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AMERISAFE INC

AMERISAFE INCAMSFEarnings & Financial Report

Nasdaq · Financials · Fire, Marine & Casualty Insurance

AMERISAFE Inc. is a specialty insurance provider that focuses exclusively on workers' compensation coverage for small and mid-sized businesses in high-hazard industries including construction, logging, trucking, and manufacturing. It operates across 49 U.S. states, offering tailored insurance policies paired with targeted risk management support for clients.

What changed in AMERISAFE INC's 10-K — 2022 vs 2023

Top changes in AMERISAFE INC's 2023 10-K

258 paragraphs added · 268 removed · 244 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

130 edited+6 added−12 removed143 unchanged
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 believe that the higher premiums typically paid by our policyholders, together with our disciplined underwriting, 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.
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.
Corporate 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.
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. 2 Knowledgeable, Dedicated Employees .
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. Knowledgeable, Dedicated Employees .
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 non-credit related unrecognized gains and losses until realized.
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. 13 We classify the majority of our fixed maturity securities as “held-to-maturity.” We do not reflect any changes in non-credit related unrecognized gains and losses until realized.
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. 17 We believe reinsurance is critical to our business.
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 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.
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 agencies.
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 11 expenses. It is possible that our actual loss and loss adjustment expenses incurred may vary significantly from our estimates.
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.
Pearson has served as our Senior Vice President and Controller since October 2019 and previously served as Vice President and Controller from 2012 until October 2019. She has been employed with our Company since 1996. Regulation Holding Company Regulation Nearly all states have enacted legislation that regulates insurance holding company systems.
Pearson has served as our Senior Vice President and Controller since October 2019 and previously served as Vice President and Controller from 2012 until October 2019. She has been employed with our Company since 1996. 20 Regulation Holding Company Regulation Nearly all states have enacted legislation that regulates insurance holding company systems.
For information on the Terrorism Risk Act, see “—Reinsurance—Terrorism Reinsurance.” 25 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.
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.
The initial estimate of the case incurred amount can vary significantly from the amount ultimately 9 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.
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.
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. 26
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.
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.
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’ 3 compensation laws and do not have any other recourse against their employer.
We also mitigate potential losses from under-reporting of premium, delinquent, or 8 non-payment of premium by collecting a deposit from the policyholder at the inception of the policy, typically representing 15% of the total estimated annual premium.
We also mitigate potential losses from under-reporting of premium, delinquent, or non-payment of premium by collecting a deposit from the policyholder at the inception of the policy, typically representing 15% of the total estimated annual premium.
The 10 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. • 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 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. 9 • 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.
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 2022 IRIS results for AIIC, SOCI and AIICTX were within expected values for all 13 industry ratios.
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 2023 IRIS results for AIIC, SOCI, and AIICTX were within expected values for all 13 industry ratios.
Includes ship building and repair, pier and marine construction, inter-coastal construction, and stevedoring. • Telecommunications. Includes the installation and maintenance of overhead and underground telecommunication lines including cell phone towers. • Other. Includes a wide variety of high-hazard businesses such as gasoline dealers, building material suppliers, automobile dismantling, oil field contractors, railroad construction, and other businesses.
Includes the installation and maintenance of overhead and underground telecommunication lines including cell phone towers. Maritime. Includes ship building and repair, pier and marine construction, inter-coastal construction, and stevedoring. Other. Includes a wide variety of high-hazard businesses such as gasoline dealers, building material suppliers, automobile dismantling, oil field contractors, railroad construction, and other businesses.
For insured losses in 2023, each insurance group is responsible for a statutory deductible under the 2019 Act that is equal to 20% of its direct earned property and casualty insurance premiums. For losses occurring in 2023, the U.S. federal government will reimburse 80% of an insurance group’s covered losses over the statutory deductible.
For insured losses in 2024, each insurance group is responsible for a statutory deductible under the 2019 Act that is equal to 20% of its direct earned property and casualty insurance premiums. For losses occurring in 2024, the U.S. federal government will reimburse 80% of an insurance group’s covered losses over the statutory deductible.
Based on data received from the National Association of Insurance Commissioners (NAIC) we do not have more than 4.9% 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.
Based on data received from the National Association of Insurance Commissioners (NAIC) we do not have more than 4.8% 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.
In establishing our reserves, we review the results of analyses using actuarial methodologies that utilize historical loss data from our 37 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.
In establishing our reserves, we review the results of analyses using actuarial methodologies that utilize historical loss data from our 38 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.
For our paid and incurred development methods, we varied both the cumulative paid and incurred loss development factors (LDFs) by an increase and decrease of 30%, both individually and in combination with one another. The results of this sensitivity analysis, using December 31, 2022 data, are summarized below.
For our paid and incurred development methods, we varied both the cumulative paid and incurred loss development factors (LDFs) by an increase and decrease of 30%, both individually and in combination with one another. The results of this sensitivity analysis, using December 31, 2023 data, are summarized below.
The layers over $10.0 million provide coverage for terrorism including the use and/or dispersal of nuclear, biological, chemical and radiological agents with an annual aggregate limit of $90.0 million. Layers two through four provide coverage through December 31, 2023. The aggregate limit for all other claims under all layers is $180.0 million.
The layers over $10.0 million provide coverage for terrorism including the use and/or dispersal of nuclear, biological, chemical and radiological agents with an annual aggregate limit of $90.0 million. Layers two through four provide coverage through December 31, 2024. The aggregate limit for all other claims under all layers is $180.0 million.
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.
Workers’ compensation is a statutory system under which an employer is required to pay for its employees’ medical, disability, wage replacement, vocational rehabilitation and death benefit costs for work-related injuries or illnesses. Most employers satisfy this requirement by purchasing workers’ compensation insurance.
Includes crop maintenance and harvesting, grain and produce operations, nursery operations, meat processing, and livestock feed and transportation. 4 • Manufacturing. Includes a diverse group of businesses such as the production of goods for use or sale using labor and machines, tools, chemical and biological processing or formulation. • Maritime.
Includes crop maintenance and harvesting, grain and produce operations, nursery operations, meat processing, and livestock feed and transportation. Manufacturing. Includes a diverse group of businesses such as the production of goods for use or sale using labor and machines, tools, chemical and biological processing or formulation. 4 Telecommunications.
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; • 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 estimated amount of loss for a reported claim is based upon various factors, including: • type of loss; • severity of the injury; • age and occupation of the injured employee; • estimated length of temporary disability; • anticipated permanent disability; 8 • 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.
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 $17 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 $18 billion.
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 these claims, while still providing an appropriate level of benefits to injured employees.
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 tail claims to close these claims, while still providing an appropriate level of benefits to injured employees.
(2) Subsidiary of Fairfax Financial Holdings Limited. 19 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 has been extended periodically, most recently by the Terrorism Risk Insurance Program Reauthorization Act of 2019 (the 2019 Act).
(2) Subsidiary of Fairfax Financial Holdings Limited. 17 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 has been extended periodically, most recently by the Terrorism Risk Insurance Program Reauthorization Act of 2019 (the 2019 Act).
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, 2022.
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, 2023.
The program consists of four layers of coverage. The first layer is a multi-year treaty that applies to losses incurred through December 31, 2025. The other layers are renewed annually. Our reinsurance treaty program provides us with reinsurance coverage for each loss occurrence up to $100.0 million, subject to applicable limitations, deductibles, retentions and aggregate limits.
The first layer is a multi-year treaty that applies to losses incurred through December 31, 2025. The other layers are renewed annually. Our reinsurance treaty program provides us with reinsurance coverage for each loss occurrence up to $100.0 million, subject to applicable limitations, deductibles, retentions and aggregate limits.
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. 14 Our investment policy establishes limitations and guidelines relating to, for example, asset allocation, diversification, credit ratings and duration.
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 risk-adjusted total return. Our investment policy establishes limitations and guidelines relating to, for example, asset allocation, diversification, credit ratings and duration.
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 $100 million for losses arising from acts of terrorism. This coverage is effective through December 31, 2023.
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 $100.0 million for losses arising from acts of terrorism. This coverage is effective through December 31, 2024.
The Company’s 2023 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.
The Company’s 2024 catastrophe excess of loss layer for loss occurrences greater than $10.0 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.
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. 3 Industry Overview.
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 share repurchases, and produce an appropriate risk adjusted return on our investment portfolio. Industry Overview.
In addition to our voluntary workers’ compensation business, we assume reinsurance premiums from mandatory pooling arrangements, and in 2022 we underwrote workers’ compensation policies for employers assigned to us, in each case to fulfill our obligations under residual market programs implemented by the states in which we operate.
In addition to our voluntary workers’ compensation business, we assume reinsurance premiums from mandatory pooling arrangements, and prior to 2023 we underwrote workers’ compensation policies for employers assigned to us, in each case to fulfill our obligations under residual market programs implemented by the states in which we operate.
Based on our 37-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.
Based on our 38-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 2 highly disciplined when quoting and binding new and renewal business.
In additional to health care and 401k retirement programs, we offer wellness initiatives and time off for annual wellness exams, a floating holiday and leisure day, reimbursements of health club memberships, quarterly wellness luncheons, an annual health fair and confidential counseling services to promote a culture of wellness.
In addition to health care and 401k retirement programs, we offer wellness initiatives and time off for annual wellness exams, a floating holiday and leisure day, reimbursements of health club memberships, wellness luncheons, an annual health fair and confidential counseling services to promote a culture of wellness.
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. 20 Human Capital Throughout our 37-year history, the retention, growth and development of our employees has been critical to our success.
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. 18 Human Capital Throughout our 38-year history, the retention, growth and development of our employees has been critical to our success.
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 (USL&H) 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.
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 (USL&H) and the Merchant Marine Act of 1920, or Jones Act.
