##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-K
 ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006
 Commission File Number: 000-51520
 AMERISAFE, INC.
  Texas
    
    75-2069407(State of Incorporation)
    
    (I.R.S. Employer Identification Number)2301 Highway 190 West, DeRidder, Louisiana
    
    70634(Address of Principal Executive Offices)
    
    (Zip Code)
 (337) 463-9052
  Title of Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, par value $0.01 per share
    
    Nasdaq Stock Market LLC
 None
 o þ
 o þ
 þ o
 o
  o þ o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TABLE OF CONTENTS
 PageNo.PART IForward-Looking Statements
    
    
    3Item     1
    
    Business
    
    
    4Item     1A
    
    Risk Factors
    
    
    33Item     1B
    
    Unresolved Staff Comments
    
    
    44Item     2
    
    Properties
    
    
    44Item     3
    
    Legal Proceedings
    
    
    44Item     4
    
    Submission of Matters to a Vote of Security Holders
    
    
    44PART IIItem     5
    
    Market for Registrants Common Equity, Related
Stockholder Matters And Issuer
Purchases of Equity Securities
    
    
    45Item     6
    
    Selected Financial Data
    
    
    50Item     7
    
    Managements Discussion and Analysis of Financial
Condition and Results of
Operations
    
    
    52Item     7A
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    68Item     8
    
    Financial Statements and Supplementary Data
    
    
    70Item     9
    
    Changes in and Disagreements with Accountants on
Accounting and Financial
Disclosure
    
    
    112Item     9A
    
    Controls and Procedures
    
    
    112Item     9B
    
    Other Information
    
    
    114PART IIIItem     10
    
    Directors, Executive Officers and Corporate Governance
    
    
    114Item     11
    
    Executive Compensation
    
    
    114Item     12
    
    Security Ownership of Certain Beneficial Owners and
Management and
Related Stockholder Matters
    
    
    114Item     13
    
    Certain Relationships and Related Transactions, and
Director Independence
    
    
    114Item     14
    
    Principal Accountant Fees and Services
    
    
    115PART IVItem     15
    
    Exhibits and Financial Statement Schedules
    
    
    116Form of First Casualty Excess of Loss Reinsurance ContractForm of Second Casualty Excess of Loss Reinsurance ContractForm of First and Second Casualty Catastrophe Excess of Loss Reinsurance ContractForm of Third and Fourth Casualty Catastrophe Excess of Loss Reinsurance ContractConsent of Ernst & Young LLPPowers of AttorneyCertification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to Section 906




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##### Table of Contents



FORWARD-LOOKING STATEMENTS
  
    
    increased competition on the basis of coverage availability, claims management, safety
services, payment terms, premium rates, policy terms, types of insurance offered, overall
financial strength, financial ratings and reputation;
    
    the cyclical nature of the workers compensation insurance industry;
    
    greater frequency or severity of claims and loss activity, including as a result of
natural or man-made catastrophic events, than our underwriting, reserving or investment
practices anticipate based on historical experience or industry data;
    
    changes in rating agency policies or practices;
    
    changes in the availability, cost or quality of reinsurance and the failure of our
reinsurers to pay claims in a timely manner or at all;
    
    negative developments in the workers compensation insurance industry;
    
    decreased level of business activity of our policyholders;
    
    decreased demand for our insurance;
    
    changes in regulations or laws applicable to us, our policyholders or the agencies
that sell our insurance;
    
    changes in legal theories of liability under our insurance policies;
    
    developments in capital markets that adversely affect the performance of our investments;
    
    loss of the services of any of our senior management or other key employees;
    
    the effects of U.S. involvement in hostilities with other countries and large-scale
acts of terrorism, or the threat of hostilities or terrorist acts; and
    
    changes in general economic conditions, including interest rates, inflation and other
factors.
  3




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##### Table of Contents



PART I
 
 Item 1. Business.
 Overview
        4




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Competitive Advantages
  Focus on Hazardous Industries.
 Focus on Small to Mid-Sized Employers.
 Specialized Underwriting Expertise.
 Comprehensive Safety Services.
 Proactive Claims Management.
 Strategy
  Expand in our Existing Markets.
 Prudent and Opportunistic Geographic Expansion.
 5




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##### Table of Contents



Focus on Underwriting Profitability.
 Leverage Existing Information Technology
 Maintain Capital Strength.
 Industry
 Overview
   6




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##### Table of Contents



Outlook
 Policyholders
   Targeted Industries
  Construction.
 Trucking.
 Logging.
 Agriculture.
 7




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##### Table of Contents



Oil and Gas.
 Maritime.
 Sawmills.
  
    
    Direct Premiums.Includes premiums from workers compensation and general liability
insurance policies that we issue to:
 
    
    employers who seek to purchase insurance directly from us and who we voluntarily
agree to insure, which we refer to as our voluntary business; and
 
    
    employers assigned to us under residual market programs implemented by some of the
states in which we operate, which we refer to as our assigned risk business.
 
    
    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.
   Percentage ofGross Premiums Written
    
    
    Gross Premiums Written2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004(In thousands)Voluntary business:Construction
    
    $
    132,083
    
    
    $
    117,134
    
    
    $
    101,298
    
    
    
    39.7
    %
    
    
    40.3
    %
    
    
    38.3
    %Trucking
    
    
    70,221
    
    
    
    59,348
    
    
    
    57,822
    
    
    
    21.1
    %
    
    
    20.4
    %
    
    
    21.8
    %Logging
    
    
    24,553
    
    
    
    26,324
    
    
    
    30,340
    
    
    
    7.4
    %
    
    
    9.0
    %
    
    
    11.5
    %Agriculture
    
    
    13,681
    
    
    
    13,119
    
    
    
    11,203
    
    
    
    4.1
    %
    
    
    4.5
    %
    
    
    4.2
    %Oil and Gas
    
    
    10,578
    
    
    
    8,035
    
    
    
    7,226
    
    
    
    3.2
    %
    
    
    2.8
    %
    
    
    2.7
    %Maritime
    
    
    9,180
    
    
    
    7,262
    
    
    
    5,909
    
    
    
    2.8
    %
    
    
    2.5
    %
    
    
    2.2
    %Sawmills
    
    
    4,260
    
    
    
    4,441
    
    
    
    5,566
    
    
    
    1.3
    %
    
    
    1.5
    %
    
    
    2.1
    %Other
    
    
    51,547
    
    
    
    34,382
    
    
    
    28,117
    
    
    
    15.5
    %
    
    
    11.8
    %
    
    
    10.6
    %Total voluntary
business
    
    
    316,103
    
    
    
    270,045
    
    
    
    247,481
    
    
    
    95.1
    %
    
    
    92.8
    %
    
    
    93.4
    %Assigned risk business
    
    
    11,936
    
    
    
    13,924
    
    
    
    9,431
    
    
    
    3.6
    %
    
    
    4.8
    %
    
    
    3.6
    %Assumed premiums
    
    
    4,452
    
    
    
    6,922
    
    
    
    8,050
    
    
    
    1.3
    %
    
    
    2.4
    %
    
    
    3.0
    %Total
    
    $
    332,491
    
    
    $
    290,891
    
    
    $
    264,962
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 8




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Geographic Distribution
  Percentage of Gross Premiums WrittenYear Ended December 31,State
    
    2006
    
    2005
    
    2004Georgia
    
    
    9.1
    %
    
    
    10.5
    %
    
    
    9.5
    %Louisiana
    
    
    8.9
    %
    
    
    8.3
    %
    
    
    10.6
    %North Carolina
    
    
    7.5
    %
    
    
    6.7
    %
    
    
    6.3
    %Florida
    
    
    6.5
    %
    
    
    5.9
    %
    
    
    4.9
    %Virginia
    
    
    6.1
    %
    
    
    5.3
    %
    
    
    5.2
    %Texas
    
    
    5.8
    %
    
    
    5.0
    %
    
    
    6.5
    %Pennsylvania
    
    
    4.8
    %
    
    
    5.3
    %
    
    
    4.5
    %Illinois
    
    
    4.6
    %
    
    
    5.4
    %
    
    
    6.4
    %South Carolina
    
    
    4.5
    %
    
    
    4.9
    %
    
    
    4.6
    %Alaska
    
    
    4.4
    %
    
    
    5.3
    %
    
    
    4.4
    %Minnesota
    
    
    4.4
    %
    
    
    4.2
    %
    
    
    3.6
    %Oklahoma
    
    
    4.4
    %
    
    
    4.1
    %
    
    
    3.3
    %Tennessee
    
    
    4.2
    %
    
    
    4.2
    %
    
    
    3.9
    %Mississippi
    
    
    4.2
    %
    
    
    3.5
    %
    
    
    3.9
    %Arkansas
    
    
    3.8
    %
    
    
    3.9
    %
    
    
    4.7
    %Wisconsin
    
    
    2.9
    %
    
    
    3.5
    %
    
    
    3.3
    %
 Sales and Marketing
   9




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Underwriting
      Pricing
   10




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Safety
    Claims
    11




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Premium Audits
  Loss Reserves
   
    
    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;
 12




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
    
    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.
       
    
    Paid Development Method  uses historical, cumulative paid losses by accident year and
develops those actual losses to estimated ultimate losses based upon the assumption that
each accident year will develop to estimated ultimate cost in a manner that is analogous
to prior years.
    
    Paid Cape Cod Method  multiplies estimated ultimate claims for each accident year by
a weighted average, trended severity. The estimated ultimate claims used in this method
are based on paid claim count development. The selected severity for a given accident
year is then derived by giving some weight to all of the accident years in the experience
history rather than treating each accident year independently.
 13




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
    
    Paid Bornhuetter-Ferguson (BF) Method  a combination of the Paid Development Method
and the Paid Cape Cod Method, the Paid BF Method estimates ultimate losses by adding
actual paid losses and projected, future unpaid losses. The amounts produced are then
added to cumulative paid losses to produce the final estimates of ultimate incurred
losses.
    
    Incurred Development Method  uses historical, cumulative incurred losses by accident
year and develops those actual losses to estimated ultimate losses based upon the
assumption that each accident year will develop to estimated ultimate cost in a manner
that is analogous to prior years.
    
    Incurred Cape Cod Method  multiplies estimated ultimate claims for each accident year
by a weighted average, trended severity. The estimated ultimate claims used in this
method are based on incurred claim count development. The selected severity for a given
accident year is then derived by giving some weight to all of the accident years in the
experience history rather than treating each accident year independently.
    
    Incurred Bornhuetter-Ferguson Method  a combination of the Incurred Development
Method and the Incurred Cape Cod Method, the Incurred BF Method estimates ultimate losses
by adding actual incurred losses and projected, future unreported losses. The amounts
produced are then added to cumulative incurred losses to produce an estimate of ultimate
incurred losses.
   
    
    open and closed claim counts;
    
    statistics related to open and closed claim count percentages;
    
    claim closure rates;
    
    changes in average case reserves and average loss and loss adjustment expenses
incurred on open claims;
    
    reported and ultimate average case incurred changes;
    
    reported and projected ultimate loss ratios; and
    
    loss payment patterns.
   14




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As of December 31, 2006MandatoryLoss and
    
    
    
    
    
    
    PoolingDCC Expenses
    
    
    AO
    
    
    Arrangements
    
    
    Total(In thousands)Low end of range
    
    $
    351,250
    
    
    $
    18,903
    
    
    $
    9,478
    
    
    $
    379,631Net reserve
    
    
    383,987
    
    
    
    18,903
    
    
    
    9,478
    
    
    
    412,368High end of range
    
    
    384,580
    
    
    
    18,903
    
    
    
    9,478
    
    
    
    412,961
  15




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Reconciliation of Loss Reserves
  Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Balance, beginning of period
    
    $
    484,485
    
    
    $
    432,880
    
    
    $
    377,559Less amounts recoverable from reinsurers on
unpaid loss and loss adjustment expenses
    
    
    120,232
    
    
    
    189,624
    
    
    
    194,558Net balance, beginning of period
    
    
    364,253
    
    
    
    243,256
    
    
    
    183,001Add incurred related to:Current year
    
    
    201,711
    
    
    
    182,174
    
    
    
    160,773Prior years
    
    
    (2,227
    )
    
    
    8,673
    
    
    
    13,413Loss on Converium commutation
    
    
    
    
    
    
    13,209
    
    
    
    Total incurred
    
    
    199,484
    
    
    
    204,056
    
    
    
    174,186Less paid related to:Current year
    
    
    41,002
    
    
    
    42,545
    
    
    
    40,312Prior years
    
    
    110,367
    
    
    
    96,620
    
    
    
    73,619Total paid
    
    
    151,369
    
    
    
    139,165
    
    
    
    113,931Add effect of Converium commutation (1)
    
    
    
    
    
    
    56,106
    
    
    
    Net balance, end of period
    
    
    412,368
    
    
    
    364,253
    
    
    
    243,256Add amounts recoverable from reinsurers on
unpaid loss and loss adjustment expenses
    
    
    106,810
    
    
    
    120,232
    
    
    
    189,624Balance, end of period
    
    $
    519,178
    
    
    $
    484,485
    
    
    $
    432,880
 
 (1)
    
    The total payment from Converium was $61.3 million, of which $56.1 million was for ceded
reserves and $5.2 million was for paid recoverables as of June 30, 2005.   16




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Loss Development
    Analysis of Loss and Loss Adjustment Expense Reserve Development
 Year Ended December 31,1996
    
    
    1997
    
    
    1998
    
    
    1999
    
    
    2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006(In thousands)Reserve for loss and loss
adjustment expenses, net of
reinsurance recoverables
    
    $
    43,952
    
    
    $
    55,096
    
    
    $
    43,625
    
    
    $
    72,599
    
    
    $
    86,192
    
    
    $
    119,020
    
    
    $
    152,908
    
    
    $
    183,001
    
    
    $
    243,256
    
    
    $
    364,253
    
    
    $
    412,368Net reserve estimated as of:One year later
    
    
    35,447
    
    
    
    54,036
    
    
    
    49,098
    
    
    
    75,588
    
    
    
    96,801
    
    
    
    123,413
    
    
    
    155,683
    
    
    
    196,955
    
    
    
    265,138
    
    
    
    362,026Two years later
    
    
    34,082
    
    
    
    60,800
    
    
    
    50,764
    
    
    
    82,633
    
    
    
    98,871
    
    
    
    116,291
    
    
    
    168,410
    
    
    
    217,836
    
    
    
    262,601Three years later
    
    
    34,252
    
    
    
    63,583
    
    
    
    57,750
    
    
    
    86,336
    
    
    
    92,740
    
    
    
    119,814
    
    
    
    187,225
    
    
    
    218,217Four years later
    
    
    35,193
    
    
    
    68,754
    
    
    
    59,800
    
    
    
    86,829
    
    
    
    93,328
    
    
    
    132,332
    
    
    
    189,098Five years later
    
    
    38,318
    
    
    
    69,610
    
    
    
    60,074
    
    
    
    87,088
    
    
    
    101,417
    
    
    
    134,836Six years later
    
    
    38,339
    
    
    
    70,865
    
    
    
    61,297
    
    
    
    90,156
    
    
    
    104,716Seven years later
    
    
    39,459
    
    
    
    70,684
    
    
    
    61,578
    
    
    
    91,170Eight years later
    
    
    38,888
    
    
    
    70,577
    
    
    
    62,484Nine years later
    
    
    39,249
    
    
    
    71,023Ten years later
    
    
    39,654Net cumulative redundancy
(deficiency)
    
    $
    4,298
    
    
    $
    (15,930
    )
    
    $
    (18,859
    )
    
    $
    (18,571
    )
    
    $
    (18,524
    )
    
    $
    (15,816
    )
    
    $
    (36,190
    )
    
    $
    (35,216
    )
    
    $
    (19,345
    )
    
    $
    2,227
 17




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##### Table of Contents



Year Ended December 31,1996
    
    
    1997
    
    
    1998
    
    
    1999
    
    
    2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006(In thousands)Cumulative amount of
reserve paid, net of
reserve recoveries,
through:One year later
    
    
    19,143
    
    
    
    35,005
    
    
    
    26,140
    
    
    
    45,095
    
    
    
    51,470
    
    
    
    51,114
    
    
    
    66,545
    
    
    
    73,783
    
    
    $
    40,514
    
    
    $
    110,369Two years later
    
    
    27,843
    
    
    
    46,735
    
    
    
    37,835
    
    
    
    62,141
    
    
    
    62,969
    
    
    
    71,582
    
    
    
    101,907
    
    
    
    65,752
    
    
    
    97,091Three years later
    
    
    30,766
    
    
    
    54,969
    
    
    
