10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008

Commission file number: 000-51520

AMERISAFE, INC.

(Exact Name of Registrant as Specified in Its Charter)

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)

Registrant’s telephone number, including area code: (337) 463-9052

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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

Large accelerated filer ¨	Accelerated filer x
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of November 1, 2008, there were 18,841,306 shares of the Registrant’s common stock, par value $.01 per share, outstanding.

TABLE OF CONTENTS

		Page No.
	Forward-Looking Statements	3
PART I - FINANCIAL INFORMATION
Item 1	Financial Statements	4
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4	Controls and Procedures	16
PART II - OTHER INFORMATION
Item 1	Legal Proceedings	17
Item 1A	Risk Factors	17
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3	Defaults Upon Senior Securities	17
Item 4	Submission of Matters to a Vote of Security Holders	17
Item 5	Other Information	17
Item 6	Exhibits	17

FORWARD-LOOKING STATEMENTS

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:

• increased competition on the basis of premium rates, coverage availability, payment terms, claims management, safety services, policy terms, types of insurance offered, overall financial strength, financial ratings and reputation;

• decreased level of business activity of our policyholders;

• the cyclical nature of the workers’ compensation insurance industry;

• greater frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events, than our underwriting, reserving or investment practices anticipate based on historical experience or industry data;

• changes in general economic conditions, including interest rates, inflation and other factors;

• negative developments in the workers’ compensation insurance industry;

• changes in the availability, cost or quality of reinsurance and the failure of our reinsurers to pay claims in a timely manner or at all;

• changes in rating agency policies or practices;

• loss of the services of any of our senior management or other key employees;

• developments in capital markets that adversely affect the performance of our investments;

• changes in regulations, laws, rates, or rating factors applicable to us, our policyholders or the agencies that sell our insurance;

• changes in legal theories of liability under our insurance policies;

• decreased demand for our insurance; and

• the effects of U.S. involvement in hostilities with other countries and large-scale acts of terrorism, or the threat of hostilities or terrorist acts.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this report, including under the caption “Risk Factors” in Item 1A, “Risk Factors” of Part I to our Annual Report on Form 10-K for the year ended December 31, 2007. 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.

3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERISAFE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	September 30, 2008			December 31, 2007
	(unaudited)
Assets
Investments:
Fixed maturity securities—held-to-maturity, at amortized cost (fair value $661,634 and $640,037 in 2008 and 2007, respectively)	$	684,307		$	639,691
Fixed maturity securities—available-for-sale, at fair value (cost $0 and $32,425 in 2008 and 2007, respectively)		—			32,425
Equity securities—available-for-sale, at fair value (cost $41,571 and $40,381 in 2008 and 2007, respectively)		33,034			39,629
Total investments		717,341			711,745
Cash and cash equivalents		71,181			47,329
Amounts recoverable from reinsurers		66,189			76,915
Premiums receivable, net		167,120			152,150
Deferred income taxes		31,373			26,418
Accrued interest receivable		8,133			7,079
Property and equipment, net		5,276			5,407
Deferred policy acquisition costs		21,263			18,414
Deferred charges		3,793			3,553
Federal income tax recoverable		958			10
Other assets		24,099			12,833
	$	1,116,726		$	1,061,853
Liabilities, redeemable preferred stock and shareholders’ equity
Liabilities:
Reserves for loss and loss adjustment expenses	$	545,417		$	537,403
Unearned premiums		149,384			138,402
Reinsurance premiums payable		489			720
Amounts held for others		5,679			2,972
Policyholder deposits		41,663			41,516
Insurance-related assessments		42,832			42,234
Accounts payable and other liabilities		28,215			28,946
Subordinated debt securities		36,090			36,090
		849,769			828,283
Redeemable preferred stock		25,000			25,000
Shareholders’ equity:
Common stock:
Voting—$0.01 par value authorized shares—50,000,000 in 2008 and 2007; issued and outstanding shares—18,841,306 in 2008 and 18,813,040 in 2007		188			188
Additional paid-in capital		174,630			173,589
Accumulated earnings		71,339			33,230
Accumulated other comprehensive income (loss)		(4,200	)		1,563
		241,957			208,570
	$	1,116,726		$	1,061,853

See accompanying notes.

4

AMERISAFE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share data)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
Revenues
Gross premiums written	$	75,767		$	81,138		$	242,739		$	265,913
Ceded premiums written		(4,574	)		(5,352	)		(14,030	)		(15,212	)
Net premiums written	$	71,193		$	75,786		$	228,709		$	250,701
Net premiums earned	$	71,284		$	79,637		$	217,727		$	232,624
Net investment income		7,712			7,924			22,934			22,282
Net realized gains (losses) on investments		(2,921	)		91			(2,860	)		127
Fee and other income		200			641			570			918
Total revenues		76,275			88,293			238,371			255,951
Expenses
Loss and loss adjustment expenses incurred		41,972			54,917			139,217			160,623
Underwriting and certain other operating costs		4,612			5,947			11,764			18,614
Commissions		4,822			5,242			16,176			15,251
Salaries and benefits		5,040			4,664			15,197			13,975
Interest expense		654			900			2,080			2,664
Policyholder dividends		125			276			563			963
Total expenses		57,225			71,946			184,997			212,090
Income before income taxes		19,050			16,347			53,374			43,861
Income tax expense		5,691			4,528			15,265			12,262
Net income		13,359			11,819			38,109			31,599
Preferred stock dividends		—			—			—			—
Net income available to common shareholders	$	13,359		$	11,819		$	38,109		$	31,599
Earnings per share
Basic	$	0.67		$	0.59		$	1.90		$	1.58
Diluted	$	0.65		$	0.58		$	1.87		$	1.56
Shares used in computing earnings per share
Basic		18,819,463			18,787.598			18,809,061			18,759,235
Diluted		19,207,487			19,091,800			19,119,207			19,074,226

See accompanying notes.

5

AMERISAFE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2008			2007
Operating Activities
Net income	$	38,109		$	31,599
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		869			1,342
Net amortization of investments		2,218			2,123
Deferred income taxes		(1,852	)		(141	)
Net realized (gains) losses on investments		2,860			(127	)
Loss on sale of fixed assets		4			—
Share-based compensation		912			790
Changes in operating assets and liabilities:
Premiums receivable		(14,970	)		(29,995	)
Accrued interest receivable		(1,054	)		(1,429	)
Deferred policy acquisition costs and deferred charges		(3,090	)		(2,106	)
Other assets		(12,214	)		(1,851	)
Reserves for loss and loss adjustment expenses		8,014			36,872
Unearned premiums		10,982			18,078
Reinsurance balances		10,495			17,497
Amounts held for others and policyholder deposits		2,707			2,073
Accounts payable and other liabilities		14			(1,816	)
Net cash provided by operating activities		44,004			72,909
Investing Activities
Purchases of investments held-to-maturity		(120,485	)		(103,511	)
Purchases of investments available-for-sale		(4,836	)		(367,716	)
Proceeds from maturities of investments held-to-maturity		70,238			36,466
Proceeds from sales and maturities of investments available-for-sale		35,544			380,015
Purchases of property and equipment		(742	)		(106	)
Net cash used in investing activities		(20,281	)		(54,852	)
Financing Activities
Proceeds from stock option exercises		113			748
Tax benefit from share-based payments		16			171
Net cash provided by financing activities		129			919
Change in cash and cash equivalents		23,852			18,976
Cash and cash equivalents at beginning of period		47,329			26,748
Cash and cash equivalents at end of period	$	71,181		$	45,724

See accompanying notes.

6

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Basis of Presentation

AMERISAFE, Inc. (the “Company”) is an insurance holding company incorporated in the state of Texas. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries: American Interstate Insurance Company (“AIIC”), Silver Oak Casualty, Inc. (“SOCI”), American Interstate Insurance Company of Texas (“AIICTX”), Amerisafe Risk Services, Inc. (“RISK”) and Amerisafe General Agency, Inc. (“AGAI”). AIIC and SOCI are property and casualty insurance companies organized under the laws of the state of Louisiana. AIICTX is a property and casualty insurance company organized under the laws of the state of Texas. RISK, a wholly owned subsidiary of the Company, is a claims and safety services company, currently servicing only affiliate insurance companies. AGAI, a wholly owned subsidiary of the Company, is a general agent for the Company. AGAI sells insurance, which is underwritten by AIIC, SOCI and AIICTX, as well as by nonaffiliated insurance carriers. The assets and operations of AGAI are not significant to that of the Company and its consolidated subsidiaries. The terms “AMERISAFE,” the “Company,” “we,” “us,” or “our” refer to AMERISAFE, Inc. and its consolidated subsidiaries, as the context requires.

The Company provides workers’ compensation and general liability insurance for small to mid-sized employers engaged in hazardous industries, principally construction, trucking and logging. Assets and revenues of AIIC represent more than 99% of comparable consolidated amounts of the Company for each of 2008 and 2007.

