10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016

Commission File Number: 001-12251

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

Securities registered pursuant to Section 12(b) of the Act:

Title of Class	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

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

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

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  ☒    No  ☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐    

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	☐
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  ☒

The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of June 30, 2016 (the last business day of the Registrant’s most recently completed second fiscal quarter) was approximately $1,164.7 million, based upon the closing price of the shares on the NASDAQ Global Select Market on that date.

As of February 15, 2017, there were 19,230,135 shares of the Registrant’s common stock, par value $0.01 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement relating to the 2017 Annual Meeting of Shareholders are incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III of this report.

TABLE OF CONTENTS

		Page No.
PART I
	Forward-Looking Statements	1
Item 1	Business	2
Item 1A	Risk Factors	24
Item 1B	Unresolved Staff Comments	32
Item 2	Properties	32
Item 3	Legal Proceedings	33
Item 4	Mine Safety Disclosures	33
PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	34
Item 6	Selected Financial Data	35
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	51
Item 8	Financial Statements and Supplementary Data	53
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	95
Item 9A	Controls and Procedures	95
Item 9B	Other Information	97
PART III
Item 10	Directors, Executive Officers and Corporate Governance	98
Item 11	Executive Compensation	98
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	98
Item 13	Certain Relationships and Related Transactions, and Director Independence	98
Item 14	Principal Accountant Fees and Services	98
PART IV
Item 15	Exhibits and Financial Statement Schedules	99

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:

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

• general economic conditions, including recession, inflation, performance of financial markets, interest rates, unemployment rates and fluctuating asset values;

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

• changes in relationships with independent agencies;

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

• technology breaches or failures, including those resulting from a malicious cyber attack on the Company or its policyholders and medical providers;

• decreased level of business activity of our policyholders caused by decreased business activity generally, and in particular in the industries we target;

• 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;

• adverse developments in economic, competitive, judicial or regulatory conditions within the workers’ compensation insurance industry;

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

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

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

• changes in rating agency policies, practices or ratings;

• 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;

• decreased demand for our insurance;

• 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; and

• other risks and uncertainties described from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”).

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

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PART I

Item1. Business.

Overview

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

Hazardous industry employers tend to have less frequent but more severe claims as compared to employers in other industries due to the nature of their businesses. Injuries that occur are often severe in nature including death, dismemberment, paraplegia and quadriplegia. As a result, employers engaged in hazardous industries pay substantially higher than average rates for workers’ compensation insurance compared to employers in other industries, as measured per payroll dollar. The higher premium rates are due to the nature of the work performed and the inherent workplace danger of our target policyholders. For example, our construction employers on average paid premium rates equal to $7.23 per $100 of payroll to obtain workers’ compensation coverage for all of their employees in 2016.

We employ a proactive, disciplined approach to underwriting employers and providing comprehensive services intended to lessen the overall incidence and cost of workplace injuries. We provide safety services at employers’ workplaces as a vital component of our underwriting process and to promote safer workplaces. We utilize intensive claims management practices that we believe permit us to reduce the overall cost of our claims. In addition, our premium audit services ensure that our policyholders pay the appropriate premiums required under the terms of their policies and enable us to monitor payroll patterns that cause underwriting, safety or fraud concerns.

We believe that the higher premiums typically paid by our policyholders, together with our disciplined underwriting and safety, claims and audit services, provide us with the opportunity to earn attractive returns on equity.

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

Competitive Advantages

We believe we have the following competitive advantages:

Focus on Hazardous Industries. We have extensive experience insuring employers engaged in hazardous industries and have a history of profitably underwriting these industries. Our specialized knowledge of these hazardous industries helps us better serve our policyholders, which leads to greater employer loyalty and policy retention. Our policy renewal rate on voluntary business that we elected to quote for renewal was 92.7% in 2016.

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

Specialized Underwriting Expertise. Based on our 31-year history of insuring employers engaged in hazardous industries, we have developed industry specific risk analysis and rating tools that support our underwriters in risk selection and pricing. We are highly disciplined when quoting and binding new and renewal business. We do not delegate underwriting authority to agencies, marketers or to any other third parties that sell our insurance.

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Comprehensive Safety Services. We provide proactive safety reviews of employers’ worksites, which are often located in rural areas. These safety reviews are a vital component of our underwriting process and also assist our policyholders in loss prevention, and encourage safer workplaces by deploying experienced field safety professionals, or FSPs, to our policyholders’ worksites. In 2016, 90.6% of our new voluntary business policyholders were subject to pre-quotation safety inspections. Additionally, we perform periodic on-site safety surveys of all of our voluntary business policyholders.

Proactive Claims Management. Our employees manage substantially all of our open claims in-house, utilizing intensive claims management practices that emphasize a personalized approach, as well as quality, cost-effective medical treatment. As of December 31, 2016, open indemnity claims per field case manager, or FCM, averaged 48 claims, which we believe is significantly less than the industry average. We also believe our claims management practices allow us to achieve a more favorable claim outcome, accelerate an employee’s return to work, lessen the likelihood of litigation and more rapidly close claims, all of which ultimately lead to lower overall claim costs.

Efficient Operating Platform. Through extensive cost management initiatives, we maintain one of the most efficient operations in the workers’ compensation industry. In 2016, our expense ratio was 21.9%. We believe that our expense ratio is substantially lower than that of our competitors, which gives us a greater opportunity to generate an underwriting profit.

Strategy

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

Focus on Underwriting Profitability. We intend to maintain our underwriting discipline throughout market cycles with the objective of remaining profitable. Our strategy is to focus on underwriting workers’ compensation insurance in hazardous industries and to maintain adequate rate levels commensurate with the risks we underwrite. We will also continue to strive for improved risk selection and pricing, as well as reduced frequency and severity of claims through comprehensive workplace safety reviews, effective medical cost containment measures and rapid closing of claims through personal, direct contact with our policyholders and their employees.

Increase Market Penetration. Based on data received from the National Association of Insurance Commissioners, the NAIC, we do not have more than 4.7% of the market share in any state we serve. As a result, we believe we have the opportunity to increase market penetration in each of the states in which we currently operate. Competition in our target markets is fragmented by state, employer size and industry. We believe that our specialized underwriting expertise and safety, claims and audit services position us to profitably increase our market share in our existing principal markets, with minimal increase in field service employees.

Prudent and Opportunistic Geographic Expansion. While we actively market our insurance in 27 states, 50.1% of our voluntary in-force premiums were generated in the six states where we derived 5.0% or more of our gross premiums written in 2016. We are licensed in an additional 20 states, the District of Columbia and the U.S. Virgin Islands. Our existing licenses and rate filings will expedite our ability to write policies in these markets when we decide it is prudent to do so.

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

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

Industry

Overview. Workers’ compensation is a statutory system under which an employer is required to pay for its employees’ medical, disability, vocational rehabilitation and death benefit costs for work-related injuries or illnesses. Most employers satisfy this requirement by purchasing workers’ compensation insurance. The principal concept underlying workers’ compensation laws is that employees injured in the course and scope of their employment have only the legal remedies available under workers’ compensation laws and do not have any other recourse against their employer. An employer’s obligation to pay workers’ compensation does not depend on any negligence or wrongdoing on the part of the employer and exists even for injuries that result from the negligence or fault of another person, a co-employee, or, in most instances, the injured employee.

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

Workers’ compensation was the fourth-largest property and casualty insurance line in the United States in 2015, according to the National Council on Compensation Insurance, Inc., the NCCI. Direct premiums written in 2015 for the workers’ compensation insurance industry were $58 billion, and direct premiums written for the property and casualty industry as a whole were $592 billion. According to the most recent market data reported by the NCCI, which is the official rating bureau in the majority of states in which we are licensed, total premiums reported for the specific occupational class codes for which we underwrite business were $16.5 billion.

Policyholders

As of December 31, 2016, we had more than 8,000 voluntary business policyholders with an average annual workers’ compensation policy written premium of $40,018.  As of December 31, 2016, our ten largest voluntary business policyholders accounted for 1.6% of our in-force premiums. Our policy renewal rate on voluntary business that we elected to quote for renewal was 92.7% in 2016, 92.3% in 2015, and 91.3% in 2014.

In addition to our voluntary workers’ compensation business, we underwrite workers’ compensation policies for employers assigned to us and assume reinsurance premiums from mandatory pooling arrangements, in each case to fulfill our obligations under residual market programs implemented by the states in which we operate. Our assigned risk business fulfills our statutory obligation to participate in residual market plans in four states. See “—Regulation—Residual Market Programs” below. For the year ended December 31, 2016, our assigned risk business accounted for 1.3% of our gross premiums written, and our assumed premiums from mandatory pooling arrangements accounted for 2.3% of our gross premiums written.

Targeted Industries

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

Construction.  Includes a broad range of operations such as highway and bridge construction, building and maintenance of pipeline and powerline networks, excavation, commercial construction, roofing, iron and steel erection, tower erection and numerous other specialized construction operations. In 2016, our average policy premium for voluntary workers’ compensation within the construction industry was $41,741, or $7.23 per $100 of payroll.

Trucking.  Includes a broad spectrum of diverse operations including contract haulers, regional and local freight carriers, special equipment transporters and other trucking companies that conduct a variety of short- and long-haul operations. In 2016, our average policy premium for voluntary workers’ compensation within the trucking industry was $41,210, or $9.03 per $100 of payroll.

Logging and Lumber.  Includes tree harvesting, tree trimming, sawmills, and other operations associated with lumber and wood products. In 2016, our average policy premium for voluntary workers’ compensation within logging and lumber was $31,707, or $13.26 per $100 of payroll.

Manufacturing.  Includes a diverse group of policyholders’ businesses such as the production of goods for use or sale using labor and machines, tools, chemical and biological processing or formulation. In 2016, our average policy premium for voluntary workers’ compensation within the manufacturing industry was $37,936, or $4.63 per $100 of payroll.

Agriculture.  Includes crop maintenance and harvesting, grain and produce operations, nursery operations, meat processing, and livestock feed and transportation. In 2016, our average policy premium for voluntary workers’ compensation within the agriculture industry was $26,594, or $6.68 per $100 of payroll.

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Maritime.  Includes ship building and repair, pier and marine construction, inter-coastal construction, and stevedoring. In 2016, our average policy premium for voluntary workers’ compensation within the maritime industry was $51,196, or $5.80 per $100 of payroll.

Oil and Gas. Includes various oil and gas activities including gathering, transportation, processing, production, and field service operations. In 2016, our average policy premium for voluntary workers’ compensation within the oil and gas industry was $34,718, or $4.17 per $100 of payroll.

Other.  Includes a wide variety of high-hazard businesses including cell phone tower service and repair, window washers, metal and scrap iron dealers, and other businesses.

Our gross premiums are derived from:

• Voluntary Business. Includes direct premiums from workers’ compensation insurance policies that we issue to employers who seek to purchase insurance directly from us and who we voluntarily agree to insure.

• Assigned Risk Business. Includes direct premiums from workers’ compensation insurance policies that we issue to employers assigned to us under residual market programs implemented by some of the states in which we operate.

• Assumed Premiums. Includes premiums from our participation in mandatory pooling arrangements under residual market programs implemented by some of the states in which we operate.

Gross premiums written during the years ended December 31, 2016, 2015 and 2014, and the allocation of those premiums among the hazardous industries we target are presented in the table below.  

	Gross Premiums Written						Percentage of Gross Premiums Written
	2016		2015		2014		2016			2015			2014
	(in thousands)
Voluntary business:
Construction	$	165,582	$	164,717	$	166,360		44.4	%		42.6	%		42.2	%
Trucking		71,314		71,872		69,520		19.1	%		18.6	%		17.7	%
Logging and Lumber		29,311		25,845		23,767		7.9	%		6.7	%		6.0	%
Manufacturing		24,536		31,778		28,239		6.5	%		8.2	%		7.2	%
Agriculture		15,652		16,133		15,426		4.2	%		4.2	%		3.9	%
Maritime		10,080		7,839		11,413		2.7	%		2.0	%		2.9	%
Oil and Gas		5,555		10,128		15,802		1.5	%		2.6	%		4.0	%
Other		37,771		44,255		48,908		10.1	%		11.5	%		12.4	%
Total voluntary business		359,801		372,567		379,435		96.4	%		96.4	%		96.3	%
Assigned risk business		4,738		4,515		5,198		1.3	%		1.2	%		1.3	%
Assumed premiums		8,516		9,447		9,186		2.3	%		2.4	%		2.4	%
Total	$	373,055	$	386,529	$	393,819		100.0	%		100.0	%		100.0	%

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Geographic Distribution

We are licensed to provide workers’ compensation insurance in 47 states, the District of Columbia and the U.S. Virgin Islands. We operate on a geographically diverse basis with 10.7% or less of our gross premiums written in 2016 derived from any one state. The table below identifies, for the years ended December 31, 2016, 2015 and 2014, the states in which the percentage of our gross premiums written exceeded 3.0% for any of the three years presented.

	Percentage of Gross Premiums Written Year Ended December 31,
State	2016			2015			2014
Georgia		10.7	%		10.7	%		10.2	%
Pennsylvania		10.6	%		9.8	%		9.3	%
Florida		8.7	%		6.8	%		6.2	%
Louisiana		7.4	%		10.1	%		12.0	%
Illinois		7.0	%		6.6	%		5.6	%
North Carolina		5.8	%		5.3	%		5.4	%
Virginia		4.6	%		4.1	%		4.3	%
Minnesota		4.2	%		4.0	%		3.8	%
Wisconsin		3.8	%		3.4	%		2.5	%
South Carolina		3.6	%		3.6	%		3.2	%
Texas		3.0	%		3.8	%		4.0	%
Oklahoma		3.0	%		3.5	%		4.1	%
Alaska		2.8	%		2.9	%		3.1	%
Mississippi		2.7	%		2.9	%		3.0	%
Total		77.9	%		77.5	%		76.7	%

Sales and Marketing

We sell our workers’ compensation insurance through agencies. As of December 31, 2016, our insurance was sold through more than 2,500 independent agencies and our wholly-owned insurance agency subsidiary, Amerisafe General Agency, which is licensed in 29 states. We are selective in establishing and maintaining relationships with independent agencies.  We seek to do business with those agencies that provide quality application flow from companies operating in our target industries and classes that are reasonably likely to accept our quotes. We compensate these agencies by paying a commission based on the premium collected from the policyholder. Our average commission rate for our independent agencies was 7.3% for the year ended December 31, 2016. We pay our insurance agency subsidiary a commission rate of 8.2%. Neither our independent agencies nor our insurance agency subsidiary has authority to underwrite or bind coverage. We do not pay contingent commissions.

As of December 31, 2016, independent agencies accounted for 97.4% of our voluntary in-force premiums. No single independent agency accounted for more than 1.3% of our voluntary in-force premiums at that date.

Underwriting

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

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

Our underwriting department reviews the application to determine if the application meets our underwriting criteria and whether all required information has been provided. If additional information is required, the underwriting department requests additional information from the agency submitting the application. This initial review process is generally completed within three days after the application is received by us.  Once this initial review process is complete, our underwriting department requests that a pre-quotation safety inspection be performed in most cases. In 2016, 90.6%of our new voluntary business policyholders were inspected prior to our offering a premium quote.

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After the pre-quotation safety inspection has been completed, our underwriting professionals review the results of the inspection to determine if a quote should be made and, if so, prepare the quote. The quote must be reviewed and approved by our underwriting department before the quote is delivered to the agency. All decisions by our underwriting department, including decisions to decline applications, are subject to review and approval by our management-level underwriters.

Our underwriting professionals participate in an incentive compensation program under which bonuses are paid quarterly based upon achieving premium underwriting volume and loss ratio targets. The determination of whether targets have been satisfied is made 30 months after the beginning of the relevant incentive compensation period.

Pricing

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

We obtain approval of our rates, including our LCMs, from state regulatory authorities. To maintain rates at profitable levels, we regularly monitor and adjust our LCMs. The effective LCM for our voluntary business was 1.72 for policy year 2016, 1.79 for policy year 2015, and 1.84 for policy year 2014. If we are unable to charge rates in a particular state or industry to produce satisfactory results, we seek to control and reduce our premium volume in that state or industry and redeploy our capital in other states or industries that offer greater opportunity to earn an underwriting profit.

Safety

Our safety inspection process begins with a request from our underwriting department to perform a pre-quotation safety inspection. Our safety inspections focus on a prospective policyholder’s operations, loss exposures and existing safety controls to prevent potential losses. The factors considered in our inspection include employee experience, turnover, training, previous loss history and corrective actions, and workplace conditions, including equipment condition and, where appropriate, use of fall protection, respiratory protection or other safety devices. Our FSPs travel to employers’ worksites to perform these safety inspections. These initial inspections allow our underwriting professionals to make decisions on both insurability and pricing. In certain circumstances, we will agree to provide workers’ compensation insurance only if the employer agrees to implement and maintain the safety management practices that we recommend. In 2016, 90.6%of our new voluntary business policyholders were inspected prior to our offering a premium quote. The remaining voluntary business policies were not pre-quote inspected for a variety of reasons, including instances where the prospective policyholder was previously insured by us or previously inspected by us.

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

Our FSPs participate in an incentive compensation program under which bonuses are paid semi-annually based upon an FSP’s production and their policyholders’ aggregate loss ratios. The results are measured 33 months after the inception of the subject policy period.

Claims

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

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

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Following notification of a workplace injury, an FCM will contact the policyholder, the injured employee and/or the treating physician to determine the nature and severity of the injury. If a serious injury occurs, the FCM will promptly visit the injured employee or the employee’s family members to discuss the benefits provided. The FCM will also visit the treating physician to discuss the proposed treatment plan. Our FCM assists the injured employee in receiving appropriate medical treatment and encourages the use of our recommended medical providers and facilities. For example, our FCM may suggest that a treating physician refer an injured worker to another physician or treatment facility that we believe has had positive outcomes for other workers with similar injuries. We actively monitor the number of open cases handled by a single FCM in order to maintain focus on each specific injured employee. As of December 31, 2016, we averaged 48 open indemnity claims per FCM, which we believe is significantly less than the industry average.

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

Premium Audits

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

Loss Reserves

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

In establishing our reserves, we review the results of analyses using actuarial methodologies that utilize historical loss data from our more than 31 years of underwriting workers’ compensation insurance. In evaluating the results of those analyses, our management also uses substantial judgment in considering other factors that are not considered in these actuarial analyses. These actuarial methodologies and subjective factors are described in more detail below. Our process and methodology for estimating reserves applies to both our voluntary and assigned risk business, but does not include our reserves for mandatory pooling arrangements. We record reserves for mandatory pooling arrangements as those reserves are reported to us by the pool administrators. We do not use loss discounting when we determine our reserves, which would involve recognizing the time value of money and offsetting estimates of future payments by future expected investment income.

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

• type of loss;

• severity of the injury or damage;

• age and occupation of the injured employee;

• estimated length of temporary disability;

• anticipated permanent disability;

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• expected medical procedures, costs and duration;

• our knowledge of the circumstances surrounding the claim;

• insurance policy provisions related to the claim, including coverage;

• jurisdiction of the occurrence; and

• other benefits defined by applicable statute.

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

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

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

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

In establishing reserves, we rely on the analysis of the more than 206,000 claims in our 31-year history. Using statistical analyses and actuarial methods, we estimate reserves based on historical patterns of case development, payment patterns, mix of business, premium rates charged, case reserving adequacy, operational changes, adjustment philosophy and severity and duration trends.

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

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

• Paid Development Method—uses historical, cumulative paid loss patterns to derive estimated ultimate losses by accident year based upon the assumption that each accident year will develop to estimated ultimate cost in a manner that is analogous to prior years.

• Paid Weighted Severity Method—multiplies estimated ultimate claims for each accident year by a weighted average, trended and developed severity. The ultimate claims estimate is based on paid claim count development. The selected severity for a given accident year is derived by giving some weight to all of the accident years in the experience history rather than treating each accident year independently.

• Paid Loss Ratio Cape Cod Method—similar to the paid weighted severity method, except that on-level premiums replace estimated ultimate claims, based upon paid claim count development, and loss ratios replace selected severities.  The selected ultimate loss ratio for a given accident year is derived by giving some weight to all of the accident years in the experience history rather than treating each accident year independently.

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• Incurred Development Method—uses historical, cumulative incurred loss patterns to derive estimated ultimate losses by accident year based upon the assumption that each accident year will develop to estimated ultimate cost in a manner that is analogous to prior years.

• Incurred Weighted Severity Method—multiplies estimated ultimate claims for each accident year by a weighted average, trended and developed severity. The ultimate claims estimate is based on incurred claim count development. The selected severity for a given accident year is derived by giving some weight to all of the accident years in the experience history rather than treating each accident year independently.

• Incurred Loss Ratio Cape Cod Method—similar to the incurred weighted severity method, except that on-level premiums replace estimated ultimate claims, based upon incurred claim count development, and loss ratios replace selected severities.  The selected ultimate loss ratio for a given accident year is derived by giving some weight to all of the accident years in the experience history rather than treating each accident year independently.

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

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

• open and closed claim counts;

• statistics related to open and closed claim count percentages;

• claim closure rates;

• changes in average case reserves and average loss and DCC expenses incurred on open claims;

• reported and ultimate average case incurred changes;

• reported and projected ultimate loss ratios; and

• loss payment patterns.

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

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

As of December 31, 2016, our best estimate of our ultimate liability for loss and loss adjustment expenses, net of amounts recoverable from reinsurers, was $664.5 million, which includes $16.3 million in reserves for mandatory pooling arrangements as reported by the pool administrators. The estimate of our ultimate liability was derived from the process and methodology described above, which relies on substantial judgment. There is inherent uncertainty in estimating our reserves for loss and loss adjustment expenses. It is possible that our actual loss and loss adjustment expenses incurred may vary significantly from our estimates. We view our estimate of loss and DCC expenses as the most significant component of our reserve for loss and loss adjustment expenses.

Additional information regarding our reserve for unpaid loss and loss adjustment expenses (“LAE”) as of December 31, 2016, 2015, and 2014 is set forth below:

	2016			2015			2014
	(in thousands)
Gross case loss and DCC reserves	$	555,926		$	537,883		$	514,874
AO reserves		21,995			20,734			18,572
Gross IBNR reserves		164,855			159,416			154,156
Gross unpaid loss, DCC and AO reserves		742,776			718,033			687,602
Reinsurance recoverables on unpaid loss and LAE		(78,256	)		(64,858	)		(59,334	)
Net unpaid loss, DCC and AO reserves	$	664,520		$	653,175		$	628,268

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We performed sensitivity analyses to show how our net loss and DCC expense reserve, including IBNR, would be impacted by changes in certain critical assumptions. For our paid and incurred development methods, we varied both the cumulative paid and incurred loss development factors (LDFs) by plus and minus 30%, both individually and in combination with one another. The results of this sensitivity analysis, using December 31, 2016 data, are summarized below.

			Resultant Change in Net Loss and DCC Reserve
Change in Paid LDFs	Change in Incurred LDFs		Amount ($)			Percentage
			(in thousands)
+30%		+30%		51,762			8.3	%
+30%		0%		4,109			0.7	%
+30%	–30%			(42,818	)		(6.8	)%
0%		+30%		47,754			7.6	%
0%	–30%			(46,977	)		(7.5	)%
–30%		+30%		43,634			7.0	%
–30%		0%		(4,135	)		(0.7	)%
–30%	–30%			(51,309	)		(8.2	)%

For our paid and incurred weighted severity methods, we varied our year-end selected trend factor (for medical costs, defense costs, wage inflation, etc.) by plus and minus 300%. The results of this sensitivity analysis, using December 31, 2016 data, are summarized below.

	Resultant Change in Net Loss and DCC Reserve
Change in Severity Trend	Amount ($)			Percentage
	(in thousands)
+300%		5,853			0.9	%
–300%		(4,684	)		(0.7	)%

Reconciliation of Loss Reserves

The table below shows the reconciliation of loss reserves on a gross and net basis for the years ended December 31, 2016, 2015 and 2014, reflecting changes in losses incurred and paid losses.

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Balance, beginning of period	$	718,033		$	687,602		$	614,557
Less amounts recoverable from reinsurers      on unpaid loss and loss adjustment expenses		64,858			59,334			48,699
Net balance, beginning of period		653,175			628,268			565,858
Add incurred related to:
Current accident year		250,337			262,387			268,633
Prior accident years		(51,306	)		(47,814	)		(23,717	)
Total incurred		199,031			214,573			244,916
Less paid related to:
Current accident year		52,085			53,955			52,848
Prior accident years		135,601			135,711			129,658
Total paid		187,686			189,666			182,506
Net balance, end of period		664,520			653,175			628,268
Add amounts recoverable from reinsurers      on unpaid loss and loss adjustment expenses		78,256			64,858			59,334
Balance, end of period	$	742,776		$	718,033		$	687,602

Our gross reserves for loss and loss adjustment expenses of $742.8 million as of December 31, 2016 are expected to cover all unpaid loss and loss adjustment expenses as of that date. As of December 31, 2016, we had 5,195 open claims, with an average of $142,979 in unpaid loss and loss adjustment expenses per open claim. During the year ended December 31, 2016, 5,338 new claims were reported, and 5,443 claims were closed.

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In 2016, our gross reserves increased to $742.8 million from $718.0 million at December 31, 2015. The increase in reserves was attributable primarily to the 2016 accident year. In 2016, we also recognized $51.3 million of favorable development for prior accident years. As of December 31, 2015, we had 5,298 open claims, with an average of $135,529 in unpaid loss and loss adjustment expenses per open claim. During the year ended December 31, 2015, 5,465 new claims were reported, and 5,678 claims were closed.

In 2015, our gross reserves increased to $718.0 million from $687.6 million at December 31, 2014. The increase in reserves was attributable to both the 2015 accident year and prior accident years. In 2015, there was also $47.8 million of favorable development for prior accident years. As of December 31, 2014, we had 5,511 open claims, with an average of $124,679 in unpaid loss and loss adjustment expenses per open claim. During the year ended December 31, 2014, 5,785 new claims were reported, and 5,565 claims were closed.

Loss Development

The table below shows the net loss development for business written each year from 2006 through 2016. The table reflects the changes in our loss and loss adjustment expense reserves in subsequent years from the prior loss estimates based on experience as of the end of each succeeding year on a GAAP basis.

The first line of the table shows, for the years indicated, our liability including the incurred but not reported loss and loss adjustment expenses as originally estimated, net of amounts recoverable from reinsurers. For example, as of December 31, 2006, it was estimated that $412.4 million would be sufficient to settle all claims not already settled that had occurred on or prior to December 31, 2006, whether reported or unreported. The next section of the table sets forth the re-estimates in later years of incurred losses, including payments, for the years indicated. The next section of the table shows, by year, the cumulative amounts of loss and loss adjustment expense payments, net of amounts recoverable from reinsurers, as of the end of each succeeding year. For example, with respect to the net loss reserves of $412.4 million as of December 31, 2006, by December 31, 2016 (ten years later) $257.6 million had actually been paid in settlement of the claims that relate to liabilities as of December 31, 2006.

The “gross cumulative redundancy (deficiency)” represents, as of December 31, 2016, the difference between the latest re-estimated liability and the amounts as originally estimated. A redundancy means that the original estimate was higher than the current estimate. A deficiency means that the current estimate is higher than the original estimate.

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Analysis of Loss and Loss Adjustment Expense Reserve Development

	Year Ended December 31,
	2006		2007		2008		2009		2010		2011		2012		2013		2014		2015		2016
	(in thousands)
Reserve for loss and loss adjustment    expenses, net of reinsurance recoverables	$	412,366	$	462,478	$	474,697	$	474,220	$	466,668	$	477,277	$	515,260	$	565,858	$	628,268	$	653,175	$	664,520
Net reserve estimated as of:
One year later		402,876		442,091		452,812		452,587		460,105		474,787		502,648		542,141		580,454		601,868
Two years later		372,520		416,758		427,794		422,697		454,479		462,650		478,931		494,327		529,149
Three years later		359,590		396,492		398,187		411,516		442,700		448,269		439,272		462,770
Four years later		348,596		371,599		387,525		402,003		429,269		427,835		420,913
Five years later		335,252		364,147		381,950		395,479		411,785		418,528
Six years later		331,390		361,720		377,158		383,827		404,753
Seven years later		330,367		358,630		369,985		378,825
Eight years later		328,133		350,693		366,192
Nine years later		320,963		347,607
Ten years later		317,902
Net cumulative redundancy (deficiency)	$	94,464	$	114,871	$	108,505	$	95,395	$	61,915	$	58,749	$	94,347	$	103,088	$	99,119	$	51,307
Cumulative amount of reserve paid, net    of reserve recoveries, through:
One year later		105,408		116,631		121,619		117,555		125,884		131,497		127,205		129,658		135,711		135,601
Two years later		167,852		182,879		185,334		182,242		199,682		201,814		188,752		198,610		203,855
Three years later		203,502		217,137		222,249		223,726		240,196		237,170		226,907		233,254
Four years later		224,419		239,189		245,012		248,294		262,415		259,823		245,860
Five years later		235,931		251,941		261,323		261,653		277,396		273,383
Six years later		242,761		261,707		270,241		272,903		286,629
Seven years later		247,681		267,745		278,641		279,275
Eight years later		251,651		272,610		283,883
Nine years later		254,753		276,704
Ten years later		257,585
Net reserve— December 31	$	412,366	$	462,478	$	474,697	$	474,220	$	466,668	$	477,277	$	515,260	$	565,858	$	628,268	$	653,175	$	664,520
Reinsurance recoverables		106,810		74,925		56,596		60,435		65,536		60,937		55,190		48,699		59,334		64,858		78,256
Gross reserve—December 31	$	519,176	$	537,403	$	531,293	$	534,655	$	532,204	$	538,214	$	570,450	$	614,557	$	687,602	$	718,033	$	742,776
Net re-estimated reserve	$	317,902	$	347,607	$	366,192	$	378,825	$	404,753	$	418,528	$	420,913	$	462,770	$	529,149	$	601,868
Re-estimated reinsurance recoverables		118,540		87,182		71,525		54,716		52,350		49,907		45,435		48,350		61,976		67,797
Gross re-estimated reserve	$	436,442	$	434,789	$	437,717	$	433,541	$	457,103	$	468,435	$	466,348	$	511,120	$	591,125	$	669,665
Gross cumulative redundancy (deficiency)	$	82,734	$	102,614	$	93,576	$	101,114	$	75,101	$	69,779	$	104,102	$	103,437	$	96,477	$	48,368

Investments

We derive net investment income from our invested assets. As of December 31, 2016, the carrying value of our investment portfolio, including cash and cash equivalents, was $1.1 billionand the fair value of the portfolio was $1.1 billion.

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

We classify the majority of our fixed maturity securities as “held-to-maturity.” We do not reflect any changes in fair value for these securities in our financial statements, unless such changes are deemed to be “other than temporary impairments,” in which case such impairments flow through our income statement within the category, “Net realized gains (losses) on investments.” The remainder of our fixed maturity securities and all of our equity securities are classified as “available-for-sale.” These investments are valued at fair value at the end of each period, with changes in fair value flowing through other comprehensive income. We generally seek to limit our holdings in equity securities to the lesser of 10% of the investment portfolio or 30% of shareholders’ equity, on a fair value basis.

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

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The table below shows the carrying values of various categories of securities held in our investment portfolio, the percentage of the total carrying value of our investment portfolio represented by each category and the effective interest rate for the year ended December 31, 2016 based on the carrying value of each category as of December 31, 2016:

	Carrying Value		Percentage of Portfolio			Effective Interest Rate
	(in thousands)
Fixed maturity securities—held-to-maturity:
State and political subdivisions	$	394,875		34.6	%		2.9	%
Corporate bonds		143,858		12.6	%		2.0	%
Commercial mortgage-backed securities		70		0.0	%		4.9	%
U.S. agency-based mortgage-backed securities		9,967		0.8	%		5.1	%
U.S. Treasury securities and obligations of U.S.    Government agencies		11,737		1.0	%		3.0	%
Asset-backed securities		1,927		0.2	%		3.6	%
Total fixed maturity securities—held-to-maturity		562,434		49.2	%		2.7	%
Fixed maturity securities—available-for-sale:
State and political subdivisions		232,293		20.3	%		3.2	%
Corporate bonds		182,515		16.0	%		2.0	%
U.S. agency-based mortgage-backed securities		9,342		0.8	%		2.4	%
U.S. Treasury securities and obligations of U.S.    Government agencies		54,947		4.8	%		1.5	%
Total fixed maturity securities—available-for-sale		479,097		41.9	%		2.6	%
Equity securities		33		0.0	%		0.1	%
Other investments		13,330		1.2	%		0.0	%
Cash and cash equivalents		58,936		5.1	%		0.3	%
Short-term investments		29,580		2.6	%		0.9	%
Total investments, including cash and cash equivalents	$	1,143,410		100.0	%		2.4	%

As of December 31, 2016, our fixed maturity securities had a carrying value of $1,041.5 million, which represented 91.1%of the carrying value of our investments, including cash and cash equivalents. For the twelve months ended December 31, 2016, the pre-tax investment yield of our investment portfolio was 2.5% per annum.

The gross unrealized gains and losses on, and the cost or amortized cost and fair value of, our investment portfolio as of December 31, 2016 are summarized as follows:

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Fixed maturity securities, held-to-maturity	$	562,434	$	9,902	$	(3,405	)	$	568,931
Fixed maturity securities, available-for-sale		479,871		4,793		(5,567	)		479,097
Equity securities, available-for-sale		—		33		—			33
Other investments, available-for-sale		10,000		3,330		—			13,330
Totals	$	1,052,305	$	18,058	$	(8,972	)	$	1,061,391

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As of December 31, 2016, municipal bonds with maturities greater than one year made up 54.9% of our investment portfolio, including cash and cash equivalents. The investments in Louisiana result from companies being allowed an investment credit against Louisiana premium taxes for varying levels of Louisiana assets.  The table below summarizes the top five geographic exposures as of December 31, 2016.

	Carrying Value		Percentage of Municipal Portfolio			Percentage of Total Portfolio
	(in thousands)
Texas	$	112,209		17.9	%		9.8	%
Louisiana		102,255		16.3	%		8.9	%
Washington		52,315		8.3	%		4.6	%
Florida		44,102		7.0	%		3.9	%
Massachusetts		26,216		4.2	%		2.3	%
Other		290,071		46.3	%		25.4	%
	$	627,168		100.0	%		54.9	%

The table below summarizes the credit quality of our investment portfolio, excluding our equity holdings, as of December 31, 2016, as determined by the middle rating of Moody’s, Standard and Poor’s, and Fitch.

Credit Rating	Percentage of Total Carrying Value
“AAA”		35.6	%
“AA”		31.7	%
“A”		17.0	%
“BBB”		14.9	%
“BB and below”		0.8	%
“Unrated securities”		0.0	%
Total		100.0	%

As of December 31, 2016, the average composite rating of our investment portfolio, excluding our equity holdings, was “AA-.”

The table below shows the composition of our fixed maturity securities by remaining time to maturity as of December 31, 2016.

	As of December 31, 2016
Maturity:	Carrying Value		Percentage
	(in thousands)
Within one year	$	174,881		16.8	%
After one year through five years		475,566		45.7	%
After five years through ten years		135,884		13.0	%
After ten years		233,894		22.5	%
U.S. agency-based mortgage-backed securities		19,309		1.8	%
Commercial mortgage-backed securities		70		0.0	%
Asset-backed securities		1,927		0.2	%
Total	$	1,041,531		100.0	%

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Reinsurance

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

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

2017 Excess of Loss Reinsurance Treaty Program

Effective January 1, 2017, we renewed our excess of loss reinsurance treaty program related to our voluntary and assigned risk business.  The program consists of two layers of coverage.  The first layer is a multi-year treaty that applies to losses incurred through December 31, 2019. The second layer must be renewed annually.  Our reinsurance treaty program provides us with reinsurance coverage for each loss occurrence up to $70.0 million, subject to applicable limitations, deductibles, retentions and aggregate limits.  In a multi-claimant loss occurrence, the reinsurance coverage for any one individual claimant remains limited to a maximum of $10.0 million, subject to applicable deductibles, retentions and aggregate limits.

We have 19 reinsurers participating in our reinsurance treaty program in 2017. Under certain circumstances, including a downgrade of a reinsurer’s A.M. Best rating to “B++” (Very Good) or below, such reinsurer may be required to provide us with security for amounts due under the terms of our reinsurance program. This security may take the form of, among other things, cash advances or letters of credit. If security is required because of a ratings downgrade, the form of security must be mutually agreed to between the reinsurer and us.

In 2017, our first layer of reinsurance provides coverage for losses up to $10.0 million for each loss occurrence in excess of $2.0 million.  This layer provides coverage in two parts.  Before our reinsurers are obligated to reimburse us under this layer, we are subject to an annual aggregate deductible of 1.5% of subject earned premium under the first part of this coverage and 6.5% of subject earned premium under the second part of this coverage.  The limit under the first part of this coverage is 5.0% of subject earned premium in any one year and 3.33% of subject earned premium in the aggregate for all three years covered by this layer.  The limit under the second part of this coverage is 3.0% of subject earned premium for any one year and 1.0% of subject earned premium in the aggregate for all three years covered by this layer.

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

Our second layer of reinsurance (catastrophe reinsurance) provides $60.0 million in coverage for each loss occurrence in excess of $10.0 million.  This layer includes coverage for terrorism including the use and/or dispersal of nuclear, biological, chemical and radiological agents with an annual aggregate limit of $60.0 million.  The aggregate limit for all other claims under this layer is $120.0 million.  This layer expires on January 1, 2018.

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The table below sets forth the reinsurers participating in our 2017 reinsurance program:

Reinsurer	A.M. Best Rating
Allianz Risk Transfer AG (Bermuda)	A+
Arch Reinsurance Company	A+
Endurance Reinsurance Corporation of America	A
Hannover Reinsurance Limited (Ireland)	A+
Houston Casualty Company	A++
Lloyd’s Syndicate 0623 AFB	A
Lloyd’s Syndicate 0780 ADV	A
Lloyd’s Syndicate 1084 CSL	A
Lloyd’s Syndicate 1414 ACS	A
Lloyd’s Syndicate 1955 BAR	A
Lloyd’s Syndicate 2623 AFB	A
Lloyd’s Syndicate 2987 BRT	A
Lloyd’s Syndicate 3000 MKL	A
Lloyd’s Syndicate 4444 CNP	A
Lloyd’s Syndicate 4472 LIB	A
Markel Global Reinsurance Company	A
Minnesota Workers' Compensation Reinsurance Association	NR
Munich Reinsurance America, Inc.	A+
XL Reinsurance America Inc.	A

Due to the nature of reinsurance, we have recoverables from reinsurers that apply to prior accident years.  The Company generally secures large reinsurance recoverable balances with various forms of collateral, including funds withheld accounts, irrevocable letters of credit and secured trusts.  The table below summarizes our amounts recoverable from reinsurers as of December 31, 2016.

Reinsurer	A.M. Best Rating		Amounts Recoverable as of December 31, 2016
			(in thousands)
Hannover Reinsurance Limited (Ireland) (1)	A+		$	29,670
Odyssey America Reinsurance Corporation	A			12,600
Minnesota Workers' Compensation Reinsurance Association (1)	NR			9,623
Clearwater Insurance (2)	NR			5,809
Allianz Risk Transfer AG (Bermuda) (1)	A+			4,943
Finial Reinsurance	A-			4,898
SCOR Reinsurance	A			4,388
Tokio Millennium Re Limited	A++			3,201
St. Paul Fire and Marine Insurance Company	A++			2,438
Clearwater Select Insurance (2)	NR			1,138
Other		—		4,958
Total amounts recoverable from reinsurers				83,666
Funds withheld and letters of credit related to the above recoverables				(38,453	)
Total unsecured amounts recoverable from reinsurers			$	45,213

(1) Current participant in our 2017 reinsurance program.

(2) Subsidiary of Fairfax Financial is no longer rated by A.M. Best.

In December 2016, the Company commuted reinsurance agreements with Hannover Reinsurance Limited (Ireland) (“Hannover”) and Tokio Millennium Re Limited (“Tokio”) covering portions of accident years 2011 through 2013.  The Company received cash of $0.2 million and an additional $25.4 million payment effectuated solely through offset against the balance of the funds withheld account under the reinsurance agreements in exchange for releasing Hannover and Tokio from their reinsurance obligations under the commuted agreements.  Both Hannover and Tokio remain obligated to the subsidiaries of the Company under other reinsurance agreements. As a result of the commutation, the effect on the Company’s net income in the year ended December 31, 2016 was immaterial.

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Terrorism Reinsurance

The Terrorism Risk Insurance Act of 2002 (the “2002 Act”) was enacted in response to the events of September 11, 2001.  The 2002 Act was extended by the Terrorism Risk Insurance Extension Act of 2005 (the “2005 Act”), the Terrorism Risk Insurance Program Reauthorization Act of 2007 (the “2007 Act”), and the Terrorism Risk Insurance Program Reauthorization Act of 2015 (the “2015 Act”). The 2002 Act, the 2005 Act, the 2007 Act and the 2015 Act were designed to ensure the availability of insurance coverage for losses resulting from certain acts of terrorism in the United States. The 2015 Act reauthorized a federal program that provides federal reimbursement to insurance companies for a portion of their losses arising from certain acts of terrorism and requires insurance companies to offer coverage for these acts. The program applies to insured losses arising out of acts that are certified as “acts of terrorism” by the Secretary of the Treasury in concurrence with the Secretary of Homeland Security and the Attorney General of the United States. In addition, the program does not provide any reimbursement for any portion of aggregate industry-wide insured losses from certified acts of terrorism that exceed $100.0 billion in any one year and is subject to certain other limitations and restrictions.

For insured losses in 2017, each insurance group is responsible for a statutory deductible under the 2015 Act that is equal to 20% of its direct earned property and casualty insurance premiums. For losses occurring in 2017, the U.S. federal government will reimburse 83% of an insurance group’s covered losses over the statutory deductible.  The U.S. federal government reimbursement will decrease by one percent each year until it reaches 80% in 2020.  In addition, no federal reimbursement is available unless the aggregate insurance industry-wide losses from a certified act of terrorism exceeds $140.0 million for any act of terrorism occurring in 2017.  This aggregate will increase by $20.0 million each year until it reaches $200.0 million in 2020.   However, there is no relief from the requirement under the 2015 Act that insurance companies offer coverage for certified acts of terrorism if those acts do not cause losses exceeding these threshold amounts and thus do not result in any federal reimbursement payments.

Under the 2015 Act, insurance companies must offer coverage for losses due to certified acts of terrorism in their workers’ compensation policies. Moreover, the workers’ compensation laws of the various states generally do not permit the exclusion of coverage for losses arising from acts of terrorism, including terrorism that involves the use of nuclear, biological, radioactive or chemical agents. In addition, state law prohibits us from limiting our workers’ compensation insurance losses arising from any one catastrophe or any one claimant. We have reinsurance protection in our current reinsurance treaty program that provides coverage of up to $70 million for losses arising from conventional terrorism. This coverage expires January 1, 2018.   The Company’s 2017 catastrophe excess of loss layer for loss occurrences greater than $10 million includes coverage for losses caused by nuclear, biological, chemical and radiological attacks, subject to the deductibles, retentions, definitions and aggregate limits.  

Technology

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

Competition

The insurance industry, in general, is highly competitive and there is significant competition in the workers’ compensation segment of the industry. Competition in the insurance business is based on many factors, including premium rates, policy terms, coverage availability, claims management, safety services, payment terms, types of insurance offered, overall financial strength and financial ratings assigned by independent rating organizations, such as A.M. Best. Some of the insurers with which we compete have significantly greater financial, marketing and management resources than we do. We may also compete with new market entrants in the future.

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

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

Employees

As of December 31, 2016, we had 437 full-time employees and two part-time employees.  None of our employees are subject to collective bargaining agreements. We believe that our employee relations are good.

Regulation

Holding Company Regulation

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

Change of Control

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

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

State Insurance Regulation

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

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

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

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Insurance agencies are also subject to regulation and supervision by the state insurance departments in the states in which they are licensed. Our wholly owned subsidiary, Amerisafe General Agency, Inc., is licensed as an insurance agent in 29 statesand as a managing general insurance agency in 12 states. Amerisafe General Agency is domiciled in Louisiana and is primarily subject to regulation and supervision by the Louisiana Department of Insurance, which regulates the solicitation of insurance and the qualification and licensing of agents and agencies that may desire to conduct business in Louisiana.

State Insurance Department Examinations

We are subject to periodic examinations by state insurance departments in the states in which we operate.  The Nebraska insurance department generally examines its domiciliary insurance companies every five years. The Texas insurance department generally conducts examinations of its domiciliary insurance companies on a triennial basis.

AIIC and SOCI underwent an examination by the Nebraska Department of Insurance in 2014 that covered calendar years 2009 through 2013. AIICTX underwent an examination by the Texas Department of Insurance in 2014 that covered calendar years 2010 through 2013.

Guaranty Fund Assessments

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

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

Residual Market Programs

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

Companies generally can fulfill their residual market obligations by either issuing insurance policies to employers assigned to them, or participating in a reinsurance pool where the results of all policies provided through the pool are shared by the participating companies. We utilize both methods, depending on management’s evaluation of the most cost-efficient method to adopt in each state that allows a choice of assigned risk or participation in a pooling arrangement. In 2016, we had assigned risks in fourstates: Alabama, Alaska, North Carolina and Virginia.

Second Injury Funds

A number of states operate trust funds that reimburse insurers and employers for claims paid to injured employees for aggravation of prior conditions or injuries. The state-managed trust funds are funded through assessments against insurers and self-insurers providing workers’ compensation coverage in the applicable state. Our recoveries from state-managed trust funds for the years ended December 31, 2016, 2015 and 2014 were $5.3 million, $5.8 million and $6.8 million, respectively. Our cash paid for assessments to state-managed trust funds for the years ended December 31, 2016, 2015 and 2014 was $2.3 million, $2.1 million and $1.9 million, respectively.  We accrue for second injury funds relative to historical paid amounts.

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Dividend Limitations

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

Federal Law and Regulations

For the year ended December 31, 2016, we derived 2.6% of our voluntary in-force premiums from employers engaged in the maritime industry. As a provider of workers’ compensation insurance for employers engaged in the maritime industry, we are subject to the United States Longshore and Harbor Workers’ Compensation Act, or the USL&H Act, and the Merchant Marine Act of 1920, or Jones Act. We are also subject to regulations related to the USL&H Act and the Jones Act.

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

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

Privacy Regulations

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

Federal and State Legislative and Regulatory Changes

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

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

The National Association of Insurance Commissioners

The NAIC is a group formed by state insurance commissioners to discuss issues and formulate policy with respect to regulation, reporting and accounting of insurance companies. Although the NAIC has no legislative authority and insurance companies are at all times subject to the laws of their respective domiciliary states and, to a lesser extent, other states in which they conduct business, the NAIC is influential in determining the form in which such laws are enacted. Model insurance laws, regulations and guidelines, which we refer to as the Model Laws, have been promulgated by the NAIC as a minimum standard by which state regulatory systems and regulations are measured. Adoption of state laws that provide for substantially similar regulations to those described in the Model

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Laws is a requirement for accreditation by the NAIC. The NAIC provides authoritative guidance to insurance regulators on statutory accounting issues by promulgating and updating a codified set of statutory accounting practices in its Accounting Practices and Procedures Manual. The Nebraska and Texas legislatures have adopted these codified statutory accounting practices.

Under Nebraska law, AIIC and SOCI are each required to maintain minimum capital and surplus of $2.0 million. Under Texas law, AIICTX is required to maintain minimum capital and surplus of $5.0 million. Property and casualty insurance companies are also subject to certain risk-based capital requirements by the NAIC. Under those requirements, the amount of capital and surplus maintained by a property and casualty insurance company is determined based on the various risk factors related to it. As of December 31, 2016, AIIC, SOCI and AIICTX exceeded the minimum risk-based capital requirements.

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

The 2016 IRIS results for AIIC were within expected values.  The 2016 IRIS results for SOCI and AIICTX were within expected values for 12 of the 13 ratios. The investment yield ratios were outside the expected range by two tenths of one percent and seven tenths of one percent, respectively. This occurred because current low interest rates affected the reinvestment rate for our investment portfolio.

Statutory Accounting Principles

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

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

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

Website Information

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

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Executive Officers of the Registrant

The table below sets forth information about our executive officers and key employees as of February 24, 2017.

Name	Age	Position
Executive Officers
G. Janelle Frost	46	President and Chief Executive Officer
Neal A. Fuller	54	Executive Vice President and Chief Financial Officer
Vincent J. Gagliano	44	Executive Vice President and Chief Risk Officer
Kathryn H. Shirley	51	Executive Vice President, General Counsel and Secretary
Key Employees
Kelly R. Goins	51	Senior Vice President, Underwriting Operations
Leon J. Lagneaux	65	Senior Vice President, Safety Operations
Henry O. Lestage, IV	56	Senior Vice President, Claims Operations
David R. Morton	46	Senior Vice President, Sales and Marketing

G. Janelle Frost has served as our Chief Executive Officer since April 2015 and President since September 2013.  She has served as a Director of the Company since April 2016.  Prior to becoming our Chief Executive Officer, Ms. Frost served as Chief Operating Officer from May 2013 to April 2015. She served as our Executive Vice President and Chief Financial Officer from November 2008 to April 2013, our Controller from May 2004 to November 2008 and Vice President from May 2006 to November 2008. She has been employed with our company since 1992 and served as Assistant Vice President from May 2004 to May 2006 and Deputy Controller from 1998 to April 2004.  Ms. Frost currently serves on the Board of Directors of the Federal Reserve Bank of Atlanta’s New Orleans Branch.

Neal A. Fuller has served as Executive Vice President and Chief Financial Officer since September 2015.  Mr. Fuller served in multiple leadership positions with Safeco Corporation from 1988 to 2009, ending as Senior Vice President – Finance and Treasurer.  Prior to joining our company, Mr. Fuller served as Senior Vice President and Chief Financial Officer of ICW Group from 2010 to 2011 and Senior Vice President and Chief Financial Officer of SeaBright Holdings, Inc. from 2011 to 2013.

Vincent J. Gagliano has served as our Executive Vice President and Chief Risk Officer since March 2016.  He has been employed with our company since 2001.  He previously served as Executive Vice President and Chief Technology Officer from January 2013 until February 2016, Senior Vice President of Information Technology from September 2009 to January 2013, Vice President, Operations Analysis from January 2008 to September 2009, Assistant Vice President of Business Intelligence from July 2005 to December 2008, Director of Business Intelligence from April 2004 to July 2005 and Senior Business Analyst from July 2001 to April 2004.

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

Kelly R. Goins has served as our Senior Vice President, Underwriting Operations since March 2005. She has been employed with our company since 1986 and served as Vice President, Underwriting Operations from 2000 until March 2005.

Leon J. Lagneaux has served as our Senior Vice President, Safety Operations since March 2005. He has been employed with our company since 1994 and served as Vice President, Safety Operations from 1999 until March 2005.

Henry O. Lestage, IV has served as our Senior Vice President, Claims Operations since September 2000. He has been employed with our company since 1987 and served as Vice President, Claims Operations from 1998 until 2000.

David R. Morton has served as Senior Vice President, Sales and Marketing since April 2015.  Prior to joining our company, Mr. Morton served in various sales leadership roles with EMPLOYERS Services, Inc., a mono-line workers’ compensation insurance carrier, including Director of Client Relations from 2007 to 2010, Vice President of Sales, Strategic Partnerships and Alliances from 2010 to 2014 and most recently as Vice President of Sales Excellence from September 2014 to April 2015.

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Item 1A. Risk Factors.

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

Risks Related to Our Business

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

The financial performance of the workers’ compensation insurance industry has historically fluctuated with periods of lower premium rates and excess underwriting capacity resulting from increased competition followed by periods of higher premium rates and reduced underwriting capacity resulting from decreased competition. Although the financial performance of an individual insurance company is dependent on its own specific business characteristics, the profitability of most workers’ compensation insurance companies generally tends to follow this cyclical market pattern. Because this market cyclicality is due in large part to the actions of our competitors and general economic factors, we cannot predict the timing or duration of changes in the market cycle. We expect these cyclical patterns will cause our revenues and net income to fluctuate, which may cause the price of our common stock to be more volatile.

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

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

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

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

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

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

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

We market a substantial portion of our workers’ compensation insurance through independent agencies. As of December 31, 2016, independent agencies produced 97.4% of our voluntary in-force premiums. No independent agency accounted for more than 1.3% of our voluntary in-force premiums at that date. Independent agencies are not obligated to promote our insurance and may sell insurance offered by our competitors. As a result, our continued profitability depends, in part, on the marketing efforts of our independent agencies and on our ability to offer workers’ compensation insurance and maintain financial strength ratings that meet the requirements of our independent agencies and their policyholders.

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

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

• collect and properly analyze a substantial volume of data;

• develop, test and apply appropriate rating formulae;

• closely monitor and timely recognize changes in trends; and

• project both frequency and severity of losses with reasonable accuracy.

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

• insufficient reliable data;

• incorrect or incomplete analysis of available data;

• uncertainties generally inherent in estimates and assumptions;

• the complexity inherent in implementing appropriate rating formulae or other pricing methodologies;

• costs of ongoing medical treatment;

• uncertainties inherent in accurately estimating retention, investment yields, and the duration of our liability for loss and loss adjustment expenses; and

• unanticipated court decisions, legislation or regulatory action.

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

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

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

• profitably increase our business in existing markets;

• identify profitable new geographic markets for entry;

• attract and retain qualified personnel for expanded operations;

• identify, recruit and integrate new independent agencies; and

• augment our internal operations and systems as we expand our business.

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

Investment income is an important component of our net income. As of December 31, 2016, our investment portfolio, including cash and cash equivalents, had a carrying value of $1.1 billion. For the year ended December 31, 2016 we had $28.1 million of net investment income. Our investment portfolio is managed under investment guidelines approved by our Board of Directors, and is made up predominately of fixed maturity securities and cash and cash equivalents. Although our investment guidelines emphasize capital preservation and liquidity, our investments are subject to a variety of risks, including risks related to general economic conditions, interest rate fluctuations, market illiquidity and market volatility. General economic conditions may be adversely affected by U.S. involvement in hostilities with other countries and large-scale acts of terrorism, or the threat of hostilities or terrorist acts.

Interest rates are highly sensitive to many factors, including governmental monetary policies and domestic and international economic and political conditions. Changes in interest rates could have an adverse effect on the value of our investment portfolio and future investment income.  Low interest rates could continue to have an adverse effect on our investment income. Additionally, changes in interest rates can expose us to prepayment risks on mortgage-backed securities included in our investment portfolio.

Similarly, during periods of market disruption, including periods of rapidly widening credit spreads or illiquidity, the fair values of certain of our fixed maturity securities, such as asset-backed and commercial mortgage-backed securities, could be deemed to be other-than-temporarily impaired, even though we have the intent not to sell these securities and it is not more likely than not that we will be required to sell these securities. Further, rapidly changing and unprecedented equity market conditions could materially impact the valuation of the equity securities as reported within our consolidated financial statements and the period-to-period changes in value could vary significantly.

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

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

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

We have established and implemented security measures, controls and procedures in an effort to safeguard our information technology systems and to prevent unauthorized access to these systems and any data processed and/or stored in these systems.  Despite these safeguards, disruptions to and breaches of our information technology systems are possible and may negatively impact our business.

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

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

In 2016, 86.3% of our gross premiums written were derived from policyholders in the construction, trucking, logging and lumber, manufacturing, agriculture, maritime, and oil and gas industries. Because premium rates are calculated, in general, as a percentage of a policyholder’s payroll expense, premiums fluctuate depending upon the level of business activity and number of employees of our policyholders. As a result, our gross premiums written are primarily dependent upon economic conditions in these industries and upon economic conditions generally.

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

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

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

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

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

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

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

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

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

• standards of solvency, including risk-based capital measurements;

• restrictions on the nature, quality and concentration of our investments;

• restrictions on the terms of the insurance policies we offer;

• restrictions on the way our premium rates are established and the premium rates we may charge;

• required reserves for unearned premiums and loss and loss adjustment expenses;

• standards for appointing general agencies;

• limitations on transactions with affiliates;

• restrictions on mergers and acquisitions;

• restrictions on the ability of our insurance company subsidiaries to pay dividends to AMERISAFE;

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• certain required methods of accounting; and

• potential assessments for state guaranty funds, second injury funds and other mandatory pooling arrangements.

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

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

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

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

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

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

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

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

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

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

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

We purchase reinsurance to protect us from the impact of large losses. Reinsurance is an arrangement in which an insurance company, called the ceding company, transfers insurance risk by sharing premiums with another insurance company, called the reinsurer. Conversely, the reinsurer receives or assumes reinsurance from the ceding company.  Our 2017 reinsurance program provides us with reinsurance coverage for each loss occurrence up to $70.0 million, subject to applicable limitations, deductibles, retentions and aggregate limits. However, for any loss occurrence involving only one claimant, our reinsurance coverage is limited to $10.0 million, subject to applicable deductibles, retentions and aggregate limits.  Our retention is $2.0 million for each loss occurrence.  Losses in the layer between $2.0 million and $10.0 million are ceded to a multi-year reinsurance treaty with an aggregate annual deductible of approximately $5.6 million and an aggregate limit of coverage of approximately $29.6 million for 2017.

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

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

When our reinsurance treaty program is terminated and we enter into a new program, any decrease in the amount of reinsurance at the time we enter into a new program, whether caused by the existence of more restrictive terms and conditions or decreased availability, will also increase our risk of loss and, as a result, could adversely affect our business, financial condition and results of operations. We currently have 19 reinsurers participating in our reinsurance treaty program, and we believe that this is a sufficient number of reinsurers to provide us with the reinsurance coverage we require. However, it is possible that one or more of our current reinsurers could terminate participation in our program. In addition, we may terminate the participation of one or more of our reinsurers under certain circumstances as permitted by the terms of our reinsurance agreements. In any of these events, if our reinsurance broker is unable to reallocate the terminated reinsurance among the remaining reinsurers in the program, it could take a significant period of time to identify and negotiate agreements with one or more replacement reinsurers. During this period, we would be exposed to an increased risk of loss, the extent of which would depend on the coverage previously provided by the terminated reinsurance.

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

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

As of December 31, 2016, we had $83.7 million of recoverables from reinsurers. Of this amount, $45.1 million was unsecured. As of December 31, 2016, our largest recoverable from reinsurers included $29.7 million from Hannover Reinsurance Limited (Ireland), $12.6 million from Odyssey America Reinsurance Corporation and and $9.6 million from Minnesota Workers’ Compensation Reinsurance Association.  No reinsurance recoverable due at December 31, 2016 was over 90 days old.   If we are unable to collect amounts recoverable from our reinsurers, our financial condition would be adversely impacted.

If more states approve non-subscriber progams, the demand for workers’ compensation insurance could be significantly impacted.

Workers’ compensation insurance is required by law with few exceptions.  States such as Texas offer employers the option to non-subscribe to the workers’ compensation system.  By non-subscribing, employers lose the exclusive remedy protection afforded

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those that do subscribe.  Texas’s program has been in existence since 1913.  Oklahoma began a program in 2013; however that program has been ruled unconstitutional.  A number of states have proposed legislation for similar programs which could threaten the demand for the workers’ compensation product we offer.

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

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

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

At December 31, 2016, we participated in mandatory pooling arrangements in 21 states and the District of Columbia. As we write policies in new states that have mandatory pooling arrangements, we will be required to participate in additional pooling arrangements. Further, the impairment, insolvency or failure of other insurance companies in these pooling arrangements would likely increase the liability for other members in the pool. The effect of assessments and premium surcharges or changes in them could reduce our profitability in any given period or limit our ability to grow our business.

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

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

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

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

When writing workers’ compensation insurance policies, we are required by law to provide workers’ compensation benefits for losses arising from acts of terrorism. The impact of any terrorist act is unpredictable, and the ultimate impact on us would depend upon the nature, extent, location and timing of such an act. Our 2017 reinsurance treaty program affords limited coverage for up to $70.0 million for losses arising from terrorism, subject to applicable deductibles, retentions, definitions and aggregate limits.

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Notwithstanding the protection provided by reinsurance and the Terrorism Risk Insurance Program Extension Act of 2015 (TRIPRA of 2015), the risk of severe losses to us from acts of terrorism has not been eliminated because our reinsurance treaty program includes various sub-limits and exclusions limiting our reinsurers’ obligation to cover losses caused by acts of terrorism. Accordingly, events constituting acts of terrorism may not be covered by, or may exceed the capacity of, our reinsurance and could adversely affect our business and financial condition. In addition, the TRIPRA of 2015 is set to expire on December 31, 2020.  If this law is not extended or replaced by legislation affording a similar level of protection to the insurance industry against insured losses arising out of acts of terrorism, reinsurance for losses arising from terrorism may be unavailable or prohibitively expensive, and we may be further exposed to losses arising from acts of terrorism.

Risks Related to Our Common Stock

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

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

• rising levels of claims costs, including medical and prescription drug costs, that we cannot anticipate at the time we establish our premium rates;

• fluctuations in interest rates, inflationary or deflationary pressures and other changes in the investment environment that affect returns on our invested assets;

• changes in the frequency or severity of claims;

• the financial stability of our reinsurers and changes in the level of reinsurance capacity and our capital capacity;

• new types of claims and new or changing judicial interpretations relating to the scope of liabilities of insurance companies;

• volatile and unpredictable developments, including man-made, weather-related and other natural catastrophes or terrorist attacks; and

• price competition.

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

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

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

• election of our directors is classified, meaning that the members of only one of three classes of our directors are elected each year;

• shareholders have limited ability to call shareholder meetings and to bring business before a meeting of shareholders;

• shareholders may not act by written consent, unless the consent is unanimous; and

• our Board of Directors may authorize the issuance of preferred stock with such rights, preferences and privileges as the board deems appropriate.

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

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

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

The trading price of our common stock may decline.

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

• our results of operations;

• changes in expectations as to our future results of operations, including financial estimates and projections by securities analysts and investors;

• results of operations that vary from those expected by securities analysts and investors;

• developments in the insurance or healthcare industries;

• current and expected economic conditions;

• changes in laws and regulations;

• announcements of claims against us by third parties; and

• future issuances or sales of our common stock.

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

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

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

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

We cannot predict what effect, if any, future sales of our common stock, or the availability of shares for future sale, will have on the trading price of our common stock. Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales could occur, may adversely affect the trading price of our common stock and may make it more difficult for you to sell your shares at a time and price that you determine appropriate. As of February 15, 2017, there were 19,230,135 shares of our common stock outstanding.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

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

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Item 3. Legal Proceedings.

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

Item 4. Mine Safety Disclosures

None.

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PART II

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

Market Information and Holders

Our common stock is traded on the NASDAQ Global Select Market under the symbol “AMSF.” As of February 15, 2017, there were 26 holders of record of our common stock.

The table below sets forth the reported high and low sales prices of our common stock as quoted on NASDAQ during each quarter for the last two fiscal years.

	High		Low
2015
First Quarter	$	46.82	$	39.59
Second Quarter	$	48.45	$	41.50
Third Quarter	$	52.50	$	44.54
Fourth Quarter	$	57.20	$	48.08
2016
First Quarter	$	54.48	$	46.88
Second Quarter	$	64.98	$	50.02
Third Quarter	$	63.09	$	55.27
Fourth Quarter	$	66.30	$	53.35

Dividend Policy

In 2016, 2015 and 2014, the Company paid regular quarterly cash dividends of $0.18, $0.15 and $0.12 per share, respectively.  In addition, the Company paid extraordinary cash dividends of $3.25 in 2016, $3.00 in 2015 and $0.50 and $1.00 per share in 2014.

On February 21, 2017 the Company declared a regular quarterly cash dividend of $0.20 per share payable on March 24, 2017 to shareholders of record on March 10, 2017.

The Board intends to continue to consider the payment of a regular cash dividend each calendar quarter.  On an annualized basis, the cash dividend is expected to be $0.80 per share in 2017.

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

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

Description of Capital Stock

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

• 10,000,000 shares of preferred stock, par value $0.01 per share; and

• 50,000,000 shares of common stock, par value $0.01 per share.

As of February 15, 2017, 19,230,135 shares of common stock were outstanding. As of that date, there were no other shares of our capital stock outstanding.

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Share Repurchases

The Company’s Board of Directors initiated a share repurchase program in February 2010. In October 2016, the Board reauthorized this program with a limit of $25.0 million with no expiration date.  There were no shares repurchased under this program in 2016, 2015 or 2014.  As of December 31, 2016, the Company has repurchased a total of 1,258,250 sharesfor $22.4 million, or an average price of $17.78, including commissions under the program. The purchases may be affected from time to time depending upon market conditions and subject to applicable regulatory considerations. It is anticipated that any future purchases will be funded from available capital.

Item 6. Selected Financial Data.

The following tables summarize certain selected financial data that should be read in conjunction with our audited financial statements and accompanying notes thereto for the year ended December 31, 2016 included in this report and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	Year Ended December 31,
	2016			2015			2014			2013			2012
	(in thousands, except share and per share data)
Income Statement Data
Gross premiums written	$	373,055		$	386,529		$	393,819		$	372,177		$	328,823
Ceded premiums written		(10,307	)		(11,228	)		(13,793	)		(18,425	)		(16,305	)
Net premiums written	$	362,748		$	375,301		$	380,026		$	353,752		$	312,518
Net premiums earned	$	368,704		$	375,894		$	375,747		$	329,983		$	290,689
Net investment income		28,106			27,902			27,214			27,029			27,018
Net realized gains (losses) on investments		(494	)		(2,494	)		697			(1,211	)		2,979
Loss on disposal of assets		(1	)		(664	)		—			(2	)		(1	)
Fee and other income		347			316			361			536			563
Total revenues		396,662			400,954			404,019			356,335			321,248
Loss and loss adjustment expenses incurred		199,031			214,573			244,916			228,973			219,903
Underwriting and certain other operating costs (1)		29,470			32,162			32,573			18,951			18,450
Commissions		26,243			27,509			27,872			25,303			22,144
Salaries and benefits		24,881			24,442			24,518			22,862			20,839
Interest expense		—			—			—			—			566
Policyholder dividends		4,216			1,301			391			1,042			2,203
Total expenses		283,841			299,987			330,270			297,131			284,105
Income before taxes		112,821			100,967			73,749			59,204			37,143
Income tax expense		34,956			30,505			20,083			15,567			7,790
Net income		77,865			70,462			53,666			43,637			29,353
Less allocated income to participating securities		—			—			—			142			22
Net income available to common shareholders	$	77,865		$	70,462		$	53,666		$	43,495		$	29,331
Diluted earnings per common share equivalent	$	4.05		$	3.69		$	2.84		$	2.32		$	1.58
Weighted average common shares		19,105,806			18,941,077			18,646,128			18,373,033			18,166,261
Stock options and performance shares		97,844			178,109			282,376			375,776			408,930
Diluted weighted average of common share    equivalents outstanding		19,203,650			19,119,186			18,928,504			18,748,809			18,575,191
Selected Insurance Ratios
Current accident year loss ratio (2)		67.9	%		69.8	%		71.5	%		73.2	%		76.5	%
Prior accident year loss ratio (3)		(13.9	)%		(12.7	)%		(6.3	)%		(3.8	)%		(0.9	)%
Net loss ratio		54.0	%		57.1	%		65.2	%		69.4	%		75.6	%
Net underwriting expense ratio (4)		21.9	%		22.4	%		22.6	%		20.3	%		21.1	%
Net dividend ratio (5)		1.1	%		0.3	%		0.1	%		0.3	%		0.8	%
Net combined ratio (6)		77.0	%		79.8	%		87.9	%		90.0	%		97.5	%

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	As of December 31,
	2016		2015		2014		2013		2012
	(in thousands)
Balance Sheet Data
Cash and cash equivalents	$	58,936	$	69,481	$	90,956	$	123,077	$	92,676
Investments		1,084,474		1,045,152		1,016,333		878,775		808,116
Amounts recoverable from reinsurers		83,666		91,077		85,888		75,326		101,352
Premiums receivable, net		183,005		185,364		178,917		171,579		141,950
Deferred income taxes		33,811		29,905		31,231		33,645		29,521
Deferred policy acquisition costs		19,300		20,412		19,649		19,171		18,419
Total assets		1,518,856		1,502,045		1,457,220		1,329,001		1,220,946
Reserves for loss and loss adjustment expenses		742,776		718,033		687,602		614,557		570,450
Unearned premiums		162,028		167,983		168,576		164,296		140,528
Insurance-related assessments		31,742		32,329		29,315		25,428		22,244
Shareholders’ equity		456,150		453,981		446,968		416,814		381,222

(1) Includes policy acquisition expenses and other general and administrative expenses, excluding commissions and salaries and benefits, related to insurance operations and corporate operating expenses.

