AMSF 10-K & 10-Q changes, risk factors and insider trading

Forward-looking statements are all statements other than statements of historical facts. You should not place undue reliance on these statements. We undertake no obligation to update any forward-looking statements, which speak only as of the date made. We caution readers that forward-looking statements are not guarantees of future performance and actual results may differ materially from those anticipated, expected, projected or assumed in the forward-looking statements. Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements are included below. See "Cautionary Statement Regarding Forward-Looking Statements" at the beginning of this annual report.

increase of costs of ongoing medical treatmenttreatment, including the impact of medical advances on the cost and duration of bodily injury claims;

As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge. These issues may adversely affect our business by either extending coverage beyond our underwriting intent or by increasing the number or size of claims. In some instances, these changes may not become apparent until after we have issued insurance policies that are affected by the changes. As a result, the full extent of our potential liability under an insurance policy may not be known until many years after the policy is issued. For example, medical costs associated with permanent and partial disabilities may increase more rapidly or may be higher than we currentlyexpect expect.at the time we issue a policy. Changes of this nature may expose us to higher claims costs than we anticipated when we wroteissued the underlying policy.

Rating agencies evaluate insurance companies based on their ability to pay claims. We are currently assigned a group letter rating of “A” (Excellent) from A.M. Best, which is the rating agency that we believe has the most influence on our business. This rating is assigned to companies that, in the opinion of A.M. Best, have demonstrated an excellent overall performance when compared to industry standards.standards, A.M. Best considers “A” rated companies toand have an excellent ability to meet their ongoing obligations to their policyholders. The ratings of A.M. Best are subject to periodic review using, among other things, proprietary capital adequacy models, and are subject to revision or withdrawal at any time. A.M. Best ratings are directed toward the concerns of policyholders and insurance agencies and are not intended for the protection of investorsour shareholders or to serve as a recommendation to buy, hold or sell our securities. Our competitive position relative to other companies is determined in part by our A.M. Best rating. Any downgrade in our A.M. Best rating would likely adversely affect our business through the loss of certain existing and potential policyholders and the loss of relationships with certain independent agencies.

Because weWe are subject to extensive state and federal regulation,regulations, legislativeand legislation, and any changes in such regulations or laws may negatively impact our business.

We are subject to extensive regulation by the Nebraska and Texas Departments of Insurance andInsurance, the insurance regulatory agencies of other states in which we are licensed to sell insurance and, to a lesser extent, the federal regulation.government. State agencies have broad regulatory powers designed primarily to protect policyholders and their employees, and not our shareholders. Regulations vary from state to state, but typically address:

certain required methods of accounting; and potential assessments for state guaranty funds, second injury funds and other mandatory pooling arrangements.arrangements;

We may be unable to comply fully with the wide variety of applicable laws and regulations thatapplicable areto us and our business which periodically undergoingundergo revision.revisions. In addition, we follow practices based on our interpretations of laws and regulations that we believe are generally followed by our industry. TheseOur practices may be different from interpretations of insurance regulatory agencies.agencies, Asand as a result, insurance regulatory agencies could preclude us from conducting some or all of our activities or otherwise penalize us. For example, in order to enforce applicable laws and regulations or to protect policyholders, insurance regulatory agencies have relatively broad discretion to impose a variety of sanctions, including examinations, corrective orders, suspension, revocation or denial of licenses, and the takeover of one or more of our insurance subsidiaries. The extensive regulation of our business may increase our costs and may limit our ability to obtainincrease our premium rate increasesrates or to take other actions to increase our profitability.

The workers’ compensation system is largely regulated by state regulation.governments. HoweverHowever, in recentthe years,past, certain federal agencies and regulatory bodies have increased interest in more federal workers’ compensation oversight. Increased federal involvement has the potential to change the workers’ compensation structurestructure, impactingwhich could impact workers’ benefits and the method of workers' compensation administration. As a result, potential changes in the level of federal oversight of the workers’ compensation industry could adversely affect our operations.

Most states require insurance companies licensed to do business in their state to participate in guaranty funds, which require the insurance companies to bear a portion of the unfunded obligations of impaired, insolvent or failed insurance companies. These obligations are funded by assessments, most of which are expected to continue in the future. State guaranty associations levy assessments, up to prescribed limits, on all member insurance companies in the state based on their proportionate share of premiums written in the lines of business in which the impaired, insolvent or failed insurance companies are engaged. See “Business—Regulation” in Item 1 of this report.report, for further discussion. Accordingly, the assessments levied on us may increase as we increase our written premiums. Some states also have laws that establish second injury funds to reimburse insurers and employers for claims paid to injured employees for aggravation of prior conditions or injuries. These funds are supported either by assessments or premium surcharges based on case incurred losses.

