months ended September 30, 2025, compared to net cash provided by investment activities of $38.6 million for the same period in 2024. Cash provided by sales and maturities of investments totaled $79.7 million for the nine months ended September 30, 2025, compared to $125.8 million for the same period in 2024. A total of $40.1 million in cash was used to purchase investments in the nine months ended September 30, 2025, compared to $86.4 million in purchases for the same period in 2024. A total of $2.0 million in cash was used to purchase property and equipment in the nine months ended September 30, 2025, compared to $0.8 million for the same period in 2024.

Current wording

Net cash used in investing activities was $12.5 million for the three months ended March 31, 2026, compared to net cash provided by investment activities of $9.9 million for the same period in 2025. Cash provided by sales and maturities of investments totaled $22.9 million for the three months ended March 31, 2026, compared to $20.4 million for the same period in 2025. A total of $35.3 million in cash was used to purchase investments in the three months ended March 31, 2026, compared to $10.5 million in purchases for the same period in 2025. There were immaterial purchases of property and equipment in the three months ended March 31, 2026 and 2025.

Previous wording

Net cash used in financing activities in the nine months ended September 30, 2025 was $27.4 million, compared to net cash used in financing activities of $27.0 million for the same period in 2024. In the nine months ended September 30, 2025, $22.4 million of cash was used for dividends paid to shareholders compared to $21.3 million in the same period of 2024. In the nine months ended September 30, 2025, there were repurchases of outstanding shares of our common stock of $4.1 million compared to $5.1 million for the same period in 2024. Share-based compensation related payroll tax withholding was $0.8 million in the nine months ended September 30, 2025, compared to $0.5 million in the same period in 2024.

Current wording

Net cash used in financing activities in the three months ended March 31, 2026 was $12.5 million, compared to net cash used in financing activities of $7.4 million for the same period in 2025. In the three months ended March 31, 2026, $7.8 million of cash was used for dividends paid to shareholders compared to $7.4 million in the same period of 2025. In the three months ended March 31, 2026, there were repurchases of outstanding shares of our common stock of $4.0 million compared to none for the same period in 2025. Share-based compensation-related payroll tax withholding was $0.7 million in the three months ended March 31, 2026, compared to none in the same period in 2025.

Previous wording

The carrying value of our investment portfolio, including cash and cash equivalents, totaled $817.0 million at September 30, 2025, compared to $832.8 million at December 31, 2024, a decrease of 1.9%. 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 $773.6 million at March 31, 2026, compared to $796.8 million at December 31, 2025, a decrease of 2.9%. 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

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.

Current wording

We classify the majority of our fixed maturity securities as “held-to-maturity.” We do not reflect any changes in non-credit related unrecognized gains and losses until realized. Upon the adoption of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), management is required to estimate expected credit related losses for these securities 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. The remainder of our fixed maturity securities are classified as “available-for-sale.” These investments are valued at fair value at the end of each period, with changes in fair value flowing through other comprehensive income. Equity securities are valued at fair value with changes in the fair value recognized in net income.

Previous wording

The Company recorded favorable prior accident year development of $8.9 million in the three months ended September 30, 2025. The table below sets forth the favorable development for the three and nine months ended September 30, 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 loss and loss adjustment expense development of $7.6 million in the three months ended March 31, 2026. The table below sets forth the favorable development for the three months ended March 31, 2026 and 2025 for accident years 2021 through 2025 and, collectively, for all accident years prior to 2021.

Previous wording

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

Current wording

The table below sets forth the number of open claims as of March 31, 2026 and 2025, and the number of claims reported and closed during the three months then ended.

Previous wording

The number of open claims at September 30, 2025 increased by 11 claims as compared to the number of open claims at September 30, 2024. At September 30, 2025, our incurred amounts for certain accident years, primarily 2011 through 2023, 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

At March 31, 2026, our incurred amounts for certain accident years, primarily 2012, 2020 and 2023, 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.

Previous wording

The assumptions we used in establishing our reserves were based on our historical claims data. However, as of September 30, 2025, actual results for certain accident years have been better than our assumptions would have predicted. We do not presently intend to modify our assumptions for establishing reserves in light of recent results. However, if actual results for current and future accident years are consistent with, or different than, our results in these recent accident years, our historical claims data will reflect this change and, over time, will impact the reserves we establish for future claims.

Current wording

The assumptions we used in establishing our reserves for these accident years were based on our historical claims data. However, as of March 31, 2026, actual results for certain accident years have been better than our assumptions would have predicted. While we do not presently intend to modify our assumptions for establishing reserves in light of recent results, if actual results for current and future accident years are consistent with, or different than, our results in these recent accident years, our historical claims data will reflect this change and, over time, will impact the reserves we establish for future claims.