(2) The current accident year loss ratio is calculated by dividing loss and loss adjustment expenses incurred for the current accident year by the current year’s net premiums earned.

(3) The prior accident year loss ratio is calculated by dividing the change in loss and loss adjustment expenses incurred for prior accident years by the current year’s net premiums earned.

(4) The net underwriting expense ratio is calculated by dividing underwriting and certain other operating costs, commissions and salaries, and benefits by the current year’s net premiums earned.

(5) The net dividend ratio is calculated by dividing policyholder dividends by the current year’s net premiums earned.

(6) The net combined ratio is the sum of the net loss ratio, the net underwriting expense ratio and the net dividend ratio.

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

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 8 of this report. This discussion includes forward-looking statements that are subject to risks, uncertainties and other factors described in Item 1A of this report. These factors could cause our actual results in 2017 and beyond to differ materially from those expressed in, or implied by, those forward-looking statements.

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, logging and lumber, manufacturing, and agriculture. Employers engaged in hazardous industries pay substantially higher than average rates for workers’ compensation insurance compared to employers in other industries, as measured per payroll dollar. The higher premium rates are due to the nature of the work performed and the inherent workplace danger of our target employers. Hazardous industry employers also tend to have less frequent but more severe claims as compared to employers in other industries due to the nature of their businesses. We provide proactive safety reviews of employers’ workplaces. These safety reviews are a vital component of our underwriting process and also promote safer workplaces. We utilize intensive claims management practices that we believe permit us to reduce the overall cost of our claims. In addition, our audit services ensure that our policyholders pay the appropriate premiums required under the terms of their policies and enable us to monitor payroll patterns that cause underwriting, safety or fraud concerns. We believe that the higher premiums typically paid by our policyholders, together with our disciplined underwriting and safety, claims and audit services, provide us with the opportunity to earn attractive returns for our shareholders.

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

Two of the key financial measures that we use to evaluate our performance are return on average equity and growth in book value per share adjusted for dividends paid to shareholders. We calculate return on average equity by dividing annual net income by the average of annual shareholders’ equity. Our return on average equity was 17.1% in 2016, 15.6% in 2015 and 12.4% in 2014. We calculate book value per share by dividing ending shareholders’ equity by the number of common shares outstanding. Our book value per share was $23.72 at December 31, 2016, $23.73 at December 31, 2015 and $23.65 at December 31, 2014.   We paid cash dividends of $3.97 per share in 2016, $3.60 per share in 2015 and $1.98 per share in 2014.

Investment income is an important element of our net income. Because the period of time between our receipt of premiums and the ultimate settlement of claims is often several years or longer, we are able to invest cash from premiums for significant periods of time. As a result, we are able to generate more investment income from our premiums as compared to insurance companies that operate in other lines of business that pay claims more quickly. From December 31, 2011 to December 31, 2016, our investment portfolio, including cash and cash equivalents, increased from $851.5 million to $1.1 billion and produced net investment income of $28.1 million in 2016, $27.9 million in 2015 and $27.2 million in 2014.

The use of reinsurance is an important component of our business strategy. We purchase reinsurance to protect us from the impact of large losses. Our reinsurance program for 2017 includes 19 reinsurers that provide coverage to us in excess of a certain specified loss amount, or retention level. Our 2017 reinsurance program provides us with reinsurance coverage for each loss occurrence up to $70.0 million, subject to applicable limitations, deductibles, retentions and aggregate limits. However, for any loss occurrence involving only one claimant, our reinsurance coverage is limited to $10.0 million for any single claimant, subject to applicable deductibles, retentions and aggregate limits.  Losses in the layer between $2.0 million and $10.0 million are ceded to a multi-year reinsurance treaty  with an aggregate annual deductible of approximately $5.6 million and an aggregate limit of coverage of approximately $29.6 million for 2017. As losses are incurred and recorded, we record amounts recoverable from reinsurers for the portion of the losses ceded to our reinsurers.

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

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

For example, for the five-year period ended December 31, 2016 we had recorded 62 severe claims, or an average of 12 severe claims per year for accident years 2012 through 2016. The number of severe claims reported in any one accident year in this five-year period ranged from a low of eight in 2012 to a high of 17 in 2016. The average reported case severity for these claims ranged from $1.6 million for the 2012 accident year to $3.5 million for the 2014 accident year. For the five accident years, the case incurred for these severe claims accounted for an average of 8.0 percentage points of our overall loss and loss adjustment expense, or LAE, ratio, measured at December 31, 2016.

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

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

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

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

Our gross reserves for loss and loss adjustment expenses at December 31, 2016, 2015 and 2014 were $742.8 million, $718.0 million and $687.6 million, respectively. As a percentage of gross reserves at year end, IBNR represented 22.2% in 2016, 22.2% in 2015 and 22.4% in 2014.

In 2016, we decreased our estimates for prior year loss reserves by $51.3 million. In 2015, we decreased our estimates for prior year loss reserves by $47.8 million. In 2014, we decreased our estimates for prior year loss reserves by $23.7 million.

The workers’ compensation insurance industry is cyclical in nature and influenced by many factors, including price competition, medical cost increases, natural and man-made disasters, changes in interest rates, changes in state laws and regulations, and general economic conditions. A hard market in our industry is characterized by decreased competition that results in higher premium rates, more restrictive policy coverage terms, and lower commissions paid to agencies. In contrast, a soft market is characterized by increased competition that results in lower premium rates, expanded policy coverage terms, and higher commissions paid to agencies. Our strategy is to focus on maintaining underwriting profitability throughout the cycle.

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

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Principal Revenue and Expense Items

Our revenues consist primarily of the following:

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

Premiums are earned on a daily pro rata basis over the term of the policy. At the end of each reporting period, premiums written that are not earned are classified as unearned premiums and are earned in subsequent periods over the remaining term of the policy. Our insurance policies typically have a term of one year. Thus, for a one-year policy written on July 1, 2016 for an employer with constant payroll during the term of the policy, we would earn half of the premiums in 2016 and the other half in 2017. On a monthly basis, we also recognize net premiums earned from mandatory pooling arrangements.

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

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

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

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

Our expenses consist primarily of the following:

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

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

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

Salaries and Benefits. We pay salaries and provide benefits to our employees.

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

Income Tax Expense. We incur federal, state, and local income tax expense.

Critical Accounting Policies

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

Management believes that the most critical accounting policies relate to the reporting of reserves for loss and loss adjustment expenses, including losses that have occurred but have not been reported prior to the reporting date, amounts recoverable from reinsurers, premiums receivable, assessments, deferred policy acquisition costs, deferred income taxes, the impairment of investment securities and share-based compensation.

The following is a description of our critical accounting policies.

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

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

In establishing our reserves, we review the results of analyses using actuarial methods that utilize historical loss data from our more than 31 years of underwriting workers’ compensation insurance. The actuarial analysis of our historical data provides the factors we use in estimating our loss reserves. These factors are primarily measures over time of the number of claims paid and reported, average paid and incurred claim amounts, claim closure rates and claim payment patterns. In evaluating the results of our analyses, management also uses substantial judgment in considering other factors that are not considered in these actuarial analyses, including changes in business mix, claims management, regulatory issues, medical trends, employment and wage patterns, insurance policy coverage interpretations, judicial determinations and other subjective factors. Due to the inherent uncertainty associated with these estimates, and the cost of incurred but unreported claims, our actual liabilities may vary significantly from our original estimates.

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

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

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

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

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

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

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

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Impairment of Investment Securities. Impairment of an investment security results in a reduction of the carrying value of the security and the realization of a loss when the fair value of the security declines below our cost or amortized cost, as applicable, for the security, and the impairment 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 specific 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 preferred stock 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;

• our intent not to sell the security for a sufficient time period for it to recover its value;

• the likelihood of being forced to sell the security before the recovery of its value; and

• an evaluation as to whether there are any credit losses on debt securities.

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

Results of Operations

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

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Income Statement Data
Gross premiums written	$	373,055		$	386,529		$	393,819
Ceded premiums written		(10,307	)		(11,228	)		(13,793	)
Net premiums written	$	362,748		$	375,301		$	380,026
Net premiums earned	$	368,704		$	375,894		$	375,747
Net investment income		28,106			27,902			27,214
Net realized gains (losses) on investments		(494	)		(2,494	)		697
Loss on disposal of assets		(1	)		(664	)		—
Fee and other income		347			316			361
Total revenues		396,662			400,954			404,019
Loss and loss adjustment expenses incurred		199,031			214,573			244,916
Underwriting and certain other operating costs (1)		29,470			32,162			32,573
Commissions		26,243			27,509			27,872
Salaries and benefits		24,881			24,442			24,518
Policyholder dividends		4,216			1,301			391
Total expenses		283,841			299,987			330,270
Income before taxes		112,821			100,967			73,749
Income tax expense		34,956			30,505			20,083
Net income	$	77,865		$	70,462		$	53,666
Selected Insurance Ratios
Current accident year loss ratio (2)		67.9	%		69.8	%		71.5	%
Prior accident year loss ratio (3)		(13.9	)%		(12.7	)%		(6.3	)%
Net loss ratio		54.0	%		57.1	%		65.2	%
Net underwriting expense ratio (4)		21.9	%		22.4	%		22.6	%
Net dividend ratio (5)		1.1	%		0.3	%		0.1	%
Net combined ratio (6)		77.0	%		79.8	%		87.9	%

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	As of December 31,
	2016		2015		2014
	(in thousands)
Balance Sheet Data
Cash and cash equivalents	$	58,936	$	69,481	$	90,956
Investments		1,084,474		1,045,152		1,016,333
Amounts recoverable from reinsurers		83,666		91,077		85,888
Premiums receivable, net		183,005		185,364		178,917
Deferred income taxes		33,811		29,905		31,231
Deferred policy acquisition costs		19,300		20,412		19,649
Total assets		1,518,856		1,502,045		1,457,220
Reserves for loss and loss adjustment expenses		742,776		718,033		687,602
Unearned premiums		162,028		167,983		168,576
Insurance-related assessments		31,742		32,329		29,315
Shareholders’ equity		456,150		453,981		446,968

(1) Includes policy acquisition expenses, and other general and administrative expenses, excluding commissions and salaries and benefits, related to insurance operations and corporate operating expenses.

(2) The current accident year loss ratio is calculated by dividing loss and loss adjustment expenses incurred for the current accident year by the current year’s net premiums earned.

(3) The prior accident year loss ratio is calculated by dividing the change in loss and loss adjustment expenses incurred for prior accident years by the current year’s net premiums earned.

(4) The net underwriting expense ratio is calculated by dividing underwriting and certain other operating costs, commissions and salaries, and benefits by the current year’s net premiums earned.

(5) The net dividend ratio is calculated by dividing policyholder dividends by the current year’s net premiums earned.

(6) The net combined ratio is the sum of the net loss ratio, the net underwriting expense ratio and the net dividend ratio.

Overview of Operating Results

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

Gross Premiums Written. Gross premiums written for 2016 were $373.1 million, compared to $386.5 million for 2015, a decrease of 3.5%. The decrease was attributable to a $8.4 million decrease in annual premiums on voluntary policies written during the period, a $4.2 million decrease in premiums resulting from payroll audits and related premium adjustments and a $0.9 million decrease in premiums from mandatory pooling arrangements.

Net Premiums Written. Net premiums written for 2016 were $362.7 million, compared to $375.3 million for 2015, a decrease of 3.3%. The decrease was primarily attributable to the decrease in gross premiums written. As a percentage of gross premiums earned, ceded premiums were 2.7% for 2016 compared to 2.9% for 2015.

Net Premiums Earned. Net premiums earned for 2016 were $368.7 million, compared to $375.9 million for 2015, a decrease of $1.9%.

Net Investment Income. Net investment income in 2016 was $28.1 million, an increase of 0.7% from the $27.9 million reported in 2015. The pre-tax investment yield on our investment portfolio was 2.5% per annum for 2016 and 2015. The tax-equivalent yield on our investment portfolio was 3.2% per annum for 2016, compared to 3.3% per annum for 2015. The tax-equivalent yield is calculated using the effective interest rate and the appropriate marginal tax rate. Average invested assets, including cash and cash equivalents, increased 2.2%, from an average of $1,140.7 million for 2015 to an average of $1,165.4 millionfor 2016.

Net Realized Gains (Losses) on Investments. Net realized losses on investments in 2016 totaled $0.5 million, compared to losses of $2.5 million in 2015.  In 2016, net realized losses of $0.9 million resulted from the sale of fixed maturity securities classified as available-for-sale.  These losses were partially offset by realized gains of $0.3 million on called fixed maturity securities. In 2015, net realized losses of $2.7 million resulted from an other-than-temporary impairment of four fixed maturity securities.  These losses were partially offset by realized gains of $0.2 million on called fixed maturity securities and other sales of securities.  

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Loss and Loss Adjustment Expenses Incurred. Loss and LAE incurred totaled $199.0 million for 2016, compared to $214.6 million for 2015, a decrease of $15.5 million, or 7.2%. The current accident year losses and LAE incurred were $250.3 million, or 67.9% of net premiums earned, compared to $262.4 million, or 69.8% of net premiums earned for 2015. We recorded favorable prior accident year development of $51.3 million in 2016, compared to $47.8 million in 2015. This is discussed in more detail below in “Prior Year Development.” Our net loss ratio was 54.0%for 2016 and 57.1% for 2015.

Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits. Underwriting and certain other operating costs, commissions and salaries and benefits for 2016 were $80.6 million, compared to $84.1 million for 2015, a decrease of 4.2%. This decrease was primarily due to a $1.9 milliondecrease in insurance related assessments, a $1.4 million decrease in premium taxes and a $1.3 milliondecrease in commission expense.  These decreases were partially offset by an increase of $1.2 million in bad debt expense due to a change in estimate of $1.1 million recorded in 2015. Our underwriting expense ratio decreased to 21.9% in 2016 from 22.4% in 2015.

Income tax expense. Income tax expense for 2016 was $35.0 million, compared to $30.5 million for 2015. The increase was primarily attributable to an increase in pre-tax income, from $101.0 million for 2015 to $112.8 millionfor 2016. The effective tax rate also increased to 31.0% for 2016, compared to 30.2% for 2015. This increase is due to improvement in underwriting margins which resulted in a higher proportion of underwriting income to tax-exempt investment income relative to 2015.

Year Ended December 31, 2015 Compared to Year Ended December 31, 2014

Gross Premiums Written. Gross premiums written for 2015 were $386.5 million, compared to $393.8 million for 2014, a decrease of 1.9%. The decrease was attributable to a $4.6 million decrease in premiums resulting from payroll audits and related premium adjustments, a $2.5 million decrease in annual premiums on voluntary policies written during the period, a $0.4 million decrease in direct assigned risk premiums, offset by a $0.3 million increase in premiums from mandatory pooling arrangements. Related premium adjustments in 2015 include a $2.4 million increase in “earned but unbilled”, or EBUB, premium.

Net Premiums Written. Net premiums written for 2015 were $375.3 million, compared to $380.0 million for 2014, a decrease of 1.2%. The decrease was primarily attributable to the decrease in gross premiums written. As a percentage of gross premiums earned, ceded premiums were 2.9% for 2015 compared to 3.5% for 2014.

Net Premiums Earned. Net premiums earned for 2015 were $375.9 million, compared to $375.7 million for 2014, an immaterial increase.

Net Investment Income. Net investment income in 2015 was $27.9 million, an increase of 2.5% from  the $27.2 million reported in 2014. The pre-tax investment yield on our investment portfolio was 2.5% per annum for 2015 and 2.6% for 2014. The tax-equivalent yield on our investment portfolio was 3.3% per annum for 2015, compared to 3.4% per annum for 2014. The tax-equivalent yield is calculated using the effective interest rate and the appropriate marginal tax rate. Average invested assets, including cash and cash equivalents, increased 7.2%, from an average of $1,064.4 million for 2014 to an average of $1,140.7 million for 2015.

Net Realized Gains (Losses) on Investments. Net realized losses on investments in 2015 totaled $2.5 million, compared to a gain of $0.7 million in 2014.  In 2015, net realized losses of $2.7 million resulted from an other-than-temporary impairment of four fixed maturity securities.  These losses were partially offset by realized gains of $0.2 million on called fixed maturity securities and other sales of securities. In 2014, net realized gains of $0.9 million resulted from gains from called fixed maturity securities, the sale of equity securities and the sale of fixed maturity securities.  These gains were partially offset by a realized loss of $0.2 million from an other-than-temporary impairment of a fixed maturity security.

Loss and Loss Adjustment Expenses Incurred. Loss and LAE incurred totaled $214.6 million for 2015, compared to $244.9 million for 2014, a decrease of $30.3 million, or 12.4%. The current accident year losses and LAE incurred were $262.4 million, or 69.8% of net premiums earned, compared to $268.6 million, or 71.5% of net premiums earned for 2014. We recorded favorable prior accident year development of $47.8 million in 2015, compared to $23.7 million in 2014. This is discussed in more detail below in “Prior Year Development.” Our net loss ratio was 57.1% for 2015 and 65.2% for 2014.

Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits. Underwriting and certain other operating costs, commissions and salaries and benefits for 2015 were $84.1 million, compared to $85.0 million for 2014, a decrease of 1.0%. This decrease was primarily due to a $1.5 million decrease in insurance related assessments, a $0.4 million decrease in commission expense, a $0.3 million decrease in bad debt expense offset by a $0.3 million increase in experience-rated commissions.    Our underwriting expense ratio decreased to 22.4% in 2015 from 22.6% in 2014.

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Income tax expense. Income tax expense for 2015 was $30.5 million, compared to $20.1 million for 2014. The increase was primarily attributable to an increase in pre-tax income, from $73.7 million for 2014 to $101.0 million for 2015. The effective tax rate also increased to 30.2% for 2015, compared to 27.2% for 2014. This increase is due to the changing mix of taxable income versus non-taxable investment income.

Prior Year Development

The Company recorded favorable prior accident year loss and loss adjustment expense development of $51.3 millionin calendar year 2016, $47.8 million in calendar year 2015 and $23.7 million in calendar year 2014. The table below sets forth the favorable development for accident years 2011 through 2015 and, collectively, all accident years prior to 2011.

	Favorable/(Unfavorable) Development for Year Ended December 31,
	2016		2015		2014
	(in millions)
2015	$	—	$	—	$	—
2014		19.7		—		—
2013		13.2		8.2		—
2012		9.1		19.2		9.3
2011		2.3		3.0		1.0
Prior to 2011		7.0		17.4		13.4
Total net development	$	51.3	$	47.8	$	23.7

The table below sets forth the number of open claims as of December 31, 2016, 2015 and 2014, and the numbers of claims reported and closed during the years then ended.

	Twelve Months Ended December 31,
	2016			2015			2014
Open claims at beginning of period		5,300			5,515			5,297
Claims reported		5,338			5,465			5,785
Claims closed		(5,443	)		(5,680	)		(5,567	)
Open claims at end of period		5,195			5,300			5,515

At December 31, 2016, our incurred amounts for certain accident years, particularly 2013 and 2014, developed more favorably than management previously expected. Multiple factors can cause loss development both unfavorable and favorable.  The favorable loss development we experienced across accident years was largely due to favorable case reserve development from closed claims and claims where the worker had reached maximum medical improvement. We believe the favorable loss development in 2013 and 2014 resulted primarily from an intensive claims management focus with the Company actively seeking to settle claims, leading to favorable development.

The assumptions we used in establishing our reserves for these accident years were based on our historical claims data. However, as of December 31, 2016, actual results for these accident years have been better than our assumptions would have predicted. We do not presently intend to modify our assumptions for establishing reserves in light of recent results. However, if actual results for current and future accident years are consistent with, or different than, our results in these recent accident years, our historical claims data will reflect this change and, over time, will impact the reserves we establish for future claims.

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

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Liquidity and Capital Resources

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

We forecast claim payments based on our historical trends. We seek to manage the funding of claim payments by actively managing available cash and forecasting cash flows on a short- and long-term basis. Cash payments, net of reinsurance, for claims were $187.7 millionin 2016, $189.7 million in 2015 and $182.5million in 2014. We fund claim payments out of cash flow from operations, principally premiums, net of amounts ceded to our reinsurers, and net investment income. Our investment portfolio increased from $851.5 million at December 31, 2011 to $1.1 billion at December 31, 2016.

As discussed above under “Overview,” we purchase reinsurance to protect us against severe claims and catastrophic events. Based on our estimates of future claims, we believe we are sufficiently capitalized to satisfy the deductibles and retentions in our 2017 reinsurance program. We reevaluate our reinsurance program at least annually, taking into consideration a number of factors, including cost of reinsurance, our liquidity requirements, operating leverage and coverage terms.

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

In December 2016, the Company commuted reinsurance agreements with Hannover Reinsurance Limited (Ireland) (“Hannover”) and Tokio Millennium Re Limited (“Tokio”) covering portions of accident years 2011 through 2013.  The Company received cash of $0.2 million and an additional $25.4 million payment effectuated solely through offset against the balance of the funds withheld account under the reinsurance agreements in exchange for releasing Hannover and Tokio from their reinsurance obligations under the commuted agreements.  Both Hannover and Tokio remain obligated to the subsidiaries of the Company under other reinsurance agreements.  As a result of the commutation, the effect on the Company’s net income in the year ended December 31, 2016 was immaterial.

Net cash provided by operating activities was $114.2 million in 2016, as compared to $92.9 million in 2015, and 140.7 million in 2014. Major components of cash provided by operating activities in 2016 were net premiums collected of $364.6 million and investment income collected of $44.7 million, offset in-part by claim payments of $189.9 million, $72.9 million of operating expenditures, federal taxes paid of $32.5 million and dividends to policyholders paid of $0.5 million.

Major components of cash provided by operating activities in 2015 were net premiums collected of $368.6 million and investment income collected of $44.3 million, offset in-part by claim payments of $190.1 million, $75.4 million of operating expenditures, $27.8 of an increase in amounts held by others, federal taxes paid of $26.1 million and dividends to policyholders paid of $0.5 million.

Major components of cash provided by operating activities in 2014 were net premiums collected of $373.1 million and investment income collected of $42.1 million, offset in-part by claim payments of $183.7 million, $71.7 million of operating expenditures, federal taxes paid of $19.9 million and dividends to policyholders paid of $1.1 million.

Net cash used in investing activities was $50.5 million in 2016, as compared to $49.8 million in 2015 and $141.3 million in 2014. In 2016, major components of net cash used in investing activities included investment purchases of $354.6 million and net purchases of furniture, fixtures and equipment of $1.6 million, offset by proceeds from sales and maturities of investment of investments of $305.8 million. In 2015, major components of net cash used in investing activities included investment purchases of $326.2 million and net purchases of furniture, fixtures and equipment of $1.0 million, offset by proceeds from sales and maturities of investment of investments of $277.3 million. In 2014, major components of net cash used in investing activities included investment purchases of $455.2 million and net purchases of furniture, fixtures and equipment of $1.0 million, offset by proceeds from sales and maturities of investments of $315.2 million.

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Net cash used in financing activities was $74.3 million in 2016, as compared to net cash used in financing activities of $64.5 million in 2015 and net cash used in financing activities of $31.6 million in 2014. Major components of cash used in financing activities in 2016 included cash used for dividends paid to shareholders of $76.1million, offset by $1.0 millionof tax benefit from share-based compensation and $0.8 millionof proceeds from the exercise of stock options.  Major components of cash used in financing activities in 2015 included $1.8 million of proceeds from the exercise of stock options and $2.2 million of tax benefit from share-based compensation, offset by cash used for dividends paid to shareholders of $68.6 million. Major components of cash provided in financing activities in 2014 included $2.7 million of proceeds from the exercise of stock options and $2.8 million of tax benefit from share-based compensation, offset by cash used for dividends paid to shareholders of $37.1 million.

The Company has a line of credit agreement with Frost Bank for borrowings up to a maximum of $20.0 million. Under the agreement, advances may be made either in the form of loans or letters of credit. Borrowings under the agreement accrue at interest rates based upon prime rate or LIBOR and are unsecured.  Under the agreement, the Company pays a fee of 0.25% on the unused portion of the loan in arrears quarterly, for a fee of $50,000 annually.  At December 31, 2016, there were no outstanding borrowings.  Unless renewed, the agreement will expire in December 2019.

The Board of Directors initially authorized the Company’s share repurchase program in February 2010. In October 2016, the Board reauthorized this program with no expiration date. As of December 31, 2016, we had repurchased a total of 1,258,250 shares of our outstanding common stock for $22.4 million. The Company had $25.0 million available for future purchases at December 31, 2016 under this program. There were no share repurchases in 2016, 2015 or 2014. The purchases may continue to be effected from time to time depending upon market conditions and subject to applicable regulatory considerations. It is anticipated that future purchases will be funded from available capital.

AMERISAFE is a holding company that transacts business through its operating subsidiaries, including AIIC, SOCI and AIICTX. AMERISAFE’s primary assets are the capital stock of these insurance subsidiaries. The ability of AMERISAFE to fund its operations depends upon the surplus and earnings of its subsidiaries and their ability to pay dividends to AMERISAFE. Payment of dividends by our insurance subsidiaries is restricted by state insurance laws, including laws establishing minimum solvency and liquidity thresholds. Based upon the prescribed calculation, the insurance subsidiaries could pay to AMERISAFE dividends of up to $78.9 million in 2017 without seeking regulatory approval. See “Business—Regulation—Dividend Limitations” in Item 1 of this report.

In 2016, 2015 and 2014, the Company paid regular quarterly cash dividends of $0.18, $0.15 and $0.12 per share, respectively.  In addition, the Company paid extraordinary cash dividends of $3.25 in 2016, $3.00 in 2015 and $0.50 and $1.00 per share in 2014.

On February 21, 2017 the Company declared a regular quarterly cash dividend of $0.20 per share payable on March 24, 2017 to shareholders of record on March 10, 2017.

The Board intends to continue to consider the payment of a regular cash dividend each calendar quarter.  On an annualized basis, the cash dividend is expected to be $0.80 per share in 2017.

Investment Portfolio

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

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

Under Nebraska and Texas law, as applicable, each of AIIC, SOCI and AIICTX is required to invest only in securities that are either interest-bearing, interest-accruing or eligible for dividends, and must limit its investment in the securities of any single issuer, other than direct obligations of the United States, to five percent of the insurance company’s assets. As of December 31, 2016, we were in compliance with these requirements.

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

As of December 31, 2016, our investment portfolio, including cash and cash equivalents, totaled $1.1 billion, an increase of 2.6% from December 31, 2015. The majority of our fixed maturity securities are classified as held-to-maturity, as defined by FASB ASC Topic 320, Investments-Debt and Equity Securities. As such, the reported value of those securities is equal to their amortized cost, and is not impacted by changing interest rates. The remainder of our fixed maturity securities and all of our equity securities are classified as available-for-sale and reported at fair value.

On January 1, 2008, we adopted FASB ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a fair value hierarchy and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. As disclosed in Note 18 of the financial statements, our securities available-for-sale are classified using Level 1, 2 and 3 inputs. We did not elect the fair value option prescribed under FASB ASC Topic 825, Financial Instruments, for any financial assets or financial liabilities in 2015 or 2016.

The composition of our investment portfolio, including cash and cash equivalents, as of December 31, 2016 is shown in the following table.

	Carrying Value		Percentage of Portfolio			Effective Interest Rate
	(in thousands)
Fixed maturity securities—held-to-maturity:
State and political subdivisions	$	394,875		34.6	%		2.9	%
Corporate bonds		143,858		12.6	%		2.0	%
Commercial mortgage-backed securities		70		0.0	%		4.9	%
U.S. agency-based mortgage-backed securities		9,967		0.8	%		5.1	%
U.S. Treasury securities and obligations of U.S.    Government agencies		11,737		1.0	%		3.0	%
Asset-backed securities		1,927		0.2	%		3.6	%
Total fixed maturity securities—held-to-maturity		562,434		49.2	%		2.7	%
Fixed maturity securities—available-for-sale:
State and political subdivisions		232,293		20.3	%		3.2	%
Corporate bonds		182,515		16.0	%		2.0	%
U.S. agency-based mortgage-backed securities		9,342		0.8	%		2.4	%
U.S. Treasury securities and obligations of U.S.    Government agencies		54,947		4.8	%		1.5	%
Total fixed maturity securities—available-for-sale		479,097		41.9	%		2.6	%
Equity securities		33		0.0	%		0.1	%
Other investments		13,330		1.2	%		0.0	%
Cash and cash equivalents		58,936		5.1	%		0.3	%
Short-term investments		29,580		2.6	%		0.9	%
Total Investments, including cash and cash equivalents	$	1,143,410		100.0	%		2.4	%

For our securities classified as available-for-sale, the securities are “marked to market” as of the end of each calendar quarter. As of that date, unrealized 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 gains and losses are not recorded 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. The key factors we consider are:

• any reduction or elimination of preferred stock 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;

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• any downgrades of the security by a rating agency;

• our intent not to sell the security for a sufficient time period for it to recover its value;

• the likelihood of being forced to sell the security before the recovery of its value; and

• an evaluation as to whether there are any credit losses on debt securities.

The following table summarizes the fair value of, and the amount of, unrealized losses on our investment securities, segregated by the time period each security has been in a continuous unrealized loss position as of December 31, 2016 and 2015:

	Less Than Twelve Months					Twelve Months or Longer
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
December 31, 2016:
Fixed maturity securities	$	379,702	$	(7,396	)	$	23,517	$	(1,576	)
Equity securities		—		—			—		—
December 31, 2015:
Fixed maturity securities	$	314,137	$	(2,272	)	$	35,005	$	(1,965	)
Equity securities		—		—			—		—

We reviewed all securities with unrealized losses in accordance with the impairment policy described above. We determined that the unrealized losses in the fixed maturity securities portfolio related primarily to changes in market interest rates since the date of purchase, current conditions in the capital markets and the impact of those conditions on market liquidity and prices. We expect to recover the carrying value of these securities as it is not more likely than not that we will be required to sell the security before the recovery of its amortized cost basis. In addition, none of the unrealized losses on debt securities are considered credit losses.

During 2016, the Company had no impairments losses recognized for other-than-temporary declines in the fair value of our investments.

During 2015, the Company impaired securities totaling $2.7 million related to four fixed maturity securities.  The impairment charge is included in “Net realized gains (losses) on investments” for 2015.  We impaired the securities due to downgrades of the securities and the amounts of the accumulated unrealized losses.

During 2014, the Company impaired securities totaling $0.2 million related to a fixed maturity security.  The impairment charge is included in “Net realized gains (losses) on investments” for 2014.  We impaired the security due to a downgrade of the security and the amount of the accumulated unrealized loss.

The pre-tax investment yield on our investment portfolio was 2.5% per annum during the twelve months ended December 31, 2016, compared to 2.5% per annum during the same period in 2015.

Contractual Obligations and Commitments

We manage risk on certain long-duration claims by settling these claims through the purchase of annuities from unaffiliated life insurance companies. In the event these companies are unable to meet their obligations under these annuity contracts, we could be liable to the claimants, but our reinsurers remain obligated to indemnify us for all or part of these obligations in accordance with the terms of our reinsurance contracts. As of December 31, 2016, the present value of these annuities was $96.1 million, as estimated by our annuity providers. Substantially all of the annuities are issued or guaranteed by life insurance companies that have an A.M. Best rating of “A” (Excellent) or better. For additional information, see Note 16 to our consolidated financial statements in Item 8 of this report.

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We lease equipment and office space under noncancelable operating leases. Future minimum lease payments at December 31, 2016, were as follows:

Year	Future Minimum Lease Payments
	(in thousands)
2017	$	131
2018		74
2019		6
	$	211

Rental expense was $0.2 millionin 2016, 2015 and 2014.

The table below provides information with respect to our contractual obligations as of December 31, 2016.

	Payment Due By Period
Contractual Obligations	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
	(in thousands)
Loss and loss adjustment expenses (1)	$	742,776	$	241,501	$	302,037	$	85,706	$	113,532
Loss-based insurance assessments (2)		15,209		4,945		6,184		1,755		2,325
Capital lease obligations		177		53		124		—		—
Operating lease obligations		211		131		80		—		—
Purchase obligations		1,055		987		68		—		—
Total	$	759,428	$	247,617	$	308,493	$	87,461	$	115,857

(1) The loss and loss adjustment expense payments due by period in the table above are based upon the loss and loss adjustment expense estimates as of December 31, 2016 and actuarial estimates of expected payout patterns and are not contractual liabilities as to a time certain. Our contractual liability is to provide benefits under the policy. As a result, our calculation of loss and loss adjustment expense payments due by period is subject to the same uncertainties associated with determining the level of loss and loss adjustment expenses generally and to the additional uncertainties arising from the difficulty of predicting when claims (including claims that have not yet been reported to us) will be paid. For a discussion of our loss and loss adjustment expense process, see “Business—Loss Reserves” in Item 1 of this report. Actual payments of loss and loss adjustment expenses by period will vary, perhaps materially, from the amounts shown in the table above to the extent that current estimates of loss and loss adjustment expenses vary from actual ultimate claims amounts and as a result of variations between expected and actual payout patterns. See “Risk Factors— Risks Related to Our Business—Our loss reserves are based on estimates and may be inadequate to cover our actual losses” in Item 1A of this report for a discussion of the uncertainties associated with estimating loss and loss adjustment expenses.

(2) We are subject to various annual assessments imposed by certain of the states in which we write insurance policies. These assessments are generally based upon the amount of premiums written or losses paid during the applicable year. Assessments based on premiums are generally paid within one year after the calendar year in which the policies are written, while assessments based on losses are generally paid within one year after calendar year in which the loss is paid. When we establish a reserve for loss and loss adjustment expenses for a reported claim, we accrue our obligation to pay any applicable assessments. If settlement of the claim is to be paid out over more than one year, our obligation to pay any related loss-based assessments extends for the same period of time. Because our reserves for loss and loss adjustment expenses are based on estimates, our accruals for loss-based insurance assessments are also based on estimates. Actual payments of loss and loss adjustment expenses may differ, perhaps materially, from our reserves. Accordingly, our actual loss-based insurance assessments may vary, perhaps materially, from our accruals.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

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Item  7A. 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.

Credit Risk

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

We address the credit risk related to the issuers of our fixed maturity securities by primarily investing in fixed maturity securities that are rated as investment grade by one or more of Moody’s, Standard & Poor’s or Fitch. We also independently monitor the financial condition of all issuers of our fixed maturity securities. To limit our risk exposure, we employ diversification policies that limit our credit exposure to any single issuer or business sector.

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

Interest Rate Risk

Interest rate risk is the risk that we may incur losses due to adverse changes in interest rates. As of December 31, 2016, we had fixed maturity securities with a fair value of $1,048.0 million and a carrying value of $1,041.5 million. These securities are all subject to interest rate risk, but because we classify the majority of our fixed maturity securities as held-to-maturity, changes in fair values have a small effect on the carrying value of our portfolio. We manage our exposure to interest rate risk with respect to these securities by investing in a portfolio of securities with moderate effective duration. At December 31, 2016, the effective duration of the total investment portfolio, including cash and short term investments, was 3.4 years. Given the current low interest rate environment, the risk to the portfolio from higher rates exceeds the potential benefit to the portfolio from lower rates. Should we experience a large rise in interest rates, the effect on the carrying value of our portfolio could be substantial.

The table below summarizes the interest rate risk associated with our fixed maturity securities by illustrating the sensitivity of the fair value and carrying value of our fixed maturity securities as of December 31, 2016 to selected hypothetical changes in interest rates, and the associated impact on our shareholders’ equity.  The change in carrying value is less than the change in fair value due to our held-to-maturity portfolio.  

Hypothetical Change in Interest Rates	Fair Value		Estimated Change in Fair Value			Carrying Value		Estimated Change in Carrying Value			Hypothetical Percentage Increase (Decrease) in Shareholders’ Equity
200 basis point increase	$	963,109	$	(84,919	)	$	993,755	$	(47,776	)		(10.5	)%
100 basis point increase		1,005,648		(42,380	)		1,017,744		(23,787	)		(5.2	)%
No change		1,048,028		—			1,041,531		—			—
100 basis point decrease		1,087,531		39,503			1,063,082		21,551			4.7	%
200 basis point decrease		1,125,632		77,604			1,083,175		41,644			9.1	%

Equity Price Risk

Equity price risk is the risk that we may incur losses due to adverse changes in the market prices of the equity securities we hold in our investment portfolio. We classify our portfolio of equity securities as available-for-sale and carry these securities on our balance sheet at fair value. Accordingly, adverse changes in the market prices of our equity securities result in a decrease in the value of our total assets and shareholders’ equity. In order to minimize our exposure to equity price risk, we independently monitor the financial condition of our equity securities, and diversify our investments. In addition, we limit the percentage of equity securities held in our

51

investment portfolio to the lesser of 10% of the investment portfolio or 30% of shareholders’ equity. As of December 31, 2016, the equity securities in our investment portfolio had a fair value of $0.03 million, representing less than 0.1% of shareholders’ equity on that date. As of December 31, 2016, the Company held an investment in a limited partnership hedge fund with a fair value of $13.3 million, representing 2.9% of shareholders’ equity on that date.  See “Business—Investments” in Item 1 of this report.

52

Item 8. Financial Statements and Supplementary Data.

	Page
Audited Financial Statements as of December 31, 2016 and 2015 and for the three years in the period ended December 31, 2016:
Report of Independent Registered Public Accounting Firm	54
Consolidated Balance Sheets	55
Consolidated Statements of Income	56
Consolidated Statements of Comprehensive Income	57
Consolidated Statements of Changes in Shareholders’ Equity	58
Consolidated Statements of Cash Flows	59
Notes to Consolidated Financial Statements	60
Financial Statement Schedules:
Schedule II. Condensed Financial Information of Registrant	91
Schedule VI. Supplemental Information Concerning Property-Casualty Insurance Operations	94
Schedules I, III, IV and V are not applicable and have been omitted

53

Report of Independent Registered Public Accounting Firm

The Board of Directors and shareholders of AMERISAFE, Inc. and subsidiaries

We have audited the accompanying consolidated balance sheets of AMERISAFE, Inc. and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedules listed in the Index at Item 15. These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AMERISAFE, Inc. and subsidiaries at December 31, 2016 and 2015, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.  Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), AMERISAFE, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New Orleans, Louisiana

February 24, 2017

54

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	December 31,
	2016			2015
Assets
Investments:
Fixed maturity securities—held-to-maturity, at amortized cost (fair value    $568,931 and $662,276 in 2016 and 2015, respectively)	$	562,434		$	645,164
Fixed maturity securities—available-for-sale, at fair value (cost $479,871 and    $376,109 in 2016 and 2015, respectively)		479,097			380,022
Equity securities—available-for-sale, at fair value (cost $0, in 2016 and 2015)		33			31
Short-term investments		29,580			7,718
Other investments		13,330			12,217
Total investments		1,084,474			1,045,152
Cash and cash equivalents		58,936			69,481
Amounts recoverable from reinsurers		83,666			91,077
Premiums receivable, net of allowance		183,005			185,364
Deferred income taxes		33,811			29,905
Accrued interest receivable		11,360			11,685
Property and equipment, net		6,636			6,181
Deferred policy acquisition costs		19,300			20,412
Other assets		37,668			42,788
Total assets	$	1,518,856		$	1,502,045
Liabilities and shareholders’ equity
Liabilities:
Reserves for loss and loss adjustment expenses	$	742,776		$	718,033
Unearned premiums		162,028			167,983
Reinsurance premiums payable		28			154
Amounts held for others		31,974			49,790
Policyholder deposits		49,130			48,380
Insurance-related assessments		31,742			32,329
Federal income tax payable		4,017			911
Accounts payable and other liabilities		31,510			30,484
Payable for investments purchased		9,501			—
Total liabilities		1,062,706			1,048,064
Shareholders’ equity:
Common stock:
Voting—$0.01 par value authorized shares—50,000,000 in 2016 and 2015;    20,488,385 and 20,388,396 shares issued and 19,230,135 and 19,130,146    shares outstanding in 2016 and 2015, respectively		204			203
Additional paid-in capital		208,390			204,688
Treasury stock at cost (1,258,250 shares in 2016 and 2015)		(22,370	)		(22,370	)
Accumulated earnings		270,418			268,873
Accumulated other comprehensive income (loss), net		(492	)		2,587
Total shareholders’ equity		456,150			453,981
Total liabilities and shareholders’ equity	$	1,518,856		$	1,502,045

See accompanying notes.

55

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share data)

	Year Ended December 31,
	2016			2015			2014
Revenues
Net premiums earned	$	368,704		$	375,894		$	375,747
Net investment income		28,106			27,902			27,214
Net realized gains (losses) on investments		(494	)		(2,494	)		697
Loss on disposal of assets		(1	)		(664	)		—
Fee and other income		347			316			361
Total revenues		396,662			400,954			404,019
Expenses
Loss and loss adjustment expenses incurred		199,031			214,573			244,916
Underwriting and certain other operating costs		29,470			32,162			32,573
Commissions		26,243			27,509			27,872
Salaries and benefits		24,881			24,442			24,518
Policyholder dividends		4,216			1,301			391
Total expenses		283,841			299,987			330,270
Income before income taxes		112,821			100,967			73,749
Income tax expense		34,956			30,505			20,083
Net income		77,865			70,462			53,666
Net income available to common shareholders	$	77,865		$	70,462		$	53,666
Earnings per share
Basic	$	4.08		$	3.72		$	2.88
Diluted	$	4.05		$	3.69		$	2.84
Shares used in computing earnings per share
Basic		19,105,806			18,941,077			18,646,128
Diluted		19,203,650			19,119,186			18,928,504
Extraordinary cash dividends declared per common share	$	3.25		$	3.00		$	1.50
Cash dividends declared per common share	$	0.72		$	0.60		$	0.48

See accompanying notes.

56

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Year Ended December 31,
	2016			2015			2014
Net income	$	77,865		$	70,462		$	53,666
Other comprehensive income:
Unrealized gain (loss) on securities, net of tax		(3,079	)		(223	)		7,105
Comprehensive income	$	74,786		$	70,239		$	60,771

See accompanying notes.

57

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands, except share data)

	Common Stock				Treasury Stock
	Shares		Amount		Shares			Amounts			Additional Paid-In Capital		Accumulated Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2013		19,855,430	$	198		(1,258,250	)	$	(22,370	)	$	192,537	$	250,744		$	(4,295	)	$	416,814
Comprehensive income:
Net income		—		—		—			—			—		53,666			—			53,666
Other comprehensive income:
Change in unrealized losses, net of tax		—		—		—			—			—		—			7,105			7,105
Comprehensive income		—		—		—			—			—		—			—			60,771
Common stock issued upon exercise of options		294,165		3		—			—			2,671		—			—			2,674
Restricted common stock issued		6,341		—		—			—			—		—			—			—
Share-based compensation		—		—		—			—			1,089		—			—			1,089
Tax benefit from share-based payments		—		—		—			—			2,841		—			—			2,841
Dividends to shareholders		—		—		—			—			—		(37,221	)		—			(37,221	)
Balance at December 31, 2014		20,155,936	$	201		(1,258,250	)	$	(22,370	)	$	199,138	$	267,189		$	2,810		$	446,968
Comprehensive income:
Net income		—		—		—			—			—		70,462			—			70,462
Other comprehensive income:
Change in unrealized gains, net of tax		—		—		—			—			—		—			(223	)		(223	)
Comprehensive income		—		—		—			—			—		—			—			70,239
Common stock issued upon exercise of options		193,204		2		—			—			1,842		—			—			1,844
Restricted common stock issued		39,256		—		—			—			502		—			—			502
Share-based compensation		—		—		—			—			1,003		—			—			1,003
Tax benefit from share-based payments		—		—		—			—			2,203		—			—			2,203
Dividends to shareholders		—		—		—			—			—		(68,778	)		—			(68,778	)
Balance at December 31, 2015		20,388,396	$	203		(1,258,250	)	$	(22,370	)	$	204,688	$	268,873		$	2,587		$	453,981
Comprehensive income:
Net income		—		—		—			—			—		77,865			—			77,865
Other comprehensive income:
Change in unrealized gains, net of tax		—		—		—			—			—		—			(3,079	)		(3,079	)
Comprehensive income		—		—		—			—			—		—			—			74,786
Common stock issued upon exercise of options		68,879		1		—			—			836		—			—			837
Restricted common stock issued		31,110		—		—			—			603		—			—			603
Share-based compensation		—		—		—			—			1,268		—			—			1,268
Tax benefit from share-based payments		—		—		—			—			995		—			—			995
Dividends to shareholders		—		—		—			—			—		(76,320	)		—			(76,320	)
Balance at December 31, 2016		20,488,385	$	204		(1,258,250	)	$	(22,370	)	$	208,390	$	270,418		$	(492	)	$	456,150

See accompanying notes.

58

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended December 31,
	2016			2015			2014
Operating activities
Net income	$	77,865		$	70,462		$	53,666
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,181			1,348			1,298
Net amortization of investments		16,247			16,424			15,243
Deferred income taxes		(2,249	)		1,446			(1,412	)
Net realized (gains) losses on investments		509			2,494			(697	)
Net realized losses on disposal of assets		1			664			—
Share-based compensation		1,603			1,223			1,519
Changes in operating assets and liabilities:
Premiums receivable, net		2,359			(6,447	)		(7,338	)
Accrued interest receivable		325			(48	)		(395	)
Deferred policy acquisition costs		1,112			(763	)		(478	)
Amounts held by others		1,016			(27,847	)		(1,082	)
Other assets		1,631			(1,042	)		(4,306	)
Reserves for loss and loss adjustment expenses		24,743			30,431			73,045
Unearned premiums		(5,955	)		(593	)		4,280
Reinsurance balances		7,285			(5,878	)		(10,326	)
Amounts held for others and policyholder deposits		(17,066	)		6,621			11,190
Accounts payable and other liabilities		3,605			4,364			6,477
Net cash provided by operating activities		114,212			92,859			140,684
Investing activities
Purchases of investments held-to-maturity		(102,830	)		(178,010	)		(223,028	)
Purchases of investments available-for-sale		(216,466	)		(135,915	)		(149,956	)
Purchases of short-term investments		(35,295	)		(12,246	)		(79,957	)
Proceeds from maturities of investments held-to-maturity		177,159			160,834			112,100
Proceeds from sales and maturities of investments available-for-sale		115,552			78,637			72,535
Proceeds from sales and maturities of short-term investments		13,040			37,833			128,043
Purchases of property and equipment		(1,638	)		(953	)		(989	)
Net cash used in investing activities		(50,478	)		(49,820	)		(141,252	)
Financing activities
Proceeds from stock option exercises		837			1,844			2,674
Tax benefit from share-based payments		995			2,203			2,841
Dividends to shareholders		(76,111	)		(68,561	)		(37,068	)
Net cash used in financing activities		(74,279	)		(64,514	)		(31,553	)
Change in cash and cash equivalents		(10,545	)		(21,475	)		(32,121	)
Cash and cash equivalents at beginning of year		69,481			90,956			123,077
Cash and cash equivalents at end of year	$	58,936		$	69,481		$	90,956
Supplemental disclosure of cash flow information
Income taxes paid	$	31,500		$	23,851		$	19,926

See accompanying notes.

59

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

1. Summary of Significant Accounting Policies

Organization

AMERISAFE, Inc. is an insurance holding company incorporated in the state of Texas. The accompanying consolidated financial statements include the accounts of AMERISAFE and its subsidiaries: American Interstate Insurance Company (“AIIC”) and its insurance subsidiaries, Silver Oak Casualty, Inc. (“SOCI”) and 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 Nebraska.  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 service company currently servicing only affiliated 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 insurance for small to mid-sized employers engaged in hazardous industries, principally construction, trucking, manufacturing, agriculture, and oil and gas. Assets and revenues of AIIC represent at least 95% of comparable consolidated amounts of the Company for each of 2016, 2015 and 2014.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of financial statements in accordance 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.

Adopted Accounting Guidance

In May 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2015-07, Fair Value Measurements (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). The amendments in this update change the disclosure requirements for investments in certain entities that calculate net asset value (NAV) per share. Under current accounting standards entities are permitted to estimate the fair value of certain investments using the investment’s NAV as a practical expedient. The disclosure guidance also permits entities to disclose the investment at NAV in the fair value hierarchy table as either Level 2 or Level 3, based upon certain criteria. The measurement basis utilizing NAV is different than the measurement criteria of all other investments which utilize inputs to calculate fair value. Due to this inconsistency, the FASB issued this ASU which requires entities to remove investments measured at NAV from the fair value hierarchy table. Other than the change in presentation, the adoption of this new guidance in interim periods beginning in 2016 did not have an impact on our consolidated financial statements.

In May 2015, FASB issued Accounting Standards Update (ASU) 2015-09, Financial Services – Insurance (Topic 944): Disclosures about Short-Duration Contracts.  The guidance requires additional disclosures for short-duration insurance contracts.  New disclosures are to include more information about initial claim estimates and subsequent adjustments to those estimates, the methodologies and judgments used to estimate claims, and the timing, frequency, and severity of claims.  This standard is effective for us beginning with this 2016 annual financial statement.  The guidance requires a change in disclosure only (see Note 9 to our financial statements), and thus has no impact on our financial condition or results of operations.

Prospective Accounting Guidance

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718):  Improvements to Employee Share-Based Payment Accounting.  The new guidance requires that all tax effects related to share-based payments be made through the income statement at the time of settlement as opposed to recognizing excess tax benefits in additional paid-in capital.  It also requires the cash flows resulting from share-based payments to be included as an operating activity.  In addition to the changes, the

60

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

guidance permits reporting entities to elect to estimate forfeitures related to share-based payments or recognize them as they occur.  The threshold to qualify for equity classification has also been revised to permit withholding up to the maximum statutory tax rates in the applicable jurisdictions.  The standard is effective for us in the first quarter of 2017.  Adoption of this guidance is not expected to have a material impact on our financial condition and results of operations.

In May 2014, the FASB Issued ASU 2014-09 (Topic 606): Revenue from Contracts with Customers.  The guidance revises the criteria for revenue recognition and requires that the revenue recognized reflect the transfer of promised goods or services to customers in an amount that represents the consideration to which the entity expects to be entitled in exchange for those goods or services.  The standard is effective for us in the first quarter of 2018.  Revenue from insurance contracts is excluded from the scope of the new guidance and as a result, adoption of this guidance is not expected to have a material impact on our financial condition and results of operations.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10):  Recognition and Measurement of Financial Assets and Financial Liabilities.  This guidance requires fair value measurement for equity investments (not including those that result in consolidation of the investee or use the equity method of accounting) and the recognition of changes in fair value to be presented as a component of net income.  The guidance also revises the disclosure requirements related to fair value changes of liabilities presented in comprehensive income, eliminates disclosure related to the methods and assumptions underlying fair value for financial instruments measured at amortized cost, and simplifies impairment assessments for equity investments without readily determinable fair values.  This standard is effective for us in the first quarter of 2018.  The Company will continue to monitor the impact as the implementation date approaches.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).  Under current guidance for lessees, leases are only included on the balance sheet if certain criteria, classifying the contract as a capital lease, are met.  The new guidance requires a lessee to recognize a lease liability and a right of use asset for all leases extending beyond twelve months.  The new guidance is effective for us in the first quarter of 2019.  Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach.  Adoption of the guidance is not expected to have a material effect on the Company’s consolidated financial statements as the Company does not have any significant leases.  

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses.  The new guidance replaces the methodology of credit loss impairment, which currently, delays the recognition of credit losses until a probable loss has been incurred.  The new guidance requires credit losses for securities measured at amortized cost, to be determined using current expected credit losses estimates.  These estimates are to be derived from historical, current and reasonable supporting forecasts, including prepayments and estimates, and will be recorded through a valuation allowance account that will run through the income statement.  The same method will be used for available-for-sale securities, but the valuation allowance will be limited to the amount by which the fair value is below amortized cost.  The standard is effective for us in the first quarter of 2020.  The Company will continue to monitor the impact as the implementation date approaches.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

Investments

The Company has the ability and positive intent to hold certain investments until maturity. Therefore, fixed maturity securities classified as held-to-maturity are recorded at amortized cost. Equity securities and fixed maturity securities classified as available-for-sale are recorded at fair value. Temporary changes in the fair value of these securities are reported in shareholders’ equity as a component of other comprehensive income, net of deferred income taxes.

Investment income is recognized as it is earned. The discount or premium on fixed maturity securities is amortized using the “constant yield” method. Anticipated prepayments, where applicable, are considered when determining the amortization of premiums or discounts. Realized investment gains and losses are determined using the specific identification method.

The Company regularly reviews the fair value of its investments. Impairment of an investment security results in a reduction of the carrying value of the security and the realization of a loss when the fair value of the security declines below the cost or amortized cost, as applicable, for the security and the impairment is deemed to be other-than-temporary. The Company regularly reviews its investment

61

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

portfolio to evaluate the existence of other-than-temporary declines in the fair value of investments. The Company considers various factors in determining if a decline in the fair value of an individual security is other-than-temporary, including but not limited to a reduction or interruption in scheduled cash flows, the financial condition of the issuer, how long and by how much the fair value has been below amortized cost, losses due to credit concerns, downgrades and the Company’s intent to sell or ability to hold the security.

Other-than-temporary impairment losses on equity securities are recognized in net income and are measured as the difference between cost and fair value. Impairment losses on fixed maturities are recognized in the financial statements depending on the facts and circumstances related to the specific security. If we intend to sell a security or it is more likely than not that we would be required to sell a security before the recovery of its amortized cost, less any current period credit loss, an other-than-temporary impairment would be recognized in net income for the difference between amortized cost and fair value. If we do not expect to recover the amortized cost basis, we do not plan to sell the security and if it is not more likely than not that we would be required to sell a security before the recovery of its amortized cost, less any current period credit loss, the recognition of the other-than-temporary impairment is bifurcated. The credit loss portion would be recognized in net income and the noncredit loss portion in other comprehensive income.

Cash and Cash Equivalents

Cash equivalents include short-term money market funds and corporate bonds with an original maturity of 90 days or less.

Short-Term Investments

Short-term investments include municipal securities, corporate bonds and certificates of deposit with an original maturity greater than 90 days but less than one year.

Other Investments

Other investments consist of a limited partnership interest that is accounted for under the equity method, valued using the net asset value provided by the general partner of the limited partnership, which approximates the fair value of the interest.  The limited partnership’s objective is to generate absolute returns by investing long and short in publicly-traded global securities.  Redemptions are allowed monthly following a 60-day notice with no lock up periods.  The Company has no unfunded commitments to the limited partnership.

Premiums Receivable

Premiums receivable consist primarily of premium-related balances due from policyholders. The Company considers premiums receivable as past due based on the payment terms of the underlying policy. The balance is shown net of the allowance for doubtful accounts. Receivables due from insureds are charged off when a determination has been made by management that a specific balance will not be collected. An estimate of amounts that are likely to be charged off is established as an allowance for doubtful accounts as of the balance sheet date. The estimate is primarily comprised of specific balances that are considered probable to be charged off after all collection efforts have ceased, as well as historical trends and an analysis of the aging of the receivables.

Property and Equipment

The Company’s property and equipment, including certain costs incurred to develop or obtain software for internal use, are stated at cost less accumulated depreciation. Depreciation is calculated primarily by the straight-line method over the estimated useful lives of the respective assets, generally 39 years for buildings and three to seven years for all other fixed assets.

Deferred Policy Acquisition Costs

The direct costs of successfully acquiring and renewing business are capitalized to the extent recoverable and are amortized over the effective period of the related insurance policies in proportion to premium revenue earned. These capitalized costs consist mainly of sales commissions, premium taxes and other underwriting costs. The Company evaluates deferred policy acquisition costs for recoverability by comparing the unearned premiums to the estimated total expected claim costs and related expenses, offset by anticipated investment income. The Company would reduce the deferred costs if the unearned premiums were less than expected claims and expenses after considering investment income, and report any adjustments in amortization of deferred policy acquisition costs. There were no adjustments necessary in 2016, 2015 or 2014.

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

Reserves for Loss and Loss Adjustment Expenses

Reserves for loss and loss adjustment expenses represent the estimated ultimate cost of all reported and unreported losses incurred through December 31. The Company does not discount loss and loss adjustment expense reserves. The reserves for loss and loss adjustment expenses are estimated using individual case-basis valuations, statistical analyses and estimates based upon experience for unreported claims and their associated loss and loss adjustment expenses. Such estimates may be more or less than the amounts ultimately paid when the claims are settled. The estimates are subject to the effects of trends in loss severity and frequency. Although considerable variability is inherent in these estimates, management believes that the reserves for loss and loss adjustment expenses are adequate. The estimates are continually reviewed and adjusted as necessary as experience develops or new information becomes known. Any adjustments are included in current operations.

Subrogation recoverables, as well as deductible recoverables from policyholders, are estimated using individual case-basis valuations and aggregate estimates. Deductibles that are recoverable from policyholders and other recoverables from state funds decrease the liability for loss and loss adjustment expenses.

The Company funds its obligations under certain settled claims where the payment pattern and ultimate cost are fixed and determinable on an individual claim basis through the purchase of annuities. These annuities are purchased from unaffiliated carriers and name the claimant as payee. The cost of purchasing the annuity is recorded as paid loss and loss adjustment expenses. To the extent the annuity funds estimated future claims, reserves for loss and loss adjustment expense are reduced.

Premium Revenue

Premiums on workers’ compensation insurance are based on actual payroll costs or production during the policy term and are normally billed monthly in arrears or annually. However, the Company generally requires a deposit at the inception of a policy.

Premium revenue is earned on a pro rata basis over periods covered by the policies. The reserve for unearned premiums on these policies is computed on a daily pro rata basis.

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

The Company estimates EBUB premiums on a quarterly basis using historical data and applying various assumptions based on the current market and economic conditions, and records an adjustment to premium, related losses, and expenses as warranted.

Reinsurance

Reinsurance premiums, losses and allocated loss adjustment expenses are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts.

Amounts recoverable from reinsurers include balances currently owed to the Company for losses and allocated loss adjustment expenses that have been paid to policyholders, amounts that are currently reserved for and will be recoverable once the related expense has been paid and experience-rated commissions recoverable upon commutation.

Upon management’s determination that an amount due from a reinsurer is uncollectible due to the reinsurer’s insolvency or other matters, the amount is written off.

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

Ceding commissions are earned from certain reinsurance companies and are intended to reimburse the Company for policy acquisition costs related to those premiums ceded to the reinsurers. Ceding commission income is recognized over the effective period of the related insurance policies in proportion to premium revenue earned and is reflected as a reduction in underwriting and certain other operating costs.

Experience-rated commissions are earned from certain reinsurance companies based on the financial results of the applicable risks ceded to the reinsurers. These commission revenues on reinsurance contracts are recognized during the related reinsurance treaty period and are based on the same assumptions used for recording loss and allocated loss adjustment expenses. These commissions are reflected as a reduction in underwriting and certain other operating costs and are adjusted as necessary as experience develops or new information becomes known. Any such adjustments are included in income from current operations. Experience-rated commissions had no impact on underwriting and certain other operating costs in 2016 compared to $0.3 in 2015 and no impact in 2014.

In December 2016, the Company commuted reinsurance agreements with Hannover Reinsurance Limited (Ireland) (“Hannover”) and Tokio Millennium Re Limited (“Tokio”) covering portions of accident years 2011 through 2013.  The Company received cash of $0.2 million and an additional $25.4 million payment effectuated solely through offset against the balance of the funds withheld account under the reinsurance agreements in exchange for releasing Hannover and Tokio from their reinsurance obligations under the commuted agreements.  Both Hannover and Tokio remain obligated to the subsidiaries of the Company under other reinsurance agreements. As a result of the commutation, the effect on the Company’s net income in the year ended December 31, 2016 was immaterial.

Fee and Other Income

The Company recognizes income related to commissions earned by AGAI as the related services are performed.

Advertising

All advertising expenditures incurred by the Company are charged to expense in the period to which they relate and are included in underwriting and certain other operating costs in the consolidated statements of income. Total advertising expenses incurred were $0.7 million in 2016 and 2015 and $0.5 million in 2014.

Income Taxes

The Company accounts for income taxes using the liability method. The provision for income taxes has two components, amounts currently payable or receivable and deferred amounts. Deferred income tax assets and liabilities are recognized for the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company considers deferred tax assets to be recoverable if it is probable that the related tax losses can be offset by future taxable income. The Company includes reversal of existing temporary differences, tax planning strategies available and future operating income in this assessment. To the extent the deferred tax assets exceed the amount expected to be recovered in future years, the Company records a valuation allowance for the amount determined unrecoverable.

Insurance-Related Assessments

Insurance-related assessments are accrued in the period in which they have been incurred. The Company is subject to a variety of assessments related to insurance commerce, including those by state guaranty funds and workers’ compensation second-injury funds. State guaranty fund assessments are used by state insurance oversight agencies to cover losses of policyholders of insolvent or rehabilitated insurance companies and for the operating expenses of such agencies.  Assessments based on premiums are generally paid one year after the calendar year in which the premium is written, while assessments based on losses are generally paid within one year of the calendar year in which the loss is paid.

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

Policyholder Dividends

The Company writes certain policies for which the policyholder may participate in favorable claims experience through a dividend. An estimated provision for workers’ compensation policyholders’ dividends is accrued as the related premiums are earned. Dividends do not become a fixed liability unless and until declared by the respective Boards of Directors of AMERISAFE’s insurance subsidiaries. The dividend to which a policyholder may be entitled is set forth in the policy and is related to the amount of losses sustained under the policy. Dividends are calculated after the policy expiration. The Company is able to estimate the policyholder dividend liability because the Company has information regarding the underlying loss experience of the policies written with dividend provisions and can estimate future dividend payments from the policy terms.

Earnings Per Share

The Company computes earnings per share (EPS) in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share. Additionally, during 2013, the Company applied the “two-class method” in computing basic and diluted earnings per share as a result of the participating unvested common shares which contained nonforfeitable rights to dividends during this period.  As of January 1, 2014, the Company no longer has participating unvested common shares which contain nonforfeitable rights to dividends and now applies the treasury stock method in computing basic and diluted earnings per share.

Under the two-class method, net income available to common and participating common shareholders is reduced by the amount of dividends declared in the current period and by the contractual amount of dividends that must be paid for the current period related to the Company’s common and participating common shares. Participating common shares include unvested share-based payment awards that contain nonforfeitable rights to dividends, whether paid or unpaid. Any remaining undistributed earnings are allocated to the common and participating common shareholders to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. The amount of earnings allocable to each security is divided by the number of outstanding shares of the security to which the earnings are allocated to determine the EPS for the security. In a period of loss, no losses are allocated to the participating common shareholders. Instead, all such losses are allocated to the common shareholders.

Basic EPS is calculated by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period. The diluted EPS calculation includes potential common shares assumed issued under the treasury stock method, which reflects the potential dilution that would occur if any outstanding options or warrants were exercised or restricted stock becomes vested, and includes the “if converted” method for participating securities if the effect is dilutive. Prior to 2014, we determined diluted EPS as the more dilutive result of either the treasury method or the two-class method.

Share-Based Compensation

The Company recognizes the impact of its share-based compensation in accordance with FASB ASC Topic 718, Compensation-Stock Compensation. All share-based grants are recognized as compensation expense over the vesting period.  The target value of long-term incentive awards are recognized as compensation over the performance period.

2. Investments

Short-term investments held at December 31, 2016 include $ 21.9 million of U.S. Treasury securities and obligation of U.S. government agencies, $4.9 million of states and political subdivisions and $2.8 million of corporate bonds. Short-term investments held at December 31, 2015 include $7.7 million of corporate bonds.

AMERISAFE holds an investment in a limited partnership hedge fund accounted for under the equity method.  The carrying value of this investment is $13.3 million at December 31, 2016.

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as held-to-maturity at December 31, 2016 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	394,875	$	7,622	$	(3,014	)	$	399,483
Corporate bonds		143,858		423		(265	)		144,016
Commercial mortgage-backed securities		70		—		—			70
U.S. agency-based mortgage-backed securities		9,967		948		—			10,915
U.S. Treasury securities and obligations      of U.S. government agencies		11,737		746		(67	)		12,416
Asset-backed securities		1,927		163		(59	)		2,031
Totals	$	562,434	$	9,902	$	(3,405	)	$	568,931

The gross unrealized gains and losses on, and the cost or amortized cost and fair value of, those investments classified as available-for-sale at December 31, 2016 are summarized as follows:

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Fixed maturity:
States and political subdivisions	$	231,168	$	4,340	$	(3,215	)	$	232,293
Corporate bonds		182,350		436		(271	)		182,515
U.S. agency-based mortgage-backed securities		10,428		17		(1,103	)		9,342
U.S. Treasury securities and obligations      of U.S. government agencies		55,925		—		(978	)		54,947
Total fixed maturity		479,871		4,793		(5,567	)		479,097
Other investments		10,000		3,330		—			13,330
Equity securities		—		33		—			33
Totals	$	489,871	$	8,156	$	(5,567	)	$	492,460

The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as held-to-maturity at December 31, 2015 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	408,447	$	15,352	$	(45	)	$	423,754
Corporate bonds		171,224		159		(810	)		170,573
Commercial mortgage-backed securities		37,494		204		(15	)		37,683
U.S. agency-based mortgage-backed securities		13,223		1,249		(1	)		14,471
U.S. Treasury securities and obligations      of U.S. government agencies		12,487		897		(4	)		13,380
Asset-backed securities		2,289		202		(76	)		2,415
Totals	$	645,164	$	18,063	$	(951	)	$	662,276

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

The gross unrealized gains and losses on, and the cost or amortized cost and fair value of, those investments classified as available-for-sale at December 31, 2015 are summarized as follows:

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Fixed maturity:
States and political subdivisions	$	164,684	$	6,942	$	(207	)	$	171,419
Corporate bonds		202,537		253		(1,486	)		201,304
U.S. agency-based mortgage-backed securities		8,888		4		(1,593	)		7,299
Total fixed maturity		376,109		7,199		(3,286	)		380,022
Other investments		10,000		2,217		—			12,217
Equity securities		—		31		—			31
Totals	$	386,109	$	9,447	$	(3,286	)	$	392,270

A summary of the amortized cost and fair value of investments in fixed maturity securities, classified as held-to-maturity at December 31, 2016, by contractual maturity, is as follows:

	Amortized Cost		Fair Value
	(in thousands)
Maturity:
Within one year	$	109,707	$	110,469
After one year through five years		259,942		263,620
After five years through ten years		105,396		106,341
After ten years		75,425		75,485
Commercial mortgage-backed securities		70		70
U.S. agency-based mortgage-backed securities		9,967		10,915
Asset-backed securities		1,927		2,031
Totals	$	562,434	$	568,931

A summary of the amortized cost and fair value of investments in fixed maturity securities, classified as available-for-sale at December 31, 2016, by contractual maturity, is as follows:

	Amortized Cost		Fair Value
	(in thousands)
Maturity:
Within one year	$	64,852	$	65,174
After one year through five years		215,486		215,624
After five years through ten years		30,846		30,488
After ten years		158,259		158,469
U.S. agency-based mortgage-backed securities		10,428		9,342
Totals	$	479,871	$	479,097

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

At December 31, 2016, there were $21.2 million of held-to-maturity investments, $0.4 million of available-for-sale investments and $0.1 million of cash on deposit with regulatory agencies of states in which the Company does business.

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

A summary of the Company’s realized gains and losses on sales, calls or redemptions of investments for 2016, 2015 and 2014 is as follows:

	Fixed Maturity Securities Available for Sale			Equity Securities			Other		Total
	(in thousands)
Year ended December 31, 2016
Proceeds from sales	$	54,730		$	—		$	4,609	$	59,339
Gross realized investment gains	$	823		$	—		$	68	$	891
Gross realized investment losses		(1,728	)		—			—		(1,728	)
Net realized investment gains (losses)		(905	)		—			68		(837	)
Other, including gains on calls and redemptions		274			—			69		343
Net realized gains (losses) on investments	$	(631	)	$	—		$	137	$	(494	)
Year ended December 31, 2015
Proceeds from sales	$	4,432		$	—		$	—	$	4,432
Gross realized investment gains	$	177		$	—		$	—	$	177
Gross realized investment (losses)		(162	)		—			—		(162	)
Net realized investment gains		15			—			—		15
Impairments		(2,653	)		—			—		(2,653	)
Other, including gains on calls and redemptions		102			—			42		144
Net realized gains (losses) on investments	$	(2,536	)	$	—		$	42	$	(2,494	)
Year ended December 31, 2014
Proceeds from sales	$	768		$	9,780		$	—	$	10,548
Gross realized investment gains	$	1		$	749		$	—	$	750
Gross realized investment (losses)		—			(451	)		—		(451	)
Net realized investment gains		1			298			—		299
Impairments		(222	)		—			—		(222	)
Other, including gains on calls and redemptions		244			—			376		620
Net realized gains on investments	$	23		$	298		$	376	$	697

In 2016, the Company sold bonds that were classified as held-to-maturity.  In February, Moody’s downgraded the bonds to B2 from B1 citing increasing liquidity concerns and also placed the bonds on negative outlook indicating the rating could be downgraded further.  Given the evidence of significant deterioration, the Company elected to sell the bonds for $3.0 million, recognizing a $0.1 million realized gain.

