AMERISAFE INC

AMERISAFE, Inc. is a specialty provider of workers' compensation insurance focused on small to mid-sized employers engaged in hazardous industries, principally construction, trucking, logging and lumber, agriculture, services, manufacturing, and maritime. Workers' compensation was the seventh-largest property and casualty insurance line in the U.S. in 2024, according to the National Council on Compensation Insurance, Inc. (the NCCI), with direct premiums written in 2024 for the workers' compensation insurance industry of $57.6 billion ¹ and direct premiums written for the property and casualty industry as a whole of $1.1 trillion ². According to the most recent market data reported by the NCCI, total premiums reported for the specific occupational class codes for which the Company underwrites business were $18.4 billion ³. The Company operates on a geographically diverse basis with 16.3% ⁴ or less of its gross premiums written in 2025 derived from any one state.

Based on data received from the National Association of Insurance Commissioners (NAIC), the Company does not have more than 5.0% ⁵ of the market share in any state it serves. The Company's competitors include other insurance companies, state insurance pools and self-insurance funds, and overall it estimates that more than 300 ⁶ insurance companies participate in the workers' compensation market. The Company's competitive advantages include its specialized underwriting expertise, comprehensive safety services, proactive claims management practices, its A.M. Best rating of "A" (Excellent) ⁷ for all three insurance subsidiaries, and its ability to reduce claims through implementation of work safety programs. The Company's policy renewal rate on voluntary business that it elected to quote for renewal was 93.1% ⁸ in 2025.

The Company generates revenue primarily through net premiums earned, which is the earned portion of net premiums written. Net premiums written equals gross premiums written less premiums ceded to reinsurers. Gross premiums written includes estimated annual premiums from each insurance policy written in voluntary business and assumed premiums from mandatory pooling arrangements. Premiums are earned on a daily pro rata basis over the term of the policy, which typically has a term of one year. The Company also derives net investment income from its invested assets, and recognizes fee and other income including commission income earned on policies issued by other carriers sold by its wholly-owned insurance agency subsidiary. The Company's primary customer segments are small to mid-sized employers engaged in hazardous industries.

The Company's gross premiums are derived from voluntary business, assumed premiums from mandatory pooling arrangements, and assigned risk business (which was discontinued beginning in 2023 in favor of mandatory pooling arrangements). For the year ended December 31, 2025, total gross premiums written were $313,864,000 ⁹, of which $305,042,000 ¹⁰ was from voluntary business (97.2% ¹¹ of total), $8,850,000 ¹² was from assumed premiums (2.8% ¹³ of total), and $(28,000) ¹⁴ was from assigned risk business. Within voluntary business, the largest industry segment was construction at $149,025,000 ¹⁵ (47.5% ¹⁶ of gross premiums written), followed by trucking at $38,035,000 ¹⁷ (12.1% ¹⁸), logging and lumber at $26,115,000 ¹⁹ (8.3% ²⁰), agriculture at $22,753,000 ²¹ (7.3% ²²), services at $18,343,000 ²³ (5.8% ²⁴), manufacturing at $16,745,000 ²⁵ (5.3% ²⁶), maritime at $10,321,000 ²⁷ (3.3% ²⁸), and other at $23,705,000 ²⁹ (7.6% ³⁰).

The Company's investment portfolio, including cash and cash equivalents, had a carrying value of $796,781,000 ³¹ as of December 31, 2025. Fixed maturity securities held-to-maturity totaled $350,087,000 ³² (43.8% ³³ of the portfolio), fixed maturity securities available-for-sale totaled $313,038,000 ³⁴ (39.4% ³⁵), equity securities totaled $57,493,000 ³⁶ (7.2% ³⁷), short-term investments totaled $14,237,000 ³⁸ (1.8% ³⁹), and cash and cash equivalents totaled $61,926,000 ⁴⁰ (7.8% ⁴¹). The average pre-tax net investment yield of the portfolio for the twelve months ended December 31, 2025 was 3.3% ⁴² per annum. The average composite rating of the investment portfolio, excluding equity holdings, was "AA-" ⁴³ as of December 31, 2025.

