10-K

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of June 30, 2023 the last business day of the Registrant’s most recently completed second fiscal quarter was approximately $1,009.0 million, based upon the closing price of the shares on the NASDAQ Global Select Market on that date.

As of February 15, 2024, there were 19,135,008 shares of the Registrant’s common stock, par value $0.01 per share, outstanding.

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934. You should not place undue reliance on these statements. These forward-looking statements include statements that reflect the current views of our senior management with respect to our financial performance and future events with respect to our business and the insurance industry in general. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate” and similar statements of a future or forward-looking nature identify forward-looking statements. Forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, the following:

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements in this report, and under the caption “Risk Factors” in Item 1A of this report. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate.

We are 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, manufacturing, telecommunications, and maritime. Since commencing operations in 1986, we have gained significant experience underwriting the complex workers’ compensation exposures inherent in these industries. We provide coverage to employers under state and federal workers’ compensation laws. These laws prescribe wage replacement and medical care benefits that employers are obligated to provide to their employees who are injured in the course and scope of their employment. Our workers’ compensation insurance policies provide benefits to injured employees for, among other things, temporary or permanent disability, death and medical and hospital expenses. The benefits payable and the duration of those benefits are set by state or federal law. The benefits vary by jurisdiction, the nature and severity of the injury and the wages of the employee. The employer, who is the policyholder, pays the premiums for coverage.

Hazardous industry employers tend to have less frequent but more severe claims as compared to employers in other industries due to the nature of their businesses. Injuries that occur are often severe in nature including death, dismemberment, paraplegia and quadriplegia. As a result, employers engaged in hazardous industries pay substantially higher than average rates for workers’ compensation insurance compared to employers in other industries, as measured per payroll dollar. The higher premium rates are due to the nature of the work performed and the inherent workplace danger of our target policyholders.

We employ a proactive, disciplined approach to underwriting employers and providing comprehensive services intended to lessen the overall incidence and cost of workplace injuries. We provide safety services at employers’ workplaces as a vital component of our underwriting process and to promote safer workplaces. We utilize intensive claims management practices that we believe permit us to reduce 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.

AMERISAFE, Inc. is an insurance holding company, incorporated in Texas in 1985. We began operations in 1986 by focusing on workers’ compensation insurance for logging contractors in the southeast United States. Beginning in 1994, we expanded our focus to include the other hazardous industries we serve today. Two of our three insurance subsidiaries, American Interstate Insurance Company (AIIC) and Silver Oak Casualty, Inc. (SOCI), are domiciled in Nebraska. Our other insurance subsidiary, American Interstate Insurance Company of Texas (AIICTX), is domiciled in Texas. All three insurance subsidiaries carry an A.M. Best rating of “A” (Excellent).

Focus on Hazardous Industries. We have extensive experience insuring employers engaged in hazardous industries and have a history of profitably underwriting these industries. Our specialized knowledge of these hazardous industries helps us better serve our policyholders, which leads to greater employer loyalty and policy retention. Our policy renewal rate on voluntary business that we elected to quote for renewal was 94.1% in 2023.

Focus on Small to Mid-Sized Employers. We believe large insurance companies generally do not target small to mid-sized employers in hazardous industries due to their smaller premium sizes, types of operations, mobile workforces and extensive service needs. We provide these employers enhanced services, including premium payment plans to better match premium payments with our policyholders’ payroll costs and cash flow.

Knowledgeable, Dedicated Employees. We deliver an exceptional product with integrity through professional, knowledgeable and dedicated employees. Service is a distinguishing factor for the Company and the level of that service is dependent on the expertise and caring culture of our employees.

Specialized Underwriting Expertise. Based on our 38-year history of insuring employers engaged in hazardous industries, we have developed industry specific risk analysis and rating tools that support our underwriters in risk selection and pricing. We are

highly disciplined when quoting and binding new and renewal business. We do not delegate underwriting authority to agencies, marketers or to any other third parties that sell our insurance.

Comprehensive Safety Services. We provide proactive safety reviews of employers’ worksites, which are often located in rural areas. These safety reviews are a vital component of our underwriting process and also assist our policyholders in loss prevention, and encourage safer workplaces by deploying experienced field safety professionals (FSPs) to our policyholders’ worksites. In 2023, 93.4% of our new voluntary business policyholders had pre-quotation safety inspections. Additionally, we perform periodic on-site safety surveys for our voluntary business policyholders.

Proactive Claims Management. Our employees manage substantially all of our claims in-house, utilizing intensive claims management practices that emphasize a personalized approach, as well as quality, cost-effective medical treatment. As of December 31, 2023, open indemnity claims per field case manager (FCM) averaged 44 claims, which we believe is significantly less than the industry average. We also believe our claims management practices allow us to achieve a more favorable claim outcome, accelerate an employee’s return to work, lessen the likelihood of litigation and more rapidly close claims, all of which ultimately lead to lower overall claim costs.

Efficient Operating Platform. Through cost management initiatives, we maintain one of the more efficient operations in the workers’ compensation industry. In 2023, our expense ratio was 29.3%. We believe that our expense ratio is generally lower than that of our competitors, which gives us a greater opportunity to generate underwriting profit.

We intend to produce favorable returns on equity and increase our book value per share adjusted for dividends paid to shareholders using the following strategies:

Focus on Underwriting Profitability. We intend to maintain our underwriting discipline throughout market cycles with the objective of remaining profitable. Our strategy is to focus on underwriting workers’ compensation insurance in hazardous industries and to maintain adequate rate levels commensurate with the risks we underwrite. We will also 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 through personal, direct contact with our policyholders and their employees.

Increase Market Penetration. Based on data received from the National Association of Insurance Commissioners (NAIC) we do not have more than 4.8% of the market share in any state we serve. As a result, we believe we have the opportunity to increase market penetration in each of the states in which we currently operate. Competition in our target markets is fragmented by state, employer size and industry. We believe that our specialized underwriting expertise, use of data, and safety, claims and audit services position us to profitably increase our market share in our existing principal markets, with minimal increase in field service employees.

Prudent and Opportunistic Geographic Expansion. While we actively market our insurance in 27 states, 51.0% of our voluntary in-force premiums were generated in the six states where we derived 5.0% or more of our gross premiums written in 2023. We are licensed in an additional 20 states, the District of Columbia and the U.S. Virgin Islands. Our existing licenses and rate filings will expedite our ability to write policies in these markets when we decide it is prudent to do so.

Capitalize on Development of Information Technology Systems. We believe our underwriting and agency management system, GEAUX, along with our customized operational system, ICAMS, and the analytical data warehouse that ICAMS feeds, significantly enhance our ability to select risk, write profitable business and cost-effectively administer our billing, claims and audit functions.

Maintain Capital Strength. We plan to manage our capital to achieve our profitability goals while striving for optimal operating leverage for our insurance company subsidiaries. To accomplish this objective, we intend to maintain underwriting profitability throughout market cycles, optimize our use of reinsurance, deploy appropriate capital management tools, including paying dividends to shareholders and share repurchases, and produce an appropriate risk adjusted return on our investment portfolio.

Overview. Workers’ compensation is a statutory system under which an employer is required to pay for its employees’ medical, disability, wage replacement, vocational rehabilitation and death benefit costs for work-related injuries or illnesses. Most employers satisfy this requirement by purchasing workers’ compensation insurance. The principal concept underlying workers’ compensation laws is that employees injured in the course and scope of their employment have only the legal remedies available under workers’

compensation laws and do not have any other recourse against their employer. An employer’s obligation to pay workers’ compensation does not depend on any negligence or wrongdoing on the part of the employer and exists even for injuries that result from the negligence or fault of another person, a co-employee, or, in most instances, the injured employee.

Workers’ compensation insurance policies generally provide that the insurance carrier will pay all benefits that the insured employer may become obligated to pay under applicable workers’ compensation laws. Each state has a regulatory and adjudicatory system that quantifies the level of wage replacement to be paid, determines the level of medical care required to be provided and the cost of temporary or permanent impairment and specifies the options in selecting medical providers available to the injured employee or the employer. These state laws generally require two types of benefits for injured employees: (1) medical benefits, which include expenses related to the diagnosis and treatment of the injury, as well as any required rehabilitation, and (2) indemnity payments, which consist of temporary wage replacement, permanent disability payments and death benefits to surviving family members. To fulfill these mandated financial obligations, virtually all employers are required to purchase workers’ compensation insurance or, if permitted by state law or approved by the U.S. Department of Labor, to self-insure. The employers may purchase workers’ compensation insurance from a private insurance carrier, a state-sanctioned assigned risk pool, or a self-insurance fund, which is an entity that allows employers to obtain workers’ compensation coverage on a pooled basis, typically subjecting each employer to joint and several liability for the entire fund.

Workers’ compensation was the sixth-largest property and casualty insurance line in the United States in 2022, according to the National Council on Compensation Insurance, Inc., the NCCI. Direct premiums written in 2022 for the workers’ compensation insurance industry were $57 billion, and direct premiums written for the property and casualty industry as a whole were $876 billion. According to the most recent market data reported by the NCCI, which is the official rating bureau in the majority of states in which we are licensed, total premiums reported for the specific occupational class codes for which we underwrite business were $18 billion.

As of December 31, 2023, we had more than 8,500 voluntary business policyholders with an average annual workers’ compensation policy written premium of $28,658. As of December 31, 2023, our ten largest voluntary business policyholders accounted for 2% of our in-force premiums. Our policy renewal rate on voluntary business that we elected to quote for renewal was 94.1% in 2023, 93.8% in 2022, and 93.5% in 2021.

In addition to our voluntary workers’ compensation business, we assume reinsurance premiums from mandatory pooling arrangements, and prior to 2023 we underwrote workers’ compensation policies for employers assigned to us, in each case to fulfill our obligations under residual market programs implemented by the states in which we operate. Prior to 2023, our assigned risk business fulfilled our statutory obligation to participate in residual market plans in three states. Beginning in 2023, the Company participated in the mandatory pooling arrangements in these states. See “—Regulation—Residual Market Programs” below. For the year ended December 31, 2023, our assigned risk business accounted for 0.1% of our gross premiums written, and our assumed premiums from mandatory pooling arrangements accounted for 2.7% of our gross premiums written.

We provide workers’ compensation insurance primarily to employers in the following targeted hazardous industries:

Construction. Includes a broad range of operations such as highway and bridge construction, building and maintenance of pipeline and powerline networks, excavation, commercial construction, roofing, iron and steel erection, tower erection and numerous other specialized construction operations.

Trucking. Includes a broad spectrum of diverse operations including contract haulers, regional and local freight carriers, special equipment transporters and other trucking companies that conduct a variety of short- and long-haul operations.

Logging and Lumber. Includes tree harvesting, tree trimming, sawmills, and other operations associated with lumber and wood products.

Agriculture. Includes crop maintenance and harvesting, grain and produce operations, nursery operations, meat processing, and livestock feed and transportation.

Manufacturing. Includes a diverse group of businesses such as the production of goods for use or sale using labor and machines, tools, chemical and biological processing or formulation.

Telecommunications. Includes the installation and maintenance of overhead and underground telecommunication lines including cell phone towers.

Maritime. Includes ship building and repair, pier and marine construction, inter-coastal construction, and stevedoring.

Other. Includes a wide variety of high-hazard businesses such as gasoline dealers, building material suppliers, automobile dismantling, oil field contractors, railroad construction, and other businesses.

Gross premiums written during the years ended December 31, 2023, 2022 and 2021, and the allocation of those premiums among the hazardous industries we target are presented in the table below.

We are licensed to provide workers’ compensation insurance in 47 states, the District of Columbia and the U.S. Virgin Islands. We operate on a geographically diverse basis with 13.4% or less of our gross premiums written in 2023 derived from any one state. The table below identifies, for the years ended December 31, 2023, 2022 and 2021, the states in which the percentage of our gross premiums written exceeded 3.0% for any of the three years presented.

We sell our workers’ compensation insurance through independent agencies (including retail and wholesale brokers and agents). As of December 31, 2023, our insurance was sold through more than 2,200 independent agencies and our wholly-owned insurance agency subsidiary, Amerisafe General Agency, which is licensed in 30 states. We are selective in establishing and maintaining relationships with independent agencies. We seek to do business with those agencies that provide quality application flow from companies operating in our target industries and classes that are reasonably likely to accept our quotes. We compensate these agencies by paying a commission based on the premium collected from the policyholder. Neither our independent agencies nor our insurance agency subsidiary has authority to underwrite or bind coverage. We do not pay contingent commissions.

As of December 31, 2023, independent agencies accounted for 98.2% of our voluntary in-force premiums. No single independent agency accounted for more than 1.8% of our voluntary in-force premiums at that date.

Our underwriting strategy is to focus on employers in certain hazardous industries that operate in those states where our underwriting efforts are the most profitable and efficient. We analyze each prospective policyholder on its own merits relative to known industry trends and statistical data. Our underwriting guidelines specify that we do not write workers’ compensation insurance for certain hazardous activities, including sub-surface mining and manufacturing of ammunition or fireworks.

Underwriting is a multi-step process that begins with the receipt of an application from agencies. We initially review the application to confirm that the prospective policyholder meets certain established criteria, including that the prospective policyholder is engaged in one of our targeted hazardous industries and industry classes and operates in the states we target. If the application satisfies these criteria, the application is forwarded to our underwriting department for further review.

Our underwriting department reviews the application to determine if the application meets our underwriting criteria and whether all required information has been provided. If additional information is required, the underwriting department requests additional information from the agency submitting the application. Once this initial review process is complete, our underwriting department requests that a pre-quotation safety inspection be performed in most cases. In 2023, 93.4% of our new voluntary business policyholders were inspected prior to our offering a premium quote.

After the pre-quotation safety inspection has been completed, our underwriting professionals review the results of the inspection to determine if a quote should be made and, if so, prepare the quote. The quote must be reviewed and approved by our underwriting department before the quote is delivered to the agency.

In the majority of states, workers’ compensation insurance rates are based upon published “loss costs.” Loss costs are derived from wage and loss data reported by insurers to the state’s statistical agent, which in most states is the NCCI. The state agent then promulgates loss costs for specific job descriptions or class codes. Insurers file requests for adoption of a loss cost multiplier (LCM) to be applied to the loss costs to support operating expenses and profit margins. In addition, most states allow pricing flexibility above and below the filed LCM, within certain limits.

We obtain approval of our rates, including our LCMs, from state regulatory authorities. To maintain rates at profitable levels, we regularly monitor and adjust our LCMs. If we are unable to charge rates in a particular state or industry to produce satisfactory results, we seek to control and reduce our premium volume in that state or industry and redeploy our capital in other states or industries that offer greater opportunity to earn an underwriting profit.

Our safety inspection process begins with a request from our underwriting department to perform a pre-quotation safety inspection. Our safety inspections focus on a prospective policyholder’s operations, loss exposures and existing safety controls to prevent potential losses. The factors considered in our inspection include employee experience, turnover, training, previous loss history and corrective actions, and workplace conditions, including equipment condition and, where appropriate, use of fall protection, respiratory protection or other safety devices. Our FSPs typically travel to employers’ worksites to perform these safety inspections. These initial inspections allow our underwriting professionals to make decisions on both insurability and pricing. In certain circumstances, we will agree to provide workers’ compensation insurance only if the employer agrees to implement and maintain the safety management practices that we recommend. In 2023, 93.4% of our new voluntary business policyholders were inspected prior to our offering a premium quote. The remaining voluntary business policies were not pre-quote inspected for a variety of reasons, including instances where the prospective policyholder was previously insured by us or previously inspected by us.

After an employer becomes a policyholder, we continue to emphasize workplace safety through periodic workplace visits, assisting the policyholder in designing and implementing enhanced safety management programs, providing safety-related information and conducting rigorous post-accident management. Generally, we may cancel or decline to renew an insurance policy if the policyholder does not implement or maintain reasonable safety management practices that we recommend.

We have structured our claims operation to provide immediate, intensive and personal management of claims to guide injured employees through medical treatment, rehabilitation and recovery, with the primary goal of returning the injured employee to work as promptly as practicable and at maximum medical improvement. We seek to limit the number of claim disputes with injured employees through early intervention in the claims process. Where possible, we purchase annuities on longer tail claims to close these claims, while still providing an appropriate level of benefits to injured employees. While we seek to promptly settle valid claims, we also aggressively defend against claims we consider to be non-meritorious.

Our FCMs are located in the geographic areas where our policyholders are based. We believe the presence of our FCMs in the field enhances our ability to guide an injured employee to the appropriate conclusion in a friendly, dignified and supportive manner. Our FCMs have broad authority to manage claims from occurrence of a workplace injury through resolution, including authority to retain many different medical providers at our expense. Such providers comprise not only our recommended medical providers, but also nurse case managers, independent medical examiners, vocational specialists, rehabilitation specialists and other specialty providers of medical services necessary to achieve a quality outcome.

Following notification of a workplace injury, an FCM will contact the policyholder, the injured employee and/or the treating physician to determine the nature and severity of the injury. If a serious injury occurs, the FCM will promptly visit the injured employee or the employee’s family members to discuss the benefits provided. The FCM will also visit the treating physician to discuss the proposed treatment plan. Our FCM assists the injured employee in receiving appropriate medical treatment and encourages the use of our recommended medical providers and facilities. For example, our FCM may suggest that a treating physician refer an injured worker to another physician or treatment facility that we believe has had positive outcomes for other workers with similar injuries. We actively monitor the number of open cases handled by a single FCM in order to maintain focus on each specific injured employee. As of December 31, 2023, we averaged 44 open indemnity claims per FCM, which we believe is significantly less than the industry average.

Locating our FCMs in the field also allows us to build professional relationships with local medical providers. In selecting medical providers, we rely, in part, on the recommendations of our FCMs who have developed professional relationships within their geographic areas. We also seek input from our policyholders and other contacts in the markets that we serve. While cost factors are considered in selecting medical providers, we consider the most important factor in the selection process to be the medical provider’s ability to achieve a quality outcome. We define quality outcome as the injured worker’s rapid, conclusive recovery and return to sustained, full capacity employment.

We conduct premium audits on all of our voluntary business policyholders annually upon the expiration of each policy, including when the policy is renewed. The purpose of these audits is to verify that policyholders have accurately reported their payroll expenses and employee job classifications, and therefore, have paid us the premium required under the terms of their policies. In addition to annual audits, we selectively perform interim audits on new business and on certain classes of business if significant or unusual claims are filed or if the monthly reports submitted by a policyholder reflect a payroll pattern or other aberrations that cause underwriting, safety or fraud concerns. We also mitigate potential losses from under-reporting of premium, delinquent, or non-payment of premium by collecting a deposit from the policyholder at the inception of the policy, typically representing 15% of the total estimated annual premium.

We record reserves for estimated losses under insurance policies that we write and for loss adjustment expenses related to the investigation and settlement of policy claims. Our reserves for loss and loss adjustment expenses represent the estimated cost of all reported and unreported loss and loss adjustment expenses incurred and unpaid as of a given point in time.

In establishing our reserves, we review the results of analyses using actuarial methodologies that utilize historical loss data from our 38 years of underwriting workers’ compensation insurance. In evaluating the results of those analyses, our management also uses substantial judgment in considering other factors that are not considered in these actuarial analyses. These actuarial methodologies and subjective factors are described in more detail below. Our process and methodology for estimating reserves applies to both our voluntary and assigned risk business, but does not include our reserves for mandatory pooling arrangements. We record reserves for mandatory pooling arrangements as those reserves are reported to us by the pool administrators. We do not use loss discounting when we determine our reserves, which would involve recognizing the time value of money and offsetting estimates of future payments by future expected investment income.

When a claim is reported, we establish an initial case reserve for the estimated amount of our loss based on our estimate of the most likely outcome of the claim at that time. Generally, that case reserve is established within 14 days after the claim is reported and consists of anticipated medical costs, indemnity costs and specific adjustment expenses, which we refer to as defense and cost containment expenses (DCC). The most complex claims, involving severe injuries, may take a considerable period of time for us to establish a more precise estimate of the most likely outcome of the claim. At any point in time, the amount paid on a claim, plus the reserve for future amounts to be paid, represents the estimated total cost of the claim, or the case incurred amount. The estimated amount of loss for a reported claim is based upon various factors, including:

The case incurred amount varies over time due to uncertainties with respect to medical treatment and outcome, length and degree of disability, recurrence of injury, employment availability and wage levels and judicial determinations. As changes occur, the case incurred amount is adjusted. The initial estimate of the case incurred amount can vary significantly from the amount ultimately paid, especially in circumstances involving severe injuries with comprehensive medical treatment. Changes in case incurred amounts is an important component of our historical claim data.

In addition to case reserves, we establish reserves on an aggregate basis for loss and DCC expenses that have been incurred but not reported (IBNR). Our IBNR reserves are also intended to provide for aggregate changes in case incurred amounts as well as the unpaid cost of recently reported claims for which an initial case reserve has not been established.

The third component of our reserves for loss and loss adjustment expenses is our adjusting and other (AO) reserve. Our AO reserve covers primarily the estimated cost of administering claims and is established for the costs of future unallocated loss adjustment expenses for all reported and unreported claims.

The final component of our reserves for loss and loss adjustment expenses is the reserve for mandatory pooling arrangements. The mandatory pooling arrangement reserve includes the amount reported to us by the pool administrators.

In establishing reserves, we rely on the analysis of the more than 239,000 claims in our 38-year history. Using statistical analyses and actuarial methods, we estimate reserves based on historical patterns of case development, payment patterns, mix of business, premium rates charged, case reserving adequacy, operational changes, adjustment philosophy and severity and duration trends.

We review our reserves by accident year and state on a quarterly basis. Individual open claims are reviewed more frequently and adjustments to case incurred amounts are made based on expected outcomes. The number of claims reported or occurring during a period, combined with a calculation of average case incurred amounts, and measured over time, provide the foundation for our reserve estimates. In establishing our reserve estimates, we use historical trends in claim reporting timeliness, frequency of claims in relation to earned premium or covered payroll, premium rate levels charged and case development patterns. However, the number of variables and judgments involved in establishing reserve estimates, combined with some random variation in loss development patterns, results in uncertainty regarding projected ultimate losses. As a result, our ultimate liability for loss and loss adjustment expenses may be more or less than our reserve estimate.

Our analysis of our historical data provides the factors we use in our statistical and actuarial analysis in estimating our loss and DCC expense reserve. These factors are primarily measures over time of claims reported, average case incurred amounts, case development, duration, severity and payment patterns. However, these factors cannot be solely used as these factors do not take into consideration changes in business mix, claims management, regulatory issues, medical trends, medical inflation, employment and wage patterns, and other subjective factors. We use this combination of factors and subjective assumptions and the use of six well-accepted actuarial methods, as follows:

These six methods are applied to both gross and net claims data. We then analyze the results and may emphasize or de-emphasize some or all of the outcomes to reflect our judgment of reasonableness in relation to supplementary information and operational and industry changes. These outcomes are then aggregated to produce a single weighted average point estimate that is the base estimate for loss and DCC expense reserves.

In determining the level of emphasis that may be placed on some or all of the methods, we review statistical information as to which methods are most appropriate, whether adjustments are appropriate within the particular methods, and if results produced by each method include inherent bias reflecting operational and industry changes. This supplementary information may include:

In establishing our AO reserves, we review our past adjustment expenses in relation to paid claims as well as estimated future costs based on expected claims activity and duration.

The sum of our net loss and DCC expense reserve, our AO reserve and our reserve for mandatory pooling arrangements is our total net reserve for loss and loss adjustment expenses.

As of December 31, 2023, our best estimate of our ultimate liability for loss and loss adjustment expenses, net of amounts recoverable from reinsurers, was $554.2 million, which includes $13.0 million in reserves for mandatory pooling arrangements as reported by the pool administrators. The estimate of our ultimate liability was derived from the process and methodology described above, which relies on substantial judgment. There is inherent uncertainty in estimating our reserves for loss and loss adjustment expenses. It is possible that our actual loss and loss adjustment expenses incurred may vary significantly from our estimates. We view our estimate of loss and DCC expenses as the most significant component of our reserve for loss and loss adjustment expenses.

Additional information regarding our reserve for unpaid loss and loss adjustment expenses (LAE) as of December 31, 2023, 2022, and 2021 is set forth below:

We performed sensitivity analyses to show how our net loss and DCC expense reserve, including IBNR, would be impacted by changes in certain critical assumptions. For our paid and incurred development methods, we varied both the cumulative paid and incurred loss development factors (LDFs) by an increase and decrease of 30%, both individually and in combination with one another. The results of this sensitivity analysis, using December 31, 2023 data, are summarized below.

For our paid and incurred weighted severity methods, we varied our year-end selected trend factor (for medical costs, defense costs, wage inflation, etc.) by an increase and decrease of 300 basis points. The results of this sensitivity analysis, using December 31, 2023 data, are summarized below.

The table below shows the reconciliation of loss reserves on a gross and net basis for the years ended December 31, 2023, 2022 and 2021, reflecting changes in losses incurred and paid losses.