Loss Development The table below shows the net loss development for business written each year from 2012 through 2022. 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 generally accepted accounting principles basis (GAAP).
Loss Development The table below shows the net loss development for business written each year from 2013 through 2023. 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 generally accepted accounting principles (GAAP) basis.
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, Environmental, Social and Governance (ESG) Report, and charters for the standing committees of our Board of Directors are available on our website as well as other shareholder communications.
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, Sustainability Report, and charters for the standing committees of our Board of Directors are available on our website as well as other shareholder communications.
Percentage of Gross Premiums Written Year Ended December 31, State 2022 2021 2020 Florida 11.8 % 11.7 % 11.0 % Georgia 11.0 % 12.5 % 12.6 % Louisiana 8.2 % 7.8 % 7.3 % Pennsylvania 7.8 % 6.8 % 8.0 % North Carolina 6.9 % 6.0 % 5.8 % Illinois 4.5 % 4.9 % 4.9 % Wisconsin 4.3 % 4.7 % 4.2 % Virginia 4.1 % 4.4 % 4.5 % Minnesota 3.7 % 3.7 % 3.7 % South Carolina 3.6 % 3.3 % 3.6 % Alabama 3.2 % 3.1 % 2.7 % Alaska 3.2 % 3.2 % 3.1 % Total 72.3 % 72.1 % 71.4 % 6 Sales and Marketing We sell our workers’ compensation insurance through independent agencies (including retail and wholesale brokers and agents).
Percentage of Gross Premiums Written Year Ended December 31, State 2023 2022 2021 Florida 13.4 % 11.8 % 11.7 % Georgia 10.9 % 11.0 % 12.5 % Pennsylvania 7.6 % 7.8 % 6.8 % Louisiana 7.5 % 8.2 % 7.8 % North Carolina 5.9 % 6.9 % 6.0 % Illinois 5.1 % 4.5 % 4.9 % Wisconsin 4.3 % 4.3 % 4.7 % Virginia 3.7 % 4.1 % 4.4 % South Carolina 3.3 % 3.6 % 3.3 % Minnesota 3.2 % 3.7 % 3.7 % Alaska 3.0 % 3.2 % 3.2 % Alabama 2.8 % 3.2 % 3.1 % Total 70.7 % 72.3 % 72.1 % Sales and Marketing We sell our workers’ compensation insurance through independent agencies (including retail and wholesale brokers and agents).
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 235,000 claims in our 37-year history.
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 239,000 claims in our 38-year history.
As of December 31, 2022, we averaged 47 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.
As of December 31, 2023, we averaged 44 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.
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. We have 24 reinsurers participating in our reinsurance treaty program in 2023.
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. We have 26 reinsurers participating in our reinsurance treaty program in 2024.
As of December 31, 2022, our insurance was sold through more than 2,300 independent agencies and our wholly-owned insurance agency subsidiary, Amerisafe General Agency, which is licensed in 30 states. We are selective in establishing and maintaining relationships with independent agencies.
As of December 31, 2023, our insurance was sold through more than 2,200 independent agencies and our wholly-owned insurance agency subsidiary, Amerisafe General Agency, which is licensed in 30 states. We are selective in establishing and maintaining relationships with independent agencies.
The table below shows the composition of our fixed maturity securities by remaining time to maturity as of December 31, 2022.
The table below shows the composition of our fixed maturity securities by remaining time to maturity as of December 31, 2023.
This includes various insurance certification programs and other professional development education, training and certifications. We also work with our employees to provide training in leadership development, professional development, project management skills and interpersonal skills development. Information About our Executive Officers The table below sets forth information about our executive officers and key employees as of February 21, 2023.
This includes various insurance certification programs and other professional development education, training and certifications. We also work with our employees to provide training in leadership development, professional development, project management skills and interpersonal skills development. 19 Information About our Executive Officers The table below sets forth information about our executive officers and key employees as of February 23, 2024.
For example, as of December 31, 2012, it was estimated that $515.3 million would be sufficient to settle all claims not already settled that had occurred on or prior to December 31, 2012, 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.
For example, as of December 31, 2013, it was estimated that $565.9 million would be sufficient to settle all claims not already settled that had occurred on or prior to December 31, 2013, 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.
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. Anastasios Omiridis has served as our Executive Vice President and Chief Financial Officer since September 2022.
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. Anastasios G.
Virgin Islands. We operate on a geographically diverse basis with 11.8% or less of our gross premiums written in 2022 derived from any one state. The table below identifies, for the years ended December 31, 2022, 2021 and 2020, the states in which the percentage of our gross premiums written exceeded 3.0% for any of the three years presented.
Virgin Islands. We operate on a geographically diverse basis with 13.4% or less of our gross premiums written in 2023 derived from any one state. The table below identifies, for the years ended December 31, 2023, 2022 and 2021, the states in which the percentage of our gross premiums written exceeded 3.0% for any of the three years presented.
He has been employed with our Company since 1995. Barbra E. McCrary has served as our Senior Vice President, Policyholder Services since November 2017 and served as Vice President, Premium Audit from 2010 until 2017. She has been employed with our Company since 1997. Angela W.
McCrary has served as our Senior Vice President, Policyholder Services since November 2017 and served as Vice President, Premium Audit from 2010 until 2017. She has been employed with our Company since 1997. Angela W.
The results of this sensitivity analysis, using December 31, 2022 data, are summarized below.
The results of this sensitivity analysis, using December 31, 2023 data, are summarized below.
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 93.8% in 2022. Focus on Small to Mid-Sized Employers.
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 94.1% in 2023. Focus on Small to Mid-Sized Employers.
While we actively market our insurance in 27 states, 46.5% of our voluntary in-force premiums were generated in the five states where we derived 5.0% or more of our gross premiums written in 2022. We are licensed in an additional 20 states, the District of Columbia and the U.S. Virgin Islands.
While we actively market our insurance in 27 states, 51.0% 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 2023. We are licensed in an additional 20 states, the District of Columbia and the U.S. Virgin Islands.
Our recoveries from state-managed trust funds for the years ended December 31, 2022, 2021 and 2020 were $3.6 million, $5.1 million and $4.5 million, respectively. Our cash paid for assessments to state-managed trust funds for the years ended December 31, 2022, 2021 and 2020 was $0.1 million, $0.8 million and $0.6 million, respectively.
Our recoveries from state-managed trust funds for the years ended December 31, 2023, 2022 and 2021 were $2.9 million, $3.6 million and $5.1 million, respectively. Our cash paid for assessments to state-managed trust funds for the years ended December 31, 2023, 2022 and 2021 was $1.8 million, $0.1 million and $0.8 million, respectively.
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, 2022, independent agencies accounted for 97.9% of our voluntary in-force premiums. No single independent agency accounted for more than 1.1% of our voluntary in-force premiums at that date.
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, 2023, independent agencies accounted for 98.2% of our voluntary in-force premiums. No single independent agency accounted for more than 1.8% of our voluntary in-force premiums at that date.
Our policy renewal rate on voluntary business that we elected to quote for renewal was 93.8% in 2022, 93.5% in 2021, and 94.4% in 2020.
Our policy renewal rate on voluntary business that we elected to quote for renewal was 94.1% in 2023, 93.8% in 2022, and 93.5% in 2021.
Workers’ compensation was the sixth-largest property and casualty insurance line in the United States in 2021, according to the National Council on Compensation Insurance, Inc., the NCCI. Direct premiums written in 2021 for the workers’ compensation insurance industry were $52 billion, and direct premiums written for the property and casualty industry as a whole were $793 billion.
Workers’ compensation was the sixth-largest property and casualty insurance line in the United States in 2022, according to the National Council on Compensation Insurance, Inc., the NCCI. Direct premiums written in 2022 for the workers’ compensation insurance industry were $57 billion, and direct premiums written for the property and casualty industry as a whole were $876 billion.
Pearson 50 Senior Vice President, Controller 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.
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.
Federal Law and Regulations For the year ended December 31, 2022, we derived 2.8% of our voluntary in-force premiums from employers engaged in the maritime industry.
Federal Law and Regulations For the year ended December 31, 2023, we derived 3.3% of our voluntary in-force premiums from employers engaged in the maritime industry.
We accrue for second injury funds relative to historical paid amounts. 24 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.
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.
The decrease in reserves was attributable primarily to favorable development from prior accident years. In 2022, we recognized $40.6 million of favorable development for prior accident years. As of December 31, 2021, we had 4,594 open claims, with an average of $162,229 in unpaid loss and loss adjustment expenses per open claim.
The decrease in reserves was attributable primarily to favorable development from prior accident years. In 2023, we recognized $41.4 million of favorable development for prior accident years. As of December 31, 2022, we had 4,275 open claims, with an average of $162,816 in unpaid loss and loss adjustment expenses per open claim.
As of December 31, 2022, the carrying value of our investment portfolio, including cash and cash equivalents, was $950.5 million and the fair value of the portfolio was $926.9 million. Our Board of Directors has established an investment policy governing our investments, which is reviewed at least annually.
As of December 31, 2023, the carrying value of our investment portfolio, including cash and cash equivalents, was $896.5 million and the fair value of the portfolio was $886.0 million. Our Board of Directors has established an investment policy governing our investments, which is reviewed at least annually.
If there are two ratings, the lower rating is used. Credit Rating Percentage of Total Carrying Value “AAA” 24.0 % “AA” 46.6 % “A” 14.5 % “BBB” 14.2 % “BB and below” 0.7 % “Unrated securities” 0.0 % Total 100.0 % As of December 31, 2022, the average composite rating of our investment portfolio, excluding our equity holdings, was “AA-”.