In 2025, the Company recognized $33,865,000 ⁴⁴ of favorable development for prior accident years. As of December 31, 2025, the Company had 4,096 ⁴⁵ open claims, with an average of $149,800 ⁴⁶ in unpaid loss and loss adjustment expenses per open claim. During the year ended December 31, 2025, 4,145 ⁴⁷ new claims were reported, and 3,847 ⁴⁸ claims were closed. Total claims reported in 2025 increased by 8.3% ⁴⁹ compared to 2024, which was directly correlated to a 10.2% ⁵⁰ growth in in-force policy count. The Company's expense ratio was 30.4% ⁵¹ in 2025. As of December 31, 2025, the Company had more than 10,200 ⁵² voluntary business policyholders, and its ten largest voluntary business policyholders accounted for 2.1% ⁵³ of in-force premiums.

For the year ended December 31, 2025, total revenues were $317,252,000 ⁵⁴, compared to $309,043,000 ⁵⁵ in 2024 and $306,873,000 ⁵⁶ in 2023. Net income was $44,851,000 ⁵⁷ in 2025, compared to $46,383,000 ⁵⁸ in 2024 and $47,105,000 ⁵⁹ in 2023. Net premiums earned were $283,057,000 ⁶⁰ in 2025, compared to $270,639,000 ⁶¹ in 2024 and $267,125,000 ⁶² in 2023. Net investment income was $26,993,000 ⁶³ in 2025, compared to $29,212,000 ⁶⁴ in 2024 and $31,339,000 ⁶⁵ in 2023. Return on average equity was 18.5% ⁶⁶ in 2025, 20.2% ⁶⁷ in 2024, and 20.4% ⁶⁸ in 2023.

The Company's strategy is to focus on maintaining underwriting profitability throughout market cycles with the objective of remaining profitable. The Company intends to maintain its underwriting discipline and to maintain adequate rate levels commensurate with the risks it underwrites. The Company also plans to continue to strive for improved risk selection and pricing, as well as reduced frequency and severity of claims through comprehensive workplace safety reviews, effective medical cost containment measures and rapid closing of claims.

The Company believes it has the opportunity to increase market penetration in each of the states in which it currently operates, as it does not have more than 5.0% ⁶⁹ of the market share in any state. Competition in the Company's target markets is fragmented by state, employer size and industry. The Company believes that its specialized underwriting expertise, use of data, and safety, claims and audit services position it to profitably increase its market share in its existing principal markets, with minimal increase in field service employees. The Company actively markets its insurance in 27 ⁷⁰ states, and 53.6% ⁷¹ of its voluntary in-force premiums were generated in the six states where it derived 5.0% ⁷² or more of its gross premiums written in 2025. The Company is licensed in an additional 20 ⁷³ states, the District of Columbia and the U.S. Virgin Islands, and its existing licenses and rate filings will expedite its ability to write policies in these markets if and when it decides it is prudent to do so.

The Company plans to manage its capital to achieve its profitability goals while striving for optimal operating leverage for its insurance company subsidiaries. To accomplish this objective, the Company intends to maintain underwriting profitability throughout market cycles, optimize its use of reinsurance, deploy appropriate capital management tools, including paying dividends to shareholders and share repurchases, and produce an appropriate risk-adjusted return on its investment portfolio. The Company's expense ratio was 30.4% ⁷⁴ in 2025, which management believes is generally lower than that of its competitors, giving it a greater opportunity to generate underwriting profit.

The Company makes substantial investments in improving its information systems on an ongoing basis. The Company believes its underwriting and agency management system, GEAUX, along with its customized operational system, ICAMS, and the analytical data warehouse that ICAMS feeds, significantly enhance its ability to select risk, write profitable business and cost-effectively administer its billing, claims and audit functions. The Company provides its field premium auditors, field safety professionals and field case managers with computer and communication equipment to efficiently complete services. The Company also deploys technology and equipment to enable remote work when needed and to ensure continuity of home office and field operations.