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

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Gross investment income:
Fixed maturity securities	$	27,837		$	28,498		$	26,622
Short-term investments and cash and cash equivalents		348			149			426
Equity securities		—			—			232
Other investments		1,568			763			1,611
Total gross investment income		29,753			29,410			28,891
Investment expenses		(1,647	)		(1,508	)		(1,677	)
Net investment income	$	28,106		$	27,902		$	27,214

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

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

	Less Than 12 Months				12 Months or Greater				Total
	Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses
	(in thousands)
December 31, 2016
Held-to-Maturity
Fixed maturity securities:
States and political subdivisions	$	157,507	$	3,014	$	—	$	—	$	157,507	$	3,014
Corporate bonds		44,654		202		6,292		63		50,946		265
U.S. Treasury securities and obligations      of U.S. government agencies		3,968		67		—		—		3,968		67
Asset-backed securities		—		—		1,173		59		1,173		59
Total held-to-maturity securities		206,129		3,283		7,465		122		213,594		3,405
Available-for Sale
Fixed maturity securities:
States and political subdivisions	$	73,505	$	2,976	$	4,523	$	239	$	78,028	$	3,215
Corporate bonds		41,419		111		7,922		160		49,341		271
U.S. agency-based mortgage-backed securities		3,702		48		3,607		1,055		7,309		1,103
U.S. Treasury securities and obligations      of U.S. government agencies		54,947		978		—		—		54,947		978
Total available-for-sale securities		173,573		4,113		16,052		1,454		189,625		5,567
Total	$	379,702	$	7,396	$	23,517	$	1,576	$	403,219	$	8,972
December 31, 2015
Held-to-Maturity
Fixed maturity securities:
States and political subdivisions	$	24,068	$	45	$	—	$	—	$	24,068	$	45
Corporate bonds		128,436		687		18,139		123		146,575		810
Commercial mortgage-backed securities		9,784		15		—		—		9,784		15
U.S. agency-based mortgage-backed securities		18		—		28		1		46		1
U.S. Treasury securities and obligations      of U.S. government agencies		2,980		4		—		—		2,980		4
Asset-backed securities		—		—		1,389		76		1,389		76
Total held-to-maturity securities		165,286		751		19,556		200		184,842		951
Available-for Sale
Fixed maturity securities:
States and political subdivisions	$	6,560	$	9	$	4,439	$	198	$	10,999	$	207
Corporate bonds		141,857		1,475		4,216		11		146,073		1,486
U.S. agency-based mortgage-backed securities		434		37		6,794		1,556		7,228		1,593
Total available-for-sale securities		148,851		1,521		15,449		1,765		164,300		3,286
Total	$	314,137	$	2,272	$	35,005	$	1,965	$	349,142	$	4,237

At December 31, 2016, the Company held 260 individual fixed maturity securities that were in an unrealized loss position, of which 17 were in a continuous unrealized loss position for longer than 12 months.

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

The Company regularly reviews its investment portfolio to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of our investments. The Company considers various factors in determining if a decline in the fair value of an individual security is other-than-temporary. The key factors considered are:

• any reduction or elimination of preferred 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;

• our intent not to sell the security for a sufficient time period for it to recover its value;

• the likelihood of being forced to sell the security before the recovery of its value; and

• an evaluation as to whether there are any credit losses on debt securities.

We reviewed all securities with unrealized losses in accordance with the impairment policy described above. The Company determined that the unrealized losses in the fixed maturity securities portfolio related primarily to changes in market interest rates since the date of purchase, current conditions in the capital markets and the impact of those conditions on market liquidity and prices generally. We expect to recover the carrying value of these securities as it is not more likely than not that we will be required to sell the securities before the recovery of its amortized cost basis.

In 2016, there were no impairment losses recognized for other-than-temporary declines in the fair value of our investments.

3. Premiums Receivable

Premiums receivable consist primarily of premium-related balances due from policyholders. The balance is shown net of the allowance for doubtful accounts. The components of premiums receivable are shown below:

	December 31,
	2016			2015
	(in thousands)
Premiums receivable	$	188,217		$	190,216
Allowance for doubtful accounts		(5,212	)		(4,852	)
Premiums receivable, net	$	183,005		$	185,364

The following summarizes the activity in the allowance for doubtful accounts:

	December 31,
	2016			2015			2014
	(in thousands)
Balance, beginning of year	$	4,852		$	5,211		$	5,458
Provision for bad debts		1,646			806			673
Write-offs		(1,286	)		(1,165	)		(920	)
Balance, end of year	$	5,212		$	4,852		$	5,211

Included in premiums receivable at December 31, 2016, 2015 and 2014 is the Company’s estimate for EBUB premium of $7.7 million, $7.6 million and $5.2 million, respectively.

4. Deferred Policy Acquisition Costs

Deferred policy acquisition costs represent those costs that are incremental and directly related to the successful acquisition of new or the renewal of existing insurance contracts.  We defer incremental costs that result directly from, and are essential to, the acquisition or renewal of an insurance contract.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

We also defer a portion of employee total compensation costs directly related to time spent performing specific acquisition or renewal activities.

These costs are deferred and expensed over the life of the related policies. Major categories of the Company’s deferred policy acquisition costs are summarized as follows:  

	December 31,
	2016		2015
	(in thousands)
Agents’ commissions	$	15,286	$	15,997
Premium taxes		2,578		3,121
Deferred underwriting expenses		1,436		1,294
Total deferred policy acquisition costs	$	19,300	$	20,412

The following summarizes the activity in the deferred policy acquisition costs:

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Balance, beginning of year	$	20,412		$	19,649		$	19,171
Policy acquisition costs deferred		43,209			45,604			44,295
Amortization expense during the year		(44,321	)		(44,841	)		(43,817	)
Balance, end of year	$	19,300		$	20,412		$	19,649

5. Property and Equipment

Property and equipment consist of the following:

	December 31,
	2016			2015
	(in thousands)
Land and office building	$	7,515		$	7,069
Furniture and equipment		6,509			6,227
Software		6,739			6,277
Automobiles		74			74
		20,837			19,647
Accumulated depreciation		(14,201	)		(13,466	)
Property and equipment, net	$	6,636		$	6,181

Furniture and equipment included property held under capital leases of $0.2 million at December 31, 2016.  Accumulated depreciation includes $80,000 that is related to these properties at December 31, 2016.  Furniture and equipment included property held under capital leases of $0.1 million at December 31, 2015.  Accumulated depreciation includes $97,000 that is related to these properties at December 31, 2015.  Furniture and equipment included property held under capital leases of $0.1 million at December 31, 2014.  Accumulated depreciation includes $49,000 that is related to these properties at December 31, 2014.  The capital lease obligations related to these properties are included in accounts payable and other liabilities.

Future minimum lease payments related to the capital lease obligations are detailed below (in thousands):

2017	$	56
2018		42
2019		42
2020		42
Present value of net minimum lease payments	$	182

71

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

The Company made a partial disposition election under tax regulations to write-off capitalized amounts for book and tax purposes of certain fixed assets and deductible repairs in the amount of $0.6 million in 2015 and this amount is included in “Loss on disposal of assets.”

6. Reinsurance

The Company cedes certain premiums and losses to various reinsurers under quota share and excess-of-loss treaties. These reinsurance arrangements provide for greater diversification of business, allow management to control exposure to potential losses arising from large risks, and provide additional capacity for growth. Ceded reinsurance contracts do not relieve the Company from its obligations to policyholders. The Company remains liable to its policyholders for the portion reinsured to the extent that any reinsurer does not meet the obligations assumed under the reinsurance agreements. To minimize its exposure to significant losses from reinsurer insolvencies, the Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers on a continual basis. The effect of reinsurance on premiums written and earned in 2016, 2015 and 2014 was as follows:

	2016 Premiums						2015 Premiums						2014 Premiums
	Written			Earned			Written			Earned			Written			Earned
	(in thousands)
Gross	$	373,055		$	379,011		$	386,529		$	387,122		$	393,819		$	389,540
Ceded		(10,307	)		(10,307	)		(11,228	)		(11,228	)		(13,793	)		(13,793	)
Net premiums	$	362,748		$	368,704		$	375,301		$	375,894		$	380,026		$	375,747

The amounts recoverable from reinsurers consist of the following:

	December 31,
	2016		2015
	(in thousands)
Unpaid losses recoverable:
Case basis	$	49,361	$	37,207
Incurred but not reported		28,895		27,651
Paid losses recoverable		485		414
Experience-rated commissions recoverable		4,925		25,805
Total	$	83,666	$	91,077

Amounts recoverable from reinsurers consists of ceded case reserves, ceded incurred but not reported (“IBNR”) reserves, paid losses recoverable and experience-rated commissions recoverable. Ceded case and ceded IBNR reserves represent the portion of gross loss and loss adjustment expense liabilities that are recoverable under reinsurance agreements, but are not yet due from reinsurers. Paid losses recoverable are receivables currently due from reinsurers for ceded paid losses. The Company considers paid losses recoverable outstanding for more than 90 days to be past due. At December 31, 2016, there were no paid losses recoverable past due. Experience-rated commissions recoverable represents earned commission from certain reinsurance companies based on the financial results of the applicable risks ceded to the reinsurers, and these amounts declined during 2016 as a result of the December 2016 commutation of the 2011 through 2013 reinsurance agreements with Hannover and Tokio.

The Company received reinsurance recoveries of $0.5 million in 2016, $1.0million in 2015 and $ 1.5 million in 2014.

72

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

The Company generally secures large reinsurance recoverable balances with various forms of collateral, including funds withheld accounts, irrevocable letters of credit and secured trusts.  At December 31, 2016, reinsurance recoverables from reinsurers that exceeded 1.5% of statutory surplus of the Company’s insurance subsidiaries are shown below (in thousands). The A.M. Best Company rating for the reinsurer is shown parenthetically.

Hannover Reinsurance Limited (Ireland) (A+)	$	29,670
Odyssey America Reinsurance Corporation (A)		12,600
Minnesota Workers’ Compensation Reinsurance Association (NR)		9,623
Other reinsurers		31,773
Total amounts recoverable from reinsurers		83,666
Funds withheld and letters of credit related to the above recoverables		(38,453	)
Total unsecured amounts recoverable from reinsurers	$	45,213

7. Income Taxes

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

	December 31,
	2016			2015
	(in thousands)
Deferred income tax assets:
Discounting of net unpaid loss and loss adjustment    expenses	$	16,035		$	15,415
Unearned premiums		14,483			14,839
Accrued expenses and other		3,640			3,904
State income tax		617			488
Accrued policyholder dividends		2,024			719
Impaired securities		70			238
Capital loss carryforward		15			715
Accrued insurance-related assessments		5,323			4,953
Net unrealized loss on securities		265			—
Total deferred tax assets		42,472			41,271
Deferred income tax liabilities:
Deferred policy acquisition costs		(8,492	)		(9,012	)
Callable bond amortization		(10	)		—
Unrealized gain on securities available-for-sale		—			(1,393	)
Property and equipment and other		204			(696	)
Salvage and subrogation		(363	)		(265	)
Guaranty fund related items		—			—
Total deferred income tax liabilities		(8,661	)		(11,366	)
Net deferred income taxes	$	33,811		$	29,905

73

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

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

	Year Ended December 31,
	2016			2015		2014
	(in thousands)
Current:
Federal	$	35,602		$	28,047	$	20,811
State		1,603			1,012		684
		37,205			29,059		21,495
Deferred:
Federal		(2,120	)		1,343		(821	)
State		(129	)		103		(591	)
		(2,249	)		1,446		(1,412	)
Total	$	34,956		$	30,505	$	20,083

During 2016, 2015 and 2014, there was no valuation allowance on the Company’s deferred income tax assets and liabilities.     

Income tax expense from operations is different from the amount computed by applying the U.S. federal income tax statutory rate of 35% to income before income taxes as follows:

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Income tax computed at federal statutory tax rate	$	39,487		$	35,338		$	25,812
Tax-exempt interest, net		(5,370	)		(5,630	)		(5,620	)
State income tax		913			762			(146	)
Dividends received deduction		(125	)		(19	)		(60	)
Other		51			54			97
	$	34,956		$	30,505		$	20,083

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. There were no uncertain tax positions as of December 31, 2016, 2015 and 2014.

Tax years 2013 through 2016 are subject to examination by the federal and state taxing authorities. In 2016, the Company was notified by the Illinois Department of Revenue that the examination of tax years 2011 and 2012 had been completed with no findings.

8. Line of Credit

In 2013, the Company entered into an agreement providing for a line of credit in the maximum amount of $20.0 million with Frost Bank.  In December 2016, the agreement was renewed.  The agreement expires in December 2019.  Under the agreement, advances may be made either in the form of loans or letters of credit. Borrowings under the agreement accrue at interest rates based upon prime rate or LIBOR.  Under the agreement, the Company will pay a fee of 0.25% on the unused portion of the loan in arrears quarterly for a fee of $50,000 annually, assuming the line of credit is not used during the calendar year.  The line of credit is unsecured. No borrowings or letters of credit were outstanding under the line of credit arrangement at December 31, 2016 or 2015.

74

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

9. Loss and Loss Adjustment Expenses

The following development tables provide the incurred and paid claims and allocated claim adjustment expenses, net of reinsurance, for workers’ compensation and general liability for accident years 2007 through 2016.  The incurred but not reported (“IBNR”) claims and claims frequency is included for each accident year presented.

	Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance																				As of
	For the Years Ended December 31,																				December 31,2016
	(Dollars in thousands)
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016		Total IBNR plus Expected Development on Reported Claims		Cumulative Number of Claims Reported
2007	$	208,480	$	218,448	$	206,044	$	196,773	$	185,225	$	181,633	$	180,229	$	179,373	$	178,608	$	178,582	$	1,620		7,122
2008		-		196,923		200,371		195,619		190,905		187,695		184,547		182,846		183,608		182,901		2,751		6,486
2009		-		-		185,359		188,746		188,462		187,943		184,006		182,274		177,795		176,586		3,199		5,371
2010		-		-		-		179,156		202,479		208,035		205,769		198,861		193,029		191,000		5,786		5,970
2011		-		-		-		-		196,384		199,522		199,163		198,213		195,262		192,988		7,461		6,040
2012		-		-		-		-		-		222,549		222,075		212,738		193,515		184,460		7,798		5,743
2013		-		-		-		-		-		-		241,810		241,811		233,656		220,457		11,868		5,761
2014		-		-		-		-		-		-		-		268,846		268,846		249,097		21,004		5,815
2015		-		-		-		-		-		-		-		-		262,573		262,573		28,658		5,477
2016		-		-		-		-		-		-		-		-		-		250,491		34,737		5,104
																	Total		$	2,089,136	$	124,882

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
	(Dollars in thousands)
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016		Claim Frequency		*
2007	$	43,470	$	97,657	$	128,254	$	141,595	$	152,136	$	158,056	$	162,903	$	164,970	$	166,734	$	167,996		21.77
2008		-		47,685		103,057		132,515		147,377		157,388		163,933		166,814		170,347		171,496		20.98
2009		-		-		42,332		96,173		123,946		142,667		150,925		155,365		158,214		159,345		19.82
2010		-		-		-		47,520		108,714		141,029		156,974		165,834		169,565		172,426		24.93
2011		-		-		-		-		53,329		111,029		140,831		153,968		161,639		165,967		22.80
2012		-		-		-		-		-		50,579		107,467		133,658		149,161		154,553		18.71
2013		-		-		-		-		-		-		51,396		119,507		150,304		165,994		16.54
2014		-		-		-		-		-		-		-		53,060		119,820		153,320		14.93
2015		-		-		-		-		-		-		-		-		54,141		121,599		14.15
2016		-		-		-		-		-		-		-		-		-		52,238		13.47
																	Total			1,484,933
All outstanding claim liabilities before 2007, net of reinsurance																				60,317
Liabilities for claims and claim adjustment expenses, net of reinsurance																				664,520
*Frequency, as calculated above, refers to reported claims divided by gross premium earned

The average annual percentage payout of incurred claims by age, net of reinsurance, for workers’ compensation and general liability as of December 31, 2016 is summarized below. Since workers’ compensation has long payout periods, the table below shows less than 100% in the years disclosed.

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited)
Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
	24.0%		29.7%		15.4%		8.1%		4.6%		2.7%		1.9%		1.2%		0.8%		0.7%

75

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

The following table provides a reconciliation of the beginning and ending reserve balances, net of related amounts recoverable from reinsurers, for 2016, 2015 and 2014:

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Balance, beginning of period	$	718,033		$	687,602		$	614,557
Less amounts recoverable from reinsurers      on unpaid loss and loss adjustment expenses		64,858			59,334			48,699
Net balance, beginning of period		653,175			628,268			565,858
Add incurred related to:
Current accident year		250,337			262,387			268,633
Prior accident years		(51,306	)		(47,814	)		(23,717	)
Total incurred		199,031			214,573			244,916
Less paid related to:
Current accident year		52,085			53,955			52,848
Prior accident years		135,601			135,711			129,658
Total paid		187,686			189,666			182,506
Net balance, end of period		664,520			653,175			628,268
Add amounts recoverable from reinsurers      on unpaid loss and loss adjustment expenses		78,256			64,858			59,334
Balance, end of period	$	742,776		$	718,033		$	687,602

The foregoing reconciliation reflects favorable development of the net reserves at December 31, 2016, 2015 and 2014. The favorable development reduced loss and loss adjustment expense incurred by $51.3 million in 2016 driven primarily by accident years 2012, 2013 and 2014 of $9.1 million, $13.2 million and $19.7 million, respectively. In 2015 and 2014, the Company recorded favorable development of $47.8 million and $23.7 million, respectively. The revisions to the Company’s reserves reflect new information gained by claims adjusters in the normal course of adjusting claims and is reflected in the financial statements when the information becomes available. It is typical for more serious claims to take several years or longer to settle and the Company continually revises estimates as more information about claimants’ medical conditions and potential disability becomes known and the claims get closer to being settled.  Multiple factors can cause loss development both unfavorable and favorable. The favorable loss development we experienced across accident years was largely due to favorable case reserve development from closed claims and claims where the worker had reached maximum medical improvement.

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

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

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Reserves for loss and LAE at beginning of year	$	958		$	819		$	219
Incurred losses and LAE during the current year		816			444			882
Loss and LAE payments		(287	)		(305	)		(282	)
Reserves for loss and LAE at end of year	$	1,487		$	958		$	819

76

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

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

The anticipated effect of inflation is implicitly considered when estimating liabilities for loss and loss adjustment expenses. Average severities are projected based on historical trends adjusted for implemented changes in underwriting standards, policy provisions and general economic trends. These anticipated trends are monitored based on actual development and are modified if necessary.

10. Statutory Accounting and Regulatory Requirements

The Company’s insurance subsidiaries file financial statements prepared in accordance with statutory accounting principles prescribed or permitted by the insurance regulatory authorities of the states in which the subsidiaries are domiciled. Statutory-basis shareholders’ capital and surplus at December 31, 2016, 2015 and 2014 of the directly owned insurance subsidiary, AIIC, and the combined statutory-basis net income and realized investment gains for all AMERISAFE’s insurance subsidiaries for the three years in the period ended December 31, 2016, were as follows (in thousands):

	2016			2015			2014
Capital and surplus	$	394,016		$	371,365		$	377,742
Net income		79,858			71,937			50,205
Net realized gains (losses) on investments		(504	)		(3,131	)		693

Property and casualty insurance companies are subject to certain risk-based capital (“RBC”) requirements specified by the National Association of Insurance Commissioners. Under these requirements, a target minimum amount of capital and surplus maintained by a property/casualty insurance company is determined based on the various risk factors related to it. At December 31, 2016, the capital and surplus of AIIC and its subsidiaries exceeded the minimum RBC requirement.

Pursuant to regulatory requirements, AIIC cannot pay dividends to the Company in excess of the greater of 10% of statutory surplus, or statutory net income, excluding realized investment gains, for the preceding 12-month period, without the prior approval of the Nebraska Director of Insurance. However, for purposes of this dividend calculation, net income from the previous two calendar years may be carried forward to the extent that it has not already been paid out as dividends. AIIC paid $67.0 million in dividends to the Company in 2016, $50.0 million in 2015 and $25.0 million in 2014. Based upon the dividend limitation described above, AIIC could pay to the Company dividends of up to $68.7 million in 2017 without seeking regulatory approval.

11. Capital Stock

Common Stock

The Company is authorized to issue 50,000,000 shares of common stock, par value $0.01 per share. At December 31, 2016, there were 20,488,385 shares of common stock issued and 19,230,135 shares outstanding.

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.01 per share. At December 31, 2016, there were no shares of preferred stock outstanding.

77

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

12. Stock Options and Restricted Stock

2005 Incentive Plan

The AMERISAFE 2005 Equity Incentive Plan (the “2005 Incentive Plan”) is administered by the Compensation Committee of the Board and was designed to provide incentive compensation to executive officers and other key management personnel. The 2005 Incentive Plan permitted awards in the form of incentive stock options, as defined in Section 422(b) of the Internal Revenue Code of 1986, non-qualified stock options, restricted shares of common stock and restricted stock units. In connection with the approval of the 2012 Equity and Incentive Compensation Plan by the Company’s shareholders, no further grants will be made under the 2005 Incentive Plan.  All grants made under the 2005 Incentive plan will continue in effect, subject to the terms and conditions of the 2005 Incentive Plan.

Stock options granted under the 2005 Incentive Plan have an exercise price of not less than 100% of the fair value of the common stock on the date of grant. Stock option grants are exercisable, subject to vesting requirements determined by the Compensation Committee, for periods of up to ten years from the date of grant. Stock options generally expire 90 days after the cessation of an optionee’s service as an employee. However, in the case of an optionee’s death or disability, the unexercised portion of a stock option remains exercisable for up to one year after the optionee’s death or disability. Stock options granted under the 2005 Incentive Plan are not transferable, except by will or the laws of descent and distribution.

The Company uses the Black-Scholes-Merton option pricing model to estimate the fair value of each option on the date of grant. The expected terms of options are developed by considering the Company’s historical attrition rate for those employees at the officer level, who are eligible to receive options. Further, the Company aggregates individual awards into homogenous groups based upon grant date. Expected volatility is estimated using daily historical volatility for six companies within the property and casualty insurance sector. The Company believes that historical volatility of this peer group is currently the best estimate of expected volatility of the market price of the Company’s common shares. The dividend yield was assumed to be zero as the Company did not pay cash dividends until 2013. The risk-free interest rate is the yield on the grant date of U.S. Treasury zero coupon securities with a maturity comparable to the expected term of the options.

The following table summarizes information about the stock options outstanding under the 2005 Incentive Plan at December 31, 2014, 2015 and 2016:

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)
Outstanding at January 1, 2014		576,248			11.12		3.8
Granted		—			—		—
Exercised		(294,165	)		9.09		—
Canceled, forfeited, or expired		—			—		—
Outstanding at December 31, 2014		282,083			11.30		3.6
Exercisable at December 31, 2014		282,083			11.30		3.6
Outstanding at January 1, 2015		282,083			11.30		3.6
Granted		—			—		—
Exercised		(193,204	)		9.55		—
Canceled, forfeited, or expired		—			—		—
Outstanding at December 31, 2015		88,879			12.10		4.3
Exercisable at December 31, 2015		88,879			12.10		4.3
Outstanding at January 1, 2016		88,879			12.10		4.3
Granted		—			—		—
Exercised		(68,879	)		12.14		3.3
Canceled, forfeited, or expired		—			—		—
Outstanding at December 31, 2016		20,000			8.71		3.1
Exercisable at December 31, 2016		20,000			8.71		3.1

78

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

	2016		2015		2014
	(in thousands)
Cash received from option exercises	$	837	$	1,844	$	2,674
Total tax benefits realized for tax deductions from    options exercised		833		2,109		2,797
Total intrinsic value of options exercised		2,967		6,969		9,145
Grant date fair value of options vested		—		—		144
Aggregate intrinsic value of vested options outstanding		1,073		3,448		8,763

The following table summarizes information about the restricted stock outstanding under the 2005 Incentive Plan at December 31, 2016:

	Shares			Weighted- Average Grant- Date Fair Value per Share
Nonvested balance at January 1, 2014		6,400			27.47
Granted		—			—
Vested		(800	)		27.35
Forfeited		(3,200	)		27.59
Nonvested balance at December 31, 2014		2,400			27.35
Granted		—			—
Vested		(800	)		27.35
Forfeited		—			—
Nonvested balance at December 31, 2015		1,600			27.35
Granted		—			—
Vested		(800	)		27.35
Forfeited		—			—
Nonvested balance at December 31, 2016		800			27.35

The Company recognized compensation expense of $58,000 in 2016 and $138,000 in 2015 and $325,000 in 2014, related to awards made under the 2005 Incentive Plan. Total tax benefits realized for tax deductions from vesting of restricted stock in 2016,  2015 and 2014 were $110,000, $81,000 and $38,000, respectively.

Non-Employee Director Restricted Stock Plan

The AMERISAFE Non-Employee Director Restricted Stock Plan (the “Restricted Stock Plan”) is administered by the Compensation Committee of the Board and provides for the automatic grant of restricted stock awards to non-employee directors of the Company. Awards to non-employee directors are generally subject to terms including non-transferability, immediate vesting upon death or total disability of a director, forfeiture of unvested shares upon termination of service by a director and acceleration of vesting upon a change of control of the Company. The maximum number of shares of common stock that may be issued pursuant to restricted stock awards under the Restricted Stock Plan is 100,000 shares, subject to the authority of the Board to adjust this amount in the event of a merger, consolidation, reorganization, stock split, combination of shares, recapitalization or similar transaction affecting the common stock. At December 31, 2016, there were 20,122 shares of common stock available for future awards under the Restricted Stock Plan.

Under the Restricted Stock Plan, each non-employee director is automatically granted a restricted stock award for a number of shares equal to $45,000 divided by the closing price of the Company’s common stock on the date of the annual meeting of shareholders at which the non-employee director is elected or is continuing as a member of the Board. Each restricted stock award vests on the date of the next annual meeting of shareholders following the date of grant, subject to the continued service of the non-employee director.  Under the terms of the Restricted Stock Plan, the Company’s Board of Directors may increase the dollar amount of the annual award to an amount up to $75,000 without shareholder approval.

79

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

As of December 31, 2016, there were 5,576 shares of restricted stock outstanding under the Non-Employee Director Restricted Stock Plan, all of which will vest on the date of the annual meeting of shareholders in 2017.

The following table summarizes information about the restricted stock outstanding under the Non-Employee Director Restricted Stock Plan at December 31, 2016:

	Shares			Weighted- Average Grant- Date Fair Value per Share
Nonvested balance at January 1, 2014		5,376			33.47
Granted		5,229			37.27
Vested		(5,376	)		33.47
Forfeited		—			—
Nonvested balance at December 31, 2014		5,229			37.27
Granted		7,112			44.26
Vested		(5,229	)		37.27
Forfeited		—			—
Nonvested balance at December 31, 2015		7,112			44.26
Granted		5,952			63.57
Vested		(7,488	)		44.54
Forfeited		—			—
Nonvested balance at December 31, 2016		5,576			64.50

The Company recognized compensation expense of $361,000 in 2016, $266,000 in 2015 and $184,000  in 2014 related to the Non-Employee Director Restricted Stock Plan. Total tax benefits realized for tax deductions from vesting of restricted stock in 2016, 2015 and 2014 were $52,000, $13,000 and $7,000, respectively.

2012 Equity and Incentive Compensation Plan

In 2012, the Company’s shareholders approved the AMERISAFE 2012 Equity and Incentive Compensation Plan (the “2012 Incentive Plan”). The 2012 Incentive Plan is administered by the Compensation Committee of the Board and is designed to attract, retain and motivate non-employee directors, officers, key employees and consultants by providing incentives for superior performance. The 2012 Incentive Plan authorizes the grant of equity-based compensation in the form of option rights, appreciation rights, restricted shares, restricted stock units, cash incentive awards, performance shares and units, and other types of awards.

A maximum of 500,000 shares of common stock may be issued or transferred upon the exercise of option rights or appreciation rights, as restricted shares and released from substantial risk of forfeiture, in payment of restricted stock units, in payment of performance shares or performance units that have been earned, as awards of shares of common stock, as other awards granted under the 2012 Incentive Plan, or in payment of dividend equivalents paid with respect to awards made under the plan subject to adjustment in the event of a merger, stock dividend, stock split or similar event, which may be original issue shares or treasury shares or a combination of the two.

In 2016, 27,077 shares of restricted stock were granted under the 2012 Incentive Plan, which will vest through 2021.  In 2015, 50,461 shares of restricted stock were granted under the 2012 Incentive Plan, which will vest through 2020.  At December 31, 2016, there were 355,777 shares of common stock available for future awards under the 2012 Incentive Plan.

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

The following table summarizes information about the restricted stock outstanding under the 2012 Incentive Plan at December 31, 2016:

	Shares			Weighted- AverageGrant- Date Fair Value per Share
Nonvested balance at January 1, 2014		82,609			33.93
Granted		4,312			43.83
Vested		(14,000	)		33.58
Forfeited		—			—
Nonvested balance at December 31, 2014		72,921			34.59
Granted		50,461			45.80
Vested		(27,537	)		37.27
Forfeited		(18,317	)		35.48
Nonvested balance at December 31, 2015		77,528			40.57
Granted		27,077			54.44
Vested		(26,294	)		45.18
Forfeited		(1,919	)		—
Nonvested balance at December 31, 2016		76,392			43.91

The Company recognized compensation expense of $849,000, $599,000 and $580,000 in 2016, 2015 and 2014, respectively, related to share-based grants.  The Company recognized compensation expense of $334,000, $220,000 and $429,000 million in 2016 2015 and 2014, respectively, related to long-term incentive awards under the 2012 Incentive Plan.   The long-term incentive award is a liability award.

13. Earnings Per Share

Diluted earnings per share includes 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 result is dilutive.

The calculation of basic and diluted EPS for the years ended December 31, 2016, 2015 and 2014 are presented below.

	For the Year Ended December 31,
	2016		2015		2014
	(in thousands, except earnings per share amounts)
Basic EPS:
Net income available to common shareholders – basic	$	77,865	$	70,462	$	53,666
Basic weighted-average common shares		19,106		18,941		18,646
Basic earnings per share	$	4.08	$	3.72	$	2.88
Diluted EPS:
Net income available to common shareholders - diluted	$	77,865	$	70,462	$	53,666
Diluted weighted average common shares:
Weighted average common shares		19,106		18,941		18,646
Stock options and performance shares		98		178		282
Diluted weighted average common shares		19,204		19,119		18,928
Diluted earnings per common share	$	4.05	$	3.69	$	2.84

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

The table below sets forth the reconciliation of the weighted average shares used for the basic and diluted EPS calculation.

	Years Ended
	2016		2015		2014
Basic weighted average common shares		19,105,806		18,941,077		18,646,128
Add: Other common shares eligible for common dividends:
Weighted average restricted shares and stock options    (including tax benefit component)		97,844		178,109		282,376
Diluted weighted average common shares		19,203,650		19,119,186		18,928,504

14. Comprehensive Income and Accumulated Other Comprehensive Income

Comprehensive income includes net income plus unrealized gains/losses on our available-for-sale investment securities, net of tax.  In reporting comprehensive income on a net basis in the statement of income, we used a 35 percent tax rate.  The following table illustrates the changes in the balance of each component of accumulated other comprehensive income (loss) for each period presented in the financial statements.

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Beginning balance	$	2,587		$	2,810		$	(4,295	)
Other comprehensive income (loss) before    reclassification		(3,231	)		(1,584	)		6,558
Amounts reclassified from accumulated other    comprehensive income		152			1,361			547
Net current period other comprehensive income (loss)		(3,079	)		(223	)		7,105
Ending balance	$	(492	)	$	2,587		$	2,810

The sale or other-than-temporary impairment (OTTI) of an available-for-sale security results in amounts being reclassified from accumulated other comprehensive income to current period net income.  The effects of reclassifications out of accumulated other comprehensive income by the respective line items of net income are presented in the following table.

Component of Accumulated Other Comprehensive Income	Year Ended December 31,									Affected line item in the statement of income
	2016			2015			2014
	(in thousands)
Unrealized losses on    available-for-sale securities	$	(234	)	$	(494	)	$	(825	)	Net realized gains (losses) on    investments
Other-than-temporary impairment		—			(1,600	)		(16	)	Net realized gains (losses) on    investments
		(234	)		(2,094	)		(841	)	Income before income taxes
		82			733			294		Income tax expense
	$	(152	)	$	(1,361	)	$	(547	)	Net income

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

	Pre-Tax Amount			Tax Expense			Net-of-Tax Amount
	(in thousands)
December 31, 2016
Unrealized loss on securities:
Unrealized loss on available-for-sale securities	$	(4,908	)	$	(1,718	)	$	(3,190	)
Less amortization of differences between fair value    and amortized cost for fixed maturity security transfer		(63	)		(22	)		(41	)
Reclassification adjustment for gains realized     in net income		234			82			152
Net unrealized loss		(4,737	)		(1,658	)		(3,079	)
Other comprehensive income	$	(4,737	)	$	(1,658	)	$	(3,079	)
December 31, 2015
Unrealized loss on securities:
Unrealized loss on available-for-sale securities	$	(2,572	)	$	(900	)	$	(1,672	)
Change in unrealized losses on available-for-sale    securities with OTTI		176			62			114
Less amortization of differences between fair value and    amortized cost for fixed maturity security transfer		(40	)		(14	)		(26	)
Reclassification adjustment for gains realized     in net income		2,093			732			1,361
Net unrealized loss		(343	)		(120	)		(223	)
Other comprehensive income	$	(343	)	$	(120	)	$	(223	)
December 31, 2014
Unrealized gain on securities:
Unrealized gain on available-for-sale securities	$	10,133		$	3,546		$	6,587
Less amortization of differences between fair value    and amortized cost for fixed maturity security transfer		(44	)		(15	)		(29	)
Reclassification adjustment for gains realized     in net income		842			295			547
Net unrealized gain		10,931			3,826			7,105
Other comprehensive income	$	10,931		$	3,826		$	7,105

15. Employee Benefit Plan

The Company’s 401(k) benefit plan is available to all employees. The Company matches up to 2% of employee compensation for participating employees, subject to certain limitations. Employees are fully vested in employer contributions to this plan after five years. Company contributions to this plan were $0.4 million in 2016, 2015 and 2014.

16. Commitments and Contingencies

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

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

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

The Company manages risk on certain long-duration claims by settling these claims through the purchase of annuities from unaffiliated carriers. In the event these carriers are unable to meet their obligations under these contracts, the Company could be liable to the claimants. The following table summarizes (in thousands) the fair value of the annuities at December 31, 2016, that the Company has purchased to satisfy its obligations. The A.M. Best Company rating is shown parenthetically.

Life Insurance Company	Statement Value of Annuities Exceeding 1% of Statutory Surplus
Metropolitan Life Insurance Company (A+)	$	17,098
Pacific Life and Annuity Company (A+)		16,688
American General Life Insurance (A)		15,049
New York Life Insurance Company (A++)		11,408
John Hancock Life Insurance Company USA (A+)		6,724
Athene Annuity and Life Assurance Company (A-)		5,164
Other		23,925
	$	96,056

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

In February 2015, the Company was notified of an adverse verdict against its subsidiary, AIIC, related to a 2009 workers’ compensation claim in the State of Iowa. The verdict was for $25.3 million, of which $0.3 million was for actual damages and $25.0 million was awarded for punitive damages. AIIC is appealing both the verdict and the damage awards. The Company has posted an appeal bond in the amount of $27.8 million, as required by law. The Company maintains reinsurance against catastrophic losses, including court ordered judgments. As of December 31, 2016, the Company’s total reserve for the claim was $2.4 million. The $2.4 million reserve does not include payments that the Company has previously paid in this case. The payments, plus the $2.4 million reserve, total $5.4 million. The Company’s retention is $5.0 million before its reinsurance providers are obligated to reimburse the Company for additional costs. The Company presently believes that the reserve amount, together with its reinsurance coverage, is adequate to satisfy this claim.

The Company leases equipment and office space under noncancelable operating leases. At December 31, 2016, future minimum lease payments are as follows (in thousands):

2017	$	131
2018		74
2019		6
	$	211

Rental expense was $0.2 million in 2016, 2015 and 2014.

17. Concentration of Operations

The Company derives its revenues almost entirely from its operations in the workers’ compensation insurance line of business. Total net premiums earned for the different lines of business are shown below:

	2016					2015					2014
	Dollars		Percent			Dollars		Percent			Dollars		Percent
	(Dollars in thousands)
Workers’ compensation	$	368,704		100.0	%	$	375,894		100.0	%	$	375,746		100.0	%
General liability		—		0.0	%		—		0.0	%		1		0.0	%
Total net premiums earned	$	368,704		100.0	%	$	375,894		100.0	%	$	375,747		100.0	%

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

Net premiums earned during 2016, 2015 and 2014 for the top ten states in 2016 and all others are shown below:

	2016					2015					2014
	Dollars		Percent			Dollars		Percent			Dollars		Percent
	(Dollars in thousands)
Pennsylvania	$	39,460		10.7	%	$	36,294		9.7	%	$	35,488		9.4	%
Georgia		38,168		10.4	%		40,497		10.8	%		36,761		9.8	%
Louisiana		30,426		8.3	%		38,874		10.3	%		47,643		12.7	%
Florida		29,051		7.9	%		24,792		6.6	%		20,691		5.5	%
Illinois		25,796		7.0	%		23,285		6.2	%		20,606		5.5	%
North Carolina		20,784		5.6	%		20,062		5.3	%		20,872		5.6	%
Virginia		16,599		4.5	%		15,656		4.2	%		16,764		4.5	%
Minnesota		15,130		4.1	%		14,618		3.9	%		13,159		3.5	%
South Carolina		13,897		3.8	%		12,955		3.4	%		12,414		3.3	%
Wisconsin		13,544		3.7	%		11,203		3.0	%		9,408		2.5	%
All others		125,849		34.0	%		137,658		36.6	%		141,941		37.7	%
Total net premiums earned	$	368,704		100.0	%	$	375,894		100.0	%	$	375,747		100.0	%

18. Fair Values of Financial Instruments

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

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

Investments—The fair values for fixed maturity and equity securities are based on quoted market prices where available. For those securities not actively traded, fair values were obtained from a third-party investment manager.

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

Other Investments— Other investments consist of a limited partnership interest that is accounted for under the equity method valued using the net asset value provided by the general partner of the limited partnership, which approximates the fair value of the interest. The limited partnership’s objective is to generate absolute returns by investing long and short in publicly-traded global securities. Redemptions are allowed monthly following a 60-day notice with no lock up periods. The Company has no unfunded commitments to the limited partnership.  

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

	December 31,
	2016				2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)
Assets:
Fixed maturity securities—held to maturity	$	562,434	$	568,931	$	645,164	$	662,276
Fixed maturity securities—available for sale		479,097		479,097		380,022		380,022
Equity securities		33		33		31		31
Cash and cash equivalents		58,936		58,936		69,481		69,481
Short-term investments		29,580		29,580		7,718		7,718
Other investments		13,330		13,330		12,217		12,217

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

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

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

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

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

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

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

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

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

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

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

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

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

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

The fair values of the Company’s investments are based upon prices provided by an independent pricing service. The Company has reviewed these prices for reasonableness and has not adjusted any prices received from the independent provider. Securities reported at fair value utilizing Level 1 inputs represent assets whose fair value is determined based upon observable unadjusted quoted market prices for identical assets in active markets. Level 2 securities represent assets whose fair value is determined using observable market information such as previous day trade prices, quotes from less active markets or quoted prices of securities with similar characteristics.  There were no transfers between Level 1 and Level 2 during the year ended December 31, 2016.

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and 2015 are as follows:

	December 31, 2016
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Financial instruments carried at fair value,      classified as part of:
Securities available for sale—equity:
Domestic common stock	$	33	$	—	$	—	$	33
Securities available for sale—fixed maturity:
States and political subdivisions		—		232,293		—		232,293
Corporate bonds		—		182,515		—		182,515
U.S. agency-based mortgage-backed securities		—		9,342		—		9,342
U.S. Treasury securities and obligations of U.S. government agencies		54,947		—		—		54,947
Total available for sale—fixed maturity		54,947		424,150		—		479,097
Total available for sale	$	54,980	$	424,150	$	—	$	479,130

	December 31, 2015
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Financial instruments carried at fair value,      classified as part of:
Securities available for sale—equity:
Domestic common stock	$	31	$	—	$	—	$	31
Securities available for sale—fixed maturity:
States and political subdivisions		—		171,419		—		171,419
Corporate bonds		—		201,304		—		201,304
U.S. agency-based mortgage-backed securities		—		7,299		—		7,299
Total available for sale—fixed maturity		—		380,022		—		380,022
Total available for sale	$	31	$	380,022	$	—	$	380,053

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

Assets and liabilities measured at amortized cost as of December 31, 2016 and 2015 are as follows:

	December 31, 2016
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Securities held-to-maturity—fixed maturity:
States and political subdivisions	$	—	$	399,483	$	—	$	399,483
Corporate bonds		—		144,016		—		144,016
Commercial mortgage-backed securities		—		70		—		70
U.S. agency-based mortgage-backed securities		—		10,915		—		10,915
U.S. Treasury securities		6,779		—		—		6,779
Obligations of U.S. government agencies		—		5,637		—		5,637
Asset-backed securities		—		2,031		—		2,031
Total held-to-maturity	$	6,779	$	562,152	$	—	$	568,931

	December 31, 2015
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Securities held-to-maturity—fixed maturity:
States and political subdivisions	$	—	$	423,754	$	—	$	423,754
Corporate bonds		—		170,573		—		170,573
Commercial mortgage-backed securities		—		37,683		—		37,683
U.S. agency-based mortgage-backed securities		—		14,471		—		14,471
U.S. Treasury securities		7,599		—		—		7,599
Obligations of U.S. government agencies		—		5,781		—		5,781
Asset-backed securities		—		2,415		—		2,415
Total held-to-maturity	$	7,599	$	654,677	$	—	$	662,276

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

At December 31, 2016, the Company held two securities measured at fair value on a nonrecurring basis due to a recognized impairment of $0.3 million. The securities are valued using Level 2 inputs and had a value of $0.3 million at December 31, 2016.  The securities were valued at fair value at the time of impairment and are currently being carried at the adjusted amortized cost.  The fair value of the securities was $0.5 million at December 31, 2016.

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

19. Quarterly Financial Data (Unaudited)

The following table represents unaudited quarterly financial data for the years ended December 31, 2016 and 2015.

	Three Months Ended
	March 31		June 30			September 30		December 31
	(in thousands, except per share amounts)
2016
Net premiums earned	$	95,961	$	90,728		$	89,918	$	92,097
Net investment income		6,044		6,201			8,006		7,855
Net realized gains (losses) on investments		248		545			181		(1,468	)
Total revenues		102,335		97,563			98,206		98,558
Income before income taxes		34,395		24,615			26,027		27,784
Net income		24,257		16,639			17,896		19,073
Net income available to common shareholders		24,257		16,639			17,896		19,073
Earnings per share:
Basic	$	1.27	$	0.87		$	0.94	$	1.00
Diluted	$	1.27	$	0.87		$	0.93	$	0.99
Comprehensive income		27,051		19,568			16,183		11,985
Extraordinary cash dividends declared per common share	$	—	$	—		$	—	$	3.25
Cash dividends declared per common share	$	0.18	$	0.18		$	0.18	$	0.18
2015
Net premiums earned	$	94,787	$	95,569		$	90,504	$	95,034
Net investment income		6,833		6,890			6,923		7,256
Net realized gains (losses) on investments		59		(2,617	)		40		24
Total revenues		101,788		99,936			97,470		101,760
Income before income taxes		21,197		20,112			25,890		33,768
Net income		15,130		14,319			17,940		23,073
Net income available to common shareholders		15,130		14,319			17,940		23,073
Earnings per share:
Basic	$	0.80	$	0.76		$	0.95	$	1.21
Diluted	$	0.79	$	0.75		$	0.94	$	1.21
Comprehensive income		15,948		12,744			19,248		22,299
Extraordinary cash dividends declared per common share	$	—	$	—		$	—	$	3.00
Cash dividends declared per common share	$	0.15	$	0.15		$	0.15	$	0.15

20. Capital Management

The Company’s Board of Directors initiated a share repurchase program in February 2010. In October 2016, the Board reauthorized this program with a limit of $25.0 million with no expiration date. There were no shares repurchased under this program in 2016. Since the beginning of this plan, the Company has repurchased a total of 1,258,250 shares for $22.4 million, or an average price of $17.78, including commissions.

In 2013, the Company’s Board of Directors initiated a regular quarterly dividend.  During 2016, the Company’s Board of Directors declared a quarterly dividend of $0.18 per share compared to $0.15 per share in 2015, $0.12 per share in 2014 and $0.08 per share in 2013.  The Company declared extraordinary dividends totaling $3.25 per share in 2016, $3.00 per share in 2015 and $1.50 per share in 2014.  There were no extraordinary dividends declared in 2013.

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AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

21. Subsequent Events

On February 21, 2017 the Company declared a regular quarterly cash dividend of $0.xx per share payable on March 24, 2017 to shareholders of record on March 10, 2017.  In 2016, the Company paid a quarterly cash dividend of $0.18 per share.

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

90

Schedule II. Condensed Financial Information of Registrant

AMERISAFE, INC.

CONDENSED BALANCE SHEETS

	December 31,
	2016		2015
	(in thousands)
Assets
Investments:
Short-term investments	$	11,939	$	—
Other investments		13,330		12,217
Investment in subsidiaries		415,767		408,135
Total investments		441,036		420,352
Cash and cash equivalents		9,596		26,968
Deferred income taxes		675		292
Notes receivable from subsidiaries		1,587		1,505
Property and equipment, net		1,942		1,817
Other assets		1,314		3,047
	$	456,150	$	453,981
Liabilities, redeemable preferred stock and shareholders’ equity
Total liabilities		—		—
Shareholders' equity (net of Treasury stock of $22,370 at December 31, 2016 and 2015		456,150		453,981
	$	456,150	$	453,981

91

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

AMERISAFE, INC.

CONDENSED STATEMENTS OF INCOME

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Revenues
Net investment income	$	1,509		$	854		$	1,541
Fee and other income		5,843			5,893			5,368
Total revenues		7,352			6,747			6,909
Expenses
Other operating costs		7,352			6,747			6,909
Total expenses		7,352			6,747			6,909
Income (loss) before income taxes and equity in earnings of subsidiaries		—			—			—
Income tax expense (benefit)		(156	)		(57	)		(13	)
Gain (loss) before equity in earnings of subsidiaries		156			57			13
Equity in net income of subsidiaries		77,709			70,405			53,653
Net income	$	77,865		$	70,462		$	53,666

92

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

AMERISAFE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Operating activities
Net cash (used in) provided by operating activities	$	2,771		$	(1,727	)	$	2,161
Investing activities
Purchases of investments		(11,940	)		—			(1,462	)
Proceeds from sales of investments		—			250			2,404
Purchases of property and equipment		(924	)		(627	)		(691	)
Dividends from subsidiary		67,000			50,000			25,000
Net cash provided by investing activities		54,136			49,623			25,251
Financing activities
Proceeds from stock option exercises		837			1,844			2,674
Tax benefit from share-based payments		995			2,204			2,841
Dividends to shareholders		(76,111	)		(68,561	)		(37,068	)
Net cash used in financing activities		(74,279	)		(64,513	)		(31,553	)
Change in cash and cash equivalents		(17,372	)		(16,617	)		(4,141	)
Cash and cash equivalents at beginning of year		26,968			43,585			47,726
Cash and cash equivalents at end of year	$	9,596		$	26,968		$	43,585

93

Schedule VI. Supplemental Information Concerning Property—Casualty Insurance Operations

AMERISAFE, INC. AND SUBSIDIARIES

	Deferred Policy Acquisition Costs		Reserves for Unpaid Loss and Loss Adjustment Expense		Unearned Premium		Earned Premium		Net Investment Income		Loss and LAE Related to Current Period		Loss and LAE Related to Prior Periods			Amortization of Deferred Policy Acquisition Costs			Paid Claims and Claim Adjustment Expenses		Net Premiums Written
	(in thousands)
2016	$	19,300	$	742,776	$	162,028	$	368,704	$	28,106	$	250,337	$	(51,306	)	$	(44,321	)	$	187,686	$	362,748
2015		20,412		718,033		167,983		375,894		27,902		262,387		(47,814	)		(44,841	)		189,666		375,301
2014		19,649		687,602		168,576		375,747		27,214		268,633		(23,717	)		(43,817	)		182,506		380,026

94

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

None.

Item  9A. Controls and Procedures.

Evaluation of Disclosure 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 specified by the SEC. We note that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving the stated goals under all potential future conditions.

Management’s Report on Internal Control over Financial Reporting

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

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016. In making this assessment, management used the criteria described in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on management’s assessment under the framework in Internal Control—Integrated Framework, our management has concluded that our internal control over financial reporting was effective as of December 31, 2016.

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

Changes in Internal Control Over Financial Reporting

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

Limitations on Controls

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

95

Report of Independent Registered Public Accounting Firm

The Board of Directors and shareholders of AMERISAFE, Inc. and subsidiaries

We have audited AMERISAFE, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). AMERISAFE, Inc. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

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

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

In our opinion, AMERISAFE, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of AMERISAFE, Inc. and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016 of AMERISAFE, Inc. and subsidiaries and our report dated February 24, 2017, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New Orleans, Louisiana

February 24, 2017

96

Item 9B. Other Information.

None.

97

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

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

The information required by Item 10 with respect to our directors is incorporated by reference to the information included under the caption “Election of Directors” in our Proxy Statement for the 2017 Annual Meeting of Shareholders. We plan to file our Proxy Statement within 120 days after December 31, 2016, the end of our fiscal year.

The information required by Item 10 with respect to compliance with Section 16 of the Exchange Act is incorporated by reference to the information included under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy Statement for the 2017 Annual Meeting of Shareholders.

The information required by Item 10 with respect to our audit committee and our audit committee financial expert is incorporated by reference to the information included under the caption “The Board, Its Committees and Its Compensation—Audit Committee” in our Proxy Statement for the 2017 Annual Meeting of Shareholders.

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

Item 11. Executive Compensation.

The information required by Item 11 is incorporated by reference to the information included under the captions “Executive Compensation,” “The Board, Its Committees, and Its Compensation—Director Compensation,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Discussion and Analysis” and “Compensation Committee Report” in our Proxy Statement for the 2017 Annual Meeting of Shareholders.

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

The information required by Item 12 is incorporated by reference to the information included under the captions “Security Ownership of Management and Certain Beneficial Holders” and “Equity Compensation Plan Information” in our Proxy Statement for the 2017 Annual Meeting of Shareholders.

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

The information required by Item 13 with respect to certain relationships and related transactions is incorporated by reference to the information included under the caption “Executive Compensation—Certain Relationships and Related Transactions” in our Proxy Statement for the 2017 Annual Meeting of Shareholders.

The information required by Item 13 with respect to director independence is incorporated by reference to the information included under the caption “The Board, Its Committees and Its Compensation—Director Independence” in our Proxy Statement for the 2017 Annual Meeting of Shareholders.

Item 14. Principal Accountant Fees and Services.

The information required by Item 14 with respect to the fees and services of Ernst & Young LLP, our independent registered public accounting firm, and the audit committee’s pre-approved policies and procedures, are incorporated by reference to the information included under the caption “Independent Public Accountants” in our Proxy Statement for the 2017 Annual Meeting of Shareholders.

98

PART IV

Item 15. Exhibits and Financial Statement Schedules.

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

	Page
Financial Statements:
Report of Independent Registered Public Accounting Firm	54
Consolidated Balance Sheets	55
Consolidated Statements of Income	56
Consolidated Statements of Changes in Comprehensive Income	57
Consolidated Statements of Changes in Shareholders’ Equity	58
Consolidated Statements of Cash Flows	59
Notes to Consolidated Financial Statements	60
Financial Statement Schedules:
Schedule II. Condensed Financial Information of Registrant	91
Schedule VI. Supplemental Information Concerning Property-Casualty Insurance Operations	94
(Schedules I, III, IV and V are not applicable and have been omitted.)

99

Exhibits:
3.1		Amended and Restated Certificate of Formation of AMERISAFE, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q filed August 6, 2010)
3.2		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed August 6, 2010)
10.1*		Amended and Restated Employment Agreement, dated March 4, 2015 by and between the Company and G. Janelle Frost (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed March 5, 2015)
10.2*		Employment Agreement, dated January 15, 2013 by and between the Company and Vincent J. Gagliano (incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K filed March 6, 2013)
10.3*		Employment Agreement effective as of September 15, 2015 by and between the Company and Neal Fuller (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed August 31, 2015)
10.4*		Employment Agreement effective as of March 1, 2016 by and between the Company and Kathryn H. Shirley (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed April 29, 2016)
10.5*		AMERISAFE, Inc. 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form S-1, Amendment No. 3 (File No. 333-127133), filed October 31, 2005)
10.6*		Form of Non-Qualified Stock Option Award Agreement for the AMERISAFE, Inc. 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-1, Amendment No. 3 (File No. 333-127133), filed October 31, 2005)
10.7*		AMERISAFE, Inc. 2012 Equity and Incentive Compensation Plan (incorporated by reference to Appendix A to the Company's Proxy Statement on Schedule 14A filed April 27, 2012)
10.8*		Form of 2012 Equity and Incentive Compensation Plan Long-Term Incentive Award Agreement (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K filed February 27, 2015)
10.9*		AMERISAFE, Inc. Non-Employee Director Restricted Stock Plan
10.10*		Form of 2012 Equity and Incentive Compensation Plan Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K filed February 28, 2014)
10.11*		Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed August 6, 2010)
10.12*		Form of Annual Incentive Compensation Agreement (incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K filed February 26, 2016)
	10.13	Second Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2008, issued to the Company by the reinsurers and named therein (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed February 15, 2008)
	10.14	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2008, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K, filed February 15, 2008)
	10.15	Second Casualty Excess of Loss Reinsurance Agreement, effective as of January 1, 2009 issued to the Company by Hannover Reinsurance (Ireland), Limited (incorporated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K, filed March 9, 2009)
	10.16	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2009 issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K, filed March 9, 2009)
	10.17	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2010 issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.28 to the Company's Annual Report on Form 10-K, filed March 7, 2011)

100

Exhibits:
	10.18	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2011, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K, filed March 7, 2011)
	10.19	Second Casualty Excess of Loss Reinsurance Agreement, effective as of January 1, 2012 issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K filed March 9, 2012)
	10.20	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2012, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.23 to the Company's Annual Report on Form 10-K filed March 9, 2012)
	10.21	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2013, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.26 to the Company's Annual Report on Form 10-K filed March 6, 2013)
	10.22	Casualty Catastrophe Excess of Loss Reinsurance Contract effective as of January 1, 2014, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.32 to the Company's Quarterly Report on Form 10-Q filed May 2, 2014)
	10.23	Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2014, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K filed February 27, 2015)
	10.24	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2015, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K filed February 27, 2015)
	10.25	Endorsement No. 1 to the Casualty Excess of Loss Reinsurance Contract, effective as of June 1, 2015, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed July 31, 2015)
	10.26	Endorsement No. 1 to the Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of June 1, 2015, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed July 31, 2015)
	10.27	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2016, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K filed February 26, 2016)
	10.28	Casualty Catastrophe Excess of Loss Reinsurance Contract effective as of January 1, 2017, issued to the Company by the reinsurers named therein
	10.29	Casualty Excess of Loss Reinsurance Contract effective as of January 1, 2017, issued to the Company by the reinsurers named therein
21.1		Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to the Company's Annual Report on Form 10-K filed February 26, 2016)
23.1		Consent of Ernst & Young LLP
24.1		Powers of Attorney for our directors and certain executive officers
31.1		Certification of G. Janelle Frost filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Neal A. Fuller filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of G. Janelle Frost and Neal A. Fuller filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

Exhibits:
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
*  Management contract, compensatory plan or arrangement

102

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 24, 2017.

AMERISAFE, INC.
By:	/s/    G. Janelle Frost
	G. Janelle Frost
	President, Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February 24, 2017.

/s/    G. Janelle Frost	President, Chief Executive Officer and Director (Principal Executive Officer)
G. Janelle Frost
/s/    Neal A. Fuller	Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
Neal A. Fuller
*	Chairman and Director
Jared A. Morris
*	Director
Michael J. Brown
*	Director
Teri G. Fontenot
*	Director
Philip A. Garcia
*	Director
Millard E. Morris
*	Director
Daniel Phillips
*	Director
Randall Roach
*	Director
Austin P. Young, III

Kathryn H. Shirley, by signing her name hereto, does hereby sign this Annual Report on Form 10-K on behalf of the above-named directors of AMERISAFE, Inc. on this 24th day of February 2017, pursuant to powers of attorney executed on behalf of such directors and contemporaneously filed with the Securities and Exchange Commission.

*By:	/s/    Kathryn H. Shirley
	Kathryn H. Shirley, Attorney-in-Fact

103

EXHIBIT INDEX

Exhibits:
3.1		Amended and Restated Certificate of Formation of AMERISAFE, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q filed August 6, 2010)
3.2		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed August 6, 2010)
10.1*		Amended and Restated Employment Agreement, dated March 4, 2015 by and between the Company and G. Janelle Frost (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed March 5, 2015)
10.2*		Employment Agreement, dated January 15, 2013 by and between the Company and Vincent J. Gagliano (incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K filed March 6, 2013)
10.3*		Employment Agreement effective as of September 15, 2015 by and between the Company and Neal Fuller (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed August 31, 2015)
10.4*		Employment Agreement effective as of March 1, 2016 by and between the Company and Kathryn H. Shirley (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed April 29, 2016)
10.5*		AMERISAFE, Inc. 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form S-1, Amendment No. 3 (File No. 333-127133), filed October 31, 2005)
10.6*		Form of Non-Qualified Stock Option Award Agreement for the AMERISAFE, Inc. 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-1, Amendment No. 3 (File No. 333-127133), filed October 31, 2005)
10.7*		AMERISAFE, Inc. 2012 Equity and Incentive Compensation Plan (incorporated by reference to Appendix A to the Company's Proxy Statement on Schedule 14A filed April 27, 2012)
10.8*		Form of 2012 Equity and Incentive Compensation Plan Long-Term Incentive Award Agreement (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K filed February 27, 2015)
10.9*		AMERISAFE, Inc. Non-Employee Director Restricted Stock Plan
10.10*		Form of 2012 Equity and Incentive Compensation Plan Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K filed February 28, 2014)
10.11*		Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed August 6, 2010)
10.12*		Form of Annual Incentive Compensation Agreement (incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K filed February 26, 2016)
	10.13	Second Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2008, issued to the Company by the reinsurers and named therein (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed February 15, 2008)
	10.14	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2008, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K, filed February 15, 2008)
	10.15	Second Casualty Excess of Loss Reinsurance Agreement, effective as of January 1, 2009 issued to the Company by Hannover Reinsurance (Ireland), Limited (incorporated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K, filed March 9, 2009)
	10.16	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2009 issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K, filed March 9, 2009)

104

Exhibits:
	10.17	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2010 issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.28 to the Company's Annual Report on Form 10-K, filed March 7, 2011)
	10.18	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2011, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K, filed March 7, 2011)
	10.19	Second Casualty Excess of Loss Reinsurance Agreement, effective as of January 1, 2012 issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K filed March 9, 2012)
	10.20	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2012, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.23 to the Company's Annual Report on Form 10-K filed March 9, 2012)
	10.21	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2013, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.26 to the Company's Annual Report on Form 10-K filed March 6, 2013)
	10.22	Casualty Catastrophe Excess of Loss Reinsurance Contract effective as of January 1, 2014, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.32 to the Company's Quarterly Report on Form 10-Q filed May 2, 2014)
	10.23	Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2014, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K filed February 27, 2015)
	10.24	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2015, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K filed February 27, 2015)
	10.25	Endorsement No. 1 to the Casualty Excess of Loss Reinsurance Contract, effective as of June 1, 2015, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed July 31, 2015)
	10.26	Endorsement No. 1 to the Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of June 1, 2015, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed July 31, 2015)
	10.27	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2016, issued to the Company by the reinsurers named therein (incorporated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K filed February 26, 2016)
	10.28	Casualty Catastrophe Excess of Loss Reinsurance Contract effective as of January 1, 2017, issued to the Company by the reinsurers named therein
	10.29	Casualty Excess of Loss Reinsurance Contract effective as of January 1, 2017, issued to the Company by the reinsurers named therein
21.1		Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to the Company's Annual Report on Form 10-K filed February 26, 2016)
23.1		Consent of Ernst & Young LLP
24.1		Powers of Attorney for our directors and certain executive officers
31.1		Certification of G. Janelle Frost filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Neal A. Fuller filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

105

Exhibits:
32.1	Certification of G. Janelle Frost and Neal A. Fuller filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
*  Management contract, compensatory plan or arrangement

106

EX-10.9

Exhibit 10.9

AMERISAFE, INC.

2016 NON-EMPLOYEE DIRECTOR RESTRICTED STOCK PLAN

1. Purpose. The purpose of this 2016 Non-Employee Director Restricted Stock Plan is to attract and retain qualified individuals who are not employed by the Company to serve as Directors.

2. Definitions. As used in this Plan,

a) “Annual Grant” means a grant of Restricted Stock to a Non-Employee Director in accordance with Section 5 of this Plan.(b) “Annual Meeting” means the Company’s annual meeting of shareholders.

b) “Award” means any award of an Initial Grant or Annual Grant under this Plan.

c) “Award Agreement” means a written agreement between the Company and a Non-Employee Director setting forth the terms, conditions and restrictions of the Award granted to the Non-Employee Director.

d) “Board” means the Board of Directors of the Company.

e) “Change in Control” shall have the meaning provided in Section 6 of this Plan.

f) “Common Shares” means the shares of common stock, par value $0.01 per share, of the Company or any security into which such Common Shares may be changed by reason of any transaction or event of the type referred to in Section 3(b) of this Plan.

g) “Company” means AMERISAFE, Inc., a Texas corporation.

h) “Date of Grant” means (i) with respect to an Initial Grant, the close of business on the date on which the Non- Employee Director is first elected or appointed to the Board, and (ii) with respect to an Annual Grant, the date on which the Annual Meeting in any calendar year is first convened.

i) “Director” means a member of the Board.

j) “Effective Date” means June 10, 2016.

k) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, as such law, rules and regulations may be amended from time to time.

l) “Initial Grant” means a grant of shares of Restricted Stock to a Non-Employee Director in accordance with Section 4 of this Plan.

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m) “Market Value per Share” means, as of any particular date, (i) the closing sale price per Common Share on that date (or if there are no sales on that date, on the next preceding trading date during which a sale occurred) as reported on the Nasdaq Stock Market LLC, or if the Common Shares are not then-traded on the Nasdaq Stock Market LLC, the principal exchange on which the Common Shares are then trading, or (ii) if clause (i) does not apply, thefair value of the Common Shares as determined by the Board.

n) “Non-Employee Director” means each member of the Board from time to time who is not an employee of the Company or any of its Affiliates.

o) “Person” means any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).

p) “Plan” means this 2010 Restated Non-Employee Director Plan.

q) “Restricted Stock” means Common Shares as to which neither the substantial risk of forfeiture nor the prohibition on transfers referred to in Section 4 or Section 5 of this Plan has lapsed.

r) “Subsidiary” means a corporation, company or other entity (i) more than 50 percent of whose outstanding shares or other securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or other securities (as may be the case in a partnership, limited liability company, business trust or other legal entity), but more than 50 percent of whose ownership interest representing the right generally to make decisions for such entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company.

s) “Total Disability” means the permanent or total disability of a Non-Employee Director, as determined by the Board in good faith.

t) “Voting Securities” means, at any time, (i) the securities entitled to vote generally in the election of Directors in the case of the Company, or (ii) the securities entitled to vote generally in the election of members of the board of directors or similar body in the case of another legal entity.

3. Shares Available Under the Plan.

a) Subject to adjustment as provided in Section 3(b) of this Plan, the number of Common Shares that may be issued or transferred as Restricted Stock and released from substantial risk of forfeiture thereof shall not exceed in the aggregate 100,000 Common Shares. Such shares may be authorized but unissued shares or treasury shares or a combination of the foregoing.

b) The number of shares available in Section 3(a) above shall be adjusted to account for shares relating to Awards that are forfeited. The number and type of shares available in Section 3(a) shall also automatically be adjusted to reflect (a) any

2

stock split, combination of shares, recapitalization or other change in the capital structure of the Company, (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing.

4. Initial Grants

a) Without any further action of the Board, each person who is elected or appointed for the first time to be a Non-Employee Director shall automatically receive an Initial Grant determined by dividing $45,000 (prorated as determined below in this Section 4(a)) by the Market Value per Share on the Date of Grant; provided, however, that the number of shares of Restricted Stock shall be rounded downward such that no fractional share shall be issued. If any such person is so elected or appointed other than at an Annual Meeting, the Initial Grant shall be prorated for the number of whole months that such Non-Employee Director will serve until the first anniversary of the immediately preceding Annual Meeting.

b) Each Initial Grant shall constitute an immediate transfer of the ownership of shares of Restricted Stock to the Non-Employee Director, entitling such Non-Employee Director to voting, dividend and other ownership rights, but subject to the substantial risk of forfeiture and restrictions on transfer set forth in this Section 4.

c) Each Initial Grant shall provide that the shares of Restricted Stock covered by such Initial Grant shall be subject to a “substantial risk of forfeiture” until the first Annual Meeting after the Date of Grant.

d) Each Initial Grant shall provide that the Non-Employee Director shall forfeit the shares of Restricted Stock covered by such Initial Grant if such Non-Employee Director terminates his or her service with the Company while such shares of Restricted Stock are subject to a substantial risk of forfeiture. Notwithstanding the foregoing, each such Initial Grant shall provide for the immediate lapse of such substantial risk of forfeiture in the event of (i) the Non- Employee Director’s death or Total Disability, or (ii) upon a Change in Control.

e) Each Initial Grant shall require that any and all dividends or other distributions (other than cash dividends) declared or otherwise distributed thereon be subject to the same restrictions as the underlying Initial Grant.

f) Each Initial Grant shall provide that during the period for which such substantial risk of forfeiture has not lapsed, the shares of Restricted Stock shall not be sold or otherwise transferred, other than by will or the laws of descent and distribution.

3

g) Each Initial Grant shall be evidenced by an Award Agreement, which shall contain such terms and provisions not inconsistent with this Plan as the Board may approve. Unless otherwise directed by the Board, all certificates representing shares of Restricted Stock shall be held in custody by the Company until all restrictions thereon shall have lapsed, together with a stock power or powers executed by the Non-Employee Director in whose name such certificates are registered, endorsed in blank.