In addition, as a condition to conducting business in some states, insurance companies are required to participate in residual market programs to provide insurance to those employers who cannot procure workers' compensation coverage from an insurance carrier on a negotiated basis. Insurance companies generally can fulfill their residual market obligations by, among other things, participating in a reinsurance pool where the results of all policies provided through the pool are shared by the participating insurance companies. Although we price our insurance to account for obligations we may have under these pooling arrangements, we may not be successful in estimating our liability for these obligations. Accordingly, mandatory pooling arrangements may cause a decrease in our profits.

At December 31, 2024,2025, we participated in mandatory pooling arrangements in 2625 states and the District of Columbia. AsIf we write policies in new states that have mandatory pooling arrangements, we willwould be required to participate in additional pooling arrangements. Further, the impairment, insolvency or failure of other insurance companies in these pooling arrangements would likely increase the liability for other members in the pool.pool, including us. The effects of assessments and premium surcharges or changes in them could reduce our profitability in any given period or limit our ability to grow our business.

In the ordinary course of our business, we are involved in various legal and other administrative proceedings involving claims arising from our insurance operations. These claims involve issues such as eligibility for workers' compensation insurance coverage or benefits, the extent of injuries, wage determinations, disability ratings, and bad faith and extra-contractual liability. AThe outcome of any legal proceedings is inherently uncertain and a significant adverse result, or multiple adverse results involving similar issues, could require us to pay significant amounts or change the manner in which we administer claims, which could have a material adverse effect on our operations or results of operations. Regardless of the merit of particular claims, defending against legal proceedings or responding to investigations can be expensive, time-consuming, disruptive to our operations and distracting to management.

When writing workers’ compensation insurance policies, we are required by law to provide workers’ compensation benefitscoverage for losses arising from acts of terrorism. The impact of any terrorist actacts is unpredictable, and the ultimate impact of such acts on us would depend upon the nature, extent, location and timing of such an act. Our 20252026 reinsurance treaty program affords limited coverage for up to $100.0 million for losses arising from terrorism, subject to applicable deductibles, exclusions, retentions, definitions and aggregate limits.

Notwithstanding the protection provided to us by reinsurance and the Terrorism Risk Insurance Program Reauthorization Act of 2019, the risk of us incurring severe losses to us from acts of terrorism hasis not been eliminated because our reinsurance treaty program includes various sub-limits and exclusions limiting our reinsurers’ obligation to cover our losses caused by acts of terrorism. Accordingly, events constituting acts of terrorism may not be covered by, or may exceed the capacitylimits of, our reinsurance treaty program and could adversely affect our business and financial condition.

We purchase reinsurance to reduce our net liability on individual risks and to protect against catastrophic losses. Reinsurance is an arrangement in which an insurance company, called the ceding company, transfers insurance risk by sharing premiums with another insurance company, called the reinsurer. Conversely, the reinsurer receives or assumes risk from the ceding company. Our 20252026 reinsurance treaty program provides us with reinsurance coverage for each loss occurrence up to $100.0 million, subject to applicable limitations, deductibles, retentions and aggregate limits. Our retention is $2.0 million for each loss occurrence. Losses in the layer between $2.0 million and $10.0 million are ceded to a multi-year reinsurance treaty.

The financial and business analysis below provides information which the Company believes is relevant to an assessment and understanding of its consolidated financial position, results of operations and cash flows. The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 8 of this report. This discussion includes forward-looking statements that are not guarantees of future performance and are not necessarily indicative of future operating results. See “Cautionary Statement Regarding Forward-Looking Statements” in Part I above for further discussion.

We are a holding company that markets and underwrites workers’ compensation insurance through its insurance subsidiaries. Workers’ compensation insurance covers statutorily prescribed benefits that employers are obligated to provide to their employees who are injured in the course and scope of their employment. Our business strategy is focused on providing this coverage to small to mid-sized employers engaged in hazardous industries, principally construction, trucking, logging and lumber, agriculture, services, manufacturing, maritime, and telecommunications.maritime. Employers engaged in hazardous industries pay substantially higher than average rates for workers’ compensation insurance compared to employers in other industries, as measured per payroll dollar. The higher premium rates are due to the nature of the work performed and the inherent workplace danger of our target employers. Hazardous industry employers also tend to have less frequent but more severe claims as compared to employers in other industries due to the nature of their businesses. We provide proactive safety reviews of most employers’ workplaces. These safety reviews are a vital component of our underwriting process and also promote safer workplaces. We utilize intensiveproactive claims management practices that we believe permit us to effectively manage the overall cost of our claims. In addition, our audit services ensure that our policyholders pay the appropriate premiums required under the terms of their policies and enable us to monitor payroll patterns that cause underwriting, safety or fraud concerns. We believe that the higher premiums typically paid by our policyholders, together with our disciplined underwriting and safety, claims and audit services, provide us with the opportunity to earn attractive returns for our shareholders.

