AMERISAFE INC (AMSF)

Results of Operations

The following table summarizes our consolidated financial results for the three and six months ended June 30, 2026 and 2025.

(1)
The net combined ratio is calculated by dividing the sum of loss and loss adjustment expenses incurred, underwriting and certain other operating costs, commissions, salaries and benefits, and policyholder dividends by net premiums earned in the current period. The net combined ratio is a key measure of underwriting performance traditionally used in the insurance industry. A net combined ratio under 100% generally reflects profitable underwriting results.

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

(3)
Book value per share is calculated by dividing shareholders’ equity by the total outstanding shares of our common stock as of the end of the reported period.

Consolidated Results of Operations for Three Months Ended June 30, 2026 Compared to June 30, 2025

Gross Premiums Written. Gross premiums written for the quarter ended June 30, 2026 were $86.0 million, compared to $79.7 million for the same period in 2025, an increase of 7.9%. The increase was attributable to a $4.3 million increase in voluntary premiums on policies written during the period and a $2.6 million increase in premiums resulting from payroll audits and related premium adjustments for policies written in previous quarters, partially offset by a $0.7 million decrease in residual market premium.

Net Premiums Written. Net premiums written for the quarter ended June 30, 2026 were $81.8 million, compared to $75.5 million for the same period in 2025, an increase of 8.3%. The increase was primarily attributable to the increase in gross premiums written. As a percentage of gross premiums earned, ceded premiums were 5.2% for the second quarter of 2026 compared to 5.7% for the second quarter of 2025. The decrease in ceded premiums as a percentage of gross premiums earned is a result of a change in our 2026 reinsurance treaties. For additional information, see Item 1, “Business—Reinsurance” in our Annual Report on Form 10-K for the year ended December 31, 2025.

Net Premiums Earned. Net premiums earned for the second quarter of 2026 were $77.3 million, compared to $69.4 million for the same period in 2025, an increase of 11.4%. The increase was primarily attributable to the increase in net premiums written.

Net Investment Income. Net investment income for the quarter ended June 30, 2026 was $6.5 million, compared to $6.7 million for the same period in 2025, a decrease of 2.4%. The decrease was due to lower average invested asset balances in the period compared to the same period in the prior year. The decrease in average invested assets was primarily attributable to capital returned to shareholders through dividend payments and share repurchases, which reduced cash and invested asset balances during the period. Average invested assets, including cash and cash equivalents, were $772.6 million in the quarter ended June 30, 2026 compared to average invested assets of $813.1 million for the same period in 2025, a decrease of 5.0%. The pre-tax investment yield on our investment portfolio was 3.4% per annum during the quarter ended June 30, 2026 compared to 3.3% per annum for the same period in 2025. The tax-equivalent yield on our investment portfolio was 3.9% per annum for the quarters ended June 30, 2026 and 2025. The tax-equivalent yield is calculated using the effective interest rate and the appropriate marginal tax rate.

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Net Realized Gains (Losses) on Investments. Net realized losses on investments in the quarter ended June 30, 2026 were $0.1 million compared to net realized gains of $3.1 million for the same period in 2025. The net realized losses in the second quarter of 2026 were mostly attributable to the redemption of fixed maturity securities. The net realized gains in the second quarter of 2025 were mostly attributable to the sales of equity and fixed maturity securities classified as available-for-sale.

Net Unrealized Gains (Losses) on Equity Securities. The market value of our equity securities increased by $8.1 million for the three months ended June 30, 2026 compared to an increase of $1.8 million for the same period in 2025. The increase in the market value of our equity securities was primarily due to stronger U.S. equity markets compared to the prior-year period.