5. Annual Grants

a) Commencing with the Annual Meeting in 2016, each Non-Employee Director who is then elected or is continuing as a Non-Employee Director shall, without any further action of the Board, automatically receive an Annual Grant determined by dividing $45,000 by the Market Value per Share on the Date of Grant; provided, however, that the number of shares of Restricted Stock shall be rounded downward such that no fractional share shall be issued.

b) Each Annual Grant shall constitute an immediate transfer of the ownership of shares of Restricted Stock to the Non-Employee Director, entitling such Non-Employee Director to voting, dividend and other ownership rights, but subject to the substantial risk of forfeiture and restrictions on transfer set forth in this Section 5.

c) Each Annual Grant shall provide that the shares of Restricted Stock covered by such Annual Grant shall be subject to a “substantial risk of forfeiture” until the first Annual Meeting after the Date of Grant. Each Annual Grant shall provide that the Non-Employee Director shall forfeit the shares of Restricted Stock covered by such Annual Grant if such Non-Employee Director terminates his or her service with the Company while such shares of Restricted Stock are subject to a substantial risk of forfeiture. Notwithstanding the foregoing, each such Annual Grant shall provide for the immediate lapse of such substantial risk of forfeiture in the event of (i) the Non-Employee Director’s death or Total Disability, or (ii) upon a Change in Control.

d) Each Annual Grant shall provide that during the period for which such substantial risk of forfeiture has not lapsed, the shares of Restricted Stock shall not be sold or otherwise transferred, other than by will or the laws of descent and distribution.

e) Each Annual Grant shall require that any and all dividends or other distributions (other than cash dividends) declared or otherwise distributed thereon be subject to the same restrictions as the underlying Annual Grant.

f) Each Annual Grant shall be evidenced by an Award Agreement, which shall contain such terms and provisions not inconsistent with this Plan as the Board may approve. Unless otherwise directed by the Board, all certificates representing Restricted Stock shall be held in custody by the Company until all restrictions thereon shall have

4

lapsed, together with a stock power or powers executed by the Non-Employee Director in whose name such certificates are registered, endorsed in blank.

6. Change in Control. For purposes of this Plan, except as may be otherwise defined in an Award Agreement, a “Change in Control” shall mean the occurrence of any of the following events:

a) the acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Section 6(a), the following acquisitions shall not constitute a Change in Control: (A) any acquisition by the Company or a Subsidiary of Voting Securities, (B) any acquisition of Voting Securities by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary or (C) any acquisition of Voting Securities by any Person pursuant to a Business Combination that complies with clauses (A), (B) and (C) of Section 6(c) below;

b) consummation of a reorganization, merger or consolidation, a sale or other disposition of all or substantially all of the assets of the Company or other transaction (each, a “Business Combination”), unless, in each case, immediately following the Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of Voting Securities immediately prior to the Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding Voting Securities of the entity resulting from the Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), (B) no Person (other than the Company, such entity resulting from the Business Combination, or any employee benefit plan (or related trust) sponsored or maintained by the Company, any Subsidiary or such entity resulting from the Business Combination) beneficially owns, directly or indirectly, more than 50% of the combined voting power of the then outstanding Voting Securities of the entity resulting from the Business Combination; provided, however, that no Person will be treated for purposes of this Section 6(c) as beneficially owning more than 50% of the Voting Securities of the entity resulting from the Business Combination solely as a result of the Voting Securities held in the Company prior to consummation of the Business Combination and (C) at least a majority of the members of the board of directors of the entity resulting from the Business Combination were directors of the Company at the time of the execution of the initial agreement or of the action of the Board providing for the Business Combination; or

c) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company, except pursuant to a Business Combination that complies with clauses (A), (B) and (C) of Section 6(b) hereof.

5

Notwithstanding anything to the contrary contained in this Section 6, a Person who holds more than 50%of the Voting Securities of the Company on the Effective Date will not be deemed to have acquired more than 50%of the Voting Securities of the Company for purposes of Section 6(a) of this Plan (and as a result, such circumstance shall not constitute a Change in Control) unless after the Effective Date such person acquires, in one or more transactions, additional Voting Securities of the Company representing 1% or more of the then outstanding Voting Securities of the Company it being understood that an increase in the percentage of Voting Securities held by a Person as a result of (i) the exercise of any conversion or exchange right pursuant to any securities of the Company that were outstanding on the Effective Date shall not be deemed to be an acquisition of Voting Securities by such Person, or (ii) the Company’s repurchase of Voting Securities of the Company is not an acquisition of Voting Securities by such Person.

7. Fractional Shares. The Company shall not issue any fractional Common Shares pursuant to this Plan.

8. Administration of the Plan.

a) This Plan shall be administered by the Board, which may from time to time delegate all or any part of its authority under this Plan to a committee of the Board (or a subcommittee thereof). To the extent of any such delegation, references in this Plan to the Board shall be deemed to be references to such committee or subcommittee.

b) The interpretation and construction by the Board of any provision of this Plan or of any Award Agreement, and any determination by the Board pursuant to any provision of this Plan or of any such Award Agreement, shall be final and conclusive. No member of the Board shall be liable for any such action or determination made in good faith.

9. Amendment and Termination of Plan. The Board may from time to time and at any time amend or terminate the Plan in whole or in part; provided, however, that any amendment (i) which must be approved by the shareholders of the Company in order to comply with applicable law or the rules of the principal exchange on which the Common Shares are traded or quoted, or (ii) which would increase the dollar amount of the Awards issuable to Non-Employee Directors as  determined by Sections 4(a) and 5(a) of this Plan to an amount greater than $75,000 annually for each  Non-Employee Director, increase the aggregate number of Common Shares that may be issued under the Plan or materially modify the eligibility requirements for participating in the Plan, shall not be effective unless and until the shareholders of the Company have approved such amendment. Notwithstanding anything to the contrary set forth in this Plan, in the event the common stock of the Company is no longer listed for trading with a national securities exchange or the Nasdaq Stock Market LLC, then all future grants under this Plan shall be suspended until the Board shall take further action with respect thereto.

6

10. Governing Law. All issues concerning construction, validity and interpretation of this Plan and all Awards granted hereunder shall be governed by the law of the State of Texas, without regard to such state’s conflict of laws rules.

11. General Provisions.

a) Nothing in the Plan shall be deemed to create any obligation on the part of the Board to nominate any Director for reelection by the Company’s shareholders or to limit the rights of the shareholders to remove any Director.

b) All notices under this Plan shall be in writing, and if to the Company, shall be delivered to the Secretary of the Company or mailed to its principal executive office addressed to the attention of the Secretary; and if to a Non- Employee Director, shall be delivered personally or mailed to the Non-Employee Director at the address appearing on the records of the Company. Such addresses may be changed at any time by written notice to the other party.

7

EX-10.28

Exhibit 10.28

american interstate insurance company

Silver oak Casualty, inc.

both of Omaha, Nebraska

and

american interstate insurance companY of texas

Austin, Texas

and

any other insurance companies which are now or hereafter come under the ownership, control or management of Amerisafe, Inc.

CASUALTY CATASTROPHE EXCESS Of loss

REINSURANCE CONTRACT

American Interstate Insurance Company
13214N17 (Eff: 1-1-17)	12-9-16
Casualty Catastrophe XOL Contract

TABLE OF CONTENTS

ARTICLE		PAGE
I	BUSINESS COVERED	1
II	TERM	1
III	SPECIAL TERMINATION	2
IV	DEFINITIONS	3
	Act of Terrorism	3
	Declaratory Judgment Expense	4
	Extra Contractual Obligations/Loss in Excess of Policy Limits	4
	Loss Adjustment Expense	5
	Loss Occurrence	5
	Net Earned Premium	6
	Policy	6
	Ultimate Net Loss	6
V	TERRITORY	6
VI	EXCLUSIONS	7
VII	TERRORISM ACT RECOVERIES	9
VIII	COVERAGE	9
IX	REINSTATEMENT	10
X	SPECIAL ACCEPTANCE	10
XI	ACCOUNTING BASIS	11
XII	REINSURANCE PREMIUM	11
XIII	NOTICE OF LOSS AND LOSS SETTLEMENTS	11
XIV	LIABILITY OF REINSURERS	12
XV	LATE PAYMENTS	13
XVI	ANNUITIES AT THE COMPANY’S OPTION	14
XVII	AGENCY AGREEMENT	14
XVIII	SUBROGATION	14
XIX	ERRORS AND OMISSIONS	15
XX	OFFSET	15
XXI	CURRENCY	15
XXII	TAXES	15
XXIII	FEDERAL EXCISE TAX	16
XXIV	FOREIGN ACCOUNT TAX COMPLIANCE ACT (“FATCA”)	16
XXV	RESERVES AND FUNDING	17
XXVI	NET RETAINED LINES	19
XXVII	THIRD PARTY RIGHTS	19
XXVIII	SEVERABILITY	19
XXIX	GOVERNING LAW	20
XXX	INSPECTION OF RECORDS	20
XXXI	CONFIDENTIALITY	20
XXXII	SUNSET AND COMMUTATION	21
XXXIII	INSOLVENCY	23
XXXIV	ARBITRATION	24
XXXV	EXPEDITED ARBITRATION	26

American Interstate Insurance Company
13214N17 (Eff: 1-1-17)	12-9-16
Casualty Catastrophe XOL Contract

XXXVI	SERVICE OF SUIT	26
XXXVII	ENTIRE AGREEMENT	27
XXXVIII	MODE OF EXECUTION	28
XXXIX	INTERMEDIARY	28
	Nuclear Incident Exclusion Clause - Liability - Reinsurance - U.S.A.

American Interstate Insurance Company
13214N17 (Eff: 1-1-17)	12-9-16
Casualty Catastrophe XOL Contract

CASUALTY CATASTROPHE Excess of loss

REINSURANCE CONTRACT

(the “Contract”)

between

american interstate insurance company

Silver Oak CasualtY, Inc.

both of Omaha, Nebraska

and

american interstate insurance companY of texas

Austin, Texas

and

any other insurance companies which are now or hereafter come under the ownership, control or management of Amerisafe, Inc.

(the “Company”)

and

THE SUBSCRIBING REINSURER(S) EXECUTING THE
INTERESTS AND LIABILITIES AGREEMENT(S)
ATTACHED HERETO

(the “Reinsurer”)

ARTICLE I

BUSINESS COVERED

By this Contract the Reinsurer agrees to reinsure the excess liability of the Company under its Policies that are in force at the effective time and date hereof or issued or renewed at or after that time and date, and classified by the Company as Workers’ Compensation, Employers Liability, including but not limited to coverage provided under the U.S. Longshore and Harbor Workers’ Compensation Act, Jones Act, Outer Continental Shelf Lands Act and any other Federal Coverage extensions, subject to the terms, conditions and limitations hereafter set forth.  Coverage hereunder includes Policies classified as loss sensitive, including but not limited to large deductible Policies.

article II

TERM

A. This Contract will apply to all losses occurring during the period January 1, 2017, 12:01 a.m. Standard Time (as set forth in the Company’s policies), to January 1, 2018, 12:01 a.m. Standard Time.

American Interstate Insurance Company
13214N17 (Eff: 1-1-17)	12-9-16
Casualty Catastrophe XOL Contract	1

B. Upon the expiration or termination of this Contract, the entire liability of the Reinsurer for losses occurring subsequent to the date of expiration shall cease concurrently with the date of expiration of this Contract.

C. Notwithstanding the above, upon expiration or termination of this Contract, the Company shall have the option of requiring that the Reinsurer shall remain liable for losses occurring under Policies in force on the expiration or termination date of this Contract until the next renewal, termination, or natural expiration date of such Policies or until 12 months (plus “odd time,” not to exceed 18 months in all) following the date of expiration (whichever occurs first).

D. If this Contract expires while a Loss Occurrence covered hereunder is in progress, the Reinsurer’s liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire Loss Occurrence had occurred prior to the expiration of this Contract, provided that no part of such Loss Occurrence is claimed against any renewal or replacement of this Contract.

article III

Special Termination

A. The Company may terminate a subscribing reinsurer’s share in this Contract by giving written notice to the subscribing reinsurer upon the happening of any one of the following circumstances:

1. A State Insurance Department or other legal authority orders the subscribing reinsurer to cease writing business, or

2. The subscribing reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary), or there has been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations, or

3. For any period not exceeding 12 months which commences no earlier than 12 months prior to the inception of this Contract, the subscribing reinsurer’s policyholders’ surplus, as reported in the financial statements of the subscribing reinsurer, has been reduced by 20.0% or more, or

4. The subscribing reinsurer has become merged with, acquired or controlled by any company, corporation, or individual(s) not controlling the subscribing reinsurer’s operations previously, or

5. The subscribing reinsurer has reinsured its entire liability under this Contract without the Company’s prior written consent, or

6. The subscribing reinsurer receives an A. M. Best rating of lower than A‑, or an S&P financial strength rating of lower than A‑, or

American Interstate Insurance Company
13214N17 (Eff: 1-1-17)	12-9-16
Casualty Catastrophe XOL Contract	2

7. The subscribing reinsurer has ceased writing new and renewal reinsurance for the lines of business covered hereunder, or

8. The subscribing reinsurer has failed to comply with the funding requirements set forth in the RESERVES AND FUNDING ARTICLE.

B. In the event of such termination, the liability of the subscribing reinsurer shall be terminated, at the Company’s option, either in accordance with the cutoff provisions of paragraph B of the TERM ARTICLE or in accordance with the runoff provisions of paragraph C of the TERM ARTICLE, and such termination shall be effective as of the date the subscribing reinsurer receives written notice of termination pursuant to paragraph A above.

C. In the event the Company terminates a subscribing reinsurer’s share in this Contract under the provisions of this Article, the Company shall have the option to commute the excess liabilities of the subscribing reinsurer.  If this commutation option is exercised, the provisions of the paragraphs B through G of the SUNSET AND COMMUTATION ARTICLE shall apply.

D. In the event the Company terminates a subscribing reinsurer’s share in this Contract under the provision of this Article, the Company shall have the option to require the subscribing reinsurer to fund its share of ceded unearned premium, outstanding loss and Loss Adjustment Expense reserves, reserves for losses and Loss Adjustment Expense incurred but not reported to the Company (IBNR as determined by the Company) and any other balances or financial obligations.  Within 30 days of the Company’s written request to fund, the subscribing reinsurer shall provide to the Company a clean, unconditional, evergreen, irrevocable letter of credit or a trust agreement which establishes a trust account for the benefit of the Company.  The method of funding must be acceptable to the Company, shall be established with a financial institution suitable to the Company, shall comply with any applicable state or federal laws or regulations involving the Company’s ability to recognize these agreements as assets or offsets to liabilities in such jurisdictions and shall be at the sole expense of the subscribing reinsurer.  The Company and the subscribing reinsurer may mutually agree on alternative methods of funding or the use of a combination of methods.  This option is available to the Company at any time there remains any outstanding liabilities of the subscribing reinsurer.  Notwithstanding the foregoing, the Company shall not require funding in accordance with this subparagraph in the event the subscribing reinsurer has otherwise fully funded its obligations under this Contract in a manner acceptable to the Company.

article IV

definitions

A. Act of Terrorism

“Act of Terrorism” as used herein shall follow the definition provided under the Terrorism Risk Insurance Act of 2002 (TRIA) and as amended by the Terrorism Risk Insurance

American Interstate Insurance Company
13214N17 (Eff: 1-1-17)	12-9-16
Casualty Catastrophe XOL Contract	3

Extension Act of 2005 (TRIEA) and the Terrorism Risk Insurance Program Reauthorization Acts of 2007 and 2015 (TRIPRA), together and including any extensions or replacement thereof, the “Terrorism Act.”

In the event the Terrorism Act is not extended or renewed, Act of Terrorism shall mean a violent act or an act that is dangerous to human life; property; or infrastructure that 1) has resulted in damage within the United States, or outside of the United States in the case of an air carrier or vessel and 2) was committed by an individual or individuals as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion.  The Company shall determine the application of the above definition.

An “Act of Terrorism” may include an act involving the use and/or dispersal of nuclear, chemical, biological or radiological agents.

B. Declaratory Judgment Expense

“Declaratory Judgment Expense” as used herein shall mean all expenses incurred by the Company in connection with a declaratory judgment action brought to determine the Company’s defense and/or indemnification obligations that are allocable to a specific claim subject to this Contract.  Declaratory Judgment Expense shall be deemed to have been incurred on the date of the original loss (if any) giving rise to the declaratory judgment action.

C. Extra Contractual Obligations/Loss in Excess of Policy Limits

1. Extra Contractual Obligations

This Contract shall protect the Company for any “Extra Contractual Obligations” which as used herein shall mean any punitive, exemplary, compensatory or consequential damages, other than Loss in Excess of Policy Limits, paid or payable by the Company as a result of an action against it by its insured, its insured’s assignee or a third party claimant, by reason of alleged or actual negligence, fraud or bad faith on the part of the Company in handling a claim under a Policy subject to this Contract.

An Extra Contractual Obligation shall be deemed to have occurred on the same date as the loss covered or alleged to be covered under the Policy.

2. Loss in Excess of Policy Limits

This Contract shall protect the Company for any “Loss in Excess of Policy Limits” which as used herein shall mean an amount that the Company would have been contractually liable to pay had it not been for the limit of the original Policy as a result of an action against it by its insured, its insured’s assignee or a third party claimant.  Such loss in excess of the limit shall have been incurred because of failure by the Company to settle within the Policy limit, or by reason of alleged or actual

American Interstate Insurance Company
13214N17 (Eff: 1-1-17)	12-9-16
Casualty Catastrophe XOL Contract	4

negligence, fraud, or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or in the preparation or prosecution of an appeal consequent upon such action.

3. This paragraph C shall not apply where an Extra Contractual Obligation and/or Loss in Excess of Policy Limits has been incurred due to an adjudicated finding of fraud committed by a member of the Board of Directors or a corporate officer of the Company acting individually or collectively or in collusion with a member of the Board of Directors or a corporate officer or a partner of any other corporation or partnership.

D. Loss Adjustment Expense

“Loss Adjustment Expense” as used herein shall mean all costs and expenses allocable to a specific claim that are incurred by the Company in the investigation, appraisal, adjustment, settlement, litigation, defense, disposition or appeal of a specific claim, including court costs and costs of supersedeas and appeal bonds, and including 1) pre‑judgment interest, unless included as part of the award or judgment; 2) post‑judgment interest; 3) legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, including Declaratory Judgment Expense; and 4) a pro rata share of salaries and expenses of Company field employees, and expenses of other Company employees who have been temporarily diverted from their normal and customary duties and assigned to the field adjustment of losses covered by this Contract.  Loss Adjustment Expense does not include unallocated loss adjustment expense.  Unallocated loss adjustment expense includes, but is not limited to, salaries and expenses of employees, other than (4) above, and office and other overhead expenses.

E. Loss Occurrence

“Loss Occurrence” as used in this Contract shall mean any one disaster or casualty or accident or loss or series of disasters or casualties or accidents or losses arising out of or caused by one event.  The Company shall be the sole judge of what constitutes one event as outlined herein and inthe original Policy.

As respects losses resulting from Occupational or Industrial Disease or Cumulative Trauma, each employee shall be considered a separate Loss Occurrence subject to the following:

Losses resulting from Occupational or Industrial Disease or Cumulative Trauma suffered by employees of an insured for which the employer is liable, as a result of a sudden and accidental event not exceeding 72 hours in duration, shall be considered one Loss Occurrence and may be combined with losses classified as other than Occupational or Industrial Disease or Cumulative Trauma which arise out of the same event and the combination of such losses shall be considered as one Loss Occurrence within the meaning hereof.

American Interstate Insurance Company
13214N17 (Eff: 1-1-17)	12-9-16
Casualty Catastrophe XOL Contract	5

A loss with respect toeach employee affected by an Occupational Disease or Cumulative Trauma shall be deemed to have been sustained by the Company on the date of the beginning of the disability for which compensation is payable.

The terms “Occupational or Industrial Disease” and “Cumulative Trauma” as used inthis Contract shall be as defined by applicable statutes or regulations.

F. Net Earned Premium

“Net Earned Premium” as used herein is defined as gross earned premium of the Company for the classes of business reinsured hereunder, less the earned portion of premiums ceded by the Company for reinsurance which inures to the benefit of this Contract and less dividends paid or accrued.  As respects large deductible Policies, Net Earned Premium shall be net of any applicable deductible credit.

G. Policy

“Policy” or “Policies” as used herein shall mean the Company’s binders, policies and contracts providing insurance or reinsurance on the classes of business covered under this Contract.

H. Ultimate Net Loss

“Ultimate Net Loss” shall mean the actual loss, including any pre-judgment interest which is included as part of the award or judgment, “Second Injury Fund” assessments that can be allocated to specific claims, Loss Adjustment Expense, 90% of Loss in Excess of Policy Limits, and 90% of Extra Contractual Obligations, paid or to be paid by the Company on its net retained liability after making deductions for all recoveries, subrogations and all claims on inuring reinsurance, whether collectible or not; provided, however, that in the event of the insolvency of the Company, payment by the Reinsurer shall be made in accordance with the provisions of the Insolvency Article.  Nothing herein shall be construed to mean that losses under this Contract are not recoverable until the Company’s Ultimate Net Loss has been ascertained.  As respects large deductible Policies, Ultimate Net Loss shall be net of any applicable deductible.

Notwithstanding the definition of “Ultimate Net Loss” herein, the provisions of paragraph H of the COVERAGE ARTICLE as respects the Minnesota Workers’ Compensation Reinsurance Association shall apply.

article V

TERRITORY

The territorial limits of this Contract shall be identical with those of the Company’s Policies.

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article VI

exclusions

A. This Contract does not apply to and specifically excludes the following:

1. Reinsurance assumed by the Company under obligatory reinsurance agreements, except:

a. Agency reinsurance where the policies involved are to be reunderwritten in accordance with the underwriting standards of the Company and reissued as Company policies at the next anniversary or expiration date; and

b. Intercompany reinsurance between any of the reinsured companies under this Contract.

2. Nuclear risks as defined in the “Nuclear Incident Exclusion Clause – Liability – Reinsurance – U.S.A.” (NMA 1590 21/9/67) attached hereto.

3. Liability as a member, subscriber or reinsurer of any Pool, Syndicate or Association, including Assigned Risk Plans or similar plans; however, this exclusion shall not apply to liability under a Policy specifically designated to the Company from an Assigned Risk Plan or similar plan.

4. All liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any Insolvency Fund. “Insolvency Fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, however denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.

5. Loss caused directly or indirectly by war, whether or not declared, civil war, insurrection, rebellion or revolution, or any act or condition incidental to any of the foregoing.  This exclusion shall not apply to any Policy that contains a standard war exclusion.

6. Workers’ Compensation where the principal exposure, as defined by the governing class code, is:

a. Operation of aircraft, but only if the annual estimated policy premium is $250,000 or more;

b. Operation of Railroads, subways or street railways;

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c. Manufacturing, assembly, packing or processing of fireworks, fuses, nitroglycerine, magnesium, pyroxylin, ammunition or explosives.  This exclusion does not apply to the assembly, packing or processing of explosives when the estimated annual premium is under $250,000 and does not apply to the commercial use of explosives;

d. Underground mining.

7. Professional sports teams.

B. Notwithstanding the foregoing, insureds regularly engaged in operations not excluded under paragraph A above, but whose operations may include one or more perils excluded therein, shall not be excluded from coverage afforded by this Contract, provided said operations are incidental to the main operations of the insured.  Notwithstanding the foregoing, coverage extended under this paragraph for incidental operations of an insured shall not apply to exposures excluded under subparagraphs 1 through 5 of paragraph A above.  The Company shall be the judge of what constitutes an incidental part of the insured’s operation.

C. Except for subparagraphs 1 through 5 of paragraph A above, if the Company is inadvertently bound or is unknowingly exposed (due to error or automatic provisions of policy coverage) on a risk otherwise excluded in paragraph A above, such exclusion shall be waived.  The duration of said waiver will not extend beyond the time that notice of such coverage has been received by a responsible underwriting authority of the Company and for a period not exceeding 30 days thereafter, or such longer period required to conform with any notice of cancellation provisions prescribed by regulatory authorities, such period not to exceed 12 months plus odd time (not exceeding 18 months).

D. If the Company is required to accept an assigned risk which conflicts with one or more of the exclusions set forth in subparagraph 6 of paragraph A, reinsurance shall apply, but only for the difference between the Company’s retention and the limit required by the applicable state statute, and in no event shall the Reinsurer’s liability exceed the limit set forth in the Coverage Article.

E. Notwithstanding the foregoing, any reinsurance falling within the scope of one or more of the exclusions set forth above that is specially accepted by the Reinsurer from the Company shall be covered under this Contract and be subject to the terms hereof.

F. Except for subparagraphs 1 through 5 of paragraph A above, should an arbitration decision or any judicial or regulatory entity having competent jurisdiction invalidate any exclusion or expand coverage of the original Policy of the Company, any amount of Loss for which the Company would not be liable, except for such invalidation or expansion of coverage, shall not be subject to any of the exclusions, conditions and limitations hereinafter set forth under this Contract.

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article VII

terrorism ACT RECOVERIES

A. Any financial assistance the Company receives under the Terrorism Act, shall apply as follows:

1. Except as provided in subparagraph 2 below, any such financial assistance shall inure solely to the benefit of the Company and shall be entirely disregarded in applying all of the provisions of this Contract.

2. If losses occurring hereunder result in recoveries made by the Company both under this Contract and under the Terrorism Act, and such recoveries, together with any other reinsurance recoverables made by the Company applicable to said losses, exceed the total amount of the Company’s insured losses, any amount in excess thereof shall reduce the Ultimate Net Loss subject to this Contract for the losses to which the Terrorism Act assistance applies.  These recoveries shall be returned in proportion to each Reinsurer’s paid share of the loss.

B. Nothing herein shall be construed to mean that the losses under this Contract are not recoverable until the Company has received financial assistance under the Terrorism Act.

article VIII

COVERAGE

A. The Reinsurer shall be liable for the Ultimate Net Loss in excess of $10,000,000 as a result of any one Loss Occurrence.  The Reinsurer’s liability in respect of any one Loss Occurrence shall not exceed $60,000,000.

B. The Reinsurer’s liability in respect of Ultimate Net Loss amounts recoverable hereunder for an Act of Terrorism (as defined in the definition of “Act of Terrorism”) occurring during the term of this Contract shall not exceed $60,000,000.  This paragraph is not subject the REINSTATEMENT ARTICLE.

C. The Reinsurer’s liability in respect of all losses occurring during the term of this Contract shall not exceed $120,000,000.

D. As respects the statutory portion of any Workers’ Compensation Policy, the Company’s Ultimate Net Loss subject to this Contract shall not exceed $10,000,000 as respects any one life, each Loss Occurrence

E. The Company shall be permitted to purchase (or maintain) other reinsurance which inures to the benefit of this Contract.

F. The Company shall be permitted to carry underlying reinsurance, recoveries under which shall inure solely to the benefit of the Company and be entirely disregarded in applying all of the provisions of this Contract.

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G. As respects Employers Liability, the maximum net subject Policy limit (except statutory where required by law) as respects any one Policy shall be $2,000,000 or the Company shall be deemed to have purchased inuring excess facultative reinsurance for subject Policy limits in excess of $2,000,000.

H. The Company shall be permitted to carry excess of loss reinsurance applying to Workers’ Compensation risks in the State of Minnesota, actual recoveries under which shall inure to the benefit of this Contract.  Such coverage shall be provided through the Minnesota Workers’ Compensation Reinsurance Association.  Notwithstanding the treatment of inuring coverage in the definition of Ultimate Net Loss, the liability of the Reinsurer for Minnesota Workers’ Compensation risks is not released.

Article ix

REINSTATEMENT

A. Should all or any part of the Reinsurer’s limit of liability be exhausted as a result of a Loss Occurrence, the sum so exhausted shall be reinstated from the date the Loss Occurrence commenced.

B. For each amount so reinstated, the Company agrees to pay an additional premium at the time of the Reinsurer’s payment of the loss calculated in accordance with the following formula:

1. The percentage of the Reinsurer’s limit of liability exhausted for the Loss Occurrence; times

2. The Net Earned Premium for the term of this Contract (exclusive of reinstatement premium).

The dollar amount resulting from the multiplication of subparagraphs 1 and 2 above shall equal the reinstatement premium.  If at the time of the Reinsurer’s payment of a loss hereon, the reinsurance premium as calculated under this Contract is unknown, the calculation of the reinstatement premium shall be based upon the deposit premium subject to adjustment when the reinsurance premium is finally established.

C. Nevertheless, the Reinsurer’s liability hereunder shall not exceed $60,000,000 in respect of any one Loss Occurrence, and shall be further limited to $120,000,000 in respect of all losses occurring during the term of this Contract.

article X

Special Acceptance

From time to time the Company may request a special acceptance applicable to this Contract.  For purposes of this Contract, in the event subscribing reinsurers whose combined shares in the interests and liabilities of the Reinsurer is 50% or greater agree to a special acceptance, such agreement shall be binding on all subscribing reinsurers.  If such agreement is not achieved, such

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special acceptance shall be made to this Contract only with respect to the interests and liabilities of each subscribing reinsurer who agrees to the special acceptance.  Should denial for special acceptance not be received within 10 working days of said request, the special acceptance shall be deemed automatically agreed.  In the event a reinsurer becomes a party to this Contract subsequent to one or more special acceptances hereunder, the new reinsurer shall automatically accept such special acceptance(s) as being covered hereunder.

article XI

ACCOUNTING BASIS

All premiums and losses under this Contract shall be reported on an “accident year” accounting basis.  Unless specified otherwise herein, all premiums shall be credited to the period during which they earn, and all losses shall be charged to the period during which they occur.

article xII

REINSURANCE PREMIUM

A. As premium for the reinsurance provided hereunder, the Company shall pay the Reinsurer 0.4616% times its Net Earned Premium for the term of this Contract subject to a Minimum Premium of $1,368,000.

B. The Company shall pay the Reinsurer a Deposit Premium of $1,710,000 payable in quarterly installments on January 1, April 1, July 1 and October 1.

C. Within 90 days after the expiration of this Contract, the Company shall provide a report to the Reinsurer setting forth the premium due hereunder, computed in accordance with paragraph A, and if the premium so computed is greater than the previously paid Deposit Premium, the balance shall be remitted by the Company with its report.

D. If this Contract expires on a runoff basis, the Company shall pay to the Reinsurer a premium for the runoff period equal to the expiring rate times its Net Earned Premium for the runoff period.  The runoff premium shall be calculated and paid within 90 days after the end of each three-month period during the runoff period.  There shall be no minimum premium requirement for the runoff period.

article XIII

NOTICE OF LOSS and Loss SETTLEMENTS

A. As soon as practicable, the Company shall advise the Reinsurer of all bodily injury claims or losses involving any of the following:

1. Any claim or loss reserved at 50.0% or more of the Company’s retention under this Contract.

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2. Any claim involving any of the following injuries where the Company’s incurred loss is greater than or equal to $1,000,000:

a. Fatality.

b. Spinal cord injuries (e.g., quadriplegia, paraplegia).

c. Brain damage (e.g., seizure, coma or physical/mental impairment).

d. Severe burn injuries resulting in disfigurement or scarring.

e. Total or partial blindness in one or both eyes.

f. Major organ (e.g., heart, lungs).

g. Amputation of a limb or multiple fractures.

B. The Company shall also advise the Reinsurer promptly of all losses which, in the opinion of the Company, may result in a claim hereunder and of all subsequent developments thereto which, in the opinion of the Company, may materially affect the position of the Reinsurer.

C. When so requested in writing, the Company shall afford the Reinsurer or its representatives an opportunity to be associated with the Company, at the expense of the Reinsurer, in the defense of any claim, suit or proceeding involving this reinsurance, and the Company and the Reinsurer shall cooperate in every respect in the defense of such claim, suit or proceeding.

D. All loss settlements made by the Company that are within the terms and conditions of this Contract (including but not limited to ex gratia payments) shall be binding upon the Reinsurer.  Upon receipt of satisfactory proof of loss, the Reinsurer agrees to promptly pay or allow, as the case may be, its share of each such settlement in accordance with this Contract.

ARTICLE XIV

LIABILITY OF REINSURERS

All reinsurances for which the Reinsurer shall be liable by virtue of this Contract shall be subject in all respects to the same rates, terms, conditions, interpretations and waivers and to the same modifications, alterations, and cancellations, as the respective policies to which such reinsurances relate, the true intent of the parties to this Contract being that the Reinsurer shall follow the fortunes of the Company.

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ARTICLE XV

Late Payments

A. In the event any premium, loss or other payment due either party is not received by the Intermediary hereunder by the payment due date, the party to whom payment is due may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to pay, an interest penalty on the amount past due calculated for each such payment on the last business day of each month as follows:

1. The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser; times

2. 1/365ths of a rate equal to the U.S. Prime Rate as published in The Wall Street Journal on the first business day following the date a remittance becomes due; times

3. The amount past due, including accrued interest.

It is agreed that interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.

B. The establishment of the due date shall, for purposes of this Article, be determined as follows:

1. As respects the payment of deposits and premiums due the Reinsurer, the due date shall be as provided for in the applicable section of this Contract.

2. Any claim or loss payment due the Company hereunder shall be deemed due 10 business days after the proof of loss or demand for payment is transmitted to the Reinsurer.  If such loss or claim payment is not received within the10 days, interest will accrue on the payment or amount overdue in accordance with the interest penalty calculation above, from the date the proof of loss or demand for payment was transmitted to the Reinsurer.

3. As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs 1 and 2 of this paragraph, the due date shall be as provided for in the applicable section of this Contract.

C. For purposes of interest calculation only, amounts due hereunder shall be deemed paid upon receipt by the Intermediary.  The validity of any claim or payment may be contested under the provisions of this Contract.  If the debtor party prevails in an arbitration, or any other proceeding, there shall be no interest penalty due.  Otherwise, any interest will be calculated and due as outlined above.

D. Interest penalties arising out of the application of this Article that are $100 or less from any party shall be waived unless there is a pattern of late payments consisting of three or more items over the course of any 12-month period.

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E. If the interest rate provided under this Article exceeds the maximum interest rate allowed by applicable law, such interest rate shall be modified to the highest rate permitted by the applicable law

article XVI

Annuities at the Company’s Option

A. Whenever the Company is required, or elects, to purchase an annuity or to negotiate a structured settlement, either in satisfaction of a judgment or in an out-of-court settlement or otherwise, the cost of the annuity or the structured settlement, as the case may be, shall be deemed part of the Company’s Ultimate Net Loss.

B. The terms “annuity” or “structured settlement” shall be understood to mean any insurance policy, lump sum payment, agreement or device of whatever nature resulting in the payment of a lump sum by the Company in settlement of any or all future liabilities which may attach to it as a result of an occurrence.

C. In the event the Company purchases an annuity which inures in whole or in part to the benefit of the Reinsurer, it is understood that the liability of the Reinsurer is not released thereby.  In the event the Company is required to provide benefits not provided by the annuity for whatever reason, the Reinsurer shall pay its share of any loss.

article XvII

Agency Agreement

If more than one reinsured company is named as a party to this Contract, the first named company will be deemed the agent of the other reinsured companies for purposes of sending or receiving notices required by the terms and conditions of this Contract and for purposes of remitting or receiving any monies due any party.

article XVIII

subrogation

The Reinsurer shall be credited with subrogation recoveries (i.e., reimbursement obtained or recovery made by the Company, less Loss Adjustment Expense incurred in obtaining such reimbursement or making such recovery) on account of claims and settlements involving reinsurance hereunder.  Subrogation recoveries thereon shall always be used to reimburse the excess carriers in the reverse order of their priority according to their participation before being used in any way to reimburse the Company for its primary loss.  The Company, at its sole option and discretion, may enforce its rights to subrogation relating to any loss, a part of which loss was sustained by the Reinsurer, and may prosecute all claims arising out of such rights.

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article XIX

Errors and Omissions

Any inadvertent delay, omission or error shall not be held to relieve either party hereto from any liability which would attach to it hereunder if such delay, omission or error had not been made, provided such omission or error is rectified upon discovery.  Nothing contained in this Article shall be held to override the specific loss reporting deadline of the SUNSET AND COMMUTATION ARTICLE.

article XX

OFFSET

The Company and the Reinsurer may offset any balance or amount due from one party to the other under this Contract or any other contract heretofore or hereafter entered into between the Company and the Reinsurer, whether acting as assuming reinsurer or ceding company.  The party asserting the right of offset may exercise such right any time whether the balances due are on account of premiums or losses or otherwise.

article XXI

Currency

A. Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

B. Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the books of the Company.

article XXII

TAXES

In consideration of the terms under which this Contract is issued, the Company will not claim a deduction in respect of the premium hereon when making tax returns, other than income or profits tax returns, to any state or territory of the United States of America, the District of Columbia or Canada.

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article XXIII

FEDERAL EXCISE TAX

(Applicable to those subscribing reinsurers who are domiciled outside the United States of America, excepting subscribing reinsurers exempt from Federal Excise Tax.)

A. The subscribing reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the applicable percentage of the premium payable hereon (as imposed under Section 4371 of the Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax.

B. In the event of any return of premium becoming due hereunder the subscribing reinsurer will deduct the applicable percentage from the return premium payable hereon and the Company or its agent should take steps to recover the tax from the United States Government.

article XXIV

Foreign account Tax Compliance Act (“FATCA”)

A. The Reinsurer hereby acknowledges the requirements of Sections 1471-1474 U.S. Internal Revenue Code of 1986, as amended, and the Treasury regulations and other guidance issued from time to time thereunder (“FATCA”) and the obligation to provide to the Company and the intermediary. a valid Internal Revenue Service (“IRS”) Form W8-BEN-E, W-9 or other documentation meeting the requirements of the FATCA regulations to establish they are not subject to any withholding requirement pursuant to FATCA (the “Required Documentation”).

B The Reinsurer shall notify the Company and the intermediary in writing (by electronic mail, certified mail or overnight mail using a nationally recognized overnight delivery service) in the event the Reinsurer is not compliant with FATCA.  If the Reinsurer has not provided the Company and the intermediary with the Required Documentation thirty (30) days prior to any premium due date, or becomes non-compliant with FATCA at any later date, the Withholding Agent [as defined in U.S. Treasury Regulation Section 1.1471-1(b)(147)] shall withhold thirty percent (30%) of any premium payment to the Reinsurer under this Contract and shall promptly notify the Reinsurer of such withholding (“Withholding”).  The Reinsurer hereby agrees to such Withholding.

C. In the event the Reinsurer is subject to Withholding as set forth under FATCA, the Reinsurer continues to remain fully liable for all of its obligations under this Contract.  The Withholding under paragraph B above does not constitute a breach of contract, any premium payment condition, warranty or other clause of this Contract.  Reinsurer(s) subject to Withholding may not terminate, cancel, revoke or restrict this Contract, may not terminate, cancel, revoke or restrict coverage under this Contract in any manner and may not deny, refuse, restrict or delay payment of any claim under this Contract or invoke any interest, penalty or other late payment provision hereunder, based on the

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Withholding. Reinsurer(s) subject to Withholding shall be liable under this Contract as if no Withholding had been made.

D. Amounts deducted or withheld as Withholding are not subject to offset. Offset rights, if any, under this Contract are hereby amended in accordance with the terms of this Article.

E. The Reinsurer shall indemnify the Company and its agents for any and all liability, expense, interest or penalty the Company and its agents incur, based upon, arising from or in connection with (i) any inaccurate or invalid Required Documentation; or (ii) any violation by the Reinsurer of FATCA.  Such indemnity shall survive the expiration or termination of this Contract.

article XXV

RESERVES AND FUNDING

A. A subscribing reinsurer will provide funding under the terms of this Article only if the Company will be denied statutory credit for reinsurance ceded to that subscribing reinsurer pursuant to the credit for reinsurance law or regulations in any applicable jurisdiction.  In the event any of the provisions of this Article conflict with or otherwise fail to satisfy the requirements of the appropriate credit for reinsurance statute or regulation, this Article will be deemed amended to conform to the appropriate statute or regulation; the intent of this Article being that the Company will be permitted to realize full credit for the reinsurance ceded to the Reinsurer under this Contract.

B. As regards Policies or bonds issued by the Company coming within the scope of this Contract, the Company agrees that when it shall file with the insurance regulatory authority or set up on its books reserves for losses covered hereunder which it shall be required by law to set up, it will forward to the subscribing reinsurer a statement showing the proportion of such reserves which is applicable to the subscribing reinsurer.  The subscribing reinsurer hereby agrees to fund such reserves in respect of known outstanding losses that have been reported to the subscribing reinsurer and allocated Loss Adjustment Expense relating thereto, losses and allocated Loss Adjustment Expense paid by the Company but not recovered from the subscribing reinsurer, plus reserves for losses incurred but not reported, as shown in the statement prepared by the Company (hereinafter referred to as “subscribing reinsurer’s obligations”) by funds withheld, cash advances or a Letter of Credit.  The subscribing reinsurer shall have the option of determining the method of funding provided it is acceptable to the Company and to the insurance regulatory authorities having jurisdiction over the Company’s reserves.

C. When funding by a Letter of Credit, the subscribing reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional Letter of Credit issued by a bank and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves in an amount equal to the subscribing reinsurer’s proportion of said reserves. Such Letter of Credit shall be issued for a period of not less than one year, and shall be automatically extended for one year from its date of expiration or any future expiration date unless 30 days (60 days where required by

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insurance regulatory authorities) prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the Letter of Credit extended for any additional period.

D. The subscribing reinsurer and Company agree that the Letters of Credit provided by the subscribing reinsurer pursuant to the provisions of this Contract may be drawn upon at any time, notwithstanding any other provision of this Contract, and be utilized by the Company or any successor, by operation of law, of the Company including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Company for the following purposes, unless otherwise provided for in a separate Trust Agreement:

1. To reimburse the Company for the subscribing reinsurer’s obligations, the payment of which is due under the terms of this Contract and which has not been otherwise paid;

2. To make refund of any sum which is in excess of the actual amount required to pay the subscribing reinsurer’s obligations under this Contract;

3. To fund an account with the Company for the subscribing reinsurer’s obligations.  Such cash deposit shall be held in an interest bearing account separate from the Company’s other assets, and interest thereon not in excess of the prime rate shall accrue to the benefit of the subscribing reinsurer;

4. To pay the subscribing reinsurer’s share of any other amounts the Company claims are due under this Contract.

In the event the amount drawn by the Company on any Letter of Credit is in excess of the actual amount required for subparagraph 1 or 3, or in the case of subparagraph 4, the actual amount determined to be due, the Company shall promptly return to the subscribing reinsurer the excess amount so drawn.  All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the subscribing reinsurer.

E. The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Company.

F. At annual intervals, or more frequently as agreed but never more frequently than quarterly, the Company shall prepare a specific statement of the subscribing reinsurer’s obligations, for the sole purpose of amending the Letter of Credit, in the following manner:

1. If the statement shows that the subscribing reinsurer’s obligations exceed the balance of credit as of the statement date, the subscribing reinsurer shall, within 30 days after receipt of notice of such excess, secure delivery to the Company of an amendment to the Letter of Credit increasing the amount of credit by the amount of such difference.

2. If, however, the statement shows that the subscribing reinsurer’s obligations are less than the balance of credit as of the statement date, the Company shall, within 30 days

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after receipt of written request from the subscribing reinsurer, release such excess credit by agreeing to secure an amendment to the Letter of Credit reducing the amount of credit available by the amount of such excess credit.

G. Should the subscribing reinsurer be in breach of its obligations under this Article, notwithstanding anything to the contrary elsewhere in this Contract, the Company may seek relief in respect of said breach from any court having competent jurisdiction of the parties hereto.

article XxVI

NET RETAINED LINES

A. This Contract applies only to that portion of any Policy which the Company retains net for its own account (prior to deduction of any underlying reinsurance specifically permitted in this Contract), and in calculating the amount of any loss hereunder and also in computing the amount or amounts in excess of which this Contract attaches, only loss or losses in respect of that portion of any Policy which the Company retains net for its own account shall be included.

B. The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts which may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

article xxVII

THIRD PARTY RIGHTS

This Contract is solely between the Company and the Reinsurer, and in no instance shall any other party have any rights under this Contract except as expressly provided otherwise in the INSOLVENCY ARTICLE.

article XXVIII

Severability

If any provision of this Contract shall be rendered illegal or unenforceable by the laws or regulations of any state, such provision shall be considered void in such state, but this shall not affect the validity or enforceability of any other provision of this Contract or the enforceability of such provision in any other jurisdiction.

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article XXIX

Governing Law

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Nebraska, exclusive of that state’s rules with respect to conflicts of law, except as to rules with respect to credit for reinsurance in which case the applicable rules of all states shall apply.

article XXX

Inspection Of Records

A. The Reinsurer or its designated representative(s) approved by the Company, upon providing reasonable advance notice to the Company, shall have access at the offices of the Company or at a location to be mutually agreed, at a time to be mutually agreed, to inspect the Company’s underwriting, accounting, or claim files pertaining to the subject matter of this Contract, other than proprietary information or privileged communications.  The Company shall determine the manner in which files shall be accessed by the Reinsurer.  The Reinsurer may, at its own expense, reasonably request copies of such files and agrees to pay the Company’s reasonable costs incurred in procuring such copies.

B. If any undisputed amounts are overdue from the Reinsurer to the Company, the Reinsurer shall have access to such records only upon payment of all such overdue amounts.

C. If the Reinsurer makes any inspection of the Company’s books and records involving specific claims under this Contract and, as a result of the inspection the claim is contested or disputed, the Reinsurer shall provide the Company, at the Company’s request, a summary of any reports, other than proprietary information or privileged communications, completed by the Reinsurer’s personnel or by third parties on behalf of the Reinsurer outlining the reasons for contesting or disputing the subject claim.

ArTICLE XXXI

CONFIDENTIALITY

A. The Reinsurer hereby acknowledges that the documents, information, and data provided to the Reinsurer by the Company, whether directly or through an authorized agent, in connection with the placement and execution of this Contract (“Confidential Information”) are proprietary and confidential to the Company.

B. Absent the prior written consent of the Company, the Reinsurer will not disclose any Confidential Information to any third parties, except when:

1. The disclosure is to professional advisors or to authorized agents of the Reinsurer performing underwriting, claim handling, pricing, placement and/or evaluation services for the Reinsurer; or

American Interstate Insurance Company
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2. The Confidential Information is publicly known or has become publicly known through no unauthorized act of the Reinsurer; or

3. Required by retrocessionaires subject to the business ceded to this Contract; or

4. Required by state regulators performing an audit of the Reinsurer’s records and/or financial condition; or

5. Required by auditors performing an audit of the Reinsurer’s records in the normal course of business.

C. Further, the Reinsurer agrees not to use any Confidential Information for any purpose not permitted by this Contract or not related to the performance of their obligations or enforcement of their rights under this Contract.

D. Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process, or any regulatory authority to release or disclose any or all of the Confidential Information, the Reinsurer agrees to provide the Company by written or electronic mail, reasonable advance notice of same prior to such release or disclosure and to use their reasonable best efforts to assist the Company in maintaining the confidentiality provided for in this Article.

E. The provisions of this Article will extend to the officers, directors, shareholders, and employees of the Reinsurer and its affiliates, who have received Confidential Information in accordance with this Contract and will be binding upon their successors and assigns.

F. The Reinsurer acknowledges that any unauthorized disclosure of Confidential Information may cause irreparable harm to the Company.  If Confidential Information is acquired by or made available to an unauthorized third party due the Reinsurer’s breach of this Article, the Reinsurer shall notify the Company immediately and the Company shall be entitled to specific performance, including immediate issuance of a temporary restraining order or preliminary injunction.  The Company shall be entitled to damages, attorneys’ fees and costs, and any other remedies available under the law due to the Reinsurer’s breach of this Article.  The Company may concurrently or alternatively seek legal relief by way of arbitration as provided for in this Contract.

article XXXII

SUNSET AND COMMUTATION

A. Ten years after the expiration of this Contract, the Company shall advise the Reinsurer of any Loss Occurrences attaching to this Contract which have not been finally settled and which may result in a claim by the Company under this Contract.  No liability shall attach hereunder for any claim or claims not reported to the Reinsurer within this ten year period.  If a loss arising out of a Loss Occurrence is reported during this period, all losses arising out of the same Loss Occurrence shall be deemed reported under this paragraph regardless of when notification of loss is provided.

American Interstate Insurance Company
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B. If both parties agree to commute the unsettled losses subject to the Contract, then the Reinsurer’s liability for all such unsettled losses shall then be commuted.

C. It is understood that commutation of all such losses shall be made using tabular reserving methods.  For each loss, the nominal ultimate value of the Company’s Ultimate Net Loss shall be established by projecting out future medical and indemnity payments and loss expenses by year based on appropriate trends and escalations applied to annual cost estimates.  The Contract limit and retention (where applicable) shall then be applied to the nominal ultimate value of the Company’s Ultimate Net Loss to determine the nominal ultimate Contract loss.  Mortality factors and discount factors shall then be applied by year to the nominal ultimate Contract loss.  The discounted, mortality adjusted projected annual loss payments shall be summed to determine the present value (“commutation price”) of the ultimate Contract loss.  The medical escalation, discount and mortality factors are described in paragraph D.

D. The following factors shall be utilized in establishing the commutation price:

1. Medical Escalation Rate

The medical escalation rate shall be a reasonable estimate of future medical inflation.

2. Discount Rate

The discount rate shall be the annualized 10-year US Treasury Bill rate at the Valuation Date.

3. Mortality Tables

Mortality factors shall be based on the most recent mortality table at the Valuation Date from the “Vital Statistics of the United States” as published by the US Department of Health and Human Services, Center for Disease Control and Prevention.  Factors for extension beyond age 85 shall also be included.

4. Impairment

Impairment factors shall be based on the individual claim characteristics.

Any other method of calculating the commutation price of one or more losses subject to this Contract may be used as mutually agreed between the Company and the Reinsurer.

E. If the Company and the Reinsurer cannot agree on a commutation value, the effort can be abandoned. Alternatively, the Company and the Reinsurer may mutually agree to settle any difference using a panel of three actuaries, one to be chosen by each party and the third by the two so chosen.  If either party refuses or neglects to appoint an actuary within 30 days, the other party may appoint two actuaries.  If the two actuaries fail to agree on the selection of a third actuary within 30 days of their appointment, each of them shall name two, of whom the other shall decline one and the decision shall be made by drawing lots.  

American Interstate Insurance Company
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All the actuaries shall be regularly engaged in the valuation of Workers’ Compensation claims and shall be Fellows of the Casualty Actuarial Society or members of the American Academy of Actuaries.  All of the actuaries shall be independent of either party to this Contract.

F. The settlement agreed upon by a majority of the panel of actuaries shall be final and binding on both parties and set forth in a sworn written document expressing their professional opinion that said value is fair for the complete mutual release of all liabilities in respect of such reserves.

G. The Reinsurer’s commutation payment shall be due within 7 days following the date the Company and the Reinsurer agree to the commutation price.  Such payment by the Reinsurer shall constitute both a complete release of the Reinsurer of its liability for all losses, known or unknown, under this Contract, and a complete release of the Company of its liabilities and obligations, known or unknown, under this Contract.

H. This Article shall survive the expiration of this Contract.

article XXXIII

INSOLVENCY

A. In the event of the insolvency of the Company, this reinsurance shall be payable directly to the Company or to its liquidator, receiver, conservator or statutory successor, with reasonable provision for verification, on the basis of the liability of the Company without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim.  It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of a claim against the Company indicating the Policy or bond reinsured which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor.  The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the Court, against the Company as part of the expense of conservation or liquidation to the extent of a proportionate share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.

B. Where two or more subscribing reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Contract as though such expense had been incurred by the Company.

American Interstate Insurance Company
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Casualty Catastrophe XOL Contract	23

C. It is further agreed that, in the event of the insolvency of the Company, the reinsurance under this Contract shall be payable directly by the Reinsurer to the Company or its liquidator, receiver, conservator, or statutory successor, except as provided by Section 4118(a) of the New York Insurance Law or except 1) where this Contract specifically provides another payee of such reinsurance in the event of the insolvency of the Company or 2) where the Reinsurer with the consent of the direct insured or insureds has assumed such Policy obligations of the Company as direct obligations of the Reinsurer to the payee under such Policies and in substitution for the obligations of the Company to such payees.

D. In the event of the insolvency of any company or companies listed in the designation of “Company” under this Contract, this Article shall apply only to the insolvent company or companies.

article XXXIV

Arbitration

A. As a condition precedent to any right of action hereunder, any irreconcilable dispute arising out of the interpretation, performance or breach of this Contract, including the formation or validity thereof, whether arising before or after the expiry or termination of the Contract, shall be submitted for decision to a panel of three arbitrators.  Notice requesting arbitration will be in writing and sent by certified mail, return receipt requested, or such reputable courier service as is capable of returning proof of receipt of such notice by the recipient to the party demanding arbitration.

B. The Company shall have the option to either litigate or arbitrate where:

1. The Reinsurer makes any allegation of misrepresentation, non-disclosure, concealment, fraud or bad faith; or

2. The Reinsurer experiences any of the circumstances set forth in subparagraphs 1 through 7 of paragraph A of the SPECIAL TERMINATION ARTICLE.

C. One arbitrator shall be appointed by each party.  If either party fails to appoint its arbitrator within 30 days after being requested to do so by the other party, the latter, after 10 days’ notice by certified mail or reputable courier as provided above of its intention to do so, may appoint the second arbitrator.

D. The two arbitrators shall, before instituting the hearing, appoint an impartial third arbitrator who shall preside at the hearing.  Should the two arbitrators fail to choose the third arbitrator within 30 days of the appointment of the second arbitrator, the parties shall appoint the third arbitrator pursuant to the AIDA Reinsurance and Insurance Arbitration Society – U.S. (ARIAS) Umpire Selection Procedure. All arbitrators shall be disinterested active or former senior executives of insurance or reinsurance companies or Underwriters at Lloyd’s, London.

American Interstate Insurance Company
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Casualty Catastrophe XOL Contract	24

E. Within 30 days after notice of appointment of all arbitrators, the panel shall meet and determine timely periods for briefs, discovery procedures and schedules for hearings.  The panel shall be relieved of all judicial formality and shall not be bound by the strict rules of procedure and evidence.  Unless the panel agrees otherwise, arbitration shall take place in Omaha, Nebraska but the venue may be changed when deemed by the panel to be in the best interest of the arbitration proceeding.  Insofar as the arbitration panel looks to substantive law, it shall consider the law of the State of Nebraska.  The decision of any two arbitrators when rendered in writing shall be final and binding.  The panel is empowered to grant interim relief as it may deem appropriate.

F. In the event an arbitrator is unable to serve due to death, disability or other incapacity, a replacement arbitrator shall be chosen in accordance with the procedures set forth in this Article for the original selection of the arbitrator appointed and the newly constituted panel shall take all necessary and/or reasonable measures to continue the arbitration proceedings without additional delay.

G. This Contract shall be interpreted as an honorable engagement rather than merely as a legal obligation.The panel shall make its decision considering the custom and practice of the applicable insurance and reinsurance business as promptly as possible following the termination of the hearings.  Judgment upon the award may be entered in any court having jurisdiction thereof.

H. Arbitration proceedings are subject to consolidation as follows:

1. Single contract, multiple reinsurers, common issue:  If more than one Reinsurer is involved in arbitration where there are common questions of law or fact and a possibility of conflicting awards or inconsistent results, all such Reinsurers, at the Company’s request, shall be joined in a single arbitration proceeding and shall constitute and act as one party for purposes of this Article and communications shall be made by the Company to each of the Reinsurers constituting the one party; provided, however, that nothing therein shall impair the rights of such Reinsurers to assert several, rather than joint defenses or claims, nor be construed as changing the liability of the Reinsurers under the terms of this Contract from several to joint.

2. Single reinsurer, multiple contracts, common issue:  If any Reinsurer to this Contract has subscribed to other reinsurance contracts with the Company, under which a dispute has arisen where there are common questions of law or fact with the dispute being arbitrated under this Contract and a possibility of conflicting awards or inconsistent results, the Reinsurer, at the Company’s request, shall arbitrate all such reinsurance disputes involving the same loss or common questions of law or fact in one consolidated proceeding, subject to the provisions of this Article.

3. Single reinsurer, multiple contracts:  If any Reinsurer to this Contract has subscribed to other reinsurance contracts with the Company and various disputes have arisen under such contracts, regardless of whether or not there are common questions of law or fact, if mutually agreed to by the parties hereto, the parties shall arbitrate all reinsurance disputes in one consolidated proceeding, subject to the provisions of this Article.

American Interstate Insurance Company
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The agreement to consolidate disputes under this Contract and one or more other reinsurance contracts will supersede all other reinsurance contracts entered into between the Company and the Reinsurer, regardless of whether any other reinsurance contract may require or address consolidation.

I. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the cost of the third arbitrator.  The remaining costs of the arbitration shall be allocated by the panel.  The panel may, at its discretion, award such further costs and expenses as it considers appropriate, including but not limited to attorney’s fees, to the extent permitted by law.  However, the panel may not award any Exemplary or Punitive Damages and Enhanced Compensatory Damages.

article XXXV

expedited Arbitration

A. Notwithstanding the provisions of the ARBITRATION ARTICLE, in the event an amount in dispute hereunder is $500,000 or less, the Company may elect to require an expedited arbitration process with the use of a single arbitrator.  The arbitrator will be chosen in accordance with the procedures for selecting an arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society – U.S. (ARIAS).  

B. Each party’s case will be submitted to the arbitrator within 100 days of the date of determination of the arbitrator.  Discovery will be limited to exchanging only those documents directly relating to the issue in dispute, subject to a limit of two discovery depositions from each party, unless otherwise authorized by the arbitrator upon a showing of good cause.

C. Within 120 days of the date of determination of the arbitrator, the hearing will be completed and a written award will be issued by the arbitrator.  The arbitrator will have all the powers conferred on the arbitration panel as provided in the ARBITRATION ARTICLE, and said Article will apply to all matters not specifically addressed above.

article XXXVI

SERVICE OF SUIT

(This Article is applicable if the Reinsurer is not domiciled in the United States of America and/or is not authorized in any State, Territory, or District of the United States where authorization is required by insurance regulatory authorities.  This Article is not intended to conflict with or override the obligation of the parties to arbitrate their disputes in accordance with the ARBITRATION ARTICLE.)

A. In the event of the failure of the Reinsurer to perform its obligations under this Contract, the Reinsurer, at the request of the Company, shall submit to the jurisdiction of a court of competent jurisdiction within the United States.  Nothing in this Article constitutes or

American Interstate Insurance Company
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should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States.  The Reinsurer, once the appropriate court is selected, whether such court is the one originally chosen by the Company and accepted by the Reinsurer or is determined by removal, transfer, or otherwise, as provided for above, shall comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against it upon this Contract, and shall abide by the final decision of such court or of any appellate court in the event of an appeal.  The validity and/or enforceability of any arbitration award or judgment obtained in the United States shall not be contested by the Reinsurer in any jurisdiction outside of the United States.

B. Service of process in such suit may be made uponthe law firm of Mendes and Mount, 750 Seventh Avenue, New York, NY 10019, or another party specifically designated by the Reinsurer in its Interests and Liabilities Agreement attached hereto. 

C. Further, pursuant to any statute of any state, territory or district of the United States that makes provision therefor, the Reinsurer hereby designates the Superintendent, Commissioner or Director of Insurance, or other officer specified for that purpose in the statute, or his/her successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceedings instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract, and hereby designates the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof.

D. The individual named in Paragraph C shall be deemed the Reinsurer’s agent for the service of process:

1. where the address designated in, or pursuant to paragraph B is invalid; or

2. to the extent necessary to bring this Contract into conformity with the applicable law of a state with jurisdiction over the Company.

article XXXVII

ENTIRE AGREEMENT

This Contract shall constitute the entire agreement between the parties with respect to the business being reinsured hereunder.  There are no understandings between the parties other than as expressed in this Contract.  Any change or modification to this Contract shall be null and void unless made by amendment to this Contract and signed by both parties.  This Article shall not be construed as limiting in any way the admissibility in the context of an arbitration or any other legal proceeding, evidence regarding the formation, interpretation, purpose or intent of this Contract.

American Interstate Insurance Company
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article XXXVIII

Mode of Execution

This Contract may be executed either by an original written ink signature of paper documents, by an exchange of facsimile copies showing the original written ink signature of paper documents, or by electronic signature by either party employing appropriate software technology as to satisfy the parties at the time of execution that the version of the document agreed to by each party shall always be capable of authentication and satisfy the same rules of evidence as written signatures.  The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this Contract.  This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.

article XxxIX

INTERMEDIARY

Willis Re Inc. is hereby recognized as the intermediary negotiating this Contract and through whom all communications, including but not limited to accounts, claim information, funds and inquiries, to theCompanyorthe Reinsurer shall be transmitted. Payments by the Company to Willis Re Inc. shall be deemed to constitute payment to the Reinsurer and payments by the Reinsurer to Willis Re Inc. shall be deemed to constitute payment to the Company only to the extent that such payments are actually received by the Company.

IN WITNESS WHEREOF, the Company by its duly authorized representative has executed this Contract as of the date specified below:

Signed this __________________ day of ____________________________________, 20___.

AMERICAN INTERSTATE INSURANCE COMPANY

SILVER OAK CASUALTY, INC.

AMERICAN INTERSTATE INSURANCE COMPANY OF TEXAS

By

Printed Name

Title

American Interstate Insurance Company
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Casualty Catastrophe XOL Contract	28

NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - U.S.A.

(1) This reinsurance does not cover any loss or liability accruing to the Reassured as a member of, or subscriber to, any association of insurers or reinsurers formed for the purpose of covering nuclear energy risks or as a direct or indirect reinsurer of any such member, subscriber or association.

(2) Without in any way restricting the operation of paragraph (1) of this Clause it is understood and agreed that for all purposes of this reinsurance all the original policies of the Reassured (new, renewal and replacement) of the classes specified in Clause II of this paragraph (2) from the time specified in Clause III in this paragraph (2) shall be deemed to include the following provision (specified as the Limited Exclusion Provision):

Limited Exclusion Provision.*

I. It is agreed that the policy does not apply under any liability coverage,

to (injury, sickness, disease, death or destruction,

(bodily injury or property damage

with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability.

II. Family Automobile Policies (liability only), Special Automobile Policies (private passenger automobiles, liability only), Farmers Comprehensive Personal Liability Policies (liability only), Comprehensive Personal Liability Policies (liability only) or policies of a similar nature; and the liability portion of combination forms related to the four classes of policies stated above, such as the Comprehensive Dwelling Policy and the applicable types of Homeowners Policies.

III. The inception dates and thereafter of all original policies as described in II above, whether new, renewal or replacement, being policies which either

(a) become effective on or after 1st May, 1960, or

(b) become effective before that date and contain the Limited Exclusion Provision set out above; provided this paragraph (2) shall not be applicable to Family Automobile Policies, Special Automobile Policies, or policies or combination policies of a similar nature, issued by the Reassured on New York risks, until 90 days following approval of the Limited Exclusion Provision by the Governmental Authority having jurisdiction thereof.

American Interstate Insurance Company
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Casualty Catastrophe XOL Contract	1

(3) Except for those classes of policies specified in Clause II of paragraph (2) and without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that for all purposes of this reinsurance the original liability policies of the Reassured (new, renewal and replacement) affording the following coverages:

Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners or Contractors (including railroad) Protective Liability, Manufacturers and Contractors Liability, Product Liability, Professional and Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle or Garage Liability)

shall be deemed to include, with respect to such coverages, from the time specified in Clause V of this paragraph (3), the following provision (specified as the Broad Exclusion Provision):

Broad Exclusion Provision.*

It is agreed that the policy does not apply:

I. Under any Liability Coverage, to (injury, sickness, disease, death or destruction

(bodily injury or property damage

(a) with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability; or

(b) resulting from the hazardous properties of nuclear material and with respect to which (1) any person or organization is required to maintain financial protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof, or (2) the insured is, or had this policy not been issued would be, entitled to indemnity from the United States of America, or any agency thereof, under any agreement entered into by the United States of America, or any agency thereof, with any person or organization.

II. Under any Medical Payments Coverage, or under any Supplementary Payments Provision

relating to (immediate medical or surgical relief,

(first aid,          

to expenses incurred with respect

to (bodily injury, sickness, disease or death

(bodily injury

resulting from the hazardous properties of nuclear material and arising out of the operation of a nuclear facility by any person or organization.

American Interstate Insurance Company
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III. Under any Liability Coverage to    (injury, sickness, disease, death or destruction

(bodily injury or property damage

resulting from the hazardous properties of nuclear material, if

(a) the nuclear material (1) is at any nuclear facility owned by, or operated by or on behalf of, an insured or (2) has been discharged or dispersed therefrom;

(b) the nuclear material is contained in spent fuel or waste at any time possessed, handled, used, processed, stored, transported or disposed of by or on behalf of an insured; or

(c) the  (injury, sickness, disease, death or destruction

(bodily injury or property damages

arises out of the furnishing by an insured of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any nuclear facility, but if such facility is located within the United States of America, its territories, or possessions or Canada, this exclusion (c) applies only  to

(injury to or destruction of property at such nuclear facility

(property damage to such nuclear facility and any property thereat.

IV. As used in this endorsement:

“Hazardous properties” include radioactive, toxic or explosive properties; “nuclear material” means source material, special nuclear material or byproduct material; “source material,” “special nuclear material,” and “byproduct material” have the meanings given them in the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel element or fuel component, solid or liquid, which has been used or exposed to radiation in a nuclear reactor; “waste” means any waste material (1) containing byproduct material and (2) resulting from the operation by any person or organization of any nuclear facility included within the definition of nuclear facility under paragraph (a) or (b) thereof; “nuclear facility” means

(a) any nuclear reactor,

(b) any equipment or device designed or used for (1) separating the isotopes of uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling, processing or packaging waste,

(c) any equipment or device used for the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than 250 grams of uranium 235,

American Interstate Insurance Company
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(d) any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste,

and includes the site on which any of the foregoing is located, all operations conducted on such site and all premises used for such operations; “nuclear reactor” means any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of fissionable material;

(With respect to injury to or destruction of property, the word “injury” or “destruction”

(“property damage” includes all forms of radioactive contamination of property

(includes all forms of radioactive contamination of property.

V. The inception dates and thereafter of all original policies affording coverages specified in this paragraph (3), whether new, renewal or replacement, being policies which become effective on or after 1st May, 1960, provided this paragraph (3) shall not be applicable to

(i) Garage and Automobile Policies issued by the Reassured on New York risks, or

(ii) statutory liability insurance required under Chapter 90, General Laws of Massachusetts,

until 90 days following approval of the Broad Exclusion Provision by the Governmental Authority having jurisdiction thereof.

(4) Without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that paragraphs (2) and (3) above are not applicable to original liability policies of the Reassured in Canada and that with respect to such policies this Clause shall be deemed to include the Nuclear Energy Liability Exclusion Provisions adopted by the Canadian Underwriters’ Association of the Independent Insurance Conference of Canada.

*NOTE:  The words printed in italics in the Limited Exclusion Provision and in the Broad Exclusion Provision shall apply only in relation to original liability policies which include a Limited Exclusion Provision or a Broad Exclusion Provision containing those words.

21/9/67

N.M.A. 1590

BRMA 35A

American Interstate Insurance Company
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EX-10.29

Exhibit 10.29

american interstate insurance company

SILVER OAK CASUALTY, INC.

both of Omaha, Nebraska

and

american interstate insurance companY of texas

Austin, Texas

and

any other insurance companies which are now or hereafter come under the ownership, control or management of Amerisafe, Inc.

CASUALTY EXCESS OF LOSS

Reinsurance Contract

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	12-27-16

TABLE OF CONTENTS

I	BUSINESS COVERED	1
II	TERM	1
III	SPECIAL TERMINATION	2
IV	DEFINITIONS	5
	Act of Terrorism	5
	Declaratory Judgment Expense	5
	Extra Contractual Obligations/Loss in Excess of Policy Limits	6
	Loss Adjustment Expense	6
	Loss Occurrence	7
	Net Earned Premium	7
	Written Premium	7
	Policy	7
	Contract Year	8
	Policy Year Manual Payroll (excluding clerical)	8
	Ultimate Net Loss	8
V	TERRITORY	8
VI	EXCLUSIONS	9
VII	TERRORISM ACT RECOVERIES	10
VIII	COVERAGE	11
IX	MATERIAL CHANGE	13
X	SPECIAL ACCEPTANCE	15
XI	REINSURANCE PREMIUM	15
XII	FUNDS WITHHELD ACCOUNT	16
XIII	NOTICE OF LOSS AND LOSS SETTLEMENTS	18
XIV	LIABILITY OF REINSURERS	18
XV	LATE PAYMENTS	18
XVI	REPORTS AND REMITTANCES	19
XVII	COMMUTATION	20
XVIII	NOTIONAL EXPERIENCE ACCOUNT	22
XIX	ANNUITIES AT THE COMPANY’S OPTION	23
XX	SUNSET	23
XXI	AGENCY AGREEMENT	23
XXII	SUBROGATION	24
XXIII	ERRORS AND OMISSIONS	24
XXIV	OFFSET	24
XXV	CURRENCY	24
XXVI	TAXES	25
XXVII	FEDERAL EXCISE TAX	25
XXVIII	FOREIGN ACCOUNT TAX COMPLIANCE ACT (“FATCA”)	25
XXIX	UNAUTHORIZED REINSURANCE	26
XXX	NET RETAINED LINES	29
XXXI	THIRD PARTY RIGHTS	30
XXXII	SEVERABILITY	30
XXXIII	GOVERNING LAW	30

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	12-27-16

XXXIV	ACCESS TO RECORDS	30
XXXV	CONFIDENTIALITY	30
XXXVI	INSOLVENCY	32
XXXVII	ARBITRATION	33
XXXVIII	EXPEDITED ARBITRATION	35
XXXIX	SERVICE OF SUIT	35
XL	MODE OF EXECUTION	36
XLI	ENTIRE AGREEMENT	36
XLII	INTERMEDIARY	37
	Nuclear Incident Exclusion Clause - Liability - Reinsurance - U.S.A.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	12-27-16

CASUALTY EXCESS OF LOSS

reinsurance contract

(the “Contract”)

between

american interstate insurance company

SILVER OAK CASUALTY, INC.

both of Omaha, Nebraska

and

american interstate insurance companY of texas

Austin, Texas

and

any other insurance companies which are now or hereafter come under the ownership, control or management of Amerisafe, Inc.

