UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020

or

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

FOR THE TRANSITION PERIOD FROM                 TO

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 each class	Trading Symbol(s)	Name of each exchange on which registered
Common	AMSF	NASDAQ

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes ☒    No  ☐

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

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

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

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

As of April 27, 2020, there were 19,302,784 shares of the Registrant’s common stock, par value $0.01 per share, outstanding.

TABLE OF CONTENTS

		Page
		No.
FORWARD-LOOKING STATEMENTS		3
PART I - FINANCIAL INFORMATION		4
Item 1	Financial Statements	4
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4	Controls and Procedures	27
PART II - OTHER INFORMATION		28
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 6	Exhibits	28

2

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;

• 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;

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

• 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 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, rating factors, or taxes applicable to the Company, its policyholders or the agencies that sell its insurance;

• changes in current accounting standards or new accounting standards;

• 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;

• 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, and under the caption “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019. Actual results may differ materially from the results expressed or implied in these statements if the underlying assumptions prove to be incorrect or as the results of risks, uncertainties and other factors including the impact of the COVID-19 pandemic on the business and operations of the Company and our policyholders and the market value of the securities in our investment portfolio.  

3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	March 31, 2020			December 31, 2019
	(unaudited)
Assets
Investments:
Fixed maturity securities—held-to-maturity, at amortized cost net of allowance    for credit losses of $275 and $0 in 2020 and 2019, respectively,    (fair value $631,688 and $621,343 in 2020 and 2019, respectively)	$	608,315		$	599,421
Fixed maturity securities—available-for-sale, at fair value    (amortized cost $401,671, allowance for credit losses of $0 in 2020    and amortized cost $425,698, allowance for credit losses of $0 in 2019)		419,036			441,146
Equity securities, at fair value    (cost $33,227 and $24,457 in 2020 and 2019, respectively)		27,910			27,903
Short-term investments		44,121			56,548
Total investments		1,099,382			1,125,018
Cash and cash equivalents		79,523			43,813
Amounts recoverable from reinsurers    (net of allowance for credit losses of $449 and $0 in 2020 and 2019, respectively)		105,128			95,913
Premiums receivable    (net of allowance for credit losses of $5,050 and $5,112 in 2020 and 2019, respectively)		169,127			157,953
Deferred income taxes		17,750			17,513
Accrued interest receivable		10,218			9,730
Property and equipment, net		6,305			6,331
Deferred policy acquisition costs		19,719			19,048
Other assets		17,009			17,587
Total assets	$	1,524,161		$	1,492,906
Liabilities and shareholders’ equity
Liabilities:
Reserves for loss and loss adjustment expenses	$	779,283		$	772,887
Unearned premiums		146,171			140,873
Amounts held for others		39,439			37,937
Policyholder deposits		44,052			44,718
Insurance-related assessments		24,155			22,967
Federal income tax payable		6,431			3,220
Accounts payable and other liabilities		39,386			40,089
Payable for investments purchased		8,288			—
Total liabilities		1,087,205			1,062,691
Shareholders’ equity:
Common stock:  voting—$0.01 par value authorized shares—50,000,000    in 2020 and 2019; 20,561,034 and 20,560,833 shares issued and 19,302,784    and 19,302,583  shares outstanding in 2020 and 2019, respectively		205			205
Additional paid-in capital		213,267			213,004
Treasury stock, at cost (1,258,250 shares in 2020 and 2019)		(22,370	)		(22,370	)
Accumulated earnings		232,159			227,165
Accumulated other comprehensive income, net		13,695			12,211
Total shareholders’ equity		436,956			430,215
Total liabilities and shareholders’ equity	$	1,524,161		$	1,492,906

See accompanying notes.

4

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share data)

(unaudited)

	Three Months Ended
	March 31,
	2020			2019
Revenues
Gross premiums written	$	87,071		$	93,107
Ceded premiums written		(2,783	)		(2,430	)
Net premiums written	$	84,288		$	90,677
Net premiums earned	$	78,990		$	84,948
Net investment income		7,749			8,015
Net realized gains on investments		992			59
Net unrealized gains (losses) on equity securities		(8,763	)		2,158
Fee and other income		201			10
Total revenues		79,169			95,190
Expenses
Loss and loss adjustment expenses incurred		43,647			49,614
Underwriting and certain other operating costs		8,217			7,552
Commissions		6,055			6,368
Salaries and benefits		7,012			6,747
Policyholder dividends		1,023			1,100
Provision for investment related credit loss benefit		(26	)		—
Total expenses		65,928			71,381
Income before income taxes		13,241			23,809
Income tax expense		2,441			4,409
Net income	$	10,800		$	19,400
Earnings per share
Basic	$	0.56		$	1.01
Diluted	$	0.56		$	1.01
Shares used in computing earnings per share
Basic		19,266,016			19,229,134
Diluted		19,352,245			19,298,036
Cash dividends declared per common share	$	0.27		$	0.25

See accompanying notes.