Our gross reserves for loss and loss adjustment expenses of $674.0 million as of December 31, 2023 are expected to cover all unpaid loss and loss adjustment expenses as of that date. As of December 31, 2023, we had 4,003 open claims, with an average of $168,372 in unpaid loss and loss adjustment expenses per open claim. During the year ended December 31, 2023, 3,948 new claims were reported, and 4,220 claims were closed.

In 2023, our gross reserves decreased to $674.0 million from $696.0 million at December 31, 2022. The decrease in reserves was attributable primarily to favorable development from prior accident years. In 2023, we recognized $41.4 million of favorable development for prior accident years. As of December 31, 2022, we had 4,275 open claims, with an average of $162,816 in unpaid loss and loss adjustment expenses per open claim. During the year ended December 31, 2022, 4,104 new claims were reported, and 4,423 claims were closed.

In 2022, our gross reserves decreased to $696.0 million from $745.3 million at December 31, 2021. The decrease in reserves was attributable primarily to favorable development from prior accident years. In 2022, there was also $40.6 million of favorable development for prior accident years. As of December 31, 2021, we had 4,594 open claims, with an average of $162,229 in unpaid loss and loss adjustment expenses per open claim. During the year ended December 31, 2021, 4,310 new claims were reported, and 4,474 claims were closed.

The table below shows the net loss development for business written each year from 2013 through 2023. The table reflects the changes in our loss and loss adjustment expense reserves in subsequent years from the prior loss estimates based on experience as of the end of each succeeding year on a generally accepted accounting principles (GAAP) basis.

The first line of the table shows, for the years indicated, our liability including the incurred but not reported loss and loss adjustment expenses as originally estimated, net of amounts recoverable from reinsurers. For example, as of December 31, 2013, it was estimated that $565.9 million would be sufficient to settle all claims not already settled that had occurred on or prior to December 31, 2013, whether reported or unreported. The next section of the table sets forth the re-estimates in later years of incurred losses, including payments, for the years indicated. The next section of the table shows, by year, the cumulative amounts of loss and loss adjustment expense payments, net of amounts recoverable from reinsurers, as of the end of each succeeding year. For example, with respect to the net loss reserves of $565.9 million as of December 31, 2013, by December 31, 2023 (ten years later) $296.8 million had actually been paid in settlement of the claims that relate to liabilities as of December 31, 2013.

The “gross cumulative redundancy (deficiency)” represents, as of December 31, 2023, the difference between the latest re-estimated liability and the amounts as originally estimated. A redundancy means that the original estimate was higher than the current estimate. A deficiency means that the current estimate is higher than the original estimate.

We derive net investment income from our invested assets. As of December 31, 2023, the carrying value of our investment portfolio, including cash and cash equivalents, was $896.5 million and the fair value of the portfolio was $886.0 million.

Our Board of Directors has established an investment policy governing our investments, which is reviewed at least annually. The principal objectives of our investment portfolio are to preserve capital and surplus and to maintain appropriate liquidity for corporate requirements. Additional objectives are to support our A.M. Best rating and to maximize after-tax income and risk-adjusted total return. Our investment policy establishes limitations and guidelines relating to, for example, asset allocation, diversification, credit ratings and duration. We periodically review our investment portfolio with the risk committee of our Board of Directors for compliance with the policy. Our investment portfolio is managed internally.

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 expense (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. We generally seek to limit our holdings in equity securities to the lesser of 10% of the investment portfolio or 30% of shareholders’ equity, on a fair value basis.

See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Investment Portfolio” for further information on the composition and results of our investment portfolio.

The table below shows the carrying values of various categories of securities held in our investment portfolio, the percentage of the total carrying value of our investment portfolio represented by each category and the effective interest rate for the year ended December 31, 2023 based on the carrying value of each category as of December 31, 2023:

As of December 31, 2023, our fixed maturity securities had a carrying value of $800.6 million, which represented 89.3% of the carrying value of our investments, including cash and cash equivalents. For the twelve months ended December 31, 2023, the pre-tax investment yield of our investment portfolio was 3.4% per annum.

The gross unrealized gains and losses on, and the cost or amortized cost and fair value of, our investment portfolio as of December 31, 2023 are summarized as follows:

As of December 31, 2023, municipal bonds with maturities greater than one year made up 61.2% of our investment portfolio, including cash and cash equivalents. The investments in Louisiana result from companies being allowed an investment credit against Louisiana premium taxes for varying levels of Louisiana assets. The table below summarizes the top five geographic exposures as of December 31, 2023.

The table below summarizes the credit quality of our investment portfolio, excluding our equity holdings, as of December 31, 2023, as determined by the middle rating of Moody’s, Standard and Poor’s, and Fitch. If there are two ratings, the lower rating is used.

As of December 31, 2023, the average composite rating of our investment portfolio, excluding our equity holdings, was “AA-”.

The table below shows the composition of our fixed maturity securities by remaining time to maturity as of December 31, 2023.

We purchase reinsurance to reduce our net liability on individual risks and to protect against catastrophic losses. Reinsurance involves an insurance company transferring to, or ceding, a portion of the exposure on a risk to a reinsurer. The reinsurer assumes the exposure in return for a portion of our premium. The cost and limits of reinsurance we purchase can vary from year to year based upon the availability of quality reinsurance at an acceptable price and our desired level of retention. Retention refers to the amount of risk that we retain for our own account. Under excess of loss reinsurance, covered losses in excess of the retention level up to the limit of the program are paid by the reinsurer. Our excess of loss reinsurance is written in layers, in which our reinsurers accept a band of coverage up to a specified amount. Any liability exceeding the limit of the program reverts to us as the ceding company. Reinsurance does not legally discharge us from primary liability for the full amount due under our policies. However, our reinsurers are obligated to indemnify us to the extent of the coverage provided in our reinsurance agreements.

We believe reinsurance is critical to our business. Our reinsurance purchasing strategy is to protect against unforeseen and/or catastrophic loss activity that would adversely impact our income and capital base. We generally select financially strong reinsurers with an A.M. Best rating of “A–” (Excellent) or better at the time we enter into a reinsurance contract. In addition, to minimize our exposure to significant losses from reinsurer insolvencies, we evaluate the financial condition of our reinsurers and monitor concentrations of credit risk on a continual basis.

Effective January 1, 2024, we renewed our excess of loss reinsurance treaty program. The program consists of four layers of coverage. The first layer is a multi-year treaty that applies to losses incurred through December 31, 2025. The other layers are renewed annually. Our reinsurance treaty program provides us with reinsurance coverage for each loss occurrence up to $100.0 million, subject to applicable limitations, deductibles, retentions and aggregate limits. In a multi-claimant loss occurrence, the reinsurance coverage for any one individual claimant is limited to a maximum of $20.0 million, subject to applicable deductibles, retentions and aggregate limits.

Our retention is $2.0 million for each loss occurrence. Losses in the layer between $2.0 million and $10.0 million are ceded to a multi-year reinsurance treaty. Our second layer of reinsurance provides $10.0 million in coverage for each loss occurrence in excess of $10.0 million. Our third layer of reinsurance provides $60.0 million in coverage for each loss occurrence in excess of $20.0 million. Our fourth layer of reinsurance provides $20.0 million in coverage for each loss occurrence in excess of $80.0 million. The layers over $10.0 million provide coverage for terrorism including the use and/or dispersal of nuclear, biological, chemical and radiological agents with an annual aggregate limit of $90.0 million. Layers two through four provide coverage through December 31, 2024. The aggregate limit for all other claims under all layers is $180.0 million.

At our option, we have the right to commute the reinsurers’ obligations under the agreement at any time after the end of the applicable term of the agreement. If we commute the reinsurers’ obligations, we are entitled to receive a portion of the premiums that were paid to the reinsurers prior to the effective dates of the applicable commutations, subject to certain adjustments provided in the agreement.

We have 26 reinsurers participating in our reinsurance treaty program in 2024. Under certain circumstances, including a downgrade of a reinsurer’s A.M. Best rating to “B++” (Very Good) or below, such reinsurer may be required to provide us with security for amounts due under the terms of our reinsurance program. This security may take the form of, among other things, cash advances or letters of credit. If security is required because of a ratings downgrade, the form of security must be mutually agreed to between the reinsurer and us.

The table below sets forth the reinsurers participating in our 2024 reinsurance program:

Due to the nature of reinsurance, we have recoverables from reinsurers that apply to prior accident years. The Company generally secures large reinsurance recoverable balances with various forms of collateral, including funds withheld accounts, irrevocable letters of credit and secured trusts. The table below summarizes our amounts recoverable from reinsurers as of December 31, 2023.

The Terrorism Risk Insurance Act of 2002 (the 2002 Act) was enacted in response to the events of September 11, 2001. The 2002 Act has been extended periodically, most recently by the Terrorism Risk Insurance Program Reauthorization Act of 2019 (the 2019 Act). This legislation was designed to ensure the availability of insurance coverage for losses resulting from certain acts of terrorism in the United States. The 2019 Act reauthorized a federal program until 2027 that provides federal reimbursement to insurance companies for a portion of their losses arising from certain acts of terrorism and requires insurance companies to offer coverage for these acts. The program applies to insured losses arising out of acts that are certified as “acts of terrorism” by the Secretary of the Treasury in consultation with the Secretary of Homeland Security and the Attorney General of the United States. In addition, the program does not provide any reimbursement for any portion of aggregate industry-wide insured losses from certified acts of terrorism that exceed $100.0 billion in any one year and is subject to certain other limitations and restrictions.

For insured losses in 2024, each insurance group is responsible for a statutory deductible under the 2019 Act that is equal to 20% of its direct earned property and casualty insurance premiums. For losses occurring in 2024, the U.S. federal government will reimburse 80% of an insurance group’s covered losses over the statutory deductible. In addition, no federal reimbursement is available unless the aggregate insurance industry-wide losses from a certified act of terrorism exceeds $200.0 million for any act of terrorism. However, there is no relief from the requirement under the 2019 Act that insurance companies offer coverage for certified acts of terrorism if those acts do not cause losses exceeding these threshold amounts and thus do not result in any federal reimbursement payments.

Under the 2019 Act, insurance companies must offer coverage for losses due to certified acts of terrorism in their workers’ compensation policies. Moreover, the workers’ compensation laws of the various states generally do not permit the exclusion of coverage for losses arising from acts of terrorism, including terrorism that involves the use of nuclear, biological, chemical or radiological agents. In addition, state law prohibits us from limiting our workers’ compensation insurance losses arising from any one catastrophe or any one claimant. We have reinsurance protection in our current reinsurance treaty program that provides coverage of up to $100.0 million for losses arising from acts of terrorism. This coverage is effective through December 31, 2024. The Company’s 2024 catastrophe excess of loss layer for loss occurrences greater than $10.0 million includes coverage for losses caused by nuclear, biological, chemical and radiological attacks, subject to the deductibles, retentions, definitions and aggregate limits.

We view our information systems as an integral part of our operations. We make substantial investments in improving our systems on an ongoing basis. We provide our field premium auditors, field safety professionals and field case managers with computer and communication equipment to efficiently complete services. We deploy technology and equipment to enable remote work when needed and to ensure continuity of home office and field operations. We also deploy online solutions for our policyholders to enable timely and efficient premium payments and for our agents to improve collaboration and exchange of data in the underwriting process. Our information technology employees perform end-user support, systems development, and infrastructure operation and maintenance with limited assistance from outside vendors.

The insurance industry, in general, is highly competitive and there is significant competition in the workers’ compensation segment of the industry. Competition in the insurance business is based on many factors, including premium rates, policy terms, coverage availability, claims management, safety services, payment terms, types of insurance offered, overall financial strength and financial ratings assigned by independent rating organizations, such as A.M. Best.

We believe the workers’ compensation market for the hazardous industries we target is more fragmented and to some degree less competitive than other segments of the workers’ compensation market. Our competitors include other insurance companies, state insurance pools and self-insurance funds. Overall, we estimate that more than 300 insurance companies participate in the workers’ compensation market. The insurance companies with which we compete vary by state and by the industries we target. Market conditions are also impacted by lower estimated loss costs adopted by a number of states in which we do business.

Our competitive advantages include our underwriting expertise, safety services and claims management practices, our A.M. Best rating and our ability to reduce claims through implementation of our work safety programs. In addition, we believe that our insurance is competitively priced and our premium rates are typically lower than those for policyholders assigned to the state insurance pools, allowing us to provide a viable alternative for policyholders in those pools.

Throughout our 38-year history, the retention, growth and development of our employees has been critical to our success. In order to continue to deliver on our mission of providing quality insurance services to our customers, it is crucial that we continue to attract and retain talented employees that are aligned with our mission.

As part of these efforts, we strive to offer a competitive compensation and benefits program that is aligned with our shareholders’ interests. Our underwriting and field safety professionals (FSPs) participate in both a long-term and a short-term incentive compensation programs that are paid quarterly.

In addition, employee bonus programs in other areas of the Company help ensure our employees’ performance is appropriately rewarded when the Company performs well.

We are committed to the health, safety and wellness of our employees as the success of our business is fundamentally connected to the well-being of our people. Our benefit offerings are designed to meet the varied and evolving needs of a diverse workforce. In addition to health care and 401k retirement programs, we offer wellness initiatives and time off for annual wellness exams, a floating holiday and leisure day, reimbursements of health club memberships, wellness luncheons, an annual health fair and confidential counseling services to promote a culture of wellness.

To assist employees in need, beginning in 2016, the Company partnered with the Community Foundation of Southwest Louisiana and later the Baton Rouge Area Foundation to provide tax-free assistance to employees that have experienced a catastrophic event through an employee assistance fund. In addition to funding from the Company, this fund also allows employees to make a one-time or recurring monetary donation to assist their fellow employees.

We actively engage and support local communities through numerous charitable and social organizations in the communities in which we operate. We believe that this commitment helps in our efforts to attract and retain employees. To encourage a culture of giving back to the communities in which we operate, all Company employees may take advantage of paid time off for volunteer activities.

In 2022, AMERISAFE launched a new committee to help the Company focus our charitable giving and corporate volunteering efforts. The committee comprises employees at various levels of the Company, different departments and locations. It is responsible for selection of recipients of monetary donations over the course of each calendar year, as well as coordinating volunteer opportunities for employees to engage in within the communities we serve.

The Company has also established an endowment to provide scholarships to dependents of our employees and members of the community in which we do business, recognizing the importance of educating future generations.

The unique differences of each individual are representative of our exceptional workforce, where service to each other is the foundation of service to our customers. We strive to promote inclusion through our Company values and behaviors. Beginning in 2022, the Company provided employees with training on diversity, equity and inclusion, unconscious bias, and workplace harassment.

As of December 31, 2023, we had 350 full-time employees and 12 part-time employees. Approximately 62% of our current workforce is female and 38% male. Our average employee tenure is 10.8 years. Women represent 54% of AMERISAFE’s leadership (defined as vice president level and above), including our CEO. Two women serve as members of our eight member Board of Directors.

We invest in the professional development of our employees. This includes various insurance certification programs and other professional development education, training and certifications. We also work with our employees to provide training in leadership development, professional development, project management skills and interpersonal skills development.

The table below sets forth information about our executive officers and key employees as of February 23, 2024.

G. Janelle Frost has served as our Chief Executive Officer since April 2015 and President since September 2013. She has served as a Director of the Company since April 2016. Prior to becoming our Chief Executive Officer, Ms. Frost served as Chief Operating Officer from May 2013 to April 2015. She served as our Executive Vice President and Chief Financial Officer from November 2008 to April 2013, our Controller from May 2004 to November 2008 and Vice President from May 2006 to November 2008. She has been employed with our company since 1992.

Anastasios G. (Andy) Omiridis has served as our Executive Vice President and Chief Financial Officer since September 2022. From 2019 to 2022, Mr. Omiridis served as the Senior Vice President, Deputy Chief Financial Officer and Principal Accounting Officer of Kemper Corporation. Previously, he served as Senior Vice President and Chief Financial Officer with Chubb Life from 2017 to 2019; and as the Chief Accounting Officer for ARGO Limited from 2012 to 2017. Prior to 2012, Mr. Omiridis served in multiple leadership positions with AIG.

Vincent J. Gagliano has served as our Executive Vice President and Chief Risk Officer since March 2016. He previously served as Executive Vice President and Chief Technology Officer from January 2013 until February 2016, and Senior Vice President of Information Technology from September 2009 to January 2013. He has been employed with our company since 2001.

Kathryn H. Shirley has served as our Executive Vice President, Chief Administrative Officer and Secretary since February 2020. She previously served as Executive Vice President, General Counsel and Secretary from February 2016 until February 2020 and Senior Vice President, General Counsel and Secretary from May 2012 until February 2016. She has been employed with our company since 2012. Prior to joining our company, she practiced law from 2009 through May 2012 at Christian & Small LLP. From 2000 until 2008 she was employed as an Insurance Regulatory Compliance Manager with United Investors Life Insurance Company and Liberty National Life Insurance Company, subsidiaries of Torchmark Corporation.

Raymond F. (Ray) Wise, Jr. has served as Executive Vice President and Chief Sales Officer since July 2023. Mr. Wise served as Chief Sales Officer for Employers Insurance Group from 2016 to 2022. From 2012 to 2016, Mr. Wise served as President of Vanliner Insurance Company.

Nancy E. Hunt has served as our Senior Vice President, Underwriting Operations since July 2022. She has been employed with our Company since 1995 and served as Regional Vice President, Underwriting Operations from September 2011 to July 2022.

Henry O. (Chris) Lestage, IV has served as our Senior Vice President, Claims Operations since September 2000. He has been employed with our Company since 1987.

Michael C. (Chad) Cobb has served as our Senior Vice President, Safety Operations since October 2023. He has been employed with our Company since 2013 and served as Vice President, Field Safety from July 2019 to October 2023.

Barbra E. McCrary has served as our Senior Vice President, Policyholder Services since November 2017 and served as Vice President, Premium Audit from 2010 until 2017. She has been employed with our Company since 1997.

Angela W. Pearson has served as our Senior Vice President and Controller since October 2019 and previously served as Vice President and Controller from 2012 until October 2019. She has been employed with our Company since 1996.

Nearly all states have enacted legislation that regulates insurance holding company systems. Each insurance company in a holding company system is required to register with the insurance supervisory agency of its state of domicile and furnish information concerning the operations of companies within the holding company system that may materially affect the operations, management or financial condition of the insurers within the system. Under these laws, the respective state insurance departments may examine us at any time, require disclosure of material transactions and require prior notice of or approval for certain transactions. All transactions within a holding company system affecting an insurer must have fair and reasonable terms and are subject to other standards and requirements established by law and regulation.

The insurance holding company laws of nearly all states require advance approval by the respective state insurance departments of any change of control of an insurer. “Control” is generally presumed to exist through the direct or indirect ownership of 10% or more of the voting securities of a domestic insurance company or any entity that controls a domestic insurance company. In addition, insurance laws in many states contain provisions that require pre-notification to the insurance commissioners of a change of control of a non-domestic insurance company licensed in those states. Any future transactions that would constitute a change of control of AIIC, SOCI or AIICTX, including a change of control of AMERISAFE, would generally require the party acquiring control to obtain the prior approval of the department of insurance in the state in which the insurance company being acquired is incorporated and may require pre-notification in the states where pre-notification provisions have been adopted. Obtaining these approvals may result in the material delay of, or deter, any such transaction.

These laws may discourage potential acquisition proposals and may delay, deter or prevent a change of control of AMERISAFE, including through transactions, and in particular unsolicited transactions, that some or all of the shareholders of AMERISAFE might consider to be desirable.

Insurance companies are subject to regulation and supervision by the department of insurance in the state in which they are domiciled and, to a lesser extent, other states in which they conduct business. AIIC and SOCI are primarily subject to regulation and supervision by the Nebraska Department of Insurance. AIICTX is primarily subject to regulation and supervision by the Texas Department of Insurance and Workers’ Compensation Commission. These state agencies have broad regulatory, supervisory and administrative powers, including the power to grant and revoke licenses to transact business, license agencies, set the standards of solvency to be met and maintained, determine the nature of, and limitations on, investments and dividends, approve policy forms and rates in some states, periodically examine financial statements, determine the form and content of required financial statements and periodically examine market conduct.

Detailed annual and quarterly financial statements and other reports are required to be filed with the state insurance departments in all states in which we are licensed to transact business. The financial statements of AIIC, SOCI and AIICTX are subject to periodic examination by the department of insurance in each state in which they are licensed to do business.

In addition, many states have laws and regulations that limit an insurer’s ability to withdraw from a particular market. For example, states may limit an insurer’s ability to cancel or not renew policies. Furthermore, certain states prohibit an insurer from withdrawing one or more lines of business from the state, except pursuant to a plan that is approved by the state insurance department. The state insurance department may disapprove a plan that may lead to market disruption. Laws and regulations that limit cancellation and non-renewal and that subject program withdrawals to prior approval requirements may restrict our ability to exit unprofitable markets.

Insurance agencies are also subject to regulation and supervision by the state insurance departments in the states in which they are licensed. Our wholly owned subsidiary, Amerisafe General Agency, Inc., is licensed as an insurance agent in 30 states. Amerisafe General Agency is domiciled in Louisiana and is primarily subject to regulation and supervision by the Louisiana Department of Insurance, which regulates the solicitation of insurance and the qualification and licensing of agents and agencies that may desire to conduct business in Louisiana.

We are subject to periodic examinations by the Nebraska and Texas insurance departments. AIIC and SOCI underwent an examination by the Nebraska Department of Insurance in 2022 and 2023 which covered calendar years 2018 through 2021. AIICTX underwent an examination by the Texas Department of Insurance in 2022 and 2023 which covered calendar years 2018 through 2021. The examinations were completed in 2023 with no material findings.

In most of the states where we are licensed to transact business, there is a requirement that property and casualty insurers doing business in that state participate in a guaranty association, which is organized to pay contractual benefits owed under insurance policies issued by impaired, insolvent or failed insurers. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premium written by member insurers in the lines of business in which the impaired, insolvent or failed insurer is engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets.

Property and casualty insurance company insolvencies or failures may result in us paying assessments at some future date. At this time, we are unable to determine the impact, if any, such assessments may have on our financial position or results of operations. We have established liabilities for potential state guaranty fund assessments with respect to insurers becoming insolvent.

Many of the states in which we conduct business or intend to conduct business require that all licensed insurers participate in a program to provide workers’ compensation insurance to those employers who have not or cannot obtain coverage from a carrier on a negotiated basis. The level of required participation in such programs is generally determined by calculating the volume of our voluntary business in that state as a percentage of all voluntary business in that state by all insurers. The resulting factor is the proportion of premium we must accept as a percentage of all of premiums in policies included in that state’s residual market program.

Companies generally can fulfill their residual market obligations by either issuing insurance policies to employers assigned to them, or participating in a reinsurance pool where the results of all policies provided through the pool are shared by the participating companies. In 2022 and prior, we utilized both methods, depending on management’s evaluation of the most cost-efficient method to adopt in each state that allows a choice of assigned risk or participation in a pooling arrangement. Beginning in 2023, we stopped accepting direct assignments.

A number of states operate trust funds that reimburse insurers and employers for claims paid to injured employees for aggravation of prior conditions or injuries. The state-managed trust funds are funded through assessments against insurers and self-insurers providing workers’ compensation coverage in the applicable state. Our recoveries from state-managed trust funds for the years ended December 31, 2023, 2022 and 2021 were $2.9 million, $3.6 million and $5.1 million, respectively. Our cash paid for assessments to state-managed trust funds for the years ended December 31, 2023, 2022 and 2021 was $1.8 million, $0.1 million and $0.8 million, respectively. We accrue for second injury funds relative to historical paid amounts.

Under Nebraska law, without the prior approval of the Nebraska Director of Insurance, AIIC and SOCI cannot pay dividends to their shareholder that exceed the greater of (a) 10% of statutory surplus as of the previous year end or (b) or statutory net income, excluding realized investment gains, for the preceding 12-month period. However, net income from the previous two calendar years may be carried forward to the extent that it has not already been paid out as dividends. Further, under Texas law, without the prior approval of the Texas Commissioner of Insurance, AIICTX cannot pay dividends to its shareholder in excess of the greater of 10% of statutory surplus, or statutory net income, for the preceding 12-month period.

For the year ended December 31, 2023, we derived 3.3% of our voluntary in-force premiums from employers engaged in the maritime industry. As a provider of workers’ compensation insurance for employers engaged in the maritime industry, we are subject to the United States Longshore and Harbor Workers’ Compensation Act (USL&H) and the Merchant Marine Act of 1920, or Jones Act. We are also subject to regulations related to the USL&H Act and the Jones Act.

The USL&H Act, which is administered by the U.S. Department of Labor, generally covers exposures on the navigable waters of the United States and in adjoining waterfront areas, including exposures resulting from stevedoring. The USL&H Act requires employers to provide medical benefits, compensation for lost wages, and rehabilitation services to longshoremen, harbor workers and other maritime workers who may suffer injury, disability or death during the course and scope of their employment. The Department of Labor has the authority to require us to make deposits to serve as collateral for losses incurred under the USL&H Act.