Loss and Loss Adjustment Expenses Incurred. Loss and loss adjustment expenses (LAE) incurred totaled $48.3 million for the three months ended June 30, 2026, compared to $40.7 million for the same period in 2025, an increase of $7.7 million, or 18.9%. The current accident year loss and LAE incurred totaled $55.6 million for the three months ended June 30, 2026, compared to $49.3 million for the same period in 2025. As of June 30, 2026, our estimate for loss and LAE for accident year 2026 continues to be 72.0% of net premiums earned, reflective of pressure from continued rate decreases and long-term claim frequency and severity trends, as well as medical inflation. Our initial estimate for loss and LAE for accident year 2025 of 71.0% of net premiums earned was increased to 72.0% in the fourth quarter of 2025 largely due to the frequency of severity observed in that accident year. We recorded favorable prior accident year development of $7.3 million in the second quarter of 2026, compared to favorable prior accident year development of $8.6 million in the same period of 2025, as further discussed below in “Prior Year Development.” Our net loss ratio was 62.6% in the second quarter of 2026, compared to 58.6% for the same period of 2025.

Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits. Underwriting and certain other operating costs, commissions and salaries and benefits for the quarter ended June 30, 2026 were $24.6 million, compared to $21.7 million for the same period in 2025, an increase of 13.1%. This increase was primarily due to a $1.1 million increase in compensation expense related to an incentive bonus true-up recorded in prior year, a $0.8 million increase in accounts receivable write-offs and a $0.7 million increase in commission expense. Partially offsetting these amounts was a $0.3 million decrease in mandatory pooling arrangement fees. Our expense ratio was 31.8% in the second quarter of 2026 compared to 31.3% in the second quarter of 2025.

Income Tax Expense. Income tax expense for the three months ended June 30, 2026 was $3.7 million, compared to $3.5 million for the same period in 2025. The effective tax rate for the quarters ended June 30, 2026 and 2025 was 20.1%.

Consolidated Results of Operations for Six Months Ended June 30, 2026 Compared to June 30, 2025

Gross Premiums Written. Gross premiums written for the six months ended June 30, 2026 were $174.5 million, compared to $163.5 million for the same period in 2025, an increase of 6.7%. The increase was attributable to a $10.7 million increase in voluntary premiums on policies written during the period and a $1.2 million increase in premiums resulting from payroll audits and related premium adjustments for policies written in previous quarters. These increases were partially offset by a $0.9 million decrease in residual market premium.

Net Premiums Written. Net premiums written for the six months ended June 30, 2026 were $166.2 million, compared to $155.1 million for the same period in 2025, an increase of 7.1%. The increase was primarily attributable to an increase in gross premiums written. As a percentage of gross premiums earned, ceded premiums were 5.2% for the first six months of 2026, compared to 5.7% in the same period of 2025. The decrease in ceded premiums as a percentage of gross premiums earned is a result of a change in our 2026 reinsurance treaties. For additional information, see Item 1, “Business—Reinsurance” in our Annual Report on Form 10-K for the year ended December 31, 2025.

Net Premiums Earned. Net premiums earned for the six months ended June 30, 2026 were $152.3 million, compared to $138.3 million for the same period in 2025, an increase of 10.2%. The increase was primarily attributable to the increase in net premiums written.

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Net Investment Income. Net investment income for the first six months of 2026 was $13.1 million, compared to $13.3 million for the same period in 2025, a decrease of 1.6%. The decrease was due to lower average invested asset balances in the period compared to the same period in the prior year. The decrease in average invested assets was primarily attributable to capital returned to shareholders through dividend payments and share repurchases, which reduced cash and invested asset balances during the period. Average invested assets, including cash and cash equivalents, were $782.8 million in the six months ended June 30, 2026, compared to average invested assets of $824.1 million in the same period in 2025, a decrease of 5.0%. The pre-tax investment yield on our investment portfolio was 3.3% per annum for each of the six months ended June 30, 2026, and 2025. The tax-equivalent yield on our investment portfolio was 3.9% per annum for the first six months of 2026 and 2025. The tax-equivalent yield is calculated using the effective interest rate and the appropriate marginal tax rate.

Net Realized Gains (Losses) on Investments. Net realized losses on investments for the six months ended June 30, 2026 were $0.1 million compared to net realized gains of $3.1 million for the same period in 2025. The net realized losses in the first six months of 2026 were mostly attributable to the redemption of fixed maturity securities. The net realized gains in the first six months of 2025 were mostly attributable to the sales of equity and fixed maturity securities classified as available-for-sale.