We actively market our insurance in 27 states through independent agencies, as well as through our wholly-owned insurance agency subsidiary.subsidiary, Amerisafe General Agency, Inc. We are also licensed in an additional 20 states, the District of Columbia and the U.S. Virgin Islands.

The use of reinsurance is an important component of our business strategy. We purchase reinsurance to reduce our net liability on individual risks and to protect against catastrophic losses. OurFor more information about our 2026 reinsurance programprogram, forsee 2025 includes 26 reinsurers that provide coverage to us“Business—Reinsurance” in excessItem 1 of athis certain specified loss amount, or retention level. Our 2025 reinsurance program provides us with reinsurance coverage for each loss occurrence up to $100.0 million, subject to applicable limitations, deductibles, retentions and aggregate limits. However, for any loss occurrence involving only one claimant, our reinsurance coverage is limited to $20.0 million, subject to applicable deductibles, retentions and aggregate limits. Losses in the layer between $2.0 million and $10.0 million are ceded to a multi-year reinsurance treaty.report. As losses are incurred and recorded, we record amounts recoverable from reinsurers for the portion of the losses ceded to our reinsurers.

Our gross reserves for loss and loss adjustment expenses at December 31, 2024,2025, 2024 and 2023 and 2022 were $651.3$613.6 million, $674.0$651.3 million and $696.0$674.0 million, respectively. As a percentage of gross reserves at year end, reserves for expenses incurred but not reported (IBNR) represented 10.5% in 2025, 16.5% in 2024,2024 and 17.8% in 2023 and 17.1% in 2022.2023.

Net Investment Income and Net Realized Gains and Losses on Investments. We invest our statutory surplus funds and the funds supporting our insurance liabilities in fixed maturity securities, equity securities and alternative investments. In addition, a portion of these funds are held in cash and cash equivalents to pay current claims. Our net investment income includes interest and dividends earned on our invested assets and amortization of premiums and discounts on our fixed maturity securities. We assess the performance of our investment portfolio using a standard tax equivalent yield metric. Investment income that is tax-exempt is increased by our marginal federal tax rate to express yield on tax-exempt securities on the same basis as taxable securities. Net realized gains and losses on our investments are reported separately from our net investment income. Net realized gains occur when our investment securities are sold for more than their cost or amortized cost, as applicable. Net realized losses occur when our investment securities are sold for less than their cost or amortized cost, as applicable. We classify thejust over a majority of our fixed maturity securities as held-to-maturity. The remainder of our fixed maturity securities are classified as available-for-sale. Net unrealized gains or losses on our securities classified as available-for-sale are reported separately within accumulated other comprehensive income (loss) on our balance sheet. Changes in net unrealized gains or losses on our equity securities are recognized in net income.

Fee and Other Income. We recognize commission income earned on policies issued by other carriers that are sold by our wholly-owned insurance agency subsidiarysubsidiary, Amerisafe General Agency, Inc., as the related services are performed. We also recognize a small portion of interest income from mandatory pooling arrangements in which we participate.

Commissions. We pay commissions to our wholly-owned subsidiary insurance agencyagency, Amerisafe General Agency, Inc., and to the independent agencies that sell our insurance based on premiums collected from policyholders.

Premiums Receivable. Premiums receivable represents premium-related balances due from our policyholders based on annual premiums for policies written, including surcharges and deposits and adjustments for premium audits, endorsements, cancellations, cash transactions and charge offs. The balance is shown net of an allowance for credit losses and includes an estimate for EBUB. The EBUB estimate is subject to significant variability and can either increase or decrease premiums receivable and earned premiums based upon several factors, including changes in premium growth, industry mix and economic conditions. EBUB assumptions include historical development factors, current economic outlook and current trends in particular sectors of our policyholders' business.

Net Investment Income. NetIncome.Net investment income in 2024 was $29.2 million, a decrease of 6.8% from the $31.3 million reported in 2023. The decrease was due to lower average invested asset balances in the period compared to prior year as well as lower investment yields on fixed income securities and cash compared to prior year. Average invested assets, including cash and cash equivalents, decreased 6.9%, from an average of $955.8 million for 2023 to an average of $890.4 million for 2024. The average pre-tax net investment yield on our investment portfolio was 3.4% per annum for 2024 and 2023. The year-end tax-equivalent yield on our investment portfolio was 3.8% per annum for 2024, compared to 3.7% per annum for 2023. The tax-equivalent yield is calculated using the effective interest rate and the appropriate marginal tax rate. Average invested assets, including cash and cash equivalents, decreased 6.9%, from an average of $955.8 million for 2023 to an average of $890.4 million for 2024.