5

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	Three Months Ended
	March 31,
	2020		2019
Net income	$	10,800	$	19,400
Other comprehensive income:
Unrealized gain on debt securities, net of tax		1,484		5,992
Change in deferred tax valuation allowance		—		(198	)
Comprehensive income	$	12,284	$	25,194

See accompanying notes.

6

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)

	Common Stock				Additional Paid-In		Treasury Stock						Accumulated			Accumulated Other Comprehensive
	Shares		Amounts		Capital		Shares			Amounts			Earnings			Income			Total
Balance at December 31, 2019		20,560,833	$	205	$	213,004		(1,258,250	)	$	(22,370	)	$	227,165		$	12,211		$	430,215
Impact of adoption of    ASU 2016-13		—		—		—		—			—			(594	)		—			(594	)
Comprehensive income:
Net income		—		—		—		—			—			10,800			—			10,800
Other comprehensive    income:
Change in unrealized    gains, net of tax		—		—		—		—			—			—			1,484			1,484
Comprehensive income:																				12,284
Common stock issued		201		—		—		—			—			—			—			—
Share-based compensation		—		—		263		—			—			—			—			263
Dividends to shareholders		—		—		—		—			—			(5,212	)		—			(5,212	)
Balance at March 31, 2020		20,561,034	$	205	$	213,267		(1,258,250	)	$	(22,370	)	$	232,159		$	13,695		$	436,956
	Common Stock				Additional Paid-In		Treasury Stock						Accumulated			Accumulated Other Comprehensive
	Shares		Amounts		Capital		Shares			Amounts			Earnings			Income (Loss)			Total
Balance at December 31, 2018		20,528,230	$	205	$	211,431		(1,258,250	)	$	(22,370	)	$	221,328		$	(832	)	$	409,762
Impact of adoption of    ASU 2016-02		—		—		—		—			—			(1	)		—			(1	)
Comprehensive income:
Net income		—		—		—		—			—			19,400			—			19,400
Other comprehensive    income:
Change in unrealized    losses, net of tax		—		—		—		—			—			—			5,992			5,992
Change in deferred tax    valuation allowance		—		—		—		—			—			—			(198	)		(198	)
Comprehensive income:																				25,194
Common stock issued upon    exercise of options		5,000		—		20		—			—			—			—			20
Share-based compensation		—		—		249		—			—			—			—			249
Dividends to shareholders		—		—		—		—			—			(4,819	)		—			(4,819	)
Balance at March 31, 2019		20,533,230	$	205	$	211,700		(1,258,250	)	$	(22,370	)	$	235,908		$	4,962		$	430,405

See accompanying notes.

7

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2020			2019
Operating activities
Net income	$	10,800		$	19,400
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		247			241
Net amortization of investments		2,074			2,347
Change in investment related allowance for credit losses		(26	)		—
Deferred income taxes		(481	)		5
Net realized gains on investments		(992	)		(59	)
Net unrealized (gains) losses on equity securities		8,763			(2,158	)
Share-based compensation		760			565
Changes in operating assets and liabilities:
Premiums receivable, net		(11,174	)		(11,832	)
Accrued interest receivable		(488	)		(720	)
Deferred policy acquisition costs		(671	)		(699	)
Other assets		234			(998	)
Reserves for loss and loss adjustment expenses		6,396			2,171
Unearned premiums		5,298			5,730
Reinsurance balances		(9,658	)		824
Amounts held for others and policyholder deposits		836			871
Accounts payable and other liabilities		3,294			4,588
Net cash provided by operating activities		15,212			20,276
Investing activities
Purchases of investments held-to-maturity		(26,201	)		(26,174	)
Purchases of investments available-for-sale		(21,592	)		(10,394	)
Purchases of equity securities		(8,770	)		(807	)
Purchases of short-term investments		(40,250	)		(64,320	)
Proceeds from maturities of investments held-to-maturity		22,018			40,578
Proceeds from sales and maturities of investments available-for-sale		47,812			26,365
Proceeds from sales and maturities of short-term investments		52,959			13,959
Purchases of property and equipment		(221	)		(22	)
Net cash provided by (used in) investing activities		25,755			(20,815	)
Financing activities
Proceeds from stock option exercises		—			20
Finance lease purchases		(12	)		(12	)
Dividends to shareholders		(5,245	)		(4,918	)
Net cash used in financing activities		(5,257	)		(4,910	)
Change in cash and cash equivalents		35,710			(5,449	)
Cash and cash equivalents at beginning of period		43,813			40,344
Cash and cash equivalents at end of period	$	79,523		$	34,895

See accompanying notes.