If there are two ratings, the lower rating is used. Credit Rating Percentage of Total Carrying Value “AAA” 12.5 % “AA” 56.4 % “A” 15.5 % “BBB” 15.6 % “BB and below” 0.0 % “Unrated securities” 0.0 % Total 100.0 % As of December 31, 2023, the average composite rating of our investment portfolio, excluding our equity holdings, was “AA-”.
Resultant Change in Net Loss and DCC Reserve Change in Paid LDFs Change in Incurred LDFs Amount ($) Percentage (in thousands) 30% increase 30% increase 25,969 4.7 % 30% increase No change — (— )% 30% increase 30% decrease (25,592 ) (4.6 )% No change 30% increase 25,969 4.7 % No change 30% decrease (25,592 ) (4.6 )% 30% decrease 30% increase 25,969 4.7 % 30% decrease No change — (— )% 30% decrease 30% decrease (25,592 ) (4.6 )% 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 an increase and decrease of 300 basis points.
Resultant Change in Net Loss and DCC Reserve Change in Paid LDFs Change in Incurred LDFs Amount ($) Percentage (in thousands) 30% increase 30% increase 31,059 5.9 % 30% increase No change — (— )% 30% increase 30% decrease (30,841 ) (5.9 )% No change 30% increase 31,059 5.9 % No change 30% decrease (30,841 ) (5.9 )% 30% decrease 30% increase 31,059 5.9 % 30% decrease No change — (— )% 30% decrease 30% decrease (30,841 ) (5.9 )% 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 an increase and decrease of 300 basis points.
Policyholders As of December 31, 2022, we had more than 8,100 voluntary business policyholders with an average annual workers’ compensation policy written premium of $29,620. As of December 31, 2022, our ten largest voluntary business policyholders accounted for 2% of our in-force premiums.
Policyholders As of December 31, 2023, we had more than 8,500 voluntary business policyholders with an average annual workers’ compensation policy written premium of $28,658. As of December 31, 2023, our ten largest voluntary business policyholders accounted for 2% of our in-force premiums.
Women represent 57% of AMERISAFE’s leadership (defined as vice president level and above), including our CEO. Two women serve as members of our eight member Board of Directors. None of our employees are subject to a collective bargaining agreement. 21 We invest in the professional development of our employees.
Our average employee tenure is 10.8 years. Women represent 54% of AMERISAFE’s leadership (defined as vice president level and above), including our CEO. Two women serve as members of our eight member Board of Directors. None of our employees are subject to a collective bargaining agreement. We invest in the professional development of our employees.
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. 2023 Excess of Loss Reinsurance Treaty Program Effective January 1, 2023, we renewed our excess of loss reinsurance treaty program related to our voluntary and assigned risk business.
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. 2024 Excess of Loss Reinsurance Treaty Program Effective January 1, 2024, we renewed our excess of loss reinsurance treaty program. The program consists of four layers of coverage.
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.
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.
During the year ended December 31, 2021, 4,310 new claims were reported, and 4,474 claims were closed. In 2021, our gross reserves decreased to $745.3 million from $760.6 million at December 31, 2020. The decrease in reserves was attributable primarily to favorable development from prior accident years.
During the year ended December 31, 2022, 4,104 new claims were reported, and 4,423 claims were closed. In 2022, our gross reserves decreased to $696.0 million from $745.3 million at December 31, 2021. The decrease in reserves was attributable primarily to favorable development from prior accident years.
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.
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. 21 State Insurance Department Examinations We are subject to periodic examinations by the Nebraska and Texas insurance departments.
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.
We are also subject to regulations related to the USL&H Act and the Jones Act. 22 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.
As of December 31, 2022, our best estimate of our ultimate liability for loss and loss adjustment expenses, net of amounts recoverable from reinsurers, was $583.5 million, which includes $12.6 million in reserves for mandatory pooling arrangements as reported by the pool administrators.
As of December 31, 2023, our best estimate of our ultimate liability for loss and loss adjustment expenses, net of amounts recoverable from reinsurers, was $554.2 million, which includes $13.0 million in reserves for mandatory pooling arrangements as reported by the pool administrators.
Through extensive cost management initiatives, we maintain one of the most efficient operations in the workers’ compensation industry. In 2022, our expense ratio was 26.5%. We believe that our expense ratio is substantially lower than that of our competitors, which gives us a greater opportunity to generate underwriting profit.
Through cost management initiatives, we maintain one of the more efficient operations in the workers’ compensation industry. In 2023, our expense ratio was 29.3%. We believe that our expense ratio is generally lower than that of our competitors, which gives us a greater opportunity to generate underwriting profit.
Additional information regarding our reserve for unpaid loss and loss adjustment expenses (LAE) as of December 31, 2022, 2021, and 2020 is set forth below: 2022 2021 2020 (in thousands) Gross case loss and DCC reserves $ 559,570 $ 605,888 $ 610,255 AO reserves 17,589 19,625 22,426 Gross IBNR reserves 118,878 119,765 127,880 Gross unpaid loss, DCC and AO reserves 696,037 745,278 760,561 Reinsurance recoverables on unpaid loss and LAE (112,555 ) (119,266 ) (105,707 ) Net unpaid loss, DCC and AO reserves $ 583,482 $ 626,012 $ 654,854 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.
Additional information regarding our reserve for unpaid loss and loss adjustment expenses (LAE) as of December 31, 2023, 2022, and 2021 is set forth below: 2023 2022 2021 (in thousands) Gross case loss and DCC reserves $ 535,116 $ 559,570 $ 605,888 AO reserves 19,117 17,589 19,625 Gross IBNR reserves 119,761 118,878 119,765 Gross unpaid loss, DCC and AO reserves 673,994 696,037 745,278 Reinsurance recoverables on unpaid loss and LAE (119,746 ) (112,555 ) (119,266 ) Net unpaid loss, DCC and AO reserves $ 554,248 $ 583,482 $ 626,012 10 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.
Resultant Change in Net Loss and DCC Reserve Change in Severity Trend Amount ($) Percentage (in thousands) 300 basis point increase 25,065 4.5 % 300 basis point decrease (21,686 ) (3.9 )% 12 Reconciliation of Loss Reserves The table below shows the reconciliation of loss reserves on a gross and net basis for the years ended December 31, 2022, 2021 and 2020, reflecting changes in losses incurred and paid losses.
Resultant Change in Net Loss and DCC Reserve Change in Severity Trend Amount ($) Percentage (in thousands) 300 basis point increase 9,214 1.8 % 300 basis point decrease (7,869 ) (1.5 )% 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, 2023, 2022 and 2021, reflecting changes in losses incurred and paid losses.
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, 2022 based on the carrying value of each category as of December 31, 2022: Carrying Value Percentage of Portfolio Effective Interest Rate (in thousands) Fixed maturity securities—held-to-maturity: State and political subdivisions $ 415,096 43.7 % 2.8 % Corporate bonds 59,707 6.2 % 2.7 % U.S. agency-based mortgage-backed securities 3,696 0.4 % 4.2 % U.S.
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, 2023 based on the carrying value of each category as of December 31, 2023: Carrying Value Percentage of Portfolio Effective Interest Rate (in thousands) Fixed maturity securities—held-to-maturity: State and political subdivisions $ 416,878 46.5 % 2.4 % Corporate bonds 52,179 5.9 % 0.6 % U.S. agency-based mortgage-backed securities 3,297 0.4 % 1.7 % U.S.
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.
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. Beginning in 2023, we stopped accepting direct assignments. • Assumed Premiums.
In 2022 and prior, we utilized 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 2022, we had assigned risks in three states: Alabama, Alaska, and North Carolina. In 2023, we are no longer accepting direct assignments.
In 2022 and prior, we utilized 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. Beginning in 2023, we stopped accepting direct assignments.
As of December 31, 2022, we had 4,275 open claims, with an average of $162,816 in unpaid loss and loss adjustment expenses per open claim. During the year ended December 31, 2022, 4,104 new claims were reported, and 4,423 claims were closed. In 2022, our gross reserves decreased to $696.0 million from $745.3 million at December 31, 2021.
As of December 31, 2023, we had 4,003 open claims, with an average of $168,372 in unpaid loss and loss adjustment expenses per open claim. During the year ended December 31, 2023, 3,948 new claims were reported, and 4,220 claims were closed. 11 In 2023, our gross reserves decreased to $674.0 million from $696.0 million at December 31, 2022.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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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; 30 • certain required methods of accounting; and • potential assessments for state guaranty funds, second injury funds and other mandatory pooling arrangements.
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; • certain required methods of accounting; and • potential assessments for state guaranty funds, second injury funds and other mandatory pooling arrangements.
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. 27 We must also implement our pricing accurately in accordance with our assumptions.
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.
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. 32 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.
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.
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 31 upon the nature, extent, location and timing of such an act.
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.
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. Risks Related to Regulation and Litigation Because we are subject to extensive state and federal regulation, legislative changes may negatively impact our business.
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. 27 Risks Related to Regulation and Litigation Because we are subject to extensive state and federal regulation, legislative changes may negatively impact our business.
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. If we cannot sustain our relationships with independent agencies, we may be unable to operate profitably.
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. 25 If we cannot sustain our relationships with independent agencies, we may be unable to operate profitably.
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.
If there are unfavorable changes affecting our 26 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.
New standards or changes in SAP accounting standards or interpretations, especially as it relates to our significant revenues, assets, liabilities, statutory surplus, risk-based capital (RBC) ratios and dividend paying ability could have a material impact on our statutory earnings, dividend paying ability or financial condition.
New standards or changes in SAP accounting standards or interpretations, especially as it relates to our significant revenues, assets, liabilities, statutory surplus, risk-based capital ratios and dividend paying ability could have a material impact on our statutory earnings, dividend paying ability or financial condition.