The Jones Act is a federal law, the maritime employer provisions of which provide injured offshore workers, or seamen, with a remedy against their employers for injuries arising from negligent acts of the employer or co-workers during the course of employment on a ship or vessel.

In 1999, Congress enacted the Gramm-Leach-Bliley Act, which, among other things, protects consumers from the unauthorized dissemination of certain personal information. Subsequently, a majority of states have implemented additional regulations to address privacy issues. These laws and regulations apply to all financial institutions, including insurance companies, and require us to maintain appropriate policies and procedures for managing and protecting certain personal information of our policyholders and to fully disclose our privacy practices to our policyholders. We may also be exposed to future privacy laws and regulations, which could impose additional costs and impact our results of operations or financial condition. In 2000, the NAIC adopted the Privacy of Consumer Financial and Health Information Model Regulation, which assisted states in promulgating regulations to comply with the Gramm-Leach-Bliley Act. In 2002, to further facilitate the implementation of the Gramm-Leach-Bliley Act, the NAIC adopted the Standards for Safeguarding Customer Information Model Regulation. Several states have now adopted similar provisions regarding the safeguarding of policyholder information. We have established policies and procedures intended to ensure that we are in compliance with the privacy requirement of the Gramm-Leach-Bliley Act.

In 2017, the National Association of Insurance Commissioners adopted the Insurance Data Security Model Law creating rules for insurers, agents and other licensed entities covering data security, investigation and notification of breach. This includes maintaining an information security program based on ongoing risk assessment, overseeing third-party service providers, investigating data breaches and notifying regulators of a cybersecurity event. Some states have adopted similar versions of the Insurance Data Security Model Law. Our policies and procedures regarding information security are intended to ensure that we are in compliance with the model law.

From time to time, various regulatory and legislative changes have been proposed in the insurance industry. Among the proposals that have in the past been, or are at present, being considered are the possible introduction of federal regulation in addition to, or in lieu of, the current system of state regulation of insurers and proposals in various state legislatures (some of which proposals have been enacted) to conform portions of their insurance laws and regulations to various model acts adopted by the NAIC. We are unable to predict whether any of these laws and regulations will be adopted, the form in which any such laws and regulations would be adopted or the effect, if any, these developments would have on our operations and financial condition.

For information on the Terrorism Risk Act, see “—Reinsurance—Terrorism Reinsurance.”

The NAIC is a group formed by state insurance commissioners to discuss issues and formulate policy with respect to regulation, reporting and accounting of insurance companies. Although the NAIC has no legislative authority and insurance companies are at all times subject to the laws of their respective domiciliary states and, to a lesser extent, other states in which they conduct business, the NAIC is influential in determining the form in which such laws are enacted. Model insurance laws, regulations and guidelines, which we refer to as the Model Laws, have been promulgated by the NAIC as a minimum standard by which state regulatory systems and regulations are measured. Adoption of state laws that provide for substantially similar regulations to those described in the Model Laws is a requirement for accreditation by the NAIC. The NAIC provides authoritative guidance to insurance regulators on statutory accounting issues by promulgating and updating a codified set of statutory accounting practices in its Accounting Practices and Procedures Manual. The Nebraska and Texas legislatures have adopted these codified statutory accounting practices.

Under Nebraska law, AIIC and SOCI are each required to maintain minimum capital and surplus of $2.0 million. Under Texas law, AIICTX is required to maintain minimum capital and surplus of $5.0 million. Property and casualty insurance companies are also subject to certain risk-based capital requirements by the NAIC. Under those requirements, the amount of capital and surplus maintained by a property and casualty insurance company is determined based on the various risk factors related to it. As of December 31, 2023, AIIC, SOCI and AIICTX exceeded the minimum risk-based capital requirements.

The key financial ratios of the NAIC’s Insurance Regulatory Information System (IRIS), which ratios were developed to assist insurance departments in overseeing the financial condition of insurance companies, are reviewed by experienced financial examiners of the NAIC and state insurance departments to select those companies that merit highest priority in the allocation of the regulators’ resources. IRIS identifies 13 industry ratios and specifies “usual values” for each ratio. Departure from the usual values on four or more of the ratios can lead to inquiries from individual state insurance commissioners as to certain aspects of an insurer’s business. The 2023 IRIS results for AIIC, SOCI, and AIICTX were within expected values for all 13 industry ratios.

Statutory accounting principles (SAP) are a basis of accounting developed to assist insurance regulators in monitoring and regulating the solvency of insurance companies. SAP is primarily concerned with measuring an insurer’s surplus as regards to policyholders. Accordingly, statutory accounting focuses on valuing assets and liabilities of insurers at financial reporting dates in accordance with appropriate insurance law and regulatory provisions applicable in each insurer’s domiciliary state.

Generally accepted accounting principles (GAAP) are concerned with a company’s solvency, but are also concerned with other financial measurements, principally income and cash flows. Accordingly, GAAP gives more consideration to appropriate matching of revenue and expenses and accounting for management’s stewardship of assets than does SAP. As a direct result, different assets and liabilities and different amounts of assets and liabilities will be reflected in financial statements prepared in accordance with GAAP as compared to SAP.

Statutory accounting principles established by the NAIC and adopted in part by Nebraska and Texas insurance regulators, determine, among other things, the amount of statutory surplus and statutory net income of AIIC, SOCI and AIICTX and thus determine, in part, the amount of funds that are available to pay dividends to AMERISAFE.

Our corporate website is located at www.amerisafe.com. Our annual report to shareholders, annual proxy statement and related proxy card will be made available on our website at the same time they are mailed to shareholders. Our quarterly reports on Form 10-Q, periodic reports on Form 8-K and amendments to those reports that we file or furnish pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available through our website, free of charge, as soon as reasonably practicable after they have been electronically filed or furnished to the Securities and Exchange Commission (SEC). Our website also provides access to reports filed by our directors, executive officers and certain significant shareholders pursuant to Section 16 of the Securities Exchange Act of 1934. In addition, our Corporate Governance Guidelines, Code of Business Conduct and Ethics, Policy Regarding Communications with the Board of Directors, Policy Regarding Shareholder Recommended Director Candidates, Majority Voting and Director Resignation Policy, Sustainability Report, and charters for the standing committees of our Board of Directors are available on our website as well as other shareholder communications. The information on our website is not incorporated by reference into this report. In addition, the SEC maintains a website, www.sec.gov, which contains reports, proxy and information statements and other information that we file electronically with the SEC.

In evaluating our Company, the factors described below should be considered carefully. The occurrence of one or more of these events could significantly and adversely affect our business, prospects, financial condition, results of operations and cash flows.

The workers’ compensation insurance industry is cyclical in nature, which may affect our overall financial performance.

The financial performance of the workers’ compensation insurance industry has historically fluctuated, with periods of lower premium rates and excess underwriting capacity resulting from increased competition followed by periods of higher premium rates and reduced underwriting capacity resulting from decreased competition. Although the financial performance of an individual insurance company is dependent on its own specific business characteristics, the profitability of most workers’ compensation

insurance companies generally tends to follow this cyclical market pattern. Because this market cyclicality is due in large part to the actions of our competitors and general economic factors, we cannot predict the timing or duration of changes in the market cycle. We expect these cyclical patterns will cause our revenues and net income to fluctuate, which may cause the price of our common stock to be more volatile.

We operate in a highly competitive industry and may lack the financial resources to compete effectively.

There is significant competition in the workers’ compensation insurance industry. We believe that our competition in the hazardous industries we target is fragmented and not dominated by one or more competitors. We compete with other insurance companies, state insurance pools and self-insurance funds. Many of our existing and potential competitors are significantly larger and possess greater financial, marketing and management resources than we do. Moreover, a number of these competitors offer other types of insurance in addition to workers’ compensation and can provide insurance nationwide.

We only offer workers’ compensation insurance. We have no current plans to focus our efforts on offering other types of insurance. As a result, negative developments in the economic, competitive or regulatory conditions affecting the workers’ compensation insurance industry could have an adverse effect on our financial condition and results of operations. Negative developments in the workers’ compensation insurance industry could have a greater impact on our company because we do not sell other types of insurance.

We compete on the basis of many factors, including coverage availability, claims management, safety services, payment terms, premium rates, policy terms, types of insurance offered, overall financial strength, financial ratings and reputation. If any of our competitors offer premium rates, policy terms or types of insurance that are more competitive than ours, we could lose market share. No assurance can be given that we will maintain our current competitive position in the markets in which we currently operate or that we will establish a competitive position in new markets into which we may expand.

If we do not appropriately establish our premium rates, our results of operations will be adversely affected.

In general, the premium rates for our insurance policies are established when coverage is initiated and, therefore, before all of the underlying costs are known. Like other workers’ compensation insurance companies, we rely on estimates and assumptions in setting our premium rates. Establishing adequate rates is necessary to generate sufficient revenue to offset losses, loss adjustment expenses and other underwriting expenses, and to earn an underwriting profit. If we fail to accurately assess the risks that we assume, we may fail to charge adequate premium rates to cover our losses and expenses, which could reduce our net income and cause us to become unprofitable. For example, when initiating coverage on a policyholder, we estimate future claims expense based, in part, on prior claims information provided by the policyholder’s previous insurance carriers. If this prior claims information is not accurate, we may underprice our policy by using claims estimates that are too low. As a result, our actual costs for providing insurance coverage to our policyholders may be significantly higher than our premiums. In order to set premium rates appropriately, we must:

We must also implement our pricing accurately in accordance with our assumptions. Our ability to undertake these efforts successfully, and as a result set premium rates accurately, is subject to a number of risks and uncertainties, principally:

Consequently, we could set our premium rates too low, which would negatively affect our results of operations and our profitability, or we could set our premium rates too high, which could reduce our competitiveness and lead to lower revenues.

If we cannot sustain our relationships with independent agencies, we may be unable to operate profitably.

We market a substantial portion of our workers’ compensation insurance through independent agencies. As of December 31, 2023, independent agencies produced 98.2% of our voluntary in-force premiums. No independent agency accounted for more than 1.8% of our voluntary in-force premiums at that date. Independent agencies are not obligated to promote our insurance and may sell insurance offered by our competitors. As a result, our continued profitability depends, in part, on the marketing efforts of our independent agencies and on our ability to offer workers’ compensation insurance and maintain financial strength ratings that meet the requirements of our independent agencies and their policyholders.

If we are unable to realize our investment objectives, our financial condition and results of operations may be adversely affected.

Investment income is an important component of our net income. As of December 31, 2023, our investment portfolio, including cash and cash equivalents, had a carrying value of $896.5 million. For the year ended December 31, 2023 we had $31.3 million of net investment income. Our investment portfolio is managed under investment guidelines approved by our Board of Directors, and is made up predominately of fixed maturity securities and cash and cash equivalents. Although our investment guidelines emphasize capital preservation and liquidity, our investments are subject to a variety of risks, including risks related to general economic conditions, interest rate fluctuations, market illiquidity and market volatility. General economic conditions may be adversely affected by global health pandemics, U.S. involvement in hostilities with other countries and large-scale acts of terrorism, or the threat of hostilities or terrorist acts.

Interest rates are highly sensitive to many factors, including governmental monetary policies and domestic and international economic and political conditions. Increased interest rates could have an adverse effect on the market value of our investment portfolio. Decreased interest rates could have an adverse effect on our investment income, in addition to increased prepayment risk on callable securities included in our investment portfolio.

Similarly, during periods of market disruption, including periods of rapidly widening credit spreads or illiquidity, the fair values of certain of our fixed maturity securities could be deemed to have a credit related loss for which the Company could be obligated to recognize an allowance for credit losses. Further, rapidly changing equity market conditions could materially impact the valuation of the equity securities as reported within our consolidated financial statements and the period-to-period changes in value could vary significantly.

These and other factors affect the capital markets and, consequently, the value of our investment portfolio and our future investment income. Any significant decline in our investment income would adversely affect our revenues and net income.

A decline in the level of business activity of our policyholders, particularly those engaged in the construction, trucking, logging and lumber, agriculture, manufacturing, telecommunications, and maritime industries, could negatively affect our earnings and profitability.

In 2023, 85.4% of our gross premiums written were derived from policyholders in the construction, trucking, logging and lumber, agriculture, manufacturing, telecommunications, and maritime industries. Because premium rates are calculated, in general, as a percentage of a policyholder’s payroll expense, premiums fluctuate depending upon the level of business activity and number of employees of our policyholders. As a result, our gross premiums written are primarily dependent upon economic conditions in these industries and upon economic conditions generally.

Our loss reserves are based on estimates and may be inadequate to cover our actual losses.

We record reserves for estimated losses under insurance policies we write and for loss adjustment expenses related to the investigation and settlement of claims. Our reserves for loss and loss adjustment expenses represent the estimated cost of all reported and unreported loss and loss adjustment expenses incurred and unpaid at any given point in time based on known facts and circumstances. Reserves are based on estimates of the most likely ultimate cost of individual claims. These estimates are inherently uncertain.

Our pre-tax income for any period is impacted by establishing reserves for new claims as well as changes in estimates for previously reported losses. Our focus on writing workers’ compensation insurance for employers engaged in hazardous industries results in our experiencing fewer, but more severe, claims. The ultimate cost of resolving severe claims is difficult to predict, particularly in the period shortly after the injury occurs. Substantial judgment is required to determine the relevance of our historical experience and industry information under current facts and circumstances. The interpretation of this historical data can be impacted by external forces, principally frequency and severity of unreported claims, length of time to achieve ultimate settlement of claims, inflation in medical costs and wages, insurance policy coverage interpretations, jury determinations, and legislative changes. Accordingly, our reserves may prove to be inadequate to cover our actual losses. If there are unfavorable changes affecting our

assumptions, our reserves may need to be increased. When a reserve estimate is increased, the change decreases pre-tax income by a corresponding amount.

The effects of emerging claims and coverage issues on our business are uncertain.

As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge. These issues may adversely affect our business by either extending coverage beyond our underwriting intent or by increasing the number or size of claims. In some instances, these changes may not become apparent until after we have issued insurance policies that are affected by the changes. As a result, the full extent of our liability under an insurance policy may not be known until many years after the policy is issued. For example, medical costs associated with permanent and partial disabilities may increase more rapidly or be higher than we currently expect. Changes of this nature may expose us to higher claims costs than we anticipated when we wrote the underlying policy.

Changes in accounting standards or new standards, as well as assumptions, estimates and judgments by management related to complex accounting issues could have a material adverse effect on our capital levels and our results of operations.

Changes in GAAP accounting standards, guidelines and interpretations have the ability to impact our financial results especially as it relates to our significant accounting policies which are described in Note 1 of our Consolidated Financial Statements. Changes in these standards, issued and promulgated by the Financial Accounting Standards Board (FASB) could impact the recognition of revenues, expenses, taxes, investments, loss reserves and other aspects of the Company’s assets and liabilities. Such changes could significantly impact our reported earnings or financial condition.

AMERISAFE is a holding company whose insurance subsidiaries are governed by SAP determined and promulgated by the NAIC and state departments of insurance. New standards or changes in SAP accounting standards or interpretations, especially as it relates to our significant revenues, assets, liabilities, statutory surplus, risk-based capital ratios and dividend paying ability could have a material impact on our statutory earnings, dividend paying ability or financial condition.

As an insurance holding company, AMERISAFE is dependent on the results of operations of its insurance subsidiaries, and our Company’s ability to pay dividends depends on the regulatory and financial capacity of its subsidiaries to pay dividends to AMERISAFE.

AMERISAFE is a holding company that transacts business through its operating subsidiaries, including AIIC. AMERISAFE’s primary assets are the capital stock of these operating subsidiaries. The ability of AMERISAFE to pay dividends to our shareholders depends upon the surplus and earnings of our subsidiaries and their ability to pay dividends to AMERISAFE. Payment of dividends by our insurance subsidiaries is restricted by state insurance laws, including laws establishing minimum solvency and liquidity thresholds, and could be subject to contractual restrictions in the future, including those imposed by indebtedness we may incur in the future. As a result, AMERISAFE may not be able to receive dividends from its insurance subsidiaries and may not receive dividends in amounts necessary to pay dividends on our capital stock.

A downgrade in our A.M. Best rating would likely reduce the amount of business we are able to write.

Rating agencies evaluate insurance companies based on their ability to pay claims. We are currently assigned a group letter rating of “A” (Excellent) from A.M. Best, which is the rating agency that we believe has the most influence on our business. This rating is assigned to companies that, in the opinion of A.M. Best, have demonstrated an excellent overall performance when compared to industry standards. A.M. Best considers “A” rated companies to have an excellent ability to meet their ongoing obligations to policyholders. The ratings of A.M. Best are subject to periodic review using, among other things, proprietary capital adequacy models, and are subject to revision or withdrawal at any time. A.M. Best ratings are directed toward the concerns of policyholders and insurance agencies and are not intended for the protection of investors or as a recommendation to buy, hold or sell securities. Our competitive position relative to other companies is determined in part by our A.M. Best rating. Any downgrade in our rating would likely adversely affect our business through the loss of certain existing and potential policyholders and the loss of relationships with certain independent agencies.

Because we are subject to extensive state and federal regulation, legislative changes may negatively impact our business.

We are subject to extensive regulation by the Nebraska and Texas Departments of Insurance and the insurance regulatory agencies of other states in which we are licensed and, to a lesser extent, federal regulation. State agencies have broad regulatory powers designed primarily to protect policyholders and their employees, and not our shareholders. Regulations vary from state to state, but typically address:

We may be unable to comply fully with the wide variety of applicable laws and regulations that are continually undergoing revision. In addition, we follow practices based on our interpretations of laws and regulations that we believe are generally followed by our industry. These practices may be different from interpretations of insurance regulatory agencies. As a result, insurance regulatory agencies could preclude us from conducting some or all of our activities or otherwise penalize us. For example, in order to enforce applicable laws and regulations or to protect policyholders, insurance regulatory agencies have relatively broad discretion to impose a variety of sanctions, including examinations, corrective orders, suspension, revocation or denial of licenses, and the takeover of one or more of our insurance subsidiaries. The extensive regulation of our business may increase the cost of our insurance and may limit our ability to obtain premium rate increases or to take other actions to increase our profitability.

The workers’ compensation system is largely regulated by state regulation. However in recent years, certain federal agencies and regulatory bodies have increased interest in more federal workers’ compensation oversight. Increased federal involvement has the potential to change the workers’ compensation structure impacting workers’ benefits and the method of administration. As a result, potential changes in the level of oversight to the workers’ compensation industry could adversely affect our operations.

Assessments and premium surcharges for state guaranty funds, second injury funds and other mandatory pooling arrangements may reduce our profitability.

Most states require insurance companies licensed to do business in their state to participate in guaranty funds, which require the insurance companies to bear a portion of the unfunded obligations of impaired, insolvent or failed insurance companies. These obligations are funded by assessments, most of which are expected to continue in the future. State guaranty associations levy assessments, up to prescribed limits, on all member insurance companies in the state based on their proportionate share of premiums written in the lines of business in which the impaired, insolvent or failed insurance companies are engaged. See “Business—Regulation” in Item 1 of this report. Accordingly, the assessments levied on us may increase as we increase our written premium. Some states also have laws that establish second injury funds to reimburse insurers and employers for claims paid to injured employees for aggravation of prior conditions or injuries. These funds are supported by either assessments or premium surcharges based on case incurred losses.

In addition, as a condition to conducting business in some states, insurance companies are required to participate in residual market programs to provide insurance to those employers who cannot procure coverage from an insurance carrier on a negotiated basis. Insurance companies generally can fulfill their residual market obligations by, among other things, participating in a reinsurance pool where the results of all policies provided through the pool are shared by the participating insurance companies. Although we price our insurance to account for obligations we may have under these pooling arrangements, we may not be successful in estimating our liability for these obligations. Accordingly, mandatory pooling arrangements may cause a decrease in our profits.

At December 31, 2023, we participated in mandatory pooling arrangements in 25 states and the District of Columbia. As we write policies in new states that have mandatory pooling arrangements, we will be required to participate in additional pooling arrangements. Further, the impairment, insolvency or failure of other insurance companies in these pooling arrangements would likely increase the liability for other members in the pool. The effect of assessments and premium surcharges or changes in them could reduce our profitability in any given period or limit our ability to grow our business.

Legal or other administrative proceedings could have a material adverse effect on our operations or results of operations.

In the ordinary course of our business, we are involved in various legal and other administrative proceedings involving claims arising from our insurance operations. These claims involve issues such as eligibility for workers' compensation insurance coverage or benefits, the extent of injuries, wage determinations, disability ratings, and bad faith and extra-contractual liability. We defend these claims. A significant adverse result, or multiple adverse results involving similar issues, could require us to pay significant amounts or to change the manner in which we administer claims, which could have a material adverse effect on our operations or results of operations.

We may have exposure to losses from terrorism for which we are required by law to provide coverage.

When writing workers’ compensation insurance policies, we are required by law to provide workers’ compensation benefits for losses arising from acts of terrorism. The impact of any terrorist act is unpredictable, and the ultimate impact on us would depend upon the nature, extent, location and timing of such an act. Our 2024 reinsurance treaty program affords limited coverage for up to $100.0 million for losses arising from terrorism, subject to applicable deductibles, retentions, definitions and aggregate limits.

Notwithstanding the protection provided by reinsurance and the Terrorism Risk Insurance Program Reauthorization Act of 2019, the risk of severe losses to us from acts of terrorism has not been eliminated because our reinsurance treaty program includes various sub-limits and exclusions limiting our reinsurers’ obligation to cover losses caused by acts of terrorism. Accordingly, events constituting acts of terrorism may not be covered by, or may exceed the capacity of, our reinsurance and could adversely affect our business and financial condition.

A downgrade in the A.M. Best rating of one or more of our significant reinsurers could adversely affect our financial condition.

Our financial condition could be adversely affected if the A.M. Best rating of one or more of our significant reinsurers is downgraded. For example, our A.M. Best rating may be downgraded if our amounts recoverable from a reinsurer are significant and the A.M. Best rating of that reinsurer is downgraded. If one of our reinsurers suffers a rating downgrade, we may consider various options to lessen the impact on our financial condition, including commutation, novation and the use of letters of credit to secure amounts recoverable from reinsurers. However, these options may result in losses to our company, and there can be no assurance that we could implement any of these options.

If we are unable to obtain reinsurance on favorable terms, our ability to write policies could be adversely affected.

We purchase reinsurance to reduce our net liability on individual risks and to protect against catastrophic losses. Reinsurance is an arrangement in which an insurance company, called the ceding company, transfers insurance risk by sharing premiums with another insurance company, called the reinsurer. Conversely, the reinsurer receives or assumes reinsurance from the ceding company. Our 2024 reinsurance program provides us with reinsurance coverage for each loss occurrence up to $100.0 million, subject to applicable limitations, deductibles, retentions and aggregate limits. Our retention is $2.0 million for each loss occurrence. Losses in the layer between $2.0 million and $10.0 million are ceded to a multi-year reinsurance treaty.

The availability, amount, and cost of reinsurance are subject to market conditions and our experience with insured losses. As a result, any material changes in market conditions or our loss experience could adversely affect our financial performance.

If any of our current reinsurers were to terminate participation in our reinsurance treaty program, we could be exposed to an increased risk of loss.

When our reinsurance treaty program is terminated and we enter into a new program, any decrease in the amount of reinsurance at the time we enter into a new program, whether caused by the existence of more restrictive terms and conditions or decreased availability, will also increase our risk of loss and, as a result, could adversely affect our business, financial condition and results of operations. We currently have 26 reinsurers participating in our reinsurance treaty program, and we believe that this is a sufficient number of reinsurers to provide us with the reinsurance coverage we require. However, it is possible that one or more of our current reinsurers could terminate participation in our program. In addition, we may terminate the participation of one or more of our reinsurers under certain circumstances as permitted by the terms of our reinsurance agreements. In any of these events, if our

reinsurance broker is unable to reallocate the terminated reinsurance among the remaining reinsurers in the program, it could take a significant period of time to identify and negotiate agreements with one or more replacement reinsurers. During this period, we would be exposed to an increased risk of loss, the extent of which would depend on the coverage previously provided by the terminated reinsurance.

We may not be able to recover amounts due from our reinsurers, which would adversely affect our financial condition.

Reinsurance does not discharge our obligations under the insurance policies we write. We remain liable to our policyholders even if we are unable to make recoveries that we are entitled to receive under our reinsurance contracts. As a result, we are subject to credit risk with respect to our reinsurers. Losses are recovered from our reinsurers as claims are paid. In long-term workers’ compensation claims, the creditworthiness of our reinsurers may change before we recover amounts to which we are entitled. Therefore, if a reinsurer is unable to meet any of its obligations to us, we would be responsible for all claims and claim settlement expenses for which we would have otherwise received payment from the reinsurer.