In the opinion of the management of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, the results of operations and cash flows for the periods presented. The unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q under the Securities Exchange Act of 1934 and therefore do not include all information and footnotes to be in conformity with accounting principles generally accepted in the United States (“GAAP”). The results for the interim periods are not necessarily indicative of the results of operations that may be expected for the year. The unaudited condensed consolidated financial statements contained herein should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2007.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 2. Stock Options and Restricted Stock

In connection with the initial public offering of shares of the Company’s common stock in November 2005, the Company’s shareholders approved the AMERISAFE 2005 Equity Incentive Plan (the “2005 Incentive Plan”) and the AMERISAFE 2005 Non-Employee Director Restricted Stock Plan (the “2005 Restricted Stock Plan”). See Note 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2007 for additional information regarding the Company’s incentive plans.

In March 2007, the compensation committee of our board of directors approved incentive compensation awards to each of the Company’s executive officers for services rendered in 2006. The awards were composed of cash bonuses and grants of restricted common stock. The restricted stock awards were made pursuant to the Company’s 2005 Incentive Plan. Vesting of those 13,030 restricted shares took place in March 2008.

In January 2008, the Company granted options to purchase an aggregate of 20,000 shares of the Company’s common stock at a per-share exercise price equal to the market value of the Company’s common stock on the date of grant in connection with the employment of a new officer. Those options were made pursuant to the Company’s 2005 Incentive Plan.

In February 2008, the compensation committee of our board of directors approved incentive compensation awards to each of the Company’s executive officers for services rendered in 2007. The awards were composed of cash bonuses and grants of restricted common stock that were made pursuant to the Company’s 2005 Incentive Plan. The market value of the 9,198 restricted shares granted was $121,000. Those restricted shares not forfeited will vest in March 2009, the first anniversary of the date of grant.

Pursuant to the 2005 Restricted Stock Plan, 5,943 shares of restricted common stock granted to non-employee directors in June 2007 vested on June 16, 2008, the date of the annual shareholders’ meeting. Also on June 16, 2008, non-employee directors were granted 6,468 shares of restricted common stock in accordance with the 2005 Restricted Stock Plan. The market value of the restricted shares granted was $105,000, and those restricted shares will vest at the next annual shareholders meeting.

7

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

During the nine months ended September 30, 2008, there were 12,600 stock options exercised. Related to these exercises, the Company received $113,000 of stock option proceeds.

The Company recognized share-based compensation expense of $335,000 in the quarter ended September 30, 2008, compared to $236,000 for the same period in 2007. The Company recognized share-based compensation expense of $912,000 in the nine months ended September 30, 2008, compared to $790,000 for the same period in 2007.

Note 3. Earnings Per Share

We compute earnings per share in accordance with Statement of Financial Accounting Standards (SFAS) No. 128, “Earnings per Share.” Additionally, we apply the “two-class method” in computing basic and diluted earnings per share. The two-class method was introduced in SFAS 128, and further clarified in Emerging Issues Task Force (EITF) No. 03-06, “Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings Per Share, (Issue 03-6).” Under the two-class method, net income is allocated between common stock and any securities other than common stock that are eligible to participate in dividends with common stock. Our redeemable preferred stock qualifies as “participating securities” under SFAS 128 and EITF 03-06.

The two-class method allocates net income available to common shareholders and participating securities to the extent that each security shares in earnings as if all earnings for the period had been distributed. The amount of earnings allocable to common shareholders is divided by the weighted-average number of common shares outstanding for the period. Participating securities that are convertible into common stock are included in the computation of basic earnings per share if the effect is dilutive.

Diluted earnings per share includes potential common shares assumed issued under the “treasury stock method,” which reflects the potential dilution that would occur if any outstanding options are exercised. Diluted earnings per share also includes the “if converted” method for participating securities if the effect is dilutive. The two-class method of calculating diluted earnings per share is used whether the “if converted” result is dilutive or anti-dilutive.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
Basic EPS:
Net income available to common shareholders	$	13,359		$	11,819		$	38,109		$	31,599
Portion allocable to common shareholders		94.1	%		94.0	%		94.0	%		94.0	%
Net income allocable to common shareholders	$	12,571		$	11,112		$	35,822		$	29,706
Basic weighted average common shares		18,819,463			18,787,598			18,809,061			18,759,235
Basic earnings per common share	$	0.67		$	0.59		$	1.90		$	1.58
Diluted EPS:
Net income allocable to common shareholders	$	12,571		$	11,112		$	35,822		$	29,706
Diluted weighted average common shares:
Weighted average common shares		18,819,463			18,787,598			18,809,061			18,759,235
Stock options		376,275			294,165			290,813			302,799
Restricted stock		11,749			10,037			19,333			12,192
Diluted weighted average common shares		19,207,487			19,091,800			19,119,207			19,074,226
Diluted earnings per common share	$	0.65		$	0.58		$	1.87		$	1.56

8

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The table below sets forth the calculation of the percentage of net income allocable to common shareholders, or the “portion allocable to common shareholders.” Under the two-class method, unvested stock options, and out-of-the-money vested stock options are not considered to be participating securities.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2008		2007		2008		2007
Numerator:
Basic weighted average common shares	18,819,463		18,787,598		18,809,061		18,759,235
Add: Other common shares eligible for common dividends:
Weighted average restricted shares and stock options (including tax benefit component)	388,024		304,202		310,146		314,991
Weighted average participating common shares	19,207,487		19,091,800		19,119,207		19,074,226
Denominator:
Weighted average participating common shares	19,207,487		19,091,800		19,119,207		19,074,226
Add: Other classes of securities, including contingently issuable common shares and convertible preferred shares:
Weighted average common shares issuable upon conversion of Series C preferred shares	242,953		242,953		242,953		242,953
Weighted average common shares issuable upon conversion of Series D preferred shares	971,817		971,817		971,817		971,817
Weighted average participating shares	20,422,257		20,306,570		20,333,977		20,288,996
Portion allocable to common shareholders	94.1	%	94.0	%	94.0	%	94.0	%

Note 4. Income Taxes

The Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”), on January 1, 2007. At the adoption date and as of September 30, 2008, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. There were no such uncertain positions for the quarters and nine months ended September 30, 2008 and 2007.

Tax years 2004 through 2007 are subject to examination by the federal and state taxing authorities. There are no income tax examinations currently in process.

Note 5. Comprehensive Income

Comprehensive income was $11.7 million for the three months ended September 30, 2008, as compared to $11.6 million for the same period in 2007. Comprehensive income was $32.3 million for the nine months ended September, 2008, as compared to $31.5 million for the same period in 2007. The difference between net income as reported and comprehensive income was the result of changes in unrealized gains and losses, net of tax.

Note 6. Fair Value Measurements

Effective January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements” (FAS 157), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. In February 2008, the FASB issued Staff Position (FSP) 157-2, “Effective Date of FASB Statement No. 157”. This FSP delays the effective date of FAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years.

The Company determined the fair values of its financial instruments based on the fair value hierarchy established in SFAS 157, 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.

9

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Fair value is defined in SFAS 157 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.

SFAS 157 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 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 SFAS 157, 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. SFAS 157 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.

Securities classified by the Company as available-for-sale investments were reported at fair value utilizing mostly Level 1 inputs. The fair value measurements consider quoted prices in active markets for identical assets. Level 2 inputs such as previous day and subsequent day trade prices were used if a trade for the security was not made on the date of measurement.

At September 30, 2008, assets and liabilities measured at fair value on a recurring basis are summarized below:

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
Securities available for sale	$	31,944	$	—	$	—	$	31,944

In addition, the Company held common securities in unconsolidated variable interest entities of $1,090,000, which are carried at cost.

At September 30, 2008, all fixed maturity securities were classified as held-to-maturity and carried at amortized cost.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (FAS 159), which permits entities to choose to measure many financial instruments and certain other items at fair value, and establishes presentation and disclosure requirements for similar assets and liabilities measured at fair value. FAS 159 was effective for fiscal years beginning after November 15, 2007. The Company did not elect the fair value option for any financial assets or financial liabilities as of January 1, 2008, the effective date of the standard and has not elected the option for any financial assets or financial liabilities subsequent to the effective date.

Note 7. Subsequent Events

On October 16, 2008, the Company commuted certain reinsurance agreements with Liberty Syndicate Management Limited (“Liberty Re”), covering portions of the 2005 and 2006 accident years. Liberty Re remains obligated to subsidiaries of AMERISAFE under other reinsurance agreements. The Company received cash of approximately $1.2 million in exchange for releasing Liberty Re from its reinsurance obligations under the commuted agreements and settling the commuted agreements’ profit contingency provisions. As a result of the commutation, the Company will record pre-tax income of approximately $319,000 in the fourth quarter of 2008.

10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the related notes included in Item 1 of this Quarterly Report on Form 10-Q, together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2007.

We begin our discussion with an overview of our Company to give you an understanding of our business and the markets we serve. We then discuss our critical accounting policies. This is followed with a discussion of our results of operations for the three and nine months ended September 30, 2008 and 2007. This discussion includes an analysis of certain significant period-to-period variances in our consolidated statements of operations. Our cash flows and financial condition are discussed under the caption “Liquidity and Capital Resources.”