Net Realized Gains (Losses) on Investments. Net realized losses on investments in 2024 totaled $0.6 million compared to net realized gains on investments of $6.6 million in 2023. In 2024, net realized losses on investments resulted primarily from the sale of equity and fixed maturity securities classified as available-for-sale as well as the redemption of fixed maturity securities. In 2023, net realized gains on investments resulted primarily from the sale of equity securities.

Net Unrealized Gains (Losses) on Equity Securities. Net unrealized gains on equity securities in 2024 were $9.5 million compared to net unrealized gains on equity securities of $1.2 million in 2023.

Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits. Underwriting and certain other operating costs, commissions and salaries and benefits for 2024 were $80.1 million, compared to $78.3 million for 2023. The Companyincrease experiencedwas primarily due to a $3.3 million increase in compensation expense, a $0.7 million decrease in profit sharing reinsurance commission, a $0.7 million increase in accounts receivable write-offs, a $0.4 million increase in travel and travel related items, and a $0.3 million increase in commission expense. OffsettingPartially offsetting these amounts were a $2.2 million decrease in insurance related assessments, a $0.4 million increase in ceding commission related to our current year reinsurance agreement, a $0.4 million increase in deferred policy acquisition costs, and a $0.3 million decrease in systems costs. Our underwriting expense ratio increased to 29.6% in 2024 from 29.3% in 2023.

At December 31, 2024,2025, our incurred amounts for certain accident years developed more favorably than management previously expected. Multiple factors can cause loss development both unfavorable and favorable. The favorable loss development we experienced across accident years was largely due to two factors: (1) lower than expected severity of injuries inacross theseprior accident years compared to our original and revised estimates; and (2) favorable case reserve development from closed claims and claims where the worker had reached maximum medical improvement. We believe the favorable case reserve development resulted primarily from ana intensivecontinued focus on our proactive claims management focusprocess with the Company actively seeking to settle claims, leading to favorable development.

Our principal sources of operating funds are premiums, investment income, and proceeds from maturities of investments. Our primary uses of operating funds include payments for claims and operating expenses. We pay claims, operating expenses, shareholder dividends and repurchasesrepurchase shares using cash flow from operations and invest our excess cash in fixed maturity and equity securities. We expect that our projected cash flow from operations will provide usbe sufficient to meet our short-term and long-term liquidity to fund future operations,needs, including payment of claims and operating expenses and other holding company expenses, for at least the next 12 months.expenses.

In December 2024, the Company commuted reinsurance agreements with Hannover Re and Tokio MilleniumMillennium Re covering portions of accident years 2012-2014. The Company received a $6.3 million payment effectuated solely through offset against the balance of the funds withheld and recoverable from reinsurers' accounts under the reinsurance agreements in exchange for releasing Hannover Re and Tokio MilleniumMillennium Re from their reinsurance obligations under the commuted agreements. Hannover Re and Tokio MilleniumMillennium Re remain obligated to the subsidiaries of the Company under other reinsurance agreements. As a result of the commutation, we recorded a pre-tax loss of approximately $1.5 million.

The Company has operating and finance leases for office space and equipment. Our leases have remaining lease terms of onetwo monthmonths to 4960 months, some of which include options to extend the leases for up to five years. The Company, in determining the present value of lease payments, utilizes either the rate implicit in the lease if that rate is readily determinable or the Company’s incremental secured borrowing rate commensurate with the term of the underlying lease.

Net cash provided by investing activities was $72.4$68.4 million in 2024,2025, as compared to net$72.4 cashmillion providedin by2024 investing activities ofand $43.9 million in 2023 and net cash provided by investing activities of $75.4 million in 2022.2023. In 2024,2025, major components of net cash provided by investing activities included proceeds from sales and maturities of investments of $183.9$137.6 million, offset partially by investment purchases of $110.7$67.0 million, and purchases of property and equipment of $2.1 million.

In 2023,2024, major components of net cash provided by investing activities included proceeds from sales and maturities of investments of $178.1$183.9 million, offset partially by investment purchases of $133.7$110.7 million.

In 2022,2023, major components of net cash provided by investing activities included proceeds from sales and maturities of investments of $293.0$178.1 million, offset partially by investment purchases of $215.5$133.7 million.