Net Unrealized Gains (Losses) on Equity Securities. The market value of our equity securities increased by $6.5 million for the six months ended June 30, 2026 compared to a decrease of $1.3 million for the same period in 2025. The increase in the market value of our equity securities was primarily due to stronger U.S. equity markets compared to the prior-year period.

Loss and Loss Adjustment Expenses Incurred. Loss and LAE incurred totaled $94.8 million for the six months ended June 30, 2026, compared to $80.8 million for the same period in 2025, an increase of $14.0 million, or 17.3%. The current accident year loss and LAE incurred totaled $109.7 million for the six months ended June 30, 2026, compared to $98.2 million for the same period in 2025. As of June 30, 2026, our estimate for loss and LAE for accident year 2026

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

The financial and business analysis below provides information which the Company believes is relevant to an assessment and understanding of its consolidated financial position, results of operations and cash flows. The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 8 of this report. This discussion includes forward-looking statements that are not guarantees of future performance and are not necessarily indicative of future operating results. See “Cautionary Statement Regarding Forward-Looking Statements” in Part I above for further discussion.

Overview

We are a holding company that markets and underwrites workers’ compensation insurance through its insurance subsidiaries. Workers’ compensation insurance covers statutorily prescribed benefits that employers are obligated to provide to their employees who are injured in the course and scope of their employment. Our business strategy is focused on providing this coverage to small to mid-sized employers engaged in hazardous industries, principally construction, trucking, logging and lumber, agriculture, services, manufacturing, and maritime. Employers engaged in hazardous industries 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 most employers’ workplaces. These safety reviews are a vital component of our underwriting process and also promote safer workplaces. We utilize proactive claims management practices that we believe permit us to effectively manage the overall cost of our claims. In addition, our 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, Amerisafe General Agency, Inc. 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 18.5% in 2025, 20.2% in 2024 and 20.4% in 2023. We calculate book value per share by dividing ending shareholders’ equity by the number of common shares outstanding. Our book value per share was $13.39 at December 31, 2025, $13.51 at December 31, 2024 and $15.28 at December 31, 2023. We paid cash dividends of $2.56 per share in 2025, $4.48 per share in 2024 and $4.86 per share in 2023.

Investment income is an important element of our net income. Because the period of time between our receipt of premiums and the ultimate settlement of claims is often several years or longer, we are able to invest cash from premiums for significant periods of time. As a result, we are able to generate more investment income from our premiums as compared to insurance companies that operate in other lines of business that pay claims more quickly. At December 31, 2025, our investment portfolio, including cash and cash equivalents, was $796.8 million and produced net investment income of $27.0 million in 2025, $29.2 million in 2024 and $31.3 million in 2023.

The use of reinsurance is an important component of our business strategy. We purchase reinsurance to reduce our net liability on individual risks and to protect against catastrophic losses. For more information about our 2026 reinsurance program, see “Business—Reinsurance” in Item 1 of this report. 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. Reserves are based on estimates of the most likely ultimate cost of individual 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. 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, 2025 we recorded 91 severe claims, representing an average of 18 severe claims per year for accident years 2021 through 2025. The number of severe claims in any one accident year in this five-year period ranged from a low of 12 in 2023 to a high of 25 in 2025. The average reported case severity for these claims ranged from $2.0 million for the 2025 accident year to $3.8 million for the 2021 accident year. For the five accident years, the case incurred for these severe claims accounted for an average of 18.6 percentage points of our overall loss and loss adjustment expense (LAE) ratio, measured at December 31, 2025.

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 average per claim case incurred loss and loss adjustment expenses can also be affected by the 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, 2025, 2024 and 2023 were $613.6 million, $651.3 million and $674.0 million, respectively. As a percentage of gross reserves at year end, reserves for expenses incurred but not reported (IBNR) represented 10.5% in 2025, 16.5% in 2024 and 17.8% in 2023.

In 2025, we decreased our estimates for prior year loss reserves by $33.9 million. In 2024, we decreased our estimates for prior year loss reserves by $34.9 million. In 2023, we decreased our estimates for prior year loss reserves by $41.4 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.

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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 business and assumed premiums from mandatory pooling arrangements 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 ha

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