Any significant decline in our investment income would adversely affect our revenues and net income. 28 A decline in the level of business activity of our policyholders, particularly those engaged in the construction, trucking, logging and lumber, agriculture, manufacturing, telecommunications, and maritime industries, could negatively affect our earnings and profitability.
Any significant decline in our investment income would adversely affect our revenues and net income. A decline in the level of business activity of our policyholders, particularly those engaged in the construction, trucking, logging and lumber, agriculture, manufacturing, telecommunications, and maritime industries, could negatively affect our earnings and profitability.
Changes in these standards, issued and promulgated by the Financial Accounting Standards Board (FASB) could impact the recognition of 29 revenues, expenses, taxes, investments, loss reserves and other aspects of the Company’s assets and liabilities. Such changes could significantly impact our reported earnings or financial condition.
Changes in these standards, issued and promulgated by the Financial Accounting Standards Board (FASB) could impact the recognition of revenues, expenses, taxes, investments, loss reserves and other aspects of the Company’s assets and liabilities. Such changes could significantly impact our reported earnings or financial condition.
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.
In any of these events, if our 29 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.
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. 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 the Texas Business Organizations Code, our ability to enter into a business combination with an affiliated shareholder is limited. In addition, two of our three insurance company subsidiaries, AIIC and SOCI, are incorporated in Nebraska and the other, AIICTX, is incorporated in Texas.
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.
Although the financial performance of an individual insurance company is dependent on its own specific business characteristics, the profitability of most workers’ compensation 24 insurance companies generally tends to follow this cyclical market pattern.
Our 2023 reinsurance program provides us with reinsurance coverage for each loss occurrence up to $100.0 million, subject to applicable limitations, 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.
Our 2024 reinsurance program provides us with reinsurance coverage for each loss occurrence up to $100.0 million, subject to applicable limitations, 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.
We currently have 24 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.
We currently have 26 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.
Our 2023 reinsurance treaty program affords limited coverage for up to $100.0 million for losses arising from terrorism, subject to applicable deductibles, retentions, definitions and aggregate limits.
Our 2024 reinsurance treaty program affords limited coverage for up to $100.0 million for losses arising from terrorism, subject to applicable deductibles, retentions, definitions and aggregate limits.
In 2022, 85.6% of our gross premiums written were derived from policyholders in the construction, trucking, logging and lumber, agriculture, manufacturing, telecommunications, and maritime 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.
In 2023, 85.4% of our gross premiums written were derived from policyholders in the construction, trucking, logging and lumber, agriculture, manufacturing, telecommunications, and maritime 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.
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, 2022, our investment portfolio, including cash and cash equivalents, had a carrying value of $950.5 million.
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, 2023, our investment portfolio, including cash and cash equivalents, had a carrying value of $896.5 million.
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, 2022, we participated in mandatory pooling arrangements in 24 states and the District of Columbia.
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. 28 At December 31, 2023, we participated in mandatory pooling arrangements in 25 states and the District of Columbia.
For the year ended December 31, 2022 we had $27.2 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.
For the year ended December 31, 2023 we had $31.3 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.
We market a substantial portion of our workers’ compensation insurance through independent agencies. As of December 31, 2022, independent agencies produced 97.9% of our voluntary in-force premiums. No independent agency accounted for more than 1.1% 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.
We market a substantial portion of our workers’ compensation insurance through independent agencies. As of December 31, 2023, independent agencies produced 98.2% of our voluntary in-force premiums. No independent agency accounted for more than 1.8% 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.
Best rating of “A” (Excellent) or better. No reinsurance recoverable due at December 31, 2022 was over 90 days old. If we are unable to collect amounts recoverable from our reinsurers, our financial condition would be adversely impacted.
Best rating of “A” (Excellent) or better. An immaterial amount of reinsurance recoverable due at December 31, 2023 was over 90 days old. If we are unable to collect amounts recoverable from our reinsurers, our financial condition would be adversely impacted.
As of February 15, 2023, there were 19,155,873 shares of our common stock outstanding. 34 General Risk Factors Technology breaches or failures, including those resulting from a malicious cyber attack on us, or our policyholders or service providers, could disrupt or otherwise negatively impact our business.
As of February 15, 2024, there were 19,135,008 shares of our common stock outstanding. 31 General Risk Factors Technology breaches or failures, including those resulting from a malicious cyber attack on us, or our policyholders or service providers, could disrupt or otherwise negatively impact our business.
As of December 31, 2022, we had $125.7 million of recoverables from reinsurers. Of this amount, $45.1 million was unsecured. As of December 31, 2022, our largest recoverable from reinsurers included $64.0 million from Hannover Reinsurance Ireland Limited (Hannover), $11.4 million from Arch Reinsurance Company and $9.5 million from Allianz Risk Transfer AG. Each of these reinsurers have an A.M.
As of December 31, 2023, we had $130.0 million of recoverables from reinsurers. Of this amount, $48.4 million was unsecured. As of December 31, 2023, our largest recoverable from reinsurers included $65.0 million from Hannover Reinsurance Ireland Limited (Hannover), $19.7 million from Arch Reinsurance Company and $9.1 million from Allianz Risk Transfer AG. Each of these reinsurers have an A.M.
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. 33 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.
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; 30 • 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.
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; 35 • identify, recruit and integrate new independent agencies; and • augment our internal operations and systems as we expand our business.
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. 32 We may require additional capital in the future, which may not be available to us or may be available only on unfavorable terms.
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.
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.
Additional risks include an increase in costs due to delays in medical treatment and the financial burden of pandemics on the healthcare industry. Changes in accounting standards or new standards, as well as assumptions, estimates and judgments by management related to complex accounting issues could have a material adverse effect on our capital levels and our results of operations.
Changes in accounting standards or new standards, as well as assumptions, estimates and judgments by management related to complex accounting issues could have a material adverse effect on our capital levels and our results of operations.
Increased interest rates could have an adverse effect on the value of our investment portfolio. 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.
Increased interest rates could have an adverse effect on the market value of our investment portfolio. Decreased interest rates could have an adverse effect on our investment income, in addition to increased prepayment risk on callable securities included in our investment portfolio.
Removed
The impact of pandemics could materially affect the business operations of our insurance subsidiaries and may adversely affect our revenues, results of operations, and cash flows. It is uncertain the ultimate impact that the economic and financial disruptions related to a pandemic could have on our business.
Added
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.
Removed
We have identified ongoing risks related to pandemics which include a decline in demand for insurance products, a reduction in hours worked by our policyholders, an inability to collect premium balances due, potential declines in the market value of our investments and the decline in interest rates on new investments.
Removed
Additional risks include legislative, judicial and regulatory actions suspending cancellation of policies for non-payment of premiums, extension of grace periods for payment of premium balances, expansion of coverage to pay for losses not contemplated by our insurance policies, and an increase in frequency and severity related to compensable claims.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Item 5. Market for Registrant’s Common Equity, Related Stoc kholder 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, 2023, there were 22 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stoc kholder 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, 2024, there were 19 holders of record of our common stock.
On an annualized basis, the cash dividend is expected to be $1.36 per share in 2023. 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.
On an annualized basis, the cash dividend is expected to be $1.48 per share in 2024. 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.
Dividend Policy In 2022, 2021 and 2020, the Company paid regular quarterly cash dividends of $0.31, $0.29, and $0.27 per share, respectively. In addition, the Company paid extraordinary cash dividends of $4.00 in both 2022 and 2021, and $3.50 in 2020.
Dividend Policy In 2023, 2022 and 2021, the Company paid regular quarterly cash dividends of $0.34, $0.31, and $0.29 per share, respectively. In addition, the Company paid extraordinary cash dividends of $3.50 in 2023 and $4.00 in both 2022 and 2021.
As of February 15, 2023, 19,155,873 shares of common stock were outstanding. As of that date, there were no shares of preferred stock outstanding. 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.
As of February 15, 2024, 19,135,008 shares of common stock were outstanding. As of that date, there were no shares of preferred stock outstanding. 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.
On February 17, 2023 the Company declared a regular quarterly cash dividend of $0.34 per share payable on March 24, 2023 to shareholders of record as of March 10, 2023. The Board intends to continue to consider the payment of a regular cash dividend each calendar quarter.
On February 19, 2024 the Company declared a regular quarterly cash dividend of $0.37 per share payable on March 22, 2024 to shareholders of record as of March 8, 2024. The Board intends to continue to consider the payment of a regular cash dividend each calendar quarter.
There were 264,449 shares repurchased under this program in 2022 for $12.4 million, or an average price of $46.84, including commissions. There were no shares repurchased under this program in 2021 or 2020. Since the beginning of this plan, the Company has repurchased a total of 1,522,699 shares for $34.8 million, or an average price of $22.83, including commissions.
There were 264,449 shares repurchased under this program in 2022 for $12.4 million, or an average price of $46.84, including commissions. There were no shares repurchased under this program in 2021. Since the beginning of this plan, the Company has repurchased a total of 1,569,440 shares for $36.9 million, or an average price of $23.53, including commissions and excise tax.
The following table summarizes the Company’s purchases of its common stock, par value $0.01 per share, during the three months ended December 31, 2022: 37 Period Total Number of Shares Purchased Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands) October 1, 2022 to October 31, 2022 3,298 $ 45.96 3,298 $ 12,612 November 1, 2022 to November 30, 2022 — — — 12,612 December 1, 2022 to December 31, 2022 — — — 12,612 Total 3,298 3,298 (1) Average price paid per share includes commissions .
It is anticipated that any future purchases will be funded from available capital. 35 The following table summarizes the Company’s purchases of its common stock, par value $0.01 per share, during the three months ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands) October 1, 2023 to October 31, 2023 — $ — — $ 12,612 November 1, 2023 to November 30, 2023 500 47.44 500 12,589 December 1, 2023 to December 31, 2023 46,241 46.44 46,241 10,441 Total 46,741 46,741 (1) Average price paid per share includes commissions and excise tax .
