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, 2021

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 26, 2021, there were 19,331,059 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
Item 1	Financial Statements	4
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4	Controls and Procedures	25
PART II - OTHER INFORMATION
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 6	Exhibits	26

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;

• the impact of COVID-19 on the business operations of our insurance subsidiaries and policyholders, the value of our investments, and our revenues, results of operations and cash flows;

• 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 (including retail and wholesale brokers and agents);

• 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 service 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, 2020. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate.

3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	March 31, 2021			December 31, 2020
	(unaudited)
Assets
Investments:
Fixed maturity securities—held-to-maturity, at amortized cost net of allowance    for credit losses of $166 and $274 in 2021 and 2020, respectively,    (fair value $603,720 and $621,654 in 2021 and 2020, respectively)	$	575,108		$	585,130
Fixed maturity securities—available-for-sale, at fair value    (amortized cost $391,687, allowance for credit losses of $0 in 2021    and amortized cost $387,665, allowance for credit losses of $0 in 2020)		411,904			414,279
Equity securities, at fair value    (cost $37,682 and $35,787 in 2021 and 2020, respectively)		50,843			43,437
Short-term investments		87,279			45,898
Total investments		1,125,134			1,088,744
Cash and cash equivalents		33,074			61,757
Amounts recoverable from reinsurers    (net of allowance for credit losses of $452 in 2021 and 2020)		110,717			105,803
Premiums receivable    (net of allowance for credit losses of $4,803 and $4,791 in 2021 and 2020, respectively)		165,170			156,760
Deferred income taxes		14,506			13,665
Accrued interest receivable		9,669			9,274
Property and equipment, net		6,302			6,182
Deferred policy acquisition costs		18,684			17,810
Other assets		11,323			10,860
Total assets	$	1,494,579		$	1,470,855
Liabilities and shareholders’ equity
Liabilities:
Reserves for loss and loss adjustment expenses	$	759,758		$	760,561
Unearned premiums		137,511			129,260
Amounts held for others		45,022			43,402
Policyholder deposits		40,973			41,524
Insurance-related assessments		18,441			17,995
Federal income tax payable		3,972			417
Accounts payable and other liabilities		41,276			38,880
Total liabilities		1,046,953			1,032,039
Shareholders’ equity:
Common stock:  voting—$0.01 par value authorized shares—50,000,000    in 2021 and 2020; 20,589,309 and 20,589,309 shares issued and 19,331,059    and 19,331,059  shares outstanding in 2021 and 2020, respectively		206			206
Additional paid-in capital		215,468			215,316
Treasury stock, at cost (1,258,250 shares in 2021 and 2020)		(22,370	)		(22,370	)
Accumulated earnings		238,351			224,645
Accumulated other comprehensive income, net		15,971			21,019
Total shareholders’ equity		447,626			438,816
Total liabilities and shareholders’ equity	$	1,494,579		$	1,470,855

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,
	2021			2020
Revenues
Gross premiums written	$	81,514		$	87,071
Ceded premiums written		(2,517	)		(2,783	)
Net premiums written	$	78,997		$	84,288
Net premiums earned	$	70,746		$	78,990
Net investment income		6,583			7,749
Net realized gains on investments		319			992
Net unrealized gains (losses) on equity securities		5,511			(8,763	)
Fee and other income		192			201
Total revenues		83,351			79,169
Expenses
Loss and loss adjustment expenses incurred		39,517			43,647
Underwriting and certain other operating costs		6,927			8,217
Commissions		5,474			6,055
Salaries and benefits		6,566			7,012
Policyholder dividends		1,350			1,023
Provision for investment related credit loss benefit		(108	)		(26	)
Total expenses		59,726			65,928
Income before income taxes		23,625			13,241
Income tax expense		4,313			2,441
Net income	$	19,312		$	10,800
Earnings per share
Basic	$	1.00		$	0.56
Diluted	$	0.99		$	0.56
Shares used in computing earnings per share
Basic		19,311,710			19,266,016
Diluted		19,408,804			19,352,245
Cash dividends declared per common share	$	0.29		$	0.27

See accompanying notes.

5

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	Three Months Ended
	March 31,
	2021			2020
Net income	$	19,312		$	10,800
Other comprehensive income:
Unrealized gain (loss) on debt securities, net of tax		(5,048	)		1,484
Comprehensive income	$	14,264		$	12,284

See accompanying notes.