As of December 31, 2023, we had $130.0 million of recoverables from reinsurers. Of this amount, $48.4 million was unsecured. As of December 31, 2023, our largest recoverable from reinsurers included $65.0 million from Hannover Reinsurance Ireland Limited (Hannover), $19.7 million from Arch Reinsurance Company and $9.1 million from Allianz Risk Transfer AG. Each of these reinsurers have an A.M. Best rating of “A” (Excellent) or better. An immaterial amount of reinsurance recoverable due at December 31, 2023 was over 90 days old. If we are unable to collect amounts recoverable from our reinsurers, our financial condition would be adversely impacted.

Our revenues and results of operations may fluctuate as a result of factors beyond our control, which fluctuation may cause the price of our common stock to be volatile.

The revenues and results of operations of our insurance subsidiaries historically have been subject to significant fluctuations and uncertainties. Our profitability can be affected significantly by:

If our revenues and results of operations fluctuate as a result of one or more of these factors, the price of our common stock may become more volatile.

Provisions of our articles of incorporation and bylaws and the laws of the states of Texas and Nebraska could impede an attempt to replace or remove our directors or otherwise effect a change of control of our company, which could diminish the value of our common stock.

Our articles of incorporation and bylaws contain provisions that may make it more difficult for shareholders to replace or remove directors even if the shareholders consider it beneficial to do so. In addition, these provisions could delay or prevent a change of control of our company that shareholders might consider favorable. Our articles of incorporation and bylaws contain the following provisions that could have an anti-takeover effect:

These provisions may make it difficult for shareholders to replace management and could have the effect of discouraging a future takeover attempt that is not approved by our Board of Directors, but which individual shareholders might consider favorable.

We are incorporated in Texas. Under the Texas Business Organizations Code, our ability to enter into a business combination with an affiliated shareholder is limited.

In addition, two of our three insurance company subsidiaries, AIIC and SOCI, are incorporated in Nebraska and the other, AIICTX, is incorporated in Texas. Under Nebraska and Texas insurance law, advance approval by the state insurance department is required for any change of control of an insurer. “Control” is presumed to exist through the direct or indirect ownership of 10% or more of the voting securities of a domestic insurance company or any entity that controls a domestic insurance company. Obtaining these approvals may result in the material delay of, or deter, any transaction that would result in a change of control.

The trading price of our common stock may decline for many reasons, some of which are beyond our control, including, among others:

In addition, the stock market experiences significant volatility from time to time that is often unrelated to the operating performance of companies whose shares are traded. These market fluctuations could adversely affect the trading price of our common stock, regardless of our actual operating performance.

Securities analysts may discontinue coverage of our common stock or may issue negative reports, which may adversely affect the trading price of our common stock.

There is no assurance that securities analysts will continue to cover our company. If securities analysts do not cover our company, this lack of coverage may adversely affect the trading price of our common stock. The trading market for our common stock relies in part on the research and reports that securities analysts publish about us or our business. If one or more of the analysts who cover our company downgrades our common stock, the trading price of our common stock may decline rapidly. If one or more of these analysts ceases to cover our company, we could lose visibility in the market, which, in turn, could also cause the trading price of our common stock to decline.

Future sales of our common stock may affect the trading price of our common stock.

We cannot predict what effect, if any, future sales of our common stock, or the availability of shares for future sale, will have on the trading price of our common stock. Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales could occur, may adversely affect the trading price of our common stock and may make it more difficult for you to sell your shares at a time and price that you determine appropriate. As of February 15, 2024, there were 19,135,008 shares of our common stock outstanding.

Technology breaches or failures, including those resulting from a malicious cyber attack on us, or our policyholders or service providers, could disrupt or otherwise negatively impact our business.

We rely on information technology systems to process, transmit, store and protect the electronic information, financial data and proprietary models that are critical to our business. Furthermore, a significant portion of the communications between our employees, our policyholders and service providers depend on information technology and electronic information exchange. Like all companies, our information technology systems are vulnerable to data breaches, interruptions or failures due to events that may be beyond our control, including natural disasters, theft, terrorist attacks, computer viruses, hackers and general technology failures.

We have established and implemented security measures, controls and procedures in an effort to safeguard our information technology systems and to prevent unauthorized access to these systems and any data processed and/or stored in these systems. We evaluate the adequacy of our third-party service providers’ cybersecurity measures through periodic due diligence and contractual obligations. Despite these safeguards, disruptions to and breaches of our information technology systems or our providers’ are possible and may negatively impact our business.

Although we have experienced no known cases involving unauthorized access to our information technology systems and data or unauthorized appropriation of such data to date, we have no assurance that such technology breaches will not occur in the future.

The expertise, wellbeing and resiliency of our workforce is necessary to maintain our competitive advantages in the high hazard workers’ compensation industry.

Our success is dependent on the expertise, wellbeing and resiliency of our employees and our ongoing leadership development activities to attract and retain key employees that are knowledgeable about our business. Succession planning and employee education and development for key positions is essential. If we are unable to attract and retain key employees and provide them with opportunities to learn and grow, our operations may be adversely impacted.

Our business is dependent on the efforts of our executive officers because of their industry expertise, knowledge of our markets and relationships with the independent agencies that sell our insurance.

Our success is dependent on the efforts of our executive officers because of their industry expertise, knowledge of our markets and relationships with our independent agencies. We have entered into employment agreements with each of our executive officers. Should any of our executive officers cease working for us, we may be unable to find acceptable replacements with comparable skills and experience in the workers’ compensation insurance industry and the hazardous industries that we target. As a result, our operations may be disrupted and our business may be adversely affected. We do not currently maintain life insurance policies with respect to our executive officers.

Economic conditions could adversely affect our financial condition and results of operations.

Negative trends in business investment, consumer confidence and spending, significant declines and volatility of the capital markets, and availability of credit and the rate of unemployment can adversely affect our business. Although we continue to closely monitor market conditions, we cannot predict future conditions or their impact on our premium volume, the value of our investment portfolio and our financial performance. As a result of economic conditions, we could experience future decreases in business activity and incur realized and unrealized losses in our investment portfolio, both of which could adversely affect our financial condition and results of operations.

An inability to effectively manage our operations could make it difficult for us to compete and could affect our ability to operate profitably.

Our continuing strategic options include expanding in our existing markets, entering new geographic markets and further developing our agency relationships. Our strategy is subject to various risks, including risks associated with our ability to:

We may require additional capital in the future, which may not be available to us or may be available only on unfavorable terms.

Our future capital requirements will depend on many factors, including state regulatory requirements, the financial stability of our reinsurers and our ability to write new business and establish premium rates sufficient to cover our estimated claims. We may need to raise additional capital or curtail our growth if the capital of our insurance subsidiaries is insufficient to support future operating requirements and/or cover claims. If we had to raise additional capital, equity or debt financing might not be available to us or might be available only on terms that are not favorable. Future equity offerings could be dilutive to our shareholders and the equity securities issued in any offering may have rights, preferences and privileges senior to our common stock.

If we cannot obtain adequate capital on favorable terms or at all, we may be unable to support future growth or operating requirements and, as a result, our business, financial condition or results of operations could be adversely affected.

We analyze the probability and impact of cybersecurity risks using recognized cybersecurity standards and frameworks for our industry and have identified certain material risks from cybersecurity threats. As part of this analysis, we also work to determine whether these material risks would be a threat to our business continuity. To help minimize our risks related to cybersecurity threats and incidents, we maintain physical controls, including a centralized electronic card access control system, uninterruptable power supply units, and environmental controls; and technical controls, including firewalls, signature and behavior-based monitoring, intrusion detection systems, encryption and backups, and mobile application management. We engage third parties in connection with our processes for assessing, identifying, and managing material risks from cybersecurity threats.

No known risks from cybersecurity threats have materially affected or are reasonably likely to materially affect our company, our business strategy, results of our operations, or our financial condition. However, despite our efforts, we cannot eliminate all risks from cybersecurity threats. For more information about these risks, please see “Risk Factors – General Risk Factors” in this annual report on Form 10-K.

As part of our overall risk management system, we assess, identify and provide oversight over cybersecurity risks to our information technology systems and our business continuity. We have identified key risk drivers and characteristics, and have incorporated these into our risk assessment matrix, which we use for day-to-day risk mitigation. Our risk assessment matrix provides us with a means to assess the probability and impact of material risks from cybersecurity threats. As a result of this process, we have identified and implemented controls and mitigation methods to manage these risks.

The Risk Committee of our Board of Directors meets with management to review and provide oversight of certain operational areas where we have identified key risks to our business, including our cybersecurity practices. The Risk Committee reviews our strategies, governing and management framework, security principles, and training and evaluations for cybersecurity threats. As part of this review, each quarter the Chief Risk Officer presents key cybersecurity metrics and analysis to the Risk Committee.

The Chief Risk Officer manages a team that assesses day-to-day cybersecurity. We actively maintain an Incident Response Plan, and in the event of a cybersecurity breach or incident, the Chief Risk Officer leads our response and initial risk assessment to mitigate impact and initiate any recovery process. Following identification of a cybersecurity breach or incident, incidents of medium or high severity level are elevated to an Incident Response Team. In addition to leading the response to such incidents, the Incident Response Team evaluates whether an incident is material and the associated public reporting implications. Incidents that are reviewed by the Incident Response Team are promptly elevated to the Risk Committee.

The Chief Risk Officer stays informed through multiple sources: technology and cybersecurity news, bulletins from the federal Cybersecurity and Infrastructure Security Agency, Information Sharing and Analysis Center feeds, and threat intelligence feeds from multiple sources. We also utilize a security operations center that acts as a centralized hub dedicated to monitoring, detecting, and responding to cybersecurity threats.

The Chief Risk Officer holds the Certified Risk Manager designation, and has more than 30 years of technology experience, including 15 years overseeing cybersecurity processes, risk assessment and risk management.

We own our principal business office which has approximately 60,000 square feet of office space together with a 3,200 square foot warehouse facility located in DeRidder, Louisiana. AIIC and SOCI lease their corporate headquarters which has approximately 3,500 square feet of office space located in Omaha, Nebraska. The Company leases space at other locations for certain of our service and claims representatives, none of which are material.

In the ordinary course of our business, we are involved in the adjudication of claims resulting from workplace injuries. We are not involved presently in any legal or administrative proceedings that we believe are likely to have a materially adverse effect on our business, financial condition or results of operations.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.

Our common stock is traded on the NASDAQ Global Select Market under the symbol “AMSF.” As of February 15, 2024, there were 19 holders of record of our common stock.

In 2023, 2022 and 2021, the Company paid regular quarterly cash dividends of $0.34, $0.31, and $0.29 per share, respectively. In addition, the Company paid extraordinary cash dividends of $3.50 in 2023 and $4.00 in both 2022 and 2021.

On February 19, 2024 the Company declared a regular quarterly cash dividend of $0.37 per share payable on March 22, 2024 to shareholders of record as of March 8, 2024.

The Board intends to continue to consider the payment of a regular cash dividend each calendar quarter. On an annualized basis, the cash dividend is expected to be $1.48 per share in 2024.

AMERISAFE is a holding company and has no direct operations. Our ability to pay dividends in the future depends on the ability of our operating subsidiaries to pay dividends to us. Our insurance company subsidiaries are regulated insurance companies and therefore are subject to significant regulatory restrictions limiting their ability to declare and pay dividends. See “Business—Regulation—Dividend Limitations” in Item 1 of this report.

Our existing revolving credit agreement contains covenants that restrict our ability to pay dividends on our common stock. For more information on our credit agreement, see “Liquidity and Capital Resources” in Item 7 of this report.

AMERISAFE is authorized to issue 60,000,000 shares of capital stock, consisting of:

As of February 15, 2024, 19,135,008 shares of common stock were outstanding. As of that date, there were no shares of preferred stock outstanding.

The Company’s Board of Directors initiated a share repurchase program in February 2010. In October 2016, the Board reauthorized this program with a limit of $25.0 million with no expiration date. The Company had $10.4 million available for future purchases at December 31, 2023 under this program. There were 46,741 shares repurchased under this program in 2023 for $2.2 million, or an average price of $46.45, including commissions and excise tax. There were 264,449 shares repurchased under this program in 2022 for $12.4 million, or an average price of $46.84, including commissions. There were no shares repurchased under this program in 2021. Since the beginning of this plan, the Company has repurchased a total of 1,569,440 shares for $36.9 million, or an average price of $23.53, including commissions and excise tax. The purchases may be affected from time to time depending upon market conditions and subject to applicable regulatory considerations. It is anticipated that any future purchases will be funded from available capital.

The following table summarizes the Company’s purchases of its common stock, par value $0.01 per share, during the three months ended December 31, 2023:

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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 of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 8 of this report. This discussion includes forward-looking statements that are subject to risks, uncertainties and other factors described in Item 1A of this report. These factors could cause our actual results in 2024 and beyond to differ materially from those expressed in, or implied by, those forward-looking statements.

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, telecommunications, and maritime. Employers engaged in hazardous industries pay substantially higher than average rates for workers’ compensation insurance compared to employers in other industries, as measured per payroll dollar. The 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 employers’ workplaces. These safety reviews are a vital component of our underwriting process and also promote safer workplaces. We utilize intensive claims management practices that we believe permit us to reduce 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.

We actively market our insurance in 27 states through independent agencies, 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.

Two of the key financial measures that we use to evaluate our performance are return on average equity and growth in book value per share adjusted for dividends paid to shareholders. We calculate return on average equity by dividing annual net income by the average of annual shareholders’ equity. Our return on average equity was 20.4% in 2023, 15.5% in 2022 and 15.7% in 2021 . We calculate book value per share by dividing ending shareholders’ equity by the number of common shares outstanding. Our book value per share was $15.28 at December 31, 2023, $16.57 at December 31, 2022 and $20.62 at December 31, 2021. We paid cash dividends of $4.86 per share in 2023, $5.24 per share in 2022 and $5.16 per share in 2021.

Investment income is an important element of our net income. Because the period of time between our receipt of premiums and the ultimate settlement of claims is often several years or longer, we are able to invest cash from premiums for significant periods of time. As a result, we are able to generate more investment income from our premiums as compared to insurance companies that operate in other lines of business that pay claims more quickly. At December 31, 2023, our investment portfolio, including cash and cash equivalents, was $896.5 million and produced net investment income of $31.3 million in 2023, $27.2 million in 2022 and $25.4 million in 2021.

The use of reinsurance is an important component of our business strategy. We purchase reinsurance to reduce our net liability on individual risks and to protect against catastrophic losses. Our reinsurance program for 2024 includes 26 reinsurers that provide coverage to us in excess of a certain specified loss amount, or retention level. Our 2024 reinsurance program provides us with reinsurance coverage for each loss occurrence up to $100.0 million, subject to applicable limitations, deductibles, retentions and aggregate limits. However, for any loss occurrence involving only one claimant, our reinsurance coverage is limited to $20.0 million, subject to applicable deductibles, retentions and aggregate limits. Losses in the layer between $2.0 million and $10.0 million are ceded to a multi-year reinsurance treaty. As losses are incurred and recorded, we record amounts recoverable from reinsurers for the portion of the losses ceded to our reinsurers.

Our most significant balance sheet liability is our reserve for loss and loss adjustment expenses. We record reserves for estimated losses under insurance policies that we write and for loss adjustment expenses related to the investigation and settlement of claims. Our reserves for loss and loss adjustment expenses represent the estimated cost of all reported and unreported loss and loss adjustment expenses incurred and unpaid at any given point in time based on known facts and circumstances. Reserves are based on estimates of the most likely ultimate cost of individual claims. These estimates are inherently uncertain. In addition, there are no policy limits on the liability for workers’ compensation claims as there are for other forms of insurance. Therefore, estimating reserves for workers’ compensation claims may be more uncertain than estimating reserves for other types of insurance claims with shorter or

more definite periods between occurrence of the claim and final determination of the loss and with policy limits on liability for claim amounts.

Our focus on providing workers’ compensation insurance to employers engaged in hazardous industries results in our receiving relatively fewer but more severe claims than many other workers’ compensation insurance companies. Severe claims, which we define as claims having an estimated ultimate cost of more than $1.0 million, usually have a material effect on each accident year’s loss reserves (and our reported results of operations) as a result of both the number of severe claims reported in any year and the timing of claims in the year. As a result of our focus on higher severity, lower frequency business, our reserve for loss and loss adjustment expenses may have greater volatility than other workers’ compensation insurance companies.

For example, for the five-year period ended December 31, 2023 we had recorded 82 severe claims, or an average of 16 severe claims per year for accident years 2019 through 2023. The number of severe claims in any one accident year in this five-year period ranged from a low of 9 in 2023 to a high of 20 in 2021 and 2022. The average reported case severity for these claims ranged from $2.28 million for the 2023 accident year to $3.91 million for the 2021 accident year. For the five accident years, the case incurred for these severe claims accounted for an average of 16.6 percentage points of our overall loss and loss adjustment expense (LAE) ratio, measured at December 31, 2023.

Further, the ultimate cost of severe claims is more difficult to estimate, principally due to uncertainties as to medical treatment and outcome and the length and degree of disability. Because of these uncertainties, the estimate of the ultimate cost of severe claims can vary significantly as more information becomes available. As a result, at year end, the case reserve for a severe claim reported early in the year may be more accurate than the case reserve established for a severe claim reported late in the year.

A key assumption used by management in establishing loss reserves is that average per claim case incurred loss and loss adjustment expenses will increase year over year. We believe this increase primarily reflects medical and wage inflation and utilization. However, changes in per average claim case incurred loss and loss adjustment expenses can also be affected by frequency of severe claims in the applicable accident years.

As more fully described in “Business—Loss Reserves” in Item 1 of this report, the estimate for loss and loss adjustment expenses is established based upon management’s analysis of historical data, and factors and trends derived from that data, including claims reported, average claim amount incurred, case development, duration, severity and payment patterns, as well as subjective assumptions. This analysis includes reviews of case reserves for individual open severe claims in the current and prior years. Management reviews the outcomes from actuarial analyses to confirm the reasonableness of its reserve estimate.

Substantial judgment is required to determine the relevance of our historical experience and industry information under current facts and circumstances. The interpretation of this historical and industry data can be impacted by external forces, principally frequency and severity of unreported claims, length of time to achieve ultimate settlement of claims, utilization, inflation in medical costs and wages, insurance policy coverage interpretations, jury determinations and legislative changes. Accordingly, our reserves may prove to be inadequate to cover our actual losses. If we change our estimates, these changes would be reflected in our results of operations during the period in which the changes occurred, with increases in our reserves resulting in decreases in our earnings. Additional information regarding our reserves for loss and loss adjustment expenses and the actuarial methods and other factors used in establishing these reserves can be found under the caption “Business—Loss Reserves” in Item 1 of this report.

Our gross reserves for loss and loss adjustment expenses at December 31, 2023, 2022 and 2021 were $674.0 million, $696.0 million and $745.3 million, respectively. As a percentage of gross reserves at year end, IBNR represented 17.8% in 2023, 17.1% in 2022 and 16.1% in 2021.

In 2023, we decreased our estimates for prior year loss reserves by $41.4 million. In 2022, we decreased our estimates for prior year loss reserves by $40.6 million. In 2021, we decreased our estimates for prior year loss reserves by $61.9 million.

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 hard market in our industry is characterized by decreased competition that results in higher premium rates, more restrictive policy coverage terms, and lower commissions paid to agencies. In contrast, a soft market is characterized by increased competition that results in lower premium rates, expanded policy coverage terms, and higher commissions paid to agencies. Our strategy is to focus on maintaining underwriting profitability throughout the cycle.

For additional information regarding our loss reserves and the analyses and methodologies used by management to establish these reserves, see the information under the caption “Business—Loss Reserves” in Item 1 of this report.

Net Premiums Earned. Net premiums earned is the earned portion of our net premiums written. Net premiums written is equal to gross premiums written less premiums ceded to reinsurers. Gross premiums written includes the estimated annual premiums from each insurance policy we write in our voluntary and assigned risk businesses during a reporting period based on the policy effective date or the date the policy is bound, whichever is later.

Premiums are earned on a daily pro rata basis over the term of the policy. At the end of each reporting period, premiums written that are not earned are classified as unearned premiums and are earned in subsequent periods over the remaining term of the policy. Our insurance policies typically have a term of one year. Thus, for a one-year policy written on July 1, 2023 for an employer with constant payroll during the term of the policy, we would earn half of the premiums in 2023 and the other half in 2024. On a monthly basis, we also recognize net premiums earned from mandatory pooling arrangements.

We estimate the annual premiums to be paid by our policyholders when we issue the policies and record those amounts on our balance sheet as premiums receivable. We conduct premium audits on all of our voluntary business policyholders annually, upon the expiration of each policy, including when the policy is renewed. The purpose of these audits is to verify that policyholders have accurately reported their payroll expenses and employee job classifications, and therefore have paid us the premium required under the terms of the policies. The difference between the estimated premium and the ultimate premium is referred to as “earned but unbilled” premium, or EBUB premium. EBUB premium is subject to significant variability and can either increase or decrease earned premium based upon several factors, including changes in premium growth, industry mix and economic conditions. Due to the timing of audits and other adjustments, the ultimate premium earned is generally not determined for several months after the expiration of the policy.

We review the estimate of EBUB premiums on a quarterly basis using historical data and applying various assumptions based on the current market and economic conditions, and we record an adjustment to premium, related losses, and expenses as warranted.

Net Investment Income and Net Realized Gains and Losses on Investments. We invest our statutory surplus funds and the funds supporting our insurance liabilities in fixed maturity securities, equity securities and alternative investments. In addition, a portion of these funds are held in cash and cash equivalents to pay current claims. Our net investment income includes interest and dividends earned on our invested assets and amortization of premiums and discounts on our fixed maturity securities. We assess the performance of our investment portfolio using a standard tax equivalent yield metric. Investment income that is tax-exempt is increased by our marginal federal tax rate to express yield on tax-exempt securities on the same basis as taxable securities. Net realized gains and losses on our investments are reported separately from our net investment income. Net realized gains occur when our investment securities are sold for more than their cost or amortized cost, as applicable. Net realized losses occur when our investment securities are sold for less than their cost or amortized cost, as applicable. We classify the majority of our fixed maturity securities as held-to-maturity. The remainder of our fixed maturity securities are classified as available-for-sale. Net unrealized gains or losses on our securities classified as available-for-sale are reported separately within accumulated other comprehensive income (loss) on our balance sheet. Changes in net unrealized gains or losses on our equity securities are recognized in net income.

Fee and Other Income. We recognize commission income earned on policies issued by other carriers that are sold by our wholly owned insurance agency subsidiary as the related services are performed. We also recognize a small portion of interest income from mandatory pooling arrangements in which we participate.

Loss and Loss Adjustment Expenses Incurred. Loss and loss adjustment expenses incurred represents our largest expense item and, for any given reporting period, includes estimates of future claim payments, changes in those estimates from prior reporting periods and costs associated with investigating, defending, and administering claims. These expenses fluctuate based on the amount and types of risks we insure. We record loss and loss adjustment expenses related to estimates of future claim payments based on case-by-case valuations and statistical analyses. We seek to establish all reserves at the most likely ultimate exposure based on our historical claims experience. It is typical for our more serious claims to take several years to settle and we revise our estimates as we receive additional information about the condition of the injured employees. Our ability to estimate loss and loss adjustment expenses accurately at the time of pricing our insurance policies is a critical factor in our profitability. Additional information regarding our reserves for loss and loss adjustment expenses and the actuarial methods and other factors used in establishing these reserves can be found under the caption “Business—Loss Reserves” in Item 1 of this report.

Underwriting and Certain Other Operating Costs. Underwriting and certain other operating costs are those expenses that we incur to underwrite and maintain the insurance policies we issue. These expenses include state and local premium taxes and fees and other operating costs, offset by commissions we receive from reinsurers under our reinsurance treaty programs. We pay state and local taxes, licenses and fees, assessments, and contributions to state workers’ compensation security funds based on premiums. In addition, other operating costs include general and administrative expenses, excluding commissions and salaries and benefits, incurred at both the insurance company and corporate level.

Commissions. We pay commissions to our subsidiary insurance agency and to the independent agencies that sell our insurance based on premiums collected from policyholders.

Policyholder Dividends. In limited circumstances, we pay dividends to policyholders in particular states as an underwriting incentive.

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.

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.

Reserves for Loss and Loss Adjustment Expenses. We record reserves for estimated losses under insurance policies that we write and for loss adjustment expenses, which include defense and cost containment (DCC) and adjusting and other (AO) expenses, related to the investigation and settlement of policy claims. Our reserves for loss and loss adjustment expenses represent the estimated cost of all reported and unreported loss and loss adjustment expenses incurred and unpaid at any given point in time based on known facts and circumstances.

Our reserves for loss and DCC expenses are estimated using case-by-case valuations based on our estimate of the most likely outcome of the claim at that time. In addition to these case reserves, we establish reserves on an aggregate basis that have been incurred but not reported (IBNR). Our IBNR reserves are also intended to provide for aggregate changes in case incurred amounts as well as for recently reported claims which an initial case reserve has not been established. The third component of our reserves for loss and loss adjustment expenses is our AO reserve. Our AO reserve is established for those future claims administration costs that cannot be allocated directly to individual claims. The final component of our reserves for loss and loss adjustment expenses is the reserve for mandatory pooling arrangements.