Business Overview

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 and logging. 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 or aberrations 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 30 states and the District of Columbia through independent agencies, as well as through our wholly owned insurance agency subsidiary. We are also licensed in an additional 15 states and the U.S. Virgin Islands.

Critical Accounting Policies

It is important to understand our accounting policies in order to understand our financial statements. Management considers some of these policies to be critically important to the presentation of our financial results because they require us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of our assets, liabilities, revenues and expenses and the 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, assessments, deferred policy acquisition costs, deferred income taxes and the valuation and determination of impairment of investment securities. These critical accounting policies are more fully described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II to our Annual Report on Form 10-K for the year ended December 31, 2007.

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Results of Operations

The following table summarizes our consolidated financial results for the three and nine months ended September 30, 2008 and 2007.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
	(dollars in thousands, except per share data)
	(unaudited)
Gross premiums written	$	75,767		$	81,138		$	242,739		$	265,913
Net premiums earned		71,284			79,637			217,727			232,624
Net investment income		7,712			7,924			22,934			22,282
Total revenues		76,275			88,293			238,371			255,951
Total expenses		57,225			71,946			184,997			212,090
Net income		13,359			11,819			38,109			31,599
Diluted earnings per common share	$	0.65		$	0.58		$	1.87		$	1.56
Other Key Measures
Net combined ratio (1)		79.4	%		89.2	%		84.0	%		90.0	%
Return on average equity (2)		20.5	%		22.4	%		20.3	%		21.0	%

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

(2) Return on average equity is calculated by dividing the annualized net income by the average shareholders’ equity, including redeemable preferred stock, for the applicable period.

Consolidated Results of Operations for Three Months Ended September 30, 2008 Compared to September 30, 2007

Gross Premiums Written. Gross premiums written for the quarter ended September 30, 2008 were $75.8 million, compared to $81.1 million for the same period in 2007, a decrease of 6.6%. The decrease was attributable to a $5.3 million decrease in premiums resulting from payroll audits and related premium adjustments and a $1.2 million decrease in direct assigned risk premiums. Offsetting these decreases was an $823,000 increase in annual premiums on voluntary policies written during the period and a $226,000 increase in assumed premiums from mandatory pooling arrangements.

Net Premiums Written. Net premiums written for the quarter ended September 30, 2008 were $71.2 million, compared to $75.8 million for the same period in 2007, a decrease of 6.1%. The decrease was primarily attributable to the decline in gross premiums written. As a percentage of gross premiums written, ceded premiums were 6.0% for the third quarter of 2008, compared to 6.6% for the third quarter of 2007.

Net Premiums Earned. Net premiums earned for the third quarter of 2008 were $71.3 million, compared to $79.6 million for the same period in 2007, a decrease of 10.5%. The decrease was attributable to the decline in net premiums written in the previous four quarters, which caused the flow of premium earnings to also decrease.

Net Investment Income. Net investment income for the third quarter of 2008 was $7.7 million, compared to $7.9 million for the same period in 2007, a decrease of 2.7%. Average invested assets, including cash and cash equivalents, were $787.5 million in the quarter ended September 30, 2008, compared to an average of $733.2 million in the same period in 2007, a growth of 7.4%. The pre-tax investment yield on our investment portfolio was 4.0% per annum during the quarter ended September 30, 2008, compared to 4.4% per annum during the same period in 2007.

Net Realized Gains (Losses) on Investments. Net realized losses on investments for the three months ended September 30, 2008 totaled $2.9 million, compared to net realized gains of $91,000 for the same period in 2007. Net realized losses in the third quarter were attributable to $381,000 in realized losses on the sale of equity securities and $2.5 million in other-than-temporary impairments of certain equities and asset-backed securities. Net realized gains in the third quarter of 2007 were the result of sales of equity securities and calls on fixed maturity securities.

Loss and Loss Adjustment Expenses Incurred. Loss and loss adjustment expenses (LAE) incurred totaled $42.0 million for the three months ended September 30, 2008, compared to $54.9 million for the same period in 2007, a decrease of $12.9 million, or 23.6%. The current accident year loss and LAE incurred decreased as a result of lower premiums earned in the third quarter of 2008, as compared to the same period in 2007. In addition, for prior accident years, we recorded favorable prior accident year development of $6.6 million in the third quarter of 2008, compared to no change in loss and LAE incurred for prior accident years for the same period in 2007.

Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits. Underwriting and certain other operating costs, commissions and salaries and benefits for the quarter ended September 30, 2008 were $14.5 million, compared to $15.9 million for the same period in 2007, a decrease of 8.7%. This decrease was primarily due to $2.4 million of experience-rated commissions from our 2008 reinsurance agreement, covering the $4 million excess of $1 million reinsured layer. This $2.4 million

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amount acts as an offset to expenses. Adding to this expense offset, we realized a $1.1 million decrease in insurance-related assessments and a $420,000 decrease in commissions. Offsetting these decreases, accounts receivable write-offs increased $2.2 million and salary and benefits increased $375,000.

Interest expense. Interest expense for the third quarter of 2008 was $654,000, compared to $900,000 for the same period in 2007. Weighted average borrowings for both periods were $36.1 million. The weighted average interest rate decreased to 6.8% per annum for the third quarter of 2008 from 9.5% per annum for the third quarter of 2007.

Income tax expense. Income tax expense for the three months ended September 30, 2008 was $5.7 million, compared to $4.5 million for the same period in 2007. The increase was primarily attributable to a $2.7 million increase in our pre-tax income, from $16.3 million for the three months ended September 30, 2007, to $19.1 million for the same period in 2008. Our effective tax rate for the quarter ended September 30, 2008 was 29.9%, compared to 27.7% for the same period in 2007.

Consolidated Results of Operations for Nine Months Ended September 30, 2008 Compared to September 30, 2007

Gross Premiums Written. Gross premiums written for the nine months ended September 30, 2008 were $242.7 million, compared to $265.9 million for the same period in 2007, a decrease of 8.7%. The decrease was attributable to a $10.3 million decrease in annual premiums on voluntary policies written during the period, a $10.4 million decrease in premiums resulting from payroll audits and related premium adjustments and a $2.4 million decrease in direct assigned risk premiums.

Net Premiums Written. Net premiums written for the nine months ended September 30, 2008 were $228.7 million, compared to $250.7 million for the same period in 2007, a decrease of 8.8%. The decrease was primarily attributable to the decline in gross premiums written. As a percentage of gross premiums written, ceded premiums were 5.8% for the nine months ended September 30, 2008, compared to 5.7% for the same period in 2007.

Net Premiums Earned. Net premiums earned for the nine months ended September 30, 2008 were $217.7 million, compared to $232.6 million for the same period in 2007, a decrease of 6.4%. The decrease was attributable to a decline in net premiums written offset by earnings from premiums written in the previous four quarters.

Net Investment Income. Net investment income for the nine months ended September 30, 2008 was $22.9 million, compared to $22.3 million for the same period in 2007, an increase of 2.9%. The change was attributable to a 10.4% increase in our average invested assets, including cash and cash equivalents, from an average of $700.6 million in the nine months ended September 30, 2007 to an average of $773.2 million for the same period in 2008. Offsetting this growth was a decrease in pre-tax investment yield on our investment portfolio, to 4.0% per annum during the nine months ended September 30, 2008, from 4.2% per annum during the same period in 2007.

Net Realized Gains (Losses) on Investments. Net realized losses on investments for the nine months ended September 30, 2008 totaled $2.9 million, compared to gains of $127,000 for the same period in 2007. Net realized losses in the nine months ended September 30, 2008 were attributable to $320,000 in realized losses on the sale of equity securities and $2.5 million in other-than-temporary impairments of certain equities and asset-backed securities. Net realized gains in the same period of 2007 were the result of sales of equity securities and calls on fixed maturity securities.

Loss and Loss Adjustment Expenses Incurred. Loss and loss adjustment expenses (LAE) incurred totaled $139.2 million for the nine months ended September 30, 2008, compared to $160.6 million for the same period in 2007, a decrease of $21.4 million, or 13.3%. The current accident year loss and LAE incurred decreased as a result of lower premiums earned in the nine months ended September 30, 2008, as compared to the same period in 2007. In addition, for prior accident years, we recorded favorable development of $11.1 million in 2008, compared to no change in loss and LAE incurred for prior accident years for the same period in 2007.

Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits. Underwriting and certain other operating costs, commissions and salaries and benefits for the nine months ended September 30, 2008 were $43.1 million, compared to $47.8 million for the same period in 2007, a decrease of 9.8%. This decrease was primarily due to $7.1 million of experience-rated commissions from our 2008 reinsurance agreement, covering the $4 million excess of $1 million reinsured layer. This $7.1 million amount is an offset to expenses. Adding to this expense offset, we realized a $3.0 million decrease in insurance-related assessments. Offsetting these decreases, accounts receivable write-offs increased $2.2 million, salary and benefits increased $1.2 million, commissions increased $925,000 relating to the introduction of certain incentive programs, professional fees increased $299,000 and income from the commutations of reinsurance contracts decreased $307,000.