8

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Basis of Presentation

AMERISAFE, Inc. (the “Company”) is an insurance holding company incorporated in the state of Texas. The accompanying unaudited 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, logging and lumber, manufacturing, agriculture, maritime, and oil and gas. Assets and revenues of AIIC and its subsidiaries represent at least 95 % of comparable consolidated amounts of the Company for each of the three months ended March 31, 2020 and 2019.

In the opinion of management of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, the results of operations and cash flows for the periods presented. The unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q under the Securities Exchange Act of 1934 and therefore do not include all information and footnotes to be in conformity with accounting principles generally accepted in the United States (“GAAP”). The results for the interim periods are not necessarily indicative of the results of operations that may be expected for the year. The unaudited consolidated financial statements contained herein should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that 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.

Adopted Accounting Guidance

On January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses (“CECL”).  The prior guidance delays the recognition of credit losses until a probable loss has occurred.  The new guidance requires credit losses for securities measured at amortized cost to be determined using current expected credit loss estimates.  These estimates are derived from historical, current and reasonable supporting forecasts, including prepayments and estimates, and are recorded through a valuation account.  The same method is used for available-for-sale securities, but the valuation account is limited to the amount by which the fair value is below amortized cost.  

The Company implemented the new standard using the modified retrospective approach.  Results for reporting periods beginning after January 1, 2020 are presented under the new guidance while prior period amounts continue to be reported in accordance with previously applicable GAAP.  The Company recorded a net decrease to Retained Earnings of $594 thousand as of January 1, 2020, for the cumulative effect of adopting ASU 2016-13.  The transition adjustment includes a $243 thousand impact to establish a credit loss allowance for held-to-maturity securities.  The remaining $351 thousand of the transition adjustment was due to the creation of the reinsurance recoverable credit allowance.

The Company believes that under the standard there is no current expected credit allowance necessary for U.S. Government Securities in its judgment as:  1) Treasury securities typically are the most highly rated securities among rating agencies; 2) Treasury securities have a long history of no credit losses; 3) Treasury securities are guaranteed by a sovereign entity (the U.S. Government) that can print its own money and whose currency (the U.S. dollar) is the reserve currency.

The Company believes that under the standard there is no current expected credit allowance necessary for GNMA Securities in its judgment as:  1) GNMA securities typically are the most highly rated securities among rating agencies; 2) GNMA securities have a long history of no credit losses and payments are explicitly guaranteed by the United States; 3) Underlying mortgage loans for GNMA securities are insured by the Federal Housing Administration or guaranteed by the U.S. Department of Veteran Affairs; 4) the U.S. Government can print its own money to retire GNMA obligations.

9

The Company believes that under the standard there is no current expected credit allowance necessary for FNMA or Freddie Mac (FHLMC) Securities in its judgment as:  1) These securities typically are among the most highly rated securities among rating agencies; 2) There is a long history of no credit losses; 3) Principal and interest payments are guaranteed by the issuing agency;  4) There is an explicit guarantee by the U.S. Government that can print its own money and whose currency (the U.S. dollar) is the reserve currency.

The Company researched various options and methodologies and has chosen to use Moody’s default rates and recovery rates for our held-to-maturity fixed income securities based on the current credit rating of the security and the time period to the stated maturity date.  This is a probability of default (PD) and loss given default (LGD) methodology.

The credit rating used for held-to-maturity fixed income securities is the rating for each security as published by Moody’s, S&P, and Fitch to determine the probability of default.   If there are two ratings, the lower rating is used.  If there are three ratings, the median rating is used.  If there is one rating, that rating is used.  This methodology provides additional conservatism in determining the credit loss allowance needed.

For corporate fixed income securities, the probability of default (given a rating) comes from Moody’s annual study of Corporate Bond defaults published each February.  This study also contains the average recovery rates based on the historical defaults in the Moody’s study.  We have chosen to use the 1983-2018 data as more reflective of the current historical pattern of defaults (the study goes back to 1920).  The maximum maturity using the default rate is 20 years (any maturity greater than 20 years will use the 20-year rate).  

For municipal fixed income securities the probability of default (given a rating) comes from Moody’s annual study of Municipal Bond defaults published each July/August.  This study also contains the average recovery rates based on the historical defaults in the Moody’s study.  This study covers 1970-2018 data, which we believe is reflective of the current historical pattern of defaults.  The maximum maturity using the default rate is 20 years (any maturity greater than 20 years will use the 20-year rate).