In establishing our reserves, we review the results of analyses using actuarial methods that utilize historical loss data from our more than 38 years of underwriting workers’ compensation insurance. The actuarial analysis of our historical data provides the factors we use in estimating our loss reserves. These factors are primarily measures over time of the number of claims paid and reported, average paid and incurred claim amounts, claim closure rates and claim payment patterns. In evaluating the results of our analyses, management also uses substantial judgment in considering other factors that are not considered in these actuarial analyses, including changes in business mix, claims management, regulatory issues, medical trends, employment and wage patterns, insurance policy coverage interpretations, judicial determinations and other subjective factors. Due to the inherent uncertainty associated with these estimates, and the cost of incurred but unreported claims, our actual liabilities may vary significantly from our original estimates.

On a quarterly basis, we review our reserves for loss and loss adjustment expenses to determine whether adjustments are required. Any resulting adjustments are included in the results for the current period. In establishing our reserves, we do not use loss discounting, which would involve recognizing the time value of money and offsetting estimates of future payments by future expected investment income. Additional information regarding our reserves for loss and loss adjustment expenses and the actuarial methods and other factors used in establishing these reserves can be found under the caption “Business—Loss Reserves” in Item 1 of this report.

Amounts Recoverable from Reinsurers. Amounts recoverable from reinsurers represent the portion of our paid and unpaid loss and loss adjustment expenses that are assumed by reinsurers and related commissions due from reinsurers. These amounts are separately reported on our balance sheet as assets net of an allowance for credit losses and do not reduce our reserves for loss and loss adjustment expenses because reinsurance does not relieve us of liability to our policyholders. We are required to pay claims even if a reinsurer fails to pay us under the terms of a reinsurance contract. We calculate amounts recoverable from reinsurers based on our estimates of the underlying loss and loss adjustment expenses, as well as the terms and conditions of our reinsurance contracts, which could be subject to interpretation. In addition, we bear credit risk with respect to our reinsurers, which can be significant because some of the unpaid loss and loss adjustment expenses for which we have reinsurance coverage remain outstanding for extended periods of time.

Premiums Receivable. Premiums receivable represents premium-related balances due from our policyholders based on annual premiums for policies written, including surcharges and deposits and adjustments for premium audits, endorsements, cancellations, cash transactions and charge offs. The balance is shown net of an allowance for credit losses and includes an estimate for EBUB. The EBUB estimate is subject to significant variability and can either increase or decrease premiums receivable and earned premiums based upon several factors, including changes in premium growth, industry mix and economic conditions. EBUB assumptions include historical development factors, current economic outlook and current trends in particular sectors of our business.

Assessments. We are subject to various assessments and premium surcharges related to our insurance activities, including assessments and premium surcharges for state guaranty funds and second injury funds. Our accrual is based on historical assessments as well as updated assessment rates. Assessments based on premiums are recorded as an expense as premiums are earned and generally paid one year after the calendar year in which the policies are written. Assessments based on losses are recorded as an expense as losses are incurred and are generally paid within one year of the calendar year in which the claims are paid by us. State guaranty fund assessments are used by state insurance oversight agencies to pay claims of policyholders of impaired, insolvent or failed insurance companies and the operating expenses of those agencies. Second injury funds are used by states to reimburse insurers and employers for claims paid to injured employees for aggravation of prior conditions or injuries. In some states, these assessments and premium surcharges may be partially recovered through a reduction in future premium taxes.

Deferred Policy Acquisition Costs. We defer commission expenses, premium taxes and certain marketing, sales, underwriting and safety costs that vary with and primarily relate to the successful acquisition of insurance policies. These acquisition costs are capitalized and charged to expense ratably as premiums are earned. In calculating deferred policy acquisition costs, these costs are limited to their estimated realizable value, which gives effect to the premiums to be earned, anticipated losses and settlement expenses and certain other costs we expect to incur as the premiums are earned, less related net investment income. Judgments as to the ultimate recoverability of these deferred policy acquisition costs are highly dependent upon estimated future profitability of unearned premiums. If the unearned premiums were less than our expected claims and expenses after considering investment income, we would reduce the deferred costs.

Deferred Income Taxes. We use the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities resulting from a tax rate change impacts our net income or loss in the reporting period that includes the enactment date of the tax rate change.

In assessing whether our deferred tax assets will be realized, management considers whether it is more likely than not that we will generate future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. If necessary, we establish a valuation allowance to reduce the deferred tax assets to the amounts that are more likely than not to be realized.

Credit Losses on Investment Securities. Investment securities are recorded on the balance sheet as assets net of an allowance for credit losses. For held-to-maturity fixed income securities, the allowance is based on historical default and recovery rates as published by Moody’s analytics for corporate bonds, municipal bonds, and other types of fixed income securities. For available-for-sale fixed income securities, a credit allowance is established if the expected discounted future cash flows no longer exceed the book value of the security. In determining the amount of the credit loss to establish, the Company considers the following factors:

Share-Based Compensation. In accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Compensation-Stock Compensation, we recognize compensation costs for restricted stock, performance-based stock and stock option awards over the applicable vesting periods.

The table below summarizes certain operating results and key measures we use in monitoring and evaluating our operations.

Gross Premiums Written. Gross premiums written for 2023 were $285.4 million, compared to $276.1 million for 2022, an increase of 3.3%. The increase was attributable to a $10.1 million increase in premiums resulting from payroll audits and related premium adjustments for policies written in previous periods, and a $0.8 million increase in annual premiums on voluntary policies written during the period. The increases were partially offset by a $1.6 million decrease in residual market premium.

Net Premiums Written. Net premiums written for 2023 were $268.7 million, compared to $265.6 million for 2022, an increase of 1.2%. The increase was primarily attributable to the increase in gross premiums written. As a percentage of gross premiums earned, ceded premiums were 5.9% for 2023 compared to 3.7% for 2022. Ceded premiums increased as we purchased higher levels of reinsurance coverage at generally higher prices in 2023. For additional information, see Item 1, “Business—Reinsurance.”

Net Premiums Earned. Net premiums earned for 2023 were $267.1 million, compared to $271.7 million for 2022, a decrease of 1.7%. The decrease was primarily attributable to the increase in the cost of reinsurance.

Net Investment Income. Net investment income in 2023 was $31.3 million, an increase of 15.1% from the $27.2 million reported in 2022.. The increase was due to higher fixed income reinvestment rates in relation to portfolio rolloff. The average pre-tax investment yield on our investment portfolio was 3.4% per annum for 2023 versus 2.7% per annum for 2022. The year-end tax-equivalent yield on our investment portfolio was 3.7% per annum for 2023, compared to 3.4% per annum for 2022. The tax-equivalent yield is calculated using the effective interest rate and the appropriate marginal tax rate. Average invested assets, including cash and cash equivalents, decreased 9.1%, from an average of $1,051.2 million for 2022 to an average of $955.8 million for 2023.

Net Realized Gains (Losses) on Investments. Net realized gains on investments in 2023 totaled $6.6 million, compared to gains of $3.4 million in 2022. In 2023 and 2022, net realized gains resulted primarily from the sale of equity securities.

Net Unrealized Gains (Losses) on Equity Securities. Net unrealized gains on equity securities in 2023 were $1.2 million compared to net unrealized losses of $8.1 million in 2022.

Loss and Loss Adjustment Expenses Incurred. Loss and LAE incurred totaled $148.3 million for 2023, compared to $152.3 million for 2022, a decrease of $4.1 million, or 2.7% . The current accident year losses and LAE incurred were $189.7 million, or 71.0% of net premiums earned, compared to $192.9 million, or 71.0% of net premiums earned for 2022. We recorded favorable prior accident year development of $41.4 million in 2023, compared to $40.6 million in 2022. This is discussed in more detail below in “Prior Year Development.” Our net loss ratio was 55.5% for 2023 and 56.1% for 2022.

Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits. Underwriting and certain other operating costs, commissions and salaries and benefits for 2023 were $78.3 million, compared to $72.0 million for 2022. The Company experienced a $4.1 million increase in insurance related assessments, a $2.0 million increase in commission expense, a $1.5 million increase in professional fees, and a $0.8 million increase in compensation expense. The increase in insurance related assessments included a benefit of $3.8 million in 2022 due to the return of assessments from the Minnesota Workers' Compensation Reinsurance Association. Offsetting these amounts were a $1.6 million increase in profit sharing reinsurance commission, a decrease of $0.8 million in accounts receivable write-offs, a $0.6 million decrease in taxes, licenses and fees, and an increase of $0.5 million in ceding commission related to our current year reinsurance agreement. Our underwriting expense ratio increased to 29.3% in 2023 from 26.5% in 2022.

Income tax expense. Income tax expense for 2023 was $15.3 million, compared to $12.0 million for 2022. The effective tax rate increased to 19.7% for 2023, compared to 17.8% for 2022. The increase in the effective tax rate is due to a lower proportion of tax-exempt income to underwriting income in 2023 relative to 2022.

Gross Premiums Written. Gross premiums written for 2022 were $276.1 million, compared to $278.3 million for 2021, a decrease of 0.8%. The decrease was attributable to a $16.0 million decrease in annual premiums on voluntary policies written during the period primarily driven by continued declines in state approved loss costs. Assumed premium from mandatory pooling arrangements decreased $1.7 million. The decreases were partially offset by a $15.2 million increase in premiums resulting from payroll audits and related premium adjustments for policies written in previous quarters.

Net Premiums Written. Net premiums written for 2022 were $265.6 million, compared to $267.8 million for 2021, a decrease of 0.8%. The decrease was primarily attributable to the decrease in gross premiums written. As a percentage of gross premiums earned, ceded premiums were 3.7% for 2022 and 2021, respectively. For additional information, see Item 1, “Business—Reinsurance.”

Net Premiums Earned. Net premiums earned for 2022 were $271.7 million, compared to $276.0 million for 2021, a decrease of 1.6%. The decrease was attributable to the decrease in net premiums written during the period.

Net Investment Income. Net investment income in 2022 was $27.2 million, an increase of 7.0% from the $25.4 million reported in 2021. The increase was due to higher interest rates on cash and fixed income securities in 2022 compared with 2021. The average pre-tax investment yield on our investment portfolio was 2.7% per annum for 2022 versus 2.3% per annum for 2021. The year-end tax-equivalent yield on our investment portfolio was 3.4% per annum for 2022, compared to 2.7% per annum for 2021. The tax-equivalent yield is calculated using the effective interest rate and the appropriate marginal tax rate. Average invested assets, including cash and cash equivalents, decreased 8.7%, from an average of $1,151.8 million for 2021 to an average of $1,051.2 million for 2022.

Net Realized Gains (Losses) on Investments. Net realized gains on investments in 2022 totaled $3.4 million, compared to gains of $1.7 million in 2021. In 2022, net realized gains resulted primarily from the sale of equity securities. In 2021, net realized gains of $1.7 million resulted from the sale of fixed maturity securities classified as available-for-sale.

Net Unrealized Gains (Losses) on Equity Securities. Net unrealized losses on equity securities in 2022 were $8.1 million compared to net unrealized gains of $12.3 million in 2021 due to declines in the equity markets.

Loss and Loss Adjustment Expenses Incurred. Loss and LAE incurred totaled $152.3 million for 2022, compared to $160.8 million for 2021, a decrease of $8.5 million, or 5.3%. The current accident year losses and LAE incurred were $192.9 million, or 71.0% of net premiums earned, compared to $222.7 million, or 80.7% of net premiums earned for 2021. We recorded favorable prior accident year development of $40.6 million in 2022, compared to $61.9 million in 2021. This is discussed in more detail below in “Prior Year Development.” Our net loss ratio was 56.1% for 2022 and 58.3% for 2021.

Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits. Underwriting and certain other operating costs, commissions and salaries and benefits for 2022 were $72.0 million, compared to $72.1 million for 2021. The Company experienced a $1.7 million decrease in insurance related assessments and a $1.4 million decrease in accounts receivable write-offs mostly on assumed premium from mandatory pooling arrangements. The decrease in insurance related assessments included a benefit of $3.8 million in 2022 due to the return of assessments from the Minnesota Workers' Compensation Reinsurance Association. Offsetting these amounts were a $0.9 million decrease in profit sharing reinsurance commission, an increase of $0.6 million in systems cost, and an increase of $0.6 million in compensation expense. Our underwriting expense ratio increased to 26.5% in 2022 from 26.1% in 2021.

Income Tax Expense. Income tax expense for 2022 was $12.0 million, compared to $13.7 million for 2021. The effective tax rate increased to 17.8% for 2022, compared to 17.2% for 2021. The increase in the effective tax rate is due to a lower proportion of tax-exempt income to underwriting income in 2022 relative to 2021.

The Company recorded favorable prior accident year loss and loss adjustment expense development of $41.4 million in calendar year 2023, $40.6 million in calendar year 2022 and $61.9 million in calendar year 2021. The table below sets forth the favorable development for accident years 2018 through 2022 and, collectively, all accident years prior to 2018.

The table below sets forth the number of open claims as of December 31, 2023, 2022 and 2021, and the numbers of claims reported and closed during the years then ended.

At December 31, 2023, our incurred amounts for certain accident years developed more favorably than management previously expected. Multiple factors can cause loss development both unfavorable and favorable. The favorable loss development we experienced across accident years was largely due to two factors: (1) lower than expected severity of injuries in these accident years compared to our original and revised estimates; and (2) favorable case reserve development from closed claims and claims where the worker had reached maximum medical improvement. We believe the favorable case reserve development resulted primarily from an intensive claims management focus with the Company actively seeking to settle claims, leading to favorable development.

The assumptions we used in establishing our reserves for these accident years were based on our historical claims data. However, as of December 31, 2023, actual results for these 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.

Our reserves for loss and loss adjustment expenses are inherently uncertain and our focus on providing workers’ compensation insurance to employers engaged in hazardous industries results in our receiving relatively fewer but more severe claims than many other workers’ compensation insurance companies. As a result of this focus on higher severity, lower frequency business, our reserve for loss and loss adjustment expenses may have greater volatility than other workers’ compensation insurance companies. Additional information regarding our reserves for loss and loss adjustment expenses and the actuarial methods and other factors used in establishing these reserves can be found under the caption “Business—Loss Reserves” in Item 1 of this report.

Our principal sources of operating funds are premiums, investment income, and proceeds from maturities of investments. Our primary uses of operating funds include payments for claims and operating expenses. We pay claims, operating expenses, shareholder dividends and repurchases using cash flow from operations and invest our excess cash in fixed maturity and equity securities. We expect that our projected cash flow from operations will provide us sufficient liquidity to fund future operations, including payment of claims and operating expenses and other holding company expenses, for at least the next 18 months.

We forecast claim payments based on our historical trends. We seek to manage the funding of claim payments by actively managing available cash and forecasting cash flows on a short- and long-term basis. Cash payments, net of reinsurance, for claims were $177.5 million in 2023, $194.8 million in 2022 and $189.6 million in 2021. We fund claim payments out of cash flow from

operations, principally premiums, net of amounts ceded to our reinsurers, and net investment income. Our investment portfolio at December 31, 2023 was $896.5 million.

As discussed above under “Overview,” we purchase reinsurance to reduce our net liability on individual risks and to protect against catastrophic losses. Based on our estimates of future claims, we believe we are sufficiently capitalized to satisfy the deductibles and retentions in our 2024 reinsurance program. We reevaluate our reinsurance program at least annually, taking into consideration a number of factors, including cost of reinsurance, our liquidity requirements, operating leverage and coverage terms.

Even if we maintain our existing retention levels, if the cost of reinsurance increases, our cash flow from operations would decrease as we would cede a greater portion of our written premiums to our reinsurers. Conversely, our cash flow from operations would increase if the cost of reinsurance declined relative to our retention.

We manage risk on certain long-duration claims by settling these claims through the purchase of annuities from unaffiliated life insurance companies. In the event these companies are unable to meet their obligations under these annuity contracts, we could be liable to the claimants, but our reinsurers remain obligated to indemnify us for all or part of these obligations in accordance with the terms of our reinsurance contracts. As of December 31, 2023, the present value of these annuities was $106.9 million, as estimated by our annuity providers. Substantially all of the annuities are issued or guaranteed by life insurance companies that have an A.M. Best rating of “A” (Excellent) or better. For additional information, see Note 16 to our consolidated financial statements in Item 8 of this report.

The Company has operating and finance leases for office space and equipment. Our leases have remaining lease terms of one month to 47 months, some of which include options to extend the leases for up to five years. The Company, in determining the present value of lease payments, utilizes either the rate implicit in the lease if that rate is readily determinable or the Company’s incremental secured borrowing rate commensurate with the term of the underlying lease.

Net cash provided by operating activities was $29.8 million in 2023, as compared to $28.2 million in 2022, and $38.0 million in 2021. Major components of cash provided by operating activities in 2023 were net premiums collected of $261.0 million, investment income collected of $34.5 million, and reinsurance recoveries collected of $16.0 million. These amounts were offset in-part by claim payments of $172.9 million, $73.9 million of operating expenditures, federal taxes paid of $14.0 million, and dividends to policyholders paid of $3.5 million.

Major components of cash provided by operating activities in 2022 were net premiums collected of $278.9 million and investment income collected of $33.6 million. These amounts were offset in-part by claim payments of $206.3 million, $64.6 million of operating expenditures, federal taxes paid of $7.8 million, and dividends to policyholders paid of $3.4 million.

Major components of cash provided by operating activities in 2021 were net premiums collected of $290.2 million and investment income collected of $35.5 million. These amounts were offset in-part by claim payments of $189.6 million, $74.2 million of operating expenditures, federal taxes paid of $18.2 million, and dividends to policyholders paid of $3.9 million.

Net cash provided by investing activities was $43.9 million in 2023, as compared to net cash provided by investing activities of $75.4 million in 2022 and net cash provided by investing activities of $71.0 million in 2021. In 2023, major components of net cash provided by investing activities included proceeds from sales and maturities of investments of $178.1 million, offset by investment purchases of $133.7 million.

In 2022, major components of net cash provided by investing activities included proceeds from sales and maturities of investments of $293.0 million, offset by investment purchases of $215.5 million.

In 2021, major components of net cash provided by investing activities included proceeds from sales and maturities of investments of $343.4 million, offset by investment purchases of $271.2 million.

Net cash used in financing activities was $96.5 million in 2023, as compared to $112.9 million in 2022 and $100.0 million in 2021. Major components of cash used in financing activities in 2023 included cash used for dividends paid to shareholders of $93.3 million, purchases of treasury stock of $2.2 million, and share-based compensation related tax withholding of $0.9 million.

Major components of cash used in financing activities in 2022 included cash used for dividends paid to shareholders of $100.4 million and purchases of treasury stock of $12.4 million.

Major components of cash used in financing activities in 2021 included cash used for dividends paid to shareholders of $99.9 million.

In December 2023, the Company renewed a line of credit agreement with Frost Bank for borrowings up to a maximum of $20.0 million. Under the agreement, advances may be made either in the form of loans or letters of credit. Borrowings under the agreement accrue at interest rates based upon prime rate or one-month term SOFR rate and are unsecured. At December 31, 2023, there were no outstanding borrowings. Unless renewed, the agreement will expire in December 2024.

The Board of Directors initially authorized the Company’s share repurchase program in February 2010. In October 2016, the Board reauthorized this program with a limit of $25.0 million with no expiration date. As of December 31, 2023, we had repurchased a total of 1,569,440 shares of our outstanding common stock for $36.9 million. The Company had $10.4 million available for future purchases at December 31, 2023 under this program. There were 46,741 and 264,449 shares repurchased in 2023 and 2022, respectively. The purchases may be effected from time to time depending upon market conditions and subject to applicable regulatory considerations. It is anticipated that future purchases will be funded from available capital.

AMERISAFE is a holding company that transacts business through its operating subsidiaries, including AIIC, SOCI and AIICTX. AMERISAFE’s primary assets are the capital stock of these insurance subsidiaries. The ability of AMERISAFE to fund its operations depends upon the surplus and earnings of its subsidiaries and their ability to pay dividends to AMERISAFE. Payment of dividends by our insurance subsidiaries is restricted by state insurance laws, including laws establishing minimum solvency and liquidity thresholds. Based upon the prescribed calculation, the insurance subsidiaries could pay to AMERISAFE dividends of up to $52.6 million in 2024 without seeking regulatory approval. See “Business—Regulation—Dividend Limitations” in Item 1 of this report.

The Company paid regular quarterly cash dividends of $0.34, $0.31, and $0.29 per share in 2023, 2022 and 2021, respectively. In addition, the Company paid extraordinary cash dividends of $3.50 in 2023 and $4.00 per share in both 2022 and 2021.

On February 19, 2024, the Company declared a regular quarterly cash dividend of $0.37 per share payable on March 22, 2024 to shareholders of record as of March 8, 2024. The Board intends to continue to consider the payment of a regular cash dividend each calendar quarter. On an annualized basis, the cash dividend is expected to be $1.48 per share in 2024.

The principal objectives of our investment portfolio are to preserve capital and surplus and to maintain appropriate liquidity for corporate requirements. Additional objectives are to support our A.M. Best rating of “A” (Excellent) and to maximize after-tax income and risk-adjusted total return. We presently expect to maintain sufficient liquidity from funds generated by operations to meet our anticipated insurance obligations and operating and capital expenditure needs. Excess funds from operations will be invested in accordance with our investment policy and statutory requirements.

We allocate our portfolio into four categories: cash and cash equivalents, short-term investments, fixed maturity securities and equity securities. Cash and cash equivalents include cash on deposit, money market funds and municipal securities, corporate securities and certificates of deposit with a maturity date, at the time of purchase, of 90 days or less. Short-term investments include municipal securities, corporate securities and certificates of deposit with an original maturity greater than 90 days but less than one year. Our fixed maturity securities include obligations of the U.S. Treasury or U.S. agencies, obligations of states and their subdivisions, U.S. Dollar-denominated obligations of the U.S. or Canadian corporations, U.S. agency mortgage-backed securities, commercial mortgage-backed securities and asset-backed securities.

Under Nebraska and Texas law, as applicable, each of AIIC, SOCI and AIICTX is required to invest only in securities that are either interest-bearing, interest-accruing or eligible for dividends, and must limit its investment in the securities of any single issuer, other than direct obligations of the United States, to five percent of the insurance company’s assets. As of December 31, 2023, we were in compliance with these requirements.

We employ diversification policies and balance investment credit risk and related underwriting risks to minimize our total potential exposure to any one business sector or security.

As of December 31, 2023, our investment portfolio, including cash and cash equivalents, totaled $896.5 million, a decrease of 5.7% from December 31, 2022. The majority of our fixed maturity securities are classified as held-to-maturity, as defined by FASB ASC Topic 320, Investments-Debt and Equity Securities. As such, the reported book value of those securities is equal to their amortized cost net of allowance for credit losses and does not fluctuate based on changing interest rates. The remainder of our fixed maturity securities are classified as available-for-sale and reported at fair market value, less an allowance for credit losses, if any. Investments in equity securities are reported at fair market value.

We follow FASB ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a fair value hierarchy and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. As disclosed in Note 18 of the financial statements, our securities available-for-sale are classified using Level 1, 2 and 3 inputs. We did not elect the fair value option prescribed under FASB ASC Topic 825, Financial Instruments, for any financial assets in 2022 or 2023.

The composition of our investment portfolio, including cash and cash equivalents, as of December 31, 2023 is shown in the following table.

The following table summarizes the gross unrealized losses and fair value of fixed income securities by the length of time that individual securities have been in a continuous unrealized loss position.

The pre-tax investment yield on our investment portfolio was 3.4% and 2.7% per annum during the twelve months ended December 31, 2023 and 2022, respectively.

Market risk is the risk of potential economic loss principally arising from adverse changes in the fair value of financial instruments. The major components of market risk affecting us are credit risk, interest rate risk, and equity price risk. We currently have no exposure to foreign currency risk.

Credit risk is the potential loss arising principally from adverse changes in the financial condition of the issuers of our fixed maturity securities and the financial condition of our reinsurers.

We address the credit risk related to the issuers of our fixed maturity securities by primarily investing in fixed maturity securities that are rated as investment grade by one or more of Moody’s, Standard & Poor’s or Fitch. We also independently monitor

the financial condition of all issuers of our fixed maturity securities. To limit our risk exposure, we employ diversification policies that limit our credit exposure to any single issuer or business sector.

We are also subject to credit risk with respect to our reinsurers. Although our reinsurers are obligated to reimburse us to the extent we cede risk to them, we are ultimately liable to our policyholders on all risks we have reinsured. As a result, reinsurance contracts do not limit our ultimate obligations to pay claims and, in some cases, we might not be able to collect amounts recoverable from our reinsurers. We address this credit risk by initially selecting reinsurers with an A.M. Best rating of “A-” (Excellent) or better and by performing, along with our reinsurance broker, periodic credit reviews of our reinsurers. If one of our reinsurers suffers a credit downgrade, we may consider various options to lessen the risk of asset impairment, including commutation, novation or letters of credit. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in Item 7 of this report.