In 2025, 2024 and 2023, the Company paid regular quarterly cash dividends of $0.39 ⁷⁵, $0.37 ⁷⁶, and $0.34 ⁷⁷ per share, respectively. In addition, the Company paid special cash dividends of $1.00 ⁷⁸, $3.00 ⁷⁹, and $3.50 ⁸⁰ per share in 2025, 2024 and 2023, respectively. On February 24, 2026, the Company declared a regular quarterly cash dividend of $0.41 ⁸¹ per share payable on March 20, 2026 to shareholders of record as of March 13, 2026. As of December 31, 2025, the Company had repurchased a total of 1,974,140 ⁸² shares for $54,200,000 ⁸³ since the inception of its share repurchase program in 2010. In July 2025, the Company announced a share repurchase program that replaced the prior program, authorizing the repurchase of shares in an aggregate amount of up to $25,000,000 ⁸⁴ with no expiration date.

The workers' compensation insurance industry is cyclical in nature and influenced by many factors, including price competition, medical cost increases, natural and man-made disasters, changes in interest rates, changes in state laws and regulations, and general economic conditions. A soft market is characterized by periods of lower premium rates and excess underwriting capacity resulting from increased competition, while a hard market is characterized by periods of higher premium rates and reduced underwriting capacity. Because this market cyclicality is due in large part to the actions of competitors and general economic factors, the Company cannot predict the timing or duration of changes in the market cycle. The Company's strategy is to focus on maintaining underwriting profitability throughout the cycle.

The Company's gross premiums written are primarily dependent upon economic conditions in the construction, trucking, logging and lumber, agriculture, services, manufacturing, and maritime industries, and upon economic conditions generally, including inflation, tariffs, interest rates, labor supply conditions and labor market disruption due to changes in the rules and enforcement around immigration. In 2025, 89.6% ⁸⁵ of the Company's gross premiums written were derived from policyholders in these industries. A decline in the level of business activity of policyholders due to unfavorable economic conditions or otherwise could adversely affect the Company's results of operations.

The Company's loss reserves are based on estimates and may be inadequate to cover actual losses, with the net reserve for loss and loss adjustment expenses totaling $507,508,000 ⁸⁶ as of December 31, 2025, and a sensitivity analysis showing that a 30% increase in both paid and incurred loss development factors would increase the net loss and DCC reserve by $24,360,000 ⁸⁷ (5.1% ⁸⁸). The Company is dependent on the results of its insurance subsidiaries, and its ability to pay dividends and repurchase shares depends on the regulatory and financial capacity of those subsidiaries, which are subject to dividend limitations under Nebraska and Texas law. The Company faces credit risk from reinsurers, with $108,098,000 ⁸⁹ in total amounts recoverable from reinsurers net of allowance for credit losses as of December 31, 2025, of which $44,212,000 ⁹⁰ was unsecured. The workers' compensation insurance industry is cyclical, and the Company only offers a single line of insurance, making it disproportionately vulnerable to negative developments in that industry. A downgrade in the Company's A.M. Best rating of "A" (Excellent) ⁹¹ would likely reduce the amount of business it can write.

Management's message emphasizes the Company's focus on underwriting profitability, disciplined risk selection, and comprehensive safety and claims services as the foundation for generating attractive returns on equity. The Company's return on average equity was 18.5% ⁹² in 2025, 20.2% ⁹³ in 2024 and 20.4% ⁹⁴ in 2023. Book value per share was $13.39 ⁹⁵ at December 31, 2025, $13.51 ⁹⁶ at December 31, 2024 and $15.28 ⁹⁷ at December 31, 2023. The Company paid cash dividends of $2.56 ⁹⁸ per share in 2025, $4.48 ⁹⁹ per share in 2024 and $4.86 ¹⁰⁰ per share in 2023. Management's strategic priorities include maintaining underwriting discipline throughout market cycles, increasing market penetration in existing states given the Company's less than 5.0% ¹⁰¹ market share in any state, prudent and opportunistic geographic expansion using existing licenses in 20 ¹⁰² additional states, capitalizing on the development of information technology systems, and maintaining capital strength through optimal use of reinsurance and capital management tools including dividends and share repurchases.