    45,404
    
    
    
    67,267
    
    
    
    70,036
    
    
    
    84,341
    
    
    
    73,391
    
    
    
    99,829Four years later
    
    
    32,576
    
    
    
    60,249
    
    
    
    48,184
    
    
    
    70,894
    
    
    
    73,680
    
    
    
    42,919
    
    
    
    96,884Five years later
    
    
    34,765
    
    
    
    62,361
    
    
    
    50,045
    
    
    
    72,744
    
    
    
    38,939
    
    
    
    59,194Six years later
    
    
    35,313
    
    
    
    64,296
    
    
    
    50,831
    
    
    
    58,809
    
    
    
    49,141Seven years later
    
    
    36,367
    
    
    
    64,659
    
    
    
    51,863
    
    
    
    62,550Eight years later
    
    
    36,379
    
    
    
    64,289
    
    
    
    52,796Nine years later
    
    
    35,870
    
    
    
    65,002Ten years later
    
    
    36,364Net reserve  December 31
    
    $
    43,952
    
    
    $
    55,096
    
    
    $
    43,625
    
    
    $
    72,599
    
    
    $
    86,192
    
    
    $
    119,020
    
    
    $
    152,908
    
    
    $
    183,001
    
    
    $
    243,256
    
    
    $
    364,253
    
    
    $
    412,368Reinsurance recoverables
    
    
    9,525
    
    
    
    12,463
    
    
    
    37,086
    
    
    
    183,818
    
    
    
    293,632
    
    
    
    264,013
    
    
    
    193,634
    
    
    
    194,558
    
    
    
    189,624
    
    
    
    120,232
    
    
    
    106,810Gross reserve  December 31
    
    $
    53,477
    
    
    $
    67,559
    
    
    $
    80,711
    
    
    $
    256,417
    
    
    $
    379,824
    
    
    $
    383,033
    
    
    $
    346,542
    
    
    $
    377,559
    
    
    $
    432,880
    
    
    $
    484,485
    
    
    $
    519,178Net re-estimated reserve
    
    $
    39,654
    
    
    $
    71,023
    
    
    $
    62,484
    
    
    $
    91,170
    
    
    $
    104,716
    
    
    $
    134,836
    
    
    $
    189,098
    
    
    $
    218,217
    
    
    $
    262,601
    
    
    $
    362,026Re-estimated reinsurance
recoverables
    
    
    26,733
    
    
    
    34,133
    
    
    
    123,405
    
    
    
    282,099
    
    
    
    385,387
    
    
    
    347,701
    
    
    
    274,487
    
    
    
    217,689
    
    
    
    178,213
    
    
    
    115,076Gross re-estimated reserve
    
    $
    66,387
    
    
    $
    105,156
    
    
    $
    185,889
    
    
    $
    373,269
    
    
    $
    490,103
    
    
    $
    482,537
    
    
    $
    463,585
    
    
    $
    435,906
    
    
    $
    440,814
    
    
    $
    477,102Gross cumulative redundancy
(deficiency)
    
    $
    (12,910
    )
    
    $
    (37,597
    )
    
    $
    (105,178
    )
    
    $
    (116,852
    )
    
    $
    (110,279
    )
    
    $
    (99,504
    )
    
    $
    (117,043
    )
    
    $
    (58,347
    )
    
    $
    (7,934
    )
    
    $
    7,383
  Investments
    18




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##### Table of Contents



AnnualizedPercentage
    
    
    Tax-EquivalentCarrying Value
    
    
    of Portfolio
    
    
    Yield(In thousands)Fixed maturity securities:State and political subdivisions
    
    $
    365,282
    
    
    
    54.9
    %
    
    
    5.9
    %Mortgage-backed securities
    
    
    117,456
    
    
    
    17.6
    %
    
    
    5.6
    %U.S. Treasury securities and obligations
of U.S. Government agencies
    
    
    78,817
    
    
    
    11.8
    %
    
    
    5.2
    %Corporate bonds
    
    
    21,123
    
    
    
    3.2
    %
    
    
    5.2
    %Asset-backed securities
    
    
    32,436
    
    
    
    4.9
    %
    
    
    5.4
    %Total fixed maturity securities
    
    
    615,114
    
    
    
    92.4
    %
    
    
    5.7
    %Equity securities
    
    
    23,666
    
    
    
    3.6
    %
    
    
    2.0
    %Cash and cash equivalents
    
    
    26,748
    
    
    
    4.0
    %
    
    
    4.3
    %Total investments, including cash and cash
equivalents
    
    $
    665,528
    
    
    
    100
    %
  19




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##### Table of Contents



Cost or
    
    
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Fixed maturity securities, held-to-maturity
    
    $
    615,114
    
    
    $
    1,294
    
    
    $
    7,140
    
    
    $
    609,268Equity securities, available-for-sale
    
    
    22,157
    
    
    
    1,509
    
    
    
    
    
    
    
    23,666Totals
    
    $
    637,271
    
    
    $
    2,803
    
    
    $
    7,140
    
    
    $
    632,934
   Percentageof TotalCredit Rating
    
    Carrying ValueAAA
    
    
    88.3
    %AA
    
    
    8.2
    %A
    
    
    2.2
    %BBB
    
    
    1.3
    %Total
    
    
    100.0
    %
   As of December 31, 2006Remaining Time to Maturity
    
    Carrying Value
    
    
    Percentage(In thousands)Less than one year
    
    $
    65,427
    
    
    
    10.6
    %One to five years
    
    
    225,135
    
    
    
    36.6
    %Five to ten years
    
    
    88,160
    
    
    
    14.3
    %More than ten years
    
    
    86,500
    
    
    
    14.1
    %Mortgage-backed securities
    
    
    117,456
    
    
    
    19.1
    %Asset-backed securities
    
    
    32,436
    
    
    
    5.3
    %Total
    
    $
    615,114
    
    
    
    100.0
    %
 20




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##### Table of Contents



Reinsurance
   2007 Excess of Loss Reinsurance Treaty Program
   
    
    First Layer. Affords coverage up to $3.0 million for each loss occurrence in excess of
$2.0 million, which is retained by us. We are subject to an annual aggregate deductible
of approximately $6.0 million for losses between $2.0 million and $5.0 million before our
reinsurers are obligated to reimburse us. This layer also affords coverage for up to an
aggregate of $3.0 million for certain losses caused by terrorism. The aggregate limit for
all claims under this layer is approximately $51.0 million. The annual aggregate
deductible and aggregate limit are calculated as a percentage of subject premium.
    
    Second Layer. Affords coverage up to $5.0 million for each loss occurrence in excess of
$5.0 million. The aggregate limit to all claims, including terrorism, under this layer is
$15.0 million.
    
    Third Layer. Affords coverage up to $10.0 million for each loss occurrence in excess
of $10.0 million. The aggregate limit for all claims, including terrorism, under this
layer is $20.0 million.
    
    Fourth Layer.Affords coverage up to $10.0 million for each loss occurrence in excess
of $20.0 million. The aggregate limit for all claims, including terrorism, under this
layer is $20.0 million.
    
    Fifth Layer.Affords coverage up to $20.0 million for each loss occurrence in excess
of $30.0 million. The aggregate limit for all claims, including terrorism, under this
layer is $40.0 million.
 21




---



##### Table of Contents



:
 A.M. BestReinsurer
    
    RatingAllied World Assurance Company Ltd.
    
    AAspen Insurance UK Limited
    
    AArch Reinsurance Company
    
    AAXA RE
    
    AAXIS Reinsurance Company
    
    ABRIT Insurance Limited/Danish Re Underwriting Agencies ApS
    
    ABRIT Syndicates Limited (1)
    
    AChaucer Syndicates Limited/Chaucer Underwriting (1)
    
    ADanish Re Syndicate/Danish Re Underwriting Agencies ApS (1)
    
    AFederal Insurance Company/Harbor Point Services, Inc.
    
    A++Hannover Ruckversicherungs-Aktiengesellschaft
    
    ALiberty Syndicate Management Limited (1)
    
    AM.J. Harrington Syndicate (1)
    
    APartner Reinsurance Company of the U.S
    
    A+Tokio Millenium Re Ltd.
    
    A+XL Reinsurance America Inc.
    
    A+
 
 (1)
    
    Member of Lloyds of London syndicate.  A.M. Best
    
    Amount Recoverable asReinsurer
    
    Rating
    
    of December 31, 2006(In thousands)Munich Reinsurance America, Inc.
    
    A
    
    $
    23,737Odyssey America Reinsurance Company
    
    A
    
    
    19,750St. Paul Fire and Marine Insurance Company
    
    A+
    
    
    10,885Clearwater Insurance Company
    
    A
    
    
    9,795SCOR Reinsurance Company
    
    A
    
    
    7,144Converium Reinsurance (North America)
    
    B+
    
    
    6,193Hannover Ruckversicherungs-Aktiengesellschaft (1)
    
    A
    
    
    5,792Aspen Insurance UK Limited (1)
    
    A
    
    
    5,643Partner Reinsurance Company of the U.S (1)
    
    A+
    
    
    3,794American National Insurance Company
    
    A+
    
    
    3,007Other (22 reinsurers)
    
    
    
    
    13,863Total
    
    
    
    $
    109,603
 
 (1)
    
    Current participant in our 2007 reinsurance program. 22




---



##### Table of Contents



Terrorism Reinsurance
    Technology
  Core Systems
 ICAMS.
 RealSafe.
 23




---



##### Table of Contents



CLAIMExpert
 Document Management System.
 Freedom Enterprise.
 Freedom Reinsurance System (FRS).
 Visual Audit.
 Information Warehouse. fnet.
 fnet. fnet fnet
 Operating Systems
  Business Continuity/Disaster Recovery
  Competition
  24




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##### Table of Contents



A
 Ratings
   Employees
  Regulation
 Holding Company Regulation
  25




---



##### Table of Contents



Change of Control
   State Insurance Regulation
     26




---



##### Table of Contents



State Insurance Department Examinations
  Guaranty Fund Assessments
   Residual Market Programs
   Second Injury Funds
  27




---



##### Table of Contents



Dividend Limitations
  Federal Law and Regulations
    Privacy Regulations
  28




---



##### Table of Contents



Federal and State Legislative and Regulatory Changes
   The National Association of Insurance Commissioners
 Accounting
Practices and Procedures
    29




---



##### Table of Contents



Statutory Accounting Practices
    Website Information
 www.amerisafe.com www.sec.gov
 30




---



##### Table of Contents



Executive Officers of the Registrant
  Name
    
    Age
    
    PositionExecutive OfficersC. Allen Bradley, Jr.
    
    
    55
    
    
    Chairman, President and Chief Executive OfficerGeoffrey R. Banta
    
    
    57
    
    
    Executive Vice President and Chief Financial OfficerCraig P. Leach
    
    
    57
    
    
    Executive Vice President, Sales and MarketingDavid O. Narigon
    
    
    54
    
    
    Executive Vice PresidentTodd Walker
    
    
    50
    
    
    Executive Vice President, General Counsel and SecretaryKey EmployeesAllan E. Farr
    
    
    48
    
    
    Senior Vice President, Enterprise Risk ManagementKelly R. Goins
    
    
    40
    
    
    Senior Vice President, Underwriting OperationsCynthia P. Harris
    
    
    52
    
    
    Senior Vice President, Human Resources/Client ServicesLeon J. Lagneaux
    
    
    55
    
    
    Senior Vice President, Safety OperationsHenry O. Lestage, IV
    
    
    46
    
    
    Senior Vice President, Claims OperationsEdwin R. Longanacre
    
    
    49
    
    
    Senior Vice President, Information TechnologyG. Janelle Frost
    
    
    36
    
    
    Vice President, ControllerAngela S. Lannen
    
    
    61
    
    
    Vice President, Treasurer
 
 C. Allen Bradley, Jr.
 Geoffrey R. Banta
 Craig P. Leach
 31




---



##### Table of Contents



David O. Narigon
 Todd Walker
 Allan E. Farr
 Kelly R. Goins
 Cynthia P. Harris
 Leon J. Lagneaux
 Henry O. Lestage, IV
 Edward R. Longanacre
 G. Janelle Frost
 Angela S. Lannen
 32




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##### Table of Contents



Item 1A.      Risk Factors.
  Risks Related to Our Business
 We operate in a highly competitive industry and may lack the financial resources to compete
effectively.
  The workers compensation insurance industry is cyclical in nature, which may affect our overall
financial performance.
  Our loss reserves are based on estimates and may be inadequate to cover our actual losses.
  33




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##### Table of Contents



A downgrade in our A.M. Best rating would likely reduce the amount of business we are able to
write.
 A
 If we are unable to obtain reinsurance on favorable terms, our ability to write policies could be
adversely affected.
   34




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##### Table of Contents



If any of our current reinsurers were to terminate participation in our reinsurance treaty program,
we could be exposed to an increased risk of loss.
  A downgrade in the A.M. Best rating of one or more of our significant reinsurers could adversely
affect our financial condition.
  We may not be able to recover amounts due from our reinsurers, which would adversely affect our
financial condition.
    35




---



##### Table of Contents



Negative developments in the workers compensation insurance industry could adversely affect our
financial condition and results of operations.
  A decline in the level of business activity of our policyholders, particularly those engaged in the
construction, trucking and logging industries, could negatively affect our earnings and
profitability.
  If we do not appropriately establish our premium rates, our results of operations will be adversely
affected.
  
    
    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.
  
    
    insufficient reliable data;
    
    incorrect or incomplete analysis of available data;
    
    uncertainties generally inherent in estimates and assumptions;
    
    the complexity inherent in implementing appropriate rating formulae or other pricing methodologies;
    
    costs of ongoing medical treatment;
    
    uncertainties inherent in accurately estimating retention, investment yields and the
duration of our liability for loss and loss adjustment expenses; and
 36




---



##### Table of Contents




    
    unanticipated court decisions, legislation or regulatory action.
  Unfavorable changes in economic conditions affecting the states in which we operate could adversely
affect our financial condition or results of operations.
  If we cannot sustain our relationships with independent agencies, we may be unable to operate
profitably.
  Our revenues and results of operations may fluctuate as a result of factors beyond our control,
which fluctuation may cause the price of our common stock to be volatile.
  
    
    rising levels of claims costs, including medical and prescription drug costs, that we
cannot anticipate at the time we establish our premium rates;
    
    fluctuations in interest rates, inflationary pressures and other changes in the
investment environment that affect returns on invested assets;
    
    changes in the frequency or severity of claims;
    
    the financial stability of our reinsurers and changes in the level of reinsurance
capacity and our capital capacity;
    
    new types of claims and new or changing judicial interpretations relating to the scope
of liabilities of insurance companies;
    
    volatile and unpredictable developments, including man-made, weather-related and other
natural catastrophes or terrorist attacks; and
    
    price competition.
  37




---



##### Table of Contents



An inability to effectively manage the growth of our operations could make it difficult for us to
compete and affect our ability to operate profitably.
  
    
    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 monitoring and control systems as we expand our business.
 Because we are subject to extensive state and federal regulation, legislative changes may
negatively impact our business.
  
    
    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.
  38




---



##### Table of Contents



The effects of emerging claim and coverage issues on our business are uncertain.
  Additional capital that we may require in the future may not be available to us or may be available
to us only on unfavorable terms.
  If we are unable to realize our investment objectives, our financial condition and results of
operations may be adversely affected.
    39




---



##### Table of Contents



Our business is dependent on the efforts of our executive officers because of their industry
expertise, knowledge of our markets and relationships with the independent agencies that sell our
insurance.
  AMERISAFE is an insurance holding company and does not have any direct operations.
   Assessments and premium surcharges for state guaranty funds, second injury funds and other
mandatory pooling arrangements may reduce our profitability.
  40




---



##### Table of Contents



Being a public company has increased our expenses and administrative workload.
  
    
    maintain and evaluate a system of internal controls over financial reporting in
compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related
rules and regulations of the SEC and the Public Company Accounting Oversight Board;
    
    maintain policies relating to disclosure controls and procedures;
    
    prepare and distribute periodic reports in compliance with our obligations under federal securities laws;
    
    institute a more comprehensive compliance function, including with respect to corporate
governance; and
    
    involve to a greater degree our outside legal counsel and accountants in the above
activities.
  We may have exposure to losses from terrorism for which we are required by law to provide coverage.
  41




---



##### Table of Contents



Risks Related to Our Common Stock
 The trading price of our common stock may decline.
  
    
    our results of operations;
    
    changes in expectations as to our future results of operations, including financial
estimates and projections by securities analysts and investors;
    
    results of operations that vary from those expected by securities analysts and investors;
    
    developments in the healthcare or insurance industries;
    
    changes in laws and regulations;
    
    announcements of claims against us by third parties; and
    
    future issuances or sales of our common stock, including issuances upon conversion of
our outstanding convertible preferred stock.
  Securities analysts may discontinue coverage of our common stock or may issue negative reports,
which may adversely affect the trading price of our common stock.
  Future sales of our common stock may affect the trading price of our common stock and the future
exercise of options or the exercise of the conversion rights of our convertible preferred stock may
lower our stock price.
  42




---



##### Table of Contents



The terms of our convertible preferred stock could adversely affect the value of our common stock.
     Provisions of our articles of incorporation and bylaws and under the laws of the states of
Louisiana and Texas could impede an attempt to replace or remove our directors or otherwise effect
a change of control of our company, which could diminish the value of our common stock.
  