Interest rate risk is the risk that we may incur losses due to adverse changes in interest rates. As of December 31, 2023, we had fixed maturity securities with a fair value of $790.2 million and a carrying value of $800.6 million. These securities are all subject to interest rate risk, but because we classify the majority of our fixed maturity securities as held-to-maturity, changes in interest rates have a smaller effect on the carrying value of our portfolio. We manage our exposure to interest rate risk by investing in a portfolio of securities with moderate effective duration. At December 31, 2023, the effective duration of the total investment portfolio, including cash and short-term investments, was 4.2 years.

The table below summarizes the interest rate risk associated with our fixed maturity securities by illustrating the sensitivity of the fair value and carrying value of our fixed maturity securities as of December 31, 2023 to selected hypothetical changes in interest rates, and the associated impact on our shareholders’ equity. The change in carrying value is less than the change in fair value due to our held-to-maturity portfolio.

Equity price risk is the risk that we may incur losses due to adverse changes in the market prices of the equity securities we hold in our investment portfolio. Equity securities are carried at fair value with unrealized gains and losses recorded within net income. Accordingly, adverse changes in the market prices of our equity securities result in a decrease in the value of our total assets, shareholders’ equity, and net income. In order to minimize our exposure to equity price risk, we independently monitor the financial condition of our equity securities and diversify our investments. In addition, we limit the percentage of equity securities held in our investment portfolio to the lesser of 10% of the investment portfolio or 30% of shareholders’ equity. As of December 31, 2023, the equity securities in our investment portfolio had a fair value of $57.1 million, representing 6.4% of our investment portfolio and less than 19.5% of shareholders’ equity on that date.

We have audited the accompanying consolidated balance sheets of AMERISAFE, Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedules listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 23, 2024 expressed an unqualified opinion thereon.

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.

Investments

There were no short-term investments held at December 31, 2023. Short-term investments held at December 31, 2022 include $9.9 million of corporate bonds, $3.0 million of U.S. Treasury securities and obligations of U.S. government agencies, and $1.2 million of obligations of states and political subdivisions.

The amortized cost, allowance for credit losses, carrying amount, gross unrecognized gains and losses, and the fair value of those investments classified as held-to-maturity at December 31, 2023 are summarized as follows:


	Amortized Cost		Allowance for Credit Losses			Carrying Amount		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	416,916	$	(38	)	$	416,878	$	4,166	$	(12,074	)	$	408,970
Corporate bonds		52,321		(142	)		52,179		—		(2,231	)		49,948
U.S. agency-based mortgage-backed securities		3,297		—			3,297		25		(123	)		3,199
U.S. Treasury securities and obligations of U.S. government agencies		11,186		—			11,186		26		(273	)		10,939
Asset-backed securities		37		(2	)		35		1		—			36
Totals	$	483,757	$	(182	)	$	483,575	$	4,218	$	(14,701	)	$	473,092

The amortized cost, gross unrealized gains and losses, fair value, and the allowance for credit losses of those investments classified as available-for-sale at December 31, 2023 are summarized as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Allowance for Credit Losses
	(in thousands)
States and political subdivisions	$	138,031	$	583	$	(6,719	)	$	131,895	$	—
Corporate bonds		168,134		2,105		(3,486	)		166,753		—
U.S. agency-based mortgage-backed securities		5,190		—		(445	)		4,745		—
U.S. Treasury securities and obligations of U.S. government agencies		14,816		—		(1,145	)		13,671		—
Totals	$	326,171	$	2,688	$	(11,795	)	$	317,064	$	—

The cost, gross unrealized gains and losses, and the fair value of equity securities at December 31, 2023 are summarized as follows:


	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
Equity securities:
Domestic common stock	$	44,046	$	13,101	$	—	$	57,147
Total equity securities	$	44,046	$	13,101	$	—	$	57,147

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

The amortized cost, allowance for credit losses, carrying amount, gross unrealized gains and losses, and the fair value of those investments classified as held-to-maturity at December 31, 2022 are summarized as follows:


	Amortized Cost		Allowance for Credit Losses			Carrying Amount		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	415,136	$	(40	)	$	415,096	$	922	$	(20,074	)	$	395,944
Corporate bonds		59,903		(196	)		59,707		1		(3,857	)		55,851
U.S. agency-based mortgage-backed securities		3,696		—			3,696		33		(153	)		3,576
U.S. Treasury securities and obligations of U.S. government agencies		13,123		—			13,123		25		(442	)		12,706
Asset-backed securities		69		(3	)		66		2		(1	)		67
Totals	$	491,927	$	(239	)	$	491,688	$	983	$	(24,527	)	$	468,144


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Allowance for Credit Losses
	(in thousands)
States and political subdivisions	$	166,019	$	463	$	(9,826	)	$	156,656	$	—
Corporate bonds		150,915		530		(6,657	)		144,788		—
U.S. agency-based mortgage-backed securities		5,984		—		(538	)		5,446		—
U.S. Treasury securities and obligations of U.S. government agencies		15,675		9		(1,453	)		14,231		—
Totals	$	338,593	$	1,002	$	(18,474	)	$	321,121	$	—

The cost, gross unrealized gains and losses on, and fair value of equity securities at December 31, 2022 are summarized as follows:


	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
Equity securities:
Domestic common stock	$	50,185	$	11,873	$	—	$	62,058
Total equity securities	$	50,185	$	11,873	$	—	$	62,058

A summary of the carrying amounts and fair value of investments in fixed maturity securities classified as held-to-maturity, by contractual maturity, is as follows:


	December 31, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)
Maturity:
Within one year	$	64,129	$	63,703	$	41,878	$	41,652
After one year through five years		136,854		131,396		165,216		159,006
After five years through ten years		114,990		110,814		121,739		112,665
After ten years		164,270		163,944		159,093		151,178
U.S. agency-based mortgage-backed securities		3,297		3,199		3,696		3,576
Asset-backed securities		35		36		66		67
Totals	$	483,575	$	473,092	$	491,688	$	468,144

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

A summary of the amortized cost and fair value of investments in fixed maturity securities classified as available-for-sale, by contractual maturity, is as follows:


	December 31, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(in thousands)
Maturity:
Within one year	$	25,995	$	25,875	$	28,290	$	27,814
After one year through five years		106,178		102,201		68,876		65,406
After five years through ten years		82,664		80,911		102,296		95,366
After ten years		106,144		103,332		133,147		127,089
U.S. agency-based mortgage-backed securities		5,190		4,745		5,984		5,446
Totals	$	326,171	$	317,064	$	338,593	$	321,121

Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations with or without call or prepayment penalties.

At December 31, 2023, there were $24.4 million of held-to-maturity investments on deposit with regulatory agencies of states in which the Company does business.

A summary of the Company’s realized gains and losses on sales, calls or redemptions of investments for 2023, 2022 and 2021 is as follows:


	Fixed Maturity Securities Available-for-Sale			Equity Securities		Other			Total
	(in thousands)
Year ended December 31, 2023
Proceeds from sales	$	28,292		$	12,688	$	925		$	41,905
Gross realized investment gains	$	181		$	6,548	$	—		$	6,729
Gross realized investment losses		(173	)		—		—			(173	)
Net realized investment gains		8			6,548		—			6,556
Other, including gains on calls and redemptions		—			—		23			23
Net realized gains on investments	$	8		$	6,548	$	23		$	6,579
Year ended December 31, 2022
Proceeds from sales	$	42,505		$	8,487	$	—		$	50,992
Gross realized investment gains	$	365		$	3,350	$	—		$	3,715
Gross realized investment losses		(51	)		—		—			(51	)
Net realized investment gains		314			3,350		—			3,664
Other, including losses on calls and redemptions		(200	)		—		(24	)		(224	)
Net realized gains (losses) on investments	$	114		$	3,350	$	(24	)	$	3,440
Year ended December 31, 2021
Proceeds from sales	$	28,191		$	—	$	12,388		$	40,579
Gross realized investment gains	$	1,751		$	—	$	3		$	1,754
Gross realized investment losses		(21	)		—		—			(21	)
Net realized investment gains		1,730			—		3			1,733
Other, including losses on calls and redemptions		(6	)		—		(32	)		(38	)
Net realized gains (losses) on investments	$	1,724		$	—	$	(29	)	$	1,695

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

Major categories of the Company’s net investment income are summarized as follows:


	Year Ended December 31,
	2023			2022			2021
	(in thousands)
Gross investment income:
Fixed maturity securities	$	26,357		$	24,399		$	24,882
Equity securities		1,456			1,566			1,236
Short-term investments and cash and cash equivalents		4,456			2,260			304
Total gross investment income		32,269			28,225			26,422
Investment expenses		(930	)		(1,002	)		(987	)
Net investment income	$	31,339		$	27,223		$	25,435

The following table summarizes the fair value and gross unrealized losses on fixed maturity securities classified as available-for-sale, aggregated by major investment category and length of time that the individual securities have been in a continuous unrealized loss position:


	Less Than 12 Months				12 Months or Greater				Total
	Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses
	(in thousands)
December 31, 2023
Available-for-Sale
States and political subdivisions	$	14,115	$	111	$	72,358	$	6,608	$	86,473	$	6,719
Corporate bonds		26,178		96		93,538		3,390		119,716		3,486
U.S. agency-based mortgage-backed securities		—		—		4,745		445		4,745		445
U.S. Treasury securities and obligations of U.S. government agencies		—		—		13,672		1,145		13,672		1,145
Total available-for-sale securities	$	40,293	$	207	$	184,313	$	11,588	$	224,606	$	11,795
December 31, 2022
Available-for-Sale
States and political subdivisions	$	87,522	$	5,319	$	24,980	$	4,507	$	112,502	$	9,826
Corporate bonds		98,590		4,549		30,011		2,108		128,601		6,657
U.S. agency-based mortgage-backed securities		4,732		444		714		94		5,446		538
U.S. Treasury securities and obligations of U.S. government agencies		5,589		313		7,719		1,140		13,308		1,453
Total available-for-sale securities	$	196,433	$	10,625	$	63,424	$	7,849	$	259,857	$	18,474

At December 31, 2023, the Company held 156 individual fixed maturity securities classified as available-for-sale that were in an unrealized loss position, of which 134 were in a continuous unrealized loss position for longer than 12 months.

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

The following table illustrates the changes in the allowance for credit losses by major security type of the investments classified as held-to-maturity for the year ended December 31, 2023.


	States and Political Subdivisions			Corporate Bonds			U.S. Agency -Based Mortgage- Backed Securities		U.S. Treasury Securities and Obligations of U.S. Government Agencies		Asset-Backed Securities			Totals
	(in thousands)
Balance at December 31, 2022	$	40		$	196		$	—	$	—	$	3		$	239
Provision for credit loss benefit		(2	)		(54	)		—		—		(1	)		(57	)
Balance at December 31, 2023	$	38		$	142		$	—	$	—	$	2		$	182

The Company has established an allowance for credit losses on 471 held-to-maturity securities totaling $0.2 million as of December 31, 2023. The majority of those securities were issued by states and political subdivisions and corporate bonds at 451 and 17, respectively.

The Company has no allowance for credit losses on investments classified as available-for-sale as of December 31, 2023 and 2022.

The credit rating used for held-to-maturity fixed income securities is the rating for each security as published by Moody’s, S&P, and Fitch to determine the probability of default. If there are two ratings, the lower rating is used. If there are three ratings, the median rating is used. If there is one rating, that rating is used. For corporate fixed income securities (given a rating), the probability of default comes from Moody’s annual study of corporate bond defaults published each February. The maximum maturity using the default rate is 20 years (any maturity greater than 20 years will use the 20-year rate). For municipal fixed income securities (given a rating), the probability of default comes from Moody’s annual study of municipal bond defaults published each July/August.

The calculation of the credit loss allowance takes the amortized cost of the fixed income security and assumes default and recovery based on the average recovery rates from the Moody’s default studies. The amortized cost of the security plus any accrued interest, minus the amount recovered, is the estimated full amount the Company could lose in a default scenario. Then this amount is multiplied by the probability of default to determine the allowance for credit loss. The lower the security is rated, the higher likelihood of default, and therefore a higher allowance for credit loss. The longer to the maturity date of a security, the higher the default risk.

The table below presents the amortized cost of held-to-maturity securities aggregated by credit quality indicator as of December 31, 2023.


	States and Political Subdivisions		Corporate Bonds		U.S. Agency -Based Mortgage- Backed Securities		U.S. Treasury Securities and Obligations of U.S. Government Agencies		Asset-Backed Securities		Totals
	Amortized cost
	(in thousands)
AAA/AA/A ratings	$	413,966	$	22,696	$	3,297	$	11,186	$	23	$	451,168
Baa/BBB ratings		2,950		29,625		—		—		14		32,589
B ratings		—		—		—		—		—		—
Total	$	416,916	$	52,321	$	3,297	$	11,186	$	37	$	483,757

Income Taxes

The Company’s deferred income tax assets and liabilities are as follows:


	December 31,
	2023			2022
	(in thousands)
Deferred income tax assets:
Discounting of net unpaid loss and loss adjustment expenses	$	15,035		$	16,164
Unearned premiums		6,072			6,173
Accrued expenses and other		2,103			2,403
State income tax		2,495			2,468
Accrued policyholder dividends		1,723			1,841
Accrued insurance-related assessments		1,870			1,990
Net unrealized loss on securities		—			1,182
Total deferred tax assets		29,298			32,221

Deferred income tax liabilities:
Deferred policy acquisition costs		(4,578	)		(4,391	)
Net unrealized gain on securities available-for-sale		(839	)		—
Property and equipment and other		(365	)		(473	)
Salvage and subrogation		(284	)		(320	)
Loss reserves adjustment		(2,829	)		(4,243	)
Total deferred income tax liabilities		(8,895	)		(9,427	)
Net deferred income taxes	$	20,403		$	22,794

The components of consolidated income tax expense (benefit) are as follows:


	Year Ended December 31,
	2023			2022			2021
	(in thousands)
Current:
Federal	$	13,621		$	12,753		$	11,368
State		1,020			427			1,055
		14,641			13,180			12,423
Deferred:
Federal		655			(802	)		2,943
State		(27	)		(334	)		(1,673	)
		628			(1,136	)		1,270
Total	$	15,269		$	12,044		$	13,693

As of December 31, 2023, 2022 and 2021, the Company had no valuation allowance against its deferred income tax assets and liabilities.

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

Income tax expense from operations is different from the amount computed by applying the U.S. federal income tax statutory rate of 21% to income before income taxes as follows:


	Year Ended December 31,
	2023			2022			2021
	(in thousands)
Income tax computed at federal statutory tax rate	$	16,249		$	14,206		$	16,684
Tax-exempt interest, net		(1,997	)		(2,268	)		(2,511	)
State income tax		779			3			911
Dividends received deduction		(125	)		(134	)		(107	)
Valuation allowance		46			(17	)		(1,803	)
Prior year adjustments		13			14			344
Other		304			240			175
	$	15,269		$	12,044		$	13,693

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. There were no uncertain tax positions as of December 31, 2023, 2022 and 2021.

The Inflation Reduction Act was enacted on August 16, 2022, and included a new Corporate Alternative Minimum Tax (CAMT). The Company has determined they do not expect to be liable for CAMT in 2023.

Tax years 2019 through 2023 are subject to examination by the federal and state taxing authorities.

Loss and Loss Adjustment Expenses

The following development tables provide the incurred and paid losses and allocated loss adjustment expenses, net of reinsurance, for workers’ compensation and general liability for accident years 2014 through 2023. The incurred but not reported (IBNR) losses and claims frequency is included for each accident year presented.


	Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance																					As of
	For the Years Ended December 31,																					December 31, 2023
	(Dollars in thousands)																				Total IBNR
																					Plus
																					Expected				Cumulative
																					Development				Number of
Accident	Unaudited (1)																				on Reported				Claims
Year	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023		Claims				Reported
2014	$	268,846	$	268,846	$	249,097	$	235,058	$	226,933	$	218,386	$	212,417	$	210,811	$	210,096	$	209,210		$	4,097			5,841
2015		—		262,573		262,573		252,514		235,471		220,965		211,758		207,929		207,086		205,556			4,374			5,517
2016		—		—		250,491		250,491		241,406		218,005		209,214		202,820		201,604		198,566			4,691			5,394
2017		—		—		—		244,094		244,098		234,587		220,096		211,964		208,360		206,293			5,324			5,214
2018		—		—		—		—		250,487		250,487		235,641		217,369		208,517		205,001			4,347			5,477
2019		—		—		—		—		—		241,344		241,344		227,246		214,123		206,109			5,672			5,223
2020		—		—		—		—		—		—		220,710		220,710		214,500		207,047			13,909			4,391
2021		—		—		—		—		—		—		—		222,715		222,715		215,232			2,894			4,304
2022		—		—		—		—		—		—		—		—		192,907		192,907			(12,814	)		4,065
2023		—		—		—		—		—		—		—		—		—		189,659			12,433			3,715
																	Total		$	2,035,580		$	44,927

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023


	Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
	(Dollars in thousands)

Accident	Unaudited (1)																				Claim
Year	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023		Frequency (2)
2014	$	53,060	$	119,820	$	153,320	$	169,736	$	180,683	$	186,129	$	191,394	$	192,169	$	193,192	$	195,409		14.99
2015		—		54,141		121,599		151,818		170,461		182,053		185,657		188,145		189,339		190,588		14.25
2016		—		—		52,238		115,713		143,016		156,860		166,887		172,133		174,134		178,572		14.23
2017		—		—		—		56,951		122,552		151,427		166,448		175,733		183,696		185,690		14.69
2018		—		—		—		—		62,061		126,057		152,328		172,423		181,081		184,797		15.23
2019		—		—		—		—		—		58,884		120,512		154,391		168,448		176,488		15.28
2020		—		—		—		—		—		—		50,113		109,882		137,411		153,974		13.95
2021		—		—		—		—		—		—		—		52,292		130,288		159,864		15.02
2022		—		—		—		—		—		—		—		—		50,954		110,494		14.40
2023		—		—		—		—		—		—		—		—		—		47,207		13.09
																	Total			1,583,083
All outstanding liabilities before 2014, net of reinsurance																				101,752
Liabilities for loss and loss adjustment expenses, net of reinsurance																				554,248

(1) Data presented for these calendar years is required supplementary information, which is unaudited.
(2) Frequency, as calculated above, refers to reported claims divided by gross premium earned.

The average annual percentage payout of incurred losses by age, net of reinsurance, for workers’ compensation and general liability as of December 31, 2023 is summarized below. Since workers’ compensation has long payout periods, the table below shows less than 100% in the years disclosed. This is required supplementary information, which is unaudited.


Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance (Unaudited)
Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7	Year 8	Year 9	Year 10
26.4%	31.7%	14.3%	8.0%	4.8%	2.5%	1.4%	1.1%	0.5%	1.1%

The following table provides a reconciliation of the beginning and ending reserve balances, net of related amounts recoverable from reinsurers, for 2023, 2022 and 2021:


	Year Ended December 31,
	2023			2022			2021
	(in thousands)
Balance, beginning of period	$	696,037		$	745,278		$	760,561
Less amounts recoverable from reinsurers on unpaid loss and loss adjustment expenses		112,555			119,266			105,707
Net balance, beginning of period		583,482			626,012			654,854
Add incurred related to:
Current accident year		189,659			192,907			222,715
Prior accident years		(41,396	)		(40,591	)		(61,917	)
Total incurred		148,263			152,316			160,798
Less paid related to:
Current accident year		47,207			50,954			52,292
Prior accident years		130,290			143,892			137,348
Total paid		177,497			194,846			189,640
Net balance, end of period		554,248			583,482			626,012
Add amounts recoverable from reinsurers on unpaid loss and loss adjustment expenses		119,746			112,555			119,266
Balance, end of period	$	673,994		$	696,037		$	745,278

The final resolution of the estimated loss reserve liability may be different from that anticipated at the reporting date because of the inherent uncertainty in loss reserve estimates, including, but not limited to, the future settlement environment. Consequently, actual paid losses in the future may result in a significantly different amount than currently reserved, favorable or unfavorable.

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

The difference between currently estimated losses and losses estimated for a prior period at a prior valuation date is known as development. Development is unfavorable when the losses ultimately settle for more than they were reserved for or future estimates suggest that reserves should be increased on unresolved claims. Development is favorable when the losses ultimately settle for less than they were reserved for or future estimates suggest that reserves should be decreased on unresolved claims. Favorable or unfavorable development of loss reserves are reflected in our results of operations in the period the estimates are changed.

The foregoing reconciliation reflects favorable development of the net reserves at December 31, 2023, 2022 and 2021. The favorable development reduced loss and loss adjustment expenses incurred by $41.4 million in 2023, driven primarily by accident years 2018 through 2021. In 2022 and 2021, the Company recorded favorable development of $40.6 million and $61.9 million, respectively. 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 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 loss development both unfavorable and favorable. 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.

Reserves established for workers’ compensation insurance includes the exposure to occupational disease or accidents related to asbestos or environmental claims. The exposure to asbestos claims emanates from the direct sale of workers’ compensation insurance. These claims resulted from industry workers who were exposed to tremolite asbestos dust and electricians and carpenters who were exposed to products that contained asbestos. There has been no known exposure to asbestos claims arising from assumed business. The emergence of these claims is slow and highly unpredictable. The Company estimates full impact of the asbestos exposure by establishing full case basis reserves on all known losses. Reserves for losses incurred but not reported (IBNR) include a provision for development of reserves on reported losses. Reserves are established for loss adjustment expenses (LAE) associated with these case and IBNR loss reserves.

The following table details our exposures to various asbestos related claims:


	Year Ended December 31,
	2023		2022			2021
	(in thousands)
Reserves for loss and LAE at beginning of year	$	248	$	260		$	318
Incurred losses and LAE during the current year		15		(2	)		(44	)
Loss and LAE payments		47		(10	)		(14	)
Reserves for loss and LAE at end of year	$	310	$	248		$	260

The Company has historically written general liability coverages that are reported in other liability lines of business. These coverages may be associated with the property and casualty industry’s exposure to environmental claims. However, the Company has not been notified by any insured for which exposure exists due to these types of claims. Company management believes potential exposure to environmental claims to be remote. Therefore, the Company has no loss or loss adjustment expense reserves for such liabilities.

The anticipated effect of inflation is implicitly considered when estimating liabilities for loss and loss adjustment expenses. In establishing our reserves for loss and loss adjustment expenses, we review the results of analyses using individual case-base valuations and statistical and actuarial methods that utilize historical loss data from our more than 38 years of underwriting workers’ compensation insurance. The actuarial analysis of our historical data provides some of the factors we use in estimating our loss reserves. These factors are primarily measures over time of the number of claims paid and reported, average paid and incurred claim amounts, claim closure rates and claim payment patterns. In evaluating the results of our analyses, management also uses substantial judgment in considering other factors that are not considered in these actuarial analyses, including changes in business mix, claims management, regulatory issues, medical trends, employment and wage patterns, insurance policy coverage interpretations, judicial determinations and other subjective factors. Due to the inherent uncertainty associated with these estimates, and the cost of incurred but unreported claims, our actual liabilities may vary significantly from our original estimates. These anticipated trends are monitored based on actual development and are modified if necessary.

12.

Restricted Stock and Stock Options

2012 Equity and Incentive Compensation Plan

In 2012, the Company’s shareholders approved the AMERISAFE 2012 Equity and Incentive Compensation Plan (the 2012 Incentive Plan). The 2012 Incentive Plan is administered by the Compensation Committee of the Board and is designed to attract, retain and motivate non-employee directors, officers, key employees and consultants by providing incentives for superior performance. The 2012 Incentive Plan authorizes the grant of equity-based compensation in the form of option rights, appreciation rights, restricted shares, restricted stock units, cash incentive awards, performance shares and units, and other types of awards. In connection with the approval of the 2022 Equity and Incentive Compensation Plan (the 2022 Incentive Plan) by the Company’s shareholders, no further grants will be made under the 2012 Incentive Plan. All grants made under the 2012 Incentive Plan will continue in effect, subject to the terms and conditions of the 2012 Incentive Plan.

In 2023, 32,928 shares of common stock were granted under the 2012 Incentive Plan, which will vest through 2027. In 2022, 40,959 shares of common stock and 1,062 shares of restricted stock were granted under the 2012 Incentive Plan which will vest through 2027.

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

The following table summarizes information about the common and restricted stock activity under the 2012 Incentive Plan:


	Shares			Weighted Average Grant Date Fair Value per Share
Nonvested balance at January 1, 2021		15,314			60.23
Granted		27,388			64.36
Vested		(29,881	)		63.03
Forfeited		—			—
Nonvested balance at December 31, 2021		12,821			62.52
Granted		42,021			48.08
Vested		(44,311	)		49.21
Forfeited		—			—
Nonvested balance at December 31, 2022		10,531			60.92
Granted		18,561			52.35
Vested		(21,887	)		53.65
Forfeited		(5,900	)		50.97
Nonvested balance at December 31, 2023		1,305			55.18

The Company recognized a forfeiture benefit of $43,000 in 2023 and compensation expense of $232,000 and $234,000 in 2022 and 2021, respectively, related to share-based grants. The Company recognized a forfeiture benefit of $223,000 and compensation expense of $1,608,000 and $1,741,000 in 2022 and 2021, respectively, related to long-term incentive awards under the 2012 Incentive Plan. The long-term incentive award is a liability award.