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.
The purchases may be affected from time to time depending upon market conditions and subject to applicable regulatory considerations.
Added
The Company had $10.4 million available for future purchases at December 31, 2023 under this program. There were 46,741 shares repurchased under this program in 2023 for $2.2 million, or an average price of $46.45, including commissions and excise tax.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

70 edited+5 added−9 removed109 unchanged
The remainder of our fixed maturity securities are classified as available-for-sale. 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. Changes in net unrealized gains or losses on our equity securities are recognized in net income. Fee and Other Income.
The remainder of our fixed maturity securities are classified as available-for-sale. Net unrealized gains or losses on our securities classified as available-for-sale are reported separately within accumulated other comprehensive income (loss) on our balance sheet. Changes in net unrealized gains or losses on our equity securities are recognized in net income. Fee and Other Income.
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. 42 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.
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. 40 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.
For additional information, see Note 16 to our consolidated financial statements in Item 8 of this report. The Company has operating and finance leases for office space and equipment. Our leases have remaining lease terms of one month to 48 months, some of which include options to extend the leases for up to five years.
For additional information, see Note 16 to our consolidated financial statements in Item 8 of this report. The Company has operating and finance leases for office space and equipment. Our leases have remaining lease terms of one month to 47 months, some of which include options to extend the leases for up to five years.
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 in 2021 or 2022.
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 in 2022 or 2023.
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. 40 Principal Revenue and Expense Items Our revenues consist primarily of the following: Net Premiums Earned.
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. 38 Principal Revenue and Expense Items Our revenues consist primarily of the following: Net Premiums Earned.
Based on our estimates of future claims, we believe we are sufficiently capitalized to satisfy the deductibles and retentions in our 2023 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.
Based on our estimates of future claims, we believe we are sufficiently capitalized to satisfy the deductibles and retentions in our 2024 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.
Thus, for a one-year policy written on July 1, 2022 for an employer with constant payroll during the term of the policy, we would earn half of the premiums in 2022 and the other half in 2023. On a monthly basis, we also recognize net premiums earned from mandatory pooling arrangements.
Thus, for a one-year policy written on July 1, 2023 for an employer with constant payroll during the term of the policy, we would earn half of the premiums in 2023 and the other half in 2024. On a monthly basis, we also recognize net premiums earned from mandatory pooling arrangements.
Investments in equity securities are reported at fair market value. We follow 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 50 measuring fair value.
Investments in equity securities are reported at fair market value. 48 We follow 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.
These factors could cause our actual results in 2023 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.
These factors could cause our actual results in 2024 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.
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. 41 Underwriting and Certain Other Operating Costs.
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. 39 Underwriting and Certain Other Operating Costs.
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. 43 Credit Losses on Investment Securities. Investment securities are recorded on the balance sheet as assets net of an allowance for credit losses.
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. 41 Credit Losses on Investment Securities. Investment securities are recorded on the balance sheet as assets net of an allowance for credit losses.
Therefore, estimating reserves 39 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.
Therefore, estimating reserves for workers’ compensation claims may be more uncertain than estimating reserves for other types of insurance claims with shorter or 37 more definite periods between occurrence of the claim and final determination of the loss and with policy limits on liability for claim amounts.
As of December 31, 2022, we were in compliance with these requirements. 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, 2023, we were in compliance with these requirements. 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.
Our 2023 reinsurance program provides us with reinsurance coverage for each loss occurrence up to $100.0 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 $20.0 million, subject to applicable deductibles, retentions and aggregate limits.
Our 2024 reinsurance program provides us with reinsurance coverage for each loss occurrence up to $100.0 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 $20.0 million, subject to applicable deductibles, retentions and aggregate limits.
In establishing our reserves, we review the results of analyses using actuarial methods that utilize historical loss data from our more than 37 years of underwriting workers’ compensation insurance. The actuarial analysis of our historical data provides the factors we use in estimating our loss reserves.
In establishing our reserves, we review the results of analyses using actuarial methods that utilize historical loss data from our more than 38 years of underwriting workers’ compensation insurance. The actuarial analysis of our historical data provides the factors we use in estimating our loss reserves.
However, as of December 31, 2022, 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, as of December 31, 2023, 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.
In determining the amount of the credit loss to establish, the Company considers the following factors: • The extent to which the fair value is less than the amortized cost basis • Adverse conditions in the security, industry, or geography, including: • Changes in technology • Discontinuation of a segment of business that may affect future earnings • Changes in the quality of the credit enhancement, if any • Changes in the payment structure of debt security • Failure of the issuer to make scheduled interest or principal payments • Any changes to the rating of the security by a rating agency Share-Based Compensation.
In determining the amount of the credit loss to establish, the Company considers the following factors: • The extent to which the fair value is less than the amortized cost basis; • Adverse conditions in the security, industry, or geography, including: • Changes in technology • Discontinuation of a segment of business that may affect future earnings • Changes in the quality of the credit enhancement, if any • Changes in the payment structure of debt security; • Failure of the issuer to make scheduled interest or principal payments; and • Any changes to the rating of the security by a rating agency.
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. 44 Results of Operations The table below summarizes certain operating results and key measures we use in monitoring and evaluating our operations.
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. 42 Results of Operations The table below summarizes certain operating results and key measures we use in monitoring and evaluating our operations.
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 $1.36 per share in 2023. Investment Portfolio The principal objectives of our investment portfolio are to preserve capital and surplus and to maintain appropriate liquidity for corporate requirements.
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 $1.48 per share in 2024. Investment Portfolio The principal objectives of our investment portfolio are to preserve capital and surplus and to maintain appropriate liquidity for corporate requirements.
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 at December 31, 2022 was $950.5 million. As discussed above under “Overview,” we purchase reinsurance to reduce our net liability on individual risks and to protect against catastrophic losses.
We fund claim payments out of cash flow from 46 operations, principally premiums, net of amounts ceded to our reinsurers, and net investment income. Our investment portfolio at December 31, 2023 was $896.5 million. As discussed above under “Overview,” we purchase reinsurance to reduce our net liability on individual risks and to protect against catastrophic losses.
The composition of our investment portfolio, including cash and cash equivalents, as of December 31, 2022 is shown in the following table.
The composition of our investment portfolio, including cash and cash equivalents, as of December 31, 2023 is shown in the following table.
We purchase reinsurance to reduce our net liability on individual risks and to protect against catastrophic losses. Our reinsurance program for 2023 includes 24 reinsurers that provide coverage to us in excess of a certain specified loss amount, or retention level.
We purchase reinsurance to reduce our net liability on individual risks and to protect against catastrophic losses. Our reinsurance program for 2024 includes 26 reinsurers that provide coverage to us in excess of a certain specified loss amount, or retention level.
Net cash provided by investing activities was $75.4 million in 2022, as compared to net cash provided by investing activities of $71.0 million in 2021 and net cash provided by investing activities of $43.4 million in 2020.
Net cash provided by investing activities was $43.9 million in 2023, as compared to net cash provided by investing activities of $75.4 million in 2022 and net cash provided by investing activities of $71.0 million in 2021.
Based upon the prescribed calculation, the insurance subsidiaries could pay to AMERISAFE dividends of up to $56.0 million in 2023 without seeking regulatory approval. See “Business—Regulation—Dividend Limitations” in Item 1 of this report. The Company paid regular quarterly cash dividends of $0.31, $0.29, $0.27 per share in 2022, 2021 and 2020, respectively.
Based upon the prescribed calculation, the insurance subsidiaries could pay to AMERISAFE dividends of up to $52.6 million in 2024 without seeking regulatory approval. See “Business—Regulation—Dividend Limitations” in Item 1 of this report. The Company paid regular quarterly cash dividends of $0.34, $0.31, and $0.29 per share in 2023, 2022 and 2021, respectively.
As of December 31, 2022, the present value of these annuities was $99.7 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.
As of December 31, 2023, the present value of these annuities was $106.9 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.
Major components of cash used in financing activities in 2022 included cash used for dividends paid to shareholders of $100.4 million and purchases of treasury stock of $12.4 million.
Major components of cash used in financing activities in 2022 included cash used for dividends paid to shareholders of $100.4 million and purchases of treasury stock of $12.4 million. 47 Major components of cash used in financing activities in 2021 included cash used for dividends paid to shareholders of $99.9 million.
At December 31, 2022, our investment portfolio, including cash and cash equivalents, was $950.5 million and produced net investment income of $27.2 million in 2022, $25.4 million in 2021 and $29.4 million in 2020. The use of reinsurance is an important component of our business strategy.
At December 31, 2023, our investment portfolio, including cash and cash equivalents, was $896.5 million and produced net investment income of $31.3 million in 2023, $27.2 million in 2022 and $25.4 million in 2021. The use of reinsurance is an important component of our business strategy.
We calculate return on average equity by dividing annual net income by the average of annual shareholders’ equity. Our return on average equity was 15.5% in 2022, 15.7% in 2021 and 19.9% in 2020. We calculate book value per share by dividing ending shareholders’ equity by the number of common shares outstanding.
We calculate return on average equity by dividing annual net income by the average of annual shareholders’ equity. Our return on average equity was 20.4% in 2023, 15.5% in 2022 and 15.7% in 2021 . We calculate book value per share by dividing ending shareholders’ equity by the number of common shares outstanding.
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 48 were $194.8 million in 2022, $189.6 million in 2021 and $179.9 million in 2020.
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 $177.5 million in 2023, $194.8 million in 2022 and $189.6 million in 2021.