    
    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 junior preferred stock with such
rights, preferences and privileges as the board deems appropriate.
   43




---



##### Table of Contents



Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
  
 Item 3.      Legal Proceedings.
  
 Item 4.      Submission of Matters to a Vote of Security Holders.
  44




---



##### Table of Contents



PART II
 
 Item 5.      Market for Registrants Common Equity, Related Stockholder Matters And Issuer
Purchases of Equity Securities.
 Market Information and Holders
   High
    
    Low2005Fourth Quarter (beginning November 18, 2005)
    
    $
    10.98
    
    
    $
    8.122006First Quarter
    
    $
    12.50
    
    
    $
    8.36Second Quarter
    
    $
    14.35
    
    
    $
    10.25Third Quarter
    
    $
    13.50
    
    
    $
    9.30Fourth Quarter
    
    $
    15.82
    
    
    $
    9.43
 Dividend Policy
    45




---



##### Table of Contents



Description of Capital Stock
  
    
    3,000,000 shares of preferred stock, par value $0.01 per share, of which:
 
    
    1,500,000 shares are designated as Series A preferred stock, of which 862,924
shares have been canceled and retired and cannot be reissued; and
    
    1,500,000 shares are designated as Series B preferred stock;
 
    
    500,000 shares of convertible preferred stock, par value $0.01 per share, of which:
 
    
    300,000 shares are designated as Series C convertible deferred pay preferred stock
of which 250,000 shares have been canceled and retired and cannot be reissued; and
    
    200,000 shares are designated as Series D non-voting convertible deferred pay
preferred stock;
 
    
    500,000 shares of Series E preferred stock, par value $0.01 per share, of which 317,744
shares have been canceled and retired and cannot be reissued;
 
    
    10,000,000 shares of junior preferred stock, par value $0.01 per share;
 
    
    50,000,000 shares of common stock, par value $0.01 per share; and
 
    
    5,000,000 shares of convertible non-voting common stock, par value $0.01 per share.
  
    
    50,000 shares of Series C convertible preferred stock;
 
    
    200,000 shares of Series D convertible preferred stock; and
 
    
    18,708,898 shares of common stock.
   46




---



##### Table of Contents



Common Stock and Non-Voting Common Stock
 Voting.
 Dividends.
 Stock Repurchases.
 Liquidation.
 Issuance and Conversion of Non-Voting Common Stock.
 Convertible Preferred Stock
 Voting.
  Dividends.
 47




---



##### Table of Contents



Liquidation Rights.
 
    
    $100 for each share of convertible preferred stock outstanding, plus the cash value,
calculated at $100 per share, of all accrued and unpaid dividends; and
    
    the amount distributable to the holders of our convertible preferred stock upon
liquidation, dissolution or winding up had the holders converted their shares into common
stock or non-voting common stock, as the case may be, in accordance with the terms of the
convertible preferred stock immediately prior to liquidation, dissolution or winding up.
  Conversion.
 
    
    at any time at the option of the holder;
    
    at our option at any time following the consummation of any public offering of our
equity securities or a change of control of our company if the closing price for our
common stock for the prior 20 trading days is, or the proceeds from the change of control
results in a value for our outstanding common stock of, at least $651.60 per share; and
    
    automatically upon consummation of a public offering of our common stock with gross
proceeds to us of at least $40 million at a price to public of at least $651.60 per share,
subject to adjustment to reflect stock splits, combinations and stock dividends.
 Conversion Price Adjustments.
 
    
    an amount equal to the sum of:
 
    
    the number of shares of common stock and non-voting common stock outstanding
immediately prior to the issuance or sale (including as outstanding all shares of
common stock and non-voting common stock issuable upon conversion of outstanding
convertible preferred stock) multiplied by the then-existing market price of our
common stock; plus
    
    the consideration, if any, received by us upon the issuance or sale; by
 
    
    the total number of shares of common stock and non-voting common stock outstanding
immediately after such issuance or sale (including as outstanding all shares of common
stock and non-voting common stock issuable upon conversion of outstanding convertible
preferred stock, without giving effect to any adjustment in the number of shares issuable
by reason of such issue and sale).
 48




---



##### Table of Contents



Redemption.
 
    
    the sale, lease or transfer of all or substantially all of our assets in one or a
series of related transactions to any person; or
    
    the acquisition of beneficial ownership by any person, other than Welsh Carson, in one
or a series of related transactions, of our voting stock representing more than 50% of the
voting power of all outstanding shares of our voting stock, whether by merger,
consolidation or otherwise, other than by way of a public offering of our equity
securities.
  49




---



##### Table of Contents



Item 6. Selected Financial Data.
  Year Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(In thousands, except share and per share data)Income Statement DataGross premiums written
    
    $
    332,491
    
    
    $
    290,891
    
    
    $
    264,962
    
    
    $
    223,590
    
    
    $
    185,093Ceded premiums written
    
    
    (19,950
    )
    
    
    (21,541
    )
    
    
    (21,951
    )
    
    
    (27,600
    )
    
    
    (26,563
    )Net premiums written
    
    $
    312,541
    
    
    $
    269,350
    
    
    $
    243,011
    
    
    $
    195,990
    
    
    $
    158,530Net premiums earned
    
    $
    299,303
    
    
    $
    256,568
    
    
    $
    234,733
    
    
    $
    179,847
    
    
    $
    163,257Net investment income
    
    
    25,383
    
    
    
    16,882
    
    
    
    12,217
    
    
    
    10,106
    
    
    
    9,419Net realized gains (losses) on
investments (1)
    
    
    7,389
    
    
    
    2,272
    
    
    
    1,421
    
    
    
    316
    
    
    
    (895
    )Fee and other income
    
    
    645
    
    
    
    561
    
    
    
    589
    
    
    
    462
    
    
    
    2,082Total revenues
    
    
    332,720
    
    
    
    276,283
    
    
    
    248,960
    
    
    
    190,731
    
    
    
    173,863Loss and loss adjustment expenses
incurred
    
    
    199,484
    
    
    
    204,056
    
    
    
    174,186
    
    
    
    129,250
    
    
    
    121,062Underwriting and certain other
operating costs (2)
    
    
    35,024
    
    
    
    31,113
    
    
    
    28,792
    
    
    
    23,062
    
    
    
    22,674Commissions
    
    
    19,030
    
    
    
    16,226
    
    
    
    14,160
    
    
    
    11,003
    
    
    
    9,189Salaries and benefits
    
    
    17,234
    
    
    
    16,045
    
    
    
    15,229
    
    
    
    15,037
    
    
    
    16,541Interest expense
    
    
    3,496
    
    
    
    2,844
    
    
    
    1,799
    
    
    
    203
    
    
    
    498Policyholder dividends (3)
    
    
    6,006
    
    
    
    4
    
    
    
    1,108
    
    
    
    736
    
    
    
    156Total expenses
    
    
    280,274
    
    
    
    270,288
    
    
    
    235,274
    
    
    
    179,291
    
    
    
    170,120Income before taxes
    
    
    52,446
    
    
    
    5,995
    
    
    
    13,686
    
    
    
    11,440
    
    
    
    3,743Income tax expense (benefit)
    
    
    15,088
    
    
    
    65
    
    
    
    3,129
    
    
    
    2,846
    
    
    
    (1,438
    )Net income
    
    
    37,358
    
    
    
    5,930
    
    
    
    10,557
    
    
    
    8,594
    
    
    
    5,181Payment-in-kind preferred dividends
    
    
    
    
    
    
    (8,593
    )
    
    
    (9,781
    )
    
    
    (10,133
    )
    
    
    (9,453
    )Net income (loss) available to
common shareholders
    
    $
    37,358
    
    
    $
    (2,663
    )
    
    $
    776
    
    
    $
    (1,539
    )
    
    $
    (4,272
    )Portion allocable to common
shareholders (4)
    
    
    88.6
    %
    
    
    100.0
    %
    
    
    70.2
    %
    
    
    100.0
    %
    
    
    100.0
    %Net income (loss) allocable to
common shareholders
    
    $
    33,099
    
    
    $
    (2,663
    )
    
    $
    545
    
    
    $
    (1,539
    )
    
    $
    (4,272
    )Diluted earnings per common share
equivalent
    
    $
    1.88
    
    
    $
    (1.25
    )
    
    $
    2.14
    
    
    $
    (8.55
    )
    
    $
    (23.72
    )Diluted weighted average of common
share equivalents outstanding
    
    
    17,597,328
    
    
    
    2,129,492
    
    
    
    255,280
    
    
    
    180,125
    
    
    
    180,125Selected Insurance RatiosCurrent accident year loss ratio (5)
    
    
    67.4
    %
    
    
    71.0
    %
    
    
    68.5
    %
    
    
    70.6
    %
    
    
    71.8
    %Prior accident year loss ratio (6)
    
    
    (0.8
    )%
    
    
    8.5
    %
    
    
    5.7
    %
    
    
    1.3
    %
    
    
    2.4
    %Net loss ratio
    
    
    66.6
    %
    
    
    79.5
    %
    
    
    74.2
    %
    
    
    71.9
    %
    
    
    74.2
    %Net underwriting expense ratio (7)
    
    
    23.8
    %
    
    
    24.7
    %
    
    
    24.8
    %
    
    
    27.3
    %
    
    
    29.7
    %Net dividend
ratio (3)(8)
    
    
    2.0
    %
    
    
    0.0
    %
    
    
    0.5
    %
    
    
    0.4
    %
    
    
    0.1
    %Net combined ratio (9)
    
    
    92.4
    %
    
    
    104.2
    %
    
    
    99.5
    %
    
    
    99.6
    %
    
    
    104.0
    %
 50




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##### Table of Contents



As of December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002(In thousands)Balance Sheet DataCash and cash equivalents
    
    $
    26,748
    
    
    $
    49,286
    
    
    $
    25,421
    
    
    $
    49,815
    
    
    $
    44,677Investments
    
    
    638,780
    
    
    
    533,618
    
    
    
    364,868
    
    
    
    257,729
    
    
    
    205,315Amounts recoverable from reinsurers
    
    
    109,603
    
    
    
    122,562
    
    
    
    198,977
    
    
    
    211,774
    
    
    
    214,342Premiums receivable, net
    
    
    144,384
    
    
    
    123,934
    
    
    
    114,141
    
    
    
    108,380
    
    
    
    95,291Deferred income taxes
    
    
    29,466
    
    
    
    22,413
    
    
    
    15,624
    
    
    
    12,713
    
    
    
    11,372Deferred policy acquisition costs
    
    
    18,486
    
    
    
    16,973
    
    
    
    12,044
    
    
    
    11,820
    
    
    
    9,505Deferred charges
    
    
    3,548
    
    
    
    3,182
    
    
    
    3,054
    
    
    
    2,987
    
    
    
    1,997Total assets
    
    
    994,146
    
    
    
    892,320
    
    
    
    754,187
    
    
    
    678,608
    
    
    
    603,801Reserves for loss and loss
adjustment expenses
    
    
    519,178
    
    
    
    484,485
    
    
    
    432,880
    
    
    
    377,559
    
    
    
    346,542Unearned premiums
    
    
    137,761
    
    
    
    124,524
    
    
    
    111,741
    
    
    
    103,462
    
    
    
    87,319Insurance-related assessments
    
    
    40,886
    
    
    
    35,135
    
    
    
    29,876
    
    
    
    26,133
    
    
    
    23,743Debt
    
    
    36,090
    
    
    
    36,090
    
    
    
    36,090
    
    
    
    16,310
    
    
    
    8,000Redeemable preferred stock (10)
    
    
    25,000
    
    
    
    50,000
    
    
    
    131,916
    
    
    
    126,424
    
    
    
    121,300Shareholders equity (deficit) (11)
    
    
    158,784
    
    
    
    97,346
    
    
    
    (42,862
    )
    
    
    (20,652
    )
    
    
    (25,100
    )
 
 (1)
    
    In 2006, includes $3.5 million net realized gains in connection with the sale of all equity
securities as discussed under Managements Discussion and Analysis of Financial Condition and
Results of OperationsInvestment Portfolio in Item 7 of this report.(2)
    
    Includes policy acquisition expenses, such as assessments, premium taxes and other general
and administrative expenses, excluding commissions and salaries and benefits, related to
insurance operations and corporate operating expenses.(3)
    
    In 2006, includes $5.2 million of dividends accrued for policyholders in Florida. Florida
law requires payment of dividends to Florida policyholders pursuant to a formula based on
underwriting results from policies written in Florida in a consecutive three-year period.(4)
    
    Reflects the participation rights of our convertible preferred stock. See Note 12 to our
audited financial statements.(5)
    
    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.(6)
    
    The prior accident year loss ratio is calculated by dividing the change in loss and loss
adjustment expenses incurred for prior accident years by the current years net premiums
earned.(7)
    
    The net underwriting expense ratio is calculated by dividing underwriting and certain other
operating costs, commissions and salaries and benefits by the current years net premiums
earned.(8)
    
    The net dividend ratio is calculated by dividing policyholder dividends by the current years
net premiums earned.(9)
    
    The net combined ratio is the sum of the net loss ratio, the net underwriting expense ratio
and the net dividend ratio.(10)
    
    Includes our Series C and Series D convertible preferred stock, each of which is mandatorily
redeemable upon the occurrence of certain events that are deemed to be outside our control.
In November 2006, 250,000 shares of Series C preferred stock were converted into shares of
common stock by the holders in connection with a secondary public offering of common stock.
For years prior to 2005, also includes our Series A preferred stock, which was mandatorily
redeemable upon the occurrence of certain events that were deemed to be outside our control.
In connection with the initial public offering of our common stock in November 2005, all
outstanding shares of our Series A preferred stock were redeemed and exchanged for shares of
our common stock.(11)
    
    In 1997, we entered into a recapitalization transaction that resulted in a $164.2 million
charge to retained earnings. 51




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Overview
     52




---



##### Table of Contents



53




---



##### Table of Contents



Principal Revenue and Expense Items
  Net Premiums Earned.
    54




---



##### Table of Contents



Net Investment Income and Net Realized Gains and Losses on Investments
 Fee and Other Income
  Loss and Loss Adjustment Expenses Incurred
 Underwriting and Certain Other Operating Costs
 Commissions
 Salaries and Benefits
 Policyholder Dividends
 Interest Expense
 Income Tax Expense
 55




---



##### Table of Contents



Critical Accounting Policies
    Reserves for Loss and Loss Adjustment Expenses
  Amounts Recoverable from Reinsurers
 Assessments
 56




---



##### Table of Contents



Deferred Policy Acquisition Costs
 Deferred Income Taxes
  Impairment of Investment Securities
 
    
    how long and by how much the fair value of the security has been below its cost;
    
    the financial condition and near-term prospects of the issuer of the security,
including any specific events that may affect its operations or earnings;
    
    our intent and ability to keep the security for a sufficient time period for it to recover its value;
    
    any downgrades of the security by a rating agency; and
    
    any reduction or elimination of dividends, or nonpayment of scheduled interest payments.
 Share-Based Compensation Share-Based Payment
 57




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##### Table of Contents



Results of Operations
  Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Income Statement DataGross premiums written
    
    $
    332,491
    
    
    $
    290,891
    
    
    $
    264,962Ceded premiums written
    
    
    (19,950
    )
    
    
    (21,541
    )
    
    
    (21,951
    )Net premiums written
    
    $
    312,541
    
    
    $
    269,350
    
    
    $
    243,011Net premiums earned
    
    $
    299,303
    
    
    $
    256,568
    
    
    $
    234,733Net investment income
    
    
    25,383
    
    
    
    16,882
    
    
    
    12,217Net realized gains on investments (1)
    
    
    7,389
    
    
    
    2,272
    
    
    
    1,421Fee and other income
    
    
    645
    
    
    
    561
    
    
    
    589Total revenues
    
    
    332,720
    
    
    