(collectively the “Company”)

and

THE SUBSCRIBING REINSURER(s) EXECUTING THE

INTERESTS AND LIABILITIES AGREEMENT(s)

ATTACHED HERETO

(the “Reinsurer”)

ARTICLE I

BUSINESS COVERED

A. By this Contract the Reinsurer agrees to reinsure the excess liability of the Company under its Policies that are in force at the effective time and date hereof or issued or renewed at or after that time and date, and classified by the Company as Workers’ Compensation, Employers Liability, including but not limited to coverage provided under the U.S. Longshore and Harbor Workers’ Compensation Act, Jones Act, Outer Continental Shelf Lands Act and any other Federal Coverage extensions, subject to the terms, conditions and limitations hereafter set forth.  Coverage hereunder includes Policies classified as loss sensitive, including but not limited to large deductible Policies.

article II

TERM

A. This Contract shall apply to all losses occurring during the period 12:01 a.m., Standard Time, January 1, 2017 (as set forth in the Company’s policies) to 12:01 a.m., Standard Time, January 1, 2020.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	1	12-27-16

B. Upon the expiration or termination of this Contract, the entire liability of the Reinsurer for losses occurring subsequent to the date of expiration or termination shall cease concurrently with the date of expiration or termination of this Contract.

C. If this Contract expires or is terminated while a Loss Occurrence covered hereunder is in progress, the Reinsurer’s liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire Loss Occurrence had occurred prior to the expiration of this Contract, provided that no part of such Loss Occurrence is claimed against any renewal or replacement of this Contract.

D. The Reinsurer shall have no right to either terminate or commute this Contract other than as set forth in paragraph F of the MATERIAL CHANGE ARTICLE or paragraph A of the COMMUTATION ARTICLE or paragraph B of the SPECIAL TERMINATION ARTICLE.

E. This Contract shall continue in force and shall apply, subject to all of the terms and limits hereof, to the Company’s Ultimate Net Loss until this Contract has been commuted in accordance with the terms of the COMMUTATION ARTICLE or until all Ultimate Net Loss has been paid by the Reinsurer in accordance with the terms of the COVERAGE ARTICLE.

ARTICLE III

SPECIAL TERMINATION

A. The Company may terminate a subscribing reinsurer’s share in this Contract by giving 90 days written notice to the subscribing reinsurer upon the happening of any one of the following circumstances:

1. A State Insurance Department or other legal authority orders the subscribing reinsurer to cease writing business, or

2. The subscribing reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary), or there has been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations, or

3. For any period not exceeding 12 months which commences no earlier than 12 months prior to the inception of this Contract, the subscribing reinsurer’s policyholders’ surplus, as reported in the financial statements of the subscribing reinsurer (as respects a subscribing reinsurer domiciled outside the United States, policyholders’ surplus shall mean the sum of share capital and contributed capital as stated in the subscribing reinsurer’s audited financial statement) has been reduced by 20.0% or more, or

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	2	12-27-16

4. The subscribing reinsurer has become merged with, acquired or controlled by any company, corporation, or individual(s) not controlling the subscribing reinsurer’s operations previously, or

5. The subscribing reinsurer has reinsured its entire liability under this Contract without the Company’s prior written consent, or

6. The subscribing reinsurer receives an A. M. Best rating of lower than A‑, or an S&P financial strength rating of lower than A‑, or

7. The subscribing reinsurer has ceased writing new and renewal reinsurance for the lines of business covered hereunder, or

8. The Company’s outside auditors determine during the first two months of the Term of the Contract that the Contract does not provide sufficient risk transfer to constitute reinsurance in accordance with the Financial Accounting Standards Board Statements guidelines.

9. The subscribing reinsurer has failed to comply with the funding requirements set forth in the UNAUTHORIZED REINSURANCE ARTICLE.

B. A subscribing reinsurer may terminate their share of this Contract by giving 90 days’ written notice to the Company upon the happening of any one of the following circumstances:

1. A State Insurance Department or other legal authority orders the Company to cease writing business, or

2. The Company has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary), or there has been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations, or

3. The Company has become merged with, acquired or controlled by any company, corporation, or individual(s) not controlling the Company’s operations previously.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	3	12-27-16

C. In the event of termination in accordance with paragraph A or B, above, or in accordance with paragraph F of the MATERIAL CHANGE ARTICLE, the following shall apply as respects reinsurance premium and reinsurance limits:

1. If terminated prior to or at the expiration of Contract Year 1, the reinsurance premium and the annual aggregate deductibles for Parts A and B of the COVERAGE ARTICLE shall be calculated based on Net Earned Premium through the  termination date. The Reinsurer’s limit of liability in respect of all losses occurring during the term of this Contract shall be equal to the limits available any one Contract Year under the COVERAGE ARTICLE being 5.0% of Net Earned Premium, as calculated above, and 3.0% of Net Earned Premium, as calculated above, under Part A and Part B respectively.

2. If terminated at any time during Contract Year 2 or Contract Year 3, the reinsurance premium and the annual aggregate deductibles and Contract Year limits for Parts A and B of the COVERAGE ARTICLE shall be calculated as specified in the REINSURANCE PREMIUM ARTICLE and COVERAGE ARTICLE for any full Contract Year prior to the termination date.  For the Contract Year in which termination occurs, the reinsurance premium and the annual aggregate deductibles under Parts A and B of the COVERAGE ARTICLE shall be calculated based on Net Earned Premium for that Contract Year through the termination date.  The Reinsurer’s limit of liability in respect of losses occurring during the Contract Year in which the termination occurs shall be equal to 5.0% of Net Earned Premium for that Contract Year, as calculated above, and 3.0% of Net Earned Premium for that Contract Year, as calculated above, under Part A and Part B respectively.   The Reinsurer’s limit of liability in respect of all losses occurring during the term of this Contract shall be equal to the limits available during the term of this Contract under the COVERAGE ARTICLE being 3.33% of Net Earned Premium and 1.0% of Net Earned Premium for all applicable Contract Years through the termination date under Part A and Part B respectively.

D. In the event the Company terminates a subscribing reinsurer’s share in this Contract under the provision of this Article, the Company has the option, but not obligation, to commute the subscribing reinsurer’s past liabilities for losses in accordance with the COMMUTATION ARTICLE.

E. In the event the Company terminates a subscribing reinsurer’s share in this Contract under the provision of this Article, the Company shall have the option to require the subscribing reinsurer to fund its share of known outstanding losses that have been reported to the subscribing reinsurer and allocated loss adjustment expense relating thereto, losses and allocated loss adjustment expense paid by the Company but not recovered from the subscribing reinsurer, reserves for losses incurred but not reported as per the Company’s statutory accounts, unearned premium and any positive Notional Experience Account balance accrued by the Company, as shown in the statement prepared by the Company, and any other balances or financial obligations.  Within 30 days of the Company’s written request to fund, the subscribing reinsurer shall provide to the Company a clean, unconditional, evergreen, irrevocable letter of credit or a trust agreement which establishes

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	4	12-27-16

a trust account for the benefit of the Company.  The method of funding must be acceptable to the Company, shall be established with a financial institution suitable to the Company, shall comply with any applicable state or federal laws or regulations involving the Company’s ability to recognize these agreements as assets or offsets to liabilities in such jurisdictions and shall be at the sole expense of the subscribing reinsurer.  The Company and the subscribing reinsurer may mutually agree on alternative methods of funding or the use of a combination of methods.  This option is available to the Company at any time there remains any outstanding liabilities of the subscribing reinsurer.  Notwithstanding the foregoing, the Company shall not require funding in accordance with this subparagraph in the event the subscribing reinsurer has otherwise fully funded its obligations under this Contract in a manner acceptable to the Company.

article IV

definitions

A. Act of Terrorism

“Act of Terrorism” as used herein shall follow the definition provided under the Terrorism Risk Insurance Act of 2002 (TRIA) and as amended by the Terrorism Risk Insurance Extension Act of 2005 (TRIEA) and the Terrorism Risk Insurance Program Reauthorization Acts of 2007 and 2015 (TRIPRA), together and including any extensions or replacement thereof, the “Terrorism Act.”

In the event the Terrorism Act is not extended or renewed, Act of Terrorism shall mean a violent act or an act that is dangerous to human life; property; or infrastructure that 1) has resulted in damage within the United States, or outside of the United States in the case of an air carrier or vessel, 2) was committed by an individual or individuals as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion.  The Company shall determine the application of the above definition.

An “Act of Terrorism” may include an act involving the use and/or dispersal of nuclear, chemical, biological or radiological agents.

B. Declaratory Judgment Expense

“Declaratory Judgment Expense” as used herein shall mean all expenses incurred by the Company in connection with a declaratory judgment action brought to determine the Company’s defense and/or indemnification obligations that are allocable to a specific claim subject to this Contract.  Declaratory Judgment Expense shall be deemed to have been incurred on the date of the original loss (if any) giving rise to the declaratory judgment action.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	5	12-27-16

C. Extra Contractual Obligations/Loss in Excess of Policy Limits

1. Extra Contractual Obligations

This Contract shall protect the Company for any “Extra Contractual Obligations” which as used herein shall mean any punitive, exemplary, compensatory or consequential damages, other than Loss in Excess of Policy Limits, paid or payable by the Company as a result of an action against it by its insured, its insured’s assignee or a third party claimant, by reason of alleged or actual negligence, fraud or bad faith on the part of the Company in handling a claim under a Policy subject to this Contract.

An Extra Contractual Obligation shall be deemed to have occurred on the same date as the loss covered or alleged to be covered under the Policy.

2. Loss in Excess of Policy Limits

This Contract shall protect the Company for any “Loss in Excess of Policy Limits” which as used herein shall mean an amount that the Company would have been contractually liable to pay had it not been for the limit of the original Policy as a result of an action against it by its insured, its insured’s assignee or a third party claimant.  Such loss in excess of the limit shall have been incurred because of failure by the Company to settle within the Policy limit, or by reason of alleged or actual negligence, fraud, or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or in the preparation or prosecution of an appeal consequent upon such action.

3. This paragraph C shall not apply where an Extra Contractual Obligation and/or Loss in Excess of Policy Limits has been incurred due to an adjudicated finding of fraud committed by a member of the Board of Directors or a corporate officer of the Company acting individually or collectively or in collusion with a member of the Board of Directors or a corporate officer or a partner of any other corporation or partnership.

D. Loss Adjustment Expense

“Loss Adjustment Expense” as used herein shall mean all costs and expenses allocable to a specific claim that are incurred by the Company in the investigation, appraisal, adjustment, settlement, litigation, defense, disposition or appeal of a specific claim, including court costs and costs of supersedeas and appeal bonds, and including 1) pre‑judgment interest, unless included as part of the award or judgment; 2) post‑judgment interest; 3) legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, including Declaratory Judgment Expense; and 4) a pro rata share of salaries and expenses of Company field employees, and expenses of other Company employees who have been temporarily diverted from their normal and customary duties and assigned to the field adjustment of losses covered by this Contract.  Loss Adjustment Expense does not include unallocated loss adjustment expense.  Unallocated loss adjustment expense includes, but is not limited to, salaries and expenses of employees, other than (4) above, and office and other overhead expenses.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	6	12-27-16

E. Loss Occurrence

“Loss Occurrence” as used in this Contract shall mean any one disaster or casualty or accident or loss or series of disasters or casualties or accidents or losses arising out of or caused by one event.  The Company shall be the sole judge of what constitutes one event as outlined herein and inthe original Policy.

As respects losses resulting from Occupational or Industrial Disease or Cumulative Trauma, each employee shall be considered a separate Loss Occurrence subject to the following:

Losses resulting from Occupational or Industrial Disease or Cumulative Trauma suffered by employees of an insured for which the employer is liable, as a result of a sudden and accidental event not exceeding 72 hours in duration, shall be considered one Loss Occurrence and may be combined with losses classified as other than Occupational or Industrial Disease or Cumulative Trauma which arise out of the same event and the combination of such losses shall be considered as one Loss Occurrence within the meaning hereof.

A loss with respect toeach employee affected by an Occupational Disease or Cumulative Trauma shall be deemed to have been sustained by the Company on the date of the beginning of the disability for which compensation is payable.

The terms “Occupational or Industrial Disease” and “Cumulative Trauma” as used inthis Contract shall be as defined by applicable statutes or regulations.

F. Net Earned Premium

Net Earned Premium” as used herein is defined as the gross earned premium of the Company for the classes of business reinsured hereunder, less the earned portion of premiums ceded by the Company for reinsurance which inures to the benefit of this Contract, less dividends paid or accrued. As respects large deductible Policies, Net Earned Premium shall be net of any applicable deductible credit.

G. Written Premium

“Written Premium” as used herein is defined as used in the company’s data system.

H. Policy

“Policy” or “Policies” as used herein shall mean the Company’s binders, policies and contracts providing insurance or reinsurance on the classes of business covered under this Contract.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	7	12-27-16

I. Contract Year

“Contract Year” as used herein shall mean each 12-month period as follows:

1. Contract Year 1: 12:01 a.m., Standard Time, January 1, 2017 (as set forth in the Company’s policies) to 12:01 a.m., Standard Time, January 1, 2018.

2. Contract Year 2: 12:01 a.m., Standard Time, January 1, 2018 (as set forth in the Company’s policies) to 12:01 a.m., Standard Time, January 1, 2019.

3. Contract Year 3: 12:01 a.m., Standard Time, January 1, 2019 (as set forth in the Company’s policies) to 12:01 a.m., Standard Time, January 1, 2020.

J. Policy Year Manual Payroll (excluding clerical)

“Policy Year Manual Payroll (excluding clerical)” shall mean manual payroll as used for applying manual premium rates for policies incepting or renewed during the calendar year excluding manual payroll for Manual Class Codes 8810 and 953. The 2016 Policy year manual payroll (excluding clerical) is estimated to be $5,010,000,000.

K. Ultimate Net Loss

“Ultimate Net Loss” shall mean the actual loss, including but not limited to ex gratia payments, any pre-judgment interest which is included as part of the award or judgment, “Second Injury Fund” assessments that can be allocated to specific claims, Loss Adjustment Expense, 90% of Loss in Excess of Policy Limits, and 90% of Extra Contractual Obligations, paid or to be paid by the Company on its net retained liability after making deductions for all recoveries, subrogations and all claims on inuring reinsurance, whether collectible or not; provided, however, that in the event of the insolvency of the Company, payment by the Reinsurer shall be made in accordance with the provisions of the Insolvency Article.  Nothing herein shall be construed to mean that losses under this Contract are not recoverable until the Company’s Ultimate Net Loss has been ascertained.  As respects large deductible Policies, Ultimate Net Loss shall be net of any applicable deductible.

Notwithstanding the definition of “Ultimate Net Loss” herein, the provisions of paragraph H of the COVERAGE ARTICLE as respects the Minnesota Workers’ Compensation Reinsurance Association shall apply.

article V

TERRITORY

The territorial limits of this Contract shall be identical with those of the Company’s Policies.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	8	12-27-16

article VI

exclusions

A. This Contract does not apply to and specifically excludes the following:

1. Reinsurance assumed by the Company under obligatory reinsurance agreements, except:

a. Agency reinsurance where the policies involved are to be re-underwritten in accordance with the underwriting standards of the Company and reissued as Company policies at the next anniversary or expiration date; and

b. Intercompany reinsurance between any of the reinsured companies under this Contract.

2. Nuclear risks as defined in the “Nuclear Incident Exclusion Clause – Liability – Reinsurance – U.S.A.” (NMA 1590 21/9/67) attached hereto.

3. Liability as a member, subscriber or reinsurer of any Pool, Syndicate or Association, including Assigned Risk Plans or similar plans; however, this exclusion shall not apply to liability under a Policy specifically designated to the Company from an Assigned Risk Plan or similar plan.

4. All liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any Insolvency Fund. “Insolvency Fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, however denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.

5. Any “Act of Terrorism” directly or indirectly involving the use of nuclear, chemical, biological or radiological devices.

6. Workers’ Compensation where the principal exposure, as defined by the governing class code, is:

a. Operation of aircraft, but only if the annual estimated policy premium is $250,000 or more;

b. Operation of Railroads, subways or street railways;

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	9	12-27-16

c. Manufacturing, assembly, packing or processing of fireworks, fuses, nitroglycerine, magnesium, pyroxylin, ammunition or explosives.  This exclusion does not apply to the assembly, packing or processing of explosives when the estimated annual premium is under $250,000 and does not apply to the commercial use of explosives

d. Underground mining.

7. All excess of loss reinsurance assumed by the Company.

8. Business written by the Company on a co-indemnity basis where the Company is not the controlling carrier.

9. As regards interests which at the time of loss or damage are on shore, no liability shall attach hereto in respect to any loss or damage which is occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or confiscation by order of any government or public authority.  This War Exclusion Clause shall not, however, apply to interests which at time of loss  or damage are within the territorial limits of the United States of America (comprising  the Fifty States of the Union, the District of Columbia and including bridges between the United States of America and Mexico provided they are under United States ownership), Canada, St. Pierre and Miquelon, provided such interests are insured under policies containing a standard war or hostilities or warlike operations exclusion clause.

B. Notwithstanding the foregoing, any reinsurance falling within the scope of one or more of the exclusions set forth above that is specially accepted by the Reinsurer from the Company shall be covered under this Contract and be subject to the terms hereof.

C. Should a court of competent jurisdiction invalidate any exclusion or expand coverage of the original Policy of the Company, any amount of Loss for which the Company would not be liable, except for such invalidation or expansion of coverage, shall not be subject to any of the exclusions, conditions and limitations hereinafter set forth under this Contract.

article VII

terrorism Act RECOVERIES

A. Any financial assistance the Company receives under the Terrorism Act, shall apply as follows:

1. Except as provided in subparagraph 2 below, any such financial assistance shall inure solely to the benefit of the Company and shall be entirely disregarded in applying all of the provisions of this Contract.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	10	12-27-16

2. If losses occurring hereunder result in recoveries made by the Company both under this Contract and under the Terrorism Act, and such recoveries, together with any other reinsurance recoverables made by the Company applicable to said losses, exceed the total amount of the Company’s insured losses, any amount in excess thereof shall reduce the Ultimate Net Loss subject to this Contract for the losses to which the Terrorism Act assistance applies.  These recoveries shall be returned in proportion to each Reinsurer’s paid share of the loss.

B. Nothing herein shall be construed to mean that the losses under this Contract are not recoverable until the Company has received financial assistance under the Terrorism Act.

article VIII

COVERAGE

A. Part A

The Reinsurer shall be liable for the amount of Ultimate Net Loss in excess of the Company’s retention, being $2,000,000 each Loss Occurrence, subject to a limit of liability to the Reinsurer of $8,000,000 each Loss Occurrence.  No paid recovery shall be made under this Part A unless and until the Company shall have first satisfied an annual aggregate deductible in respect of all cumulative paid losses otherwise recoverable under this Part A equal to the greater of 1.5% of Net Earned Premium or $4,445,000 for the applicable Contract Year.  The Reinsurer’s liability in respect of all losses occurring during any one Contract Year of this Contract shall not exceed the lesser of:

1. 5.0% of Net Earned Premium for the applicable Contract Year, or

2. $22,225,000 with respect to Contract Year 1,

$22,225,000 with respect to Contract Year 2, and

$22,225,000 with respect to Contract Year 3.

The Reinsurer’s liability in respect of all losses occurring during the term of this Contract shall not exceed the lesser of:

1. 3.33% of Net Earned Premium for all Contract Years over the term of this Contract, or

2. $44,450,000.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	11	12-27-16

Part B

The Reinsurer shall be liable for the amount of Ultimate Net Loss in excess of the Company’s retention, being $2,000,000 each Loss Occurrence, subject to a limit of liability to the Reinsurer of $8,000,000 each Loss Occurrence.  No paid recovery shall be made under this Part B unless and until the Company shall have first satisfied an annual aggregate deductible in respect of all cumulative paid losses otherwise recoverable under this Part B equal to the sum of i) the annual aggregate deductible under Part A as calculated above plus ii) 5.0% of Net Earned Premium for the applicable Contract Year.  The Reinsurer’s liability in respect of all losses occurring during any one Contract Year of this Contract shall not exceed the lesser of:

1. 3.0% of Net Earned Premium for the applicable Contract Year, or

2. $13,335,000 with respect to Contract Year 1,

$13,335,000 with respect to Contract Year 2, and

$13,335,000 with respect to Contract Year 3.

The Reinsurer’s liability in respect of all losses occurring during the term of this Contract shall not exceed the lesser of:

1. 1.0% of Net Earned Premium for all Contract Years over the term of this Contract, or

2. $13,335,000.

For avoidance of doubt, this Contract shall be subject to a Loss Occurrence limit equal to $8,000,000 and shall be inclusive of all indemnity, Extra Contractual Obligations, Loss in Excess of Policy Limits amounts and Loss Adjustment Expenses recoverable under this Contract with respect to each Loss Occurrence.

B. The Company shall be permitted to purchase (or maintain) other reinsurance which inures to the benefit of this Contract.

C. The Company shall be permitted to carry excess of loss reinsurance applying to Workers’ Compensation risks in the State of Minnesota, actual recoveries under which shall inure to the benefit of this Contract. Such coverage shall be provided through the Minnesota Workers’ Compensation Reinsurance Association. Notwithstanding the treatment of inuring coverage in the definition of Ultimate Net Loss, the liability of the Reinsurer for Minnesota Workers’ Compensation risks is not released.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	12	12-27-16

ARTICLE IX

MATERIAL CHANGE

The Company shall not introduce material changes in its generally established practices, including but not limited to claims, acceptance and underwriting policies, its inuring reinsurance protection and loss reserving process (including the allocation of loss adjustment expenses between allocated and unallocated) in any manner which materially affects this Contract, unless the Company has received the prior written approval from the Reinsurer.

A. Prior to the start of each of Contract Year 2 and Contract Year 3, a determination shall be made as respects whether a Material Change to the underlying Business Covered by this Contract has occurred.

B. The Company shall provide to Reinsurer, no later than October 15of each of 2017 and 2018, a schedule of Written Premium in total and for the Governing Class Groups enumerated in subparagraph 5 below.  Written Premium for purposes of this Article shall be:

1. With respect to the determination for Contract Year 2: actual Written Premium from the effective date of this Contract, being January 1, 2017 through September 30, 2017 plus projected Written Premium from October 1, 2017 through December 31, 2018, and

2. With respect to the determination for Contract Year 3: actual Written Premium from the effective date of this Contract, being January 1, 2017 through September 30, 2018 plus projected Written Premium from October 1, 2018 through December 31, 2019.

3. To the extent that the ratio of Written Premium for each of the Governing Class Groups enumerated in subparagraph 5 below to Written Premium in total, both figures as calculated above, is within the applicable ranges listed in subparagraph 5, no Material Change in Business Covered shall have been deemed to occur and the operation of this Contract shall continue without change or modification.

4. To the extent that the ratio of Written Premium for any of the Governing Class Groups enumerated in subparagraph 5 below to Written Premium in total, both figures as calculated above, is outside the applicable ranges listed in subparagraph 5, or to the extent that the Logging component of the Lumber Governing Class Group exceeds five percentage points of Written Premium in total, a Material Change in Business Covered shall have been deemed to occur.

5. The Governing Class Groups and their applicable ranges shall be as follows:

Construction – No less than 20% nor more than 50%

Trucking – No less than 12.5% nor more than 35%

Lumber – No less than 2.5% nor more than 17.5%

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	13	12-27-16

Roofing – No less than 2.5% nor more than 17.5%

Manufacturing – No less than 1.0% nor more than 15%.

All such ratios being calculated as total Written Premium for the enumerated Governing Class Groups as calculated under paragraph B above for the period specified therein divided by total Written Premium for all Governing Class Groups as calculated under paragraph B above for the period specified therein.

C. The Company shall provide to Reinsurer, no later than October 15 of each of 2017 and 2018, a calculation of Policy Year Manual Payroll (excluding clerical) for the current Contract Year. Policy Year Manual Payroll (excluding clerical) for purposes of this Article shall be:

1. With respect to the determination for Contract Year 2: actual policy year manual payroll from the effective date of this Contract, being January 1, 2017 through September 30, 2017 plus projected policy year manual payroll from October 1, 2017 through December 31, 2017, in each case excluding policy year manual payroll in Manual Class Codes 8810 and 953, and

2. With respect to the determination for Contract Year 3: actual policy year manual payroll from the first day of Contract Year 2, being January 1, 2018 through September 30, 2018 plus projected policy year manual payroll from October 1, 2018 through December 31, 2018, in each case excluding policy year manual payroll in Class Codes 8810 and 953.

3. To the extent that Policy Year Manual Payroll (excluding clerical) as determined above for Contract Year 2 is less than or equal to $6,012,000,000, no Material Change in Business Covered shall have been deemed to occur and the operation of this Contract shall continue without change or modification.

4. To the extent that Policy Year Manual Payroll (excluding clerical) as determined above for Contract Year 2 is more than $6,012,000,000, a Material Change in Business Covered shall have been deemed to occur.

5. To the extent that Policy Year Manual Payroll (excluding clerical) as determined above for Contract Year 3 is less than or equal to $6,763,900,000, no Material Change in Business Covered shall have been deemed to occur and the operation of this Contract shall continue without change or modification.

6. To the extent that Policy Year Manual Payroll (excluding clerical) as determined above for Contract Year 3 is more than $6,763,900,000, a Material Change in Business Covered shall have been deemed to occur.

D. A Material Change shall have been deemed to occur if the Company acquires, during the term of this Contract, any insurance or reinsurance company having annual subject premium of $20,000,000 or more.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	14	12-27-16

E. If a Material Change has been deemed to occur under paragraphs B, C or D above for any Contract Year, Company and Reinsurer shall mutually agree to such modifications of this contract as shall be deemed necessary to reflect the Material Change, including but not limited to, changes in Exclusions, Reinsurance Premium, the Company’s annual aggregate deductible, the Reinsurer’s fixed expenses or any other Contract features or the adoption of new limitations or changes in coverage.

F. If a Material Change has been deemed to occur under paragraphs B or C above for either Contract Year 2 or Contract Year 3, and the Company and Reinsurer are not able to mutually agree to the necessary modifications described in paragraph E above, then the Reinsurer may cancel the Contract at the end of Contract Year 1 or Contract Year 2 as applicable, by the provision of 45 calendar days’ prior written notice by certified mail. If such notice of cancellation is not received, the operation of this Contract shall continue without change.

G. In the event of termination in accordance with paragraph F, above, paragraph C of the SPECIAL TERMINATION ARTICLE shall apply with respect to the calculation of the contract terms listed therein.

H. If a Material Change has been deemed to occur under paragraph D above for any Contract Year and the Company and Reinsurer are not able to mutually agree to the necessary modifications described in paragraph E above, then this Contract shall not apply to the acquired company and any business written by such acquired company shall be excluded.

article X

Special Acceptance

From time to time the Company may request a special acceptance applicable to this Contract.  For purposes of this Contract, in the event subscribing reinsurers whose combined shares in the interests and liabilities of the Reinsurer is 50% or greater agree to a special acceptance, such agreement shall be binding on all subscribing reinsurers.  If such agreement is not achieved, such special acceptance shall be made to this Contract only with respect to the interests and liabilities of each subscribing reinsurer who agrees to the special acceptance.  Should denial for special acceptance not be received within 10 working days of said request, the special acceptance shall be deemed automatically agreed.  In the event a reinsurer becomes a party to this Contract subsequent to one or more special acceptances hereunder, the new reinsurer shall automatically accept such special acceptance(s) as being covered hereunder.

article xi

REINSURANCE PREMIUM

A. As premium for the reinsurance provided hereunder, the Company shall pay the Reinsurer 2.1% of its Net Earned Premium for each Contract Year during the term of this Contract, subject to a minimum annual premium of $6,223,000.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	15	12-27-16

B. The Company shall pay the Reinsurer a deposit premium of $7,779,000 for Contract Year 1; $7,779,000for Contract Year 2; and $7,779,000 for Contract Year 3.  The deposit premium for each Contract Year will be paid in four equal installments on each January 1, April 1, July 1 and October 1 of the respective Contract Year.

C. The Reinsurer shall allow the Company a 30.0% commission on all premiums ceded to the Reinsurer hereunder.  The Company shall allow the Reinsurer return commission on return premiums at the same rate.

D. Within 90 days after the expiration of each Contract Year, the Company shall provide a report to the Reinsurer setting forth the premium due hereunder, computed in accordance with paragraph A, and any additional premium due the Reinsurer or return premium due the Company shall be remitted within 15 days of receipt of such report.

article XIi

FUNDS WITHHELD ACCOUNT

A. At the subscribing reinsurer’s option, the Company shall retain any and all Reinsurance Premiums due hereunder on a Funds Withheld basis, provided however that payment of the subscribing reinsurer’s fixed expenses at a rate of 22.5% of the Reinsurance Premium shall be paid in cash to the subscribing reinsurer at such time as the respective Reinsurance Premiums are due and shall not be affected by the terms of this FUNDS WITHHELD ACCOUNT ARTICLE.

B. In consideration of the subscribing reinsurer choosing this Funds Withheld option, the Company agrees (i) to calculate a Notional Funds Withheld Account Balance from the inception of this Contract until there is a complete and final release of all of the Reinsurer’s obligations to the Reinsured under this Contract and (ii) that the Notional Funds Withheld Account Balance (as defined below) may be offset by the Reinsurer against liability of any nature whatsoever (whether then contingent, due and payable, or in the future becoming due) that it may then have, or in the future may have, under this Contract and (iii) such offset shall occur as a condition precedent to any payments by the Reinsurer hereunder.

C. As of the close of each calendar quarter, and at any other time as required, the Company shall calculate the balance of the Notional Funds Withheld Account as follows:

1. 100% of the balance of the Notional Funds Withheld Account from the immediately preceding calendar quarter (at the Inception Date of this Contract, the starting balance is zero); less

2. 100% of the Company’s Ultimate Net Loss paid or deemed paid by the Reinsurer since the preceding calendar quarter; plus

3. The Reinsurance Premium deemed received by the Reinsurer since the preceding calendar quarter; less

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	16	12-27-16

4. The Ceding Commission deemed paid by the Reinsurer since the preceding calendar quarter; less

5. The Reinsurer’s fixed expenses at a rate of 22.5% of (3); plus

6. The interest credit since the preceding calendar quarter. Such interest credit shall be equal to the result of the “interest crediting rate” applied to the quarter end sum of    [1 minus 2 plus 3 minus 4 minus 5].

The interest crediting rate shall be equal to one fourth (.25) of the greater of:

a. The five (5) year U.S. Treasury note rate as published in the Wall Street Journal on the first business day of each Contract Year minus fifty (50) basis points, or

b. 4.0%.

E. If the Contract has not been commuted by December 31, 2022, a subscribing reinsurer may terminate the Funds Withheld election under this FUNDS WITHHELD ACCOUNT ARTICLE at their option on July 1, 2023 or on each January 1st or July 1st subsequent to that date (the Reversion Date) by giving 90 days’ written notice to the Company.

Following receipt of written notice to terminate the Funds Withheld election, the Company will calculate the Notional Funds Withheld Account Balance as of the Reversion Date and remit such balance to the reinsurer within 15 days.  Subsequent to such termination, the Notional Experience Account Balance will be calculated on a funds transferred basis.

F. A subscribing reinsurer may terminate the Funds Withheld election under this FUNDS WITHHELD ACCOUNT ARTICLE by giving 15 days’ written notice to the Company upon the happening of any one of the following circumstances:

1. A State Insurance Department or other legal authority orders the Company to cease writing business, or

2. The Company has become merged with, acquired or controlled by any company, corporation, or individual(s) not controlling the subscribing reinsurer’s operations previously, or

3. The Company receives an A. M. Best rating of lower than B + +, or

4. American Interstate Insurance Company’s total adjusted capital is less than 225% of its authorized control level risk based capital.

Following receipt of written notice to terminate the Funds Withheld election, the Company will calculate the Notional Funds Withheld Account Balance as of that date and remit such balance to the reinsurer within 15 days.  Subsequent to such termination, the Notional Experience Account Balance will be calculated on a funds transferred basis.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	17	12-27-16

G. For all avoidance of doubt, it is intended that if a subscribing reinsurer chooses the Funds Withheld option as described above then the Notional Funds Withheld Account Balance as calculated above at any date shall equal the subscribing reinsurer’s share of the Notional Experience Account, as calculated in the NOTIONAL EXPERIENCE ACCOUNT ARTICLE as of that same date.

article XIIi

NOTICE OF LOSS and Loss SETTLEMENTS

All loss settlements made by the Company that are within the terms and conditions of this Contract (including but not limited to ex gratia payments) shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of satisfactory evidence of the amount paid by the Company.  Upon receipt of the Summary Report as described below in the REPORTS AND REMITTANCES ARTICLE, the Reinsurer agrees to promptly pay or allow, as the case may be, its share of each such settlement in accordance with this Contract.

ARTICLE Xiv

LIABILITY OF REINSURERS

All reinsurances for which the Reinsurer shall be liable by virtue of this Contract shall be subject in all respects to the same rates, terms, conditions, interpretations and waivers and to the same modifications, alterations, and cancellations, as the respective policies to which such reinsurances relate, the true intent of the parties to this Contract being that the Reinsurer shall follow the fortunes of the Company.

ARTICLE XV

Late Payments

(The provisions of this article shall not be implemented unless specifically invoked, in writing, by one of the parties to the Contract.)

A. In the event any premium, loss or other payment due either party is not received by the Intermediary hereunder by the payment due date, the party to whom payment is due may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to pay, an interest penalty on the amount past due calculated for each such payment on the last business day of each month as follows:

1. The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser; times

2. 1/365ths of a rate equal to U.S. Prime Rate as published in The Wall Street Journal on the first business day following the date a remittance becomes due plus 300 basis points; times

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	18	12-27-16

3. The amount past due, including accrued interest.

It is agreed that interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.

B. The establishment of the due date shall, for purposes of this Article, be determined as follows:

1. As respects the payment of deposits and premiums due the Reinsurer, the due date shall be as provided for in the applicable section of this Contract.

2. As respects any claim or loss payment due the Company, the due date shall be as provided for in the applicable section of this Contract.

3. As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs 1 and 2 of this paragraph, the due date shall be as provided for in the applicable section of this Contract.

C. For purposes of interest calculation only, amounts due hereunder shall be deemed paid upon receipt by the Intermediary.  The validity of any claim or payment may be contested under the provisions of this Contract.  If the debtor party prevails in an arbitration, or any other proceeding, there shall be no interest penalty due.  Otherwise, any interest will be calculated and due as outlined above.

D. Interest penalties arising out of the application of this Article that are $100 or less from any party shall be waived unless there is a pattern of late payments consisting of three or more items over the course of any 12-month period.

E. If the interest rate provided under this Article exceeds the maximum interest rate allowed by applicable law, such interest rate shall be modified to the highest rate permitted by the applicable law

ARTICLE XVi

REPORTS AND REMITTANCES

A. Quarterly Reports and Remittances:

1. While this Contract is in force, within 60 calendar days from the end of each calendar quarter, the Company shall supply to the Reinsurer a Quarterly Statement, as filed with the Nebraska Department of Insurance and a Summary Report listing:

a. The Company’s quarterly Net Earned Premium.

b. The aggregate amount of Ultimate Net Loss, including paid, case outstanding, and IBNR components of this total.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	19	12-27-16

c. The portion of paid, case outstanding, and IBNR Ultimate Net Loss ceded under this Contract from inception of this Contract and for the quarter.

d. Claims reserved by the Company at 50% of its retention hereunder.

e. A report showing the Notional Funds Withheld Account Balance as calculated in the FUNDS WITHHELD ACCOUNT ARTICLE (if applicable).

All for business covered during the term of this Contract as reflected in the Quarterly Statement.

2. While this contract is in force, within 60 calendar days from the end of each calendar quarter, the subscribing reinsurers shall supply to the Company a report showing the Notional Experience Account Balance as calculated in the NOTIONAL EXPERIENCE ACCOUNT ARTICLE.

3. Quarterly within 5 business days from the beginning of each calendar quarter, the Company shall pay to the Reinsurer the reinsurance premium as stipulated in the REINSURANCE PREMIUM ARTICLE.

4. Payment to the Company of quarterly ceded paid loss amounts due from the Reinsurer, or payment to the Reinsurer of quarterly ceded paid loss adjustments due from the Company, shall be in arrears and shall be made within 45 calendar days from actual receipt by the Reinsurer of the Summary Report in paragraph A.1, above.

B. The Company shall furnish to the Reinsurer, upon its written request, any and all actuarial, accounting or statistical data as may be required by the Reinsurer for regulatory filing purposes, reserve setting or any other reasonable purpose.

ARTICLE XVIi

COMMUTATION

A. The Reinsurer may cancel and commute this Contract at any time with 90 calendar days’ advance written notice by certified mail, but only in the event(s) of:

1. Payment by the Reinsurer of the overall aggregate limit; or

2. Failure by the Company to pay any amounts when due under this Contract, if such default is not cured within 30 calendar days following receipt by certified mail by the Company of notice of such default from the subscribing reinsurer.

B. At any time after expiration or termination of this Contract the Company may commute this Contract with 90 calendar days’ advance written notice by certified mail, but only if the Notional Experience Account balance is greater than zero.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	20	12-27-16

C. As provided within the SPECIAL TERMINATION ARTICLE, upon the Company’s termination of a subscribing reinsurer’s share in the Contract upon the happening of any one of the enumerated circumstances, the Company has the option, but not the obligation, to commute this Contract with written notice.

D. Upon Commutation by the Reinsurer in accordance with paragraph A, above, or Commutation by the Company in accordance with paragraph B, above, the following shall occur:

1. The Notional Experience Account balance shall be calculated, as stipulated in the NOTIONAL EXPERIENCE ACCOUNT ARTICLE, as of the date of commutation.

2. The “Commutation Settlement Amount” will be equal to the amount under paragraph D.1, above, and the Reinsurer shall remit to the Company this Commutation Settlement Amount within 5 U.S. business days following such calculation.

3. Upon receipt of the Commutation Settlement Amount, the Company shall provide the Reinsurer with a complete and final release of any further liability under this Contract, or so deemed; concurrently, the Company shall release any Letters of Credit provided by the Reinsurer under the UNAUTHORIZED REINSURANCE ARTICLE.  In the event that any or all Letters of Credit have not been released within 5 business days of the receipt of the Commutation Settlement Amount, it is agreed that the Reinsurer can bill the Company at any time and the Company has to pay to the Reinsurer an annualized fee of 200 bps on the amount of any Letters of Credit not released 5 business days after the receipt of the Commutation Settlement Amount.

E. Upon Commutation by the Company in accordance with paragraph C above and the SPECIAL TERMINATION ARTICLE, the Commutation Settlement Amount shall be the greater of the amount calculated in paragraph D or the net present value of outstanding ceded reserves including incurred but not reported losses.

If the Reinsurer disputes the Commutation Settlement Amount established by the Company under this paragraph E, then such dispute shall be settled by a panel of three actuaries, one to be chosen by each party and the third by the two so chosen. If either party refuses or neglects to appoint an actuary within 30 days, the other party may appoint two actuaries. If the two actuaries fail to agree on the selection of a third actuary within 30 days of their appointment, each of them shall name two, of whom the other shall decline one and the decision shall be made by drawing lots. All the actuaries shall be Fellows of the Casualty Actuarial Society or members of the American Academy of Actuaries. All of the actuaries shall be independent of either party to this Contract. Each party shall bear the cost of their appointed actuary (or actuary appointed for them if they fail to make a timely appointment) and shall share the cost evenly of the third actuary.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	21	12-27-16

The settlement agreed upon by a majority of the panel of actuaries shall be final and binding on both parties and set forth in a sworn written document expressing their professional opinion that said value is fair for the complete mutual release of all liabilities in respect of such reserves.

ARTICLE XVIIi

NOTIONAL EXPERIENCE ACCOUNT

As of the close of each calendar quarter, and at any other time as stipulated in the COMMUTATION ARTICLE, the subscribing reinsurer shall calculate the value of the Notional Experience Account as follows:

1. 100% of the balance of the Notional Experience Account from the immediately preceding calendar quarter (at the Inception Date of this Contract, the starting balance is zero); less

2. 100% of the Company’s Ultimate Net Loss paid by the Reinsurer since the preceding calendar quarter; plus

3. The Reinsurance Premium received by the Reinsurer since the preceding calendar quarter; less

4. The Ceding Commission paid by the Reinsurer since the preceding calendar quarter; less

5. The Reinsurer’s fixed expenses at a rate of 22.5% of (3); plus

6. The interest credit since the preceding calendar quarter. Such interest credit shall be equal to the result of the “interest crediting rate” applied to the quarter end sum of [1 minus 2 plus 3 minus 4 minus 5].

The interest crediting rate shall be equal to one fourth (0.25) of:

a. The five (5) year U.S. Treasury note rate as published in the Wall Street Journal on the first business day of each Contract Year minus fifty (50) basis points if the subscribing reinsurer elects to receive premium on a funds transferred basis, or

b. The greater of the five (5) year U.S. Treasury note rate as published in the Wall Street Journal on the first business day of each Contract Year minus fifty (50) basis points, or 4.0% if the subscribing reinsurer elects the provisions of the FUNDS WITHHELD ACCOUNT ARTICLE.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	22	12-27-16

article Xix

Annuities at the Company’s Option

A. Whenever the Company is required, or elects, to purchase an annuity or to negotiate a structured settlement, either in satisfaction of a judgment or in an out-of-court settlement or otherwise, the cost of the annuity or the structured settlement, as the case may be, shall be deemed part of the Company’s Ultimate Net Loss.

B. The terms “annuity” or “structured settlement” shall be understood to mean any insurance policy, lump sum payment, agreement or device of whatever nature resulting in the payment of a lump sum by the Company in settlement of any or all future liabilities which may attach to it as a result of an occurrence.

C. In the event the Company purchases an annuity which inures in whole or in part to the benefit of the Reinsurer, it is understood that the liability of the Reinsurer is not released thereby.  In the event the Company is required to provide benefits not provided by the annuity for whatever reason, the Reinsurer shall pay its share of any loss.

ARTICLE XX

SUNSET

Seven (7) years after the expiration of this Contract (i.e., January 1, 2027), the Company shall advise the Reinsurer of any Loss Occurrences attaching to this Contract which have not been finally settled and which may result in a claim by the Company under this Contract.  No liability shall attach hereunder for any claim or claims not reported to the Reinsurer within this 7‑year period.  If a loss arising out of a Loss Occurrence is reported during this period, all losses arising out of the same Loss Occurrence shall be deemed reported under this paragraph regardless of when notification of loss is provided.

If the Notional Experience Account balance is positive and the Company does not commute this Contract on or before December 31, 2026, the Company shall pay to the Reinsurer in cash each January 1, beginning January 1, 2027, an annual charge equal to the greater of i) $100,000 or ii) 1% of the ceded loss at the preceding December 31^st.

ARTICLE XXi

Agency Agreement

If more than one reinsured company is named as a party to this Contract, the first named company will be deemed the agent of the other reinsured companies for purposes of sending or receiving notices required by the terms and conditions of this Contract and for purposes of remitting or receiving any monies due any party.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	23	12-27-16

article xxii

subrogation

The Reinsurer shall be credited with subrogation or salvage recoveries (i.e., reimbursement obtained or recovery made by the Company, less Loss Adjustment Expense incurred in obtaining such reimbursement or making such recovery) on account of claims and settlements involving reinsurance hereunder.  Subrogation or salvage recoveries thereon shall always be used to reimburse the excess carriers in the reverse order of their priority according to their participation before being used in any way to reimburse the Company for its primary loss.  The Company, at its sole option and discretion, may enforce its rights to subrogation relating to any loss, a part of which loss was sustained by the Reinsurer, and may prosecute all claims arising out of such rights.

article XXIii

Errors and Omissions

Any inadvertent delay, omission or error shall not be held to relieve either party hereto from any liability which would attach to it hereunder if such delay, omission or error had not been made, provided such omission or error is rectified upon discovery.

article XXiv

OFFSET

The Company and each subscribing reinsurer may offset any balance or amount due from one party to the other under this Contract or any other contract heretofore or hereafter entered into between the Company and such subscribing Reinsurer, whether acting as assuming reinsurer or ceding company.  The party asserting the right of offset may exercise such right any time whether the balances due are on account of premiums or undisputed losses or otherwise.

article XXv

Currency

A. Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

B. Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the books of the Company.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	24	12-27-16

article XXVi

TAXES

In consideration of the terms under which this Contract is issued, the Company will not claim a deduction in respect of the premium hereon when making tax returns, other than income or profits tax returns, to any state or territory of the United States of America, the District of Columbia or Canada.

article XXVii

FEDERAL EXCISE TAX

(Applicable to those subscribing reinsurers who are domiciled outside the United States of America, excepting subscribing reinsurers exempt from Federal Excise Tax.)

A. The subscribing reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the applicable percentage of the premium payable hereon (as imposed under Section 4371 of the Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax.

B. In the event of any return of premium becoming due hereunder the subscribing reinsurer will deduct the applicable percentage from the return premium payable hereon and the Company or its agent should take steps to recover the tax from the United States Government.

article XXVIii

Foreign account Tax Compliance Act (“FATCA”)

A. The Reinsurer hereby acknowledges the requirements of Sections 1471-1474 U.S. Internal Revenue Code of 1986, as amended, and the Treasury regulations and other guidance issued from time to time thereunder (“FATCA”) and the obligation to provide to the Company and the intermediary. a valid Internal Revenue Service (“IRS”) Form W8-BEN-E, W-9 or other documentation meeting the requirements of the FATCA regulations to establish they are not subject to any withholding requirement pursuant to FATCA (the “Required Documentation”).

B The Reinsurer shall notify the Company and the intermediary in writing (by electronic mail, certified mail or overnight mail using a nationally recognized overnight delivery service) in the event the Reinsurer is not compliant with FATCA.  If the Reinsurer has not provided the Company and the intermediary with the Required Documentation thirty (30) days prior to any premium due date, or becomes non-compliant with FATCA at any later date, the Withholding Agent [as defined in U.S. Treasury Regulation Section 1.1471-1(b)(147)] shall withhold thirty percent (30%) of any premium payment to the Reinsurer under this Contract and shall promptly notify the Reinsurer of such withholding (“Withholding”).  The Reinsurer hereby agrees to such Withholding.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	25	12-27-16

C. In the event the Reinsurer is subject to Withholding as set forth under FATCA, the Reinsurer continues to remain fully liable for all of its obligations under this Contract.  The Withholding under paragraph B above does not constitute a breach of contract, any premium payment condition, warranty or other clause of this Contract.  Reinsurer(s) subject to Withholding may not terminate, cancel, revoke or restrict this Contract, may not terminate, cancel, revoke or restrict coverage under this Contract in any manner and may not deny, refuse, restrict or delay payment of any claim under this Contract or invoke any interest, penalty or other late payment provision hereunder, based on the Withholding. Reinsurer(s) subject to Withholding shall be liable under this Contract as if no Withholding had been made.

D. Amounts deducted or withheld as Withholding are not subject to offset. Offset rights, if any, under this Contract are hereby amended in accordance with the terms of this Article.

E. The Reinsurer shall indemnify the Company and its agents for any and all liability, expense, interest or penalty the Company and its agents incur, based upon, arising from or in connection with (i) any inaccurate or invalid Required Documentation; or (ii) any violation by the Reinsurer of FATCA.  Such indemnity shall survive the expiration or termination of this Contract.

article xxix

UNAUTHORIZED REINSURANCE

(Applies only to a subscribing reinsurer who does not qualify for full credit with any insurance regulatory authority having jurisdiction over the Company’s reserves.)

A. As regards Policies or bonds issued by the Company coming within the scope of this Contract, the Company agrees that when it shall file with the insurance regulatory authority or set up on its books reserves for losses covered hereunder which it shall be required by law to set up, it will forward to the subscribing reinsurer a statement showing the proportion of such reserves which is applicable to the subscribing reinsurer.  The subscribing reinsurer hereby agrees to fund such reserves in respect of known outstanding losses that have been reported to the subscribing reinsurer and allocated loss adjustment expense relating thereto, losses and allocated loss adjustment expense paid by the Company but not recovered from the subscribing reinsurer, plus reserves for losses incurred but not reported as per the Company’s statutory accounts, unearned premium and any positive Notional Experience Account balance accrued by the Company, as shown in the statement prepared by the Company (hereinafter referred to as “subscribing reinsurer’s obligations”) by funds withheld, cash advances, qualified trust, or a Letter of Credit.  The subscribing reinsurer shall have the option of determining the method of funding provided it is acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves.  All costs associated with the method of funding shall be borne solely by the subscribing reinsurer.  However, where the subscribing reinsurer elects and continues to fund under the FUNDS WITHHELD ACCOUNT article, the Company shall bear the cost associated with any funding that is required in excess of the funds withheld account.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	26	12-27-16

B. When funding by a Letter of Credit, the subscribing reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional Letter of Credit issued by a bank and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves in an amount equal to the subscribing reinsurer’s proportion of said reserves.  Such Letter of Credit shall be issued for a period of not less than one year, and shall be automatically extended for one year from its date of expiration or any future expiration date unless 30 days (60 days where required by insurance regulatory authorities) prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the Letter of Credit extended for any additional period.

C. The subscribing reinsurer and Company agree that the Letters of Credit provided by the subscribing reinsurer pursuant to the provisions of this Contract may be drawn upon at any time, notwithstanding any other provision of this Contract, and be utilized by the Company or any successor, by operation of law, of the Company including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Company for the following purposes, unless otherwise provided for in a separate Trust Agreement:

1. To reimburse the Company for the subscribing reinsurer’s obligations, the payment of which is due under the terms of this Contract and which has not been otherwise paid;

2. To make refund of any sum which is in excess of the actual amount required to pay the subscribing reinsurer’s obligations under this Contract;

3. To fund an account with the Company for the subscribing reinsurer’s obligations.  Such cash deposit shall be held in an interest bearing account separate from the Company’s other assets, and interest thereon not in excess of the prime rate shall accrue to the benefit of the subscribing reinsurer;

4. To pay the subscribing reinsurer’s share of any other amounts the Company claims are due under this Contract.

In the event the amount drawn by the Company on any Letter of Credit is in excess of the actual amount required for subparagraph 1 or 3 or, in the case of subparagraph 4, the actual amount determined to be due, the Company shall promptly return to the subscribing reinsurer the excess amount so drawn.  All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the subscribing reinsurer.

D. The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Company.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	27	12-27-16

E. At quarterly intervals and immediately following each reinsurance premium payment, the Company shall prepare a specific statement of the subscribing reinsurer’s obligations, for the sole purpose of amending the Letter of Credit as set forth in subparagraphs 1 and 2 below.  For avoidance of doubt, the subscribing reinsurer’s obligation under this paragraph E shall include any positive balance of the Notional Experience Account as calculated under the NOTIONAL EXPERIENCE ACCOUNT ARTICLE:

1. If the statement shows that the subscribing reinsurer’s obligations exceed the balance of credit as of the statement date, the subscribing reinsurer shall, within 30 days after receipt of notice of such excess, secure delivery to the Company of an amendment to the Letter of Credit increasing the amount of credit by the amount of such difference.

2. If, however, the statement shows that the subscribing reinsurer’s obligations are less than the balance of credit as of the statement date, the Company shall, within 30 days after receipt of written request from the subscribing reinsurer, release such excess credit by agreeing to secure an amendment to the Letter of Credit reducing the amount of credit available by the amount of such excess credit.

F. With regard to funding in whole or in part by any Trust Account, it is agreed that the subscribing Reinsurer shall enter into a trust agreement and establish a Trust Account hereunder for the sole benefit of the Company with a trustee (“Trustee”).  The Trustee and the trust agreement shall comply with all applicable requirements of regulatory authorities having jurisdiction over the Company.

G. The Reinsurer agrees that the assets deposited into the Trust Account shall consist only of currency of the United States of America, certificates of deposit issued by a United States bank and payable in United States legal tender, and investments of the types specified in paragraphs (1), (2), (3), (8) and (10) of Section 1404(a) of the New York Insurance Law, provided such investments are issued by an institution that is not the parent, subsidiary or affiliate of either the Grantor or the Beneficiary (“Authorized Investments”).

H. The Reinsurer, prior to depositing assets with the Trustee, shall execute all assignments and endorsements in blank, and shall transfer legal title to the Trustee of all shares, obligations or any other assets requiring assignments, in order that the Company, or the Trustee upon direction of the Company, may whenever necessary negotiate any such assets without consent or signature from the Reinsurer or any other entity.

I. The Reinsurer shall deposit in the Trust Account Authorized investments at least equal in value to one hundred percent (100%) of the Reinsurer’s Obligations (less the value of the balance of credit available under any Letter(s) of Credit).

J. At quarterly intervals and immediately following each reinsurance premium payment, the Company shall determine if the Trust Account is adequately funded with respect to the Company’s liabilities reinsured under the Contract.  If the Company determines that the fair market value of the Authorized Investments held in the Trust Account is less than one hundred percent (100%) of the Reinsurer’s Obligations, the Company shall send the Reinsurer a notice specifying the amount of the inadequacy and the Reinsurer shall deposit such amount in the Trust Account within 30 days of receipt of such notice.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	28	12-27-16

K. All settlements of account under the Trust Agreement between the Company and Reinsurer shall be made in cash or its equivalent.

L. The Reinsurer and the Company agree that the assets in the Trust Account may be withdrawn by the Company at any time, notwithstanding any other provisions in the Contract, provided such assets are applied and utilized by the Company or any successor of the Company by operation of law, including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Company, without diminution because of the insolvency of the Company or the Reinsurer, only for the following purposes:

1. To reimburse the Company for the Reinsurer’s share of the Obligations paid by the Company under the terms and provisions of the reinsured policies;

2. To fund an account specifically established by the Company in an amount at least equal to the deduction, for reinsurance ceded, from the Company’s liabilities ceded under this Contract.  Such amount shall include, but not be limited to, amounts for policy reserves, and reserves for claims and losses incurred (including losses incurred but not reported); and

3. To pay any other amounts, consistent with the terms of this Contract, which the Company has calculated to be due to it.

M. If and to the extent that the laws and regulations governing the Company’s right to obtain statutory financial statement credit for the reinsurance provided pursuant to this Contract are amended such that the Reinsurer is no longer required to secure 100% of its share of the Obligations, the Company acknowledges and agrees that the Reinsurer’s obligation to provide such security shall immediately and automatically be reduced to the extent permitted by such amended laws and regulations.

article xxx

NET RETAINED LINES

A. This Contract applies only to that portion of any Policy which the Company retains net for its own account and, in calculating the amount of any loss hereunder and also in computing the amount or amounts in excess of which this Contract attaches, only loss or losses in respect of business covered which the Company retains net for its own account shall be included.

B. The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts which may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	29	12-27-16

article Xxxi

THIRD PARTY RIGHTS

This Contract is solely between the Company and the Reinsurer, and in no instance shall any other party have any rights under this Contract except as expressly provided otherwise in the INSOLVENCY ARTICLE.

article xXXii

Severability

If any provision of this Contract shall be rendered illegal or unenforceable by the laws or  regulations of any state, such provision shall be considered void in such state, but this shall not affect the validity or enforceability of any other provision of this Contract or the enforceability of such provision in any other jurisdiction.

article xXXiii

Governing Law

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Nebraska, exclusive of that state’s rules with respect to conflicts of law, except as to rules with respect to credit for reinsurance in which case the applicable rules of all states shall apply.

article XXXiv

Access to Records

The Reinsurer or its designated representatives shall have access to and can make reasonable copies of the books and records of the Company on matters relating to this reinsurance at all reasonable times for the purpose of obtaining information concerning this Contract or the subject matter hereof.

article XXXv

CONFIDENTIALITY

A. The Reinsurer hereby acknowledges that the documents, information, and data provided to the Reinsurer by the Company, whether directly or through an authorized agent, in connection with the placement and execution of this Contract (“Confidential Information”) are proprietary and confidential to the Company.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	30	12-27-16

B. Absent the prior written consent of the Company, the Reinsurer will not disclose any Confidential Information to any third parties, except when:

1. The disclosure is to professional advisors, statutory auditors, legal advisors or to authorized agents of the Reinsurer performing underwriting, claim handling, pricing, placement and/or evaluation services for the Reinsurer; or

2. The Confidential Information is publicly known or has become publicly known through no unauthorized act of the Reinsurer; or

3. Required by retrocessionaires subject to the business ceded to this Contract; or

4. Required by state regulators performing an audit of the Reinsurer’s records and/or financial condition; or

5. Required by auditors performing an audit of the Reinsurer’s records in the normal course of business.

C. Further, the Reinsurer agrees not to use any Confidential Information for any purpose not permitted by this Contract or not related to the performance of their obligations or enforcement of their rights under this Contract.

D. Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process, or any regulatory authority to release or disclose any or all of the Confidential Information, the Reinsurer agrees to provide the Company by written or electronic mail, reasonable advance notice of same prior to such release or disclosure and to use their reasonable best efforts to assist the Company in maintaining the confidentiality provided for in this Article.

E. The provisions of this Article will extend to the officers, directors, shareholders, and employees of the Reinsurer and its affiliates, who have received Confidential Information in accordance with this Contract and will be binding upon their successors and assigns.

F. The Reinsurer acknowledges that any unauthorized disclosure of Confidential Information may cause irreparable harm to the Company.  If Confidential Information is acquired by or made available to an unauthorized third party due the Reinsurer’s breach of this Article, the Reinsurer shall notify the Company immediately and the Company shall be entitled to seek specific performance, including immediate issuance of a temporary restraining order or preliminary injunction.  The Company shall be entitled to seek damages, attorney’s fees and costs, and any other remedies available under the law due to the Reinsurer’s breach of this Article.  The Company may concurrently or alternatively seek legal relief by way of arbitration as provided for in this Contract.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	31	12-27-16

article XXXvi

INSOLVENCY

A. In the event of the insolvency of the Company, this reinsurance shall be payable directly to the Company or to its liquidator, receiver, conservator or statutory successor, with reasonable provision for verification, on the basis of the liability of the Company without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim.  It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of a claim against the Company indicating the Policy or bond reinsured which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor.  The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the Court, against the Company as part of the expense of conservation or liquidation to the extent of a proportionate share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.

B. Where two or more subscribing reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Contract as though such expense had been incurred by the Company.

C. It is further agreed that, in the event of the insolvency of the Company, the reinsurance under this Contract shall be payable directly by the Reinsurer to the Company or its liquidator, receiver, conservator, or statutory successor, except as provided by Section 4118(a) of the New York Insurance Law or except 1) where this Contract specifically provides another payee of such reinsurance in the event of the insolvency of the Company or 2) where the Reinsurer with the consent of the direct insured or insureds has assumed such Policy obligations of the Company as direct obligations of the Reinsurer to the payee under such Policies and in substitution for the obligations of the Company to such payees.

D. In the event of the insolvency of any company or companies listed in the designation of “Company” under this Contract, this Article shall apply only to the insolvent company or companies.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	32	12-27-16

article XXXvii

Arbitration

A. As a condition precedent to any right of action hereunder, any irreconcilable dispute arising out of the interpretation, performance or breach of this Contract, including the formation or validity thereof, whether arising before or after the expiry or termination of the Contract, shall be submitted for decision to a panel of three arbitrators.  Notice requesting arbitration will be in writing and sent by certified mail, return receipt requested, or such reputable courier service as is capable of returning proof of receipt of such notice by the recipient to the party demanding arbitration.

B. The Company shall have the option to either litigate or arbitrate where:

1. The Reinsurer makes any allegation of misrepresentation, non-disclosure, concealment, fraud or bad faith; or

2. The Reinsurer experiences any of the circumstances set forth in subparagraphs 1 through 7 of paragraph A of the SPECIAL TERMINATION ARTICLE.

C. One arbitrator shall be appointed by each party.  If either party fails to appoint its arbitrator within 30 days after being requested to do so by the other party, the latter, after 10 days’ notice by certified mail or reputable courier as provided above of its intention to do so, may appoint the second arbitrator.

D. The two arbitrators shall, before instituting the hearing, appoint an impartial third arbitrator who shall preside at the hearing.  Should the two arbitrators fail to choose the third arbitrator within 30 days of the appointment of the second arbitrator, the parties shall appoint the third arbitrator pursuant to the AIDA Reinsurance and Insurance Arbitration Society – U.S. (ARIAS) Umpire Selection Procedure. All arbitrators shall be disinterested active or former senior executives of insurance or reinsurance companies or Underwriters at Lloyd’s, London.

E. Within 30 days after notice of appointment of all arbitrators, the panel shall meet and determine timely periods for briefs, discovery procedures and schedules for hearings.  The panel shall be relieved of all judicial formality and shall not be bound by the strict rules of procedure and evidence.  Unless the panel agrees otherwise, arbitration shall take place in Omaha, Nebraska but the venue may be changed when deemed by the panel to be in the best interest of the arbitration proceeding.  Insofar as the arbitration panel looks to substantive law, it shall consider the law of the State of Nebraska.  The decision of any two arbitrators when rendered in writing shall be final and binding.  The panel is empowered to grant interim relief as it may deem appropriate.

F. In the event an arbitrator is unable to serve due to death, disability or other incapacity, a replacement arbitrator shall be chosen in accordance with the procedures set forth in this Article for the original selection of the arbitrator appointed and the newly constituted panel shall take all necessary and/or reasonable measures to continue the arbitration proceedings without additional delay.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	33	12-27-16

G. This Contract shall be interpreted as an honorable engagement rather than merely as a legal obligation.The panel shall make its decision considering the custom and practice of the applicable insurance and reinsurance business as promptly as possible following the termination of the hearings.  Judgment upon the award may be entered in any court having jurisdiction thereof.

H. Arbitration proceedings are subject to consolidation as follows:

1. Single contract, multiple reinsurers, common issue:  If more than one Reinsurer is involved in arbitration where there are common questions of law or fact and a possibility of conflicting awards or inconsistent results, all such Reinsurers, at the Company’s request, shall be joined in a single arbitration proceeding and shall constitute and act as one party for purposes of this Article and communications shall be made by the Company to each of the Reinsurers constituting the one party; provided, however, that nothing therein shall impair the rights of such Reinsurers to assert several, rather than joint defenses or claims, nor be construed as changing the liability of the Reinsurers under the terms of this Contract from several to joint.

2. Single reinsurer, multiple contracts, common issue:  If any Reinsurer to this Contract has subscribed to other reinsurance contracts with the Company, under which a dispute has arisen where there are common questions of law or fact with the dispute being arbitrated under this Contract and a possibility of conflicting awards or inconsistent results, the Reinsurer, at the Company’s request, shall arbitrate all such reinsurance disputes involving the same loss or common questions of law or fact in one consolidated proceeding, subject to the provisions of this Article.

3. Single reinsurer, multiple contracts:  If any Reinsurer to this Contract has subscribed to other reinsurance contracts with the Company and various disputes have arisen under such contracts, regardless of whether or not there are common questions of law or fact, if mutually agreed to by the parties hereto, the parties shall arbitrate all reinsurance disputes in one consolidated proceeding, subject to the provisions of this Article.

The agreement to consolidate disputes under this Contract and one or more other reinsurance contracts will supersede all other reinsurance contracts entered into between the Company and the Reinsurer, regardless of whether any other reinsurance contract may require or address consolidation.

I. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the cost of the third arbitrator.  The remaining costs of the arbitration shall be allocated by the panel.  The panel may, at its discretion, award such further costs and expenses as it considers appropriate, including but not limited to attorneys’ fees, to the extent permitted by law.  However, the panel may not award any Exemplary or Punitive Damages and Enhanced Compensatory Damages.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	34	12-27-16

article XXXViii

expedited Arbitration

A. Notwithstanding the provisions of the ARBITRATION ARTICLE, in the event an amount in dispute hereunder is $500,000 or less, the Company may elect to require an expedited arbitration process with the use of a single arbitrator.  The arbitrator will be chosen in accordance with the procedures for selecting an arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society – U.S. (ARIAS).  

B. Each party’s case will be submitted to the arbitrator within 100 days of the date of determination of the arbitrator.  Discovery will be limited to exchanging only those documents directly relating to the issue in dispute, subject to a limit of two discovery depositions from each party, unless otherwise authorized by the arbitrator upon a showing of good cause.

C. Within 120 days of the date of determination of the arbitrator, the hearing will be completed and a written award will be issued by the arbitrator.  The arbitrator will have all the powers conferred on the arbitration panel as provided in the ARBITRATION ARTICLE, and said Article will apply to all matters not specifically addressed above.

article xxxix

SERVICE OF SUIT

(This Article is applicable if the Reinsurer is not domiciled in the United States of America and/or is not authorized in any State, Territory, or District of the United States where authorization is required by insurance regulatory authorities.  This Article is not intended to conflict with or override the obligation of the parties to arbitrate their disputes in accordance with the ARBITRATION ARTICLE.)

A. In the event of the failure of the Reinsurer to perform its obligations under this Contract, the Reinsurer, at the request of the Company, shall submit to the jurisdiction of a court of competent jurisdiction within the United States.  Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States.  The Reinsurer, once the appropriate court is selected, whether such court is the one originally chosen by the Company and accepted by the Reinsurer or is determined by removal, transfer, or otherwise, as provided for above, shall comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against it upon this Contract, and shall abide by the final decision of such court or of any appellate court in the event of an appeal.  The validity and/or enforceability of any arbitration award or judgment obtained in the United States shall not be contested by the Reinsurer in any jurisdiction outside of the United States.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	35	12-27-16

B. Service of process in such suit may be made uponthe law firm of Mendes and Mount, 750 Seventh Avenue, New York, NY 10019, or another party specifically designated by the Reinsurer in its Interests and Liabilities Agreement attached hereto. 

C. Further, pursuant to any statute of any state, territory or district of the United States that makes provision therefor, the Reinsurer hereby designates the Superintendent, Commissioner or Director of Insurance, or other officer specified for that purpose in the statute, or his/her successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceedings instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract, and hereby designates the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof.

D. The individual named in Paragraph C shall be deemed the Reinsurer’s agent for the service of process:

1. where the address designated in, or pursuant to paragraph B is invalid; or

2. to the extent necessary to bring this Contract into conformity with the applicable law of a state with jurisdiction over the Company.

article Xl

Mode of Execution

This Contract may be executed either by an original written ink signature of paper documents, by an exchange of facsimile copies showing the original written ink signature of paper documents, or by electronic signature by either party employing appropriate software technology as to satisfy the parties at the time of execution that the version of the document agreed to by each party shall always be capable of authentication and satisfy the same rules of evidence as written signatures.  The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this Contract.  This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.

ARTICLE Xli

ENTIRE AGREEMENT

This Contract shall constitute the entire agreement between the parties with respect to the business being reinsured hereunder.  There are no understandings between the parties other than as expressed in this Contract.  Any change or modification to this Contract shallbe null and void unless made by amendment to this Contract and signed by both parties.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	36	12-27-16

articlE xlII

INTERMEDIARY

Willis Re Inc. is hereby recognized as the intermediary negotiating this Contract and through whom all communications, including but not limited to accounts, claim information, funds and inquiries, to the Company or the Reinsurer shall be transmitted.  Payments by the Company to Willis Re Inc. shall be deemed to constitute payment to the Reinsurer and payments by the Reinsurer to Willis Re Inc. shall be deemed to constitute payment to the Company only to the extent that such payments are actually received by the Company.

