Loss and Loss Adjustment Expenses Incurred. Loss and LAE incurred totaled $219.9 million for 2012, compared to $189.7 million for 2011, an increase of $30.2 million, or 15.9%. The current accident year losses and LAE incurred were $222.4 million, or 76.5% of net premiums earned, compared to $196.3 million, or 78.2% of net premiums earned for 2011. We recorded favorable prior accident year development of $2.5 million in 2012, compared to $6.6 million in 2011. This is further discussed below in “Prior Year Development.” Our net loss ratio was 75.6% for 2012 and 2011.
Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits. Underwriting and certain other operating costs, commissions and salaries and benefits for 2012 were $61.4 million, compared to $60.9 million for 2011, an increase of 1.0%. This increase was primarily due to a $3.6 million increase in commission expense, a $0.8 million increase in insurance related assessments, a $0.8 million increase in accounts receivable write-offs, and a $0.7 million increase in mandatory pooling arrangement fees. Offsetting these increases were a $5.4 million increase in experience-rated commissions, a $0.5 million decrease in taxes and fees and a $0.5 million decrease in ceding commission related to our 2012 reinsurance agreement. Our underwriting expense ratio decreased to 21.1% in 2012 from 24.3% in 2011.
available for future purchases at December 31, 2012 under this program. There were no share repurchases in 2012. The purchases will continue to be affected from time to time depending upon market conditions and subject to applicable regulatory considerations. It is anticipated that future purchases will be funded from available capital.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AMERISAFE, Inc. and Subsidiaries at December 31, 2012 and 2011, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
Comprehensive income for 2011 as reported was $26,075,000 and adjusted to $26,131,000.
the financial condition and near-term prospects of the issuer of the applicable security, including any specific events that may affect its operations or earnings;
of more than 10% of the Company’s voting stock, which will have exercise periods limited to a maximum of five years. Stock options generally expire 90 days after the cessation of an optionee’s service as an employee. However, in the case of an optionee’s death or disability, the unexercised portion of a stock option remains exercisable for up to one year after the optionee’s death or disability. Stock options granted under the 2005 Incentive Plan are not transferable, except by will or the laws of descent and distribution.
The Company uses the Black-Scholes-Merton option pricing model to estimate the fair value of each option on the date of grant. The expected terms of options are developed by considering the Company’s historical attrition rate for those employees at the officer level, who are eligible to receive options. Further, the Company aggregates individual awards into homogenous groups based upon grant date. Expected volatility is estimated using daily historical volatility for six companies within the property and casualty insurance sector. The Company believes that historical volatility of this peer group is currently the best estimate of expected volatility of the market price of the Company’s common shares. The dividend yield is assumed to be zero as the Company did not pay cash dividends until 2013. The risk-free interest rate is the yield on the grant date of U.S. Treasury zero coupon securities with a maturity comparable to the expected term of the options.
The calculation of basic and diluted EPS for the years ended December 31, 2012, 2011 and 2010 are presented below.
Supplemental Information Concerning Property-Casualty Insurance Operations Schedule VI. Supplemental Information Concerning Property-Casualty Insurance Operations