    276,283
    
    
    
    248,960Loss and loss adjustment expenses incurred
    
    
    199,484
    
    
    
    204,056
    
    
    
    174,186Underwriting and certain other operating costs (2)
    
    
    35,024
    
    
    
    31,113
    
    
    
    28,792Commissions
    
    
    19,030
    
    
    
    16,226
    
    
    
    14,160Salaries and benefits
    
    
    17,234
    
    
    
    16,045
    
    
    
    15,229Interest expense
    
    
    3,496
    
    
    
    2,844
    
    
    
    1,799Policyholder dividends (3)
    
    
    6,006
    
    
    
    4
    
    
    
    1,108Total expenses
    
    
    280,274
    
    
    
    270,288
    
    
    
    235,274Income before taxes
    
    
    52,446
    
    
    
    5,995
    
    
    
    13,686Income tax expense
    
    
    15,088
    
    
    
    65
    
    
    
    3,129Net income
    
    $
    37,358
    
    
    $
    5,930
    
    
    $
    10,557Selected Insurance RatiosCurrent accident year loss ratio (4)
    
    
    67.4
    %
    
    
    71.0
    %
    
    
    68.5
    %Prior accident year loss ratio (5)
    
    
    (0.8
    )%
    
    
    8.5
    %
    
    
    5.7
    %Net loss ratio
    
    
    66.6
    %
    
    
    79.5
    %
    
    
    74.2
    %Net underwriting expense ratio (6)
    
    
    23.8
    %
    
    
    24.7
    %
    
    
    24.8
    %Net dividend ratio (3) (7)
    
    
    2.0
    %
    
    
    0.0
    %
    
    
    0.5
    %Net combined ratio (8)
    
    
    92.4
    %
    
    
    104.2
    %
    
    
    99.5
    %
 58




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##### Table of Contents



As of December 31,2006
    
    2005
    
    2004(In thousands)Balance Sheet DataCash and cash equivalents
    
    $
    26,748
    
    
    $
    49,286
    
    
    $
    25,421Investments
    
    
    638,780
    
    
    
    533,618
    
    
    
    364,868Amounts recoverable from reinsurers
    
    
    109,603
    
    
    
    122,562
    
    
    
    198,977Premiums receivable, net
    
    
    144,384
    
    
    
    123,934
    
    
    
    114,141Deferred income taxes
    
    
    29,466
    
    
    
    22,413
    
    
    
    15,624Deferred policy acquisition costs
    
    
    18,486
    
    
    
    16,973
    
    
    
    12,044Deferred charges
    
    
    3,548
    
    
    
    3,182
    
    
    
    3,054Total assets
    
    
    994,146
    
    
    
    892,320
    
    
    
    754,187Reserves for loss and loss adjustment expenses
    
    
    519,178
    
    
    
    484,485
    
    
    
    432,880Unearned premiums
    
    
    137,761
    
    
    
    124,524
    
    
    
    111,741Insurance-related assessments
    
    
    40,886
    
    
    
    35,135
    
    
    
    29,876Debt
    
    
    36,090
    
    
    
    36,090
    
    
    
    36,090Redeemable preferred stock (9)
    
    
    25,000
    
    
    
    50,000
    
    
    
    131,916Shareholders equity (deficit) (10)
    
    
    158,784
    
    
    
    97,346
    
    
    
    (42,862
    )
 
 (1)
    
    In 2006, includes $3.5 million net realized gains in connection with the sale of all equity
securities as discussed below under Investment Portfolio in Item 7 of this report.(2)
    
    Includes policy acquisition expenses, such as assessments, premium taxes and other general
and administrative expenses, excluding commissions and salaries and benefits, related to
insurance operations and corporate operating expenses.(3)
    
    In 2006, includes $5.2 million of dividends accrued for policyholders in Florida. Florida
law requires payment of dividends to Florida policyholders pursuant to a formula based on
underwriting results from policies written in Florida in a consecutive three-year period.(4)
    
    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.(5)
    
    The prior accident year loss ratio is calculated by dividing the change in loss and loss
adjustment expenses incurred for prior accident years by the current years net premiums
earned.(6)
    
    The net underwriting expense ratio is calculated by dividing underwriting and certain other
operating costs, commissions and salaries and benefits by the current years net premiums
earned.(7)
    
    The net dividend ratio is calculated by dividing policyholder dividends by the current years
net premiums earned.(8)
    
    The net combined ratio is the sum of the net loss ratio, the net underwriting expense ratio
and the net dividend ratio.(9)
    
    Includes our Series C and Series D convertible preferred stock, each of which is mandatorily
redeemable upon the occurrence of certain events that are deemed to be outside our control.
In November 2006, 250,000 shares of Series C preferred stock were converted into shares of
common stock by the holders in connection with a secondary public offering of common stock.
For 2004, also includes our Series A preferred stock, which was mandatorily redeemable upon
the occurrence of certain events that were deemed to be outside our control. In connection
with the initial public offering of our common stock in November 2005, all outstanding shares
of our Series A preferred stock were redeemed and exchanged for shares of our common stock.(10)
    
    In 1997, we entered into a recapitalization transaction with our then-principal shareholder
that resulted in a $164.2 million charge to retained earnings. For periods presented prior to
November 2005, shareholders equity (deficit) included our Series E preferred stock. In
connection with the initial public offering of our common stock in November 2005, all
outstanding shares of our Series E preferred stock were redeemed for cash. 59




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##### Table of Contents



Overview of Operating Results
 Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
 Gross Premiums Written .
 Net Premiums Written .
 Net Premiums Earned ,
 Net Investment Income ,
 Net Realized Gains on Investments
 Loss and Loss Adjustment Expenses Incurred ,
 60




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##### Table of Contents



Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits
 Interest Expense
 Policyholder Dividend Expense.
 Income Tax Expense
 Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
 Gross Premiums Written
 Net Premiums Written
 Net Premiums Earned
 Net Investment Income
 Net Realized Gains on Investments
 61




---



##### Table of Contents



Loss and Loss Adjustment Expenses Incurred
 Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits
 Interest expense
 Income tax expense
 Liquidity and Capital Resources
    62




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,
     63




---



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,
   Investment Portfolio
    64




---



##### Table of Contents



PercentageCarrying Value
    
    
    of Portfolio(In thousands)Fixed maturity securities:State and political subdivisions
    
    $
    365,282
    
    
    
    54.9
    %Mortgage-backed securities
    
    
    117,456
    
    
    
    17.6
    %U.S. Treasury securities and obligations of
U.S. Government agencies
    
    
    78,817
    
    
    
    11.8
    %Corporate bonds
    
    
    21,123
    
    
    
    3.2
    %Asset-backed securities
    
    
    32,436
    
    
    
    4.9
    %Total fixed maturity securities
    
    
    615,114
    
    
    
    92.4
    %Equity securities (1)
    
    
    23,666
    
    
    
    3.6
    %Cash and cash equivalents
    
    
    26,748
    
    
    
    4.0
    %Total investments, including cash and cash equivalents
    
    $
    665,528
    
    
    
    100.0
    %
 
 (1)
    
    Equity securities represented 12.9% of shareholders equity plus redeemable preferred
stock as of December 31, 2006.  
    
    how long and by how much the fair value of the security has been below its cost;
    
    the financial condition and near-term prospects of the issuer of the security,
including any specific events that may affect its operations or earnings;
    
    our intent and ability to keep the security for a sufficient time period for it to recover its value;
    
    any downgrades of the security by a rating agency; and
 65




---



##### Table of Contents




    
    any reduction or elimination of dividends, or nonpayment of scheduled interest payments.
  Contractual Obligations and Commitments
   Future MinimumYear
    
    Lease Payments(In thousands)2007
    
    $
    7492008
    
    
    5692009
    
    
    4732010
    
    
    8$
    1,799
  66




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##### Table of Contents



Payment Due By PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    More ThanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 Years(In thousands)Subordinated notes (1)
    
    $
    36,090
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    36,090Loss and loss adjustment expenses (2)
    
    
    519,178
    
    
    
    187,423
    
    
    
    227,919
    
    
    
    51,399
    
    
    
    52,437Loss-based insurance assessments (3)
    
    
    17,669
    
    
    
    6,379
    
    
    
    7,757
    
    
    
    1,749
    
    
    
    1,784Capital lease obligations
    
    
    548
    
    
    
    507
    
    
    
    41
    
    
    
    0
    
    
    
    0Operating lease obligations
    
    
    1,799
    
    
    
    749
    
    
    
    1,042
    
    
    
    8
    
    
    
    0Purchase obligations
    
    
    424
    
    
    
    284
    
    
    
    140
    
    
    
    0
    
    
    
    0Total
    
    $
    575,708
    
    
    $
    195,342
    
    
    $
    236,899
    
    
    $
    53,156
    
    
    $
    90,311
 
 (1)
    
    Amounts do not include interest payments associated with these obligations. Interest rates
on our subordinated notes are variable and may change on a quarterly basis. See Liquidity
and Capital Resources in Item 1 of this report for further discussion of our subordinated
notes.(2)
    
    The loss and loss adjustment expense payments due by period in the table above are based upon
the loss and loss adjustment expense estimates as of December 31, 2006 and actuarial estimates
of expected payout patterns and are not contractual liabilities as to a time certain. Our
contractual liability is to provide benefits under the policy. As a result, our calculation
of loss and loss adjustment expense payments due by period is subject to the same
uncertainties associated with determining the level of loss and loss adjustment expenses
generally and to the additional uncertainties arising from the difficulty of predicting when
claims (including claims that have not yet been reported to us) will be paid. For a
discussion of our loss and loss adjustment expense process, see BusinessLoss Reserves in
Item 1 of this report. Actual payments of loss and loss adjustment expenses by period will
vary, perhaps materially, from the amounts shown in the table above to the extent that current
estimates of loss and loss adjustment expenses vary from actual ultimate claims amounts and as
a result of variations between expected and actual payout patterns. See Risk FactorsRisks
Related to Our BusinessOur loss reserves are based on estimates and may be inadequate to
cover our actual losses in Item 1 of this report for a discussion of the uncertainties
associated with estimating loss and loss adjustment expenses.(3)
    
    We are subject to various annual assessments imposed by certain of the states in which we
write insurance policies. These assessments are generally based upon the amount of premiums
written or losses paid during the applicable year. Assessments based on premiums are
generally paid within one year after the calendar year in which the policies are written,
while assessments based on losses are generally paid within one year after the loss is paid.
When we establish a reserve for loss and loss adjustment expenses for a reported claim, we
accrue our obligation to pay any applicable assessments. If settlement of the claim is to be
paid out over more than one year, our obligation to pay any related loss-based assessments
extends for the same period of time. Because our reserves for loss and loss adjustment
expenses are based on estimates, our accruals for loss-based insurance assessments are also
based on estimates. Actual payments of loss and loss adjustment expenses may differ, perhaps
materially, from our reserves. Accordingly, our actual loss-based insurance assessments may
vary, perhaps materially, from our accruals. Off-Balance Sheet Arrangements
  67




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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
  Credit Risk
    Interest Rate Risk
  68




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##### Table of Contents



HypotheticalPercentageEstimated
    
    IncreaseEstimated
    
    
    
    
    
    Change in
    
    (Decrease) inHypothetical Change
    
    
    
    
    
    Change in
    
    
    
    
    
    Carrying
    
    Shareholdersin Interest Rates
    
    Fair Value
    
    Fair Value
    
    Carrying Value
    
    Value
    
    Equity200 basis point increase
    
    $
    557,324
    
    
    $
    (51,944
    )
    
    $
    615,114
    
    
    $
    
    
    
    
    100 basis point increase
    
    
    581,580
    
    
    
    (27,688
    )
    
    
    615,114
    
    
    
    
    
    
    
    No change
    
    
    609,268
    
    
    
    
    
    
    
    615,114
    
    
    
    
    
    
    
    100 basis point decrease
    
    
    636,854
    
    
    
    27,586
    
    
    
    615,114
    
    
    
    
    
    
    
    200 basis point decrease
    
    
    668,529
    
    
    
    59,262
    
    
    
    615,114
    
    
    
    
    
    
    
    
 Equity Price Risk
  69




---



##### 



Item 8. Financial Statements and Supplementary Data.
  
 PageAudited Financial Statements as of December 31, 2006 and 2005 and for the three years in theperiod ended December 31, 2006:Report of Independent Registered Public Accounting Firm
    
    
    71Consolidated Balance Sheets
    
    
    72Consolidated Statements of Income
    
    
    73Consolidated Statements of Changes in Shareholders Equity
    
    
    74Consolidated Statements of Cash Flows
    
    
    75Notes to Consolidated Financial Statements
    
    
    76Financial Statement Schedules:Schedule II. Condensed Financial Information of Registrant
    
    
    108Schedule VI. Supplemental Information Concerning Property-Casualty Insurance Operations
    
    
    111(Schedules I, III, IV and V are not applicable and have been omitted)
  70




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Report of Independent Registered Public Accounting Firm
 
      
 71




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 December 31,2006
    
    
    2005AssetsInvestments:Fixed maturity securitiesheld-to-maturity, at amortized cost (fair value $609,268 and
$458,819 in 2006 and 2005, respectively)
    
    $
    615,114
    
    
    $
    465,648Fixed maturity securitiesavailable-for-sale, at fair value (cost $0 and $1,709 in 2006 and
2005, respectively)
    
    
    
    
    
    
    1,695Equity securitiesavailable-for-sale, at fair value (cost $22,157 and $62,875 in 2006
and 2005, respectively)
    
    
    23,666
    
    
    
    66,275Total investments
    
    
    638,780
    
    
    
    533,618Cash and cash equivalents
    
    
    26,748
    
    
    
    49,286Amounts recoverable from reinsurers
    
    
    109,603
    
    
    
    122,562Premiums receivable, net
    
    
    144,384
    
    
    
    123,934Deferred income taxes
    
    
    29,466
    
    
    
    22,413Accrued interest receivable
    
    
    5,921
    
    
    
    4,597Property and equipment, net
    
    
    5,687
    
    
    
    6,321Deferred policy acquisition costs
    
    
    18,486
    
    
    
    16,973Deferred charges
    
    
    3,548
    
    
    
    3,182Other assets
    
    
    11,523
    
    
    
    9,434$
    994,146
    
    
    $
    892,320Liabilities, redeemable preferred stock and shareholders equityLiabilities:Reserves for loss and loss adjustment expenses
    
    $
    519,178
    
    
    $
    484,485Unearned premiums
    
    
    137,761
    
    
    
    124,524Reinsurance premiums payable
    
    
    1,378
    
    
    
    694Amounts held for others
    
    
    1,827
    
    
    
    1,484Policyholder deposits
    
    
    39,141
    
    
    
    38,033Insurance-related assessments
    
    
    40,886
    
    
    
    35,135Federal income tax payable
    
    
    3,631
    
    
    
    1,677Accounts payable and other liabilities
    
    
    30,470
    
    
    
    22,852Subordinated debt securities
    
    
    36,090
    
    
    
    36,090810,362
    
    
    
    744,974Redeemable preferred stock:Series A nonconvertible$0.01 par value, $100 per share redemption value:Authorized shares1,500,000; issued and outstanding sharesnone in 2006
and 2005
    
    
    
    
    
    
    Series C convertible$0.01 par value, $100 per share redemption value:Authorized shares300,000; issued and outstanding shares50,000 in 2006 and
300,000 in 2005
    
    
    5,000
    
    
    
    30,000Series D convertible$0.01 par value, $100 per share redemption value:Authorized shares200,000; issued and outstanding shares200,000 in 2006 and 2005
    
    
    20,000
    
    
    
    20,00025,000
    
    
    
    50,000Shareholders equity:Preferred stock: Series E nonconvertible$0.01 par value, $100 per share redemption value:Authorized500,000; issued and outstanding sharesnone in 2006 and in 2005
    
    
    
    
    
    
    Common stock:Voting$0.01 par value authorized shares50,000,000 in 2006 and 2005;
issued and outstanding shares18,705,098 in 2006 and 17,424,054 in 2005
    
    
    187
    
    
    
    174Additional paid-in capital
    
    
    171,557
    
    
    
    145,206Accumulated deficit
    
    
    (16,988
    )
    
    
    (54,346
    )Accumulated other comprehensive income
    
    
    4,028
    
    
    
    6,312158,784
    
    
    
    97,346$
    994,146
    
    
    $
    892,320
  72




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
 Year Ended December 31,2006
    
    
    2005
    
    
    2004RevenuesPremiums earned
    
    $
    299,303
    
    
    $
    256,568
    
    
    $
    234,733Net investment income
    
    
    25,383
    
    
    