IN WITNESS WHEREOF, the Company by its duly authorized representative has executed this Contract as of the date specified below:

Signed this __________________ day of ____________________________________, 20___.

AMERICAN INTERSTATE INSURANCE COMPANY

SILVER OAK CASUALTY, INC.

AMERICAN INTERSTATE INSURANCE COMPANY OF TEXAS

By

Printed Name

Title

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	37	12-27-16

NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - U.S.A.

(1) This reinsurance does not cover any loss or liability accruing to the Reassured as a member of, or subscriber to, any association of insurers or reinsurers formed for the purpose of covering nuclear energy risks or as a direct or indirect reinsurer of any such member, subscriber or association.

(2) Without in any way restricting the operation of paragraph (1) of this Clause it is understood and agreed that for all purposes of this reinsurance all the original policies of the Reassured (new, renewal and replacement) of the classes specified in Clause II of this paragraph (2) from the time specified in Clause III in this paragraph (2) shall be deemed to include the following provision (specified as the Limited Exclusion Provision):

Limited Exclusion Provision.*

I. It is agreed that the policy does not apply under any liability coverage,

to (injury, sickness, disease, death or destruction,

(bodily injury or property damage

with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability.

II. Family Automobile Policies (liability only), Special Automobile Policies (private passenger automobiles, liability only), Farmers Comprehensive Personal Liability Policies (liability only), Comprehensive Personal Liability Policies (liability only) or policies of a similar nature; and the liability portion of combination forms related to the four classes of policies stated above, such as the Comprehensive Dwelling Policy and the applicable types of Homeowners Policies.

III. The inception dates and thereafter of all original policies as described in II above, whether new, renewal or replacement, being policies which either

(a) become effective on or after 1st May, 1960, or

(b) become effective before that date and contain the Limited Exclusion Provision set out above;

provided this paragraph (2) shall not be applicable to Family Automobile Policies, Special Automobile Policies, or policies or combination policies of a similar nature, issued by the Reassured on New York risks, until 90 days following approval of the Limited Exclusion Provision by the Governmental Authority having jurisdiction thereof.

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	1	12-20-16

(3)Except for those classes of policies specified in Clause II of paragraph (2) and without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that for all purposes of this reinsurance the original liability policies of the Reassured (new, renewal and replacement) affording the following coverages:

Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners or Contractors (including railroad) Protective Liability, Manufacturers and Contractors Liability, Product Liability, Professional and Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle or Garage Liability)

shall be deemed to include, with respect to such coverages, from the time specified in Clause V of this paragraph (3), the following provision (specified as the Broad Exclusion Provision):

Broad Exclusion Provision.*

It is agreed that the policy does not apply:

I. Under any Liability Coverage, to (injury, sickness, disease, death or destruction

(bodily injury or property damage

(a) with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability; or

(b) resulting from the hazardous properties of nuclear material and with respect to which (1) any person or organization is required to maintain financial protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof, or (2) the insured is, or had this policy not been issued would be, entitled to indemnity from the United States of America, or any agency thereof, under any agreement entered into by the United States of America, or any agency thereof, with any person or organization.

II. Under any Medical Payments Coverage, or under any Supplementary Payments Provision

relating to (immediate medical or surgical relief,

(first aid,

to expenses incurred with respect

to (bodily injury, sickness, disease or death

(bodily injury

resulting from the hazardous properties of nuclear material and arising out of the operation of a nuclear facility by any person or organization.

III. Under any Liability Coverage to    (injury, sickness, disease, death or destruction

(bodily injury or property damage

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	2	12-20-16

resulting from the hazardous properties of nuclear material, if

(a) the nuclear material (1) is at any nuclear facility owned by, or operated by or on behalf of, an insured or (2) has been discharged or dispersed therefrom;

(b) the nuclear material is contained in spent fuel or waste at any time possessed, handled, used, processed, stored, transported or disposed of by or on behalf of an insured; or

(c) the (injury, sickness, disease, death or destruction

(bodily injury or property damages

arises out of the furnishing by an insured of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any nuclear facility, but if such facility is located within the United States of America, its territories, or possessions or Canada, this exclusion (c) applies only  to

(injury to or destruction of property at such nuclear facility

(property damage to such nuclear facility and any property thereat.

IV. As used in this endorsement:

“Hazardous properties” include radioactive, toxic or explosive properties; “nuclear material” means source material, special nuclear material or byproduct material; “source material,” “special nuclear material,” and “byproduct material” have the meanings given them in the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel element or fuel component, solid or liquid, which has been used or exposed to radiation in a nuclear reactor; “waste” means any waste material (1) containing byproduct material and (2) resulting from the operation by any person or organization of any nuclear facility included within the definition of nuclear facility under paragraph (a) or (b) thereof; “nuclear facility” means

(a)any nuclear reactor,

(b)any equipment or device designed or used for (1) separating the isotopes of uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling, processing or packaging waste,

(c)any equipment or device used for the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than 250 grams of uranium 235,

(d)any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste,

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	3	12-20-16

and includes the site on which any of the foregoing is located, all operations conducted on such site and all premises used for such operations; “nuclear reactor” means any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of fissionable material;

(With respect to injury to or destruction of property, the word “injury” or “destruction”

(“property damage” includes all forms of radioactive contamination of property

(includes all forms of radioactive contamination of property.

V. The inception dates and thereafter of all original policies affording coverages specified in this paragraph (3), whether new, renewal or replacement, being policies which become effective on or after 1st May, 1960, provided this paragraph (3) shall not be applicable to

(i) Garage and Automobile Policies issued by the Reassured on New York risks, or

(ii) statutory liability insurance required under Chapter 90, General Laws of Massachusetts,

until 90 days following approval of the Broad Exclusion Provision by the Governmental Authority having jurisdiction thereof.

(4) Without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that paragraphs (2) and (3) above are not applicable to original liability policies of the Reassured in Canada and that with respect to such policies this Clause shall be deemed to include the Nuclear Energy Liability Exclusion Provisions adopted by the Canadian Underwriters’ Association of the Independent Insurance Conference of Canada.

*NOTE:  The words printed in italics in the Limited Exclusion Provision and in the Broad Exclusion Provision shall apply only in relation to original liability policies which include a Limited Exclusion Provision or a Broad Exclusion Provision containing those words.

21/9/67

N.M.A. 1590

BRMA 35A

American Interstate Insurance Company
13215N17 (Eff: 1-1-17)
Casualty Excess of Loss Contract	4	12-20-16

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:          

(1) Registration Statement (Form S-8 No. 333-129980) pertaining to the 2005 Non-Employee Director Restricted Stock Plan of AMERISAFE, Inc.,

(2) Registration Statement (Form S-8 No. 333-129982) pertaining to the 2005 Equity Incentive Plan of AMERISAFE, Inc.,

(3) Registration Statement (Form S-8 No. 333-170392) pertaining to the 2010 Restated Non-Employee Director Restricted Stock Plan of AMERISAFE, Inc., and

(4) Registration Statement (Form S-8 No. 333-182125) pertaining to the 2012 Equity and Incentive Compensation Planof AMERISAFE, Inc.;

of our reports dated February 24, 2017, with respect to the consolidated financial statements and schedules of AMERISAFE, Inc. and subsidiaries and the effectiveness of internal control over financial reporting of AMERISAFE, Inc. and subsidiaries included in this Annual Report (Form 10-K) of AMERISAFE, Inc. for the year ended December 31, 2016.

New Orleans, Louisiana

February 24, 2017

A member firm of Ernst & Young Global Limited

 

EX-24.1

Exhibit 24.1

POWERS OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned hereby constitutes and appoints Neal A. Fuller and Kathryn H. Shirley, and both of them, the true and lawful attorney or attorney-in-fact, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, to sign on his or her behalf as a director or officer or both, as the case may be, of AMERSIAFE, Inc. an Annual Report on Form 10-K for the fiscal year ended December 31, 2016 under the Securities Exchange Act of 1934, as amended, and to sign any or all amendments thereto and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney or attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

/s/ Michael J. Brown	/s/ Teri G. Fontenot
Michael J. Brown	Teri G. Fontenot
/s/ G. Janelle Frost	/s/ Philip A. Garcia
G. Janelle Frost	Philip A. Garcia
/s/ Jared A. Morris	/s/ Millard E. Morris
Jared A. Morris	Millard E. Morris
/s/ Daniel Phillips	/s/ Randall Roach
Daniel Phillips	Randall Roach
/s/ Austin P. Young, III
Austin P. Young, III

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, G. Janelle Frost, certify that:

1. I have reviewed this Annual Report on Form 10-K 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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: February 24, 2017	/s/ G. Janelle Frost
	G. Janelle Frost
	President, Chief Executive Officer and Director (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Neal A. Fuller, certify that:

1. I have reviewed this Annual Report on Form 10-K 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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: February 24, 2017	/s/ Neal A. Fuller
	Neal A. Fuller
	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 Annual Report on Form 10-K of AMERISAFE, Inc., a Texas corporation (the “Company”), for the year ended December 31, 2016, 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: February 24, 2017	/s/ G. Janelle Frost
	G. Janelle Frost
	President, Chief Executive Officer and Director (Principal Executive Officer)
	/s/ Neal A. Fuller
	Neal A. Fuller
	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.

XML

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Feb. 15, 2017	Jun. 30, 2016
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Trading Symbol	AMSF
Entity Registrant Name	AMERISAFE INC
Entity Central Index Key	0001018979
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		19,230,135
Entity Public Float			$ 1,164.7

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Investments:
Fixed maturity securities—held-to-maturity, at amortized cost (fair value $568,931 and $662,276 in 2016 and 2015, respectively)	$ 562,434	$ 645,164
Fixed maturity securities—available-for-sale, at fair value (cost $479,871 and $376,109 in 2016 and 2015, respectively)	479,097	380,022
Equity securities—available-for-sale, at fair value (cost $0, in 2016 and 2015)	33	31
Short-term investments	29,580	7,718
Other investments	13,330	12,217
Total investments	1,084,474	1,045,152
Cash and cash equivalents	58,936	69,481
Amounts recoverable from reinsurers	83,666	91,077
Premiums receivable, net of allowance	183,005	185,364
Deferred income taxes	33,811	29,905
Accrued interest receivable	11,360	11,685
Property and equipment, net	6,636	6,181
Deferred policy acquisition costs	19,300	20,412
Other assets	37,668	42,788
Total assets	1,518,856	1,502,045
Liabilities:
Reserves for loss and loss adjustment expenses	742,776	718,033
Unearned premiums	162,028	167,983
Reinsurance premiums payable	28	154
Amounts held for others	31,974	49,790
Policyholder deposits	49,130	48,380
Insurance-related assessments	31,742	32,329
Federal income tax payable	4,017	911
Accounts payable and other liabilities	31,510	30,484
Payable for investments purchased	9,501
Total liabilities	1,062,706	1,048,064
Shareholders’ equity:
Voting—$0.01 par value authorized shares—50,000,000 in 2016 and 2015; 20,488,385 and 20,388,396 shares issued and 19,230,135 and 19,130,146 shares outstanding in 2016 and 2015, respectively	204	203
Additional paid-in capital	208,390	204,688
Treasury stock at cost (1,258,250 shares in 2016 and 2015)	(22,370)	(22,370)
Accumulated earnings	270,418	268,873
Accumulated other comprehensive income (loss), net	(492)	2,587
Total shareholders’ equity	456,150	453,981
Total liabilities and shareholders’ equity	$ 1,518,856	$ 1,502,045

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Statement Of Financial Position [Abstract]
Fixed maturity securities, fair value	$ 568,931	$ 662,276
Fixed maturity securities, cost	479,871	376,109
Equity securities, cost	$ 0	$ 0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	20,488,385	20,388,396
Common stock, shares outstanding	19,230,135	19,130,146
Treasury stock, shares	1,258,250	1,258,250

XML

Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Revenues
Net premiums earned	$ 368,704	$ 375,894	$ 375,747
Net investment income	28,106	27,902	27,214
Net realized gains (losses) on investments	(494)	(2,494)	697
Loss on disposal of assets	(1)	(664)
Fee and other income	347	316	361
Total revenues	396,662	400,954	404,019
Expenses
Loss and loss adjustment expenses incurred	199,031	214,573	244,916
Underwriting and certain other operating costs	29,470	32,162	32,573
Commissions	26,243	27,509	27,872
Salaries and benefits	24,881	24,442	24,518
Policyholder dividends	4,216	1,301	391
Total expenses	283,841	299,987	330,270
Income before income taxes	112,821	100,967	73,749
Income tax expense	34,956	30,505	20,083
Net income	77,865	70,462	53,666
Net income available to common shareholders	$ 77,865	$ 70,462	$ 53,666
Earnings per share
Basic	$ 4.08	$ 3.72	$ 2.88
Diluted	$ 4.05	$ 3.69	$ 2.84
Shares used in computing earnings per share
Basic	19,105,806	18,941,077	18,646,128
Diluted	19,203,650	19,119,186	18,928,504
Extraordinary cash dividends declared per common share	$ 3.25	$ 3.00	$ 1.50
Cash dividends declared per common share	$ 0.72	$ 0.60	$ 0.48

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 19,073	$ 17,896	$ 16,639	$ 24,257	$ 23,073	$ 17,940	$ 14,319	$ 15,130	$ 77,865	$ 70,462	$ 53,666
Other comprehensive income:
Unrealized gain (loss) on securities, net of tax									(3,079)	(223)	7,105
Comprehensive income	$ 11,985	$ 16,183	$ 19,568	$ 27,051	$ 22,299	$ 19,248	$ 12,744	$ 15,948	$ 74,786	$ 70,239	$ 60,771

XML

Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock [Member]	Treasury Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Beginning Balance at Dec. 31, 2013	$ 416,814	$ 198	$ (22,370)	$ 192,537	$ 250,744	$ (4,295)
Beginning Balance, Shares at Dec. 31, 2013		19,855,430
Treasury Stock Beginning Balance, Shares at Dec. 31, 2013			(1,258,250)
Comprehensive income:
Net income	53,666				53,666
Other comprehensive income:
Change in unrealized gains loss, net of tax	7,105					7,105
Comprehensive income	60,771
Common stock issued upon exercise of options	2,674	$ 3		2,671
Common stock issued upon exercise of options, Shares		294,165
Restricted common stock issued, Shares		6,341
Share-based compensation	1,089			1,089
Tax benefit from share-based payments	2,841			2,841
Dividends to shareholders	(37,221)				(37,221)
Ending Balance at Dec. 31, 2014	446,968	$ 201	$ (22,370)	199,138	267,189	2,810
Ending Balance, Shares at Dec. 31, 2014		20,155,936
Treasury Stock Ending Balance, Shares at Dec. 31, 2014			(1,258,250)
Comprehensive income:
Net income	70,462				70,462
Other comprehensive income:
Change in unrealized gains loss, net of tax	(223)					(223)
Comprehensive income	70,239
Common stock issued upon exercise of options	1,844	$ 2		1,842
Common stock issued upon exercise of options, Shares		193,204
Restricted common stock issued	502			502
Restricted common stock issued, Shares		39,256
Share-based compensation	1,003			1,003
Tax benefit from share-based payments	2,203			2,203
Dividends to shareholders	(68,778)				(68,778)
Ending Balance at Dec. 31, 2015	$ 453,981	$ 203	$ (22,370)	204,688	268,873	2,587
Ending Balance, Shares at Dec. 31, 2015	20,388,396	20,388,396
Treasury Stock Ending Balance, Shares at Dec. 31, 2015	(1,258,250)		(1,258,250)
Comprehensive income:
Net income	$ 77,865				77,865
Other comprehensive income:
Change in unrealized gains loss, net of tax	(3,079)					(3,079)
Comprehensive income	74,786
Common stock issued upon exercise of options	837	$ 1		836
Common stock issued upon exercise of options, Shares		68,879
Restricted common stock issued	603			603
Restricted common stock issued, Shares		31,110
Share-based compensation	1,268			1,268
Tax benefit from share-based payments	995			995
Dividends to shareholders	(76,320)				(76,320)
Ending Balance at Dec. 31, 2016	$ 456,150	$ 204	$ (22,370)	$ 208,390	$ 270,418	$ (492)
Ending Balance, Shares at Dec. 31, 2016	20,488,385	20,488,385
Treasury Stock Ending Balance, Shares at Dec. 31, 2016	(1,258,250)		(1,258,250)

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating activities
Net income	$ 77,865	$ 70,462	$ 53,666
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	1,181	1,348	1,298
Net amortization of investments	16,247	16,424	15,243
Deferred income taxes	(2,249)	1,446	(1,412)
Net realized (gains) losses on investments	509	2,494	(697)
Net realized losses on disposal of assets	1	664
Share-based compensation	1,603	1,223	1,519
Changes in operating assets and liabilities:
Premiums receivable, net	2,359	(6,447)	(7,338)
Accrued interest receivable	325	(48)	(395)
Deferred policy acquisition costs	1,112	(763)	(478)
Amounts held by others	1,016	(27,847)	(1,082)
Other assets	1,631	(1,042)	(4,306)
Reserves for loss and loss adjustment expenses	24,743	30,431	73,045
Unearned premiums	(5,955)	(593)	4,280
Reinsurance balances	7,285	(5,878)	(10,326)
Amounts held for others and policyholder deposits	(17,066)	6,621	11,190
Accounts payable and other liabilities	3,605	4,364	6,477
Net cash provided by operating activities	114,212	92,859	140,684
Investing activities
Purchases of investments held-to-maturity	(102,830)	(178,010)	(223,028)
Purchases of investments available-for-sale	(216,466)	(135,915)	(149,956)
Purchases of short-term investments	(35,295)	(12,246)	(79,957)
Proceeds from maturities of investments held-to-maturity	177,159	160,834	112,100
Proceeds from sales and maturities of investments available-for-sale	115,552	78,637	72,535
Proceeds from sales and maturities of short-term investments	13,040	37,833	128,043
Purchases of property and equipment	(1,638)	(953)	(989)
Net cash (used in) provided by investing activities	(50,478)	(49,820)	(141,252)
Financing activities
Proceeds from stock option exercises	837	1,844	2,674
Tax benefit from share-based payments	995	2,203	2,841
Dividends to shareholders	(76,111)	(68,561)	(37,068)
Net cash used in financing activities	(74,279)	(64,514)	(31,553)
Change in cash and cash equivalents	(10,545)	(21,475)	(32,121)
Cash and cash equivalents at beginning of year	69,481	90,956	123,077
Cash and cash equivalents at end of year	58,936	69,481	90,956
Supplemental disclosure of cash flow information
Income taxes paid	$ 31,500	$ 23,851	$ 19,926

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

Organization

AMERISAFE, Inc. is an insurance holding company incorporated in the state of Texas. The accompanying consolidated financial statements include the accounts of AMERISAFE and its subsidiaries: American Interstate Insurance Company (“AIIC”) and its insurance subsidiaries, Silver Oak Casualty, Inc. (“SOCI”) and 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 Nebraska.  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 service company currently servicing only affiliated 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 insurance for small to mid-sized employers engaged in hazardous industries, principally construction, trucking, manufacturing, agriculture, and oil and gas. Assets and revenues of AIIC represent at least 95% of comparable consolidated amounts of the Company for each of 2016, 2015 and 2014.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of financial statements in accordance 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.

Adopted Accounting Guidance

In May 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2015-07, Fair Value Measurements (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). The amendments in this update change the disclosure requirements for investments in certain entities that calculate net asset value (NAV) per share. Under current accounting standards entities are permitted to estimate the fair value of certain investments using the investment’s NAV as a practical expedient. The disclosure guidance also permits entities to disclose the investment at NAV in the fair value hierarchy table as either Level 2 or Level 3, based upon certain criteria. The measurement basis utilizing NAV is different than the measurement criteria of all other investments which utilize inputs to calculate fair value. Due to this inconsistency, the FASB issued this ASU which requires entities to remove investments measured at NAV from the fair value hierarchy table. Other than the change in presentation, the adoption of this new guidance in interim periods beginning in 2016 did not have an impact on our consolidated financial statements.

In May 2015, FASB issued Accounting Standards Update (ASU) 2015-09, Financial Services – Insurance (Topic 944): Disclosures about Short-Duration Contracts.  The guidance requires additional disclosures for short-duration insurance contracts.  New disclosures are to include more information about initial claim estimates and subsequent adjustments to those estimates, the methodologies and judgments used to estimate claims, and the timing, frequency, and severity of claims.  This standard is effective for us beginning with this 2016 annual financial statement.  The guidance requires a change in disclosure only (see Note 9 to our financial statements), and thus has no impact on our financial condition or results of operations.

Prospective Accounting Guidance

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718):  Improvements to Employee Share-Based Payment Accounting.  The new guidance requires that all tax effects related to share-based payments be made through the income statement at the time of settlement as opposed to recognizing excess tax benefits in additional paid-in capital.  It also requires the cash flows resulting from share-based payments to be included as an operating activity.  In addition to the changes, the guidance permits reporting entities to elect to estimate forfeitures related to share-based payments or recognize them as they occur.  The threshold to qualify for equity classification has also been revised to permit withholding up to the maximum statutory tax rates in the applicable jurisdictions.  The standard is effective for us in the first quarter of 2017.  Adoption of this guidance is not expected to have a material impact on our financial condition and results of operations.

In May 2014, the FASB Issued ASU 2014-09 (Topic 606): Revenue from Contracts with Customers.  The guidance revises the criteria for revenue recognition and requires that the revenue recognized reflect the transfer of promised goods or services to customers in an amount that represents the consideration to which the entity expects to be entitled in exchange for those goods or services.  The standard is effective for us in the first quarter of 2018.  Revenue from insurance contracts is excluded from the scope of the new guidance and as a result, adoption of this guidance is not expected to have a material impact on our financial condition and results of operations.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10):  Recognition and Measurement of Financial Assets and Financial Liabilities.  This guidance requires fair value measurement for equity investments (not including those that result in consolidation of the investee or use the equity method of accounting) and the recognition of changes in fair value to be presented as a component of net income.  The guidance also revises the disclosure requirements related to fair value changes of liabilities presented in comprehensive income, eliminates disclosure related to the methods and assumptions underlying fair value for financial instruments measured at amortized cost, and simplifies impairment assessments for equity investments without readily determinable fair values.  This standard is effective for us in the first quarter of 2018.  The Company will continue to monitor the impact as the implementation date approaches.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).  Under current guidance for lessees, leases are only included on the balance sheet if certain criteria, classifying the contract as a capital lease, are met.  The new guidance requires a lessee to recognize a lease liability and a right of use asset for all leases extending beyond twelve months.  The new guidance is effective for us in the first quarter of 2019.  Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach.  Adoption of the guidance is not expected to have a material effect on the Company’s consolidated financial statements as the Company does not have any significant leases.  

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses.  The new guidance replaces the methodology of credit loss impairment, which currently, delays the recognition of credit losses until a probable loss has been incurred.  The new guidance requires credit losses for securities measured at amortized cost, to be determined using current expected credit losses estimates.  These estimates are to be derived from historical, current and reasonable supporting forecasts, including prepayments and estimates, and will be recorded through a valuation allowance account that will run through the income statement.  The same method will be used for available-for-sale securities, but the valuation allowance will be limited to the amount by which the fair value is below amortized cost.  The standard is effective for us in the first quarter of 2020.  The Company will continue to monitor the impact as the implementation date approaches.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

Investments

The Company has the ability and positive intent to hold certain investments until maturity. Therefore, fixed maturity securities classified as held-to-maturity are recorded at amortized cost. Equity securities and fixed maturity securities classified as available-for-sale are recorded at fair value. Temporary changes in the fair value of these securities are reported in shareholders’ equity as a component of other comprehensive income, net of deferred income taxes.

Investment income is recognized as it is earned. The discount or premium on fixed maturity securities is amortized using the “constant yield” method. Anticipated prepayments, where applicable, are considered when determining the amortization of premiums or discounts. Realized investment gains and losses are determined using the specific identification method.

The Company regularly reviews the fair value of its investments. Impairment of an investment security results in a reduction of the carrying value of the security and the realization of a loss when the fair value of the security declines below the cost or amortized cost, as applicable, for the security and the impairment is deemed to be other-than-temporary. The Company regularly reviews its investment portfolio to evaluate the existence of other-than-temporary declines in the fair value of investments. The Company considers various factors in determining if a decline in the fair value of an individual security is other-than-temporary, including but not limited to a reduction or interruption in scheduled cash flows, the financial condition of the issuer, how long and by how much the fair value has been below amortized cost, losses due to credit concerns, downgrades and the Company’s intent to sell or ability to hold the security.

Other-than-temporary impairment losses on equity securities are recognized in net income and are measured as the difference between cost and fair value. Impairment losses on fixed maturities are recognized in the financial statements depending on the facts and circumstances related to the specific security. If we intend to sell a security or it is more likely than not that we would be required to sell a security before the recovery of its amortized cost, less any current period credit loss, an other-than-temporary impairment would be recognized in net income for the difference between amortized cost and fair value. If we do not expect to recover the amortized cost basis, we do not plan to sell the security and if it is not more likely than not that we would be required to sell a security before the recovery of its amortized cost, less any current period credit loss, the recognition of the other-than-temporary impairment is bifurcated. The credit loss portion would be recognized in net income and the noncredit loss portion in other comprehensive income.

Cash and Cash Equivalents

Cash equivalents include short-term money market funds and corporate bonds with an original maturity of 90 days or less.

Short-Term Investments

Short-term investments include municipal securities, corporate bonds and certificates of deposit with an original maturity greater than 90 days but less than one year.

Other Investments

Other investments consist of a limited partnership interest that is accounted for under the equity method, valued using the net asset value provided by the general partner of the limited partnership, which approximates the fair value of the interest.  The limited partnership’s objective is to generate absolute returns by investing long and short in publicly-traded global securities.  Redemptions are allowed monthly following a 60-day notice with no lock up periods.  The Company has no unfunded commitments to the limited partnership.

Premiums Receivable

Premiums receivable consist primarily of premium-related balances due from policyholders. The Company considers premiums receivable as past due based on the payment terms of the underlying policy. The balance is shown net of the allowance for doubtful accounts. Receivables due from insureds are charged off when a determination has been made by management that a specific balance will not be collected. An estimate of amounts that are likely to be charged off is established as an allowance for doubtful accounts as of the balance sheet date. The estimate is primarily comprised of specific balances that are considered probable to be charged off after all collection efforts have ceased, as well as historical trends and an analysis of the aging of the receivables.

Property and Equipment

The Company’s property and equipment, including certain costs incurred to develop or obtain software for internal use, are stated at cost less accumulated depreciation. Depreciation is calculated primarily by the straight-line method over the estimated useful lives of the respective assets, generally 39 years for buildings and three to seven years for all other fixed assets.

Deferred Policy Acquisition Costs

The direct costs of successfully acquiring and renewing business are capitalized to the extent recoverable and are amortized over the effective period of the related insurance policies in proportion to premium revenue earned. These capitalized costs consist mainly of sales commissions, premium taxes and other underwriting costs. The Company evaluates deferred policy acquisition costs for recoverability by comparing the unearned premiums to the estimated total expected claim costs and related expenses, offset by anticipated investment income. The Company would reduce the deferred costs if the unearned premiums were less than expected claims and expenses after considering investment income, and report any adjustments in amortization of deferred policy acquisition costs. There were no adjustments necessary in 2016, 2015 or 2014.

Reserves for Loss and Loss Adjustment Expenses

Reserves for loss and loss adjustment expenses represent the estimated ultimate cost of all reported and unreported losses incurred through December 31. The Company does not discount loss and loss adjustment expense reserves. The reserves for loss and loss adjustment expenses are estimated using individual case-basis valuations, statistical analyses and estimates based upon experience for unreported claims and their associated loss and loss adjustment expenses. Such estimates may be more or less than the amounts ultimately paid when the claims are settled. The estimates are subject to the effects of trends in loss severity and frequency. Although considerable variability is inherent in these estimates, management believes that the reserves for loss and loss adjustment expenses are adequate. The estimates are continually reviewed and adjusted as necessary as experience develops or new information becomes known. Any adjustments are included in current operations.

Subrogation recoverables, as well as deductible recoverables from policyholders, are estimated using individual case-basis valuations and aggregate estimates. Deductibles that are recoverable from policyholders and other recoverables from state funds decrease the liability for loss and loss adjustment expenses.

The Company funds its obligations under certain settled claims where the payment pattern and ultimate cost are fixed and determinable on an individual claim basis through the purchase of annuities. These annuities are purchased from unaffiliated carriers and name the claimant as payee. The cost of purchasing the annuity is recorded as paid loss and loss adjustment expenses. To the extent the annuity funds estimated future claims, reserves for loss and loss adjustment expense are reduced.

Premium Revenue

Premiums on workers’ compensation insurance are based on actual payroll costs or production during the policy term and are normally billed monthly in arrears or annually. However, the Company generally requires a deposit at the inception of a policy.

Premium revenue is earned on a pro rata basis over periods covered by the policies. The reserve for unearned premiums on these policies is computed on a daily pro rata basis.

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

The Company estimates EBUB premiums on a quarterly basis using historical data and applying various assumptions based on the current market and economic conditions, and records an adjustment to premium, related losses, and expenses as warranted.

Reinsurance

Reinsurance premiums, losses and allocated loss adjustment expenses are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts.

Amounts recoverable from reinsurers include balances currently owed to the Company for losses and allocated loss adjustment expenses that have been paid to policyholders, amounts that are currently reserved for and will be recoverable once the related expense has been paid and experience-rated commissions recoverable upon commutation.

Upon management’s determination that an amount due from a reinsurer is uncollectible due to the reinsurer’s insolvency or other matters, the amount is written off.

Ceding commissions are earned from certain reinsurance companies and are intended to reimburse the Company for policy acquisition costs related to those premiums ceded to the reinsurers. Ceding commission income is recognized over the effective period of the related insurance policies in proportion to premium revenue earned and is reflected as a reduction in underwriting and certain other operating costs.

Experience-rated commissions are earned from certain reinsurance companies based on the financial results of the applicable risks ceded to the reinsurers. These commission revenues on reinsurance contracts are recognized during the related reinsurance treaty period and are based on the same assumptions used for recording loss and allocated loss adjustment expenses. These commissions are reflected as a reduction in underwriting and certain other operating costs and are adjusted as necessary as experience develops or new information becomes known. Any such adjustments are included in income from current operations. Experience-rated commissions had no impact on underwriting and certain other operating costs in 2016 compared to $0.3 in 2015 and no impact in 2014.

In December 2016, the Company commuted reinsurance agreements with Hannover Reinsurance Limited (Ireland) (“Hannover”) and Tokio Millennium Re Limited (“Tokio”) covering portions of accident years 2011 through 2013.  The Company received cash of $0.2 million and an additional $25.4 million payment effectuated solely through offset against the balance of the funds withheld account under the reinsurance agreements in exchange for releasing Hannover and Tokio from their reinsurance obligations under the commuted agreements.  Both Hannover and Tokio remain obligated to the subsidiaries of the Company under other reinsurance agreements. As a result of the commutation, the effect on the Company’s net income in the year ended December 31, 2016 was immaterial.

Fee and Other Income

The Company recognizes income related to commissions earned by AGAI as the related services are performed.

Advertising

All advertising expenditures incurred by the Company are charged to expense in the period to which they relate and are included in underwriting and certain other operating costs in the consolidated statements of income. Total advertising expenses incurred were $0.7 million in 2016 and 2015 and $0.5 million in 2014.

Income Taxes

The Company accounts for income taxes using the liability method. The provision for income taxes has two components, amounts currently payable or receivable and deferred amounts. Deferred income tax assets and liabilities are recognized for the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company considers deferred tax assets to be recoverable if it is probable that the related tax losses can be offset by future taxable income. The Company includes reversal of existing temporary differences, tax planning strategies available and future operating income in this assessment. To the extent the deferred tax assets exceed the amount expected to be recovered in future years, the Company records a valuation allowance for the amount determined unrecoverable.

Insurance-Related Assessments

Insurance-related assessments are accrued in the period in which they have been incurred. The Company is subject to a variety of assessments related to insurance commerce, including those by state guaranty funds and workers’ compensation second-injury funds. State guaranty fund assessments are used by state insurance oversight agencies to cover losses of policyholders of insolvent or rehabilitated insurance companies and for the operating expenses of such agencies.  Assessments based on premiums are generally paid one year after the calendar year in which the premium is written, while assessments based on losses are generally paid within one year of the calendar year in which the loss is paid.

Policyholder Dividends

The Company writes certain policies for which the policyholder may participate in favorable claims experience through a dividend. An estimated provision for workers’ compensation policyholders’ dividends is accrued as the related premiums are earned. Dividends do not become a fixed liability unless and until declared by the respective Boards of Directors of AMERISAFE’s insurance subsidiaries. The dividend to which a policyholder may be entitled is set forth in the policy and is related to the amount of losses sustained under the policy. Dividends are calculated after the policy expiration. The Company is able to estimate the policyholder dividend liability because the Company has information regarding the underlying loss experience of the policies written with dividend provisions and can estimate future dividend payments from the policy terms.

Earnings Per Share

The Company computes earnings per share (EPS) in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share. Additionally, during 2013, the Company applied the “two-class method” in computing basic and diluted earnings per share as a result of the participating unvested common shares which contained nonforfeitable rights to dividends during this period.  As of January 1, 2014, the Company no longer has participating unvested common shares which contain nonforfeitable rights to dividends and now applies the treasury stock method in computing basic and diluted earnings per share.

Under the two-class method, net income available to common and participating common shareholders is reduced by the amount of dividends declared in the current period and by the contractual amount of dividends that must be paid for the current period related to the Company’s common and participating common shares. Participating common shares include unvested share-based payment awards that contain nonforfeitable rights to dividends, whether paid or unpaid. Any remaining undistributed earnings are allocated to the common and participating common shareholders to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. The amount of earnings allocable to each security is divided by the number of outstanding shares of the security to which the earnings are allocated to determine the EPS for the security. In a period of loss, no losses are allocated to the participating common shareholders. Instead, all such losses are allocated to the common shareholders.

Basic EPS is calculated by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period. The diluted EPS calculation includes potential common shares assumed issued under the treasury stock method, which reflects the potential dilution that would occur if any outstanding options or warrants were exercised or restricted stock becomes vested, and includes the “if converted” method for participating securities if the effect is dilutive. Prior to 2014, we determined diluted EPS as the more dilutive result of either the treasury method or the two-class method.

Share-Based Compensation

The Company recognizes the impact of its share-based compensation in accordance with FASB ASC Topic 718, Compensation-Stock Compensation. All share-based grants are recognized as compensation expense over the vesting period.  The target value of long-term incentive awards are recognized as compensation over the performance period.

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Investments

12 Months Ended

Dec. 31, 2016

Investments Debt And Equity Securities [Abstract]

Investments

2. Investments

Short-term investments held at December 31, 2016 include $ 21.9 million of U.S. Treasury securities and obligation of U.S. government agencies, $4.9 million of states and political subdivisions and $2.8 million of corporate bonds. Short-term investments held at December 31, 2015 include $7.7 million of corporate bonds.

AMERISAFE holds an investment in a limited partnership hedge fund accounted for under the equity method.  The carrying value of this investment is $13.3 million at December 31, 2016.

The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as held-to-maturity at December 31, 2016 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	394,875	$	7,622	$	(3,014	)	$	399,483
Corporate bonds		143,858		423		(265	)		144,016
Commercial mortgage-backed securities		70		—		—			70
U.S. agency-based mortgage-backed securities		9,967		948		—			10,915
U.S. Treasury securities and obligations      of U.S. government agencies		11,737		746		(67	)		12,416
Asset-backed securities		1,927		163		(59	)		2,031
Totals	$	562,434	$	9,902	$	(3,405	)	$	568,931

The gross unrealized gains and losses on, and the cost or amortized cost and fair value of, those investments classified as available-for-sale at December 31, 2016 are summarized as follows:

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Fixed maturity:
States and political subdivisions	$	231,168	$	4,340	$	(3,215	)	$	232,293
Corporate bonds		182,350		436		(271	)		182,515
U.S. agency-based mortgage-backed securities		10,428		17		(1,103	)		9,342
U.S. Treasury securities and obligations      of U.S. government agencies		55,925		—		(978	)		54,947
Total fixed maturity		479,871		4,793		(5,567	)		479,097
Other investments		10,000		3,330		—			13,330
Equity securities		—		33		—			33
Totals	$	489,871	$	8,156	$	(5,567	)	$	492,460

The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as held-to-maturity at December 31, 2015 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	408,447	$	15,352	$	(45	)	$	423,754
Corporate bonds		171,224		159		(810	)		170,573
Commercial mortgage-backed securities		37,494		204		(15	)		37,683
U.S. agency-based mortgage-backed securities		13,223		1,249		(1	)		14,471
U.S. Treasury securities and obligations      of U.S. government agencies		12,487		897		(4	)		13,380
Asset-backed securities		2,289		202		(76	)		2,415
Totals	$	645,164	$	18,063	$	(951	)	$	662,276

The gross unrealized gains and losses on, and the cost or amortized cost and fair value of, those investments classified as available-for-sale at December 31, 2015 are summarized as follows:

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Fixed maturity:
States and political subdivisions	$	164,684	$	6,942	$	(207	)	$	171,419
Corporate bonds		202,537		253		(1,486	)		201,304
U.S. agency-based mortgage-backed securities		8,888		4		(1,593	)		7,299
Total fixed maturity		376,109		7,199		(3,286	)		380,022
Other investments		10,000		2,217		—			12,217
Equity securities		—		31		—			31
Totals	$	386,109	$	9,447	$	(3,286	)	$	392,270

A summary of the amortized cost and fair value of investments in fixed maturity securities, classified as held-to-maturity at December 31, 2016, by contractual maturity, is as follows:

	Amortized Cost		Fair Value
	(in thousands)
Maturity:
Within one year	$	109,707	$	110,469
After one year through five years		259,942		263,620
After five years through ten years		105,396		106,341
After ten years		75,425		75,485
Commercial mortgage-backed securities		70		70
U.S. agency-based mortgage-backed securities		9,967		10,915
Asset-backed securities		1,927		2,031
Totals	$	562,434	$	568,931

A summary of the amortized cost and fair value of investments in fixed maturity securities, classified as available-for-sale at December 31, 2016, by contractual maturity, is as follows:

	Amortized Cost		Fair Value
	(in thousands)
Maturity:
Within one year	$	64,852	$	65,174
After one year through five years		215,486		215,624
After five years through ten years		30,846		30,488
After ten years		158,259		158,469
U.S. agency-based mortgage-backed securities		10,428		9,342
Totals	$	479,871	$	479,097

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

At December 31, 2016, there were $21.2 million of held-to-maturity investments, $0.4 million of available-for-sale investments and $0.1 million of cash on deposit with regulatory agencies of states in which the Company does business.

A summary of the Company’s realized gains and losses on sales, calls or redemptions of investments for 2016, 2015 and 2014 is as follows:

	Fixed Maturity Securities Available for Sale			Equity Securities			Other		Total
	(in thousands)
Year ended December 31, 2016
Proceeds from sales	$	54,730		$	—		$	4,609	$	59,339
Gross realized investment gains	$	823		$	—		$	68	$	891
Gross realized investment losses		(1,728	)		—			—		(1,728	)
Net realized investment gains (losses)		(905	)		—			68		(837	)
Other, including gains on calls and redemptions		274			—			69		343
Net realized gains (losses) on investments	$	(631	)	$	—		$	137	$	(494	)
Year ended December 31, 2015
Proceeds from sales	$	4,432		$	—		$	—	$	4,432
Gross realized investment gains	$	177		$	—		$	—	$	177
Gross realized investment (losses)		(162	)		—			—		(162	)
Net realized investment gains		15			—			—		15
Impairments		(2,653	)		—			—		(2,653	)
Other, including gains on calls and redemptions		102			—			42		144
Net realized gains (losses) on investments	$	(2,536	)	$	—		$	42	$	(2,494	)
Year ended December 31, 2014
Proceeds from sales	$	768		$	9,780		$	—	$	10,548
Gross realized investment gains	$	1		$	749		$	—	$	750
Gross realized investment (losses)		—			(451	)		—		(451	)
Net realized investment gains		1			298			—		299
Impairments		(222	)		—			—		(222	)
Other, including gains on calls and redemptions		244			—			376		620
Net realized gains on investments	$	23		$	298		$	376	$	697

In 2016, the Company sold bonds that were classified as held-to-maturity.  In February, Moody’s downgraded the bonds to B2 from B1 citing increasing liquidity concerns and also placed the bonds on negative outlook indicating the rating could be downgraded further.  Given the evidence of significant deterioration, the Company elected to sell the bonds for $3.0 million, recognizing a $0.1 million realized gain.

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

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Gross investment income:
Fixed maturity securities	$	27,837		$	28,498		$	26,622
Short-term investments and cash and cash equivalents		348			149			426
Equity securities		—			—			232
Other investments		1,568			763			1,611
Total gross investment income		29,753			29,410			28,891
Investment expenses		(1,647	)		(1,508	)		(1,677	)
Net investment income	$	28,106		$	27,902		$	27,214

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

	Less Than 12 Months				12 Months or Greater				Total
	Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses
	(in thousands)
December 31, 2016
Held-to-Maturity
Fixed maturity securities:
States and political subdivisions	$	157,507	$	3,014	$	—	$	—	$	157,507	$	3,014
Corporate bonds		44,654		202		6,292		63		50,946		265
U.S. Treasury securities and obligations      of U.S. government agencies		3,968		67		—		—		3,968		67
Asset-backed securities		—		—		1,173		59		1,173		59
Total held-to-maturity securities		206,129		3,283		7,465		122		213,594		3,405
Available-for Sale
Fixed maturity securities:
States and political subdivisions	$	73,505	$	2,976	$	4,523	$	239	$	78,028	$	3,215
Corporate bonds		41,419		111		7,922		160		49,341		271
U.S. agency-based mortgage-backed securities		3,702		48		3,607		1,055		7,309		1,103
U.S. Treasury securities and obligations      of U.S. government agencies		54,947		978		—		—		54,947		978
Total available-for-sale securities		173,573		4,113		16,052		1,454		189,625		5,567
Total	$	379,702	$	7,396	$	23,517	$	1,576	$	403,219	$	8,972
December 31, 2015
Held-to-Maturity
Fixed maturity securities:
States and political subdivisions	$	24,068	$	45	$	—	$	—	$	24,068	$	45
Corporate bonds		128,436		687		18,139		123		146,575		810
Commercial mortgage-backed securities		9,784		15		—		—		9,784		15
U.S. agency-based mortgage-backed securities		18		—		28		1		46		1
U.S. Treasury securities and obligations      of U.S. government agencies		2,980		4		—		—		2,980		4
Asset-backed securities		—		—		1,389		76		1,389		76
Total held-to-maturity securities		165,286		751		19,556		200		184,842		951
Available-for Sale
Fixed maturity securities:
States and political subdivisions	$	6,560	$	9	$	4,439	$	198	$	10,999	$	207
Corporate bonds		141,857		1,475		4,216		11		146,073		1,486
U.S. agency-based mortgage-backed securities		434		37		6,794		1,556		7,228		1,593
Total available-for-sale securities		148,851		1,521		15,449		1,765		164,300		3,286
Total	$	314,137	$	2,272	$	35,005	$	1,965	$	349,142	$	4,237

At December 31, 2016, the Company held 260 individual fixed maturity securities that were in an unrealized loss position, of which 17 were in a continuous unrealized loss position for longer than 12 months.

The Company regularly reviews its investment portfolio to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of our investments. The Company considers various factors in determining if a decline in the fair value of an individual security is other-than-temporary. The key factors considered are:

• any reduction or elimination of preferred 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;

• our intent not to sell the security for a sufficient time period for it to recover its value;

• the likelihood of being forced to sell the security before the recovery of its value; and

• an evaluation as to whether there are any credit losses on debt securities.

We reviewed all securities with unrealized losses in accordance with the impairment policy described above. The Company determined that the unrealized losses in the fixed maturity securities portfolio related primarily to changes in market interest rates since the date of purchase, current conditions in the capital markets and the impact of those conditions on market liquidity and prices generally. We expect to recover the carrying value of these securities as it is not more likely than not that we will be required to sell the securities before the recovery of its amortized cost basis.

In 2016, there were no impairment losses recognized for other-than-temporary declines in the fair value of our investments.

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Premiums Receivable

12 Months Ended

Dec. 31, 2016

Insurance [Abstract]

Premiums Receivable

3. Premiums Receivable

Premiums receivable consist primarily of premium-related balances due from policyholders. The balance is shown net of the allowance for doubtful accounts. The components of premiums receivable are shown below:

	December 31,
	2016			2015
	(in thousands)
Premiums receivable	$	188,217		$	190,216
Allowance for doubtful accounts		(5,212	)		(4,852	)
Premiums receivable, net	$	183,005		$	185,364

The following summarizes the activity in the allowance for doubtful accounts:

	December 31,
	2016			2015			2014
	(in thousands)
Balance, beginning of year	$	4,852		$	5,211		$	5,458
Provision for bad debts		1,646			806			673
Write-offs		(1,286	)		(1,165	)		(920	)
Balance, end of year	$	5,212		$	4,852		$	5,211

Included in premiums receivable at December 31, 2016, 2015 and 2014 is the Company’s estimate for EBUB premium of $7.7 million, $7.6 million and $5.2 million, respectively.

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Deferred Policy Acquisition Costs

12 Months Ended

Dec. 31, 2016

Insurance [Abstract]

Deferred Policy Acquisition Costs

4. Deferred Policy Acquisition Costs

Deferred policy acquisition costs represent those costs that are incremental and directly related to the successful acquisition of new or the renewal of existing insurance contracts.  We defer incremental costs that result directly from, and are essential to, the acquisition or renewal of an insurance contract.

We also defer a portion of employee total compensation costs directly related to time spent performing specific acquisition or renewal activities.

These costs are deferred and expensed over the life of the related policies. Major categories of the Company’s deferred policy acquisition costs are summarized as follows:  

	December 31,
	2016		2015
	(in thousands)
Agents’ commissions	$	15,286	$	15,997
Premium taxes		2,578		3,121
Deferred underwriting expenses		1,436		1,294
Total deferred policy acquisition costs	$	19,300	$	20,412

The following summarizes the activity in the deferred policy acquisition costs:

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Balance, beginning of year	$	20,412		$	19,649		$	19,171
Policy acquisition costs deferred		43,209			45,604			44,295
Amortization expense during the year		(44,321	)		(44,841	)		(43,817	)
Balance, end of year	$	19,300		$	20,412		$	19,649

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Property and Equipment

12 Months Ended

Dec. 31, 2016

Property Plant And Equipment [Abstract]

Property and Equipment

5. Property and Equipment

Property and equipment consist of the following:

	December 31,
	2016			2015
	(in thousands)
Land and office building	$	7,515		$	7,069
Furniture and equipment		6,509			6,227
Software		6,739			6,277
Automobiles		74			74
		20,837			19,647
Accumulated depreciation		(14,201	)		(13,466	)
Property and equipment, net	$	6,636		$	6,181

Furniture and equipment included property held under capital leases of $0.2 million at December 31, 2016.  Accumulated depreciation includes $80,000 that is related to these properties at December 31, 2016.  Furniture and equipment included property held under capital leases of $0.1 million at December 31, 2015.  Accumulated depreciation includes $97,000 that is related to these properties at December 31, 2015.  Furniture and equipment included property held under capital leases of $0.1 million at December 31, 2014.  Accumulated depreciation includes $49,000 that is related to these properties at December 31, 2014.  The capital lease obligations related to these properties are included in accounts payable and other liabilities.

Future minimum lease payments related to the capital lease obligations are detailed below (in thousands):

2017	$	56
2018		42
2019		42
2020		42
Present value of net minimum lease payments	$	182

The Company made a partial disposition election under tax regulations to write-off capitalized amounts for book and tax purposes of certain fixed assets and deductible repairs in the amount of $0.6 million in 2015 and this amount is included in “Loss on disposal of assets.”

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Reinsurance

12 Months Ended

Dec. 31, 2016

Insurance [Abstract]

Reinsurance

6. Reinsurance

The Company cedes certain premiums and losses to various reinsurers under quota share and excess-of-loss treaties. These reinsurance arrangements provide for greater diversification of business, allow management to control exposure to potential losses arising from large risks, and provide additional capacity for growth. Ceded reinsurance contracts do not relieve the Company from its obligations to policyholders. The Company remains liable to its policyholders for the portion reinsured to the extent that any reinsurer does not meet the obligations assumed under the reinsurance agreements. To minimize its exposure to significant losses from reinsurer insolvencies, the Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers on a continual basis. The effect of reinsurance on premiums written and earned in 2016, 2015 and 2014 was as follows:

	2016 Premiums						2015 Premiums						2014 Premiums
	Written			Earned			Written			Earned			Written			Earned
	(in thousands)
Gross	$	373,055		$	379,011		$	386,529		$	387,122		$	393,819		$	389,540
Ceded		(10,307	)		(10,307	)		(11,228	)		(11,228	)		(13,793	)		(13,793	)
Net premiums	$	362,748		$	368,704		$	375,301		$	375,894		$	380,026		$	375,747

The amounts recoverable from reinsurers consist of the following:

	December 31,
	2016		2015
	(in thousands)
Unpaid losses recoverable:
Case basis	$	49,361	$	37,207
Incurred but not reported		28,895		27,651
Paid losses recoverable		485		414
Experience-rated commissions recoverable		4,925		25,805
Total	$	83,666	$	91,077

Amounts recoverable from reinsurers consists of ceded case reserves, ceded incurred but not reported (“IBNR”) reserves, paid losses recoverable and experience-rated commissions recoverable. Ceded case and ceded IBNR reserves represent the portion of gross loss and loss adjustment expense liabilities that are recoverable under reinsurance agreements, but are not yet due from reinsurers. Paid losses recoverable are receivables currently due from reinsurers for ceded paid losses. The Company considers paid losses recoverable outstanding for more than 90 days to be past due. At December 31, 2016, there were no paid losses recoverable past due. Experience-rated commissions recoverable represents earned commission from certain reinsurance companies based on the financial results of the applicable risks ceded to the reinsurers, and these amounts declined during 2016 as a result of the December 2016 commutation of the 2011 through 2013 reinsurance agreements with Hannover and Tokio.

The Company received reinsurance recoveries of $0.5 million in 2016, $1.0million in 2015 and $ 1.5 million in 2014.

The Company generally secures large reinsurance recoverable balances with various forms of collateral, including funds withheld accounts, irrevocable letters of credit and secured trusts.  At December 31, 2016, reinsurance recoverables from reinsurers that exceeded 1.5% of statutory surplus of the Company’s insurance subsidiaries are shown below (in thousands). The A.M. Best Company rating for the reinsurer is shown parenthetically.

Hannover Reinsurance Limited (Ireland) (A+)	$	29,670
Odyssey America Reinsurance Corporation (A)		12,600
Minnesota Workers’ Compensation Reinsurance Association (NR)		9,623
Other reinsurers		31,773
Total amounts recoverable from reinsurers		83,666
Funds withheld and letters of credit related to the above recoverables		(38,453	)
Total unsecured amounts recoverable from reinsurers	$	45,213

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Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

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

	December 31,
	2016			2015
	(in thousands)
Deferred income tax assets:
Discounting of net unpaid loss and loss adjustment    expenses	$	16,035		$	15,415
Unearned premiums		14,483			14,839
Accrued expenses and other		3,640			3,904
State income tax		617			488
Accrued policyholder dividends		2,024			719
Impaired securities		70			238
Capital loss carryforward		15			715
Accrued insurance-related assessments		5,323			4,953
Net unrealized loss on securities		265			—
Total deferred tax assets		42,472			41,271
Deferred income tax liabilities:
Deferred policy acquisition costs		(8,492	)		(9,012	)
Callable bond amortization		(10	)		—
Unrealized gain on securities available-for-sale		—			(1,393	)
Property and equipment and other		204			(696	)
Salvage and subrogation		(363	)		(265	)
Guaranty fund related items		—			—
Total deferred income tax liabilities		(8,661	)		(11,366	)
Net deferred income taxes	$	33,811		$	29,905

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

	Year Ended December 31,
	2016			2015		2014
	(in thousands)
Current:
Federal	$	35,602		$	28,047	$	20,811
State		1,603			1,012		684
		37,205			29,059		21,495
Deferred:
Federal		(2,120	)		1,343		(821	)
State		(129	)		103		(591	)
		(2,249	)		1,446		(1,412	)
Total	$	34,956		$	30,505	$	20,083

During 2016, 2015 and 2014, there was no valuation allowance on the Company’s deferred income tax assets and liabilities.     

Income tax expense from operations is different from the amount computed by applying the U.S. federal income tax statutory rate of 35% to income before income taxes as follows:

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Income tax computed at federal statutory tax rate	$	39,487		$	35,338		$	25,812
Tax-exempt interest, net		(5,370	)		(5,630	)		(5,620	)
State income tax		913			762			(146	)
Dividends received deduction		(125	)		(19	)		(60	)
Other		51			54			97
	$	34,956		$	30,505		$	20,083

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. There were no uncertain tax positions as of December 31, 2016, 2015 and 2014.

Tax years 2013 through 2016 are subject to examination by the federal and state taxing authorities. In 2016, the Company was notified by the Illinois Department of Revenue that the examination of tax years 2011 and 2012 had been completed with no findings.

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Line of Credit

12 Months Ended

Dec. 31, 2016

Text Block [Abstract]

Line of Credit

8. Line of Credit

In 2013, the Company entered into an agreement providing for a line of credit in the maximum amount of $20.0 million with Frost Bank.  In December 2016, the agreement was renewed.  The agreement expires in December 2019.  Under the agreement, advances may be made either in the form of loans or letters of credit. Borrowings under the agreement accrue at interest rates based upon prime rate or LIBOR.  Under the agreement, the Company will pay a fee of 0.25% on the unused portion of the loan in arrears quarterly for a fee of $50,000 annually, assuming the line of credit is not used during the calendar year.  The line of credit is unsecured. No borrowings or letters of credit were outstanding under the line of credit arrangement at December 31, 2016 or 2015.

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Loss and Loss Adjustment Expenses

12 Months Ended

Dec. 31, 2016

Insurance [Abstract]

Loss and Loss Adjustment Expenses

9. Loss and Loss Adjustment Expenses

The following development tables provide the incurred and paid claims and allocated claim adjustment expenses, net of reinsurance, for workers’ compensation and general liability for accident years 2007 through 2016.  The incurred but not reported (“IBNR”) claims and claims frequency is included for each accident year presented.

	Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance																				As of
	For the Years Ended December 31,																				December 31,2016
	(Dollars in thousands)
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016		Total IBNR plus Expected Development on Reported Claims		Cumulative Number of Claims Reported
2007	$	208,480	$	218,448	$	206,044	$	196,773	$	185,225	$	181,633	$	180,229	$	179,373	$	178,608	$	178,582	$	1,620		7,122
2008		-		196,923		200,371		195,619		190,905		187,695		184,547		182,846		183,608		182,901		2,751		6,486
2009		-		-		185,359		188,746		188,462		187,943		184,006		182,274		177,795		176,586		3,199		5,371
2010		-		-		-		179,156		202,479		208,035		205,769		198,861		193,029		191,000		5,786		5,970
2011		-		-		-		-		196,384		199,522		199,163		198,213		195,262		192,988		7,461		6,040
2012		-		-		-		-		-		222,549		222,075		212,738		193,515		184,460		7,798		5,743
2013		-		-		-		-		-		-		241,810		241,811		233,656		220,457		11,868		5,761
2014		-		-		-		-		-		-		-		268,846		268,846		249,097		21,004		5,815
2015		-		-		-		-		-		-		-		-		262,573		262,573		28,658		5,477
2016		-		-		-		-		-		-		-		-		-		250,491		34,737		5,104
																	Total		$	2,089,136	$	124,882

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
	(Dollars in thousands)
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016		Claim Frequency		*
2007	$	43,470	$	97,657	$	128,254	$	141,595	$	152,136	$	158,056	$	162,903	$	164,970	$	166,734	$	167,996		21.77
2008		-		47,685		103,057		132,515		147,377		157,388		163,933		166,814		170,347		171,496		20.98
2009		-		-		42,332		96,173		123,946		142,667		150,925		155,365		158,214		159,345		19.82
2010		-		-		-		47,520		108,714		141,029		156,974		165,834		169,565		172,426		24.93
2011		-		-		-		-		53,329		111,029		140,831		153,968		161,639		165,967		22.80
2012		-		-		-		-		-		50,579		107,467		133,658		149,161		154,553		18.71
2013		-		-		-		-		-		-		51,396		119,507		150,304		165,994		16.54
2014		-		-		-		-		-		-		-		53,060		119,820		153,320		14.93
2015		-		-		-		-		-		-		-		-		54,141		121,599		14.15
2016		-		-		-		-		-		-		-		-		-		52,238		13.47
																	Total			1,484,933
All outstanding claim liabilities before 2007, net of reinsurance																				60,317
Liabilities for claims and claim adjustment expenses, net of reinsurance																				664,520
*Frequency, as calculated above, refers to reported claims divided by gross premium earned

The average annual percentage payout of incurred claims by age, net of reinsurance, for workers’ compensation and general liability as of December 31, 2016 is summarized below. Since workers’ compensation has long payout periods, the table below shows less than 100% in the years disclosed.

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited)
Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
	24.0%		29.7%		15.4%		8.1%		4.6%		2.7%		1.9%		1.2%		0.8%		0.7%

The following table provides a reconciliation of the beginning and ending reserve balances, net of related amounts recoverable from reinsurers, for 2016, 2015 and 2014:

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Balance, beginning of period	$	718,033		$	687,602		$	614,557
Less amounts recoverable from reinsurers      on unpaid loss and loss adjustment expenses		64,858			59,334			48,699
Net balance, beginning of period		653,175			628,268			565,858
Add incurred related to:
Current accident year		250,337			262,387			268,633
Prior accident years		(51,306	)		(47,814	)		(23,717	)
Total incurred		199,031			214,573			244,916
Less paid related to:
Current accident year		52,085			53,955			52,848
Prior accident years		135,601			135,711			129,658
Total paid		187,686			189,666			182,506
Net balance, end of period		664,520			653,175			628,268
Add amounts recoverable from reinsurers      on unpaid loss and loss adjustment expenses		78,256			64,858			59,334
Balance, end of period	$	742,776		$	718,033		$	687,602

The foregoing reconciliation reflects favorable development of the net reserves at December 31, 2016, 2015 and 2014. The favorable development reduced loss and loss adjustment expense incurred by $51.3 million in 2016 driven primarily by accident years 2012, 2013 and 2014 of $9.1 million, $13.2 million and $19.7 million, respectively. In 2015 and 2014, the Company recorded favorable development of $47.8 million and $23.7 million, respectively. The revisions to the Company’s reserves reflect new information gained by claims adjusters in the normal course of adjusting claims and is reflected in the financial statements when the information becomes available. It is typical for more serious claims to take several years or longer to settle and the Company continually revises estimates as more information about claimants’ medical conditions and potential disability becomes known and the claims get closer to being settled.  Multiple factors can cause loss development both unfavorable and favorable. The favorable loss development we experienced across accident years was largely due to favorable case reserve development from closed claims and claims where the worker had reached maximum medical improvement.

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

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

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Reserves for loss and LAE at beginning of year	$	958		$	819		$	219
Incurred losses and LAE during the current year		816			444			882
Loss and LAE payments		(287	)		(305	)		(282	)
Reserves for loss and LAE at end of year	$	1,487		$	958		$	819

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

The anticipated effect of inflation is implicitly considered when estimating liabilities for loss and loss adjustment expenses. Average severities are projected based on historical trends adjusted for implemented changes in underwriting standards, policy provisions and general economic trends. These anticipated trends are monitored based on actual development and are modified if necessary.

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Statutory Accounting and Regulatory Requirements

12 Months Ended

Dec. 31, 2016

Text Block [Abstract]

Statutory Accounting and Regulatory Requirements

10. Statutory Accounting and Regulatory Requirements

The Company’s insurance subsidiaries file financial statements prepared in accordance with statutory accounting principles prescribed or permitted by the insurance regulatory authorities of the states in which the subsidiaries are domiciled. Statutory-basis shareholders’ capital and surplus at December 31, 2016, 2015 and 2014 of the directly owned insurance subsidiary, AIIC, and the combined statutory-basis net income and realized investment gains for all AMERISAFE’s insurance subsidiaries for the three years in the period ended December 31, 2016, were as follows (in thousands):

	2016			2015			2014
Capital and surplus	$	394,016		$	371,365		$	377,742
Net income		79,858			71,937			50,205
Net realized gains (losses) on investments		(504	)		(3,131	)		693

Property and casualty insurance companies are subject to certain risk-based capital (“RBC”) requirements specified by the National Association of Insurance Commissioners. Under these requirements, a target minimum amount of capital and surplus maintained by a property/casualty insurance company is determined based on the various risk factors related to it. At December 31, 2016, the capital and surplus of AIIC and its subsidiaries exceeded the minimum RBC requirement.

Pursuant to regulatory requirements, AIIC cannot pay dividends to the Company in excess of the greater of 10% of statutory surplus, or statutory net income, excluding realized investment gains, for the preceding 12-month period, without the prior approval of the Nebraska Director of Insurance. However, for purposes of this dividend calculation, net income from the previous two calendar years may be carried forward to the extent that it has not already been paid out as dividends. AIIC paid $67.0 million in dividends to the Company in 2016, $50.0 million in 2015 and $25.0 million in 2014. Based upon the dividend limitation described above, AIIC could pay to the Company dividends of up to $68.7 million in 2017 without seeking regulatory approval.

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Capital Stock

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

Capital Stock

11. Capital Stock

Common Stock

The Company is authorized to issue 50,000,000 shares of common stock, par value $0.01 per share. At December 31, 2016, there were 20,488,385 shares of common stock issued and 19,230,135 shares outstanding.

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.01 per share. At December 31, 2016, there were no shares of preferred stock outstanding.

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Stock Options and Restricted Stock

12 Months Ended

Dec. 31, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Options and Restricted Stock

12. Stock Options and Restricted Stock

2005 Incentive Plan

The AMERISAFE 2005 Equity Incentive Plan (the “2005 Incentive Plan”) is administered by the Compensation Committee of the Board and was designed to provide incentive compensation to executive officers and other key management personnel. The 2005 Incentive Plan permitted awards in the form of incentive stock options, as defined in Section 422(b) of the Internal Revenue Code of 1986, non-qualified stock options, restricted shares of common stock and restricted stock units. In connection with the approval of the 2012 Equity and Incentive Compensation Plan by the Company’s shareholders, no further grants will be made under the 2005 Incentive Plan.  All grants made under the 2005 Incentive plan will continue in effect, subject to the terms and conditions of the 2005 Incentive Plan.

Stock options granted under the 2005 Incentive Plan have an exercise price of not less than 100% of the fair value of the common stock on the date of grant. Stock option grants are exercisable, subject to vesting requirements determined by the Compensation Committee, for periods of up to ten years from the date of grant. Stock options generally expire 90 days after the cessation of an optionee’s service as an employee. However, in the case of an optionee’s death or disability, the unexercised portion of a stock option remains exercisable for up to one year after the optionee’s death or disability. Stock options granted under the 2005 Incentive Plan are not transferable, except by will or the laws of descent and distribution.

The Company uses the Black-Scholes-Merton option pricing model to estimate the fair value of each option on the date of grant. The expected terms of options are developed by considering the Company’s historical attrition rate for those employees at the officer level, who are eligible to receive options. Further, the Company aggregates individual awards into homogenous groups based upon grant date. Expected volatility is estimated using daily historical volatility for six companies within the property and casualty insurance sector. The Company believes that historical volatility of this peer group is currently the best estimate of expected volatility of the market price of the Company’s common shares. The dividend yield was assumed to be zero as the Company did not pay cash dividends until 2013. The risk-free interest rate is the yield on the grant date of U.S. Treasury zero coupon securities with a maturity comparable to the expected term of the options.

The following table summarizes information about the stock options outstanding under the 2005 Incentive Plan at December 31, 2014, 2015 and 2016:

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)
Outstanding at January 1, 2014		576,248			11.12		3.8
Granted		—			—		—
Exercised		(294,165	)		9.09		—
Canceled, forfeited, or expired		—			—		—
Outstanding at December 31, 2014		282,083			11.30		3.6
Exercisable at December 31, 2014		282,083			11.30		3.6
Outstanding at January 1, 2015		282,083			11.30		3.6
Granted		—			—		—
Exercised		(193,204	)		9.55		—
Canceled, forfeited, or expired		—			—		—
Outstanding at December 31, 2015		88,879			12.10		4.3
Exercisable at December 31, 2015		88,879			12.10		4.3
Outstanding at January 1, 2016		88,879			12.10		4.3
Granted		—			—		—
Exercised		(68,879	)		12.14		3.3
Canceled, forfeited, or expired		—			—		—
Outstanding at December 31, 2016		20,000			8.71		3.1
Exercisable at December 31, 2016		20,000			8.71		3.1

	2016		2015		2014
	(in thousands)
Cash received from option exercises	$	837	$	1,844	$	2,674
Total tax benefits realized for tax deductions from    options exercised		833		2,109		2,797
Total intrinsic value of options exercised		2,967		6,969		9,145
Grant date fair value of options vested		—		—		144
Aggregate intrinsic value of vested options outstanding		1,073		3,448		8,763

The following table summarizes information about the restricted stock outstanding under the 2005 Incentive Plan at December 31, 2016:

	Shares			Weighted- Average Grant- Date Fair Value per Share
Nonvested balance at January 1, 2014		6,400			27.47
Granted		—			—
Vested		(800	)		27.35
Forfeited		(3,200	)		27.59
Nonvested balance at December 31, 2014		2,400			27.35
Granted		—			—
Vested		(800	)		27.35
Forfeited		—			—
Nonvested balance at December 31, 2015		1,600			27.35
Granted		—			—
Vested		(800	)		27.35
Forfeited		—			—
Nonvested balance at December 31, 2016		800			27.35

The Company recognized compensation expense of $58,000 in 2016 and $138,000 in 2015 and $325,000 in 2014, related to awards made under the 2005 Incentive Plan. Total tax benefits realized for tax deductions from vesting of restricted stock in 2016,  2015 and 2014 were $110,000, $81,000 and $38,000, respectively.

Non-Employee Director Restricted Stock Plan

The AMERISAFE Non-Employee Director Restricted Stock Plan (the “Restricted Stock Plan”) is administered by the Compensation Committee of the Board and provides for the automatic grant of restricted stock awards to non-employee directors of the Company. Awards to non-employee directors are generally subject to terms including non-transferability, immediate vesting upon death or total disability of a director, forfeiture of unvested shares upon termination of service by a director and acceleration of vesting upon a change of control of the Company. The maximum number of shares of common stock that may be issued pursuant to restricted stock awards under the Restricted Stock Plan is 100,000 shares, subject to the authority of the Board to adjust this amount in the event of a merger, consolidation, reorganization, stock split, combination of shares, recapitalization or similar transaction affecting the common stock. At December 31, 2016, there were 20,122 shares of common stock available for future awards under the Restricted Stock Plan.

Under the Restricted Stock Plan, each non-employee director is automatically granted a restricted stock award for a number of shares equal to $45,000 divided by the closing price of the Company’s common stock on the date of the annual meeting of shareholders at which the non-employee director is elected or is continuing as a member of the Board. Each restricted stock award vests on the date of the next annual meeting of shareholders following the date of grant, subject to the continued service of the non-employee director.  Under the terms of the Restricted Stock Plan, the Company’s Board of Directors may increase the dollar amount of the annual award to an amount up to $75,000 without shareholder approval.

As of December 31, 2016, there were 5,576 shares of restricted stock outstanding under the Non-Employee Director Restricted Stock Plan, all of which will vest on the date of the annual meeting of shareholders in 2017.

The following table summarizes information about the restricted stock outstanding under the Non-Employee Director Restricted Stock Plan at December 31, 2016:

	Shares			Weighted- Average Grant- Date Fair Value per Share
Nonvested balance at January 1, 2014		5,376			33.47
Granted		5,229			37.27
Vested		(5,376	)		33.47
Forfeited		—			—
Nonvested balance at December 31, 2014		5,229			37.27
Granted		7,112			44.26
Vested		(5,229	)		37.27
Forfeited		—			—
Nonvested balance at December 31, 2015		7,112			44.26
Granted		5,952			63.57
Vested		(7,488	)		44.54
Forfeited		—			—
Nonvested balance at December 31, 2016		5,576			64.50

The Company recognized compensation expense of $361,000 in 2016, $266,000 in 2015 and $184,000  in 2014 related to the Non-Employee Director Restricted Stock Plan. Total tax benefits realized for tax deductions from vesting of restricted stock in 2016, 2015 and 2014 were $52,000, $13,000 and $7,000, respectively.