As of December 31, 2022, our investment portfolio, including cash and cash equivalents, totaled $950.5 million, a decrease of 12.3% from December 31, 2021. 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 of December 31, 2023, our investment portfolio, including cash and cash equivalents, totaled $896.5 million, a decrease of 5.7% from December 31, 2022. 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.
Favorable/(Unfavorable) Development for Year Ended December 31, 2022 2021 2020 (in millions) 2021 $ — $ — $ — 2020 6.2 — — 2019 13.1 14.1 — 2018 8.9 18.3 14.8 2017 3.6 8.1 14.5 Prior to 2017 8.8 21.4 34.2 Total net development $ 40.6 $ 61.9 $ 63.5 The table below sets forth the number of open claims as of December 31, 2022, 2021 and 2020, and the numbers of claims reported and closed during the years then ended.
Favorable/(Unfavorable) Development for Year Ended December 31, 2023 2022 2021 (in millions) 2022 $ — $ — $ — 2021 7.5 — — 2020 7.5 6.2 — 2019 8.0 13.1 14.1 2018 3.5 8.9 18.3 Prior to 2018 14.9 12.4 29.5 Total net development $ 41.4 $ 40.6 $ 61.9 The table below sets forth the number of open claims as of December 31, 2023, 2022 and 2021, and the numbers of claims reported and closed during the years then ended.
Our gross reserves for loss and loss adjustment expenses at December 31, 2022, 2021 and 2020 were $696.0 million, $745.3 million and $760.6 million, respectively. As a percentage of gross reserves at year end, IBNR represented 17.1% in 2022, 16.1% in 2021 and 16.8% in 2020. In 2022, we decreased our estimates for prior year loss reserves by $40.6 million.
Our gross reserves for loss and loss adjustment expenses at December 31, 2023, 2022 and 2021 were $674.0 million, $696.0 million and $745.3 million, respectively. As a percentage of gross reserves at year end, IBNR represented 17.8% in 2023, 17.1% in 2022 and 16.1% in 2021. In 2023, we decreased our estimates for prior year loss reserves by $41.4 million.
For the five accident years, the case incurred for these severe claims accounted for an average of 14.5 percentage points of our overall loss and loss adjustment expense (LAE) ratio measured at December 31, 2022.
For the five accident years, the case incurred for these severe claims accounted for an average of 16.6 percentage points of our overall loss and loss adjustment expense (LAE) ratio, measured at December 31, 2023.
Our book value per share was $16.57 at December 31, 2022, $20.62 at December 31, 2021 and $22.70 at December 31, 2020. We paid cash dividends of $5.24 per share in 2022, $5.16 per share in 2021 and $4.58 per share in 2020. Investment income is an important element of our net income.
Our book value per share was $15.28 at December 31, 2023, $16.57 at December 31, 2022 and $20.62 at December 31, 2021. We paid cash dividends of $4.86 per share in 2023, $5.24 per share in 2022 and $5.16 per share in 2021. Investment income is an important element of our net income.
The table below sets forth the favorable development for accident years 2017 through 2021 and, collectively, all accident years prior to 2017.
The table below sets forth the favorable development for accident years 2018 through 2022 and, collectively, all accident years prior to 2018.
For example, for the five-year period ended December 31, 2022 we had recorded 81 severe claims, or an average of 16 severe claims per year for accident years 2018 through 2022.
For example, for the five-year period ended December 31, 2023 we had recorded 82 severe claims, or an average of 16 severe claims per year for accident years 2019 through 2023.
Less Than Twelve Months Twelve Months or Longer Fair Value Unrealized Losses Fair Value Unrealized Losses (in thousands) December 31, 2022: Fixed maturity securities—available-for-sale $ 196,433 $ (10,625 ) $ 63,424 $ (7,849 ) December 31, 2021: Fixed maturity securities—available-for-sale 67,825 (657 ) — — The pre-tax investment yield on our investment portfolio was 2.7% and 2.3% per annum during the twelve months ended December 31, 2022 and 2021, respectively.
Less Than Twelve Months Twelve Months or Longer Fair Value Unrealized Losses Fair Value Unrealized Losses (in thousands) December 31, 2023: Fixed maturity securities—available-for-sale $ 40,293 $ (207 ) $ 184,313 $ (11,588 ) December 31, 2022: Fixed maturity securities—available-for-sale 196,433 (10,625 ) 63,424 (7,849 ) The pre-tax investment yield on our investment portfolio was 3.4% and 2.7% per annum during the twelve months ended December 31, 2023 and 2022, respectively.
In addition, the Company paid extraordinary cash dividends of $4.00 per share in both 2022 and 2021 and $3.50 per share in 2020. On February 17, 2023, the Company declared a regular quarterly cash dividend of $0.34 per share payable on March 24, 2023 to shareholders of record as of March 10, 2023.
In addition, the Company paid extraordinary cash dividends of $3.50 in 2023 and $4.00 per share in both 2022 and 2021. On February 19, 2024, the Company declared a regular quarterly cash dividend of $0.37 per share payable on March 22, 2024 to shareholders of record as of March 8, 2024.
The number of severe claims in any one accident year in this five-year period ranged from a low of 13 in 2022 and 2018 to a high of 20 in 2021. The average reported case severity for these claims ranged from $1.96 million for the 2022 accident year to $3.6 million for the 2021 accident year.
The number of severe claims in any one accident year in this five-year period ranged from a low of 9 in 2023 to a high of 20 in 2021 and 2022. The average reported case severity for these claims ranged from $2.28 million for the 2023 accident year to $3.91 million for the 2021 accident year.
In 2020, major components of net cash provided by investing activities included proceeds from sales and maturities of investments of $365.2 million, offset by investment purchases of $320.9 million. Net cash used in financing activities was $112.9 million in 2022, as compared to $100.0 million in 2021 and $88.8 million in 2020.
In 2021, major components of net cash provided by investing activities included proceeds from sales and maturities of investments of $343.4 million, offset by investment purchases of $271.2 million. Net cash used in financing activities was $96.5 million in 2023, as compared to $112.9 million in 2022 and $100.0 million in 2021.
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 purchases may 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.
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.
Additional objectives are to support our A.M. Best rating of “A” (Excellent) and to maximize after-tax income and risk-adjusted 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.
Twelve Months Ended December 31, 2022 2021 2020 Open claims at beginning of period 4,594 4,758 5,053 Claims reported 4,104 4,310 4,452 Claims closed (4,423 ) (4,474 ) (4,747 ) Open claims at end of period 4,275 4,594 4,758 At December 31, 2022, our incurred amounts for certain accident years, particularly 2017 through 2020, developed more favorably than management previously expected.
Twelve Months Ended December 31, 2023 2022 2021 Open claims at beginning of period 4,275 4,594 4,758 Claims reported 3,948 4,104 4,310 Claims closed (4,220 ) (4,423 ) (4,474 ) Open claims at end of period 4,003 4,275 4,594 At December 31, 2023, our incurred amounts for certain accident years developed more favorably than management previously expected.
Year Ended December 31, 2022 2021 2020 (in thousands) Income Statement Data Gross premiums written $ 276,110 $ 278,294 $ 303,090 Ceded premiums written (10,527 ) (10,469 ) (10,276 ) Net premiums written $ 265,583 $ 267,825 $ 292,814 Net premiums earned $ 271,698 $ 275,993 $ 304,427 Net investment income 27,223 25,435 29,364 Net realized gains on investments 3,440 1,695 1,132 Net unrealized gains (losses) on equity securities (8,092 ) 12,315 4,204 Fee and other income 468 496 350 Total revenues 294,737 315,934 339,477 Loss and loss adjustment expenses incurred 152,316 160,798 157,226 Underwriting and certain other operating costs (1) 24,039 24,813 20,834 Commissions 21,483 21,284 23,147 Salaries and benefits 26,510 25,954 27,925 Policyholder dividends 2,699 3,715 3,453 Provision for investment related credit loss expense (benefit) 44 (79 ) (27 ) Total expenses 227,091 236,485 232,558 Income before taxes 67,646 79,449 106,919 Income tax expense 12,044 13,693 20,317 Net income $ 55,602 $ 65,756 $ 86,602 Selected Insurance Ratios Current accident year loss ratio (2) 71.0 % 80.7 % 72.5 % Prior accident year loss ratio (3) (14.9 )% (22.4 )% (20.9 )% Net loss ratio 56.1 % 58.3 % 51.6 % Net underwriting expense ratio (4) 26.5 % 26.1 % 23.6 % Net dividend ratio (5) 1.0 % 1.3 % 1.1 % Net combined ratio (6) 83.6 % 85.7 % 76.3 % As of December 31, 2022 2021 2020 (in thousands) Balance Sheet Data Cash and cash equivalents $ 61,469 $ 70,722 $ 61,757 Investments 888,987 1,012,571 1,088,744 Amounts recoverable from reinsurers 125,677 120,561 105,803 Premiums receivable, net 121,713 135,100 156,760 Deferred income taxes 22,794 14,384 13,665 Deferred policy acquisition costs 17,401 17,059 17,810 Total assets 1,269,279 1,402,724 1,470,855 Reserves for loss and loss adjustment expenses 696,037 745,278 760,561 Unearned premiums 114,976 121,092 129,260 Insurance-related assessments 17,653 16,850 17,995 Shareholders’ equity 317,432 399,323 438,816 (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. 45 (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.