    16,882
    
    
    
    12,217Net realized gains on investments
    
    
    7,389
    
    
    
    2,272
    
    
    
    1,421Fee and other income
    
    
    645
    
    
    
    561
    
    
    
    589Total revenues
    
    
    332,720
    
    
    
    276,283
    
    
    
    248,960ExpensesLoss and loss adjustment expenses incurred
    
    
    199,484
    
    
    
    204,056
    
    
    
    174,186Underwriting and certain other operating costs
    
    
    35,024
    
    
    
    31,113
    
    
    
    28,792Commissions
    
    
    19,030
    
    
    
    16,226
    
    
    
    14,160Salaries and benefits
    
    
    17,234
    
    
    
    16,045
    
    
    
    15,229Interest expense
    
    
    3,496
    
    
    
    2,844
    
    
    
    1,799Policyholder dividends
    
    
    6,006
    
    
    
    4
    
    
    
    1,108Total expenses
    
    
    280,274
    
    
    
    270,288
    
    
    
    235,274Income before income taxes
    
    
    52,446
    
    
    
    5,995
    
    
    
    13,686Income tax expense
    
    
    15,088
    
    
    
    65
    
    
    
    3,129Net income
    
    
    37,358
    
    
    
    5,930
    
    
    
    10,557Preferred stock dividends
    
    
    
    
    
    
    (8,593
    )
    
    
    (9,781
    )Net income (loss) available to common shareholders
    
    $
    37,358
    
    
    $
    (2,663
    )
    
    $
    776Earnings (loss) per shareBasic
    
    $
    1.88
    
    
    $
    (1.25
    )
    
    $
    2.42Diluted
    
    $
    1.88
    
    
    $
    (1.25
    )
    
    $
    2.14Shares used in computing earnings (loss) per shareBasic
    
    
    17,579,829
    
    
    
    2,129,492
    
    
    
    225,367Diluted
    
    
    17,594,736
    
    
    
    2,129,492
    
    
    
    255,280
  73




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(In thousands, except share data)
 AccumulatedSeries E
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    OtherPreferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    TotalBalance at January 1, 2004
    
    
    247,209
    
    
    $
    24,720
    
    
    
    180,125
    
    
    $
    2
    
    
    $
    
    
    
    $
    (52,544
    )
    
    $
    7,170
    
    
    $
    (20,652
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,557
    
    
    
    
    
    
    
    10,557Other comprehensive income,
net of tax:Unrealized loss on securities.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (117
    )
    
    
    (117
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,440Conversion of warrants
    
    
    
    
    
    
    
    
    
    
    119,649
    
    
    
    1
    
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    86Dividends paid in Series A
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,492
    )
    
    
    
    
    
    
    (5,492
    )Dividends paid in Series E
preferred stock
    
    
    42,880
    
    
    
    4,289
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,289
    )
    
    
    
    
    
    
    Redemption of Series E preferred
stock
    
    
    (272,436
    )
    
    
    (27,244
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,244
    )Balance at December 31, 2004
    
    
    17,653
    
    
    
    1,765
    
    
    
    299,774
    
    
    
    3
    
    
    
    
    
    
    
    (51,683
    )
    
    
    7,053
    
    
    
    (42,862
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,930
    
    
    
    
    
    
    
    5,930Other comprehensive income:Change in unrealized gains,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (741
    )
    
    
    (741
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,189Dividends paid in Series A
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,376
    )
    
    
    
    
    
    
    (4,376
    )Dividends paid in Series E
preferred stock
    
    
    27,655
    
    
    
    2,766
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,766
    )
    
    
    
    
    
    
    IPO  Common stock issued
    
    
    
    
    
    
    
    
    
    
    8,000,000
    
    
    
    80
    
    
    
    71,920
    
    
    
    
    
    
    
    
    
    
    
    72,000IPO  Common stock issued
in exchange for Series A
preferred stock
    
    
    
    
    
    
    
    
    
    
    9,120,948
    
    
    
    91
    
    
    
    81,997
    
    
    
    (837
    )
    
    
    
    
    
    
    81,251Restricted common
stock issued
    
    
    
    
    
    
    
    
    
    
    3,332
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    53IPO  Series A preferred stock
redeemed
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (52
    )
    
    
    
    
    
    
    (52
    )IPO  Series E preferred stock
redeemed
    
    
    (45,308
    )
    
    
    (4,531
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (562
    )
    
    
    
    
    
    
    (5,093
    )IPO  Offering costs:Underwriting discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,040
    )
    
    
    
    
    
    
    
    
    
    
    (5,040
    )Other IPO expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,724
    )
    
    
    
    
    
    
    
    
    
    
    (3,724
    )Balance at December 31, 2005
    
    
    
    
    
    
    
    
    
    
    17,424,054
    
    
    
    174
    
    
    
    145,206
    
    
    
    (54,346
    )
    
    
    6,312
    
    
    
    97,346Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,358
    
    
    
    
    
    
    
    37,358Other comprehensive income:Change in unrealized gains,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,284
    )
    
    
    (2,284
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,074Common stock issued
upon conversion of Series C
preferred stock
    
    
    
    
    
    
    
    
    
    
    1,214,771
    
    
    
    12
    
    
    
    24,988
    
    
    
    
    
    
    
    
    
    
    
    25,000Common stock issued
upon exercise of options
    
    
    
    
    
    
    
    
    
    
    47,500
    
    
    
    1
    
    
    
    427
    
    
    
    
    
    
    
    
    
    
    
    428Restricted common stock issued
    
    
    
    
    
    
    
    
    
    
    18,773
    
    
    
    
    
    
    
    168
    
    
    
    
    
    
    
    
    
    
    
    168Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    754
    
    
    
    
    
    
    
    
    
    
    
    754Tax benefit of share-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    14Balance at December 31, 2006
    
    
    
    
    
    $
    
    
    
    
    18,705,098
    
    
    $
    187
    
    
    $
    171,557
    
    
    $
    (16,988
    )
    
    $
    4,028
    
    
    $
    158,784
  74




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Operating activitiesNet income
    
    $
    37,358
    
    
    $
    5,930
    
    
    $
    10,557Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    1,960
    
    
    
    2,159
    
    
    
    1,695Net amortization/accretion of investments
    
    
    2,272
    
    
    
    2,256
    
    
    
    1,673Deferred income taxes
    
    
    (5,824
    )
    
    
    (6,389
    )
    
    
    (2,849
    )Net realized gains on investments
    
    
    (7,389
    )
    
    
    (2,272
    )
    
    
    (1,421
    )(Gain)loss on sale of asset
    
    
    (82
    )
    
    
    2
    
    
    
    Share-based compensation
    
    
    922
    
    
    
    53
    
    
    
    Changes in operating assets and liabilities:Premiums receivable
    
    
    (20,450
    )
    
    
    (9,793
    )
    
    
    (5,761
    )Accrued interest receivable
    
    
    (1,324
    )
    
    
    (1,474
    )
    
    
    (464
    )Deferred policy acquisition costs and deferred charges
    
    
    (1,879
    )
    
    
    (5,057
    )
    
    
    (291
    )Other assets
    
    
    (2,089
    )
    
    
    424
    
    
    
    3,497Reserve for loss and loss adjustment expenses
    
    
    34,693
    
    
    
    51,605
    
    
    
    55,321Unearned premiums
    
    
    13,237
    
    
    
    12,783
    
    
    
    8,279Reinsurance balances
    
    
    13,643
    
    
    
    76,248
    
    
    
    13,173Amounts held for others and policyholder deposits
    
    
    1,451
    
    
    
    4,557
    
    
    
    4,975Accounts payable and other liabilities
    
    
    15,323
    
    
    
    11,063
    
    
    
    3,565Net cash provided by operating activities
    
    
    81,822
    
    
    
    142,095
    
    
    
    91,949Investing activitiesPurchases of investments held-to-maturity
    
    
    (214,627
    )
    
    
    (240,054
    )
    
    
    (113,461
    )Purchases of investments available-for-sale
    
    
    (41,972
    )
    
    
    (56,115
    )
    
    
    (31,795
    )Proceeds from maturities of investments held-to-maturity
    
    
    61,182
    
    
    
    99,953
    
    
    
    21,789Proceeds from sales and maturities of investments
available-for-sale
    
    
    91,859
    
    
    
    26,342
    
    
    
    14,908Repayments on mortgage loan
    
    
    
    
    
    
    
    
    
    
    2,370Purchases of property and equipment
    
    
    (1,330
    )
    
    
    (1,409
    )
    
    
    (2,778
    )Proceeds from sales of property and equipment
    
    
    86
    
    
    
    3
    
    
    
    2Net cash used in investing activities
    
    
    (104,802
    )
    
    
    (171,280
    )
    
    
    (108,965
    )Financing activitiesProceeds from stock option exercise
    
    
    428
    
    
    
    
    
    
    
    Tax benefit from share-based payments
    
    
    14
    
    
    
    
    
    
    
    Net proceeds from initial public offering
    
    
    
    
    
    
    63,236
    
    
    
    Series A preferred stock redemption
    
    
    
    
    
    
    (5,093
    )
    
    
    Series E preferred stock redemption
    
    
    
    
    
    
    (5,093
    )
    
    
    (27,244
    )Principal payments on note payable
    
    
    
    
    
    
    
    
    
    
    (6,000
    )Warrants exercised
    
    
    
    
    
    
    
    
    
    
    86Proceeds from issuance of subordinated debt securities
    
    
    
    
    
    
    
    
    
    
    25,780Net cash provided by (used in) financing activities
    
    
    442
    
    
    
    53,050
    
    
    
    (7,378
    )Change in cash and cash equivalents
    
    
    (22,538
    )
    
    
    23,865
    
    
    
    (24,394
    )Cash and cash equivalents at beginning of year
    
    
    49,286
    
    
    
    25,421
    
    
    
    49,815Cash and cash equivalents at end of year
    
    $
    26,748
    
    
    $
    49,286
    
    
    $
    25,421Supplemental disclosure of cash flow informationInterest paid
    
    $
    2,655
    
    
    $
    2,556
    
    
    $
    1,260Income taxes paid
    
    $
    18,638
    
    
    $
    3,650
    
    
    $
    8,434Pay-in-kind dividends (non-cash)
    
    $
    
    
    
    $
    8,593
    
    
    $
    9,781
  75




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 1. Summary of Significant Accounting Policies
 Organization
       76




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 Basis of Presentation
    Investments
      77




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 Cash and Cash Equivalents
  Premiums Receivable
  Property and Equipment
  Deferred Policy Acquisition Costs
  Reserves for Loss and Loss Adjustment Expenses
   78




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
  Premium Revenue
     Reinsurance
     79




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
  Fee and Other Income
  Advertising
  Income Taxes
   Insurance-Related Assessments
  80




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 Policyholder Dividends
  Variable Interest Entities
    Earnings Per Share
   81




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 Stock-Based Compensation
    Recent Accounting Pronouncements
    82




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
  2. Investments
  Cost or
    
    
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)U.S. Treasury securities and obligations of
U.S. Government agencies
    
    $
    78,817
    
    
    $
    93
    
    
    $
    (921
    )
    
    $
    77,989States and political subdivisions
    
    
    365,282
    
    
    
    996
    
    
    
    (3,481
    )
    
    
    362,797Mortgage-backed and asset-backed
securities
    
    
    149,892
    
    
    
    193
    
    
    
    (2,225
    )
    
    
    147,860Corporate bonds
    
    
    21,023
    
    
    
    12
    
    
    
    (513
    )
    
    
    20,522Long-term certificates of deposit
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    100Totals
    
    $
    615,114
    
    
    $
    1,294
    
    
    $
    (7,140
    )
    
    $
    609,268
   Gross
    
    
    GrossUnrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Equity securities
    
    $
    22,157
    
    
    $
    1,509
    
    
    $
    
    
    
    $
    23,666
 83




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)U.S. Treasury securities and obligations of
U.S. Government agencies
    
    $
    71,548
    
    
    $
    75
    
    
    $
    (934
    )
    
    $
    70,689States and political subdivisions
    
    
    255,598
    
    
    
    585
    
    
    
    (4,345
    )
    
    
    251,838Mortgage-backed and asset-backed
securities
    
    
    115,510
    
    
    
    217
    
    
    
    (1,950
    )
    
    
    113,777Corporate bonds
    
    
    22,892
    
    
    
    17
    
    
    
    (494
    )
    
    
    22,415Long-term certificates of deposit
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    100Totals
    
    $
    465,648
    
    
    $
    894
    
    
    $
    (7,723
    )
    
    $
    458,819
  Cost or
    
    
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Equity securities
    
    $
    62,875
    
    
    $
    5,355
    
    
    $
    (1,955
    )
    
    $
    66,275Fixed maturity securities
    
    
    1,709
    
    
    
    7
    
    
    
    (21
    )
    
    
    1,695Totals
    
    $
    64,584
    
    
    $
    5,362
    
    
    $
    (1,976
    )
    
    $
    67,970
  Cost orAmortizedCost
    
    
    Fair Value(In thousands)Maturity:Due in 2007
    
    $
    65,427
    
    
    $
    65,262In 2008 through 2011
    
    
    225,135
    
    
    
    221,963In 2012 through 2016
    
    
    88,160
    
    
    
    87,434After 2016
    
    
    86,500
    
    
    
    86,749Mortgage-backed and asset-backed securities
    
    
    149,892
    
    
    
    147,860Totals
    
    $
    615,114
    
    
    $
    609,268
   84




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AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
  FixedMaturitySecuritiesAvailable
    
    
    Equityfor Sale
    
    
    Securities
    
    
    Other
    
    
    Total(In thousands)Year ended December 31, 2006Proceeds from sales
    
    $
    2,000
    
    
    $
    89,859
    
    
    $
    
    
    
    $
    91,859Gross realized investment gains
    
    $
    
    
    
    $
    10,601
    
    
    $
    
    
    
    $
    10,601Gross realized investment losses
    
    
    
    
    
    
    (3,142
    )
    
    
    
    
    
    
    (3,142
    )Net realized investment gain
    
    
    
    
    
    
    7,459
    
    
    
    
    
    
    
    7,459Impairments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other, including losses on calls and
redemptions
    
    
    (5
    )
    
    
    
    
    
    
    (65
    )
    
    
    (70
    )Net realized investment gains (losses)
    
    $
    (5
    )
    
    $
    7,459
    
    
    $
    (65
    )
    
    $
    7,389Year ended December 31, 2005Proceeds from sales
    
    $
    
    
    
    $
    26,342
    
    
    $
    
    
    
    $
    26,342Gross realized investment gains
    
    $
    
    
    
    $
    3,338
    
    
    $
    
    
    
    $
    3,338Gross realized investment losses
    
    
    
    
    
    
    (1,179
    )
    
    
    
    
    
    
    (1,179
    )Net realized investment gain
    
    
    
    
    
    
    2,159
    
    
    
    
    
    
    
    2,159Impairments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other, including gains on calls and
redemptions
    
    
    
    
    
    
    
    
    
    
    113
    
    
    
    113Net realized investment gains
    
    $
    
    
    
    $
    2,159
    
    
    $
    113
    
    
    $
    2,272Year ended December 31, 2004Proceeds from sales
    
    $
    
    
    
    $
    13,529
    
    
    $
    
    
    
    $
    13,529Gross realized investment gains
    
    $
    
    
    
    $
    1,784
    
    
    $
    
    
    
    $
    1,784Gross realized investment losses
    
    
    
    
    
    
    (537
    )
    
    
    
    
    
    
    (537
    )Net realized investment gain
    
    
    
    
    
    
    1,247
    
    
    
    
    
    
    
    1,247Impairments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other, including gains on calls and
redemptions
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    174Net realized investment gains
    
    $
    
    
    
    $
    1,247
    
    
    $
    174
    
    
    $
    1,421
 85




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AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
  Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Gross investment income:Fixed maturity securities
    
    $
    22,261
    
    
    $
    15,515
    
    
    $
    11,294Equity securities
    
    
    1,522
    
    
    
    1,333
    
    
    
    811Cash and cash equivalents
    
    
    2,674
    
    
    
    1,031
    
    
    
    693Total gross investment income
    
    
    26,457
    
    
    
    17,879
    
    
    
    12,798Investment expenses
    
    
    (1,074
    )
    
    
    (997
    )
    
    
    (581
    )Net investment income
    
    $
    25,383
    
    
    $
    16,882
    
    
    $
    12,217
  Less Than
    
    
    Twelve MonthsTwelve Months
    
    
    or LongerFair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses(In thousands)December 31, 2006:Fixed maturity securities
    