2012 Equity and Incentive Compensation Plan

In 2012, the Company’s shareholders approved the AMERISAFE 2012 Equity and Incentive Compensation Plan (the “2012 Incentive Plan”). The 2012 Incentive Plan is administered by the Compensation Committee of the Board and is designed to attract, retain and motivate non-employee directors, officers, key employees and consultants by providing incentives for superior performance. The 2012 Incentive Plan authorizes the grant of equity-based compensation in the form of option rights, appreciation rights, restricted shares, restricted stock units, cash incentive awards, performance shares and units, and other types of awards.

A maximum of 500,000 shares of common stock may be issued or transferred upon the exercise of option rights or appreciation rights, as restricted shares and released from substantial risk of forfeiture, in payment of restricted stock units, in payment of performance shares or performance units that have been earned, as awards of shares of common stock, as other awards granted under the 2012 Incentive Plan, or in payment of dividend equivalents paid with respect to awards made under the plan subject to adjustment in the event of a merger, stock dividend, stock split or similar event, which may be original issue shares or treasury shares or a combination of the two.

In 2016, 27,077 shares of restricted stock were granted under the 2012 Incentive Plan, which will vest through 2021.  In 2015, 50,461 shares of restricted stock were granted under the 2012 Incentive Plan, which will vest through 2020.  At December 31, 2016, there were 355,777 shares of common stock available for future awards under the 2012 Incentive Plan.

The following table summarizes information about the restricted stock outstanding under the 2012 Incentive Plan at December 31, 2016:

	Shares			Weighted- AverageGrant- Date Fair Value per Share
Nonvested balance at January 1, 2014		82,609			33.93
Granted		4,312			43.83
Vested		(14,000	)		33.58
Forfeited		—			—
Nonvested balance at December 31, 2014		72,921			34.59
Granted		50,461			45.80
Vested		(27,537	)		37.27
Forfeited		(18,317	)		35.48
Nonvested balance at December 31, 2015		77,528			40.57
Granted		27,077			54.44
Vested		(26,294	)		45.18
Forfeited		(1,919	)		—
Nonvested balance at December 31, 2016		76,392			43.91

The Company recognized compensation expense of $849,000, $599,000 and $580,000 in 2016, 2015 and 2014, respectively, related to share-based grants.  The Company recognized compensation expense of $334,000, $220,000 and $429,000 million in 2016 2015 and 2014, respectively, related to long-term incentive awards under the 2012 Incentive Plan.   The long-term incentive award is a liability award.

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Earnings Per Share

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Earnings Per Share

13. Earnings Per Share

Diluted earnings per share includes 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 result is dilutive.

The calculation of basic and diluted EPS for the years ended December 31, 2016, 2015 and 2014 are presented below.

	For the Year Ended December 31,
	2016		2015		2014
	(in thousands, except earnings per share amounts)
Basic EPS:
Net income available to common shareholders – basic	$	77,865	$	70,462	$	53,666
Basic weighted-average common shares		19,106		18,941		18,646
Basic earnings per share	$	4.08	$	3.72	$	2.88
Diluted EPS:
Net income available to common shareholders - diluted	$	77,865	$	70,462	$	53,666
Diluted weighted average common shares:
Weighted average common shares		19,106		18,941		18,646
Stock options and performance shares		98		178		282
Diluted weighted average common shares		19,204		19,119		18,928
Diluted earnings per common share	$	4.05	$	3.69	$	2.84

The table below sets forth the reconciliation of the weighted average shares used for the basic and diluted EPS calculation.

	Years Ended
	2016		2015		2014
Basic weighted average common shares		19,105,806		18,941,077		18,646,128
Add: Other common shares eligible for common dividends:
Weighted average restricted shares and stock options    (including tax benefit component)		97,844		178,109		282,376
Diluted weighted average common shares		19,203,650		19,119,186		18,928,504

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Comprehensive Income and Accumulated Other Comprehensive Income

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

Comprehensive Income and Accumulated Other Comprehensive Income

14. Comprehensive Income and Accumulated Other Comprehensive Income

Comprehensive income includes net income plus unrealized gains/losses on our available-for-sale investment securities, net of tax.  In reporting comprehensive income on a net basis in the statement of income, we used a 35 percent tax rate.  The following table illustrates the changes in the balance of each component of accumulated other comprehensive income (loss) for each period presented in the financial statements.

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Beginning balance	$	2,587		$	2,810		$	(4,295	)
Other comprehensive income (loss) before    reclassification		(3,231	)		(1,584	)		6,558
Amounts reclassified from accumulated other    comprehensive income		152			1,361			547
Net current period other comprehensive income (loss)		(3,079	)		(223	)		7,105
Ending balance	$	(492	)	$	2,587		$	2,810

The sale or other-than-temporary impairment (OTTI) of an available-for-sale security results in amounts being reclassified from accumulated other comprehensive income to current period net income.  The effects of reclassifications out of accumulated other comprehensive income by the respective line items of net income are presented in the following table.

Component of Accumulated Other Comprehensive Income	Year Ended December 31,									Affected line item in the statement of income
	2016			2015			2014
	(in thousands)
Unrealized losses on    available-for-sale securities	$	(234	)	$	(494	)	$	(825	)	Net realized gains (losses) on    investments
Other-than-temporary impairment		—			(1,600	)		(16	)	Net realized gains (losses) on    investments
		(234	)		(2,094	)		(841	)	Income before income taxes
		82			733			294		Income tax expense
	$	(152	)	$	(1,361	)	$	(547	)	Net income

	Pre-Tax Amount			Tax Expense			Net-of-Tax Amount
	(in thousands)
December 31, 2016
Unrealized loss on securities:
Unrealized loss on available-for-sale securities	$	(4,908	)	$	(1,718	)	$	(3,190	)
Less amortization of differences between fair value    and amortized cost for fixed maturity security transfer		(63	)		(22	)		(41	)
Reclassification adjustment for gains realized     in net income		234			82			152
Net unrealized loss		(4,737	)		(1,658	)		(3,079	)
Other comprehensive income	$	(4,737	)	$	(1,658	)	$	(3,079	)
December 31, 2015
Unrealized loss on securities:
Unrealized loss on available-for-sale securities	$	(2,572	)	$	(900	)	$	(1,672	)
Change in unrealized losses on available-for-sale    securities with OTTI		176			62			114
Less amortization of differences between fair value and    amortized cost for fixed maturity security transfer		(40	)		(14	)		(26	)
Reclassification adjustment for gains realized     in net income		2,093			732			1,361
Net unrealized loss		(343	)		(120	)		(223	)
Other comprehensive income	$	(343	)	$	(120	)	$	(223	)
December 31, 2014
Unrealized gain on securities:
Unrealized gain on available-for-sale securities	$	10,133		$	3,546		$	6,587
Less amortization of differences between fair value    and amortized cost for fixed maturity security transfer		(44	)		(15	)		(29	)
Reclassification adjustment for gains realized     in net income		842			295			547
Net unrealized gain		10,931			3,826			7,105
Other comprehensive income	$	10,931		$	3,826		$	7,105

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Employee Benefit Plan

12 Months Ended

Dec. 31, 2016

Compensation And Retirement Disclosure [Abstract]

Employee Benefit Plan

15. Employee Benefit Plan

The Company’s 401(k) benefit plan is available to all employees. The Company matches up to 2% of employee compensation for participating employees, subject to certain limitations. Employees are fully vested in employer contributions to this plan after five years. Company contributions to this plan were $0.4 million in 2016, 2015 and 2014.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2016

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

16. Commitments and Contingencies

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

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

The Company manages risk on certain long-duration claims by settling these claims through the purchase of annuities from unaffiliated carriers. In the event these carriers are unable to meet their obligations under these contracts, the Company could be liable to the claimants. The following table summarizes (in thousands) the fair value of the annuities at December 31, 2016, that the Company has purchased to satisfy its obligations. The A.M. Best Company rating is shown parenthetically.

Life Insurance Company	Statement Value of Annuities Exceeding 1% of Statutory Surplus
Metropolitan Life Insurance Company (A+)	$	17,098
Pacific Life and Annuity Company (A+)		16,688
American General Life Insurance (A)		15,049
New York Life Insurance Company (A++)		11,408
John Hancock Life Insurance Company USA (A+)		6,724
Athene Annuity and Life Assurance Company (A-)		5,164
Other		23,925
	$	96,056

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

In February 2015, the Company was notified of an adverse verdict against its subsidiary, AIIC, related to a 2009 workers’ compensation claim in the State of Iowa. The verdict was for $25.3 million, of which $0.3 million was for actual damages and $25.0 million was awarded for punitive damages. AIIC is appealing both the verdict and the damage awards. The Company has posted an appeal bond in the amount of $27.8 million, as required by law. The Company maintains reinsurance against catastrophic losses, including court ordered judgments. As of December 31, 2016, the Company’s total reserve for the claim was $2.4 million. The $2.4 million reserve does not include payments that the Company has previously paid in this case. The payments, plus the $2.4 million reserve, total $5.4 million. The Company’s retention is $5.0 million before its reinsurance providers are obligated to reimburse the Company for additional costs. The Company presently believes that the reserve amount, together with its reinsurance coverage, is adequate to satisfy this claim.

The Company leases equipment and office space under noncancelable operating leases. At December 31, 2016, future minimum lease payments are as follows (in thousands):

2017	$	131
2018		74
2019		6
	$	211

Rental expense was $0.2 million in 2016, 2015 and 2014.

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Concentration of Operations

12 Months Ended

Dec. 31, 2016

Text Block [Abstract]

Concentration of Operations

17. Concentration of Operations

The Company derives its revenues almost entirely from its operations in the workers’ compensation insurance line of business. Total net premiums earned for the different lines of business are shown below:

	2016					2015					2014
	Dollars		Percent			Dollars		Percent			Dollars		Percent
	(Dollars in thousands)
Workers’ compensation	$	368,704		100.0	%	$	375,894		100.0	%	$	375,746		100.0	%
General liability		—		0.0	%		—		0.0	%		1		0.0	%
Total net premiums earned	$	368,704		100.0	%	$	375,894		100.0	%	$	375,747		100.0	%

Net premiums earned during 2016, 2015 and 2014 for the top ten states in 2016 and all others are shown below:

	2016					2015					2014
	Dollars		Percent			Dollars		Percent			Dollars		Percent
	(Dollars in thousands)
Pennsylvania	$	39,460		10.7	%	$	36,294		9.7	%	$	35,488		9.4	%
Georgia		38,168		10.4	%		40,497		10.8	%		36,761		9.8	%
Louisiana		30,426		8.3	%		38,874		10.3	%		47,643		12.7	%
Florida		29,051		7.9	%		24,792		6.6	%		20,691		5.5	%
Illinois		25,796		7.0	%		23,285		6.2	%		20,606		5.5	%
North Carolina		20,784		5.6	%		20,062		5.3	%		20,872		5.6	%
Virginia		16,599		4.5	%		15,656		4.2	%		16,764		4.5	%
Minnesota		15,130		4.1	%		14,618		3.9	%		13,159		3.5	%
South Carolina		13,897		3.8	%		12,955		3.4	%		12,414		3.3	%
Wisconsin		13,544		3.7	%		11,203		3.0	%		9,408		2.5	%
All others		125,849		34.0	%		137,658		36.6	%		141,941		37.7	%
Total net premiums earned	$	368,704		100.0	%	$	375,894		100.0	%	$	375,747		100.0	%

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Fair Values of Financial Instruments

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Fair Values of Financial Instruments

18. Fair Values of Financial Instruments

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

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

Investments—The fair values for fixed maturity and equity securities are based on quoted market prices where available. For those securities not actively traded, fair values were obtained from a third-party investment manager.

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

Other Investments— Other investments consist of a limited partnership interest that is accounted for under the equity method valued using the net asset value provided by the general partner of the limited partnership, which approximates the fair value of the interest. The limited partnership’s objective is to generate absolute returns by investing long and short in publicly-traded global securities. Redemptions are allowed monthly following a 60-day notice with no lock up periods. The Company has no unfunded commitments to the limited partnership.  

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

	December 31,
	2016				2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)
Assets:
Fixed maturity securities—held to maturity	$	562,434	$	568,931	$	645,164	$	662,276
Fixed maturity securities—available for sale		479,097		479,097		380,022		380,022
Equity securities		33		33		31		31
Cash and cash equivalents		58,936		58,936		69,481		69,481
Short-term investments		29,580		29,580		7,718		7,718
Other investments		13,330		13,330		12,217		12,217

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

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

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

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

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

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

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

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

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

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

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

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

The fair values of the Company’s investments are based upon prices provided by an independent pricing service. The Company has reviewed these prices for reasonableness and has not adjusted any prices received from the independent provider. Securities reported at fair value utilizing Level 1 inputs represent assets whose fair value is determined based upon observable unadjusted quoted market prices for identical assets in active markets. Level 2 securities represent assets whose fair value is determined using observable market information such as previous day trade prices, quotes from less active markets or quoted prices of securities with similar characteristics.  There were no transfers between Level 1 and Level 2 during the year ended December 31, 2016.

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and 2015 are as follows:

	December 31, 2016
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Financial instruments carried at fair value,      classified as part of:
Securities available for sale—equity:
Domestic common stock	$	33	$	—	$	—	$	33
Securities available for sale—fixed maturity:
States and political subdivisions		—		232,293		—		232,293
Corporate bonds		—		182,515		—		182,515
U.S. agency-based mortgage-backed securities		—		9,342		—		9,342
U.S. Treasury securities and obligations of U.S. government agencies		54,947		—		—		54,947
Total available for sale—fixed maturity		54,947		424,150		—		479,097
Total available for sale	$	54,980	$	424,150	$	—	$	479,130

	December 31, 2015
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Financial instruments carried at fair value,      classified as part of:
Securities available for sale—equity:
Domestic common stock	$	31	$	—	$	—	$	31
Securities available for sale—fixed maturity:
States and political subdivisions		—		171,419		—		171,419
Corporate bonds		—		201,304		—		201,304
U.S. agency-based mortgage-backed securities		—		7,299		—		7,299
Total available for sale—fixed maturity		—		380,022		—		380,022
Total available for sale	$	31	$	380,022	$	—	$	380,053

Assets and liabilities measured at amortized cost as of December 31, 2016 and 2015 are as follows:

	December 31, 2016
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Securities held-to-maturity—fixed maturity:
States and political subdivisions	$	—	$	399,483	$	—	$	399,483
Corporate bonds		—		144,016		—		144,016
Commercial mortgage-backed securities		—		70		—		70
U.S. agency-based mortgage-backed securities		—		10,915		—		10,915
U.S. Treasury securities		6,779		—		—		6,779
Obligations of U.S. government agencies		—		5,637		—		5,637
Asset-backed securities		—		2,031		—		2,031
Total held-to-maturity	$	6,779	$	562,152	$	—	$	568,931

	December 31, 2015
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Securities held-to-maturity—fixed maturity:
States and political subdivisions	$	—	$	423,754	$	—	$	423,754
Corporate bonds		—		170,573		—		170,573
Commercial mortgage-backed securities		—		37,683		—		37,683
U.S. agency-based mortgage-backed securities		—		14,471		—		14,471
U.S. Treasury securities		7,599		—		—		7,599
Obligations of U.S. government agencies		—		5,781		—		5,781
Asset-backed securities		—		2,415		—		2,415
Total held-to-maturity	$	7,599	$	654,677	$	—	$	662,276

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

At December 31, 2016, the Company held two securities measured at fair value on a nonrecurring basis due to a recognized impairment of $0.3 million. The securities are valued using Level 2 inputs and had a value of $0.3 million at December 31, 2016.  The securities were valued at fair value at the time of impairment and are currently being carried at the adjusted amortized cost.  The fair value of the securities was $0.5 million at December 31, 2016.

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Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2016

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data (Unaudited)

19. Quarterly Financial Data (Unaudited)

The following table represents unaudited quarterly financial data for the years ended December 31, 2016 and 2015.

	Three Months Ended
	March 31		June 30			September 30		December 31
	(in thousands, except per share amounts)
2016
Net premiums earned	$	95,961	$	90,728		$	89,918	$	92,097
Net investment income		6,044		6,201			8,006		7,855
Net realized gains (losses) on investments		248		545			181		(1,468	)
Total revenues		102,335		97,563			98,206		98,558
Income before income taxes		34,395		24,615			26,027		27,784
Net income		24,257		16,639			17,896		19,073
Net income available to common shareholders		24,257		16,639			17,896		19,073
Earnings per share:
Basic	$	1.27	$	0.87		$	0.94	$	1.00
Diluted	$	1.27	$	0.87		$	0.93	$	0.99
Comprehensive income		27,051		19,568			16,183		11,985
Extraordinary cash dividends declared per common share	$	—	$	—		$	—	$	3.25
Cash dividends declared per common share	$	0.18	$	0.18		$	0.18	$	0.18
2015
Net premiums earned	$	94,787	$	95,569		$	90,504	$	95,034
Net investment income		6,833		6,890			6,923		7,256
Net realized gains (losses) on investments		59		(2,617	)		40		24
Total revenues		101,788		99,936			97,470		101,760
Income before income taxes		21,197		20,112			25,890		33,768
Net income		15,130		14,319			17,940		23,073
Net income available to common shareholders		15,130		14,319			17,940		23,073
Earnings per share:
Basic	$	0.80	$	0.76		$	0.95	$	1.21
Diluted	$	0.79	$	0.75		$	0.94	$	1.21
Comprehensive income		15,948		12,744			19,248		22,299
Extraordinary cash dividends declared per common share	$	—	$	—		$	—	$	3.00
Cash dividends declared per common share	$	0.15	$	0.15		$	0.15	$	0.15

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Capital Management

12 Months Ended

Dec. 31, 2016

Text Block [Abstract]

Capital Management

20. Capital Management

The Company’s Board of Directors initiated a share repurchase program in February 2010. In October 2016, the Board reauthorized this program with a limit of $25.0 million with no expiration date. There were no shares repurchased under this program in 2016. Since the beginning of this plan, the Company has repurchased a total of 1,258,250 shares for $22.4 million, or an average price of $17.78, including commissions.

In 2013, the Company’s Board of Directors initiated a regular quarterly dividend.  During 2016, the Company’s Board of Directors declared a quarterly dividend of $0.18 per share compared to $0.15 per share in 2015, $0.12 per share in 2014 and $0.08 per share in 2013.  The Company declared extraordinary dividends totaling $3.25 per share in 2016, $3.00 per share in 2015 and $1.50 per share in 2014.  There were no extraordinary dividends declared in 2013.

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Subsequent Events

12 Months Ended

Dec. 31, 2016

Subsequent Events [Abstract]

Subsequent Events

21. Subsequent Events

On February 21, 2017 the Company declared a regular quarterly cash dividend of $0.xx per share payable on March 24, 2017 to shareholders of record on March 10, 2017.  In 2016, the Company paid a quarterly cash dividend of $0.18 per share.

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

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Schedule II. Condensed Financial Information of Registrant

12 Months Ended

Dec. 31, 2016

Condensed Financial Information Of Parent Company Only Disclosure [Abstract]

Schedule II. Condensed Financial Information of Registrant

Schedule II. Condensed Financial Information of Registrant

AMERISAFE, INC.

CONDENSED BALANCE SHEETS

	December 31,
	2016		2015
	(in thousands)
Assets
Investments:
Short-term investments	$	11,939	$	—
Other investments		13,330		12,217
Investment in subsidiaries		415,767		408,135
Total investments		441,036		420,352
Cash and cash equivalents		9,596		26,968
Deferred income taxes		675		292
Notes receivable from subsidiaries		1,587		1,505
Property and equipment, net		1,942		1,817
Other assets		1,314		3,047
	$	456,150	$	453,981
Liabilities, redeemable preferred stock and shareholders’ equity
Total liabilities		—		—
Shareholders' equity (net of Treasury stock of $22,370 at December 31, 2016 and 2015		456,150		453,981
	$	456,150	$	453,981

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

AMERISAFE, INC.

CONDENSED STATEMENTS OF INCOME

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Revenues
Net investment income	$	1,509		$	854		$	1,541
Fee and other income		5,843			5,893			5,368
Total revenues		7,352			6,747			6,909
Expenses
Other operating costs		7,352			6,747			6,909
Total expenses		7,352			6,747			6,909
Income (loss) before income taxes and equity in earnings of subsidiaries		—			—			—
Income tax expense (benefit)		(156	)		(57	)		(13	)
Gain (loss) before equity in earnings of subsidiaries		156			57			13
Equity in net income of subsidiaries		77,709			70,405			53,653
Net income	$	77,865		$	70,462		$	53,666

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

AMERISAFE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Operating activities
Net cash (used in) provided by operating activities	$	2,771		$	(1,727	)	$	2,161
Investing activities
Purchases of investments		(11,940	)		—			(1,462	)
Proceeds from sales of investments		—			250			2,404
Purchases of property and equipment		(924	)		(627	)		(691	)
Dividends from subsidiary		67,000			50,000			25,000
Net cash provided by investing activities		54,136			49,623			25,251
Financing activities
Proceeds from stock option exercises		837			1,844			2,674
Tax benefit from share-based payments		995			2,204			2,841
Dividends to shareholders		(76,111	)		(68,561	)		(37,068	)
Net cash used in financing activities		(74,279	)		(64,513	)		(31,553	)
Change in cash and cash equivalents		(17,372	)		(16,617	)		(4,141	)
Cash and cash equivalents at beginning of year		26,968			43,585			47,726
Cash and cash equivalents at end of year	$	9,596		$	26,968		$	43,585

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Schedule VI. Supplemental Information Concerning Property-Casualty Insurance Operations

12 Months Ended

Dec. 31, 2016

Supplemental Information For Property Casualty Insurance Underwriters [Abstract]

Schedule VI. Supplemental Information Concerning Property-Casualty Insurance Operations

Schedule VI. Supplemental Information Concerning Property—Casualty Insurance Operations

AMERISAFE, INC. AND SUBSIDIARIES

	Deferred Policy Acquisition Costs		Reserves for Unpaid Loss and Loss Adjustment Expense		Unearned Premium		Earned Premium		Net Investment Income		Loss and LAE Related to Current Period		Loss and LAE Related to Prior Periods			Amortization of Deferred Policy Acquisition Costs			Paid Claims and Claim Adjustment Expenses		Net Premiums Written
	(in thousands)
2016	$	19,300	$	742,776	$	162,028	$	368,704	$	28,106	$	250,337	$	(51,306	)	$	(44,321	)	$	187,686	$	362,748
2015		20,412		718,033		167,983		375,894		27,902		262,387		(47,814	)		(44,841	)		189,666		375,301
2014		19,649		687,602		168,576		375,747		27,214		268,633		(23,717	)		(43,817	)		182,506		380,026

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Organization

Organization

AMERISAFE, Inc. is an insurance holding company incorporated in the state of Texas. The accompanying consolidated financial statements include the accounts of AMERISAFE and its subsidiaries: American Interstate Insurance Company (“AIIC”) and its insurance subsidiaries, Silver Oak Casualty, Inc. (“SOCI”) and 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 Nebraska.  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 service company currently servicing only affiliated 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 insurance for small to mid-sized employers engaged in hazardous industries, principally construction, trucking, manufacturing, agriculture, and oil and gas. Assets and revenues of AIIC represent at least 95% of comparable consolidated amounts of the Company for each of 2016, 2015 and 2014.

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of financial statements in accordance 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.

Adopted Accounting Guidance

Adopted Accounting Guidance

In May 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2015-07, Fair Value Measurements (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). The amendments in this update change the disclosure requirements for investments in certain entities that calculate net asset value (NAV) per share. Under current accounting standards entities are permitted to estimate the fair value of certain investments using the investment’s NAV as a practical expedient. The disclosure guidance also permits entities to disclose the investment at NAV in the fair value hierarchy table as either Level 2 or Level 3, based upon certain criteria. The measurement basis utilizing NAV is different than the measurement criteria of all other investments which utilize inputs to calculate fair value. Due to this inconsistency, the FASB issued this ASU which requires entities to remove investments measured at NAV from the fair value hierarchy table. Other than the change in presentation, the adoption of this new guidance in interim periods beginning in 2016 did not have an impact on our consolidated financial statements.

In May 2015, FASB issued Accounting Standards Update (ASU) 2015-09, Financial Services – Insurance (Topic 944): Disclosures about Short-Duration Contracts.  The guidance requires additional disclosures for short-duration insurance contracts.  New disclosures are to include more information about initial claim estimates and subsequent adjustments to those estimates, the methodologies and judgments used to estimate claims, and the timing, frequency, and severity of claims.  This standard is effective for us beginning with this 2016 annual financial statement.  The guidance requires a change in disclosure only (see Note 9 to our financial statements), and thus has no impact on our financial condition or results of operations.

Prospective Accounting Guidance

Prospective Accounting Guidance

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718):  Improvements to Employee Share-Based Payment Accounting.  The new guidance requires that all tax effects related to share-based payments be made through the income statement at the time of settlement as opposed to recognizing excess tax benefits in additional paid-in capital.  It also requires the cash flows resulting from share-based payments to be included as an operating activity.  In addition to the changes, the guidance permits reporting entities to elect to estimate forfeitures related to share-based payments or recognize them as they occur.  The threshold to qualify for equity classification has also been revised to permit withholding up to the maximum statutory tax rates in the applicable jurisdictions.  The standard is effective for us in the first quarter of 2017.  Adoption of this guidance is not expected to have a material impact on our financial condition and results of operations.

In May 2014, the FASB Issued ASU 2014-09 (Topic 606): Revenue from Contracts with Customers.  The guidance revises the criteria for revenue recognition and requires that the revenue recognized reflect the transfer of promised goods or services to customers in an amount that represents the consideration to which the entity expects to be entitled in exchange for those goods or services.  The standard is effective for us in the first quarter of 2018.  Revenue from insurance contracts is excluded from the scope of the new guidance and as a result, adoption of this guidance is not expected to have a material impact on our financial condition and results of operations.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10):  Recognition and Measurement of Financial Assets and Financial Liabilities.  This guidance requires fair value measurement for equity investments (not including those that result in consolidation of the investee or use the equity method of accounting) and the recognition of changes in fair value to be presented as a component of net income.  The guidance also revises the disclosure requirements related to fair value changes of liabilities presented in comprehensive income, eliminates disclosure related to the methods and assumptions underlying fair value for financial instruments measured at amortized cost, and simplifies impairment assessments for equity investments without readily determinable fair values.  This standard is effective for us in the first quarter of 2018.  The Company will continue to monitor the impact as the implementation date approaches.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).  Under current guidance for lessees, leases are only included on the balance sheet if certain criteria, classifying the contract as a capital lease, are met.  The new guidance requires a lessee to recognize a lease liability and a right of use asset for all leases extending beyond twelve months.  The new guidance is effective for us in the first quarter of 2019.  Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach.  Adoption of the guidance is not expected to have a material effect on the Company’s consolidated financial statements as the Company does not have any significant leases.  

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses.  The new guidance replaces the methodology of credit loss impairment, which currently, delays the recognition of credit losses until a probable loss has been incurred.  The new guidance requires credit losses for securities measured at amortized cost, to be determined using current expected credit losses estimates.  These estimates are to be derived from historical, current and reasonable supporting forecasts, including prepayments and estimates, and will be recorded through a valuation allowance account that will run through the income statement.  The same method will be used for available-for-sale securities, but the valuation allowance will be limited to the amount by which the fair value is below amortized cost.  The standard is effective for us in the first quarter of 2020.  The Company will continue to monitor the impact as the implementation date approaches.

Reclassifications

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

Investments

Investments

The Company has the ability and positive intent to hold certain investments until maturity. Therefore, fixed maturity securities classified as held-to-maturity are recorded at amortized cost. Equity securities and fixed maturity securities classified as available-for-sale are recorded at fair value. Temporary changes in the fair value of these securities are reported in shareholders’ equity as a component of other comprehensive income, net of deferred income taxes.

Investment income is recognized as it is earned. The discount or premium on fixed maturity securities is amortized using the “constant yield” method. Anticipated prepayments, where applicable, are considered when determining the amortization of premiums or discounts. Realized investment gains and losses are determined using the specific identification method.

The Company regularly reviews the fair value of its investments. Impairment of an investment security results in a reduction of the carrying value of the security and the realization of a loss when the fair value of the security declines below the cost or amortized cost, as applicable, for the security and the impairment is deemed to be other-than-temporary. The Company regularly reviews its investment portfolio to evaluate the existence of other-than-temporary declines in the fair value of investments. The Company considers various factors in determining if a decline in the fair value of an individual security is other-than-temporary, including but not limited to a reduction or interruption in scheduled cash flows, the financial condition of the issuer, how long and by how much the fair value has been below amortized cost, losses due to credit concerns, downgrades and the Company’s intent to sell or ability to hold the security.

Other-than-temporary impairment losses on equity securities are recognized in net income and are measured as the difference between cost and fair value. Impairment losses on fixed maturities are recognized in the financial statements depending on the facts and circumstances related to the specific security. If we intend to sell a security or it is more likely than not that we would be required to sell a security before the recovery of its amortized cost, less any current period credit loss, an other-than-temporary impairment would be recognized in net income for the difference between amortized cost and fair value. If we do not expect to recover the amortized cost basis, we do not plan to sell the security and if it is not more likely than not that we would be required to sell a security before the recovery of its amortized cost, less any current period credit loss, the recognition of the other-than-temporary impairment is bifurcated. The credit loss portion would be recognized in net income and the noncredit loss portion in other comprehensive income.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash equivalents include short-term money market funds and corporate bonds with an original maturity of 90 days or less.

Short Term Investments Policy Text Block

Short-Term Investments

Short-term investments include municipal securities, corporate bonds and certificates of deposit with an original maturity greater than 90 days but less than one year.

Other Investments Policy Text Block

Other Investments

Other investments consist of a limited partnership interest that is accounted for under the equity method, valued using the net asset value provided by the general partner of the limited partnership, which approximates the fair value of the interest.  The limited partnership’s objective is to generate absolute returns by investing long and short in publicly-traded global securities.  Redemptions are allowed monthly following a 60-day notice with no lock up periods.  The Company has no unfunded commitments to the limited partnership.

Premiums Receivable

Premiums Receivable

Premiums receivable consist primarily of premium-related balances due from policyholders. The Company considers premiums receivable as past due based on the payment terms of the underlying policy. The balance is shown net of the allowance for doubtful accounts. Receivables due from insureds are charged off when a determination has been made by management that a specific balance will not be collected. An estimate of amounts that are likely to be charged off is established as an allowance for doubtful accounts as of the balance sheet date. The estimate is primarily comprised of specific balances that are considered probable to be charged off after all collection efforts have ceased, as well as historical trends and an analysis of the aging of the receivables.

Property and Equipment

Property and Equipment

The Company’s property and equipment, including certain costs incurred to develop or obtain software for internal use, are stated at cost less accumulated depreciation. Depreciation is calculated primarily by the straight-line method over the estimated useful lives of the respective assets, generally 39 years for buildings and three to seven years for all other fixed assets.

Deferred Policy Acquisition Costs

Deferred Policy Acquisition Costs

The direct costs of successfully acquiring and renewing business are capitalized to the extent recoverable and are amortized over the effective period of the related insurance policies in proportion to premium revenue earned. These capitalized costs consist mainly of sales commissions, premium taxes and other underwriting costs. The Company evaluates deferred policy acquisition costs for recoverability by comparing the unearned premiums to the estimated total expected claim costs and related expenses, offset by anticipated investment income. The Company would reduce the deferred costs if the unearned premiums were less than expected claims and expenses after considering investment income, and report any adjustments in amortization of deferred policy acquisition costs. There were no adjustments necessary in 2016, 2015 or 2014.

Reserves for Loss and Loss Adjustment Expenses

Reserves for Loss and Loss Adjustment Expenses

Reserves for loss and loss adjustment expenses represent the estimated ultimate cost of all reported and unreported losses incurred through December 31. The Company does not discount loss and loss adjustment expense reserves. The reserves for loss and loss adjustment expenses are estimated using individual case-basis valuations, statistical analyses and estimates based upon experience for unreported claims and their associated loss and loss adjustment expenses. Such estimates may be more or less than the amounts ultimately paid when the claims are settled. The estimates are subject to the effects of trends in loss severity and frequency. Although considerable variability is inherent in these estimates, management believes that the reserves for loss and loss adjustment expenses are adequate. The estimates are continually reviewed and adjusted as necessary as experience develops or new information becomes known. Any adjustments are included in current operations.

Subrogation recoverables, as well as deductible recoverables from policyholders, are estimated using individual case-basis valuations and aggregate estimates. Deductibles that are recoverable from policyholders and other recoverables from state funds decrease the liability for loss and loss adjustment expenses.

The Company funds its obligations under certain settled claims where the payment pattern and ultimate cost are fixed and determinable on an individual claim basis through the purchase of annuities. These annuities are purchased from unaffiliated carriers and name the claimant as payee. The cost of purchasing the annuity is recorded as paid loss and loss adjustment expenses. To the extent the annuity funds estimated future claims, reserves for loss and loss adjustment expense are reduced.

Premium Revenue

Premium Revenue

Premiums on workers’ compensation insurance are based on actual payroll costs or production during the policy term and are normally billed monthly in arrears or annually. However, the Company generally requires a deposit at the inception of a policy.

Premium revenue is earned on a pro rata basis over periods covered by the policies. The reserve for unearned premiums on these policies is computed on a daily pro rata basis.

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

The Company estimates EBUB premiums on a quarterly basis using historical data and applying various assumptions based on the current market and economic conditions, and records an adjustment to premium, related losses, and expenses as warranted.

Reinsurance

Reinsurance

Reinsurance premiums, losses and allocated loss adjustment expenses are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts.

Amounts recoverable from reinsurers include balances currently owed to the Company for losses and allocated loss adjustment expenses that have been paid to policyholders, amounts that are currently reserved for and will be recoverable once the related expense has been paid and experience-rated commissions recoverable upon commutation.

Upon management’s determination that an amount due from a reinsurer is uncollectible due to the reinsurer’s insolvency or other matters, the amount is written off.

Ceding commissions are earned from certain reinsurance companies and are intended to reimburse the Company for policy acquisition costs related to those premiums ceded to the reinsurers. Ceding commission income is recognized over the effective period of the related insurance policies in proportion to premium revenue earned and is reflected as a reduction in underwriting and certain other operating costs.

Experience-rated commissions are earned from certain reinsurance companies based on the financial results of the applicable risks ceded to the reinsurers. These commission revenues on reinsurance contracts are recognized during the related reinsurance treaty period and are based on the same assumptions used for recording loss and allocated loss adjustment expenses. These commissions are reflected as a reduction in underwriting and certain other operating costs and are adjusted as necessary as experience develops or new information becomes known. Any such adjustments are included in income from current operations. Experience-rated commissions had no impact on underwriting and certain other operating costs in 2016 compared to $0.3 in 2015 and no impact in 2014.

In December 2016, the Company commuted reinsurance agreements with Hannover Reinsurance Limited (Ireland) (“Hannover”) and Tokio Millennium Re Limited (“Tokio”) covering portions of accident years 2011 through 2013.  The Company received cash of $0.2 million and an additional $25.4 million payment effectuated solely through offset against the balance of the funds withheld account under the reinsurance agreements in exchange for releasing Hannover and Tokio from their reinsurance obligations under the commuted agreements.  Both Hannover and Tokio remain obligated to the subsidiaries of the Company under other reinsurance agreements. As a result of the commutation, the effect on the Company’s net income in the year ended December 31, 2016 was immaterial.

Fee And Other Income Policy Text Block

Fee and Other Income

The Company recognizes income related to commissions earned by AGAI as the related services are performed.

Advertising

Advertising

All advertising expenditures incurred by the Company are charged to expense in the period to which they relate and are included in underwriting and certain other operating costs in the consolidated statements of income. Total advertising expenses incurred were $0.7 million in 2016 and 2015 and $0.5 million in 2014.

Income Taxes

Income Taxes

The Company accounts for income taxes using the liability method. The provision for income taxes has two components, amounts currently payable or receivable and deferred amounts. Deferred income tax assets and liabilities are recognized for the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company considers deferred tax assets to be recoverable if it is probable that the related tax losses can be offset by future taxable income. The Company includes reversal of existing temporary differences, tax planning strategies available and future operating income in this assessment. To the extent the deferred tax assets exceed the amount expected to be recovered in future years, the Company records a valuation allowance for the amount determined unrecoverable.

Insurance-Related Assessments

Insurance-Related Assessments

Insurance-related assessments are accrued in the period in which they have been incurred. The Company is subject to a variety of assessments related to insurance commerce, including those by state guaranty funds and workers’ compensation second-injury funds. State guaranty fund assessments are used by state insurance oversight agencies to cover losses of policyholders of insolvent or rehabilitated insurance companies and for the operating expenses of such agencies.  Assessments based on premiums are generally paid one year after the calendar year in which the premium is written, while assessments based on losses are generally paid within one year of the calendar year in which the loss is paid.

Policyholder Dividends

Policyholder Dividends

The Company writes certain policies for which the policyholder may participate in favorable claims experience through a dividend. An estimated provision for workers’ compensation policyholders’ dividends is accrued as the related premiums are earned. Dividends do not become a fixed liability unless and until declared by the respective Boards of Directors of AMERISAFE’s insurance subsidiaries. The dividend to which a policyholder may be entitled is set forth in the policy and is related to the amount of losses sustained under the policy. Dividends are calculated after the policy expiration. The Company is able to estimate the policyholder dividend liability because the Company has information regarding the underlying loss experience of the policies written with dividend provisions and can estimate future dividend payments from the policy terms.

Earnings Per Share

Earnings Per Share

The Company computes earnings per share (EPS) in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share. Additionally, during 2013, the Company applied the “two-class method” in computing basic and diluted earnings per share as a result of the participating unvested common shares which contained nonforfeitable rights to dividends during this period.  As of January 1, 2014, the Company no longer has participating unvested common shares which contain nonforfeitable rights to dividends and now applies the treasury stock method in computing basic and diluted earnings per share.

Under the two-class method, net income available to common and participating common shareholders is reduced by the amount of dividends declared in the current period and by the contractual amount of dividends that must be paid for the current period related to the Company’s common and participating common shares. Participating common shares include unvested share-based payment awards that contain nonforfeitable rights to dividends, whether paid or unpaid. Any remaining undistributed earnings are allocated to the common and participating common shareholders to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. The amount of earnings allocable to each security is divided by the number of outstanding shares of the security to which the earnings are allocated to determine the EPS for the security. In a period of loss, no losses are allocated to the participating common shareholders. Instead, all such losses are allocated to the common shareholders.

Basic EPS is calculated by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period. The diluted EPS calculation includes potential common shares assumed issued under the treasury stock method, which reflects the potential dilution that would occur if any outstanding options or warrants were exercised or restricted stock becomes vested, and includes the “if converted” method for participating securities if the effect is dilutive. Prior to 2014, we determined diluted EPS as the more dilutive result of either the treasury method or the two-class method.

Share-Based Compensation

Share-Based Compensation

The Company recognizes the impact of its share-based compensation in accordance with FASB ASC Topic 718, Compensation-Stock Compensation. All share-based grants are recognized as compensation expense over the vesting period.  The target value of long-term incentive awards are recognized as compensation over the performance period.

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Investments (Tables)

12 Months Ended

Dec. 31, 2016

Gross Unrealized Gains and Losses and Amortized Cost and Fair Value of Investments Classified as Held-to-maturity

The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as held-to-maturity at December 31, 2016 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	394,875	$	7,622	$	(3,014	)	$	399,483
Corporate bonds		143,858		423		(265	)		144,016
Commercial mortgage-backed securities		70		—		—			70
U.S. agency-based mortgage-backed securities		9,967		948		—			10,915
U.S. Treasury securities and obligations      of U.S. government agencies		11,737		746		(67	)		12,416
Asset-backed securities		1,927		163		(59	)		2,031
Totals	$	562,434	$	9,902	$	(3,405	)	$	568,931

The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as held-to-maturity at December 31, 2015 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	408,447	$	15,352	$	(45	)	$	423,754
Corporate bonds		171,224		159		(810	)		170,573
Commercial mortgage-backed securities		37,494		204		(15	)		37,683
U.S. agency-based mortgage-backed securities		13,223		1,249		(1	)		14,471
U.S. Treasury securities and obligations      of U.S. government agencies		12,487		897		(4	)		13,380
Asset-backed securities		2,289		202		(76	)		2,415
Totals	$	645,164	$	18,063	$	(951	)	$	662,276

Gross Unrealized Gains and Losses and Cost or Amortized Cost and Fair Value of Investments Classified as Available-for-sale

The gross unrealized gains and losses on, and the cost or amortized cost and fair value of, those investments classified as available-for-sale at December 31, 2016 are summarized as follows:

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Fixed maturity:
States and political subdivisions	$	231,168	$	4,340	$	(3,215	)	$	232,293
Corporate bonds		182,350		436		(271	)		182,515
U.S. agency-based mortgage-backed securities		10,428		17		(1,103	)		9,342
U.S. Treasury securities and obligations      of U.S. government agencies		55,925		—		(978	)		54,947
Total fixed maturity		479,871		4,793		(5,567	)		479,097
Other investments		10,000		3,330		—			13,330
Equity securities		—		33		—			33
Totals	$	489,871	$	8,156	$	(5,567	)	$	492,460

The gross unrealized gains and losses on, and the cost or amortized cost and fair value of, those investments classified as available-for-sale at December 31, 2015 are summarized as follows:

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Fixed maturity:
States and political subdivisions	$	164,684	$	6,942	$	(207	)	$	171,419
Corporate bonds		202,537		253		(1,486	)		201,304
U.S. agency-based mortgage-backed securities		8,888		4		(1,593	)		7,299
Total fixed maturity		376,109		7,199		(3,286	)		380,022
Other investments		10,000		2,217		—			12,217
Equity securities		—		31		—			31
Totals	$	386,109	$	9,447	$	(3,286	)	$	392,270

A Summary of the Company's Realized Gains and Losses on Sales, Calls or Redemptions of Investments

A summary of the Company’s realized gains and losses on sales, calls or redemptions of investments for 2016, 2015 and 2014 is as follows:

	Fixed Maturity Securities Available for Sale			Equity Securities			Other		Total
	(in thousands)
Year ended December 31, 2016
Proceeds from sales	$	54,730		$	—		$	4,609	$	59,339
Gross realized investment gains	$	823		$	—		$	68	$	891
Gross realized investment losses		(1,728	)		—			—		(1,728	)
Net realized investment gains (losses)		(905	)		—			68		(837	)
Other, including gains on calls and redemptions		274			—			69		343
Net realized gains (losses) on investments	$	(631	)	$	—		$	137	$	(494	)
Year ended December 31, 2015
Proceeds from sales	$	4,432		$	—		$	—	$	4,432
Gross realized investment gains	$	177		$	—		$	—	$	177
Gross realized investment (losses)		(162	)		—			—		(162	)
Net realized investment gains		15			—			—		15
Impairments		(2,653	)		—			—		(2,653	)
Other, including gains on calls and redemptions		102			—			42		144
Net realized gains (losses) on investments	$	(2,536	)	$	—		$	42	$	(2,494	)
Year ended December 31, 2014
Proceeds from sales	$	768		$	9,780		$	—	$	10,548
Gross realized investment gains	$	1		$	749		$	—	$	750
Gross realized investment (losses)		—			(451	)		—		(451	)
Net realized investment gains		1			298			—		299
Impairments		(222	)		—			—		(222	)
Other, including gains on calls and redemptions		244			—			376		620
Net realized gains on investments	$	23		$	298		$	376	$	697

Major Categories of the Company's Net Investment Income

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

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Gross investment income:
Fixed maturity securities	$	27,837		$	28,498		$	26,622
Short-term investments and cash and cash equivalents		348			149			426
Equity securities		—			—			232
Other investments		1,568			763			1,611
Total gross investment income		29,753			29,410			28,891
Investment expenses		(1,647	)		(1,508	)		(1,677	)
Net investment income	$	28,106		$	27,902		$	27,214

Investment Securities Continuous Unrealized Loss Position

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

	Less Than 12 Months				12 Months or Greater				Total
	Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses
	(in thousands)
December 31, 2016
Held-to-Maturity
Fixed maturity securities:
States and political subdivisions	$	157,507	$	3,014	$	—	$	—	$	157,507	$	3,014
Corporate bonds		44,654		202		6,292		63		50,946		265
U.S. Treasury securities and obligations      of U.S. government agencies		3,968		67		—		—		3,968		67
Asset-backed securities		—		—		1,173		59		1,173		59
Total held-to-maturity securities		206,129		3,283		7,465		122		213,594		3,405
Available-for Sale
Fixed maturity securities:
States and political subdivisions	$	73,505	$	2,976	$	4,523	$	239	$	78,028	$	3,215
Corporate bonds		41,419		111		7,922		160		49,341		271
U.S. agency-based mortgage-backed securities		3,702		48		3,607		1,055		7,309		1,103
U.S. Treasury securities and obligations      of U.S. government agencies		54,947		978		—		—		54,947		978
Total available-for-sale securities		173,573		4,113		16,052		1,454		189,625		5,567
Total	$	379,702	$	7,396	$	23,517	$	1,576	$	403,219	$	8,972
December 31, 2015
Held-to-Maturity
Fixed maturity securities:
States and political subdivisions	$	24,068	$	45	$	—	$	—	$	24,068	$	45
Corporate bonds		128,436		687		18,139		123		146,575		810
Commercial mortgage-backed securities		9,784		15		—		—		9,784		15
U.S. agency-based mortgage-backed securities		18		—		28		1		46		1
U.S. Treasury securities and obligations      of U.S. government agencies		2,980		4		—		—		2,980		4
Asset-backed securities		—		—		1,389		76		1,389		76
Total held-to-maturity securities		165,286		751		19,556		200		184,842		951
Available-for Sale
Fixed maturity securities:
States and political subdivisions	$	6,560	$	9	$	4,439	$	198	$	10,999	$	207
Corporate bonds		141,857		1,475		4,216		11		146,073		1,486
U.S. agency-based mortgage-backed securities		434		37		6,794		1,556		7,228		1,593
Total available-for-sale securities		148,851		1,521		15,449		1,765		164,300		3,286
Total	$	314,137	$	2,272	$	35,005	$	1,965	$	349,142	$	4,237

Held-to-Maturity Securities [Member]

Summary of Amortized Cost and Fair Value of Investments in Fixed Maturity Securities, by Contractual Maturity

A summary of the amortized cost and fair value of investments in fixed maturity securities, classified as held-to-maturity at December 31, 2016, by contractual maturity, is as follows:

	Amortized Cost		Fair Value
	(in thousands)
Maturity:
Within one year	$	109,707	$	110,469
After one year through five years		259,942		263,620
After five years through ten years		105,396		106,341
After ten years		75,425		75,485
Commercial mortgage-backed securities		70		70
U.S. agency-based mortgage-backed securities		9,967		10,915
Asset-backed securities		1,927		2,031
Totals	$	562,434	$	568,931

Available-for-Sale Securities [Member]

Summary of Amortized Cost and Fair Value of Investments in Fixed Maturity Securities, by Contractual Maturity

A summary of the amortized cost and fair value of investments in fixed maturity securities, classified as available-for-sale at December 31, 2016, by contractual maturity, is as follows:

	Amortized Cost		Fair Value
	(in thousands)
Maturity:
Within one year	$	64,852	$	65,174
After one year through five years		215,486		215,624
After five years through ten years		30,846		30,488
After ten years		158,259		158,469
U.S. agency-based mortgage-backed securities		10,428		9,342
Totals	$	479,871	$	479,097

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Premiums Receivable (Tables)

12 Months Ended

Dec. 31, 2016

Insurance [Abstract]

Components of Premiums Receivable

The components of premiums receivable are shown below:

	December 31,
	2016			2015
	(in thousands)
Premiums receivable	$	188,217		$	190,216
Allowance for doubtful accounts		(5,212	)		(4,852	)
Premiums receivable, net	$	183,005		$	185,364

Summarizes the Activity in the Allowance for Doubtful Accounts

The following summarizes the activity in the allowance for doubtful accounts:

	December 31,
	2016			2015			2014
	(in thousands)
Balance, beginning of year	$	4,852		$	5,211		$	5,458
Provision for bad debts		1,646			806			673
Write-offs		(1,286	)		(1,165	)		(920	)
Balance, end of year	$	5,212		$	4,852		$	5,211

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Deferred Policy Acquisition Costs (Tables)

12 Months Ended

Dec. 31, 2016

Insurance [Abstract]

Schedule of Major Categories of the Deferred Policy Acquisition Costs

Major categories of the Company’s deferred policy acquisition costs are summarized as follows:  

	December 31,
	2016		2015
	(in thousands)
Agents’ commissions	$	15,286	$	15,997
Premium taxes		2,578		3,121
Deferred underwriting expenses		1,436		1,294
Total deferred policy acquisition costs	$	19,300	$	20,412

Schedule of the Activity in the Deferred Policy Acquisition Costs

The following summarizes the activity in the deferred policy acquisition costs:

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Balance, beginning of year	$	20,412		$	19,649		$	19,171
Policy acquisition costs deferred		43,209			45,604			44,295
Amortization expense during the year		(44,321	)		(44,841	)		(43,817	)
Balance, end of year	$	19,300		$	20,412		$	19,649

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Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2016

Property Plant And Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment consist of the following:

	December 31,
	2016			2015
	(in thousands)
Land and office building	$	7,515		$	7,069
Furniture and equipment		6,509			6,227
Software		6,739			6,277
Automobiles		74			74
		20,837			19,647
Accumulated depreciation		(14,201	)		(13,466	)
Property and equipment, net	$	6,636		$	6,181

Schedule of Future Minimum Lease Payments for Capital Lease Obligations

Future minimum lease payments related to the capital lease obligations are detailed below (in thousands):

2017	$	56
2018		42
2019		42
2020		42
Present value of net minimum lease payments	$	182

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Reinsurance (Tables)

12 Months Ended

Dec. 31, 2016

Insurance [Abstract]

Schedule of the Effect of Reinsurance on Premiums Written and Earned

The effect of reinsurance on premiums written and earned in 2016, 2015 and 2014 was as follows:

	2016 Premiums						2015 Premiums						2014 Premiums
	Written			Earned			Written			Earned			Written			Earned
	(in thousands)
Gross	$	373,055		$	379,011		$	386,529		$	387,122		$	393,819		$	389,540
Ceded		(10,307	)		(10,307	)		(11,228	)		(11,228	)		(13,793	)		(13,793	)
Net premiums	$	362,748		$	368,704		$	375,301		$	375,894		$	380,026		$	375,747

Schedule of the Amounts Recoverable from Reinsurers

The amounts recoverable from reinsurers consist of the following:

	December 31,
	2016		2015
	(in thousands)
Unpaid losses recoverable:
Case basis	$	49,361	$	37,207
Incurred but not reported		28,895		27,651
Paid losses recoverable		485		414
Experience-rated commissions recoverable		4,925		25,805
Total	$	83,666	$	91,077

Schedule of Unsecured Reinsurance Recoverables from Reinsurers

The A.M. Best Company rating for the reinsurer is shown parenthetically.

Hannover Reinsurance Limited (Ireland) (A+)	$	29,670
Odyssey America Reinsurance Corporation (A)		12,600
Minnesota Workers’ Compensation Reinsurance Association (NR)		9,623
Other reinsurers		31,773
Total amounts recoverable from reinsurers		83,666
Funds withheld and letters of credit related to the above recoverables		(38,453	)
Total unsecured amounts recoverable from reinsurers	$	45,213

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Schedule of Company's Deferred Income Tax Assets and Liabilities

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

	December 31,
	2016			2015
	(in thousands)
Deferred income tax assets:
Discounting of net unpaid loss and loss adjustment    expenses	$	16,035		$	15,415
Unearned premiums		14,483			14,839
Accrued expenses and other		3,640			3,904
State income tax		617			488
Accrued policyholder dividends		2,024			719
Impaired securities		70			238
Capital loss carryforward		15			715
Accrued insurance-related assessments		5,323			4,953
Net unrealized loss on securities		265			—
Total deferred tax assets		42,472			41,271
Deferred income tax liabilities:
Deferred policy acquisition costs		(8,492	)		(9,012	)
Callable bond amortization		(10	)		—
Unrealized gain on securities available-for-sale		—			(1,393	)
Property and equipment and other		204			(696	)
Salvage and subrogation		(363	)		(265	)
Guaranty fund related items		—			—
Total deferred income tax liabilities		(8,661	)		(11,366	)
Net deferred income taxes	$	33,811		$	29,905

Components of Consolidated Income Tax Expense (Benefit)

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

	Year Ended December 31,
	2016			2015		2014
	(in thousands)
Current:
Federal	$	35,602		$	28,047	$	20,811
State		1,603			1,012		684
		37,205			29,059		21,495
Deferred:
Federal		(2,120	)		1,343		(821	)
State		(129	)		103		(591	)
		(2,249	)		1,446		(1,412	)
Total	$	34,956		$	30,505	$	20,083

Income Tax Expense from Operations from the Amount Computed by Applying the U.S. Federal Income Tax Statutory Rate of 35% to Income Before Income Taxes

Income tax expense from operations is different from the amount computed by applying the U.S. federal income tax statutory rate of 35% to income before income taxes as follows:

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Income tax computed at federal statutory tax rate	$	39,487		$	35,338		$	25,812
Tax-exempt interest, net		(5,370	)		(5,630	)		(5,620	)
State income tax		913			762			(146	)
Dividends received deduction		(125	)		(19	)		(60	)
Other		51			54			97
	$	34,956		$	30,505		$	20,083

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Loss and Loss Adjustment Expenses (Tables)

12 Months Ended

Dec. 31, 2016

Insurance [Abstract]

Summary of Development Tables of Incurred and Paid Claims and Allocated Claim Adjustment Expenses Net of Reinsurance

	Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance																				As of
	For the Years Ended December 31,																				December 31,2016
	(Dollars in thousands)
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016		Total IBNR plus Expected Development on Reported Claims		Cumulative Number of Claims Reported
2007	$	208,480	$	218,448	$	206,044	$	196,773	$	185,225	$	181,633	$	180,229	$	179,373	$	178,608	$	178,582	$	1,620		7,122
2008		-		196,923		200,371		195,619		190,905		187,695		184,547		182,846		183,608		182,901		2,751		6,486
2009		-		-		185,359		188,746		188,462		187,943		184,006		182,274		177,795		176,586		3,199		5,371
2010		-		-		-		179,156		202,479		208,035		205,769		198,861		193,029		191,000		5,786		5,970
2011		-		-		-		-		196,384		199,522		199,163		198,213		195,262		192,988		7,461		6,040
2012		-		-		-		-		-		222,549		222,075		212,738		193,515		184,460		7,798		5,743
2013		-		-		-		-		-		-		241,810		241,811		233,656		220,457		11,868		5,761
2014		-		-		-		-		-		-		-		268,846		268,846		249,097		21,004		5,815
2015		-		-		-		-		-		-		-		-		262,573		262,573		28,658		5,477
2016		-		-		-		-		-		-		-		-		-		250,491		34,737		5,104
																	Total		$	2,089,136	$	124,882

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
	(Dollars in thousands)
Accident Year	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016		Claim Frequency		*
2007	$	43,470	$	97,657	$	128,254	$	141,595	$	152,136	$	158,056	$	162,903	$	164,970	$	166,734	$	167,996		21.77
2008		-		47,685		103,057		132,515		147,377		157,388		163,933		166,814		170,347		171,496		20.98
2009		-		-		42,332		96,173		123,946		142,667		150,925		155,365		158,214		159,345		19.82
2010		-		-		-		47,520		108,714		141,029		156,974		165,834		169,565		172,426		24.93
2011		-		-		-		-		53,329		111,029		140,831		153,968		161,639		165,967		22.80
2012		-		-		-		-		-		50,579		107,467		133,658		149,161		154,553		18.71
2013		-		-		-		-		-		-		51,396		119,507		150,304		165,994		16.54
2014		-		-		-		-		-		-		-		53,060		119,820		153,320		14.93
2015		-		-		-		-		-		-		-		-		54,141		121,599		14.15
2016		-		-		-		-		-		-		-		-		-		52,238		13.47
																	Total			1,484,933
All outstanding claim liabilities before 2007, net of reinsurance																				60,317
Liabilities for claims and claim adjustment expenses, net of reinsurance																				664,520
*Frequency, as calculated above, refers to reported claims divided by gross premium earned

Summary of Average Annual Percentage Payout of Incurred Claims by Age Net of Reinsurance for Worker's Compensation and General Liability

The average annual percentage payout of incurred claims by age, net of reinsurance, for workers’ compensation and general liability as of December 31, 2016 is summarized below. Since workers’ compensation has long payout periods, the table below shows less than 100% in the years disclosed.

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited)
Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
	24.0%		29.7%		15.4%		8.1%		4.6%		2.7%		1.9%		1.2%		0.8%		0.7%

Reconciliation of Beginning and Ending Reserve Balances, Net of Related Amounts Recoverable from Reinsurers

The following table provides a reconciliation of the beginning and ending reserve balances, net of related amounts recoverable from reinsurers, for 2016, 2015 and 2014:

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Balance, beginning of period	$	718,033		$	687,602		$	614,557
Less amounts recoverable from reinsurers      on unpaid loss and loss adjustment expenses		64,858			59,334			48,699
Net balance, beginning of period		653,175			628,268			565,858
Add incurred related to:
Current accident year		250,337			262,387			268,633
Prior accident years		(51,306	)		(47,814	)		(23,717	)
Total incurred		199,031			214,573			244,916
Less paid related to:
Current accident year		52,085			53,955			52,848
Prior accident years		135,601			135,711			129,658
Total paid		187,686			189,666			182,506
Net balance, end of period		664,520			653,175			628,268
Add amounts recoverable from reinsurers      on unpaid loss and loss adjustment expenses		78,256			64,858			59,334
Balance, end of period	$	742,776		$	718,033		$	687,602

Summary Exposures to Various Asbestos Related Claims

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

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Reserves for loss and LAE at beginning of year	$	958		$	819		$	219
Incurred losses and LAE during the current year		816			444			882
Loss and LAE payments		(287	)		(305	)		(282	)
Reserves for loss and LAE at end of year	$	1,487		$	958		$	819

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Statutory Accounting and Regulatory Requirements (Tables)

12 Months Ended

Dec. 31, 2016

Text Block [Abstract]

Insurance Subsidiaries

Statutory-basis shareholders’ capital and surplus at December 31, 2016, 2015 and 2014 of the directly owned insurance subsidiary, AIIC, and the combined statutory-basis net income and realized investment gains for all AMERISAFE’s insurance subsidiaries for the three years in the period ended December 31, 2016, were as follows (in thousands):

	2016			2015			2014
Capital and surplus	$	394,016		$	371,365		$	377,742
Net income		79,858			71,937			50,205
Net realized gains (losses) on investments		(504	)		(3,131	)		693

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Stock Options and Restricted Stock (Tables)

12 Months Ended

Dec. 31, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Options Outstanding

The following table summarizes information about the stock options outstanding under the 2005 Incentive Plan at December 31, 2014, 2015 and 2016:

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)
Outstanding at January 1, 2014		576,248			11.12		3.8
Granted		—			—		—
Exercised		(294,165	)		9.09		—
Canceled, forfeited, or expired		—			—		—
Outstanding at December 31, 2014		282,083			11.30		3.6
Exercisable at December 31, 2014		282,083			11.30		3.6
Outstanding at January 1, 2015		282,083			11.30		3.6
Granted		—			—		—
Exercised		(193,204	)		9.55		—
Canceled, forfeited, or expired		—			—		—
Outstanding at December 31, 2015		88,879			12.10		4.3
Exercisable at December 31, 2015		88,879			12.10		4.3
Outstanding at January 1, 2016		88,879			12.10		4.3
Granted		—			—		—
Exercised		(68,879	)		12.14		3.3
Canceled, forfeited, or expired		—			—		—
Outstanding at December 31, 2016		20,000			8.71		3.1
Exercisable at December 31, 2016		20,000			8.71		3.1

Weighted Average Grant Date Fair Values of Options Granted

	2016		2015		2014
	(in thousands)
Cash received from option exercises	$	837	$	1,844	$	2,674
Total tax benefits realized for tax deductions from    options exercised		833		2,109		2,797
Total intrinsic value of options exercised		2,967		6,969		9,145
Grant date fair value of options vested		—		—		144
Aggregate intrinsic value of vested options outstanding		1,073		3,448		8,763

Restricted Stock Outstanding

The following table summarizes information about the restricted stock outstanding under the 2005 Incentive Plan at December 31, 2016:

	Shares			Weighted- Average Grant- Date Fair Value per Share
Nonvested balance at January 1, 2014		6,400			27.47
Granted		—			—
Vested		(800	)		27.35
Forfeited		(3,200	)		27.59
Nonvested balance at December 31, 2014		2,400			27.35
Granted		—			—
Vested		(800	)		27.35
Forfeited		—			—
Nonvested balance at December 31, 2015		1,600			27.35
Granted		—			—
Vested		(800	)		27.35
Forfeited		—			—
Nonvested balance at December 31, 2016		800			27.35

The following table summarizes information about the restricted stock outstanding under the Non-Employee Director Restricted Stock Plan at December 31, 2016:

	Shares			Weighted- Average Grant- Date Fair Value per Share
Nonvested balance at January 1, 2014		5,376			33.47
Granted		5,229			37.27
Vested		(5,376	)		33.47
Forfeited		—			—
Nonvested balance at December 31, 2014		5,229			37.27
Granted		7,112			44.26
Vested		(5,229	)		37.27
Forfeited		—			—
Nonvested balance at December 31, 2015		7,112			44.26
Granted		5,952			63.57
Vested		(7,488	)		44.54
Forfeited		—			—
Nonvested balance at December 31, 2016		5,576			64.50

The following table summarizes information about the restricted stock outstanding under the 2012 Incentive Plan at December 31, 2016:

	Shares			Weighted- AverageGrant- Date Fair Value per Share
Nonvested balance at January 1, 2014		82,609			33.93
Granted		4,312			43.83
Vested		(14,000	)		33.58
Forfeited		—			—
Nonvested balance at December 31, 2014		72,921			34.59
Granted		50,461			45.80
Vested		(27,537	)		37.27
Forfeited		(18,317	)		35.48
Nonvested balance at December 31, 2015		77,528			40.57
Granted		27,077			54.44
Vested		(26,294	)		45.18
Forfeited		(1,919	)		—
Nonvested balance at December 31, 2016		76,392			43.91

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Calculation of Basic and Diluted Earnings Per Share

The calculation of basic and diluted EPS for the years ended December 31, 2016, 2015 and 2014 are presented below.

	For the Year Ended December 31,
	2016		2015		2014
	(in thousands, except earnings per share amounts)
Basic EPS:
Net income available to common shareholders – basic	$	77,865	$	70,462	$	53,666
Basic weighted-average common shares		19,106		18,941		18,646
Basic earnings per share	$	4.08	$	3.72	$	2.88
Diluted EPS:
Net income available to common shareholders - diluted	$	77,865	$	70,462	$	53,666
Diluted weighted average common shares:
Weighted average common shares		19,106		18,941		18,646
Stock options and performance shares		98		178		282
Diluted weighted average common shares		19,204		19,119		18,928
Diluted earnings per common share	$	4.05	$	3.69	$	2.84

Calculation of Percentage of Net Income Allocable to Common Shareholders

The table below sets forth the reconciliation of the weighted average shares used for the basic and diluted EPS calculation.

	Years Ended
	2016		2015		2014
Basic weighted average common shares		19,105,806		18,941,077		18,646,128
Add: Other common shares eligible for common dividends:
Weighted average restricted shares and stock options    (including tax benefit component)		97,844		178,109		282,376
Diluted weighted average common shares		19,203,650		19,119,186		18,928,504

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Comprehensive Income and Accumulated Other Comprehensive Income (Tables)

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

Schedule of Changes in Accumulated Other Comprehensive Income (AOCI)

The following table illustrates the changes in the balance of each component of accumulated other comprehensive income (loss) for each period presented in the financial statements.

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Beginning balance	$	2,587		$	2,810		$	(4,295	)
Other comprehensive income (loss) before    reclassification		(3,231	)		(1,584	)		6,558
Amounts reclassified from accumulated other    comprehensive income		152			1,361			547
Net current period other comprehensive income (loss)		(3,079	)		(223	)		7,105
Ending balance	$	(492	)	$	2,587		$	2,810

Reclassification Out of Accumulated Other Comprehensive Income

The effects of reclassifications out of accumulated other comprehensive income by the respective line items of net income are presented in the following table.

Component of Accumulated Other Comprehensive Income	Year Ended December 31,									Affected line item in the statement of income
	2016			2015			2014
	(in thousands)
Unrealized losses on    available-for-sale securities	$	(234	)	$	(494	)	$	(825	)	Net realized gains (losses) on    investments
Other-than-temporary impairment		—			(1,600	)		(16	)	Net realized gains (losses) on    investments
		(234	)		(2,094	)		(841	)	Income before income taxes
		82			733			294		Income tax expense
	$	(152	)	$	(1,361	)	$	(547	)	Net income

Other Comprehensive Income

	Pre-Tax Amount			Tax Expense			Net-of-Tax Amount
	(in thousands)
December 31, 2016
Unrealized loss on securities:
Unrealized loss on available-for-sale securities	$	(4,908	)	$	(1,718	)	$	(3,190	)
Less amortization of differences between fair value    and amortized cost for fixed maturity security transfer		(63	)		(22	)		(41	)
Reclassification adjustment for gains realized     in net income		234			82			152
Net unrealized loss		(4,737	)		(1,658	)		(3,079	)
Other comprehensive income	$	(4,737	)	$	(1,658	)	$	(3,079	)
December 31, 2015
Unrealized loss on securities:
Unrealized loss on available-for-sale securities	$	(2,572	)	$	(900	)	$	(1,672	)
Change in unrealized losses on available-for-sale    securities with OTTI		176			62			114
Less amortization of differences between fair value and    amortized cost for fixed maturity security transfer		(40	)		(14	)		(26	)
Reclassification adjustment for gains realized     in net income		2,093			732			1,361
Net unrealized loss		(343	)		(120	)		(223	)
Other comprehensive income	$	(343	)	$	(120	)	$	(223	)
December 31, 2014
Unrealized gain on securities:
Unrealized gain on available-for-sale securities	$	10,133		$	3,546		$	6,587
Less amortization of differences between fair value    and amortized cost for fixed maturity security transfer		(44	)		(15	)		(29	)
Reclassification adjustment for gains realized     in net income		842			295			547
Net unrealized gain		10,931			3,826			7,105
Other comprehensive income	$	10,931		$	3,826		$	7,105

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2016

Commitments And Contingencies Disclosure [Abstract]

Fair Value of Annuities

The following table summarizes (in thousands) the fair value of the annuities at December 31, 2016, that the Company has purchased to satisfy its obligations. The A.M. Best Company rating is shown parenthetically.