2022 Equity and Incentive Compensation Plan

In 2022, the Company’s shareholders approved the AMERISAFE 2022 Equity and Incentive Compensation Plan (the 2022 Incentive Plan). The 2022 Incentive Plan is administered by the Compensation Committee of the Board and is designed to attract, retain and motivate non-employee directors, officers, key employees and consultants by providing incentives for superior performance. The 2022 Incentive Plan authorizes the grant of equity-based compensation in the form of option rights, appreciation rights, restricted shares, restricted stock units, cash incentive awards, performance shares and units, and other types of awards.

A maximum of 500,000 shares of common stock may be issued or transferred upon the exercise of option rights or appreciation rights, as restricted shares and released from substantial risk of forfeiture, in payment of restricted stock units, in payment of performance shares or performance units that have been earned, as awards of shares of common stock, as other awards granted under the 2022 Incentive Plan, or in payment of dividend equivalents paid with respect to awards made under the plan subject to adjustment in the event of a merger, stock dividend, stock split or similar event, which may be original issue shares or treasury shares or a combination of the two.

In 2023, 33,369 restricted stock units were granted under the 2022 Incentive Plan, which will vest through 2027. At December 31, 2023, there were 442,694 shares of common stock available for future awards under the 2022 Incentive Plan.

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

The following table summarizes information about the restricted stock activity under the 2022 Incentive Plan:


	Shares			Weighted Average Grant Date Fair Value per Share
Nonvested balance at January 1, 2021		—			—
Granted		—			—
Vested		—			—
Forfeited		—			—
Nonvested balance at December 31, 2021		—			—
Granted		2,098			47.65
Vested		—			—
Forfeited		—			—
Nonvested balance at December 31, 2022		2,098			47.65
Granted		—			—
Vested		(419	)		47.65
Forfeited		—			—
Nonvested balance at December 31, 2023		1,679			47.65

The following table summarizes information about the restricted stock unit activity under the 2022 Incentive Plan:


	Shares			Weighted Average Grant Date Fair Value per Share
Nonvested balance at January 1, 2021		—			—
Granted		—			—
Vested		—			—
Forfeited		—			—
Nonvested balance at December 31, 2021		—			—
Granted		22,826			48.19
Vested		—			—
Forfeited		—			—
Nonvested balance at December 31, 2022		22,826			48.19
Granted		33,369			52.61
Vested		(7,989	)		48.19
Forfeited		(987	)		51.26
Nonvested balance at December 31, 2023		47,219			51.19

The Company recognized compensation expense of $559,000 and $137,000 in 2023 and 2022, respectively, related to share-based grants under the 2022 Incentive Plan. The Company recognized compensation expense of $780,000 in 2023 related to long-term incentive awards under the 2022 Incentive Plan. The long-term incentive award is a liability award.

Non-Employee Director Restricted Stock Plan

The AMERISAFE Non-Employee Director Restricted Stock Plan (the Restricted Stock Plan) is administered by the Compensation Committee of the Board and provides for the automatic grant of restricted stock awards to non-employee directors of the Company. Awards to non-employee directors are generally subject to terms including non-transferability, immediate vesting upon death or total disability of a director, forfeiture of unvested shares upon termination of service by a director and acceleration of vesting upon a change of control of the Company. The maximum number of shares of common stock that may be issued pursuant to restricted stock awards under the Restricted Stock Plan is 150,000 shares, subject to the authority of the Board to adjust this amount in the event of a merger, consolidation, reorganization, stock split, combination of shares, recapitalization or similar transaction affecting the common stock. At December 31, 2023, there were 21,622 shares of common stock available for future awards under the Restricted Stock Plan.

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

Under the Restricted Stock Plan, each non-employee director is automatically granted a restricted stock award for a number of shares equal to $75,000 divided by the closing price of the Company’s common stock on the date of the annual meeting of shareholders at which the non-employee director is elected or is continuing as a member of the Board. Each restricted stock award vests on the date of the next annual meeting of shareholders following the date of grant, subject to the continued service of the non-employee director.

As of December 31, 2023, there were 9,856 shares of restricted stock outstanding under the Non-Employee Director Restricted Stock Plan, all of which will vest on the date of the annual meeting of shareholders in 2024.

The following table summarizes information about the restricted stock activity under the Non-Employee Director Restricted Stock Plan:


	Shares			Weighted Average Grant Date Fair Value per Share
Nonvested balance at January 1, 2021		5,068			69.03
Granted		5,607			62.40
Vested		(5,068	)		69.03
Forfeited		—			—
Nonvested balance at December 31, 2021		5,607			62.40
Granted		12,149			50.41
Vested		(5,868	)		61.75
Forfeited		—			—
Nonvested balance at December 31, 2022		11,888			50.47
Granted		9,856			53.26
Vested		(10,402	)		50.47
Forfeited		(1,486	)		55.08
Nonvested balance at December 31, 2023		9,856			53.26

The Company recognized compensation expense of $484,000, $502,000, and $344,000 in 2023, 2022, and 2021, respectively, related to the Non-Employee Director Restricted Stock Plan.

16.

Commitments and Contingencies

The Company is a party to various legal actions arising principally from claims made under insurance policies and contracts. Those actions are considered by the Company in estimating reserves for loss and loss adjustment expenses. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position or results of operations.

The Company provides workers’ compensation insurance in several states that maintain second-injury funds. Incurred losses on qualifying claims that exceed certain amounts may be recovered from these state funds. There is no assurance that the applicable states will continue to provide funding under these programs.

The Company manages risk on certain long-duration claims by settling these claims through the purchase of annuities from unaffiliated carriers. In the event these carriers are unable to meet their obligations under these contracts, the Company could be liable

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

to the claimants. The following table summarizes the fair value of the annuities at December 31, 2023, that the Company has purchased to satisfy its obligations.


Life Insurance Company	A.M. Best Rating	Statement Value of Annuities Exceeding 1% of Statutory Surplus
		(in thousands)
Pacific Life Insurance Company	A+	$	20,961
Metropolitan Tower Life Insurance Company	A+		15,173
American General Life Insurance Company	A		14,171
United of Omaha Life Insurance Company	A+		10,316
Brighthouse Financial Life Insurance Company	A		9,039
New York Life Insurance Company	A++		8,271
Berkshire Hathaway Life Insurance Company of Nebraska	A++		7,226
John Hancock Life Insurance Company	A+		5,569
Athene Annuity and Life Company	A		3,644
Protective Life Insurance Company	A+		3,514
Wilton Reassurance Company	A+		2,971
Other			6,041
		$	106,896

Substantially all of the annuities are issued or guaranteed by life insurance companies that have an A.M. Best Company rating of “A” (Excellent) or better.

The components of lease expense were as follows:


	Year Ended December 31,
	2023		2022
	(in thousands)
Operating lease cost	$	108	$	103
Finance lease cost:
Amortization of right-of-use assets		320		193
Interest on lease liabilities		8		9
Total finance lease cost	$	328	$	202

Supplemental cash flow information related to leases was as follows:


	Year Ended December 31,
	2023			2022
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(77	)	$	(87	)
Operating cash flows from finance leases		8			9
Financing cash flows from finance leases		91			58

Right-of-use assets obtained in the exchange for the lease obligations were as follows:


	December 31,
	2023		2022
	(in thousands)
Operating leases	$	26	$	45
Finance leases		99		122

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

Supplemental balance sheet information related to leases was as follows:


	December 31, 2023			December 31, 2022			Balance Sheet Classification
	(in thousands)
Operating leases:
Operating lease right-of-use assets	$	29		$	106		Other assets

Operating lease liabilities	$	29		$	106		Accounts payable and other liabilities

Finance leases:
Finance lease right-of-use assets	$	462		$	362
Finance lease accumulated amortization right-of-use assets		(320	)		(193	)
Property and equipment, net	$	142		$	169		Property and equipment, net

Finance lease liabilities	$	238		$	230		Accounts payable and other liabilities


	December 31,
	2023				2022
Weighted average remaining lease term:
Operating leases		0.7		years		1.2		years
Finance leases		2.9		years		3.0		years
Weighted average discount rate:
Operating leases		6.66	%			1.59	%
Finance leases		5.52	%			3.33	%

The following is a maturity analysis of the annual undiscounted cash flows of the operating and finance lease liabilities as of December 31, 2023:


	Operating Leases		Finance Leases
	(in thousands)
2024	$	29	$	97
2025		1		93
2026		—		49
2027		—		22
2028		—		—
Total lease payments		30		261
Less imputed interest		1		23
Total	$	29	$	238

Rental expense was $0.1 million in 2023, $0.1 million in 2022 and $0.2 million in 2021.

18.

Fair Values of Financial Instruments

The Company determines fair value amounts for financial instruments using available third-party market information. When such information is not available, the Company determines the fair value amounts using appropriate valuation methodologies. Nonfinancial instruments such as real estate, property and equipment, deferred policy acquisition costs, deferred income taxes and loss and loss adjustment expense reserves are excluded from the fair value disclosure.

Cash and Cash Equivalents—The carrying amounts reported in the accompanying consolidated balance sheets for these financial instruments approximate their fair values.

Investments—The Company’s fixed maturity securities are priced by an independent pricing service. The prices provided by the independent pricing service are estimated based on observable market data in active markets utilizing pricing models and processes, which may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers, sector groupings, matrix pricing and reference data. The Company reviews the prices provided by pricing services for reasonableness and compares them to prices provided by the Company’s custodian which uses different pricing services.

Short-Term Investments—The carrying amounts reported in the accompanying consolidated balance sheets for these financial instruments approximate their fair value.

The following table summarizes the carrying or reported values and corresponding fair values for financial instruments:


	December 31,
	2023				2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)
Assets:
Fixed maturity securities—held-to-maturity	$	483,575	$	473,092	$	491,688	$	468,144
Fixed maturity securities—available-for-sale		317,064		317,064		321,121		321,121
Equity securities		57,147		57,147		62,058		62,058
Short-term investments		—		—		14,120		14,120
Cash and cash equivalents		38,682		38,682		61,469		61,469

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

The Company carries available-for-sale securities and equity securities at fair value in our consolidated financial statements and determines fair value measurements and disclosure in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures.

The Company determines the fair values of its financial instruments based on the fair value hierarchy established in ASC Topic 820, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard defines fair value, describes three levels of inputs that may be used to measure fair value, and expands disclosures about fair value measurements.

Fair value is defined in ASC Topic 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is the price to sell an asset or transfer a liability and, therefore, represents an exit price, not an entry price. Fair value is the exit price in the principal market (or, if lacking a principal market, the most advantageous market) in which the reporting entity would transact. Fair value is a market-based measurement, not an entity-specific measurement, and, as such, is determined based on the assumptions that market participants would use in pricing the asset or liability. The exit price objective of a fair value measurement applies regardless of the reporting entity’s intent and/or ability to sell the asset or transfer the liability at the measurement date.

ASC Topic 820 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present value amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset, also known as current replacement cost. Valuation techniques used to measure fair value are to be consistently applied.

In ASC Topic 820, inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value (such as a pricing model) and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable:

•

Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity.

•

Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

Valuation techniques used to measure fair value are intended to maximize the use of observable inputs and minimize the use of unobservable inputs. ASC Topic 820 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:

•

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

•

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data.

•

Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are to be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters.

The fair values of the Company’s investments are based upon prices provided by an independent pricing service. The Company has reviewed these prices for reasonableness and has not adjusted any prices received from the independent provider. Securities reported at fair value utilizing Level 1 inputs represent assets whose fair value is determined based upon observable unadjusted quoted market prices for identical assets in active markets. Level 2 securities represent assets whose fair value is determined using observable

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

market information such as previous day trade prices, quotes from less active markets or quoted prices of securities with similar characteristics. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2023.

Assets measured at fair value on a recurring basis as of December 31, 2023 and 2022 are as follows:


	December 31, 2023
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Financial instruments carried at fair value, classified as part of:
Securities available-for-sale—fixed maturity:
States and political subdivisions	$	—	$	131,895	$	—	$	131,895
Corporate bonds		—		166,753		—		166,753
U.S. agency-based mortgage-backed securities		—		4,745		—		4,745
U.S. Treasury securities		13,671		—		—		13,671
Total securities available-for-sale—fixed maturity		13,671		303,393		—		317,064
Equity securities:
Domestic common stock		57,147		—		—		57,147
Total	$	70,818	$	303,393	$	—	$	374,211


	December 31, 2022
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Financial instruments carried at fair value, classified as part of:
Securities available-for-sale—fixed maturity:
States and political subdivisions	$	—	$	156,656	$	—	$	156,656
Corporate bonds		—		144,788		—		144,788
U.S. agency-based mortgage-backed securities		—		5,446		—		5,446
U.S. Treasury securities		14,231		—		—		14,231
Total securities available-for-sale—fixed maturity		14,231		306,890		—		321,121
Equity securities:
Domestic common stock		62,058		—		—		62,058
Total	$	76,289	$	306,890	$	—	$	383,179

Assets measured at amortized cost net of allowance for credit losses as of December 31, 2023 and 2022 are as follows:


	December 31, 2023
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Securities held-to-maturity—fixed maturity:
States and political subdivisions	$	—	$	408,970	$	—	$	408,970
Corporate bonds		—		49,948		—		49,948
U.S. agency-based mortgage-backed securities		—		3,199		—		3,199
U.S. Treasury securities		10,939		—		—		10,939
Asset-backed securities		—		36		—		36
Total held-to-maturity	$	10,939	$	462,153	$	—	$	473,092

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023


	December 31, 2022
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Securities held-to-maturity—fixed maturity:
States and political subdivisions	$	—	$	395,944	$	—	$	395,944
Corporate bonds		—		55,851		—		55,851
U.S. agency-based mortgage-backed securities		—		3,576		—		3,576
U.S. Treasury securities		12,706		—		—		12,706
Obligations of U.S. government agencies		—		—		—		—
Asset-backed securities		—		67		—		67
Total held-to-maturity	$	12,706	$	455,438	$	—	$	468,144

At December 31, 2023 and 2022, the Company did not hold any securities measured at fair value on a nonrecurring basis due to expected credit losses.

Schedule II. Condensed Financial Information of Registrant

AMERISAFE, INC.

CONDENSED BALANCE SHEETS


	December 31,
	2023		2022
	(in thousands)
Assets:
Investments:
Fixed maturity securities—available-for-sale, at fair value (amortized cost $24,309 and $19,824 in 2023 and 2022, respectively)	$	24,283	$	19,470
Equity securities, at fair value (cost $7,108 and $10,007 in 2023 and 2022, respectively)		9,857		13,602
Short-term investments		—		10,145
Investment in subsidiaries		249,159		239,664
Total investments		283,299		282,881
Cash and cash equivalents		6,635		31,911
Deferred income taxes		880		982
Notes receivable from subsidiaries		1,925		1,855
Property and equipment, net		1,933		2,736
Federal income tax recoverable		784		543
Other assets		1,099		1,752
Total assets	$	296,555	$	322,660
Liabilities and shareholders’ equity
Liabilities:
Accounts payable and other liabilities		4,104		5,228
Total liabilities		4,104		5,228
Shareholders' equity (net of Treasury stock of $36,929 and $34,758 at December 31, 2023 and 2022, respectively)		292,451		317,432
Total liabilities and shareholders' equity	$	296,555	$	322,660

Schedule II. Condensed Financial Information of Registrant – (Continued)

AMERISAFE, INC.

CONDENSED STATEMENTS OF INCOME


	Year Ended December 31,
	2023			2022			2021
	(in thousands)
Revenues
Net investment income	$	4,861		$	2,395		$	896
Net unrealized gains (losses) on equity securities		(845	)		(490	)		2,590
Fee and other income		8,933			9,533			8,541
Total revenues		12,949			11,438			12,027
Expenses
Other operating costs		8,932			9,533			8,541
Total expenses		8,932			9,533			8,541
Income before income taxes and equity in earnings of subsidiaries		4,017			1,905			3,486
Income tax expense (benefit)		1,055			714			(1,188	)
Gain before equity in earnings of subsidiaries		2,962			1,191			4,674
Equity in net income of subsidiaries		59,146			54,411			61,083
Net income	$	62,108		$	55,602		$	65,757

Schedule II. Condensed Financial Information of Registrant – (Continued)

AMERISAFE, INC.

CONDENSED STATEMENTS OF CASH FLOWS


	Year Ended December 31,
	2023			2022			2021
	(in thousands)
Operating activities
Net cash provided by operating activities	$	5,591		$	6,121		$	6,622
Investing activities
Purchases of investments		(24,885	)		(31,909	)		(87,289	)
Proceeds from sales of investments		35,013			75,950			28,780
Purchases of property and equipment		(482	)		(1,903	)		(1,277	)
Dividends from subsidiary		56,000			77,700			148,400
Net cash provided by investing activities		65,646			119,838			88,614
Financing activities
Finance lease purchases		(91	)		(58	)		(44	)
Share-based compensation related tax withholding		(944	)		—			—
Purchase of treasury stock		(2,171	)		(12,388	)		—
Dividends to shareholders		(93,307	)		(100,427	)		(99,929	)
Net cash used in financing activities		(96,513	)		(112,873	)		(99,973	)
Change in cash and cash equivalents		(25,276	)		13,086			(4,737	)
Cash and cash equivalents at beginning of year		31,911			18,825			23,562
Cash and cash equivalents at end of year	$	6,635		$	31,911		$	18,825

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that information we are required to disclose in reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms specified by the SEC. We note that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving the stated goals under all potential future conditions.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and our Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles.

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria described in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on management’s assessment under the framework in Internal Control—Integrated Framework, our management has concluded that our internal control over financial reporting was effective as of December 31, 2023.

Our independent registered public accounting firm, Ernst & Young LLP, has audited the effectiveness of internal controls over financial reporting, as stated in their report included herein.

There have not been any changes in our internal control over financial reporting during the fourth quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Because of its inherent limitations, management does not expect that our disclosure controls and procedures and our internal controls over financial reporting will prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with policies and procedures may deteriorate. Any control system, no matter how well designed and operated, is based upon certain assumptions and can only provide reasonable, not absolute assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to errors or fraud will not occur or that all control issues and instances of fraud, if any within the Company, have been detected.

We have audited AMERISAFE, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework (the COSO criteria). In our opinion, AMERISAFE, Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2023 consolidated financial statements of the Company and our report dated February 23, 2024 expressed an unqualified opinion thereon.

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Inherent Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

None of the Company’s directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended December 31, 2023.

The information required by Item 10 with respect to our executive officers is included in Part I of this report.

The information required by Item 10 with respect to our directors is incorporated by reference to the information included under the caption “Election of Directors” in our Proxy Statement for the 2024 Annual Meeting of Shareholders. We plan to file our Proxy Statement within 120 days after December 31, 2023, the end of our fiscal year.

The information required by Item 10 with respect to our audit committee and our audit committee financial expert is incorporated by reference to the information included under the caption “The Board, Its Committees and Its Compensation—Audit Committee” in our Proxy Statement for the 2024 Annual Meeting of Shareholders.

The information required by Item 10 with respect to our code of business conduct and ethics for executive and financial officers and directors is posted on our website at www.amerisafe.com in the Investor Relations section under “Corporate Governance—Governance Documents—Code of Business Conduct and Ethics.” We will post information regarding any amendment to, or waiver from, our code of business conduct and ethics on our website in the Investor Relations section under Corporate Governance.

The information required by Item 11 is incorporated by reference to the information included under the captions “Executive Compensation,” “The Board, Its Committees, and Its Compensation—Director Compensation,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Discussion and Analysis” and “Compensation Committee Report” in our Proxy Statement for the 2024 Annual Meeting of Shareholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by Item 12 is incorporated by reference to the information included under the captions “Security Ownership of Management and Certain Beneficial Holders” and “Equity Compensation Plan Information” in our Proxy Statement for the 2024 Annual Meeting of Shareholders.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by Item 13 with respect to certain relationships and related transactions is incorporated by reference to the information included under the caption “Executive Compensation—Certain Relationships and Related Transactions” in our Proxy Statement for the 2024 Annual Meeting of Shareholders.

The information required by Item 13 with respect to director independence is incorporated by reference to the information included under the caption “The Board, Its Committees and Its Compensation—Director Independence” in our Proxy Statement for the 2024 Annual Meeting of Shareholders.

The information required by Item 14 with respect to the fees and services of Ernst & Young LLP, our independent registered public accounting firm, and the audit committee’s pre-approved policies and procedures, are incorporated by reference to the information included under the caption “Independent Public Accountants” in our Proxy Statement for the 2024 Annual Meeting of Shareholders.

The following consolidated financial statements and schedules are filed in Item 8 of Part II of this report:

† Certain confidential information contained in this Exhibit has been omitted by means of redacting a portion of the text and replacing it with [***], pursuant to Regulation S-K Item 601(b) of the Securities Act of 1933, as amended. Certain confidential information has been excluded from the Exhibit because it is: (i) not material and (ii) the Company treats such information as private or confidential.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 23, 2024.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February 23, 2024.

Kathryn H. Shirley, by signing her name hereto, does hereby sign this Annual Report on Form 10-K on behalf of the above-named directors of AMERISAFE, Inc. on this 23rd day of February 2024, pursuant to powers of attorney executed on behalf of such directors and contemporaneously filed with the Securities and Exchange Commission.


	Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance																					As of
	For the Years Ended December 31,																					December 31, 2023
	(Dollars in thousands)																				Total IBNR
																					Plus
																					Expected				Cumulative
																					Development				Number of
Accident	Unaudited (1)																				on Reported				Claims
Year	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023		Claims				Reported
2014	$	268,846	$	268,846	$	249,097	$	235,058	$	226,933	$	218,386	$	212,417	$	210,811	$	210,096	$	209,210		$	4,097			5,841
2015		—		262,573		262,573		252,514		235,471		220,965		211,758		207,929		207,086		205,556			4,374			5,517
2016		—		—		250,491		250,491		241,406		218,005		209,214		202,820		201,604		198,566			4,691			5,394
2017		—		—		—		244,094		244,098		234,587		220,096		211,964		208,360		206,293			5,324			5,214
2018		—		—		—		—		250,487		250,487		235,641		217,369		208,517		205,001			4,347			5,477
2019		—		—		—		—		—		241,344		241,344		227,246		214,123		206,109			5,672			5,223
2020		—		—		—		—		—		—		220,710		220,710		214,500		207,047			13,909			4,391
2021		—		—		—		—		—		—		—		222,715		222,715		215,232			2,894			4,304
2022		—		—		—		—		—		—		—		—		192,907		192,907			(12,814	)		4,065
2023		—		—		—		—		—		—		—		—		—		189,659			12,433			3,715
																	Total		$	2,035,580		$	44,927


	Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
	(Dollars in thousands)

Accident	Unaudited (1)																				Claim
Year	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023		Frequency (2)
2014	$	53,060	$	119,820	$	153,320	$	169,736	$	180,683	$	186,129	$	191,394	$	192,169	$	193,192	$	195,409		14.99
2015		—		54,141		121,599		151,818		170,461		182,053		185,657		188,145		189,339		190,588		14.25
2016		—		—		52,238		115,713		143,016		156,860		166,887		172,133		174,134		178,572		14.23
2017		—		—		—		56,951		122,552		151,427		166,448		175,733		183,696		185,690		14.69
2018		—		—		—		—		62,061		126,057		152,328		172,423		181,081		184,797		15.23
2019		—		—		—		—		—		58,884		120,512		154,391		168,448		176,488		15.28
2020		—		—		—		—		—		—		50,113		109,882		137,411		153,974		13.95
2021		—		—		—		—		—		—		—		52,292		130,288		159,864		15.02
2022		—		—		—		—		—		—		—		—		50,954		110,494		14.40
2023		—		—		—		—		—		—		—		—		—		47,207		13.09
																	Total			1,583,083
All outstanding liabilities before 2014, net of reinsurance																				101,752
Liabilities for loss and loss adjustment expenses, net of reinsurance																				554,248

(1) Data presented for these calendar years is required supplementary information, which is unaudited.
(2) Frequency, as calculated above, refers to reported claims divided by gross premium earned.