Interest expense. Interest expense for the nine months ended September 30, 2008 was $2.1 million, compared to $2.7 million for the comparable period of 2007. Weighted average borrowings for both periods were $36.1 million. The weighted average interest rate decreased to 7.2% per annum for the nine months ended September 30, 2008 from 9.3% per annum for the nine months ended September 30, 2007.

Income tax expense. Income tax expense for the nine months ended September 30, 2008 was $15.3 million, compared to $12.3 million for the same period in 2007. The increase was primarily attributable to a $9.5 million increase in our pre-tax income, from $43.9 million for the nine months ended September 30, 2007, to $53.4 million for the same period in 2008. Our effective tax rate for

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the nine months ended September 30, 2008 was 28.6%, compared to 28.0% for the same period in 2007. The increase in the effective tax rate from the nine months ended September 30, 2007 to the same period in 2008 was attributable to a lower percentage of pre-tax income from tax-exempt interest income.

Liquidity and Capital Resources

Our principal sources of operating funds are premiums, investment income and proceeds from sales and maturities of investments. Our primary uses of operating funds include payments of claims and operating expenses. Currently, we pay claims using cash flow from operations and invest our excess cash in fixed maturity and equity securities.

Net cash provided by operating activities was $44.0 million for the nine months ended September 30, 2008, which represented a $28.9 million decrease in cash provided by operating activities, from $72.9 million in net cash provided by operating activities for the nine months ended September 30, 2007. This decrease in operating cash was attributable to a $17.0 million decrease in reinsurance recoveries in the nine months ended September 30, 2008, compared to the same period in 2007, primarily related to commutations. Other contributing factors to our operating cash flow were a $6.1 million decrease in premiums collected, a $1.6 million increase in expense disbursements and a $1.4 million increase in federal income taxes paid for the nine months ended September 30, 2008, compared to the same period in 2007. Also, dividends paid to policyholders increased $3.9 million in the nine months ended September 30, 2008, compared to the same period in 2007, mainly attributable to a special “excessive profits” dividend we were required to pay to Florida policyholders. Offsetting the decreases in operating cash flow was a $987,000 decrease in claim payments.

Net cash used in investing activities was $20.3 million for the nine months ended September 30, 2008, compared to $54.9 million for the same period in 2007. Cash provided by sales and maturities of investments totaled $105.8 million for the nine months ended September 30, 2008 compared to $416.5 million for the same period in 2007. A total of $125.3 million in cash was used to purchase investments in the nine months ended September 30, 2008, compared to $471.2 million in purchases for the same period in 2007. The decrease in sales and purchases of investments from 2007 was due to a decrease in the use of variable rate demand obligations (sometimes referred to as “floaters”), which we bought and sold regularly in 2007, and which were recorded on a gross basis.

Net cash provided by financing activities in the nine months ended September 30, 2008 was $129,000, as compared $919,000 in the same period in 2007. In the nine months ended September 30, 2008, proceeds from stock option exercises totaled $113,000 and tax benefits related to share-based compensation was $16,000. In the nine months ended September 30, 2007, proceeds from stock option exercises totaled $748,000 and tax benefits from share-based compensation totaled $171,000.

On June 20, 2008, we commuted certain reinsurance agreements with Hannover Ruckversicherungs-Aktiengesellschaft (“Hannover”), covering portions of the 2003, 2004, 2005 and 2006 accident years. Hannover remains obligated to subsidiaries of the Company under other reinsurance agreements. We received cash of approximately $7.5 million in exchange for releasing Hannover from its reinsurance obligations under the commuted agreements. As a result of the commutation, we recorded additional pre-tax income of approximately $991,000 in the second quarter of 2008.

On July 7, 2008, we commuted certain reinsurance agreements with Partner Reinsurance Company of the U. S. (“Partner Re”), covering portions of the 2005 and 2006 accident years. Partner Re remains obligated to subsidiaries of AMERISAFE under other reinsurance agreements. We received cash of approximately $4.5 million in exchange for releasing Partner Re from its reinsurance obligations under the commuted agreements and settling the commuted agreements’ profit contingency provisions. As a result of the commutation, we recorded pre-tax income of approximately $703,000 in the third quarter of 2008.

Investment Portfolio

As of September 30, 2008, our investment portfolio, including cash and cash equivalents, totaled $788.5 million, an increase of 7.0% from September 30, 2007. Our fixed maturity securities are classified as held-to-maturity, as defined by SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” As such, the reported value of those securities is equal to their amortized cost, and is not impacted by changing interest rates. In 2007, we invested in variable rate demand obligations (“VRDOs”), which are long-term bonds that bear floating interest rates and provide investors with the option to tender or put the bonds at par, generally on a daily, weekly or monthly basis. Due to the fact that we purchased these securities with the intent to hold less than thirty days, we classified VRDOs as available-for-sale, as defined by SFAS No. 115. As such, VRDOs were reported at fair value on our balance sheet. We sold all of our available-for-sale fixed maturity securities as of January 15, 2008. Our equity securities are also classified as available-for-sale and reported at fair value. For the nine months ended September 30, 2008, net unrealized gains and losses for our equity securities decreased $7.8 million, from an overall net unrealized loss of $752,000 at December 31, 2007 to an overall net unrealized loss of $8.5 million at September 30, 2008.

On January 1, 2008, we adopted SFAS 157 that 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 6 of the financial statements, our securities available-for-sale are classified using Level 1 inputs. We did not elect the fair value option prescribed under SFAS 159 for any financial assets or financial liabilities as of September 30, 2008.

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The composition of our investment portfolio, including cash and cash equivalents, as of September 30, 2008 is shown in the following table.

	Carrying Value		Percentage of Portfolio
	(in thousands)
Fixed maturity securities:
States and political subdivisions	$	475,473	60.3	%
U.S. agency-based mortgage-backed securities		95,649	12.1	%
Commercial mortgage-backed securities		51,615	6.6	%
U.S. Treasury securities and obligations of U.S. Government agencies		33,667	4.3	%
Corporate bonds		16,133	2.0	%
Asset-backed securities		11,770	1.5	%
Total fixed maturity securities		684,307	86.8	%
Equity securities		33,034	4.2	%
Cash and cash equivalents		71,181	9.0	%
Total investments, including cash and cash equivalents	$	788,522	100.0	%

It should be noted that, during the third quarter of 2008, our investment portfolio did not contain:

• any holdings of preferred stock;

• any common stock in Fannie Mae or Freddie Mac;

• any common stock or debt holdings in Bear Stearns, Lehman Brothers, Morgan Stanley or Goldman Sachs; or

• any common stock or debt holdings in American International Group, Wachovia, IndyMac Bank or Washington Mutual.

For our securities classified as available-for-sale, the securities are “marked to market” as of each financial close, whereby unrealized holding gains and losses are recorded against Accumulated Other Comprehensive Income (Loss), except when such securities are deemed to be other-than-temporarily impaired. For our securities classified as held-to-maturity, unrealized holding gains and losses are not reported in the financial statements until realized or until a decline in fair value, below amortized cost, is deemed to be other-than-temporary.

We regularly review our investment portfolio to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of our investments. We consider various factors in determining if a decline in the fair value of an individual security is other-than-temporary. Some of the factors we consider include:

• any reduction or elimination of dividends, or nonpayment of scheduled principal or interest payments;

• the financial condition and near-term prospects of the issuer of the applicable security, including any specific events that may affect its operations or earnings;

• how long and by how much the fair value of the security has been below its cost or amortized cost;

• any downgrades of the security by a rating agency; and

• our intent and ability to keep the security for a sufficient time period for it to recover its value.

In September 2008, we recorded charges for certain equities and asset-backed securities, whose fair values we determined were other-than-temporarily impaired. These charges are included in “Net realized gains (losses) on investments,” and total $2.5 million for the quarter ended September 30, 2008. No other such impairment charges were taken in the first two quarters of 2008 or in 2007. The pre-tax investment yield on our investment portfolio was 4.0% per annum during the nine months ended September 30, 2008, compared to 4.2% per annum during the same period in 2007.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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.

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Since December 31, 2007, there have been no material changes in the quantitative or qualitative aspect of our market risk profile. For additional information regarding the Company’s exposure to certain market risks, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Item 4. Controls and Procedures.

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. We note that the design of any system of controls is based in part upon 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.

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

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit No.	Description
10.1	Employment Agreement, dated November 1, 2008 by and between the Company and G. Janelle Frost
31.1	Certification of C. Allen Bradley, Jr. filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of G. Janelle Frost filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of C. Allen Bradley, Jr. and G. Janelle Frost filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

Pursuant to the requirements 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.

	AMERISAFE, INC.
November 6, 2008	/s/ C. Allen Bradley, Jr.
	C. Allen Bradley, Jr.
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)
November 6, 2008	/s/ G. Janelle Frost
	G. Janelle Frost
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Employment Agreement, dated November 1, 2008 by and between the Company and G. Janelle Frost
31.1	Certification of C. Allen Bradley, Jr. filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of G. Janelle Frost filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of C. Allen Bradley, Jr. and G. Janelle Frost filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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EX-10.1

Exhibit 10.1

EXECUTIVE OFFICER EMPLOYMENT AGREEMENT

This Employment Agreement is being entered into on the date or dates hereinbelow written by and between Amerisafe, Inc., a Texas corporation with its principal place of business in DeRidder, Louisiana (the “Company”) and G. Janelle Frost, a competent individual of the lawful age of majority who will principally render his/her services in DeRidder, Louisiana (the “Employee”), and the parties hereby enter into this Employment Agreement (the “Agreement”) with an Effective Date as designated below.