Life Insurance Company	Statement Value of Annuities Exceeding 1% of Statutory Surplus
Metropolitan Life Insurance Company (A+)	$	17,098
Pacific Life and Annuity Company (A+)		16,688
American General Life Insurance (A)		15,049
New York Life Insurance Company (A++)		11,408
John Hancock Life Insurance Company USA (A+)		6,724
Athene Annuity and Life Assurance Company (A-)		5,164
Other		23,925
	$	96,056

Future Minimum Lease Payments

The Company leases equipment and office space under noncancelable operating leases. At December 31, 2016, future minimum lease payments are as follows (in thousands):

2017	$	131
2018		74
2019		6
	$	211

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Concentration of Operations (Tables)

12 Months Ended

Dec. 31, 2016

Text Block [Abstract]

Net Premiums Earned for the Different Lines of Business

The Company derives its revenues almost entirely from its operations in the workers’ compensation insurance line of business. Total net premiums earned for the different lines of business are shown below:

	2016					2015					2014
	Dollars		Percent			Dollars		Percent			Dollars		Percent
	(Dollars in thousands)
Workers’ compensation	$	368,704		100.0	%	$	375,894		100.0	%	$	375,746		100.0	%
General liability		—		0.0	%		—		0.0	%		1		0.0	%
Total net premiums earned	$	368,704		100.0	%	$	375,894		100.0	%	$	375,747		100.0	%

Net Premiums Earned for the Top Ten States

Net premiums earned during 2016, 2015 and 2014 for the top ten states in 2016 and all others are shown below:

	2016					2015					2014
	Dollars		Percent			Dollars		Percent			Dollars		Percent
	(Dollars in thousands)
Pennsylvania	$	39,460		10.7	%	$	36,294		9.7	%	$	35,488		9.4	%
Georgia		38,168		10.4	%		40,497		10.8	%		36,761		9.8	%
Louisiana		30,426		8.3	%		38,874		10.3	%		47,643		12.7	%
Florida		29,051		7.9	%		24,792		6.6	%		20,691		5.5	%
Illinois		25,796		7.0	%		23,285		6.2	%		20,606		5.5	%
North Carolina		20,784		5.6	%		20,062		5.3	%		20,872		5.6	%
Virginia		16,599		4.5	%		15,656		4.2	%		16,764		4.5	%
Minnesota		15,130		4.1	%		14,618		3.9	%		13,159		3.5	%
South Carolina		13,897		3.8	%		12,955		3.4	%		12,414		3.3	%
Wisconsin		13,544		3.7	%		11,203		3.0	%		9,408		2.5	%
All others		125,849		34.0	%		137,658		36.6	%		141,941		37.7	%
Total net premiums earned	$	368,704		100.0	%	$	375,894		100.0	%	$	375,747		100.0	%

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Fair Values of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Summary of Carrying or Reported Values and Corresponding Fair Values for Financial Instruments

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

	December 31,
	2016				2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)
Assets:
Fixed maturity securities—held to maturity	$	562,434	$	568,931	$	645,164	$	662,276
Fixed maturity securities—available for sale		479,097		479,097		380,022		380,022
Equity securities		33		33		31		31
Cash and cash equivalents		58,936		58,936		69,481		69,481
Short-term investments		29,580		29,580		7,718		7,718
Other investments		13,330		13,330		12,217		12,217

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and 2015 are as follows:

	December 31, 2016
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Financial instruments carried at fair value,      classified as part of:
Securities available for sale—equity:
Domestic common stock	$	33	$	—	$	—	$	33
Securities available for sale—fixed maturity:
States and political subdivisions		—		232,293		—		232,293
Corporate bonds		—		182,515		—		182,515
U.S. agency-based mortgage-backed securities		—		9,342		—		9,342
U.S. Treasury securities and obligations of U.S. government agencies		54,947		—		—		54,947
Total available for sale—fixed maturity		54,947		424,150		—		479,097
Total available for sale	$	54,980	$	424,150	$	—	$	479,130

	December 31, 2015
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Financial instruments carried at fair value,      classified as part of:
Securities available for sale—equity:
Domestic common stock	$	31	$	—	$	—	$	31
Securities available for sale—fixed maturity:
States and political subdivisions		—		171,419		—		171,419
Corporate bonds		—		201,304		—		201,304
U.S. agency-based mortgage-backed securities		—		7,299		—		7,299
Total available for sale—fixed maturity		—		380,022		—		380,022
Total available for sale	$	31	$	380,022	$	—	$	380,053

Schedule of Assets and Liabilities Measured at Amortized Cost

Assets and liabilities measured at amortized cost as of December 31, 2016 and 2015 are as follows:

	December 31, 2016
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Securities held-to-maturity—fixed maturity:
States and political subdivisions	$	—	$	399,483	$	—	$	399,483
Corporate bonds		—		144,016		—		144,016
Commercial mortgage-backed securities		—		70		—		70
U.S. agency-based mortgage-backed securities		—		10,915		—		10,915
U.S. Treasury securities		6,779		—		—		6,779
Obligations of U.S. government agencies		—		5,637		—		5,637
Asset-backed securities		—		2,031		—		2,031
Total held-to-maturity	$	6,779	$	562,152	$	—	$	568,931

	December 31, 2015
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(in thousands)
Securities held-to-maturity—fixed maturity:
States and political subdivisions	$	—	$	423,754	$	—	$	423,754
Corporate bonds		—		170,573		—		170,573
Commercial mortgage-backed securities		—		37,683		—		37,683
U.S. agency-based mortgage-backed securities		—		14,471		—		14,471
U.S. Treasury securities		7,599		—		—		7,599
Obligations of U.S. government agencies		—		5,781		—		5,781
Asset-backed securities		—		2,415		—		2,415
Total held-to-maturity	$	7,599	$	654,677	$	—	$	662,276

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Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2016

Quarterly Financial Information Disclosure [Abstract]

Unaudited Quarterly Financial Data

The following table represents unaudited quarterly financial data for the years ended December 31, 2016 and 2015.

	Three Months Ended
	March 31		June 30			September 30		December 31
	(in thousands, except per share amounts)
2016
Net premiums earned	$	95,961	$	90,728		$	89,918	$	92,097
Net investment income		6,044		6,201			8,006		7,855
Net realized gains (losses) on investments		248		545			181		(1,468	)
Total revenues		102,335		97,563			98,206		98,558
Income before income taxes		34,395		24,615			26,027		27,784
Net income		24,257		16,639			17,896		19,073
Net income available to common shareholders		24,257		16,639			17,896		19,073
Earnings per share:
Basic	$	1.27	$	0.87		$	0.94	$	1.00
Diluted	$	1.27	$	0.87		$	0.93	$	0.99
Comprehensive income		27,051		19,568			16,183		11,985
Extraordinary cash dividends declared per common share	$	—	$	—		$	—	$	3.25
Cash dividends declared per common share	$	0.18	$	0.18		$	0.18	$	0.18
2015
Net premiums earned	$	94,787	$	95,569		$	90,504	$	95,034
Net investment income		6,833		6,890			6,923		7,256
Net realized gains (losses) on investments		59		(2,617	)		40		24
Total revenues		101,788		99,936			97,470		101,760
Income before income taxes		21,197		20,112			25,890		33,768
Net income		15,130		14,319			17,940		23,073
Net income available to common shareholders		15,130		14,319			17,940		23,073
Earnings per share:
Basic	$	0.80	$	0.76		$	0.95	$	1.21
Diluted	$	0.79	$	0.75		$	0.94	$	1.21
Comprehensive income		15,948		12,744			19,248		22,299
Extraordinary cash dividends declared per common share	$	—	$	—		$	—	$	3.00
Cash dividends declared per common share	$	0.15	$	0.15		$	0.15	$	0.15

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Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Schedule Of Accounting Policies [Line Items]
Percentage of comparable consolidated amounts	95.00%	95.00%	95.00%
Original maturity of cash equivalent	90 days
Monthly redemption of investments notice period	60 days
Experience rated commission and other operating costs	$ 0	$ 300,000	$ 0
Cash received, under reinsurance agreements	200,000
Commutation payment adjusted through offset against balance of funds	25,400,000
Advertising expense	$ 700,000	$ 700,000	$ 500,000
Assessment Related premium Payment period	1 year
Assessment Related loss Payment period	1 year
Land and Office Building [Member]
Schedule Of Accounting Policies [Line Items]
Estimated useful life of assets	39 years
Limited Partnership [Member]
Schedule Of Accounting Policies [Line Items]
Unfunded commitments	$ 0
Minimum [Member]
Schedule Of Accounting Policies [Line Items]
Short-term investments maturity period	90 days
Minimum [Member] | Other Fixed Assets [Member]
Schedule Of Accounting Policies [Line Items]
Estimated useful life of assets	3 years
Maximum [Member]
Schedule Of Accounting Policies [Line Items]
Short-term investments maturity period	one year
Maximum [Member] | Other Fixed Assets [Member]
Schedule Of Accounting Policies [Line Items]
Estimated useful life of assets	7 years

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Investments - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2016 USD ($) Security	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Investment [Line Items]
Short-term investments	$ 29,580,000	$ 7,718,000
Carrying value of investments	13,330,000	12,217,000
Sale of securities classified as held to maturity	3,000,000
Gain of held-to-maturity investment securities	$ 100,000
Individual fixed maturity held in unrealized loss position | Security	260
Individual fixed maturity held in unrealized loss position longer than 12 months | Security	17
Impairment losses recognized	$ 0	2,653,000	$ 222,000
Cash [Member]
Investment [Line Items]
Cash or cash held by insurance regulators	100,000
Held-to-Maturity Securities [Member]
Investment [Line Items]
Cash or cash held by insurance regulators	21,200,000
Available-for-Sale Securities [Member]
Investment [Line Items]
Cash or cash held by insurance regulators	400,000
Corporate Bonds [Member]
Investment [Line Items]
Short-term investments	2,800,000	$ 7,700,000
U.S. Treasury Securities and Obligations of U.S. Government Agencies [Member]
Investment [Line Items]
Short-term investments	21,900,000
States and Political Subdivisions [Member]
Investment [Line Items]
Short-term investments	$ 4,900,000

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Investments - Gross Unrealized Gains and Losses and Amortized Cost and Fair Value of Investments Classified as Held-to-Maturity (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Investment [Line Items]
Held-to-Maturity, Amortized Cost	$ 562,434	$ 645,164
Held-to-Maturity, Gross Unrealized Gains	9,902	18,063
Held-to-Maturity, Gross Unrealized Losses	(3,405)	(951)
Held-to-Maturity, Fair Value	568,931	662,276
States and Political Subdivisions [Member]
Investment [Line Items]
Held-to-Maturity, Amortized Cost	394,875	408,447
Held-to-Maturity, Gross Unrealized Gains	7,622	15,352
Held-to-Maturity, Gross Unrealized Losses	(3,014)	(45)
Held-to-Maturity, Fair Value	399,483	423,754
Corporate Bonds [Member]
Investment [Line Items]
Held-to-Maturity, Amortized Cost	143,858	171,224
Held-to-Maturity, Gross Unrealized Gains	423	159
Held-to-Maturity, Gross Unrealized Losses	(265)	(810)
Held-to-Maturity, Fair Value	144,016	170,573
Commercial Mortgage-Backed Securities [Member]
Investment [Line Items]
Held-to-Maturity, Amortized Cost	70	37,494
Held-to-Maturity, Gross Unrealized Gains		204
Held-to-Maturity, Gross Unrealized Losses		(15)
Held-to-Maturity, Fair Value	70	37,683
U.S. Agency-Based Mortgage-Backed Securities [Member]
Investment [Line Items]
Held-to-Maturity, Amortized Cost	9,967	13,223
Held-to-Maturity, Gross Unrealized Gains	948	1,249
Held-to-Maturity, Gross Unrealized Losses		(1)
Held-to-Maturity, Fair Value	10,915	14,471
U.S. Treasury Securities and Obligations of U.S. Government Agencies [Member]
Investment [Line Items]
Held-to-Maturity, Amortized Cost	11,737	12,487
Held-to-Maturity, Gross Unrealized Gains	746	897
Held-to-Maturity, Gross Unrealized Losses	(67)	(4)
Held-to-Maturity, Fair Value	12,416	13,380
Asset-Backed Securities [Member]
Investment [Line Items]
Held-to-Maturity, Amortized Cost	1,927	2,289
Held-to-Maturity, Gross Unrealized Gains	163	202
Held-to-Maturity, Gross Unrealized Losses	(59)	(76)
Held-to-Maturity, Fair Value	$ 2,031	$ 2,415

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Investments - Gross Unrealized Gains and Losses and Cost or Amortized Cost and Fair Value of Investments Classified as Available-for-Sale (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Investment [Line Items]
Available-for-Sale, Cost or Amortized Cost	$ 489,871	$ 386,109
Available-for-Sale, Fair Value	492,460	392,270
Available-for-Sale, Gross Unrealized Gains	8,156	9,447
Available-for-Sale, Gross Unrealized Losses	(5,567)	(3,286)
Other Investments [Member]
Investment [Line Items]
Available-for-Sale, Cost or Amortized Cost	10,000	10,000
Available-for-Sale, Fair Value	13,330	12,217
Available-for-Sale, Gross Unrealized Gains	3,330	2,217
Total Fixed Maturity [Member]
Investment [Line Items]
Available-for-Sale, Cost or Amortized Cost	479,871	376,109
Available-for-Sale, Gross Unrealized Gains	4,793	7,199
Available-for-Sale, Gross Unrealized Losses	(5,567)	(3,286)
Available-for-Sale, Fair Value	479,097	380,022
States and Political Subdivisions [Member]
Investment [Line Items]
Available-for-Sale, Cost or Amortized Cost	231,168	164,684
Available-for-Sale, Gross Unrealized Gains	4,340	6,942
Available-for-Sale, Gross Unrealized Losses	(3,215)	(207)
Available-for-Sale, Fair Value	232,293	171,419
Corporate Bonds [Member]
Investment [Line Items]
Available-for-Sale, Cost or Amortized Cost	182,350	202,537
Available-for-Sale, Gross Unrealized Gains	436	253
Available-for-Sale, Gross Unrealized Losses	(271)	(1,486)
Available-for-Sale, Fair Value	182,515	201,304
U.S. Agency-Based Mortgage-Backed Securities [Member]
Investment [Line Items]
Available-for-Sale, Cost or Amortized Cost	10,428	8,888
Available-for-Sale, Gross Unrealized Gains	17	4
Available-for-Sale, Gross Unrealized Losses	(1,103)	(1,593)
Available-for-Sale, Fair Value	9,342	7,299
U.S. Treasury Securities and Obligations of U.S. Government Agencies [Member]
Investment [Line Items]
Available-for-Sale, Cost or Amortized Cost	55,925
Available-for-Sale, Gross Unrealized Losses	(978)
Available-for-Sale, Fair Value	54,947
Equity Securities [Member]
Investment [Line Items]
Available-for-Sale, Fair Value	33	31
Available-for-Sale, Gross Unrealized Gains	$ 33	$ 31

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Investments - Summary of Amortized Cost and Fair Value of Investments in Fixed Maturity Securities, Classified as Held-to-Maturity (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Investment [Line Items]
Within one year, Amortized Cost Basis	$ 109,707
After one year through five years, Amortized Cost Basis	259,942
After five years through ten years, Amortized Cost Basis	105,396
After ten years, Amortized Cost Basis	75,425
Held-to-Maturity, Amortized Cost	562,434	$ 645,164
Within one year, Fair Value	110,469
After one year through five years, Fair Value	263,620
After five years through ten years, Fair Value	106,341
After ten years, Fair Value	75,485
Total, Fair Value	568,931	$ 662,276
U.S. Agency-Based Mortgage-Backed Securities [Member]
Investment [Line Items]
Held-to-maturity, Amortized Cost Basis	9,967
Held-to-maturity, Fair Value	10,915
Commercial Mortgage-Backed Securities [Member]
Investment [Line Items]
Held-to-maturity, Amortized Cost Basis	70
Held-to-maturity, Fair Value	70
Asset-Backed Securities [Member]
Investment [Line Items]
Held-to-maturity, Amortized Cost Basis	1,927
Held-to-maturity, Fair Value	$ 2,031

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Investments - Summary of Amortized Cost and Fair Value of Investments in Fixed Maturity Securities, Classified as Available-for-Sale (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Investment [Line Items]
Within one year, Amortized Cost Basis	$ 64,852
After one year through five years, Amortized Cost Basis	215,486
After five years through ten years, Amortized Cost Basis	30,846
After ten years, Amortized Cost Basis	158,259
Total , Amortized Cost Basis	479,871	$ 376,109
Within one year, Fair Value	65,174
After one year through five years, Fair Value	215,624
After five years through ten years, Fair Value	30,488
After ten years, Fair Value	158,469
Total, Fair Value	479,097	$ 380,022
U.S. Agency-Based Mortgage-Backed Securities [Member]
Investment [Line Items]
Available-for-sale securities, Amortized Cost Basis	10,428
Available-for-sale securities, Fair value	$ 9,342

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Investments - A Summary of the Company's Realized Gains and Losses on Sales, Calls or Redemptions of Investments (Detail) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Investment [Line Items]
Proceeds from sales									$ 59,339,000	$ 4,432,000	$ 10,548,000
Gross realized investment gains									891,000	177,000	750,000
Gross realized investment losses									(1,728,000)	(162,000)	(451,000)
Net realized investment gains (losses)									(837,000)	15,000	299,000
Impairments									0	(2,653,000)	(222,000)
Other, including gains on calls and redemptions									343,000	144,000	620,000
Net realized gains (losses) on investments	$ (1,468,000)	$ 181,000	$ 545,000	$ 248,000	$ 24,000	$ 40,000	$ (2,617,000)	$ 59,000	(494,000)	(2,494,000)	697,000
Fixed Maturity Securities Available for Sale [Member]
Investment [Line Items]
Proceeds from sales									54,730,000	4,432,000	768,000
Gross realized investment gains									823,000	177,000	1,000
Gross realized investment losses									(1,728,000)	(162,000)
Net realized investment gains (losses)									(905,000)	15,000	1,000
Impairments										(2,653,000)	(222,000)
Other, including gains on calls and redemptions									274,000	102,000	244,000
Net realized gains (losses) on investments									(631,000)	(2,536,000)	23,000
Equity Securities [Member]
Investment [Line Items]
Proceeds from sales											9,780,000
Gross realized investment gains											749,000
Gross realized investment losses											(451,000)
Net realized investment gains (losses)											298,000
Net realized gains (losses) on investments											298,000
Other [Member]
Investment [Line Items]
Proceeds from sales									4,609,000
Gross realized investment gains									68,000
Net realized investment gains (losses)									68,000
Other, including gains on calls and redemptions									69,000	42,000	376,000
Net realized gains (losses) on investments									$ 137,000	$ 42,000	$ 376,000

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Investments - Major Categories of the Company's Net Investment Income (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Investment [Line Items]
Total gross investment income									$ 29,753	$ 29,410	$ 28,891
Investment expenses									(1,647)	(1,508)	(1,677)
Net investment income	$ 7,855	$ 8,006	$ 6,201	$ 6,044	$ 7,256	$ 6,923	$ 6,890	$ 6,833	28,106	27,902	27,214
Fixed Maturity Securities Available for Sale [Member]
Investment [Line Items]
Total gross investment income									27,837	28,498	26,622
Short-term Investments [Member]
Investment [Line Items]
Total gross investment income									348	149	426
Equity Securities [Member]
Investment [Line Items]
Total gross investment income											232
Other Investments [Member]
Investment [Line Items]
Total gross investment income									$ 1,568	$ 763	$ 1,611

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Investments - Investment Securities Continuous Unrealized Loss Position (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Investment [Line Items]
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 206,129	$ 165,286
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less Than Twelve Months, Accumulated Loss	3,283	751
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	7,465	19,556
Held-to-maturity Securities, Continuous Unrealized Loss Position Twelve Months Or Longer, Accumulated Loss	122	200
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	213,594	184,842
Held-to-maturity Securities, Gross Unrealized Losses	3,405	951
Available-for Sale, Fair value of Investments with Unrealized Losses, Less Than 12 Months	173,573	148,851
Available-for Sale, Gross Unrealized Losses, Less Than 12 Months	4,113	1,521
Available-for Sale, Fair Value of Investments with Unrealized Losses, 12 Months or Greater	16,052	15,449
Available-for Sale, Gross Unrealized Losses, 12 Months or Greater	1,454	1,765
Available-for Sale, Fair Value of Investments with Unrealized Losses, Total	189,625	164,300
Available-for Sale, Gross Unrealized Losses, Total	5,567	3,286
Fair Value of Investments with Unrealized Losses, Less Than 12 months	379,702	314,137
Gross Unrealized Loss, Less Than 12 Months	7,396	2,272
Fair Value of Investments with Unrealized Losses, 12 Months or Greater	23,517	35,005
Gross Unrealized Losses, 12 Months or Greater	1,576	1,965
Fair Value of Investments with Unrealized Losses, Total	403,219	349,142
Gross Unrealized Losses, Total	8,972	4,237
States and Political Subdivisions [Member]
Investment [Line Items]
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	157,507	24,068
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less Than Twelve Months, Accumulated Loss	3,014	45
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	157,507	24,068
Held-to-maturity Securities, Gross Unrealized Losses	3,014	45
Available-for Sale, Fair value of Investments with Unrealized Losses, Less Than 12 Months	73,505	6,560
Available-for Sale, Gross Unrealized Losses, Less Than 12 Months	2,976	9
Available-for Sale, Fair Value of Investments with Unrealized Losses, 12 Months or Greater	4,523	4,439
Available-for Sale, Gross Unrealized Losses, 12 Months or Greater	239	198
Available-for Sale, Fair Value of Investments with Unrealized Losses, Total	78,028	10,999
Available-for Sale, Gross Unrealized Losses, Total	3,215	207
Corporate Bonds [Member]
Investment [Line Items]
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	44,654	128,436
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less Than Twelve Months, Accumulated Loss	202	687
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	6,292	18,139
Held-to-maturity Securities, Continuous Unrealized Loss Position Twelve Months Or Longer, Accumulated Loss	63	123
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	50,946	146,575
Held-to-maturity Securities, Gross Unrealized Losses	265	810
Available-for Sale, Fair value of Investments with Unrealized Losses, Less Than 12 Months	41,419	141,857
Available-for Sale, Gross Unrealized Losses, Less Than 12 Months	111	1,475
Available-for Sale, Fair Value of Investments with Unrealized Losses, 12 Months or Greater	7,922	4,216
Available-for Sale, Gross Unrealized Losses, 12 Months or Greater	160	11
Available-for Sale, Fair Value of Investments with Unrealized Losses, Total	49,341	146,073
Available-for Sale, Gross Unrealized Losses, Total	271	1,486
Asset-Backed Securities [Member]
Investment [Line Items]
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	1,173	1,389
Held-to-maturity Securities, Continuous Unrealized Loss Position Twelve Months Or Longer, Accumulated Loss	59	76
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	1,173	1,389
Held-to-maturity Securities, Gross Unrealized Losses	59	76
Commercial Mortgage-Backed Securities [Member]
Investment [Line Items]
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value		9,784
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less Than Twelve Months, Accumulated Loss		15
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value		9,784
Held-to-maturity Securities, Gross Unrealized Losses		15
U.S. Agency-Based Mortgage-Backed Securities [Member]
Investment [Line Items]
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value		18
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value		28
Held-to-maturity Securities, Continuous Unrealized Loss Position Twelve Months Or Longer, Accumulated Loss		1
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value		46
Held-to-maturity Securities, Gross Unrealized Losses		1
Available-for Sale, Fair value of Investments with Unrealized Losses, Less Than 12 Months	3,702	434
Available-for Sale, Gross Unrealized Losses, Less Than 12 Months	48	37
Available-for Sale, Fair Value of Investments with Unrealized Losses, 12 Months or Greater	3,607	6,794
Available-for Sale, Gross Unrealized Losses, 12 Months or Greater	1,055	1,556
Available-for Sale, Fair Value of Investments with Unrealized Losses, Total	7,309	7,228
Available-for Sale, Gross Unrealized Losses, Total	1,103	1,593
U.S. Treasury Securities and Obligations of U.S. Government Agencies [Member]
Investment [Line Items]
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	3,968	2,980
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less Than Twelve Months, Accumulated Loss	67	4
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	3,968	2,980
Held-to-maturity Securities, Gross Unrealized Losses	67	$ 4
Available-for Sale, Fair value of Investments with Unrealized Losses, Less Than 12 Months	54,947
Available-for Sale, Gross Unrealized Losses, Less Than 12 Months	978
Available-for Sale, Fair Value of Investments with Unrealized Losses, Total	54,947
Available-for Sale, Gross Unrealized Losses, Total	$ 978

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Premiums Receivable - Components of Premiums Receivable (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Premiums Receivable, Net [Abstract]
Premiums receivable	$ 188,217	$ 190,216
Allowance for doubtful accounts	(5,212)	(4,852)	$ (5,211)	$ (5,458)
Premiums receivable, net	$ 183,005	$ 185,364

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Premiums Receivable - Summarizes the Activity in the Allowance for Doubtful Accounts (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Premiums Receivable, Allowance for Doubtful Accounts [Roll Forward]
Balance, beginning of year	$ 4,852	$ 5,211	$ 5,458
Provision for bad debts	1,646	806	673
Write-offs	(1,286)	(1,165)	(920)
Balance, end of year	$ 5,212	$ 4,852	$ 5,211

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Premiums Receivable - Additional Information (Detail) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Premiums Receivable, Net [Abstract]
Earned but Unbilled	$ 7.7	$ 7.6	$ 5.2

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Deferred Policy Acquisition Costs - Schedule of Major Categories of the Deferred Policy Acquisition Costs (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Deferred Charges Insurers [Abstract]
Agents’ commissions	$ 15,286	$ 15,997
Premium taxes	2,578	3,121
Deferred underwriting expenses	1,436	1,294
Total deferred policy acquisition costs	$ 19,300	$ 20,412	$ 19,649	$ 19,171

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Deferred Policy Acquisition Costs - Schedule of Activity in the Deferred Policy Acquisition Costs (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Movement Analysis of Deferred Policy Acquisition Costs [Roll Forward]
Balance, beginning of year	$ 20,412	$ 19,649	$ 19,171
Policy acquisition costs deferred	43,209	45,604	44,295
Amortization expense during the year	(44,321)	(44,841)	(43,817)
Balance, end of year	$ 19,300	$ 20,412	$ 19,649

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Property and Equipment - Schedule of Property and Equipment (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Property and equipment, Gross	$ 20,837	$ 19,647
Accumulated depreciation	(14,201)	(13,466)
Property and equipment, net	6,636	6,181
Land and Office Building [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, Gross	7,515	7,069
Furniture and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, Gross	6,509	6,227
Software [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, Gross	6,739	6,277
Automobiles [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, Gross	$ 74	$ 74

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Property and Equipment - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2014
Property Plant And Equipment [Abstract]
Property and equipment held under capital lease	$ 100,000	$ 200,000	$ 100,000
Accumulated depreciation	97,000	$ 80,000	$ 49,000
Loss on disposal of assets	$ (664,000)

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Property and Equipment - Schedule of Future Minimum Lease Payments for Capital Lease Obligations (Detail) $ in Thousands	Dec. 31, 2016 USD ($)
Property Plant And Equipment [Abstract]
2017	$ 56
2018	42
2019	42
2020	42
Present value of net minimum lease payments	$ 182

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Reinsurance - Schedule of the Effect of Reinsurance on Premiums Written and Earned (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Premiums Written and Earned [Abstract]
Gross Written									$ 373,055	$ 386,529	$ 393,819
Ceded Written									(10,307)	(11,228)	(13,793)
Net premiums Written									362,748	375,301	380,026
Gross Earned									379,011	387,122	389,540
Ceded Earned									(10,307)	(11,228)	(13,793)
Net premiums Earned	$ 92,097	$ 89,918	$ 90,728	$ 95,961	$ 95,034	$ 90,504	$ 95,569	$ 94,787	$ 368,704	$ 375,894	$ 375,747

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Reinsurance - Schedule of the Amounts Recoverable from Reinsurers (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Unpaid losses recoverable:
Case basis	$ 49,361	$ 37,207
Incurred but not reported	28,895	27,651
Paid losses recoverable	485	414
Experience-rated commissions recoverable	4,925	25,805
Total reinsurance recoverables	$ 83,666	$ 91,077

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Reinsurance - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Insurance [Abstract]
Paid losses recoverable outstanding due date	90 days
Paid losses recoverable past due	$ 0
Received reinsurance recoveries	$ 500,000	$ 1,000,000	$ 1,500,000
Unsecured reinsurance recoverable by reinsurer reporting threshold	1.50%

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Reinsurance - Schedule of Unsecured Reinsurance Recoverables from Reinsurers (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Ceded Credit Risk [Line Items]
Amounts recoverable from reinsurers	$ 83,666	$ 91,077
Funds withheld and letters of credit related to the above recoverables	(38,453)
Total unsecured amounts recoverable from reinsurers	45,213
Reinsurance Recoverable [Member] | Reinsurer Concentration Risk [Member]
Ceded Credit Risk [Line Items]
Amounts recoverable from reinsurers	83,666
Reinsurance Recoverable [Member] | Reinsurer Concentration Risk [Member] | Hannover Reinsurance Limited (Ireland) (A+) [Member]
Ceded Credit Risk [Line Items]
Amounts recoverable from reinsurers	29,670
Reinsurance Recoverable [Member] | Reinsurer Concentration Risk [Member] | Odyssey America Reinsurance Corporation (A) [Member]
Ceded Credit Risk [Line Items]
Amounts recoverable from reinsurers	12,600
Reinsurance Recoverable [Member] | Reinsurer Concentration Risk [Member] | Minnesota Workers' Compensation Reinsurance Association (NR) [Member]
Ceded Credit Risk [Line Items]
Amounts recoverable from reinsurers	9,623
Reinsurance Recoverable [Member] | Reinsurer Concentration Risk [Member] | Other Reinsurers [Member]
Ceded Credit Risk [Line Items]
Amounts recoverable from reinsurers	$ 31,773

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Income Taxes - Schedule of Company's Deferred Income Tax Assets and Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Deferred income tax assets:
Discounting of net unpaid loss and loss adjustment expenses	$ 16,035	$ 15,415
Unearned premiums	14,483	14,839
Accrued expenses and other	3,640	3,904
State income tax	617	488
Accrued policyholder dividends	2,024	719
Impaired securities	70	238
Capital loss carryforward	15	715
Accrued insurance-related assessments	5,323	4,953
Net unrealized loss on securities	265
Total deferred tax assets	42,472	41,271
Deferred income tax liabilities:
Deferred policy acquisition costs	(8,492)	(9,012)
Callable bond amortization	(10)
Unrealized gain on securities available-for-sale		(1,393)
Property and equipment and other	204	(696)
Salvage and subrogation	(363)	(265)
Total deferred income tax liabilities	(8,661)	(11,366)
Net deferred income taxes	$ 33,811	$ 29,905

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Income Taxes - Components of Consolidated Income Tax Expense (Benefit) (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Current:
Federal	$ 35,602	$ 28,047	$ 20,811
State	1,603	1,012	684
Total Current	37,205	29,059	21,495
Deferred:
Federal	(2,120)	1,343	(821)
State	(129)	103	(591)
Total Deferred	(2,249)	1,446	(1,412)
Income tax expense, Total	$ 34,956	$ 30,505	$ 20,083

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Income Taxes - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Valuation allowance	$ 0	$ 0	$ 0
U.S. federal income tax statutory rate	35.00%
Company recognized uncertain tax positions	$ 0	$ 0	$ 0

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Income Taxes - Income Tax Expense from Operations from the Amount Computed by Applying the U.S. Federal Income Tax Statutory Rate of 35% to Income Before Income Taxes (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Income tax computed at federal statutory tax rate	$ 39,487	$ 35,338	$ 25,812
Tax-exempt interest, net	(5,370)	(5,630)	(5,620)
State income tax	913	762	(146)
Dividends received deduction	(125)	(19)	(60)
Other	51	54	97
Income tax expense, Total	$ 34,956	$ 30,505	$ 20,083

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Line of Credit - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2013
Line of Credit Facility [Line Items]
Maximum amount of line of credit			$ 20,000,000
Line of credit facility renewed date	Dec. 31, 2016
Line of credit facility expiration date	Dec. 31, 2019
Outstanding borrowings or letters of credit	$ 0	$ 0
Line of Credit Facility Expired December 2019 [Member]
Line of Credit Facility [Line Items]
Payment on unused portion of the loan	0.25%
Total fee	$ 50,000

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Loss and Loss Adjustment Expenses - Development Tables of Incurred and Paid Claims and Allocated Claim Adjustment Expenses Net of Reinsurance (Detail) $ in Thousands		12 Months Ended
		Dec. 31, 2016 USD ($) Claim	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2010 USD ($)	Dec. 31, 2009 USD ($)	Dec. 31, 2008 USD ($)	Dec. 31, 2007 USD ($)
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 2,089,136
Total IBNR plus Expected Development on Reported Claims		124,882
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		1,484,933
All outstanding claim liabilities before 2007, net of reinsurance		60,317
Liabilities for claims and claim adjustment expenses, net of reinsurance		664,520
Accident Year 2007 [Member]
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		178,582	$ 178,608	$ 179,373	$ 180,229	$ 181,633	$ 185,225	$ 196,773	$ 206,044	$ 218,448	$ 208,480
Total IBNR plus Expected Development on Reported Claims		$ 1,620
Cumulative Number of Claims Reported | Claim		7,122
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 167,996	166,734	164,970	162,903	158,056	152,136	141,595	128,254	97,657	$ 43,470
Claim Frequency	[1]	21.77%
Accident Year 2008 [Member]
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 182,901	183,608	182,846	184,547	187,695	190,905	195,619	200,371	196,923
Total IBNR plus Expected Development on Reported Claims		$ 2,751
Cumulative Number of Claims Reported | Claim		6,486
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 171,496	170,347	166,814	163,933	157,388	147,377	132,515	103,057	$ 47,685
Claim Frequency	[1]	20.98%
Accident Year 2009 [Member]
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 176,586	177,795	182,274	184,006	187,943	188,462	188,746	185,359
Total IBNR plus Expected Development on Reported Claims		$ 3,199
Cumulative Number of Claims Reported | Claim		5,371
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 159,345	158,214	155,365	150,925	142,667	123,946	96,173	$ 42,332
Claim Frequency	[1]	19.82%
Accident Year 2010 [Member]
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 191,000	193,029	198,861	205,769	208,035	202,479	179,156
Total IBNR plus Expected Development on Reported Claims		$ 5,786
Cumulative Number of Claims Reported | Claim		5,970
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 172,426	169,565	165,834	156,974	141,029	108,714	$ 47,520
Claim Frequency	[1]	24.93%
Accident Year 2011 [Member]
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 192,988	195,262	198,213	199,163	199,522	196,384
Total IBNR plus Expected Development on Reported Claims		$ 7,461
Cumulative Number of Claims Reported | Claim		6,040
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 165,967	161,639	153,968	140,831	111,029	$ 53,329
Claim Frequency	[1]	22.80%
Accident Year 2012 [Member]
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 184,460	193,515	212,738	222,075	222,549
Total IBNR plus Expected Development on Reported Claims		$ 7,798
Cumulative Number of Claims Reported | Claim		5,743
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 154,553	149,161	133,658	107,467	$ 50,579
Claim Frequency	[1]	18.71%
Accident Year 2013 [Member]
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 220,457	233,656	241,811	241,810
Total IBNR plus Expected Development on Reported Claims		$ 11,868
Cumulative Number of Claims Reported | Claim		5,761
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 165,994	150,304	119,507	$ 51,396
Claim Frequency	[1]	16.54%
Accident Year 2014 [Member]
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 249,097	268,846	268,846
Total IBNR plus Expected Development on Reported Claims		$ 21,004
Cumulative Number of Claims Reported | Claim		5,815
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 153,320	119,820	$ 53,060
Claim Frequency	[1]	14.93%
Accident Year 2015 [Member]
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 262,573	262,573
Total IBNR plus Expected Development on Reported Claims		$ 28,658
Cumulative Number of Claims Reported | Claim		5,477
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 121,599	$ 54,141
Claim Frequency	[1]	14.15%
Accident Year 2016 [Member]
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 250,491
Total IBNR plus Expected Development on Reported Claims		$ 34,737
Cumulative Number of Claims Reported | Claim		5,104
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance		$ 52,238
Claim Frequency	[1]	13.47%

[1] Frequency, as calculated above, refers to reported claims divided by gross premium earned

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Loss and Loss Adjustment Expenses - Summary of Average Annual Percentage Payout Of Incurred Claims By Age Net of Reinsurance For Worker's Compensation and general Liability (Unaudited) (Detail)	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008	Dec. 31, 2007
Shortduration Insurance Contracts Liability For Unpaid Claims And Allocated Claim Adjustment Expense Net [Abstract]
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance 1	24.00%
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance 2		29.70%
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance 3			15.40%
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance 4				8.10%
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance 5					4.60%
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance 6						2.70%
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance 7							1.90%
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance 8								1.20%
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance 9									0.80%
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance 10										0.70%

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Loss and Loss Adjustment Expenses - Reconciliation of Beginning and Ending Reserve Balances, Net of Related Amounts Recoverable from Reinsurers (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Roll Forward In Liability For Unpaid Claims And Claims Adjustment Expense [Abstract]
Balance, beginning of period	$ 718,033	$ 687,602	$ 614,557
Less amounts recoverable from reinsurers on unpaid loss and loss adjustment expenses	64,858	59,334	48,699
Net balance, beginning of period	653,175	628,268	565,858
Add incurred related to:
Current accident year	250,337	262,387	268,633
Prior accident years	(51,306)	(47,814)	(23,717)
Total incurred	199,031	214,573	244,916
Less paid related to:
Current accident year	52,085	53,955	52,848
Prior accident years	135,601	135,711	129,658
Total paid	187,686	189,666	182,506
Net balance, end of period	664,520	653,175	628,268
Add amounts recoverable from reinsurers on unpaid loss and loss adjustment expenses	78,256	64,858	59,334
Balance, end of period	$ 742,776	$ 718,033	$ 687,602

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Loss and Loss Adjustment Expenses - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Unpaid Losses And Loss Expenses [Line Items]
Loss and LAE Related to Prior Periods	$ (51,306)	$ (47,814)	$ (23,717)
Accident Year 2012 [Member]
Unpaid Losses And Loss Expenses [Line Items]
Loss and LAE Related to Prior Periods	9,100
Accident Year 2013 [Member]
Unpaid Losses And Loss Expenses [Line Items]
Loss and LAE Related to Prior Periods	13,200
Accident Year 2014 [Member]
Unpaid Losses And Loss Expenses [Line Items]
Loss and LAE Related to Prior Periods	$ 19,700

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Loss and Loss Adjustment Expenses - Summary Exposures to Various Asbestos Related Claims (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Asbestos Claims [Line Items]
Balance, beginning of period	$ 718,033	$ 687,602	$ 614,557
Incurred losses and LAE during the current year	199,031	214,573	244,916
Loss and LAE payments	(52,085)	(53,955)	(52,848)
Balance, end of period	742,776	718,033	687,602
Asbestos Issue [Member]
Asbestos Claims [Line Items]
Balance, beginning of period	958	819	219
Incurred losses and LAE during the current year	816	444	882
Loss and LAE payments	(287)	(305)	(282)
Balance, end of period	$ 1,487	$ 958	$ 819

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Statutory Accounting and Regulatory Requirements - Insurance Subsidiaries (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Insurance [Abstract]
Capital and surplus	$ 394,016	$ 371,365	$ 377,742
Net income	79,858	71,937	50,205
Net realized gains (losses) on investments	$ (504)	$ (3,131)	$ 693

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Statutory Accounting and Regulatory Requirements - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Insurance [Abstract]
Dividends to the Company	10.00%
Dividends paid	$ 67.0	$ 50.0	$ 25.0
Dividends permissible to pay without seeking regulatory approval	$ 68.7

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Capital Stock - Additional Information (Detail) - $ / shares	Dec. 31, 2016	Dec. 31, 2015
Equity [Abstract]
Common stock, shares authorized	50,000,000	50,000,000
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares issued	20,488,385	20,388,396
Common stock, shares outstanding	19,230,135	19,130,146
Preferred stock, shares authorized	10,000,000
Preferred stock, par value	$ 0.01
Preferred stock, shares outstanding	0

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Stock Options and Restricted Stock - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2016 USD ($) Company shares	Dec. 31, 2015 USD ($) shares	Dec. 31, 2014 USD ($) shares	Dec. 31, 2013 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total tax expense	$ 995,000	$ 2,203,000	$ 2,841,000
2005 Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options exercise price	100.00%
Duration for Stock option grants exercisable	10 years
Stock options exercise period	5 years
Expiration of stock option	90 days
Unexercised portion of stock option remains exercisable	1 year
Number of companies used for the estimation of expected volatility | Company	6
Dividend yield assumed	0.00%
Cash dividends paid				$ 0
Compensation expense	$ 58,000	138,000	325,000
Total tax expense	$ 110,000	$ 81,000	$ 38,000
Restricted stock outstanding | shares	800	1,600	2,400	6,400
Non-Employee Director Restricted Stock Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense	$ 361,000	$ 266,000	$ 184,000
Total tax expense	$ 52,000	$ 13,000	$ 7,000
Shares authorized under incentive plan | shares	100,000
Common stock available for future awards | shares	20,122
Restricted stock award for a number of shares	$ 45,000
Restricted stock outstanding | shares	5,576	7,112	5,229	5,376
Restricted stock granted | shares	5,952	7,112	5,229
Non-Employee Director Restricted Stock Plan [Member] | Restricted Stock [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Increase in annual restricted stock award	$ 75,000
2012 Equity and Incentive Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized under incentive plan | shares	500,000
Common stock available for future awards | shares	355,777
Restricted stock granted | shares	27,077	50,461
2012 Equity and Incentive Compensation Plan [Member] | Share Based Grants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense	$ 849,000	$ 599,000	$ 580,000
2012 Equity and Incentive Compensation Plan [Member] | Long-Term Incentive Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense	$ 334,000	$ 220,000	$ 429,000

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Stock Options and Restricted Stock - Stock Options Outstanding (Detail) - 2005 Incentive Plan [Member] - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares outstanding, Beginning balance	88,879	282,083	576,248
Shares, Granted	0	0	0
Shares, Exercised	(68,879)	(193,204)	(294,165)
Shares Canceled, forfeited, or expired	0	0	0
Shares outstanding, Ending balance	20,000	88,879	282,083	576,248
Shares exercisable, Ending balance	20,000	88,879	282,083
Weighted- Average Exercise Price, Beginning balance	$ 12.10	$ 11.30	$ 11.12
Weighted- Average Exercise Price, Granted	0	0	0
Weighted- Average Exercise Price, Exercised	12.14	9.55	9.09
Weighted- Average Exercise Price, Canceled, forfeited, or expired	0	0	0
Weighted- Average Exercise Price, Ending balance	8.71	12.10	11.30	$ 11.12
Weighted- Average Exercise Price, Exercisable Ending balance	$ 8.71	$ 12.10	$ 11.30
Weighted- Average Remaining Contractual Life (in years)	3 years 1 month 6 days	4 years 3 months 18 days	3 years 7 months 6 days	3 years 9 months 18 days
Weighted- Average Remaining Contractual Life (in years), Exercised	3 years 3 months 18 days
Weighted- Average Remaining Contractual Life (in years), Exercisable	3 years 1 month 6 days	4 years 3 months 18 days	3 years 7 months 6 days

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Stock Options and Restricted Stock - Weighted Average Grant Date Fair Values of Options Granted (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Cash received from option exercises	$ 837	$ 1,844	$ 2,674
Total tax benefits realized for tax deductions from options exercised	833	2,109	2,797
Total intrinsic value of options exercised	2,967	6,969	9,145
Grant date fair value of options vested			144
Aggregate intrinsic value of vested options outstanding	$ 1,073	$ 3,448	$ 8,763

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Stock Options and Restricted Stock - Restricted Stock Outstanding (Detail) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
2005 Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares, Nonvested outstanding, Beginning balance	1,600	2,400	6,400
Shares, Vested	(800)	(800)	(800)
Shares, Forfeited			(3,200)
Shares, Nonvested outstanding, Ending balance	800	1,600	2,400
Weighted-Average Grant-Date Fair Value per Share, Beginning balance	$ 27.35	$ 27.35	$ 27.47
Weighted-Average Grant-Date Fair Value per Share, Vested	27.35	27.35	27.35
Weighted-Average Grant-Date Fair Value per Share, Forfeited			27.59
Weighted-Average Grant-Date Fair Value per Share, Ending balance	$ 27.35	$ 27.35	$ 27.35
Non-Employee Director Restricted Stock Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares, Nonvested outstanding, Beginning balance	7,112	5,229	5,376
Shares, Granted	5,952	7,112	5,229
Shares, Vested	(7,488)	(5,229)	(5,376)
Shares, Nonvested outstanding, Ending balance	5,576	7,112	5,229
Weighted-Average Grant-Date Fair Value per Share, Beginning balance	$ 44.26	$ 37.27	$ 33.47
Weighted-Average Grant-Date Fair Value per Share, Granted	63.57	44.26	37.27
Weighted-Average Grant-Date Fair Value per Share, Vested	44.54	37.27	33.47
Weighted-Average Grant-Date Fair Value per Share, Ending balance	$ 64.50	$ 44.26	$ 37.27
2012 Incentive Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares, Nonvested outstanding, Beginning balance	77,528	72,921	82,609
Shares, Granted	27,077	50,461	4,312
Shares, Vested	(26,294)	(27,537)	(14,000)
Shares, Forfeited	(1,919)	(18,317)
Shares, Nonvested outstanding, Ending balance	76,392	77,528	72,921
Weighted-Average Grant-Date Fair Value per Share, Beginning balance	$ 40.57	$ 34.59	$ 33.93
Weighted-Average Grant-Date Fair Value per Share, Granted	54.44	45.80	43.83
Weighted-Average Grant-Date Fair Value per Share, Vested	45.18	37.27	33.58
Weighted-Average Grant-Date Fair Value per Share, Forfeited		35.48
Weighted-Average Grant-Date Fair Value per Share, Ending balance	$ 43.91	$ 40.57	$ 34.59

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Earnings Per Share - Calculation of Basic and Diluted Earnings Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Earnings Per Share Basic [Abstract]
Net income available to common shareholders – basic									$ 77,865	$ 70,462	$ 53,666
Basic weighted-average common shares									19,105,806	18,941,077	18,646,128
Basic earnings per share	$ 1.00	$ 0.94	$ 0.87	$ 1.27	$ 1.21	$ 0.95	$ 0.76	$ 0.80	$ 4.08	$ 3.72	$ 2.88
Net income available to common shareholders - diluted	$ 19,073	$ 17,896	$ 16,639	$ 24,257	$ 23,073	$ 17,940	$ 14,319	$ 15,130	$ 77,865	$ 70,462	$ 53,666
Weighted average common shares									19,105,806	18,941,077	18,646,128
Stock options and performance shares									97,844	178,109	282,376
Diluted weighted average common shares									19,203,650	19,119,186	18,928,504
Diluted earnings per common share	$ 0.99	$ 0.93	$ 0.87	$ 1.27	$ 1.21	$ 0.94	$ 0.75	$ 0.79	$ 4.05	$ 3.69	$ 2.84

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Earnings Per Share - Calculation of Percentage of Net Income Allocable to Common Shareholders (Detail) - shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Earnings Per Share [Abstract]
Basic weighted-average common shares	19,105,806	18,941,077	18,646,128
Add: Other common shares eligible for common dividends:
Weighted average restricted shares and stock options (including tax benefit component)	97,844	178,109	282,376
Diluted weighted average common shares	19,203,650	19,119,186	18,928,504

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Comprehensive Income and Accumulated Other Comprehensive Income - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2016
Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]
Comprehensive income tax rate	35.00%

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Comprehensive Income and Accumulated Other Comprehensive Income - Schedule of Changes in Accumulated Other Comprehensive Income (AOCI) (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	$ 453,981	$ 446,968	$ 416,814
Net current period other comprehensive income (loss)	(3,079)	(223)	7,105
Ending Balance	456,150	453,981	446,968
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	2,587	2,810	(4,295)
Other comprehensive income (loss) before reclassification	(3,231)	(1,584)	6,558
Amounts reclassified from accumulated other comprehensive income	152	1,361	547
Net current period other comprehensive income (loss)	(3,079)	(223)	7,105
Ending Balance	$ (492)	$ 2,587	$ 2,810

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Comprehensive Income and Accumulated Other Comprehensive Income - Reclassification Out of Accumulated Other Comprehensive Income (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Income before income taxes	$ 27,784	$ 26,027	$ 24,615	$ 34,395	$ 33,768	$ 25,890	$ 20,112	$ 21,197	$ 112,821	$ 100,967	$ 73,749
Income tax expense									(34,956)	(30,505)	(20,083)
Net income	$ 19,073	$ 17,896	$ 16,639	$ 24,257	$ 23,073	$ 17,940	$ 14,319	$ 15,130	77,865	70,462	53,666
Changes in Net Unrealized Gains (Losses) on Investment Securities [Member] | Reclassification Out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Unrealized losses on available-for-sale securities									(234)	(494)	(825)
Other-than-temporary impairment										(1,600)	(16)
Income before income taxes									(234)	(2,094)	(841)
Income tax expense									82	733	294
Net income									$ (152)	$ (1,361)	$ (547)

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Comprehensive Income and Accumulated Other Comprehensive Income - Other Comprehensive Income (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Equity [Abstract]
Unrealized gain (loss) on available-for-sale securities, Pre-tax Amount	$ (4,908)	$ (2,572)	$ 10,133
Change in unrealized losses on available-for-sale securities with OTTI, Pre-Tax Amount		176
Less amortization of differences between fair value and amortized cost for fixed maturity security transfer, Pre-tax Amount	(63)	(40)	(44)
Less reclassification adjustment for gains realized in net income, Pre-Tax Amount	234	2,093	842
Net unrealized gain loss, Pre-Tax Amount	(4,737)	(343)	10,931
Other comprehensive income, Pre-Tax Amount	(4,737)	(343)	10,931
Unrealized gain loss on available-for-sale securities, Tax Expense	(1,718)	(900)	3,546
Change in unrealized losses on available-for-sale securities with OTTI, Tax Expense		62
Less amortization of differences between fair value and amortized cost for fixed maturity security transfer, Tax Expense	(22)	(14)	(15)
Less reclassification adjustment for gains realized in net income, Tax Expense	82	732	295
Net unrealized gain loss, Tax Expense	(1,658)	(120)	3,826
Other comprehensive income, Tax Expense	(1,658)	(120)	3,826
Unrealized gain (loss) on available-for-sale securities, Net-of-Tax Amount	(3,190)	(1,672)	6,587
Change in unrealized losses on available-for-sale securities with OTTI, Net-of-Tax Amount		114
Less amortization of differences between fair value and amortized cost for fixed maturity security transfer, Net-of-Tax Amount	(41)	(26)	(29)
Reclassification adjustment for gains realized in net income, Net-of-Tax Amount	152	1,361	547
Net unrealized gain loss, Net-of-Tax Amount	(3,079)	(223)	7,105
Other comprehensive income, Net-of-Tax Amount	$ (3,079)	$ (223)	$ 7,105

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Employee Benefit Plan - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Compensation And Retirement Disclosure [Abstract]
Matches employee compensation for participating employees	2.00%
Fully vested in employer contributions	5 years
Defined contribution this plan	$ 0.4	$ 0.4	$ 0.4

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Commitments and Contingencies - Fair Value of Annuities (Detail) $ in Thousands	Dec. 31, 2016 USD ($)
Commitments And Contingencies [Line Items]
Statement value of annuities exceeding 1% of statutory surplus	$ 96,056
Metropolitan Life Insurance Company (A+) [Member]
Commitments And Contingencies [Line Items]
Statement value of annuities exceeding 1% of statutory surplus	17,098
Pacific Life and Annuity Company (A+) [Member]
Commitments And Contingencies [Line Items]
Statement value of annuities exceeding 1% of statutory surplus	16,688
American General Life Insurance (A) [Member]
Commitments And Contingencies [Line Items]
Statement value of annuities exceeding 1% of statutory surplus	15,049
New York Life Insurance Company (A++) [Member]
Commitments And Contingencies [Line Items]
Statement value of annuities exceeding 1% of statutory surplus	11,408
John Hancock Life Insurance Company USA (A+) [Member]
Commitments And Contingencies [Line Items]
Statement value of annuities exceeding 1% of statutory surplus	6,724
Athene Annuity and Life Assurance Company (A-) [Member]
Commitments And Contingencies [Line Items]
Statement value of annuities exceeding 1% of statutory surplus	5,164
Other [Member]
Commitments And Contingencies [Line Items]
Statement value of annuities exceeding 1% of statutory surplus	$ 23,925

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Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Millions	1 Months Ended	12 Months Ended
	Feb. 28, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Loss Contingencies [Line Items]
Retention amount		$ 5.0
Rent expense		0.2	$ 0.2	$ 0.2
AIIC [Member] | Iowa [Member]
Loss Contingencies [Line Items]
Appeal bond		27.8
AIIC [Member] | 2009 Workers' Compensation Claim [Member] | Iowa [Member]
Loss Contingencies [Line Items]
Workers compensation claim, damages awarded	$ 25.3
Workers compensation claims contingency reserves		2.4
Total amount expensed on workers compensation claim		$ 5.4
AIIC [Member] | Plaintiff Seeking Actual Damages [Member] | Iowa [Member]
Loss Contingencies [Line Items]
Amount of damages	0.3
AIIC [Member] | Plaintiff Seeking Punitive Damages [Member] | Iowa [Member]
Loss Contingencies [Line Items]
Amount of damages	$ 25.0

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Commitments and Contingencies - Future Minimum Lease Payments (Detail) $ in Thousands	Dec. 31, 2016 USD ($)
Operating Leases Future Minimum Payments Due [Abstract]
2017	$ 131
2018	74
2019	6
Total future minimum lease payments	$ 211

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Concentration of Operations - Net Premiums Earned for the Different Lines of Business (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Schedule Of Premiums Earned Net By Segment [Line Items]
Net premiums earned	$ 92,097	$ 89,918	$ 90,728	$ 95,961	$ 95,034	$ 90,504	$ 95,569	$ 94,787	$ 368,704	$ 375,894	$ 375,747
Premium earned percentage									100.00%	100.00%	100.00%
Workers Compensation [Member]
Schedule Of Premiums Earned Net By Segment [Line Items]
Net premiums earned									$ 368,704	$ 375,894	$ 375,746
Premium earned percentage									100.00%	100.00%	100.00%
General Liability [Member]
Schedule Of Premiums Earned Net By Segment [Line Items]
Net premiums earned											$ 1
Premium earned percentage									0.00%	0.00%	0.00%

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Concentration of Operations - Net Premiums Earned for the Top Ten States (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Schedule Of Premiums Earned Net By Segment [Line Items]
Net premiums earned	$ 92,097	$ 89,918	$ 90,728	$ 95,961	$ 95,034	$ 90,504	$ 95,569	$ 94,787	$ 368,704	$ 375,894	$ 375,747
Premium earned percentage									100.00%	100.00%	100.00%
Pennsylvania [Member]
Schedule Of Premiums Earned Net By Segment [Line Items]
Net premiums earned									$ 39,460	$ 36,294	$ 35,488
Premium earned percentage									10.70%	9.70%	9.40%
Georgia [Member]
Schedule Of Premiums Earned Net By Segment [Line Items]
Net premiums earned									$ 38,168	$ 40,497	$ 36,761
Premium earned percentage									10.40%	10.80%	9.80%
Louisiana [Member]
Schedule Of Premiums Earned Net By Segment [Line Items]
Net premiums earned									$ 30,426	$ 38,874	$ 47,643
Premium earned percentage									8.30%	10.30%	12.70%
Florida [Member]
Schedule Of Premiums Earned Net By Segment [Line Items]
Net premiums earned									$ 29,051	$ 24,792	$ 20,691
Premium earned percentage									7.90%	6.60%	5.50%
Illinois [Member]
Schedule Of Premiums Earned Net By Segment [Line Items]
Net premiums earned									$ 25,796	$ 23,285	$ 20,606
Premium earned percentage									7.00%	6.20%	5.50%
North Carolina [Member]
Schedule Of Premiums Earned Net By Segment [Line Items]
Net premiums earned									$ 20,784	$ 20,062	$ 20,872
Premium earned percentage									5.60%	5.30%	5.60%
Virginia [Member]
Schedule Of Premiums Earned Net By Segment [Line Items]
Net premiums earned									$ 16,599	$ 15,656	$ 16,764
Premium earned percentage									4.50%	4.20%	4.50%
Minnesota [Member]
Schedule Of Premiums Earned Net By Segment [Line Items]
Net premiums earned									$ 15,130	$ 14,618	$ 13,159
Premium earned percentage									4.10%	3.90%	3.50%
South Carolina [Member]
Schedule Of Premiums Earned Net By Segment [Line Items]
Net premiums earned									$ 13,897	$ 12,955	$ 12,414
Premium earned percentage									3.80%	3.40%	3.30%
Wisconsin [Member]
Schedule Of Premiums Earned Net By Segment [Line Items]
Net premiums earned									$ 13,544	$ 11,203	$ 9,408
Premium earned percentage									3.70%	3.00%	2.50%
All Others [Member]
Schedule Of Premiums Earned Net By Segment [Line Items]
Net premiums earned									$ 125,849	$ 137,658	$ 141,941
Premium earned percentage									34.00%	36.60%	37.70%

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Fair Values of Financial Instruments - Summary of Carrying or Reported Values and Corresponding Fair Values for Financial Instruments (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fixed maturity securities—held to maturity	$ 568,931	$ 662,276
Fixed maturity securities—held to maturity	562,434	645,164
Fixed maturity securities—available for sale	479,097	380,022
Equity securities	33	31
Cash and cash equivalents	58,936	69,481
Short-term investments	29,580	7,718
Other investments	13,330	12,217
Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fixed maturity securities—held to maturity	562,434	645,164
Fixed maturity securities—available for sale	479,097	380,022
Equity securities	33	31
Cash and cash equivalents	58,936	69,481
Short-term investments	29,580	7,718
Other investments	$ 13,330	$ 12,217

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Fair Values of Financial Instruments - Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	$ 492,460	$ 392,270
Equity Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	33	31
Fair Value, Measurements, Recurring [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	479,130	380,053
Fair Value, Measurements, Recurring [Member] | Debt Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	479,097	380,022
Fair Value, Measurements, Recurring [Member] | Common Stock [Member] | Equity Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	33	31
Fair Value, Measurements, Recurring [Member] | States and Political Subdivisions [Member] | Debt Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	232,293	171,419
Fair Value, Measurements, Recurring [Member] | Corporate Bonds [Member] | Debt Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	182,515	201,304
Fair Value, Measurements, Recurring [Member] | U.S. Agency-Based Mortgage-Backed Securities [Member] | Debt Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	9,342	7,299
Fair Value, Measurements, Recurring [Member] | U.S. Treasury Securities [Member] | Debt Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	54,947
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	54,980	31
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Debt Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	54,947
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Common Stock [Member] | Equity Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	33	31
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Treasury Securities [Member] | Debt Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	54,947
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	424,150	380,022
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Debt Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	424,150	380,022
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | States and Political Subdivisions [Member] | Debt Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	232,293	171,419
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Corporate Bonds [Member] | Debt Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	182,515	201,304
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency-Based Mortgage-Backed Securities [Member] | Debt Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Available-for-Sale, Fair Value	$ 9,342	$ 7,299

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Fair Values of Financial Instruments - Schedule of Assets and Liabilities Measured at Amortized Cost (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	$ 568,931	$ 662,276
Fair Value, Inputs, Level 1 [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	6,779	7,599
Fair Value, Inputs, Level 2 [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	562,152	654,677
States and Political Subdivisions [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	399,483	423,754
States and Political Subdivisions [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	399,483	423,754
Corporate Bonds [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	144,016	170,573
Corporate Bonds [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	144,016	170,573
Commercial Mortgage-Backed Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	70	37,683
Commercial Mortgage-Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	70	37,683
U.S. Agency-Based Mortgage-Backed Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	10,915	14,471
U.S. Agency-Based Mortgage-Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	10,915	14,471
U.S. Treasury Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	6,779	7,599
U.S. Treasury Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	6,779	7,599
US Government-sponsored Enterprises Debt Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	5,637	5,781
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	5,637	5,781
Asset-Backed Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	2,031	2,415
Asset-Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Measurements Disclosure [Line Items]
Securities held-to-maturity-fixed maturity, Fair Value	$ 2,031	$ 2,415

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Fair Values of Financial Instruments - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Fair Value Measurements Disclosure [Line Items]
Securities held to maturity, carrying value	$ 562,434	$ 645,164
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Measurements Disclosure [Line Items]
Recognized impairment	300
Securities held to maturity, carrying value	300
Securities held to maturity, fair value	$ 500

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Quarterly Financial Data (Unaudited) - Unaudited Quarterly Financial Data (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Quarterly Financial Information Disclosure [Abstract]
Net premiums earned	$ 92,097	$ 89,918	$ 90,728	$ 95,961	$ 95,034	$ 90,504	$ 95,569	$ 94,787	$ 368,704	$ 375,894	$ 375,747
Net investment income	7,855	8,006	6,201	6,044	7,256	6,923	6,890	6,833	28,106	27,902	27,214
Net realized gains (losses) on investments	(1,468)	181	545	248	24	40	(2,617)	59	(494)	(2,494)	697
Total revenues	98,558	98,206	97,563	102,335	101,760	97,470	99,936	101,788	396,662	400,954	404,019
Income before income taxes	27,784	26,027	24,615	34,395	33,768	25,890	20,112	21,197	112,821	100,967	73,749
Net income	19,073	17,896	16,639	24,257	23,073	17,940	14,319	15,130	77,865	70,462	53,666
Net income available to common shareholders	$ 19,073	$ 17,896	$ 16,639	$ 24,257	$ 23,073	$ 17,940	$ 14,319	$ 15,130	$ 77,865	$ 70,462	$ 53,666
Earnings per share:
Basic	$ 1.00	$ 0.94	$ 0.87	$ 1.27	$ 1.21	$ 0.95	$ 0.76	$ 0.80	$ 4.08	$ 3.72	$ 2.88
Diluted	$ 0.99	$ 0.93	$ 0.87	$ 1.27	$ 1.21	$ 0.94	$ 0.75	$ 0.79	$ 4.05	$ 3.69	$ 2.84
Comprehensive income	$ 11,985	$ 16,183	$ 19,568	$ 27,051	$ 22,299	$ 19,248	$ 12,744	$ 15,948	$ 74,786	$ 70,239	$ 60,771
Extraordinary cash dividends declared per common share	$ 3.25				$ 3.00				$ 3.25	$ 3.00	$ 1.50	$ 0
Cash dividends declared per common share	$ 0.18	$ 0.18	$ 0.18	$ 0.18	$ 0.15	$ 0.15	$ 0.15	$ 0.15	$ 0.72	$ 0.60	$ 0.48

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Capital Management - Additional Information (Detail) - USD ($)	3 Months Ended		12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Oct. 31, 2016
Equity [Abstract]
Share repurchase new limit amount							$ 25,000,000
Shares repurchased under the program			0
Shares repurchased	1,258,250	1,258,250	1,258,250	1,258,250
Shares repurchased, value	$ 22,400,000		$ 22,400,000
Shares repurchased, average price			$ 17.78
Quarterly dividend	$ 0.18	$ 0.15	0.18	$ 0.15	$ 0.12	$ 0.08
Extraordinary cash dividends declared per common share	$ 3.25	$ 3.00	$ 3.25	$ 3.00	$ 1.50	$ 0

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Subsequent Events - Additional Information (Detail) - $ / shares	Feb. 21, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Subsequent Event [Line Items]
Cash dividend per share		$ 0.18	$ 0.15	$ 0.12	$ 0.08
Dividend Declared [Member]
Subsequent Event [Line Items]
Cash dividend per share		$ 0.18
Subsequent Event [Member] | Dividend Declared [Member]
Subsequent Event [Line Items]
Date of payment to shareholders entitled to dividends	Mar. 24, 2017
Date of record of shareholders entitled to dividends	Mar. 10, 2017

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Schedule II. Condensed Financial Information of Registrant - Condensed Balance Sheets (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Assets
Short-term investments	$ 29,580	$ 7,718
Other investments	13,330	12,217
Total investments	1,084,474	1,045,152
Cash and cash equivalents	58,936	69,481	$ 90,956	$ 123,077
Deferred income taxes	33,811	29,905
Property and equipment, net	6,636	6,181
Other assets	37,668	42,788
Total assets	1,518,856	1,502,045
Liabilities, redeemable preferred stock and shareholders’ equity
Total liabilities	1,062,706	1,048,064
Shareholders' equity (net of Treasury stock of $22,370 at December 31, 2016 and 2015	456,150	453,981	446,968	416,814
Total liabilities and shareholders’ equity	1,518,856	1,502,045
Parent Company [Member]
Assets
Short-term investments	11,939
Other investments	13,330	12,217
Investment in subsidiaries	415,767	408,135
Total investments	441,036	420,352
Cash and cash equivalents	9,596	26,968	$ 43,585	$ 47,726
Deferred income taxes	675	292
Notes receivable from subsidiaries	1,587	1,505
Property and equipment, net	1,942	1,817
Other assets	1,314	3,047
Total assets	456,150	453,981
Liabilities, redeemable preferred stock and shareholders’ equity
Shareholders' equity (net of Treasury stock of $22,370 at December 31, 2016 and 2015	456,150	453,981
Total liabilities and shareholders’ equity	$ 456,150	$ 453,981

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Schedule II. Condensed Financial Information of Registrant - Condensed Balance Sheets (Parenthetical) (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Condensed Balance Sheet Statements, Captions [Line Items]
Net of Treasury stock	$ 22,370	$ 22,370
Parent Company [Member]
Condensed Balance Sheet Statements, Captions [Line Items]
Net of Treasury stock	$ 22,370	$ 22,370

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Schedule II. Condensed Financial Information of Registrant - Condensed Statements of Income (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Revenues
Net investment income	$ 7,855	$ 8,006	$ 6,201	$ 6,044	$ 7,256	$ 6,923	$ 6,890	$ 6,833	$ 28,106	$ 27,902	$ 27,214
Fee and other income									347	316	361
Total revenues	98,558	98,206	97,563	102,335	101,760	97,470	99,936	101,788	396,662	400,954	404,019
Expenses
Total expenses									283,841	299,987	330,270
Income tax expense (benefit)									34,956	30,505	20,083
Net income	$ 19,073	$ 17,896	$ 16,639	$ 24,257	$ 23,073	$ 17,940	$ 14,319	$ 15,130	77,865	70,462	53,666
Parent Company [Member]
Revenues
Net investment income									1,509	854	1,541
Fee and other income									5,843	5,893	5,368
Total revenues									7,352	6,747	6,909
Expenses
Other operating costs									7,352	6,747	6,909
Total expenses									7,352	6,747	6,909
Income tax expense (benefit)									(156)	(57)	(13)
Gain (loss) before equity in earnings of subsidiaries									156	57	13
Equity in net income of subsidiaries									77,709	70,405	53,653
Net income									$ 77,865	$ 70,462	$ 53,666

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Schedule II. Condensed Financial Information of Registrant - Condensed Statements of Cash Flows (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating activities
Net cash (used in) provided by operating activities	$ 114,212	$ 92,859	$ 140,684
Investing activities
Purchases of property and equipment	(1,638)	(953)	(989)
Net cash (used in) provided by investing activities	(50,478)	(49,820)	(141,252)
Financing activities
Proceeds from stock option exercises	837	1,844	2,674
Tax benefit from share-based payments	995	2,203	2,841
Dividends to shareholders	(76,111)	(68,561)	(37,068)
Net cash used in financing activities	(74,279)	(64,514)	(31,553)
Change in cash and cash equivalents	(10,545)	(21,475)	(32,121)
Cash and cash equivalents at beginning of year	69,481	90,956	123,077
Cash and cash equivalents at end of year	58,936	69,481	90,956
Parent Company [Member]
Operating activities
Net cash (used in) provided by operating activities	2,771	(1,727)	2,161
Investing activities
Purchases of investments	(11,940)		(1,462)
Proceeds from sales of investments		250	2,404
Purchases of property and equipment	(924)	(627)	(691)
Dividends from subsidiary	67,000	50,000	25,000
Net cash (used in) provided by investing activities	54,136	49,623	25,251
Financing activities
Proceeds from stock option exercises	837	1,844	2,674
Tax benefit from share-based payments	995	2,204	2,841
Dividends to shareholders	(76,111)	(68,561)	(37,068)
Net cash used in financing activities	(74,279)	(64,513)	(31,553)
Change in cash and cash equivalents	(17,372)	(16,617)	(4,141)
Cash and cash equivalents at beginning of year	26,968	43,585	47,726
Cash and cash equivalents at end of year	$ 9,596	$ 26,968	$ 43,585

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Schedule VI. Supplemental Information Concerning Property-Casualty Insurance Operations (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Supplemental Information For Property Casualty Insurance Underwriters [Abstract]
Deferred Policy Acquisition Costs	$ 19,300	$ 20,412	$ 19,649
Reserves for Unpaid Loss and Loss Adjustment Expense	742,776	718,033	687,602
Unearned Premium	162,028	167,983	168,576
Earned Premium	368,704	375,894	375,747
Net Investment Income	28,106	27,902	27,214
Loss and LAE Related to Current Period	250,337	262,387	268,633
Loss and LAE Related to Prior Periods	(51,306)	(47,814)	(23,717)
Amortization of Deferred Policy Acquisition Costs	(44,321)	(44,841)	(43,817)
Paid Claims and Claim Adjustment Expenses	187,686	189,666	182,506
Net Premiums Written	$ 362,748	$ 375,301	$ 380,026