Year Ended December 31, 2023 2022 2021 (in thousands) Income Statement Data Gross premiums written $ 285,355 $ 276,110 $ 278,294 Ceded premiums written (16,621 ) (10,527 ) (10,469 ) Net premiums written $ 268,734 $ 265,583 $ 267,825 Net premiums earned $ 267,125 $ 271,698 $ 275,993 Net investment income 31,339 27,223 25,435 Net realized gains on investments 6,579 3,440 1,695 Net unrealized gains (losses) on equity securities 1,228 (8,092 ) 12,315 Fee and other income 582 468 496 Total revenues 306,853 294,737 315,934 Loss and loss adjustment expenses incurred 148,263 152,316 160,798 Underwriting and certain other operating costs (1) 27,508 24,039 24,813 Commissions 23,446 21,483 21,284 Salaries and benefits 27,359 26,510 25,954 Policyholder dividends 2,957 2,699 3,715 Provision for investment related credit loss expense (benefit) (57 ) 44 (79 ) Total expenses 229,476 227,091 236,485 Income before taxes 77,377 67,646 79,449 Income tax expense 15,269 12,044 13,693 Net income $ 62,108 $ 55,602 $ 65,756 Selected Insurance Ratios Current accident year loss ratio (2) 71.0 % 71.0 % 80.7 % Prior accident year loss ratio (3) (15.5 )% (14.9 )% (22.4 )% Net loss ratio 55.5 % 56.1 % 58.3 % Net underwriting expense ratio (4) 29.3 % 26.5 % 26.1 % Net dividend ratio (5) 1.1 % 1.0 % 1.3 % Net combined ratio (6) 85.9 % 83.6 % 85.7 % As of December 31, 2023 2022 2021 (in thousands) Balance Sheet Data Cash and cash equivalents $ 38,682 $ 61,469 $ 70,722 Investments 857,786 888,987 1,012,571 Amounts recoverable from reinsurers 129,963 125,677 120,561 Premiums receivable, net 132,861 121,713 135,100 Deferred income taxes 20,403 22,794 14,384 Deferred policy acquisition costs 17,975 17,401 17,059 Total assets 1,229,162 1,269,279 1,402,724 Reserves for loss and loss adjustment expenses 673,994 696,037 745,278 Unearned premiums 116,585 114,976 121,092 Insurance-related assessments 16,896 17,653 16,850 Shareholders’ equity 292,451 317,432 399,323 (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. 43 (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.
In 2022, major components of net cash provided by investing activities included proceeds from sales and maturities of investments of $293.0 million, offset by investment purchases of $215.5 million. In 2021, major components of net cash provided by investing activities included proceeds from sales and maturities of investments of $343.4 million, offset by investment purchases of $271.2 million.
In 2023, major components of net cash provided by investing activities included proceeds from sales and maturities of investments of $178.1 million, offset by investment purchases of $133.7 million. In 2022, major components of net cash provided by investing activities included proceeds from sales and maturities of investments of $293.0 million, offset by investment purchases of $215.5 million.
In 2021, we decreased our estimates for prior year loss reserves by $61.9 million. In 2020, we decreased our estimates for prior year loss reserves by $63.5 million.
In 2022, we decreased our estimates for prior year loss reserves by $40.6 million. In 2021, we decreased our estimates for prior year loss reserves by $61.9 million.
Carrying Value Percentage of Portfolio Effective Interest Rate (in thousands) Fixed maturity securities—held-to-maturity: State and political subdivisions $ 415,096 43.7 % 2.8 % Corporate bonds 59,707 6.2 % 2.7 % U.S. agency-based mortgage-backed securities 3,696 0.4 % 4.2 % U.S. Treasury securities and obligations of U.S.
Carrying Value Percentage of Portfolio Effective Interest Rate (in thousands) Fixed maturity securities—held-to-maturity: State and political subdivisions $ 416,878 46.5 % 2.4 % Corporate bonds 52,179 5.9 % 0.6 % U.S. agency-based mortgage-backed securities 3,297 0.4 % 1.7 % U.S. Treasury securities and obligations of U.S.
Dollar-denominated obligations of the U.S. or Canadian corporations, U.S. agency mortgage-backed securities, commercial mortgage-backed securities and asset-backed securities.
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 mortgage-backed securities, commercial mortgage-backed securities and asset-backed securities.
Overview of Operating Results Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Gross Premiums Written . Gross premiums written for 2022 were $276.1 million, compared to $278.3 million for 2021, a decrease of 0.8%.
Overview of Operating Results Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Gross Premiums Written . Gross premiums written for 2023 were $285.4 million, compared to $276.1 million for 2022, an increase of 3.3%.
The effective tax rate also increased to 17.8% for 2022, compared to 17.2% for 2021. The increase in the effective tax rate is due to a lower proportion of tax-exempt income to underwriting income in 2022 relative to 2021. 46 Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Gross Premiums Written .
The increase in the effective tax rate is due to a lower proportion of tax-exempt income to underwriting income in 2023 relative to 2022. 44 Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Gross Premiums Written . Gross premiums written for 2022 were $276.1 million, compared to $278.3 million for 2021, a decrease of 0.8%.
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 a maturity date, at the time of purchase, of 90 days or less.
Cash and cash equivalents include cash on deposit, money market funds and municipal securities, corporate securities and certificates of deposit with a maturity date, at the time of purchase, of 90 days or less. 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.
This decrease in the effective tax rate is due to a higher proportion of tax-exempt income to underwriting income in 2021 relative to 2020 and a reduction in a valuation allowance on deferred state tax assets. 47 Prior Year Development The Company recorded favorable prior accident year loss and loss adjustment expense development of $40.6 million in calendar year 2022, $61.9 million in calendar year 2021 and $63.5 million in calendar year 2020.
The increase in the effective tax rate is due to a lower proportion of tax-exempt income to underwriting income in 2022 relative to 2021. 45 Prior Year Development The Company recorded favorable prior accident year loss and loss adjustment expense development of $41.4 million in calendar year 2023, $40.6 million in calendar year 2022 and $61.9 million in calendar year 2021.
Net cash provided by operating activities was $28.2 million in 2022, as compared to $38.0 million in 2021, and $63.4 million in 2020. Major components of cash provided by operating activities in 2022 were net premiums collected of $278.9 million and investment income collected of $33.6 million.
Net cash provided by operating activities was $29.8 million in 2023, as compared to $28.2 million in 2022, and $38.0 million in 2021. Major components of cash provided by operating activities in 2023 were net premiums collected of $261.0 million, investment income collected of $34.5 million, and reinsurance recoveries collected of $16.0 million.
Government agencies 14,231 1.5 % 1.7 % Total fixed maturity securities—available-for-sale 321,121 33.8 % 3.4 % Equity securities 62,058 6.5 % 2.6 % Short-term investments 14,120 1.5 % 4.2 % Cash and cash equivalents 61,469 6.5 % 4.1 % Total Investments, including cash and cash equivalents $ 950,456 100.0 % 3.1 % The following table summarizes the gross unrealized losses and fair value of fixed income securities by the length of time that individual securities have been in a continuous unrealized loss position.
Government agencies 13,671 1.5 % 0.9 % Total fixed maturity securities—available-for-sale 317,064 35.3 % 1.4 % Equity securities 57,147 6.4 % 2.1 % Cash and cash equivalents 38,682 4.3 % 5.1 % Total Investments, including cash and cash equivalents $ 896,468 100.0 % 3.4 % The following table summarizes the gross unrealized losses and fair value of fixed income securities by the length of time that individual securities have been in a continuous unrealized loss position.
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 one-month term SOFR rate and are unsecured. At December 31, 2022, there were no outstanding borrowings. Unless renewed, the agreement will expire in December 2023.
In December 2023, the Company renewed 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 one-month term SOFR rate and are unsecured.
Government agencies 13,123 1.4 % 2.0 % Asset-backed securities 66 0.0 % 5.0 % Total fixed maturity securities—held-to-maturity 491,688 51.7 % 2.8 % Fixed maturity securities—available-for-sale: State and political subdivisions 156,656 16.5 % 3.0 % Corporate bonds 144,788 15.2 % 4.0 % U.S. agency-based mortgage-backed securities 5,446 0.6 % 2.7 % U.S. Treasury securities and obligations of U.S.
Government agencies 11,186 1.2 % 0.9 % Asset-backed securities 35 0.0 % 6.7 % Total fixed maturity securities—held-to-maturity 483,575 54.0 % 1.6 % Fixed maturity securities—available-for-sale: State and political subdivisions 131,895 14.7 % 0.7 % Corporate bonds 166,753 18.6 % 3.6 % U.S. agency-based mortgage-backed securities 4,745 0.5 % 1.7 % U.S. Treasury securities and obligations of U.S.
Income tax expense for 2021 was $13.7 million, compared to $20.3 million for 2020. The effective tax rate also decreased to 17.2% for 2021, compared to 19.0% for 2020.
Income tax expense. Income tax expense for 2023 was $15.3 million, compared to $12.0 million for 2022. The effective tax rate increased to 19.7% for 2023, compared to 17.8% for 2022.
The Board of Directors initially authorized the Company’s 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. As of December 31, 2022, we had repurchased a total of 1,522,699 shares of our outstanding common stock for $34.8 million.
At December 31, 2023, there were no outstanding borrowings. Unless renewed, the agreement will expire in December 2024. The Board of Directors initially authorized the Company’s 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.
These amounts were offset in-part by claim payments of $179.1 million, $69.4 million of operating expenditures, federal taxes paid of $20.6 million, and dividends to policyholders paid of $4.9 million.
These amounts were offset in-part by claim payments of $172.9 million, $73.9 million of operating expenditures, federal taxes paid of $14.0 million, and dividends to policyholders paid of $3.5 million. Major components of cash provided by operating activities in 2022 were net premiums collected of $278.9 million and investment income collected of $33.6 million.
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, decreased 3.3%, from an average of $1,191.7 million for 2020 to an average of $1,151.8 million for 2021. Net Realized Gains (Losses) on Investments.
Average invested assets, including cash and cash equivalents, decreased 9.1%, from an average of $1,051.2 million for 2022 to an average of $955.8 million for 2023. Net Realized Gains (Losses) on Investments. Net realized gains on investments in 2023 totaled $6.6 million, compared to gains of $3.4 million in 2022.