Texas		75-2069407
(State of Incorporation)		(I.R.S. Employer Identification Number)
2301 Highway 190 West, DeRidder, Louisiana		70634
(Address of Principal Executive Offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	AMSF	NASDAQ


	Gross Premiums Written						Percentage of Gross Premiums Written
	2023		2022		2021		2023			2022			2021
	(in thousands)
Voluntary business:
Construction	$	135,758	$	123,748	$	125,696		47.6	%		44.8	%		45.2	%
Trucking		36,173		39,785		43,530		12.7	%		14.4	%		15.6	%
Logging and Lumber		26,879		28,388		27,452		9.4	%		10.3	%		9.8	%
Agriculture		16,985		15,593		15,488		5.9	%		5.6	%		5.6	%
Manufacturing		16,205		14,245		13,880		5.7	%		5.2	%		5.0	%
Telecommunications		6,582		7,122		7,256		2.3	%		2.6	%		2.6	%
Maritime		5,122		7,409		6,153		1.8	%		2.7	%		2.2	%
Other		33,601		29,936		28,136		11.8	%		10.8	%		10.1	%
Total voluntary business		277,305		266,226		267,591		97.2	%		96.4	%		96.1	%
Assigned risk business		432		3,063		2,180		0.1	%		1.1	%		0.8	%
Assumed premiums		7,618		6,821		8,523		2.7	%		2.5	%		3.1	%
Total	$	285,355	$	276,110	$	278,294		100.0	%		100.0	%		100.0	%


	2023			2022			2021
	(in thousands)
Gross case loss and DCC reserves	$	535,116		$	559,570		$	605,888
AO reserves		19,117			17,589			19,625
Gross IBNR reserves		119,761			118,878			119,765
Gross unpaid loss, DCC and AO reserves		673,994			696,037			745,278
Reinsurance recoverables on unpaid loss and LAE		(119,746	)		(112,555	)		(119,266	)
Net unpaid loss, DCC and AO reserves	$	554,248		$	583,482		$	626,012


		Resultant Change in Net Loss and DCC Reserve
Change in Paid LDFs	Change in Incurred LDFs	Amount ($)			Percentage
		(in thousands)
30% increase	30% increase		31,059			5.9	%
30% increase	No change		—			(—	)%
30% increase	30% decrease		(30,841	)		(5.9	)%
No change	30% increase		31,059			5.9	%
No change	30% decrease		(30,841	)		(5.9	)%
30% decrease	30% increase		31,059			5.9	%
30% decrease	No change		—			(—	)%
30% decrease	30% decrease		(30,841	)		(5.9	)%


☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


		Page No.
PART I

	Forward-Looking Statements	1

Item 1	Business	2

Item 1A	Risk Factors	24

Item 1B	Unresolved Staff Comments	33

Item 1C	Cybersecurity	33

Item 2	Properties	34

Item 3	Legal Proceedings	34

Item 4	Mine Safety Disclosures	34

PART II

Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	35

Item 6	[Reserved]	36

Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 7A	Quantitative and Qualitative Disclosures About Market Risk	49

Item 8	Financial Statements and Supplementary Data	51

Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	91

Item 9A	Controls and Procedures	91

Item 9B	Other Information	93

Item 9C	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	93

PART III

Item 10	Directors, Executive Officers and Corporate Governance	94

Item 11	Executive Compensation	94

Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	94

Item 13	Certain Relationships and Related Transactions, and Director Independence	94

Item 14	Principal Accountant Fees and Services	94

PART IV

Item 15	Exhibits and Financial Statement Schedules	95

Item 16	Form 10-K Summary	97


	Percentage of Gross Premiums Written Year Ended December 31,
State	2023			2022			2021
Florida		13.4	%		11.8	%		11.7	%
Georgia		10.9	%		11.0	%		12.5	%
Pennsylvania		7.6	%		7.8	%		6.8	%
Louisiana		7.5	%		8.2	%		7.8	%
North Carolina		5.9	%		6.9	%		6.0	%
Illinois		5.1	%		4.5	%		4.9	%
Wisconsin		4.3	%		4.3	%		4.7	%
Virginia		3.7	%		4.1	%		4.4	%
South Carolina		3.3	%		3.6	%		3.3	%
Minnesota		3.2	%		3.7	%		3.7	%
Alaska		3.0	%		3.2	%		3.2	%
Alabama		2.8	%		3.2	%		3.1	%
Total		70.7	%		72.3	%		72.1	%


	Resultant Change in Net Loss and DCC Reserve
Change in Severity Trend	Amount ($)			Percentage
	(in thousands)
300 basis point increase		9,214			1.8	%
300 basis point decrease		(7,869	)		(1.5	)%


	Year Ended December 31,
	2013		2014		2015		2016		2017		2018		2019		2020		2021		2022		2023
	(in thousands)
Reserve for loss and loss adjustment expenses, net of reinsurance recoverables	$	565,858	$	628,268	$	653,175	$	664,520	$	686,956	$	691,193	$	677,544	$	654,854	$	626,012	$	583,482	$	554,248
Net reserve estimated as of:
One year later		542,141		580,454		601,868		629,750		641,360		626,192		614,060		592,937		585,421		542,086
Two years later		494,327		529,149		567,098		584,149		576,358		562,709		552,143		552,345		544,024
Three years later		462,770		504,437		530,582		528,659		527,722		514,889		517,763		518,432
Four years later		452,097		484,964		498,494		494,513		498,173		493,631		491,301
Five years later		440,750		467,382		473,137		473,097		485,768		475,184
Six years later		431,715		451,232		458,115		464,296		470,837
Seven years later		421,534		440,039		450,531		451,432
Eight years later		411,947		433,298		440,705
Nine years later		405,921		425,002
Ten years later		398,512
Net cumulative redundancy	$	167,346	$	203,266	$	212,470	$	213,088	$	216,119	$	216,009	$	186,243	$	136,422	$	81,988	$	41,396
Cumulative amount of reserve paid, net of reserve recoveries, through:
One year later		129,658		135,711		135,601		129,937		138,593		131,108		129,803		137,348		143,892		130,290
Two years later		198,610		203,855		202,063		202,928		205,705		199,284		207,382		203,243		214,641
Three years later		233,254		240,098		247,751		241,165		247,609		242,983		245,749		244,417
Four years later		253,081		267,143		272,144		268,049		271,213		267,293		270,359
Five years later		269,179		279,944		289,001		282,368		286,865		283,863
Six years later		276,534		293,197		298,074		290,057		299,720
Seven years later		284,522		299,782		303,762		300,918
Eight years later		290,332		304,276		310,185
Nine years later		293,803		309,450
Ten years later		296,760
Net reserve— December 31	$	565,858	$	628,268	$	653,175	$	664,520	$	686,956	$	691,193	$	677,544	$	654,854	$	626,012	$	583,482	$	554,248
Reinsurance recoverables		48,699		59,334		64,858		78,256		84,889		107,216		95,343		105,707		119,266		112,555		119,746
Gross reserve— December 31	$	614,557	$	687,602	$	718,033	$	742,776	$	771,845	$	798,409	$	772,887	$	760,561	$	745,278	$	696,037	$	673,994
Net re-estimated reserve	$	398,512	$	425,002	$	440,705	$	451,432	$	470,837	$	475,184	$	491,301	$	518,432	$	544,024	$	542,086
Re-estimated reinsurance recoverables		38,769		45,816		46,168		51,194		62,864		64,651		77,912		83,149		107,946		110,824
Gross re-estimated reserve	$	437,281	$	470,818	$	486,873	$	502,626	$	533,701	$	539,835	$	569,213	$	601,581	$	651,970	$	652,910
Gross cumulative redundancy (deficiency)	$	177,276	$	216,784	$	231,160	$	240,150	$	238,144	$	258,574	$	203,674	$	158,980	$	93,308	$	43,127


	Carrying Value		Percentage of Portfolio			Effective Interest Rate
	(in thousands)
Fixed maturity securities—held-to-maturity:
State and political subdivisions	$	416,878		46.5	%		2.4	%
Corporate bonds		52,179		5.9	%		0.6	%
U.S. agency-based mortgage-backed securities		3,297		0.4	%		1.7	%
U.S. Treasury securities and obligations of U.S. Government agencies		11,186		1.2	%		0.9	%
Asset-backed securities		35		0.0	%		6.7	%
Total fixed maturity securities—held-to-maturity		483,575		54.0	%		1.6	%
Fixed maturity securities—available-for-sale:
State and political subdivisions		131,895		14.7	%		0.7	%
Corporate bonds		166,753		18.6	%		3.6	%
U.S. agency-based mortgage-backed securities		4,745		0.5	%		1.7	%
U.S. Treasury securities and obligations of U.S. Government agencies		13,671		1.5	%		0.9	%
Total fixed maturity securities—available-for-sale		317,064		35.3	%		1.4	%
Equity securities		57,147		6.4	%		2.1	%
Cash and cash equivalents		38,682		4.3	%		5.1	%
Total investments, including cash and cash equivalents	$	896,468		100.0	%		3.4	%


	Cost or Amortized Cost		Allowance for Credit Losses			Cost or Amortized Cost Net of Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Fixed maturity securities, held-to-maturity	$	483,757	$	(182	)	$	483,575	$	4,218	$	(14,701	)	$	473,092
Fixed maturity securities, available-for-sale		326,171		—			326,171		2,688		(11,795	)		317,064
Equity securities		44,046		—			44,046		13,101		—			57,147
Totals	$	853,974	$	(182	)	$	853,792	$	20,007	$	(26,496	)	$	847,303


	Carrying Value		Percentage of Municipal Portfolio			Percentage of Total Portfolio
	(in thousands)
Louisiana	$	69,003		12.6	%		7.7	%
Texas		67,698		12.3	%		7.5	%
Arkansas		59,976		10.9	%		6.7	%
Florida		38,659		7.0	%		4.3	%
Wisconsin		26,078		4.8	%		2.9	%
Other		287,359		52.4	%		32.1	%
	$	548,773		100.0	%		61.2	%


Reinsurer		A.M. Best Rating
Allied World Assurance Company Holdings, Ltd		A
Arch Reinsurance Company		A+
Hannover Reinsurance Ireland Limited		A+
Houston Casualty Company		A++
Lloyd’s Syndicate 1414 ASC		A
Lloyd’s Syndicate 1955 ASL		A
Lloyd’s Syndicate 2987 BRT		A
Lloyd’s Syndicate 3000 MKL		A
Lloyd’s Syndicate 4472 LIB		A
Lloyd's Syndicate 0510 KLN		A
Lloyd's Syndicate 0609 AUW		A
Lloyd's Syndicate 1084 CSL		A
Lloyd's Syndicate 1686 AXS		A
Lloyd's Syndicate 1880 TOK		A
Lloyd's Syndicate 1945 SII		A
Lloyd's Syndicate 1969 APL		A
Lloyd's Syndicate 2001 AML		A
Lloyd's Syndicate 2121 ARG		A
Lloyd's Syndicate 2988 BRT		A
Lloyd's Syndicate 4711 ASP		A
Markel Global Reinsurance Company		A
Minnesota Workers' Compensation Reinsurance Association		NR
MS Amlin AG		A
Munich Reinsurance America, Inc		A+
State National Insurance Company		A
WCF National Insurance Company		A


Hypothetical Change in Interest Rates	Fair Value		Estimated Change in Fair Value			Carrying Value		Estimated Change in Carrying Value			Hypothetical Percentage Increase (Decrease) in Shareholders’ Equity
200 basis point increase	$	713,431	$	(76,725	)	$	770,453	$	(30,187	)		(10.2	)%
100 basis point increase		752,950		(37,206	)		786,012		(14,627	)		(5.0	)%
No change		790,156		—			800,640		—			0.0	%
100 basis point decrease		823,626		33,469			814,174		13,534			4.6	%
200 basis point decrease		854,846		64,690			827,611		26,972			9.1	%


Credit Rating	Percentage of Total Carrying Value
“AAA”		12.5	%
“AA”		56.4	%
“A”		15.5	%
“BBB”		15.6	%
“BB and below”		0.0	%
“Unrated securities”		0.0	%
Total		100.0	%


	As of December 31, 2023
Maturity:	Carrying Value		Percentage
	(in thousands)
Within one year	$	90,004		11.2	%
After one year through five years		239,055		29.9	%
After five years through ten years		195,901		24.5	%
After ten years		267,602		33.4	%
U.S. agency-based mortgage-backed securities		8,042		1.0	%
Asset-backed securities		35		0.0	%
Total	$	800,639		100.0	%


Reinsurer		A.M. Best Rating	Amounts Recoverable as of December 31, 2023
			(in thousands)
Hannover Reinsurance Ireland Limited	(1)	A+	$	65,045
Arch Reinsurance Company	(1)	A+		19,694
Allianz Risk Transfer AG (Bermuda)		A+		9,084
Minnesota Workers' Compensation Reinsurance Association	(1)	NR		8,950
Munich Reinsurance America, Inc	(1)	A+		5,542
Odyssey America Reinsurance Corporation		A+		4,961
Clearwater Insurance	(2)	B+		2,131
Finial Reinsurance		A-		1,878
SCOR Reinsurance		A		1,807
Other reinsurers				11,231
Total amounts recoverable from reinsurers				130,323
Allowance for credit losses				(360	)
Total amounts recoverable from reinsurers net of allowance for credit losses				129,963
Funds withheld and letters of credit related to the above recoverables				(81,520	)
Total unsecured amounts recoverable from reinsurers			$	48,443


Name	Age	Position
Executive Officers
G. Janelle Frost	53	President and Chief Executive Officer
Anastasios G. (Andy) Omiridis	56	Executive Vice President and Chief Financial Officer
Vincent J. Gagliano	51	Executive Vice President and Chief Risk Officer
Kathryn H. Shirley	58	Executive Vice President, Chief Administrative Officer and Secretary
Raymond F. (Ray) Wise, Jr.	58	Executive Vice President and Chief Sales Officer

Key Employees
Nancy E. Hunt	54	Senior Vice President, Underwriting
Henry O. (Chris) Lestage, IV	63	Senior Vice President, Claims Operations
Michael C. (Chad) Cobb	48	Senior Vice President, Safety Operations
Barbra E. McCrary	49	Senior Vice President, Policyholder Services
Angela W. Pearson	51	Senior Vice President, Controller


Period	Total Number of Shares Purchased		Average Price Paid per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
							(in thousands)
October 1, 2023 to October 31, 2023		—	$	—		—	$	12,612
November 1, 2023 to November 30, 2023		500		47.44		500		12,589
December 1, 2023 to December 31, 2023		46,241		46.44		46,241		10,441
Total		46,741				46,741


	As of December 31,
	2023		2022		2021
	(in thousands)
Balance Sheet Data
Cash and cash equivalents	$	38,682	$	61,469	$	70,722
Investments		857,786		888,987		1,012,571
Amounts recoverable from reinsurers		129,963		125,677		120,561
Premiums receivable, net		132,861		121,713		135,100
Deferred income taxes		20,403		22,794		14,384
Deferred policy acquisition costs		17,975		17,401		17,059
Total assets		1,229,162		1,269,279		1,402,724
Reserves for loss and loss adjustment expenses		673,994		696,037		745,278
Unearned premiums		116,585		114,976		121,092
Insurance-related assessments		16,896		17,653		16,850
Shareholders’ equity		292,451		317,432		399,323


	Favorable/(Unfavorable) Development for Year Ended December 31,
	2023		2022		2021
	(in millions)
2022	$	—	$	—	$	—
2021		7.5		—		—
2020		7.5		6.2		—
2019		8.0		13.1		14.1
2018		3.5		8.9		18.3
Prior to 2018		14.9		12.4		29.5
Total net development	$	41.4	$	40.6	$	61.9


	Twelve Months Ended December 31,
	2023			2022			2021
Open claims at beginning of period		4,275			4,594			4,758
Claims reported		3,948			4,104			4,310
Claims closed		(4,220	)		(4,423	)		(4,474	)
Open claims at end of period		4,003			4,275			4,594


	Less Than Twelve Months					Twelve Months or Longer
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
December 31, 2023:
Fixed maturity securities—available-for-sale	$	40,293	$	(207	)	$	184,313	$	(11,588	)
December 31, 2022:
Fixed maturity securities—available-for-sale		196,433		(10,625	)		63,424		(7,849	)


	Page
Audited Financial Statements as of December 31, 2023 and 2022 and for the three years in the period ended December 31, 2023:
Report of Independent Registered Public Accounting Firm	52
Consolidated Balance Sheets	54
Consolidated Statements of Income	55
Consolidated Statements of Comprehensive Income	56
Consolidated Statements of Changes in Shareholders’ Equity	57
Consolidated Statements of Cash Flows	58
Notes to Consolidated Financial Statements	59

Financial Statement Schedules:
Schedule II. Condensed Financial Information of Registrant	87
Schedule VI. Supplemental Information Concerning Property-Casualty Insurance Operations	90
Schedules I, III, IV and V are not applicable and have been omitted


		Valuation of Loss and Loss Adjustment Expense reserves
Description of the Matter		At December 31, 2023, the Company’s reserves for loss and loss adjustment expenses (LAE) was $673 million, which includes Incurred But Not Reported (IBNR) reserves of $119 million. As discussed in Notes 1 and 9 to the consolidated financial statements, the reserve for loss and LAE represents the estimated ultimate costs of all reported and unreported losses incurred and unpaid as of the reporting date. There is significant uncertainty inherent in determining the ultimate loss and LAE costs which are estimated using individual case-base valuations and statistical and actuarial analysis based upon experience for previously unreported claims and their ultimate loss and LAE costs. In particular, the estimates are sensitive to loss severity and frequency trends, changes in customers, claims management, regulatory factors, medical trends, employment and wage patterns, insurance policy coverage interpretations, and judicial determinations, among other factors. Auditing management’s IBNR reserve estimate required the involvement of our actuarial specialists and was complex and highly judgmental due to the nature of significant assumptions used in the valuation process. The IBNR reserve estimate was sensitive to the selection of actuarial methods and assumptions, including the adjustment of historical loss severity experience for changes in policies and customer base.
How We Addressed the Matter in Our Audit		We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for estimating loss and LAE reserves, including, among others controls over the review and approval processes that the Company has in place for the methods and assumptions used in estimating IBNR reserves. To test the recorded IBNR reserves, with the assistance of our actuarial specialists, we evaluated the Company’s selection of methods and assumptions, including loss severity, against those used in prior periods and used in the industry for similar types of insurance. We also considered changes to employment and wage patterns and the Company’s customers and claims management. We involved our actuarial specialist to independently calculated a range of reasonable loss and LAE reserve estimates and compared this range to the Company’s recorded loss and LAE reserve. We also performed a review of the development of prior years’ reserve estimates.


	Common Stock						Treasury Stock
	Shares		Amount		Additional Paid-In Capital		Shares			Amounts			Accumulated Earnings				Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2020		20,589,309	$	206	$	215,316		(1,258,250	)	$	(22,370	)		$	224,645		$	21,019			438,816
Comprehensive income:
Net income		—		—		—		—			—				65,756			—			65,756
Other comprehensive income:
Change in unrealized gains on debt securities, net of tax		—		—		—		—			—				—			(7,482	)		(7,482	)
Comprehensive income		—		—		—		—			—				—			—			58,274
Common stock issued		32,995		—		1,563		—			—				—			—			1,563
Share-based compensation		—		—		579		—			—				—			—			579
Dividends to shareholders		—		—		—		—			—				(99,909	)		—			(99,909	)
Balance at December 31, 2021		20,622,304	$	206	$	217,458		(1,258,250	)	$	(22,370	)		$	190,492		$	13,537		$	399,323
Comprehensive income:
Net income		—		—		—		—			—				55,602			—			55,602
Other comprehensive income:
Change in unrealized gains on debt securities, net of tax		—		—		—		—			—				—			(27,365	)		(27,365	)
Comprehensive income		—		—		—		—			—				—			—			28,237
Common stock issued		56,268		1		1,970		—			—				—			—			1,971
Purchase of treasury stock		-		—		—		(264,449	)		(12,388	)			—			—			(12,388	)
Share-based compensation		—		—		871		—			—				—			—			871
Dividends to shareholders		—		—		—		—			—				(100,582	)		—			(100,582	)
Balance at December 31, 2022		20,678,572	$	207	$	220,299		(1,522,699	)	$	(34,758	)		$	145,512		$	(13,828	)	$	317,432
Comprehensive income:
Net income		—		—		—		—			—				62,108			—			62,108
Other comprehensive income:
Change in unrealized losses on debt securities, net of tax		—		—		—		—			—				—			6,634			6,634
Comprehensive income		—		—		—		—			—				—			—			68,742
Common stock issued		25,876		—		779		—			—				—			—			779
Purchase of treasury stock		—		—		—		(46,741	)		(2,171	)			—			—			(2,171	)
Share-based compensation		—		—		1,000		—			—				—			—			1,000
Dividends to shareholders		—		—		—		—			—				(93,331	)		—			(93,331	)
Balance at December 31, 2023		20,704,448	$	207	$	222,078		(1,569,440	)	$	(36,929	)		$	114,289		$	(7,194	)	$	292,451


	2023 Premiums						2022 Premiums						2021 Premiums
	Written			Earned			Written			Earned			Written			Earned
	(in thousands)
Gross	$	285,355		$	283,746		$	276,110		$	282,225		$	278,294		$	286,462
Ceded		(16,621	)		(16,621	)		(10,527	)		(10,527	)		(10,469	)		(10,469	)
Net premiums	$	268,734		$	267,125		$	265,583		$	271,698		$	267,825		$	275,993


	Year Ended
	December 31,
	2023			2022
	(in thousands)
Balance, beginning of period	$	372		$	440
Provision for credit loss expense (benefit)		(12	)		(68	)
Balance, end of period	$	360		$	372


	For the Year Ended December 31,
	2023		2022		2021
	(in thousands, except earnings per share amounts)
Basic EPS:
Net income – basic	$	62,108	$	55,602	$	65,756
Basic weighted average common shares		19,149		19,233		19,332
Basic earnings per share	$	3.24	$	2.89	$	3.40
Diluted EPS:
Net income – diluted	$	62,108	$	55,602	$	65,756
Diluted weighted average common shares:
Weighted average common shares		19,149		19,233		19,332
Restricted stock and RSUs		77		89		77
Diluted weighted average common shares		19,226		19,322		19,409
Diluted earnings per common share	$	3.23	$	2.88	$	3.39


	Years Ended
	2023		2022		2021
Basic weighted average common shares		19,149,080		19,233,241		19,332,391
Add: Other common shares eligible for common dividends:
Restricted stock and RSUs		76,941		88,476		76,228
Diluted weighted average common shares		19,226,021		19,321,717		19,408,619


Component of Accumulated Other Comprehensive Income (Loss)	Year Ended December 31,									Affected line item in the statement of income
	2023			2022			2021
	(in thousands)
Unrealized gains (losses) on available-for- sale securities	$	(547	)	$	3,037		$	2,776		Net realized gains on investments
		(547	)		3,037			2,776		Income before income taxes
		115			(638	)		(583	)	Income tax expense
	$	(432	)	$	2,399		$	2,193		Net income


	Pre-Tax Amount			Tax Expense (Benefit)			Net-of-Tax Amount
	(in thousands)
December 31, 2023
Unrealized gain on securities:
Unrealized gain on available-for-sale securities	$	7,850		$	1,648		$	6,202
Reclassification adjustment for gains realized in net income		547			115			432
Net unrealized gain		8,397			1,763			6,634
Other comprehensive income	$	8,397		$	1,763		$	6,634
December 31, 2022
Unrealized loss on securities:
Unrealized loss on available-for-sale securities	$	(31,602	)	$	(6,636	)	$	(24,966	)
Reclassification adjustment for losses realized in net income		(3,037	)		(638	)		(2,399	)
Net unrealized loss		(34,639	)		(7,274	)		(27,365	)
Other comprehensive loss	$	(34,639	)	$	(7,274	)	$	(27,365	)
December 31, 2021
Unrealized loss on securities:
Unrealized loss on available-for-sale securities	$	(6,695	)	$	(1,406	)	$	(5,289	)
Reclassification adjustment for losses realized in net income		(2,776	)		(583	)		(2,193	)
Net unrealized loss		(9,471	)		(1,989	)		(7,482	)
Other comprehensive loss	$	(9,471	)	$	(1,989	)	$	(7,482	)


	Deferred Policy Acquisition Costs		Reserves for Unpaid Loss and Loss Adjustment Expense		Unearned Premium		Net Premiums Earned		Net Investment Income		Loss and LAE Related to Current Period		Loss and LAE Related to Prior Periods			Amortization of Deferred Policy Acquisition Costs			Paid Claims and Claim Adjustment Expenses		Net Premiums Written
	(in thousands)
2023	$	17,975	$	673,994	$	116,585	$	267,125	$	31,339	$	189,659	$	(41,396	)	$	(40,859	)	$	177,497	$	268,734
2022		17,401		696,037		114,976		271,698		27,223		192,907		(40,591	)		(39,852	)		194,846		265,583
2021		17,059		745,278		121,092		275,993		25,435		222,715		(61,917	)		(38,481	)		189,640		267,825


		Page
Financial Statements:
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)		52
Consolidated Balance Sheets		54
Consolidated Statements of Income		55
Consolidated Statements of Comprehensive Income		56
Consolidated Statements of Changes in Shareholders’ Equity		57
Consolidated Statements of Cash Flows		58
Notes to Consolidated Financial Statements		59

Financial Statement Schedules:
Schedule II. Condensed Financial Information of Registrant		87
Schedule VI. Supplemental Information Concerning Property-Casualty Insurance Operations		90

(Schedules I, III, IV and V are not applicable and have been omitted.)