6

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Three Months Ended March 31, 2021 and 2020

(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, 2020		20,589,309	$	206	$	215,316		(1,258,250	)	$	(22,370	)	$	224,645		$	21,019		$	438,816
Comprehensive income:
Net income		—		—		—		—			—			19,312			—			19,312
Other comprehensive    income:
Change in unrealized    gains, net of tax		—		—		—		—			—			—			(5,048	)		(5,048	)
Comprehensive income:																				14,264
Share-based compensation		—		—		152		—			—			—			—			152
Dividends to shareholders		—		—		—		—			—			(5,606	)		—			(5,606	)
Balance at March 31, 2021		20,589,309	$	206	$	215,468		(1,258,250	)	$	(22,370	)	$	238,351		$	15,971		$	447,626
	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

See accompanying notes.

7

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2021			2020
Operating activities
Net income	$	19,312		$	10,800
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		270			247
Net amortization of investments		2,179			2,074
Change in investment related allowance for credit losses		(108	)		(26	)
Deferred income taxes		500			(481	)
Net realized gains on investments		(319	)		(992	)
Net unrealized (gains) losses on equity securities		(5,511	)		8,763
Net realized gains on disposal of assets		(23	)		—
Share-based compensation		571			760
Changes in operating assets and liabilities:
Premiums receivable, net		(8,410	)		(11,174	)
Accrued interest receivable		(395	)		(488	)
Deferred policy acquisition costs		(874	)		(671	)
Other assets		(266	)		234
Reserves for loss and loss adjustment expenses		(803	)		6,396
Unearned premiums		8,251			5,298
Reinsurance balances		(4,914	)		(9,658	)
Amounts held for others and policyholder deposits		1,069			836
Federal income taxes payable		3,555			3,211
Accounts payable and other liabilities		2,509			83
Net cash provided by operating activities		16,593			15,212
Investing activities
Purchases of investments held-to-maturity		(5,281	)		(26,201	)
Purchases of investments available-for-sale		(22,118	)		(21,592	)
Purchases of equity securities		(1,895	)		(8,770	)
Purchases of short-term investments		(42,286	)		(40,250	)
Proceeds from maturities of investments held-to-maturity		13,814			22,018
Proceeds from sales and maturities of investments available-for-sale		17,947			47,812
Proceeds from sales and maturities of short-term investments		585			52,959
Purchases of property and equipment		(390	)		(221	)
Proceeds from sales of property and equipment		23			—
Net cash provided by (used in) investing activities		(39,601	)		25,755
Financing activities
Finance lease purchases		(9	)		(12	)
Dividends to shareholders		(5,666	)		(5,245	)
Net cash used in financing activities		(5,675	)		(5,257	)
Change in cash and cash equivalents		(28,683	)		35,710
Cash and cash equivalents at beginning of period		61,757			43,813
Cash and cash equivalents at end of period	$	33,074		$	79,523

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, 2021 and 2020.

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, 2020.

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

The Company has not adopted any new accounting guidance in 2021.     

Prospective Accounting Guidance

All issued but not yet effective accounting and reporting standards as of March 31, 2021 are either not applicable to the Company or are not expected to have a material impact on the Company.

Note 2. Restricted Stock and Stock Options

As of March 31, 2021, 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”). See Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 for additional information regarding the Company’s incentive plans.

During the three months ended March 31, 2021, the Company did not issue any shares of common stock pursuant to vested performance awards or shares of restricted common stock to non-employee directors.    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 was $13.7 thousand.

During the three months ended March 31, 2021 and 2020, there were no exercises of options to purchase common stock.  The Company had no stock options outstanding as of March 31, 2021.

9

The Company recognized share-based compensation expense of $0.6 million in the quarter ended March 31, 2021 and $0.8 million for the same period in 2020.  

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.

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 restricted stock becomes vested.

	Three Months Ended
	March 31,
	2021		2020
	(in thousands, except share and per share amounts)
Basic EPS:
Net income	$	19,312	$	10,800
Basic weighted average common shares		19,311,710		19,266,016
Basic earnings per common share	$	1.00	$	0.56
Diluted EPS:
Net income	$	19,312	$	10,800
Diluted weighted average common shares:
Weighted average common shares		19,311,710		19,266,016
Restricted stock and stock options		97,094		86,229
Diluted weighted average common shares		19,408,804		19,352,245
Diluted earnings per common share	$	0.99	$	0.56

Note 4. Investments

The gross unrecognized gains and losses, amortized cost, allowance for credit losses, carrying amount, and fair value of those investments classified as held-to-maturity at March 31, 2021 are summarized as follows:

	Amortized Cost		Allowance for Credit Losses	Carrying Amount	Gross Unrecognized Gains	Gross Unrecognized Losses	Fair Value
	(in thousands)
States and political subdivisions	$	486,376	$