WITNESSETH:

WHEREAS, Employee desires to induce Company to employ her or continue to employ her and Employee desires to engage in or continue to engage in an employment relationship with Company and Company desires to induce Employee to be employed with or to continue her employment with Company and Company desires to engage in an employment relationship or continue an employment relationship with Employee under the specific terms and conditions as set forth below;

NOW, THEREFORE, in exchange for good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged and in exchange for the mutual covenants and obligations contained in this Agreement, Company and Employee hereby covenant and agree as follows:

1. Employment.

(a) Company hereby agrees to employ Employee, and Employee hereby accepts such employment with Company, for the period set forth in Section 2 hereof, subject to the terms and conditions hereinafter set forth.

(b) Employee affirms and represents that she is under no obligation to any former employer or other person or entity which is in any way inconsistent with, or which imposes any restriction upon, Employee’s employment hereunder with Company, the employment of Employee by Company, or Employee’s undertakings under this Agreement.

2. Term of Employment. Unless earlier terminated as provided in this Agreement, the term of Employee’s employment under this Agreement shall be for a period beginning on November 1, 2008 (the “Effective Date”) and ending on March 1, 2011; provided, however, that this Agreement shall automatically renew for successive one year periods, unless either party shall notify the other in writing not less than thirty (30) days prior to the third anniversary date or any successive anniversary date that such party does not intent to renew this Agreement. Such period, plus any annual renewal periods, or, if Employee’s employment hereunder is earlier terminated as provided herein and including termination pursuant to Section 9, or such shorter period, is sometimes referred to herein as the “Employment Term”.

3. Duties. Employee shall be employed by the Company as a senior executive officer and shall endeavor in good faith to competently perform such duties as inherent in Employee’s employment or any designated job position or as specified by Company and shall also perform and discharge such other employment duties and responsibilities as the Board of Directors or President of Company shall from time to time reasonably determine, not inconsistent with Employee’s position as a senior executive officer with Company. Employee shall also comply with any By-Laws of Company, as applicable. Employee shall perform Employee’s duties principally at the offices of the Company at 2301 Highway 190 West, DeRidder, Louisiana, with such travel to such other locations from time to time as the Board of Directors or President of Company may reasonably request. Except as may otherwise be approved in advance by the Board of Directors of Company, and except during vacation periods and reasonable periods of absence due to sickness, injury or disability, Employee shall devote Employee’s full time throughout the Employment Term to the services required of Employee hereunder; provided that the foregoing shall not prohibit Employee from engaging in reasonable charitable, civic and community activities. Employee shall render Employee’s business services exclusively to Company and its subsidiaries and affiliate entities during the Employment Term and shall use his/her good faith efforts, judgment and energy to improve and advance the business and interests of the Company and its subsidiaries in a manner consistent with the duties of Employee’s position. Employee shall diligently, prudently, professionally and responsibly perform his duties and shall discharge his employment utilizing his best faith efforts and prudent judgment with a high degree of proficiency and competency and for the exclusive interest of company.

Page 1 of 14

4. General Compliance, Code of Ethics and Conflicts of Interest.

(a) Employee shall comply with all applicable laws and regulations (federal, state and local) and shall comply with all applicable directives, orders, and regulations of any governmental agency or regulatory body including federal, state, and local agencies and bodies. Employee shall also comply with all policies and procedures of the Company and directives of the Board of Directors. Employee understands, acknowledges and agrees that she holds a position of trust and that fiduciary duties and responsibilities may apply under applicable law and that these duties and responsibilities may be continuing in nature, even after separation from employment. Employee agrees to fully and faithfully perform and discharge all such duties, responsibilities, and obligations.

(b) Employee has an obligation to act in an ethical manner in dealings with Company, with co-employees, with customers and any third party. In this regard, Employee is required to be honest, forthright and to not take any action or make statements or engage in any conduct which is unethical, improper, or which could create the appearance of impropriety. In addition, Employee shall not engage in any conduct, take any actions, or make statements which negatively reflect upon Company or in any way harm or potentially cause harm to the Company’s image, reputation or good will.

(c) Employee must also ensure that she does not engage in any conflict of interest. In this regard, Employee shall not engage in any activity or conduct which is contrary to the exclusive interests of or in conflict with the exclusive interests of Company. All business opportunities presented to Employee during the course and scope of his/her employment or while employed with Company are to be used for the benefit of Company only. Further, Employee shall not take any position contrary to Company’s interests or inconsistent with Employee’s employment with the Company.

5. EEO Compliance. Employee shall not engage in any conduct which constitutes or which may be considered an unlawful employment practice or which violates or could violate any employment practices, equal employment opportunity, discrimination, or retaliation laws or regulations (federal, state, or local). Employee acknowledges that the Company is an Equal Opportunity Employer and prohibits all forms of unlawful discrimination in the terms and condition of employment, it prohibits all forms of harassment, including sexual harassment, and it prohibits retaliation against any employee who engages in protected activity.

6. Salary and Bonus.

(a) Salary. As compensation for the services to be performed by the Employee hereunder during the Employment Term, Company shall pay the Employee a base salary at the annual rate of not less than One Hundred Seventy-Five Thousand and No/100s Dollars ($175,000.00) (said amount, together with any increases thereto as may be determined from time to time by the Compensation Committee of the Board of Directors of Company in its sole discretion, being hereinafter referred to as “Salary”). Any Salary payable hereunder shall be paid in regular intervals in accordance with Company’s established and regular payroll practices from time to time in effect, but in no event less than monthly.

(b) Bonus. Employee shall be eligible to receive bonus compensation from Company for each fiscal year (or portion thereof) occurring during the Employment Term in amounts, if any, as may be determined by the Compensation Committee of the Board of Directors of Company in its sole discretion on the basis of performance-based criteria or annual incentive plans to be established from time to time by such Committee in its sole discretion, provided that any such Bonus so awarded shall be paid in the calendar year following the year in which the services for which such Bonus is awarded were performed.

(c) Withholding and Taxes. The payment of any Salary and Bonus and the payment of any separation pay pursuant to this Agreement, shall be subject to applicable withholding and payroll taxes, and such other deductions as may be required under the Company’s employee benefit plans.

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7. Other Benefits.

During the Employment Term, Employee shall:

(a) be eligible to participate in all employee fringe benefits and pension, retirement or profit sharing plans that may be provided by the Company for its other senior executive officers in accordance with the provision of any such plans, as the same may be in effect from time to time;

(b) be eligible to participate in all medical and health plans or other employee welfare benefit plans that may be provided by the company for its other senior executive officers in accordance with the provisions of any such plans, as the same be in effect from time to time;

(c) be entitled to at least 23 vacation/personal days in each calendar year; Employee shall also be entitled to all paid holidays given by Company to its other senior executive officers;

(d) be entitled to sick pay and disability benefits in accordance with any Company policy that may be applicable to other senior executive officers from time to time;

(e) be entitled to a car allowance consistent with established Company practices as of the date hereof and which may be in effect from time to time;

(f) be entitled to accrue earned and unused vacation time and carry such unused time forward from year to year during the Employment Term, provided the amount of accrued and unused time shall not exceed 200 hours at any time during the term hereof; and

(g) be entitled to reimbursement for all reasonable and authorized out-of-pocket business expenses incurred by Employee in the performance of Employee’s duties hereunder in accordance with Company policies and practices that may be applicable to senior executive officers from time to time, provided that such business expenses shall be reimbursed, if at all, not later than the year following that in which such expenses are incurred, and that the amount of expenses eligible for reimbursement during one taxable year may not affect the amount of expenses eligible for reimbursement in another taxable year.