    $
    157,606
    
    
    $
    2,011
    
    
    $
    258,177
    
    
    $
    5,129Equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    December 31, 2005:Fixed maturity securities
    
    
    34,119
    
    
    
    2,544
    
    
    
    271,579
    
    
    
    5,179Equity securities
    
    
    40,437
    
    
    
    1,405
    
    
    
    3,599
    
    
    
    571
  3. Premiums Receivable
  December 31,2006
    
    
    2005(In thousands)Premiums receivable
    
    $
    146,894
    
    
    $
    126,148Allowance for doubtful accounts
    
    
    (2,510
    )
    
    
    (2,214
    )Premiums receivable, net
    
    $
    144,384
    
    
    $
    123,934
 86




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AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
  December 31,2006
    
    
    2005
    
    
    2004(In thousands)Balance, beginning of year
    
    $
    2,214
    
    
    $
    2,916
    
    
    $
    3,229Provision for bad debts
    
    
    1,839
    
    
    
    956
    
    
    
    1,507Write-offs
    
    
    (1,543
    )
    
    
    (1,658
    )
    
    
    (1,820
    )Balance, end of year
    
    $
    2,510
    
    
    $
    2,214
    
    
    $
    2,916
 4. Deferred Policy Acquisition Costs
  December 31,2006
    
    
    2005(In thousands)Agents commissions
    
    $
    12,080
    
    
    $
    11,033Premium taxes
    
    
    3,469
    
    
    
    3,088Deferred underwriting expenses
    
    
    2,937
    
    
    
    2,852Total deferred policy acquisition costs
    
    $
    18,486
    
    
    $
    16,973
  Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Balance, beginning of year
    
    $
    16,973
    
    
    $
    12,044
    
    
    $
    11,820Policy acquisition costs deferred
    
    
    41,939
    
    
    
    36,714
    
    
    
    26,193Amortization expense during the year
    
    
    (40,426
    )
    
    
    (31,785
    )
    
    
    (25,969
    )Balance, end of year
    
    $
    18,486
    
    
    $
    16,973
    
    
    $
    12,044
 87




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AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 5. Property and Equipment
  December 31,2006
    
    
    2005(In thousands)Land and office building
    
    $
    4,382
    
    
    $
    4,383Furniture and equipment
    
    
    6,244
    
    
    
    6,445Software
    
    
    6,943
    
    
    
    6,902Automobiles
    
    
    73
    
    
    
    7917,642
    
    
    
    17,809Accumulated depreciation
    
    
    (11,955
    )
    
    
    (11,488
    )Real estate, furniture and equipment, net
    
    $
    5,687
    
    
    $
    6,321
   2007
    
    $
    5072008
    
    
    41Total minimum lease payments
    
    
    548Less amount representing interest
    
    
    (4
    )Present value of net minimum lease payments
    
    $
    544
 6. Reinsurance
  2006 Premiums
    
    
    2005 Premiums
    
    
    2004 PremiumsWritten
    
    
    Earned
    
    
    Written
    
    
    Earned
    
    
    Written
    
    
    Earned(In thousands)Gross
    
    $
    332,491
    
    
    $
    319,253
    
    
    $
    290,891
    
    
    $
    278,109
    
    
    $
    264,962
    
    
    $
    256,684Ceded
    
    
    (19,950
    )
    
    
    (19,950
    )
    
    
    (21,541
    )
    
    
    (21,541
    )
    
    
    (21,951
    )
    
    
    (21,951
    )Net premiums
    
    $
    312,541
    
    
    $
    299,303
    
    
    $
    269,350
    
    
    $
    256,568
    
    
    $
    243,011
    
    
    $
    234,733
 88




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
  December 31,2006
    
    
    2005(In thousands)Unpaid losses recoverable:Case basis
    
    $
    89,285
    
    
    $
    106,626Incurred but not reported
    
    
    17,525
    
    
    
    13,606Paid losses recoverable
    
    
    2,793
    
    
    
    2,330Total
    
    $
    109,603
    
    
    $
    122,562
    Munich Reinsurance America, Inc. (A)
    
    $
    23,737Odyssey America Reinsurance Corporation (A)
    
    
    19,750St. Paul Fire & Marine Insurance Company (A+)
    
    
    10,885Clearwater Insurance Company (A)
    
    
    9,795SCOR Reinsurance Company (A)
    
    
    7,144Converium Reinsurance (North America) (B+)
    
    
    6,193Other reinsurers
    
    
    14,884Total unsecured reinsurance recoverables
    
    
    92,388Letters of credit
    
    
    17,215Total reinsurance recoverables
    
    $
    109,603
 89




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 7. Income Taxes
  December 31,2006
    
    
    2005(In thousands)Deferred income tax assets:Discounting of net unpaid loss and loss adjustment expenses
    
    $
    19,105
    
    
    $
    16,047Unearned premiums
    
    
    11,785
    
    
    
    10,738Accrued expenses and other
    
    
    1,653
    
    
    
    1,703Accrued policyholder dividends
    
    
    2,198
    
    
    
    271Accrued insurance-related assessments
    
    
    6,195
    
    
    
    6,189Total deferred tax assets
    
    
    40,936
    
    
    
    34,948Deferred income tax liabilities:Deferred policy acquisition costs
    
    
    (7,965
    )
    
    
    (7,749
    )Deferred charges
    
    
    (1,087
    )
    
    
    (998
    )Unrealized gain on securities available-for-sale
    
    
    (2,169
    )
    
    
    (3,399
    )Property and equipment, primarily a result of differences
in depreciation
    
    
    (249
    )
    
    
    (372
    )Other
    
    
    
    
    
    
    (17
    )Total deferred tax liabilities
    
    
    (11,470
    )
    
    
    (12,535
    )Net deferred income tax asset
    
    $
    29,466
    
    
    $
    22,413
  Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Current:Federal
    
    $
    20,606
    
    
    $
    5,928
    
    
    $
    5,444State
    
    
    306
    
    
    
    526
    
    
    
    53420,912
    
    
    
    6,454
    
    
    
    5,978Deferred:Federal
    
    
    (5,824
    )
    
    
    (6,389
    )
    
    
    (2,849
    )Total
    
    $
    15,088
    
    
    $
    65
    
    
    $
    3,129
  Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Income tax computed at federal statutory tax rate
    
    $
    18,356
    
    
    $
    2,098
    
    
    $
    4,790Tax-exempt interest, net
    
    
    (3,145
    )
    
    
    (2,187
    )
    
    
    (1,737
    )State income tax
    
    
    306
    
    
    
    526
    
    
    
    534Dividends received deduction
    
    
    (236
    )
    
    
    (224
    )
    
    
    (135
    )Other
    
    
    (193
    )
    
    
    (148
    )
    
    
    (323
    )$
    15,088
    
    
    $
    65
    
    
    $
    3,129
 90




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 8. Note Payable
  9. Subordinated Debt Securities
   91




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 10. Loss and Loss Adjustment Expenses
  Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Reserves for loss and loss adjustment expenses (LAE)
    
    $
    484,485
    
    
    $
    432,880
    
    
    $
    377,559Less amounts
recoverable from reinsurers on unpaid loss and LAE
    
    
    120,232
    
    
    
    189,624
    
    
    
    194,558Reserves for loss and LAE, net of related amounts
recoverable from reinsurers, at beginning of year
    
    
    364,253
    
    
    
    243,256
    
    
    
    183,001Add:Provision for loss and LAE for claims occurring in
the current year, net of reinsurance
    
    
    201,711
    
    
    
    182,174
    
    
    
    160,773Change in estimated loss and LAE for claims
occurring in prior years, net of reinsurance
    
    
    (2,227
    )
    
    
    8,673
    
    
    
    13,413Loss on Converium commutation
    
    
    
    
    
    
    13,209
    
    
    
    Incurred losses during the current year, net of
reinsurance
    
    
    199,484
    
    
    
    204,056
    
    
    
    174,186Less loss and LAE payments for claims, net of
reinsurance, occurring during:Current year
    
    
    41,002
    
    
    
    42,545
    
    
    
    40,312Prior years
    
    
    110,367
    
    
    
    96,620
    
    
    
    73,619151,369
    
    
    
    139,165
    
    
    
    113,931Add effect of Converium commutation (1)
    
    
    
    
    
    
    56,106
    
    
    
    Reserves for loss and LAE, net of related amounts
recoverable from reinsurers, at end of year
    
    
    412,368
    
    
    
    364,253
    
    
    
    243,256Add amounts recoverable from reinsurers on unpaid
loss and LAE
    
    
    106,810
    
    
    
    120,232
    
    
    
    189,624Reserves for loss and LAE
    
    $
    519,178
    
    
    $
    484,485
    
    
    $
    432,880
 
 (1)
    
    The total payment from Converium was $61.3 million, of which $56.1 million was for ceded
reserves and $5.2 million was for paid recoverables as of June 30, 2005.  92




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
   11. Statutory Accounting and Regulatory Requirements
  2006
    
    
    2005
    
    
    2004Capital and surplus
    
    $
    196,017
    
    
    $
    157,740
    
    
    $
    112,334Net income (loss)
    
    
    38,591
    
    
    
    (4,208
    )
    
    
    7,828Realized investment gains
    
    
    7,389
    
    
    
    2,272
    
    
    
    1,421
   93




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 12. Capital Stock
 Common Stock
   Non-Voting Common Stock
  Series A Preferred Stock
  RedemptionShares
    
    
    AmountBalance at January 1, 2004
    
    
    764,243
    
    
    $
    76,424Series A preferred stock dividends
    
    
    54,918
    
    
    
    5,492Balance at December 31, 2004
    
    
    819,161
    
    
    
    81,916Series A preferred stock dividends accrued
    
    
    43,763
    
    
    
    4,376Series A preferred stock dividends redeemed
    
    
    (50,410
    )
    
    
    (5,041
    )Series A preferred stock exchanged for common stock
    
    
    (812,514
    )
    
    
    (81,251
    )Balance at December 31, 2005
    
    
    
    
    
    $
    
   94




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
   Series B Preferred Stock
  Series C and Series D Convertible Preferred Stock
     95




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
        Series E Preferred Stock
    96




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 Junior Preferred Stock
  Liquidation Provisions
  13. Stock Options and Restricted Stock
 2005 Incentive Plan
    97




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AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
   Share-Based Payment
 2006
    
    2005Expected Volatility
    
    
    28.0%  28.2
    %
    
    
    29.3
    %Weighted-Average Risk-Free Interest Rate
    
    
    4.5%  4.7
    %
    
    
    4.4
    %Weighted-Average Expected Life
    
    6.5 years
    
    6.5 yearsExpected Dividend Yield
    
    
    0.0
    %
    
    
    0.0
    %
 98




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
  Weighted-Weighted-
    
    AverageAverage
    
    RemainingExercise
    
    Contractual LifeShares
    
    Price
    
    (in years)Outstanding at January 1, 2005
    
    
    
    
    
    $
    
    
    
    
    Granted
    
    
    1,548,500
    
    
    
    9.00
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    Canceled, forfeited, or expired
    
    
    
    
    
    
    
    
    
    
    Outstanding at December 31, 2005
    
    
    1,548,500
    
    
    
    9.00
    
    
    
    9.9Exercisable at December 31, 2005
    
    
    
    
    
    
    
    
    
    
    Outstanding at January 1, 2006
    
    
    1,548,500
    
    
    
    9.00
    
    
    
    9.9Granted
    
    
    100,000
    
    
    
    10.46
    
    
    
    Exercised
    
    
    47,500
    
    
    
    9.00
    
    
    
    Canceled, forfeited, or expired
    
    
    (209,000
    )
    
    
    9.00
    
    
    
    Outstanding at December 31, 2006
    
    
    1,392,000
    
    
    
    9.10
    
    
    
    8.9Exercisable at December 31, 2006
    
    
    258,400
    
    
    
    9.00
    
    
    
    8.9
    Weighted-Average Grant-DateShares
    
    Fair Value per ShareNonvested balance at beginning of year
    
    
    
    
    
    $
    Granted
    
    
    15,946
    
    
    
    10.66Vested
    
    
    
    
    
    
    Forfeited
    
    
    (3,283
    )
    
    
    10.66Nonvested balance at end of year
    
    
    12,663
    
    
    
    10.66
  99




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 2005 Restricted Stock Plan
     Weighted-Average Grant-DateShares
    
    Fair Value per ShareNonvested balance at beginning of year
    
    
    3,332
    
    
    $
    9.00Granted
    
    
    6,110
    
    
    
    10.66Vested
    
    
    (3,332
    )
    
    
    9.00Forfeited
    
    
    
    
    
    
    Nonvested balance at end of year
    
    
    6,110
    
    
    
    10.66
  1998 Plan
  100




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
    2005
    
    2004Weighted-
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    PriceOutstanding at the beginning of the year
    
    
    20,098
    
    
    $
    215.28
    
    
    
    20,140
    
    
    $
    216.72Granted
    
    
    167
    
    
    
    360.00
    
    
    
    167
    
    
    
    360.00Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled, forfeited, or expired
    
    
    (20,265
    )
    
    
    216.72
    
    
    
    (209
    )
    
    
    360.00Outstanding at the end of the year
    
    
    
    
    
    
    
    
    
    
    20,098
    
    
    
    215.28Exercisable at the end of the year
    
    
    
    
    
    
    
    
    
    
    20,098
    
    
    
    215.28
  14. Warrants
  Exercise
    
    SharesNumber
    
    Price
    
    PurchasedWarrants outstanding at January 1, 2004
    
    
    119,849
    
    
    $
    0.72
    
    
    
    Issued
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    119,649
    
    
    
    0.72
    
    
    
    119,649Expired
    
    
    200
    
    
    
    0.72
    
    
    
    Warrants outstanding at December 31, 2004
    
    
    
 101




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AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 15. Earnings Per Share
   For the Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands, except per share amounts)Basic EPS:Net income
    
    $
    37,358
    
    
    $
    5,930
    
    
    $
    10,557Preferred stock dividends
    
    
    
    
    
    
    (8,593
    )
    
    
    (9,781
    )Income (loss) available to common shareholders
    
    $
    37,358
    
    
    $
    (2,663
    )
    
    $
    776Amount allocable to common shareholders
    
    
    88.6
    %
    
    
    100
    %
    
    
    70.2
    %Income (loss) allocable to common shareholders
    
    $
    33,099
    
    
    $
    (2,663
    )
    
    $
    545Weighted-average common shares outstanding
    
    
    17,580
    
    
    
    2,129
    
    
    
    225Basic earnings (loss) per share
    
    $
    1.88
    
    
    $
    (1.25
    )
    
    $
    2.42Diluted EPS:Income (loss) allocable to common shareholders
    
    $
    37,358
    
    
    $
    (2,663
    )
    
    $
    545Dividends on participating securities
    
    
    
    
    
    
    
    
    
    
    Income (loss) allocable to common shareholders
after assumed conversions
    
    $
    37,358
    
    
    $
    (2,663
    )
    
    $
    545Weighted average common shares outstanding
    
    
    17,580
    
    
    
    2,129
    
    
    
    225Diluted effect:Stock options
    
    
    
    
    
    
    
    
    
    
    Restricted stock
    
    
    15
    
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    
    
    
    
    30Conversion of participating securities
    
    
    
    
    
    
    
    
    
    
    Weighted average diluted shares outstanding
    
    
    17,595
    
    
    
    2,129
    
    
    
    255Diluted earnings (loss) per share
    
    $
    1.88
    
    
    $
    (1.25
    )
    
    $
    2.14
 102




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AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
  Years Ended2006
    
    2005
    
    2004Numerator:Basic weighted average common shares
    
    
    17,579,829
    
    
    
    2,129,492
    
    
    
    225,367Add: Other common shares eligible for common
dividends:Weighted average restricted shares (including tax
benefit component)
    
    
    14,907
    
    
    
    
    
    
    
    Weighted average participating common shares
    
    
    17,594,736
    
    
    
    2,129,492
    
    
    
    225,367Denominator:Weighted average participating common shares
    
    
    17,594,736
    
    
    
    2,129,492
    
    
    
    225,367Add: Other classes of securities, including contingently
issuable common shares and convertible preferred
shares:Weighted average common shares issuable upon
conversion of Series C preferred shares
    
    
    1,301,301
    
    
    
    
    (1)
    
    
    57,524Weighted average common shares issuable upon
conversion of Series D preferred shares
    
    
    971,817
    
    
    
    
    (1)
    
    
    38,350Weighted average participating shares
    
    
    19,867,854
    
    
    
    2,129,492
    
    
    
    321,241
 
 (1)
    
    Not applicable as impact is antidilutive.  103




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##### Table of Contents



AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 16. Other Comprehensive Income
 Pre-Tax
    