The Company did not record a credit allowance for available-for-sale securities.  The available-for-sale portfolio is composed of highly rated securities, which carry a low risk of default.  The Company’s concentrations in municipal bonds have helped lower default risk, as the historical default rates and recovery rates for municipal bonds has been much better than corporate bonds rated at the same level.  The Company creates a watch list of available-for-sale securities that are below book value at the end of each quarter.  This watch list excludes US Treasury securities, GNMA Securities, and government agency securities (FNMA, etc.) as none of those securities will have an expected credit loss.  The watch list will also exclude those securities that are trading at least at $95 or above (par value $100) as the Company believes any slight difference between $95 and par likely reflect interest rate changes and liquidity only and are not a sign of credit impairment or market expectations for any current expected credit loss.  

The list is reviewed by the Management Investment Committee to evaluate any security where the discounted cash flows expected no longer exceed the book value of the security.  If the Company intends to sell the security (or more likely than not be required to sell the security before recovery of the loss) the Company will write down the security to fair value through earnings.  If the Company intends to hold the security, the Company will establish a credit loss allowance for the security through earnings, and adjust the allowance each quarter through earnings, as the security changes in value.

In determining the amount the credit loss allowance, the Company will consider all of the following factors:

1. The extent to which the fair value is less than the amortized cost basis

2. Adverse conditions in the security, industry, or geography, including:

a.) Changes in technology

b.) Discontinuation of a segment of business that may affect future earnings

c.) Changes in the quality of the credit enhancement, if any

3. Changes in the payment structure of the debt security

4. Failure of the issuer to make scheduled interest or principal payments

5. Any changes to the rating of the security by a rating agency

The calculation of the credit loss allowance will not take into account the amount of time the security has been below book value or when the security might be expected to recover in value.

10

The Company has researched various options and methodologies and has chosen to use Moody’s default rates and recovery rates for our unsecured reinsurance recoverables based on the current credit rating of the reinsurer and a time period of ten years.  This is a probability of default (PD) and loss given default (LGD) methodology.  The ten-year period is consistent with our current working layer reinsurance treaty where we have a three-year treaty, which must be commuted by the end of the tenth year.  We believe this is an appropriate approach to our reinsurance recoverables.  

The credit rating used for reinsurance recoverables uses the average rating for each reinsurer as published by Moody’s, S&P, Fitch and A.M. Best to determine the probability of default.   The median rating is used if there are three ratings.  The probability of default (given a rating) comes from Moody’s annual study of Corporate Bond defaults published each February.  This study also contains the average recovery rates based on the historical defaults in the Moody’s study.  We have chosen to use the 1983-2018 data as more reflective of the current historical pattern of defaults (the study goes back to 1920).  

The Company does not hold any debt securities for which an other-than-temporary impairment has been recognized.  Additionally, the Company does not hold any financial assets purchased with credit deterioration.

The Company’s internal working group evaluated the existing allowance for doubtful accounts reserving methodology for premiums receivable and determined the calculation was consistent with the new credit loss guidance.  There was no impact to the premiums receivable balance as a result of the adoption of the new standard.

The Company has elected not to establish a credit allowance for interest receivable.  The Company plans to continue use of the current policy for writing off balances receivable over ninety days old.  

Prospective Accounting Guidance

All issued but not yet effective accounting and reporting standards as of March 31, 2020 are either not applicable to the Company or are not expected to have a material impact on the Company.

Note 2. Stock Options and Restricted Stock

As of March 31, 2020, the Company has two equity incentive plans: the AMERISAFE Non-Employee Director Restricted Stock Plan (the “Restricted Stock Plan”) and the AMERISAFE 2012 Equity and Incentive Compensation Plan (the “2012 Incentive Plan”). In connection with the approval of the 2012 Incentive Plan by the Company’s shareholders, no further grants were made under the AMERISAFE 2005 Incentive Plan.  There are no outstanding options or restricted stock awards under the 2005 Incentive Plan. See Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 for additional information regarding the Company’s incentive plans.

During the three months ended March 31, 2020, the Company issued 201 shares of restricted common stock to non-employee directors.  The market value of these shares totaled $13.7 thousand.  During the three months ended March 31, 2019, the Company issued no shares of common stock.

During the three months ended March 31, 2020, there were no exercises of options to purchase common stock. During the three months ended March 31, 2019, options to purchase 5,000 shares of common stock were exercised. In connection with these exercises, the Company received $19.8 thousand of stock option proceeds.  The Company had no stock options outstanding as of March 31, 2020.

The Company recognized share-based compensation expense of $0.8 million in the quarter ended March 31, 2020 and $0.6 million for the same period in 2019.  

Note 3. Earnings Per Share

The Company computes earnings per share (“EPS”) in accordance with FASB Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share. The Company has no participating unvested common shares which contain nonforfeitable rights to dividends and applies the treasury stock method in computing basic and diluted earnings per share.

Basic EPS is calculated by dividing net income by the weighted-average number of common shares outstanding during the period.

11

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 were exercised or restricted stock becomes vested.

Three Months Ended

March 31,

2020