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8. Confidential Information. Employee hereby covenants, agrees and acknowledges as follows:

(a) Employee has and will have access to and will participate in the development of or be acquainted with confidential and proprietary information and trade secrets that directly or indirectly relate to the business, prospects, operations and other aspects of the Company and any other present or future subsidiaries and affiliates of Company (collectively with the Company, the “Companies”), including but not limited to (1) customer lists; the identity, lists or descriptions of new or prospective customers; financial statements; cost reports or other financial information; contract proposals or bidding information, business plans; training and operations methods and manuals; personnel records; software programs; reports and correspondence; and management systems, policies or procedures, including related forms and manuals; (2) information pertaining to future developments such as future marketing or acquisition plans or ideas; and (3) all other tangible and intangible property, which are used in the business and operations of the Companies but not made public. The information and trade secrets relating to the business of the Companies described hereinabove in this paragraph 8(a) are hereinafter referred to collectively as the “Confidential Information”, provided that the term “Confidential Information” shall not include any information (x) that is or becomes publicly available (other than as a result of violation of this Agreement by the Employee), or (y) that Employee receives or received on a non-confidential basis from a source (other than the Companies or any of their representatives) that is not prohibited from disclosing such information by a legal, contractual or fiduciary obligation (provided, however that the Employee shall not be deemed to be in violation of this clause 8(a)(y) unless she has actual knowledge of any such obligation on the party of any such source). “Confidential Information” also includes, but is in no way limited to: financial information, budgets, general plans, business plans, data, trade secrets, computer software, technical information, research and development, product and service information, processes, insured lists, insured information, renewal and expiration dates, pricing and underwriting information, processes, procedures and standards, sales information, marketing information, bid information, job or project information, contracts, purchasing information, data processing, formulas, designs, drafts, drawings, systems, specifications, means, techniques, compilations, intellectual property, inventions, developments and improvements, operational methods, protocols, business strategies, market information, vendor or supplier information, personnel matters and records and matters that are sensitive, business, proprietary, and confidential information. “Confidential Information” also includes, but is in no way limited to, any other proprietary, confidential, or business information or documentation which is protected by or which is otherwise defined as trade secrets under any federal or state trade secret laws including, but in no way limited to, Louisiana’s Uniform Trade Secrets Act (La.R.S. 51:1431, et seq.) or other applicable law.

(b) Employee agrees that she will not use, disclose, communicate, disseminate, or otherwise make known, directly or indirectly, any Confidential Information to any person or entity not employed by or directly affiliated with Company. Additionally, Employee agrees that she will not use any Confidential Information for the benefit of herself or for the benefit of any other person or entity that is not employed by or affiliated with Company or in any way that may be directly or indirectly competitive with or detrimental to the interests of Company.

(c) In the event that Employee receives an order or subpoena from a court of competent jurisdiction and venue or an order or subpoena from a governmental agency with jurisdiction and authority, Employee shall, within forty-eight (48) hours of receipt of such order or subpoena, immediately notify, by telephone communication and in writing, Company’s President or General Counsel and Employee shall provide Company’s President or General Counsel with a copy of any such order or subpoena and Employee shall notify Company’s President or General Counsel of whether or not she intends to comply with the order or subpoena and Employee shall cooperate with Company in any action it takes in order to protect its rights or to contest or dispute the disclosure of Confidential Information pursuant to such order or subpoena.

(d) Employee acknowledges and agrees that a remedy at law for any breach or threatened breach of the provisions of this Section 8 would be inadequate and, therefore, agrees that Company shall be entitled to injunctive relief in addition to any other available rights and remedies in case of any such breach or threatened breach; provided, however, that nothing contained herein shall be construed as prohibiting Company from pursuing any other rights and remedies available for any such breach or threatened breach.

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(e) Employee agrees that upon termination or separation of Employee’s employment with Company for any reason, Employee shall immediately return to the Company all Confidential Information in Employee’s possession in whatever form maintained (including, without limitation, computer disks and other electronic and digital media).

(f) The obligations of the Employee under this Section 8 shall, except as otherwise provided herein, survive the termination of the Employment Term or the termination or separation of Employee’s employment with Company to the maximum period allowed by applicable law.

9. Termination.

9.01 Employee’s employment hereunder shall be terminated upon the occurrence of any of the following:

(a) death of the Employee (Death);

(b) Employee’s inability to perform her duties or the essential functions of his/her job, with or without accommodation, on account of disability or incapacity for a period of one hundred eighty (180) or more days, whether or not consecutive, within any period of twelve (12) consecutive months (Disability);

(c) Company Termination for Cause (as defined herein);

(d) Company Termination Without Cause (as defined herein);

(e) Employee Termination for Good Cause (as defined herein); or

(f) Employee Termination Without Good Cause (as defined herein).

9.02 As used in this Agreement, “Company Termination for Cause” shall mean a termination of Employee’s employment by action of the Board of Directors or President of Company (or their or his/her designee) at any time, including during the Employment Term, based on any one or more of the following:

(a) The arrest, charge, indictment, guilty plea, nolo contendre/no contest plea, or conviction of any crime designated under any federal, state, or local law as a felon or any crime involving theft, fraud, embezzlement, securities, drugs, or moral turpitude.

(b) Any act of dishonesty or moral turpitude that the Board of Directors or President of Company reasonably determines is materially detrimental to the interests or image of Company.

(c) Any act, error, or omission of Employee that is materially detrimental to Company, which causes material damage to or liability of Company or which is likely to or tends to cause material damage to or liability of Company.

(d) Breach by Employee of fiduciary duties or the engagement in prohibited conflicts of interest.

(e) Failure of Employee to follow and comply with reasonable and lawful instructions, orders or directives of the Board of Directors of Company or the President of Company, following written notice to Employee by the Board of Directors of the alleged failure to comply and a reasonable period in which to cure same.

(f) Gross neglect or negligence of Employee in the performance of her duties or the willful disregard by Employee of her obligations under this Agreement following written notice to Employee by the Board of Directors of the alleged gross neglect, negligence, or willful disregard of obligations and a reasonable period in which to cure same.

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(g) Employee’s breach of this Agreement or any provision or term of this Agreement following written notice to Employee by the Board of Directors of the alleged breach and a reasonable period in which to cure same.

9.03 For purposes of this Agreement, “Employer Termination Without Cause” shall mean a termination of Employee’s employment by Company or Company’s nonrenewal of this Agreement for any reason or on any grounds other than a “Company Termination for Cause.”

9.04 For purposes of this Agreement, “Employee Termination Without Good Cause” shall mean a termination or resignation of employment by Employee or Employee’s nonrenewal of this Agreement for any reason or for any grounds other than an “Employee Termination for Good Cause.”

9.05 For purposes of this Agreement, “Employee Termination for Good Cause” shall mean Employee’s termination of or resignation from Employment or Employee’s nonrenewal of this Agreement for any one or more of the following reasons:

(a) Company materially and substantially adversely changes the nature or scope of the authority, powers, functions, responsibilities and duties associated with Employee’s job position designated or existing as of the Effective Date of this Agreement without the consent of Employee;

(b) Company’s material and substantial reduction of Employee’s Salary without the consent of Employee unless such reduction is part of a plan or decision of the Board of Directors that results in a reduction in salary for substantially all of senior executive officers;

(c) Company’s termination of Employee’s participation in employee benefits provided or existing as of the Effective Date of this Agreement unless such termination of employee benefits is applicable to all senior executive officers of Company or unless termination is required or directed under the terms and conditions of any applicable benefit plans, summary plan descriptions, insurance policies or applicable law.

(d) Company requires, without Employee’s consent, Employee to have his principal location of work change to any location which is in excess of twenty-five (25) miles from his/her principal work location existing as of the Effective Date of this Agreement if such change in work location materially increases Employee’s commute from Employee’s residence to Employee’s principal location of work; or

(e) Company’s material and substantial breach of its obligations to Employee pursuant to this Agreement.

In order for Employee to terminate or separate employment for purposes of Employee Termination for Good Cause, Employee shall be required to give Company advance written notice of his intention to terminate or separate employment and such written notice shall describe the reasons constituting Employee Termination for Good Cause. Such written notice must be delivered to the President of Company and Company shall be given thirty (30) days to cure, correct or otherwise remedy the item or items presented by Employee as constituting Employee Termination for Good Cause. Such notice by Employee to Company shall be given within ninety (90) days of the occurrence of the event, action or item which Employee asserts constitutes grounds for Employee Termination for Good Cause, the failure of which shall constitute a waiver of such grounds for Employee Termination for Cause. If Employee timely notifies the Company of the occurrence of an event described in paragraphs (a) through (e) above and the Company fails to timely cure such event, Employee shall terminate employment on or before 30 calendar days after the date the Company’s cure period expires or Employee shall be deemed to have waived the right to have such termination based on such failure to cure be treated as a Employee Termination for Good Cause under this Agreement.

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9.06 In the event that Employee’s employment is terminated at any time by a Company Termination Without Cause or an Employee Termination for Good Cause, for a twelve month period following the effective date of such termination, Company shall pay monthly (as severance, termination pay, separation pay, contract payout, compensation, or liquidated damages) (i) the monthly Salary that would have otherwise been payable to the Employee during such period, and (ii) an amount equal to one-twelfth of the average of the three Bonuses most recently awarded under 6(b) and under predecessor agreements (or, if less than three, the average of all Bonuses awarded under 6(b) and under predecessor agreements). Each such monthly payment shall be treated as a separate payment for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and will be paid during such period in accordance with the Company’s then existing payroll practices, methods, or pay periods. In addition, in the event that Employee’s employment is terminated at any time by a Company Termination Without Cause or an Employee Termination for Good Cause, Company will pay or reimburse Employee for a twelve month period following such termination the actual cost of COBRA continuing health coverage premiums, to the extent COBRA is applicable and Employee elects COBRA continuing health coverage. In this regard, if Employee is eligible for COBRA continuing health benefits and if Employee timely elects COBRA continuing health care coverage, Company will pay and/or reimburse up to a maximum of twelve months of COBRA continuing health care coverage premiums provided that such COBRA premiums shall be reimbursed, if at all, not later than the year following that in which such premiums are incurred, and that the amount of premiums eligible for reimbursement during one taxable year may not affect the amount of premiums eligible for reimbursement in another taxable year. It shall be at Company’s option and discretion to either pay the COBRA premiums directly or to reimburse Employee for premiums that Employee pays for COBRA continuing health coverage. Any premiums or amounts due for COBRA continuing health coverage beyond the twelve month period referenced above shall be at the sole cost and expense of Employee and will not be paid or reimbursed by Company. The above described obligations of Company (continuation of Salary and Bonus for a twelve month period following and payment of COBRA premiums for a twelve month period following Company Termination Without Cause or Employee Termination for Good Cause) shall be the exclusive remedies and payment obligations and no other amounts or obligations will be due and owing by Company to Employee. In this regard, Company Termination Without Cause and Employee Termination for Good Cause may be effectuated at any time during the Employment Term or renewal and the only amounts that Company will be obligated or required to pay are the amounts calculated according to the formulas set forth above.