    
    
    
    
    
    Net-of-TaxAmount
    
    
    Tax Expense
    
    
    Amount(In thousands)December 31, 2006Unrealized gain on securities:Unrealized gain on available-for-sale securities
    
    $
    1,983
    
    
    $
    694
    
    
    $
    1,289Less amortization of differences between fair value
and amortized cost for fixed maturity security
transfer
    
    
    (1,637
    )
    
    
    (573
    )
    
    
    (1,064
    )Less reclassification adjustment for losses realized
in net income
    
    
    (3,860
    )
    
    
    (1,351
    )
    
    
    (2,509
    )Net unrealized loss
    
    
    (3,514
    )
    
    
    (1,230
    )
    
    
    (2,284
    )Other comprehensive income
    
    $
    (3,514
    )
    
    $
    (1,230
    )
    
    $
    (2,284
    )December 31, 2005Unrealized gain on securities:Unrealized gain on available-for-sale securities
    
    $
    3,057
    
    
    $
    1,070
    
    
    $
    1,987Less amortization of differences between fair value
and amortized cost for fixed maturity security
transfer
    
    
    (1,969
    )
    
    
    (689
    )
    
    
    (1,280
    )Less reclassification adjustment for losses realized
in net income
    
    
    (2,228
    )
    
    
    (780
    )
    
    
    (1,448
    )Net unrealized loss
    
    
    (1,140
    )
    
    
    (399
    )
    
    
    (741
    )Other comprehensive income
    
    $
    (1,140
    )
    
    $
    (399
    )
    
    $
    (741
    )December 31, 2004Unrealized gain on securities:Unrealized gain on available-for-sale securities
    
    $
    1,993
    
    
    $
    698
    
    
    $
    1,295Less amortization of differences between fair value
and amortized cost for fixed maturity security
transfer
    
    
    (2,413
    )
    
    
    (845
    )
    
    
    (1,568
    )Less reclassification adjustment for gains realized
in net income
    
    
    242
    
    
    
    86
    
    
    
    156Net unrealized loss
    
    
    (178
    )
    
    
    (61
    )
    
    
    (117
    )Other comprehensive income
    
    $
    (178
    )
    
    $
    (61
    )
    
    $
    (117
    )
 17. Employee Benefit Plan
  18. Commitments and Contingencies
   104




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AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
  Statement Valueof Annuities ExceedingLife Insurance Company
    
    1% of Statutory SurplusAmerican General Life Insurance (A++)
    
    $
    23,007New York Life Insurance Company (A++)
    
    
    4,463First Colony Life Insurance Company (A+)
    
    
    3,806Monumental Life Insurance Company (A+)
    
    
    3,300Pacific Life and Annuity Company (A++)
    
    
    3,081John Hancock Life Insurance Company (A++)
    
    
    2,941Liberty Life Assurance Company of Boston (A)
    
    
    2,594Transamerica Life Insurance and Annuity (A+)
    
    
    2,522Massachusetts Mutual Life Insurance Company (A++)
    
    
    2,238Other
    
    
    12,308$
    60,260
   2007
    
    $
    7492008
    
    
    5692009
    
    
    4732010
    
    
    8$
    1,799
  105




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AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
 19. Concentration of Operations
  2006
    
    
    2005
    
    
    2004Dollars
    
    
    Percent
    
    
    Dollars
    
    
    Percent
    
    
    Dollars
    
    
    Percent(Dollars in thousands)Workers compensation
    
    $
    297,227
    
    
    
    99.3
    %
    
    $
    254,117
    
    
    
    99.0
    %
    
    $
    232,291
    
    
    
    99.0
    %General liability
    
    
    2,075
    
    
    
    0.7
    %
    
    
    2,451
    
    
    
    1.0
    %
    
    
    2,442
    
    
    
    1.0
    %Total net premiums earned
    
    $
    299,303
    
    
    
    100.0
    %
    
    $
    256,568
    
    
    
    100.0
    %
    
    $
    234,733
    
    
    
    100.0
    %
  2006
    
    
    2005
    
    
    2004Dollars
    
    
    Percent
    
    
    Dollars
    
    
    Percent
    
    
    Dollars
    
    
    Percent(Dollars in thousands)Georgia
    
    $
    28,800
    
    
    
    9.6
    %
    
    $
    26,198
    
    
    
    10.2
    %
    
    $
    22,313
    
    
    
    9.5
    %Louisiana
    
    
    26,120
    
    
    
    8.7
    
    
    
    23,441
    
    
    
    9.1
    
    
    
    26,422
    
    
    
    11.3Florida
    
    
    20,281
    
    
    
    6.8
    
    
    
    13,671
    
    
    
    5.3
    
    
    
    10,959
    
    
    
    4.7North Carolina
    
    
    19,442
    
    
    
    6.5
    
    
    
    16,861
    
    
    
    6.6
    
    
    
    14,705
    
    
    
    6.3Virginia
    
    
    17,643
    
    
    
    5.9
    
    
    
    12,935
    
    
    
    5.0
    
    
    
    12,395
    
    
    
    5.3Texas
    
    
    16,562
    
    
    
    5.5
    
    
    
    15,159
    
    
    
    5.9
    
    
    
    17,150
    
    
    
    7.3Illinois
    
    
    15,079
    
    
    
    5.1
    
    
    
    14,198
    
    
    
    5.5
    
    
    
    14,186
    
    
    
    6.0Pennsylvania
    
    
    14,941
    
    
    
    5.0
    
    
    
    13,066
    
    
    
    5.1
    
    
    
    9,812
    
    
    
    4.2Alaska
    
    
    14,446
    
    
    
    4.8
    
    
    
    12,841
    
    
    
    5.0
    
    
    
    9,365
    
    
    
    4.0South Carolina
    
    
    14,122
    
    
    
    4.7
    
    
    
    12,440
    
    
    
    4.8
    
    
    
    10,067
    
    
    
    4.3187,436
    
    
    
    62.6
    
    
    
    160,810
    
    
    
    62.5
    
    
    
    147,374
    
    
    
    62.9All others
    
    
    111,867
    
    
    
    37.4
    
    
    
    95,758
    
    
    
    37.5
    
    
    
    87,359
    
    
    
    37.1Total net premiums earned
    
    $
    299,303
    
    
    
    100.0
    %
    
    $
    256,568
    
    
    
    100.0
    %
    
    $
    234,733
    
    
    
    100.0
    %
 20. Fair Values of Financial Instruments
  Cash and Cash Equivalents
 Investments
 Subordinated Debt Securities
 106




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AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
  December 31,2006
    
    2005Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    Value(In thousands)Assets:Fixed maturity securities
    
    $
    615,114
    
    
    $
    609,268
    
    
    $
    467,343
    
    
    $
    460,514Equity securities
    
    
    23,666
    
    
    
    23,666
    
    
    
    66,275
    
    
    
    66,275Cash and cash equivalents
    
    
    26,748
    
    
    
    26,748
    
    
    
    49,286
    
    
    
    49,286Liabilities:Subordinated debt securities:ACT I
    
    
    10,310
    
    
    
    10,310
    
    
    
    10,310
    
    
    
    10,310ACT II
    
    
    25,780
    
    
    
    25,780
    
    
    
    25,780
    
    
    
    25,780
 21. Quarterly Financial Data (Unaudited)
  Three Months EndedMarch 31
    
    June 30
    
    September 30
    
    December 31(In thousands, except per share amounts)2006Premiums earned
    
    $
    67,874
    
    
    $
    72,107
    
    
    $
    74,991
    
    
    $
    84,331Net investment income
    
    
    5,973
    
    
    
    5,843
    
    
    
    6,316
    
    
    
    7,251Net realized gains on investments
    
    
    1,154
    
    
    
    1,081
    
    
    
    346
    
    
    
    4,808Total revenues
    
    
    75,158
    
    
    
    79,229
    
    
    
    81,848
    
    
    
    96,485Income before income taxes
    
    
    9,873
    
    
    
    9,735
    
    
    
    10,757
    
    
    
    22,081Net income
    
    
    7,236
    
    
    
    7,818
    
    
    
    8,265
    
    
    
    14,039Net income allocable to common
shareholders
    
    
    7,236
    
    
    
    7,818
    
    
    
    8,265
    
    
    
    14,039Earnings per share:Basic
    
    
    0.36
    
    
    
    0.39
    
    
    
    0.42
    
    
    
    0.71Diluted
    
    
    0.36
    
    
    
    0.39
    
    
    
    0.42
    
    
    
    0.70Comprehensive income
    
    
    8,698
    
    
    
    6,005
    
    
    
    8,963
    
    
    
    11,4082005Premiums earned
    
    $
    61,917
    
    
    $
    63,115
    
    
    $
    64,338
    
    
    $
    67,198Net investment income
    
    
    3,718
    
    
    
    3,932
    
    
    
    4,335
    
    
    
    4,897Net realized gains on investments
    
    
    227
    
    
    
    547
    
    
    
    563
    
    
    
    935Total revenues
    
    
    66,024
    
    
    
    67,738
    
    
    
    69,356
    
    
    
    73,165Income (loss) before income taxes
    
    
    4,345
    
    
    
    (12,298
    )
    
    
    6,518
    
    
    
    7,430Net income (loss)
    
    
    3,237
    
    
    
    (7,521
    )
    
    
    4,809
    
    
    
    5,405Net income (loss) allocable to common
shareholders
    
    
    681
    
    
    
    (9,902
    )
    
    
    1,812
    
    
    
    2,992Earnings (loss) per share:Basic
    
    
    2.27
    
    
    
    (33.03
    )
    
    
    6.05
    
    
    
    0.40Diluted
    
    
    2.27
    
    
    
    (33.03
    )
    
    
    6.05
    
    
    
    0.39Comprehensive income
    
    
    2,892
    
    
    
    (7,592
    )
    
    
    4,966
    
    
    
    4,921
 107




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Schedule II. Condensed Financial Information of Registrant
 AMERISAFE, INC.
CONDENSED BALANCE SHEETS
 December 31,2006
    
    
    2005(In thousands)AssetsInvestments:Equity securitiesavailable-for-sale, at fair value
    
    $
    1,090
    
    
    $
    1,090Investment in subsidiaries
    
    
    215,217
    
    
    
    178,429Total investments
    
    
    216,307
    
    
    
    179,519Cash and cash equivalents
    
    
    11,293
    
    
    
    11,149Deferred income taxes
    
    
    199
    
    
    
    29Property and equipment, net
    
    
    2,558
    
    
    
    2,923Other assets
    
    
    1,039
    
    
    
    1,442$
    231,396
    
    
    $
    195,062Liabilities, redeemable preferred stock and shareholders equityLiabilities:Accounts payable and other liabilities
    
    $
    1,498
    
    
    $
    1,826Note payable to subsidiaries
    
    
    10,024
    
    
    
    9,800Subordinated debt securities
    
    
    36,090
    
    
    
    36,090Total liabilities
    
    
    47,612
    
    
    
    47,716Redeemable preferred stock:Series A nonconvertible$0.01 par value, $100 per share redemption
value:Authorized shares1,500,000; issued and outstanding sharesnone in
2006 and 2005
    
    
    
    
    
    
    Series C convertible$0.01 par value, $100 per share redemption value:Authorized shares300,000; issued and outstanding shares50,000 in
2006 and 300,000 in 2005
    
    
    5,000
    
    
    
    30,000Series D convertible$0.01 par value, $100 per share redemption value:Authorized shares200,000; issued and outstanding shares200,000 in
2006 and 2005
    
    
    20,000
    
    
    
    20,00025,000
    
    
    
    50,000Shareholders equity
    
    
    158,784
    
    
    
    97,346$
    231,396
    
    
    $
    195,062
 108




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##### Table of Contents



Schedule II. Condensed Financial Information of Registrant  (Continued)
 AMERISAFE, INC.
CONDENSED STATEMENTS OF INCOME
 Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)RevenuesNet investment income
    
    $
    1,300
    
    
    $
    990
    
    
    $
    281Fee and other income
    
    
    8,268
    
    
    
    5,813
    
    
    
    3,661Total revenues
    
    
    9,568
    
    
    
    6,803
    
    
    
    3,942ExpensesOther operating costs
    
    
    7,217
    
    
    
    3,567
    
    
    
    1,831Interest expense
    
    
    3,971
    
    
    
    3,160
    
    
    
    1,757Total expenses
    
    
    11,188
    
    
    
    6,727
    
    
    
    3,588Income (loss) before income taxes and equity in
earnings of subsidiaries
    
    
    (1,620
    )
    
    
    76
    
    
    
    354Income tax expense
    
    
    95
    
    
    
    302
    
    
    
    293Income (loss) before equity in earnings of
subsidiaries
    
    
    (1,715
    )
    
    
    (226
    )
    
    
    61Equity in net income of subsidiaries
    
    
    39,073
    
    
    
    6,156
    
    
    
    10,496Net income
    
    $
    37,358
    
    
    $
    5,930
    
    
    $
    10,557
 109




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##### Table of Contents



Schedule II. Condensed Financial Information of Registrant  (Continued)
 AMERISAFE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
 Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Operating activitiesNet cash provided by operating activities
    
    $
    1,030
    
    
    $
    412
    
    
    $
    8,351Investing activitiesPurchases of investments
    
    
    
    
    
    
    
    
    
    
    (780
    )Purchases of property and equipment
    
    
    (1,328
    )
    
    
    (1,379
    )
    
    
    (3,589
    )Capital contributions to subsidiary
    
    
    
    
    
    
    (45,000
    )
    
    
    (2,710
    )Net cash used in investing activities
    
    
    (1,328
    )
    
    
    (46,379
    )
    
    
    (7,079
    )Financing activitiesProceeds from stock option exercise
    
    
    428
    
    
    
    
    
    
    
    Tax benefit from share-based payments
    
    
    14
    
    
    
    
    
    
    
    Net proceeds from initial public offering
    
    
    
    
    
    
    63,236
    
    
    
    Series A preferred stock redemption
    
    
    
    
    
    
    (5,093
    )
    
    
    Series E preferred stock redemptions
    
    
    
    
    
    
    (5,093
    )
    
    
    (27,244
    )Principal payments on note payable
    
    
    
    
    
    
    
    
    
    
    (6,000
    )Warrants exercised
    
    
    
    
    
    
    
    
    
    
    86Proceeds from issuance of subordinated debt securities
    
    
    
    
    
    
    
    
    
    
    25,780Net cash provided by (used in) financing activities
    
    
    442
    
    
    
    53,050
    
    
    
    (7,378
    )Change in cash and cash equivalents
    
    
    144
    
    
    
    7,083
    
    
    
    (6,106
    )Cash and cash equivalents at beginning of year
    
    
    11,149
    
    
    
    4,066
    
    
    
    10,172Cash and cash equivalents at end of year
    
    $
    11,293
    
    
    $
    11,149
    
    
    $
    4,066
 110




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Schedule VI. Supplemental Information Concerning Property  Casualty Insurance Operations
 AMERISAFE, INC. AND SUBSIDIARIES
 Reserves for
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss and
    
    Loss and
    
    AmortizationDeferred
    
    Unpaid Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    LAE
    
    LAE
    
    of Deferred
    
    Paid ClaimsPolicy
    
    and Loss
    
    
    
    
    
    
    
    
    
    Net
    
    related to
    
    related to
    
    Policy
    
    and Claim
    
    NetAcquisition
    
    Adjustment
    
    Unearned
    
    Earned
    
    Investment
    
    Current
    
    Prior
    
    Acquisition
    
    Adjustment
    
    PremiumsCost
    
    Expense
    
    Premium
    
    Premium
    
    Income
    
    Period
    
    Periods
    
    Costs
    
    Expenses
    
    Written(In thousands)2006
    
    $
    18,486
    
    
    $
    519,178
    
    
    $
    137,761
    
    
    $
    299,303
    
    
    $
    25,383
    
    
    $
    201,711
    
    
    $
    (2,227
    )
    
    $
    (40,426
    )
    
    $
    151,369
    
    
    $
    312,5412005
    
    
    16,973
    
    
    
    484,485
    
    
    
    124,524
    
    
    
    256,568
    
    
    
    16,882
    
    
    
    182,174
    
    
    
    8,673
    (1)
    
    
    (31,785
    )
    
    
    139,165
    (1)
    
    
    269,3502004
    
    
    12,044
    
    
    
    432,880
    
    
    
    111,741
    
    
    
    234,733
    
    
    
    12,217
    
    
    
    160,773
    
    
    
    13,413
    
    
    
    (25,969
    )
    
    
    113,931
    
    
    