In 2020, net realized gains of $1.0 million resulted from the sale of fixed maturity securities classified as available-for-sale and $0.1 million from redemptions of fixed maturity securities. Net Unrealized Gains (Losses) on Equity Securities .
In 2023 and 2022, net realized gains resulted primarily from the sale of equity securities. Net Unrealized Gains (Losses) on Equity Securities . Net unrealized gains on equity securities in 2023 were $1.2 million compared to net unrealized losses of $8.1 million in 2022. Loss and Loss Adjustment Expenses Incurred.
As a percentage of gross premiums earned, ceded premiums were 3.7% for 2021 compared to 3.3% for 2020. The increase in ceded premiums as a percentage of gross premiums earned reflects additional ceded premium of $0.6 million resulting from excess ceded losses. For additional information, see Item 1, “Business—Reinsurance.” Net Premiums Earned .
Ceded premiums increased as we purchased higher levels of reinsurance coverage at generally higher prices in 2023. For additional information, see Item 1, “Business—Reinsurance.” Net Premiums Earned . Net premiums earned for 2023 were $267.1 million, compared to $271.7 million for 2022, a decrease of 1.7%. The decrease was primarily attributable to the increase in the cost of reinsurance.
The decrease was due to lower interest rates on fixed income securities in 2021 compared with 2020. The pre-tax investment yield on our investment portfolio was 2.3% per annum for 2021 versus 2.5% per annum for 2020. The tax-equivalent yield on our investment portfolio was 2.7% per annum for 2021, compared to 2.9% per annum for 2020.
Net Investment Income. Net investment income in 2023 was $31.3 million, an increase of 15.1% from the $27.2 million reported in 2022.. The increase was due to higher fixed income reinvestment rates in relation to portfolio rolloff. The average pre-tax investment yield on our investment portfolio was 3.4% per annum for 2023 versus 2.7% per annum for 2022.
Premiums resulting from payroll audits and related premium adjustments for policies written in previous periods decreased by $7.7 million. The decreases were offset by a $0.8 million increase in assumed premium from mandatory pooling arrangements. Payroll audits completed this year included periods of activity impacted by COVID-19.
The increase was attributable to a $10.1 million increase in premiums resulting from payroll audits and related premium adjustments for policies written in previous periods, and a $0.8 million increase in annual premiums on voluntary policies written during the period. The increases were partially offset by a $1.6 million decrease in residual market premium. Net Premiums Written.
Underwriting and certain other operating costs, commissions and salaries and benefits for 2021 were $72.1 million, compared to $71.9 million for 2020, an increase of $0.1 million, or 0.2%.
Underwriting and certain other operating costs, commissions and salaries and benefits for 2023 were $78.3 million, compared to $72.0 million for 2022. The Company experienced a $4.1 million increase in insurance related assessments, a $2.0 million increase in commission expense, a $1.5 million increase in professional fees, and a $0.8 million increase in compensation expense.
The increases above were partially offset by a decrease of $2.0 million in compensation expense, a decrease of $1.9 million in commission expense, an increase of $1.0 million in profit sharing reinsurance commission, and a decrease of 0.7 million in premium taxes. Our underwriting expense ratio increased to 26.1% in 2021 from 23.6% in 2020. Income Tax Expense.
Offsetting these amounts were a $1.6 million increase in profit sharing reinsurance commission, a decrease of $0.8 million in accounts receivable write-offs, a $0.6 million decrease in taxes, licenses and fees, and an increase of $0.5 million in ceding commission related to our current year reinsurance agreement. Our underwriting expense ratio increased to 29.3% in 2023 from 26.5% in 2022.
Related premium adjustments in 2021 include a $1.6 million increase in “earned but unbilled,” or EBUB, premium. Net Premiums Written. Net premiums written for 2021 were $267.8 million, compared to $292.8 million for 2020, a decrease of 8.5%. The decrease was primarily attributable to the decrease in gross premiums written.
Net premiums written for 2023 were $268.7 million, compared to $265.6 million for 2022, an increase of 1.2%. The increase was primarily attributable to the increase in gross premiums written. As a percentage of gross premiums earned, ceded premiums were 5.9% for 2023 compared to 3.7% for 2022.
The current accident year losses and LAE incurred were $222.7 million, or 80.7% of net premiums earned, compared to $220.7 million, or 72.5% of net premiums earned for 2020. We recorded favorable prior accident year development of $61.9 million in 2021, compared to $63.5 million in 2020. Our net loss ratio was 58.3% for 2021 and 51.6% for 2020.
Loss and LAE incurred totaled $148.3 million for 2023, compared to $152.3 million for 2022, a decrease of $4.1 million, or 2.7% . The current accident year losses and LAE incurred were $189.7 million, or 71.0% of net premiums earned, compared to $192.9 million, or 71.0% of net premiums earned for 2022.
The Company had $12.6 million available for future purchases at December 31, 2022 under this program. There were 264,449 shares repurchased in 2022. There were no share repurchases in 2021 or 2020. The purchases may be effected from time to time depending upon market conditions and subject to applicable regulatory considerations.
As of December 31, 2023, we had repurchased a total of 1,569,440 shares of our outstanding common stock for $36.9 million. The Company had $10.4 million available for future purchases at December 31, 2023 under this program. There were 46,741 and 264,449 shares repurchased in 2023 and 2022, respectively.
The increase in insurance related assessments resulted from a benefit of $5.7 million recorded in the prior year due to the early termination of an assessment related to a state multiple injury fund.
The increase in insurance related assessments included a benefit of $3.8 million in 2022 due to the return of assessments from the Minnesota Workers' Compensation Reinsurance Association.
Removed
Gross premiums written for 2021 were $278.3 million, compared to $303.1 million for 2020, a decrease of 8.2%. The decrease was attributable to a $18.0 million decrease in annual premiums on voluntary policies written during the period primarily driven by continued declines in state approved loss costs.
Added
The year-end tax-equivalent yield on our investment portfolio was 3.7% per annum for 2023, compared to 3.4% per annum for 2022. The tax-equivalent yield is calculated using the effective interest rate and the appropriate marginal tax rate.
Removed
Net premiums earned for 2021 were $276.0 million, compared to $304.4 million for 2020, a decrease of 9.3%. The decrease was attributable to the decrease in net premiums written during the period. Net Investment Income. Net investment income in 2021 was $25.4 million, a decrease of 13.4% from the $29.4 million reported in 2020.
Added
We recorded favorable prior accident year development of $41.4 million in 2023, compared to $40.6 million in 2022. This is discussed in more detail below in “Prior Year Development.” Our net loss ratio was 55.5% for 2023 and 56.1% for 2022. Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits.
Removed
Net realized gains on investments in 2021 totaled $1.7 million, compared to $1.1 million in 2020. In 2021, net realized gains of $1.7 million resulted from the sale of fixed maturity securities classified as available-for-sale.
Added
The effective tax rate increased to 17.8% for 2022, compared to 17.2% for 2021.
Removed
Net unrealized gains on equity securities in 2021 were $12.3 million compared to net unrealized gains of $4.2 million in 2020 due to strong appreciation of our common stock investments in 2021. Loss and Loss Adjustment Expenses Incurred. Loss and LAE incurred totaled $160.8 million for 2021, compared to $157.2 million for 2020, an increase of $3.6 million, or 2.3%.
Added
Major components of cash used in financing activities in 2023 included cash used for dividends paid to shareholders of $93.3 million, purchases of treasury stock of $2.2 million, and share-based compensation related tax withholding of $0.9 million.
Removed
The increase in the 2021 accident year loss and loss adjustment expenses incurred and net loss ratios resulted from a catastrophic claim reported in the year. Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits.
Added
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−0 removed8 unchanged
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, 2022 to selected hypothetical changes in interest rates, and the associated impact on our shareholders’ equity.
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, 2023 to selected hypothetical changes in interest rates, and the associated impact on our shareholders’ equity.
At December 31, 2022, the effective duration of the total investment portfolio, including cash and short term investments, was 4.2 years.
At December 31, 2023, the effective duration of the total investment portfolio, including cash and short-term investments, was 4.2 years.
As of December 31, 2022, the equity securities in our investment portfolio had a fair value of $62.1 million, representing 6.5% of our investment portfolio and less than 19.6% of shareholders’ equity on that date. 52
As of December 31, 2023, the equity securities in our investment portfolio had a fair value of $57.1 million, representing 6.4% of our investment portfolio and less than 19.5% of shareholders’ equity on that date. 50
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, 2022, we had fixed maturity securities with a fair value of $789.3 million and a carrying value of $812.8 million.
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, 2023, we had fixed maturity securities with a fair value of $790.2 million and a carrying value of $800.6 million.
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.
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.
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. 51 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 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 49 the financial condition of all issuers of our fixed maturity securities.
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 $ 710,233 $ (79,032 ) $ 779,131 $ (33,678 ) (10.6 )% 100 basis point increase 750,364 (38,901 ) 796,249 (16,561 ) (5.2 )% No change 789,265 — 812,809 — 0.0 % 100 basis point decrease 825,085 35,820 828,189 15,380 4.8 % 200 basis point decrease 858,701 69,436 842,981 30,172 9.5 % 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.
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 $ 713,431 $ (76,725 ) $ 770,453 $ (30,187 ) (10.2 )% 100 basis point increase 752,950 (37,206 ) 786,012 (14,627 ) (5.0 )% No change 790,156 — 800,640 — 0.0 % 100 basis point decrease 823,626 33,469 814,174 13,534 4.6 % 200 basis point decrease 854,846 64,690 827,611 26,972 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.
Added
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.

Other AMSF 10-K year-over-year comparisons