9.07 Notwithstanding anything to the contrary expressed or implied herein, except as required by applicable law and except as set forth in Section 9.06 above, Company shall not be obligated to make any payments to the Employee or on her behalf of whatever kind or nature by reason of the Employee’s cessation of employment (including, without limitation, by reason of a Company Termination for Cause, Employee Termination Without Good Cause, Death or Disability), other than (i) such amounts, if any, of Employee’s Salary and Bonus as shall be accrued, earned and remained unpaid as of the effective date of employment separation and (ii) such other amounts, if any, which may be then otherwise payable to the Employee pursuant to the terms of the Company’s benefits plans or pursuant to Section 7 above.

9.08 To the extent that a payment becomes due to Employee under this Agreement by reason of Employee’s termination of employment, the term “termination of employment” will have the same meaning as “separation from service” under Section 409A of the Code. Notwithstanding anything to the contrary expressed or implied herein, if the Company makes a good faith determination that a payment under the Agreement (i) constitutes a deferral of compensation for purposes of Section 409A of the Code, (ii) is made to Employee by reason of her separation from service and (iii) at the time such payment would otherwise be made Employee is a “specified employee” within the meaning of Section 409A of the Code, the payment will be delayed until the first day of the seventh month following the date of such termination of employment to the extent required by Section 409A of the Code.

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10. Restrictive Covenants: Non-Competition and Non-Solicitation.

10.01 Introduction. The restrictive covenants set forth in this Agreement prohibiting competition and solicitation shall apply during the “Restricted Period,” as defined herein, in the “Restricted Area,” as defined herein. Employee acknowledges and understands that one of the principal causes and considerations of Company employing or continuing to employ Employee in a senior executive officer position is the restrictive covenants to which Employee is obligated under this Agreement. Employee further acknowledges and agrees that she will be granted access to and will be provided confidential, business and proprietary information and trade secrets of Company and that she will have access to and will be provided confidential information and data to which only senior executive officers have access and that the provision and access of such information constitutes additional consideration in exchange for the restrictive covenants contained herein. Additionally, Company will be providing to Employee special and unique training opportunities and experience and she will be obtaining knowledge, experience and skills through employment with Company that may not otherwise be obtained or acquired by Employee.

10.02 Restricted Period. For purposes of this Agreement, the “Restricted Period” shall mean the Employment Term plus:

(a) in the event that the employment of the Employee is terminated by a Company Termination Without Cause or Employee Termination For Good Cause, a period of twelve months. As such, the Restricted Period would be the Employment Term and duration of employment and would extend beyond termination or separation for twelve months; or

(b) in the event that the employment of the Employee is terminated by Company by a Company Termination For Cause, or by Employee’s Termination Without Good Cause, the Non-Compete Period shall expire upon the effective date of Employee’s separation of employment; provided, however, in such event, Company shall have the exclusive option and absolute right of extending the Restrictive Period for a period of twelve months following the effective date of the termination or separation of employment if Company: (1) delivers written notice to the Employee irrevocably exercising such option before employment termination or separation or within 180 days after employment separation or termination and (2) agrees to pay and does pay the Employee the payments provided for under Section 9.06 of this Agreement for such twelve month period. If Company exercises this option and right and complies with the requirements for same, the Restrictive Period shall be extended beyond the employment separation effective date for the twelve month period designed and Employee agrees and acknowledges that Employee is bound by such restrictive covenants for the Restrictive Period.

10.03 Definition of Restricted Area. The term “Restricted Area” shall mean the states, parishes, counties and municipalities designated in Attachment “A” which is incorporated herein by reference as if copied in extension.

10.04 Business of the Company. Employee acknowledges and understands that the “business” of Company involves and relates to the underwriting of risks for, the sale of and the servicing of workers’ compensation insurance, general liability insurance and commercial and business insurance product lines and related services. Employee further acknowledges, agrees and represents that she understands and knows the business in which Company is engaged and the scope, activities and business pursuits involved in the business of Company. Employee further acknowledges and understands that the noncompetition and nonsolicitation of customer restrictions in this Agreement prohibit the Employee from engaging, in any capacity or any position, and from conducting any activities or business similar to that of Company or that is competitive with Company and as provided under the specific terms and conditions of this Agreement.

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10.05 Customers of the Company. For purposes of this Agreement, “customers” shall include, but are not limited to, insured businesses, persons, and entities who have or have had insurance coverage with the Company and insurance agents with whom Company has contracts, agreements, arrangements or any type of business, insurance placement or working relationship. Employee acknowledges and represents that Employee understands the nature of the Company’s customer relationships and who and what comprises its customers.

10.06 Non-Competition. During the Restricted Period, Employee shall not engage in any of the following activities in the Restricted Area:

(a) Carry on or engage in his/her own business (as a sole proprietor, corporation, partnership, limited liability company, limited partnership or any other business entity or business association) in competition with or similar to the business of Company.

(b) Carry on or engage in a competing business or work similar to or in competition with the business of the Company as an employee, consultant, board member, officer, manager, representative, contractor, consultant, subcontractor, independent contractor, or agent of any other person or entity or in any capacity with or for any other person or entity.

(c) Acquire or have an interest in or an option or other right to acquire an interest in any entity or business which is carrying on or engaging in a competing business with Company or in a business similar to that of the Company. The term “an interest” shall include, without limitation, an interest or right as a partner, shareholder, officer, director, member, general manager, principal, limited partner, owner, trustee, financier, guarantor, surety, mortgagee and lender.

(d) Accept or conduct any business or any transactions with any customer or former customer of Company or receive any compensation, remuneration or consideration arising out of, related to or in any associated with any business arrangement or relationship with any customer or former customer of Company.

10.07 Non-Solicitation. During the Restricted Period, Employee shall not engage in the following activities in the Restricted Area:

(a) Solicit the customers of Company.

(b) Solicit the customers or former customers of Employee.

(c) Accept business from any customer of Company.

(d) Accept business from any customer or former customer of Employee.

(e) Service accounts or business of any customers of Company.

(f) Service accounts or business of any customers or former customers of Employee.

(g) Solicit, induce or attempt to induce any employee of the Company to leave the employ of the Company.

10.08 Application. Company and Employee agree that (i) each of the actions described in this Agreement constitute “carrying on and engaging in a business similar to that of” Company and the “soliciting customers of” Company, as those terms are used in La.R.S. 23:921, and (ii) this Agreement shall have the broadest possible meaning and application as allowed under applicable

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law. Additionally, any future amendment to La.R.S. 23:921 or decisions or rulings of any court of competent jurisdiction which would expand the Company’s rights or impose greater restrictions on Employee shall apply and shall be enforceable herein. For purposes of this Agreement, the term “solicit” includes, but is in no way limited to, any and all direct and indirect solicitation of business (by Employee or through others) and the engagement in communications (through any format or medium) for the purpose of or which would in any way facilitate or attempt to generate business, services, work or other business activities with the customer and this shall apply regardless of whether the customer initiates the contact with Employee or Employee (or another person or entity) initiates the contact with the customer.

10.09 Remedies. In the event of breach or threatened or attempted breach of any provision of this Agreement by Employee, the parties recognize and acknowledge that such a breach would cause irreparable harm to the Company or that the Company may not have an adequate remedy at law and that the restrictive covenants contained in this Agreement are “obligations not to do” and that the Company shall not be required to prove irreparable injury in order to obtain injunctive relief in the event of any breach or threatened breach of this Agreement. Employee further agree and acknowledge that if there is any breach or threatened breach of any one or more of the provisions of this Agreement, the Company may, in addition to any other legal or equitable remedies which may be available to it, (i) obtain a temporary restraining order, preliminary injunction and permanent injunction to enjoin or restrain Employee from the breach or threatened breach of any such provision or provisions without the necessity of posting a bond and (ii) require Employee to account for and pay over to Company all compensation, profits, moneys, accruals, increments, remuneration or any other benefits derived or received by Employee as a result of any transactions or actions constituting a breach of any provision of this Agreement. Company shall also be entitled to recover any damages, attorney’s fees and costs incurred by it in any legal action or to obtain specific performance of or to enforce this Agreement or to remedy any breach of this Agreement. All such remedies in favor of the Company shall be cumulative and shall not be exclusive. In the event that the Company takes any legal action to enforce this Agreement or to remedy any breach of this Agreement, the Company shall be entitled to recover and the Employee shall be liable for all attorney’s fees, court costs and expenses incurred by the Company in any such action.