    243,011
 
 (1)
    
    In June 2005, we commuted three reinsurance agreements with Converium Reinsurance North
America (Converium). The incurred loss of $13.2 million and cash received from Converium
for ceded reserves of $56.1 million are not reflected in these amounts. 111




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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
    Changes in Internal Control Over Financial Reporting
  Limitations on Controls
  112




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Report of Independent Registered Public Accounting Firm
 
        
 113




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##### Table of Contents



Item 9B. Other Information.
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance.
     www.amerisafe.com
 
 Item 11. Executive Compensation.
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
   114




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##### Table of Contents



Item 14. Principal Accountant Fees and Services.
  115




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PART IV
 
 Item 15. Exhibits and Financial Statement Schedules.
  PageFinancial Statements:Report of Independent Registered Public Accounting Firm
    
    
    71Consolidated Balance Sheets
    
    
    72Consolidated Statements of Income
    
    
    73Consolidated Statements of Changes in Shareholders Equity
    
    
    74Consolidated Statements of Cash Flows
    
    
    75Notes to Consolidated Financial Statements
    
    
    76Financial Statement Schedules:Schedule II. Condensed Financial Information of Registrant
    
    
    108Schedule VI. Supplemental Information Concerning Property-Casualty Insurance Operations
    
    
    111(Schedules I, III, IV and V are not applicable and have been omitted.)
 Exhibits:
 3.1
    
    Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit
3.1 to the Companys Registration Statement on Form S-1, Amendment No. 3 (File No. 333-127133), filed
October 31, 2005)3.2
    
    Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the
Companys Registration Statement on Form S-1 (File No. 333-127133), filed August 3, 2005)10.1*
    
    Employment Agreement, dated January 1, 2004, by and between the Registrant and C. Allen Bradley, Jr.,
as amended by Amendment No. 1 to Employment Agreement, dated June 17, 2005 (incorporated by reference
to Exhibit 10.2 to the Companys Registration Statement on Form S-1 (File No. 333-127133), filed August
3, 2005)10.2*
    
    Employment Agreement, dated January 1, 2004, by and between the Registrant and Geoffrey R. Banta, as
amended by Amendment No. 1 to Employment Agreement, dated June 17, 2005 (incorporated by reference to
Exhibit 10.3 to the Companys Registration Statement on Form S-1 (File No. 333-127133), filed August 3,
2005)10.3*
    
    Employment Agreement, dated January 1, 2004, by and between the Registrant and Craig P. Leach, as
amended by Amendment No. 1 to Employment Agreement, dated June 17, 2005 (incorporated by reference to
Exhibit 10.5 to the Companys Registration Statement on Form S-1 (File No. 333-127133), filed August 3,
2005)10.4 *
    
    Employment Agreement, dated September 1, 2006, by and between the Registrant and David O. Narigon
(incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed
September 6, 2006)10.5*
    
    Employment Agreement, effective September 25, 2006, by and between the Registrant and Todd Walker
(incorporated by reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K, filed
September 6, 2006)10.6*
    
    AMERISAFE, Inc. 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.6 to the Companys
Registration Statement on Form S-1, Amendment No. 3 (File No. 333-127133), filed October 31, 2005)
 116




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##### Table of Contents



10.7*
    
    Form of Incentive Stock Option Award Agreement for the AMERISAFE, Inc. 2005 Equity Incentive Plan
(incorporated by reference to Exhibit 10.7 to the Companys Registration Statement on Form S-1,
Amendment No. 3 (File No. 333-127133), filed October 31, 2005)10.8*
    
    Form of Non-Qualified Stock Option Award Agreement for the AMERISAFE, Inc. 2005 Equity Incentive Plan
(incorporated by reference to Exhibit 10.8 to the Companys Registration Statement on Form S-1,
Amendment No. 3 (File No. 333-127133), filed October 31, 2005)10.9*
    
    Form of Restricted Stock Award Agreement for the AMERISAFE, Inc. 2005 Equity Incentive Plan
(incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed March
15, 2006)10.10*
    
    AMERISAFE, Inc. 2005 Non-Employee Director Restricted Stock Plan (incorporated by reference to Exhibit
10.9 to the Companys Registration Statement on Form S-1, Amendment No. 3 (File No. 333-127133), filed
October 31, 2005)10.11*
    
    Form of Restricted Stock Award Agreement for the AMERISAFE, Inc. 2005 Non-Employee Director Restricted
Stock Plan (incorporated by reference to Exhibit 10.10 to the Companys Registration Statement on Form
S-1 (File No. 333-127133), filed August 3, 2005)10.12*
    
    Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.11 to
the Companys Registration Statement on Form S-1 (File No. 333-127133), filed August 3, 2005)10.13
    
    First Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2005, issued to the
Registrant by the reinsurers and named therein (incorporated by reference to Exhibit 10.12 to the
Companys Registration Statement on Form S-1 (File No. 333-127133), filed August 3, 2005)10.14
    
    Second Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2005, issued to the
Registrant by the reinsurers and named therein (incorporated by reference to Exhibit 10.13 to the
Companys Registration Statement on Form S-1 (File No. 333-127133), filed August 3, 2005)10.15
    
    Workers Compensation Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2005,
issued to the Registrant by the reinsurers named therein (incorporated by reference to Exhibit 10.14 to
the Companys Registration Statement on Form S-1 (File No. 333-127133), filed August 3, 2005)10.16
    
    First Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to the
Registrant by the reinsurers named therein (incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q, filed August 14, 2006)10.17
    
    Second Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to the
Registrant by the reinsurers named therein (incorporated by reference to Exhibit 10.2 to the
Registrants Quarterly Report on Form 10-Q, filed August 14, 2006)10.18
    
    Third Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to the
Registrant by the reinsurers named therein (incorporated by reference to Exhibit 10.3 to the
Registrants Quarterly Report on Form 10-Q, filed August 14, 2006)10.19
    
    Workers Compensation Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2006,
issued to the Registrant by the reinsurers named therein (incorporated by reference to Exhibit 10.4 to
the Registrants Quarterly Report on Form 10-Q, filed August 14, 2006)10.20
    
    Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to
the Registrant by the reinsurers named therein (incorporated by reference to Exhibit 10.5 to the
Registrants Quarterly Report on Form 10-Q, filed August 14, 2006)
 117




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10.21
    
    Form of First Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2007, issued to
the Registrant by the reinsurers named therein10.22
    
    Form of Second Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2007, issued
to the Registrant by the reinsurers named therein10.23
    
    Form of First and Second Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of
January 1, 2007, issued to the Registrant by the reinsurers named therein10.24
    
    Form of Third Casualty Catastrophe
Excess of Loss Reinsurance Contract, effective as of
January 1, 2007, issued to the Registrant by the reinsurers named therein10.25
    
    Commutation and Release Agreement, effective as of June 30, 2005, between the Registrant and Converium
Reinsurance (North America) Inc. (incorporated by reference to Exhibit 10.15 to the Companys
Registration Statement of Form S-1 (File No. 333-127133), filed August 3, 2005)10.26
    
    Services Agreement, effective as of March 31, 2005, by and between Concentra Integrated Services, Inc.
and Amerisafe Risk Services, Inc. (incorporated by reference to Exhibit 10.16 to the Companys
Registration Statement on Form S-1, Amendment No. 1 (File No. 333-127133), filed September 9, 2005)10.27
    
    Agreement, effective as of March 31, 2005, by and between Amerisafe Risk Services, Inc. and MedRisk,
Inc. and its affiliates and subsidiaries (incorporated by reference to Exhibit 10.17 to the Companys
Registration Statement on Form S-1, Amendment No. 1 (File No. 333-127133), filed September 9, 2005)10.28
    
    Lease Agreement, effective as of January 1, 2005, by and between The Phoenix Hat Company, LLC and the
Registrant (incorporated by reference to Exhibit 10.18 to the Companys Registration Statement on Form
S-1, Amendment No. 1 (File No. 333-127133), filed September 9, 2005)10.29
    
    Amended and Restated Registration Rights Agreement, dated March 18, 1998, by and among the Registrant
and the shareholders of the Registrant named therein (incorporated by reference to Exhibit 4.1 to the
Companys Registration Statement on Form S-1 (File No. 333-127133), filed August 3, 2005)21.1
    
    Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the Companys Registration
Statement on Form S-1 (File No. 333-127133), filed August 3, 2005)23.1
    
    Consent of Ernst & Young LLP24.1
    
    Powers of Attorney for our directors and certain executive officers31.1
    
    Certification of C. Allen Bradley filed pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Geoffrey R. Banta filed pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of C. Allen Bradley and Geoffrey R. Banta filed pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Management contract, compensatory plan or arrangement 118




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SIGNATURES
  AMERISAFE, INC.By:
    /s/ C. Allen Bradley, Jr.C. Allen Bradley, Jr.Chairman, President and Chief Executive Officer  /s/ C. Allen Bradley, Jr.

C. Allen Bradley, Jr.
    
    Chairman, President, 
Chief Executive Officer and Director
(Principal Executive Officer)/s/ Geoffrey R. Banta

Geoffrey R. Banta
    
    Executive Vice President and 
Chief Financial Officer
(Principal Financial and Accounting Officer)*
    
    DirectorThomas W. Hallagan*
    
    DirectorJared A. MorrisDirectorRandy Roach*
    
    DirectorSean M. Traynor*
    
    DirectorAustin P. Young, III
  
 *By:
    
    /s/ Todd Walker

Todd Walker, Attorney-in-Fact
 119




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##### Table of Contents



EXHIBIT INDEX
 Exhibits:
 3.1
    
    Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to
Exhibit 3.1 to the Companys Registration Statement on Form S-1, Amendment No. 3 (File No.
333-127133), filed October 31, 2005)3.2
    
    Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the
Companys Registration Statement on Form S-1 (File No. 333-127133), filed August 3, 2005)10.1*
    
    Employment Agreement, dated January 1, 2004, by and between the Registrant and C. Allen Bradley,
Jr., as amended by Amendment No. 1 to Employment Agreement, dated June 17, 2005 (incorporated by
reference to Exhibit 10.2 to the Companys Registration Statement on Form S-1 (File No.
333-127133), filed August 3, 2005)10.2*
    
    Employment Agreement, dated January 1, 2004, by and between the Registrant and Geoffrey R. Banta,
as amended by Amendment No. 1 to Employment Agreement, dated June 17, 2005 (incorporated by
reference to Exhibit 10.3 to the Companys Registration Statement on Form S-1 (File No.
333-127133), filed August 3, 2005)10.3*
    
    Employment Agreement, dated January 1, 2004, by and between the Registrant and Craig P. Leach, as
amended by Amendment No. 1 to Employment Agreement, dated June 17, 2005 (incorporated by
reference to Exhibit 10.5 to the Companys Registration Statement on Form S-1 (File No.
333-127133), filed August 3, 2005)10.4*
    
    Employment Agreement, dated September 1, 2006, by and between the Registrant and David O. Narigon
(incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed
September 6, 2006)10.5*
    
    Employment Agreement, effective September 25, 2006, by and between the Registrant and Todd Walker
(incorporated by reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K, filed
September 6, 2006)10.6*
    
    AMERISAFE, Inc. 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.6 to the
Companys Registration Statement on Form S-1, Amendment No. 3 (File No. 333-127133), filed
October 31, 2005)10.7*
    
    Form of Incentive Stock Option Award Agreement for the AMERISAFE, Inc. 2005 Equity Incentive Plan
(incorporated by reference to Exhibit 10.7 to the Companys Registration Statement on Form S-1,
Amendment No. 3 (File No. 333-127133), filed October 31, 2005)10.8*
    
    Form of Non-Qualified Stock Option Award Agreement for the AMERISAFE, Inc. 2005 Equity Incentive
Plan (incorporated by reference to Exhibit 10.8 to the Companys Registration Statement on Form
S-1, Amendment No. 3 (File No. 333-127133), filed October 31, 2005)10.9*
    
    Form of Restricted Stock Award Agreement for the AMERISAFE, Inc. 2005 Equity Incentive Plan
(incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed
March 15, 2006)10.10*
    
    AMERISAFE, Inc. 2005 Non-Employee Director Restricted Stock Plan (incorporated by reference to
Exhibit 10.9 to the Companys Registration Statement on Form S-1, Amendment No. 3 (File No.
333-127133), filed October 31, 2005)
 120




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10.11*
    
    Form of Restricted Stock Award Agreement for the AMERISAFE, Inc. 2005 Non-Employee Director
Restricted Stock Plan (incorporated by reference to Exhibit 10.10 to the Companys Registration
Statement on Form S-1 (File No. 333-127133), filed August 3, 2005)10.12*
    
    Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit
10.11 to the Companys Registration Statement on Form S-1 (File No. 333-127133), filed August 3,
2005)10.13
    
    First Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2005, issued to
the Registrant by the reinsurers and named therein (incorporated by reference to Exhibit 10.12 to
the Companys Registration Statement on Form S-1 (File No. 333-127133), filed August 3, 2005)10.14
    
    Second Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2005, issued to
the Registrant by the reinsurers and named therein (incorporated by reference to Exhibit 10.13 to
the Companys Registration Statement on Form S-1 (File No. 333-127133), filed August 3, 2005)10.15
    
    Workers Compensation Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1,
2005, issued to the Registrant by the reinsurers named therein (incorporated by reference to
Exhibit 10.14 to the Companys Registration Statement on Form S-1 (File No. 333-127133), filed
August 3, 2005)10.16
    
    First Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to
the Registrant by the reinsurers named therein (incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q, filed August 14, 2006)10.17
    
    Second Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to
the Registrant by the reinsurers named therein (incorporated by reference to Exhibit 10.2 to the
Registrants Quarterly Report on Form 10-Q, filed August 14, 2006)10.18
    
    Third Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to
the Registrant by the reinsurers named therein (incorporated by reference to Exhibit 10.3 to the
Registrants Quarterly Report on Form 10-Q, filed August 14, 2006)10.19
    
    Workers Compensation Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1,
2006, issued to the Registrant by the reinsurers named therein (incorporated by reference to
Exhibit 10.4 to the Registrants Quarterly Report on Form 10-Q, filed August 14, 2006)10.20
    
    Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued
to the Registrant by the reinsurers named therein (incorporated by reference to Exhibit 10.5 to
the Registrants Quarterly Report on Form 10-Q, filed August 14, 2006)10.21
    
    Form of First Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2007,
issued to the Registrant by the reinsurers named therein10.22
    
    Form of Second Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2007,
issued to the Registrant by the reinsurers named therein10.23
    
    Form of First and Second Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as
of January 1, 2007, issued to the Registrant by the reinsurers named therein10.24
    
    Form of Third Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as
of January 1, 2007, issued to the Registrant by the reinsurers named therein10.25
    
    Commutation and Release Agreement, effective as of June 30, 2005, between the Registrant and
Converium Reinsurance (North America) Inc. (incorporated by reference to Exhibit 10.15 to the
Companys Registration Statement of Form S-1 (File No. 333-127133), filed August 3, 2005)




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##### Table of Contents



10.26
    
    Services Agreement, effective as of March 31, 2005, by and between Concentra Integrated Services,
Inc. and Amerisafe Risk Services, Inc. (incorporated by reference to Exhibit 10.16 to the
Companys Registration Statement on Form S-1, Amendment No. 1 (File No. 333-127133), filed
September 9, 2005)10.27
    
    Agreement, effective as of March 31, 2005, by and between Amerisafe Risk Services, Inc. and
MedRisk, Inc. and its affiliates and subsidiaries (incorporated by reference to Exhibit 10.17 to
the Companys Registration Statement on Form S-1, Amendment No. 1 (File No. 333-127133), filed
September 9, 2005)10.28
    
    Lease Agreement, effective as of January 1, 2005, by and between The Phoenix Hat Company, LLC and
the Registrant (incorporated by reference to Exhibit 10.18 to the Companys Registration
Statement on Form S-1, Amendment No. 1 (File No. 333-127133), filed September 9, 2005)10.29
    
    Amended and Restated Registration Rights Agreement, dated March 18, 1998, by and among the
Registrant and the shareholders of the Registrant named therein (incorporated by reference to
Exhibit 4.1 to the Companys Registration Statement on Form S-1 (File No. 333-127133), filed
August 3, 2005)21.1
    
    Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the Companys
Registration Statement on Form S-1 (File No. 333-127133), filed August 3, 2005)23.1
    
    Consent of Ernst & Young LLP24.1
    
    Powers of Attorney for our directors and certain executive officers31.1
    
    Certification of C. Allen Bradley filed pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Geoffrey R. Banta filed pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of C. Allen Bradley and Geoffrey R. Banta filed pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Management contract, compensatory plan or arrangement