10.10 Company Designation. As used in this Section 10, “Company” includes Amerisafe, Inc., American Interstate Insurance Company, Silver Oak Casualty, Inc., American Interstate Insurance Company of Texas, Amerisafe General Agency, Inc. and any and all predecessor entities, successor entities, affiliate entities, parent companies, assigns and subsidiaries. The parties acknowledge and agree that the restrictive covenants in this Section 10 enure to the benefit of and operate for the interest of all of the above-mentioned companies and affiliates and said entities are expressly designated as third party beneficiaries of this Section 10 and the restrictive covenants and obligations imposed on Employee.

10.11 Construction Reformation and Severability. It is understood and agreed that, should any portion of any clause or paragraph of this Section 10 be deemed too broad to permit enforcement to its full extent, or should any portion of any clause or paragraph of this Section 10 be deemed unreasonable, invalid or unenforceable, then said clause or paragraph shall be reformed and enforced to the maximum extent permitted by law. Additionally, if any of the provisions of this Section 10 are ever found by a court of competent jurisdiction to exceed the maximum enforceable (i) periods of time, (ii) geographic areas of restriction, (iii) scope of noncompetition or nonsolicitation or (iv) description of the Company’s business or customers, or for any other reason, then such unenforceable element(s) of this Section 10 shall be reformed and reduced to the maximum periods of time, geographic areas of restriction, scope of noncompetition or nonsolicitation or description of the Company’s business that is permitted by law. In this regard, any unenforceable, unreasonable or overly broad provision shall be reformed or severed so as to permit enforcement to the fullest extent permitted by law and reformation and severability shall apply.

10.12 Reasonableness. Employee acknowledges, represents and agrees that the restrictive covenants in this Section 10 are reasonable in nature, scope, time and territory and in the terms and conditions set forth

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herein. Employee acknowledges, represents and agrees that the Company has expended substantial cost in training Employee and that the Company has provided her with access to valuable information and has pro vided her with valuable experience. In addition, Employee acknowledges, represents and agrees that the Company has placed Employee in contact with its customers, and has made Employee part of its business plans. Employee further acknowledges, represents and agrees that Employee would not have obtained such training, experience, contacts and information from other sources without the employment relationship with the Company. Employee further acknowledges, represents and agrees that the foregoing have occurred or resulted based on the Company’s reliance on these restrictive covenants and Employee’s representations and obligations made herein. Employee further acknowledges, represents and agrees that this Section 10 and the obligations of Employee under these restrictive covenants are reasonable in order to protect the legitimate interests of the Company. Employee further acknowledges, represents and agrees that by virtue of his/her job position, she has become an integral and influential component of the Company’s current and future business plans. It is the Employee’s desire and intent that this Agreement be given full force and effect. Employee further acknowledges and agrees that enforcement of these restrictive covenants will not create an undue burden or hardship on her and will not impair or prevent her from earning a livelihood based on his/her own education, training, experience, qualifications and skills.

11. Assignment.

(a) Neither this Agreement nor any right or interest hereunder shall be assignable by the Employee or his beneficiaries or legal representatives without the Company’s prior written consent; provided, however, that nothing in this Section 11(a) shall preclude the Employee from designating a beneficiary to receive any benefit payable hereunder upon his death or incapacity.

(b) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to exclusion, attachment, levy or similar process or to assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect.

(c) Company shall have the right, without Employee’s consent, to assign this Agreement and to assign any rights and obligations under this Agreement to any person or entity including, but in no way limited to, any parent companies, subsidiaries, affiliate entities, predecessors, and successors.

12. Binding Effect. Without limiting or diminishing the effect of Section 11 hereof, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors, legal representatives and assigns.

13. Notices. All notices which are required or may be given pursuant to the terms of this Agreement shall be in writing and shall be sufficient in all respects if given in writing and (i) delivered personally, (ii) five business days after being mailed by certified or registered mail, return receipt requested and postage prepaid, (iii) sent via a nationally recognized overnight courier, or (iv) sent via facsimile confirmed by certified or registered mail, return receipt requested and postage prepaid, if to the Company at the Company’s principal place of business, and if to the Employee, at his home address most recently filed with the Company, or to such other address or addresses as either party shall have designated in writing to the other party hereto.

14. Law Governing. This Agreement shall be governed by and construed in accordance with the laws of the State of Louisiana, without regard to the application of conflicts of laws principles. Employee consents to the jurisdiction and venue of the 36^th Judicial District Court, Beauregard Parish, State of Louisiana and, alternatively, the U.S. District Court for the Western District of Louisiana, Lake Charles Division.

15. Execution and Performance. Employee agrees and understands that this Agreement is being executed, in whole or in part, in Beauregard Parish, Louisiana. Additionally, performance of this Agreement is to be rendered, in whole or in part, in Beauregard Parish, Louisiana. Employee further understands and acknowledges that the employment relationship between Employee and Company is principally centered and based in Beauregard Parish, Louisiana.

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16. Severability. The Employee agrees that in the event that any court of competent jurisdiction shall finally hold that any provision of this Agreement is void or constitutes an unreasonable restriction against the Employee, this Agreement shall not be rendered void but shall apply with respect to such extent as such court may judicially determine constitutes a reasonable restriction under the circumstances. If any part of this Agreement is held by a court of competent jurisdiction to be invalid, illegible or incapable of being enforced in whole or in part by reason of any rule of law or public policy, such part shall be deemed to be severed from the remainder of this Agreement for the purpose only of the particular legal proceedings in question and all other covenants and provisions of this Agreement shall in every other respect continue in full force and effect and no covenant or provision shall be deemed dependent upon any other covenant or provision. Severability and reformation shall apply.

It is understood and agreed that should any portion of any clause or paragraph of this Agreement be deemed too broad to permit enforcement to its full extent or should any portion of any clause or paragraph of this Agreement be deemed unreasonable, then said clause or paragraph shall be reformed and enforced to the maximum extent permitted by law.

17. Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.

18. Entire Agreement; Modifications. This Agreement, with referenced Attachment “A”, constitutes the entire and final expression of the agreement of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, oral and written, between the parties hereto with respect to the subject matter hereof. This Agreement may be modified or amended only by an instrument in writing signed by both Employee and the President of Company, provided, however, that in light of the uncertainty with respect to the proper application of Section 409A of the Code, the Company reserves the right to make amendments to the Agreement as the Company deems necessary or desirable solely to avoid the imposition of taxes or penalties under Section 409A.

19. Counterparts and Multiple Originals. This Agreement may be executed in two or more counterparts and in multiple originals, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

20. Interpretation. Company and Employee have jointly participated in the negotiations and drafting of this Agreement. In the event any question of intent or interpretation arises, this Agreement shall be construed and interpreted as if drafted by both parties.

21. References to Exhibits. All exhibits, schedules and other documents which are referred to herein are hereby incorporated by reference as if copied at length herein.

22. Consultation and Acknowledgment. Employee acknowledges and agrees that Employee has read and understands this Agreement and its effect, and that Employee has had the opportunity to consult fully and freely with an attorney or other advisor of his choice regarding this Agreement and to have an attorney or advisor review and advise Employee with respect to this Agreement prior to his entering into this Agreement. Employee further acknowledges that she has carefully read this entire Agreement and understands the nature and extent of the rights and obligations created by this Agreement and that she is entering into this Agreement voluntarily and without coercion. Employee further acknowledges that this Agreement is being entered into after due thought and consideration and after a mutual and meaningful negotiation between the parties.

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AMERISAFE, INC.
By:	/s/    C. Allen Bradley, Jr.
	C. Allen Bradley, Jr., President/CEO
Date:	November 1, 2008
EMPLOYEE:
/s/    G. Janelle Frost
Signature
G. Janelle Frost
Print Name
November 1, 2008
Date

Page 13 of 14

ATTACHMENT “A”

Employment Agreement

“Designated Area”

The following states constitute the “Designated Area” for purposes of the Employment Agreement, including Section 10, entitled “Restrictive Covenants”, entered into between the Company and the Employee:

States of Alabama, Alaska, Arkansas, California, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Wisconsin and Wyoming.

Page 14 of 14

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, C. Allen Bradley, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of AMERISAFE, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2008	/s/ C. Allen Bradley, Jr.
	C. Allen Bradley, Jr.
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, G. Janelle Frost, certify that:

1. I have reviewed this quarterly report on Form 10-Q of AMERISAFE, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2008	/s/ G. Janelle Frost
	G. Janelle Frost
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. § 1350,

AS ADOPTED PURSUANT TO § 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Quarterly Report on Form 10-Q of AMERISAFE, Inc., a Texas corporation (the “Company”), for the quarter ended September 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

1. The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

Date: November 6, 2008	/s/ C. Allen Bradley, Jr.
	C. Allen Bradley, Jr.
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)
	/s/ G. Janelle Frost
	G. Janelle Frost
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.