Our board of directors initially authorized the Company’s share repurchase program in February 2010. In OctoberJuly 2016,2025, theour Boardboard of directors reauthorized this program with a limit of $25.0 million with no expiration date. As of December 31, 2024,2025, we had repurchased a total of 1,682,851 shares of our outstanding common stock for $42.1 million. The Company had $5.3$16.9 million was available for future repurchases at December 31, 2024 under thisthe share repurchase program. There were 113,411 and 46,741 shares repurchased in 2024 and 2023, respectively. The repurchases may be effected from time to time dependingpursuant uponto trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act. The share repurchase program does not obligate the Company to repurchase any shares of the Company's common stock and may be modified, increased, suspended or terminated at the discretion of our board of directors. The board of directors' determination will depend on a variety of factors, including, but not limited to, market conditions and subject to applicable regulatory considerations. It is anticipated that future repurchases will be funded from available capital. There were 291,289 and 113,411 shares repurchased in 2025 and 2024, respectively.

We paid regular quarterly cash dividends of $0.39, $0.37, $0.34, and $0.31$0.34 per share in 2024,2025, 20232024 and 2022,2023, respectively. In addition, the Company paid extraordinaryspecial cash dividends of $3.00$1.00, in$3.00, 2024,and $3.50 per share in 2023,2025, 2024 and $4.002023, in 2022.respectively.

On February 25,24, 2025,2026, we declared a regular quarterly cash dividend of $0.39$0.41 per share payable on March 21,20, 20252026 to shareholders of record as of March 7,13, 2025.2026. Our board of directors intends to continue to consider the payment of a regular cash dividend each calendar quarter. On an annualized basis, the cash dividend is expected to be $1.56 per share in 2025.

The average pre-tax net investment yield on our investment portfolio was 3.3% and 3.4% per annum during the twelve months ended December 31, 20242025 and 2023.2024, respectively.

We are a holding company that markets and underwrites workers’ compensation insurance through its insurance subsidiaries. Workers’ compensation insurance covers statutorily prescribed benefits that employers are obligated to provide to their employees who are injured in the course and scope of their employment. Our business strategy is focused on providing this coverage to small to mid-sized employers engaged in hazardous industries, principally construction, trucking, logging and lumber, agriculture, services, manufacturing, and maritime. Employers engaged in hazardous industries typically pay substantially higher than average rates for workers’ compensation insurance compared to employers in other industries, as measured per payroll dollar. These higher premium rates are due to the nature of the work performed and the inherent workplace danger of our target policyholders. Hazardous industry employers also tend to have less frequent but more severe claims as compared to employers in other industries due to the nature of their businesses. We provide proactive safety reviews of most employers’ workplaces. These safety reviews are a vital component of our underwriting process and are aimed at promoting safer workplaces. We utilize proactive claims management practices that we believe permit us to effectively manage the overall cost of our claims. In addition, our premium audit services calculate the appropriate premiums for our policyholders under the terms of their policies and enable us to monitor payroll patterns that cause underwriting, safetysafety, or fraud concerns. We believe that the higher premiums typically paid by our policyholders, together with our disciplined underwriting, safety, claims, and audit services, provide us with the opportunity to earn attractive returns on equity.

The following table summarizes our consolidated financial results for the three and six months ended MarchJune 31,30, 2026 and 2025.

Consolidated Results of Operations for Three Months Ended MarchJune 31,30, 2026 Compared to MarchJune 31,30, 2025

Gross Premiums Written. Gross premiums written for the quarter ended MarchJune 31,30, 2026 were $88.5$86.0 million, compared to $83.8$79.7 million for the same period in 2025, an increase of 5.6%.7.9%. The increase was attributable to a $6.3$4.3 million increase in voluntary premiums on policies written during the period.period The increase was partially offset byand a $1.4$2.6 million decreaseincrease in premiums resulting from payroll audits and related premium adjustments for policies written in previous quarters.quarters, partially offset by a $0.7 million decrease in residual market premium.

Net Premiums Written. Net premiums written for the quarter ended MarchJune 31,30, 2026 were $84.4$81.8 million, compared to $79.6$75.5 million for the same period in 2025, an increase of 6.1%.8.3%. The increase was primarily attributable to the increase in gross premiums written. As a percentage of gross premiums earned, ceded premiums were 5.1%5.2% for the firstsecond quarter of 2026 compared to 5.7% for the firstsecond quarter of 2025. The decrease in ceded premiums as a percentage of gross premiums earned is a result of a change in our 2026 reinsurance treaties. For additional information, see Item 1, “Business—Reinsurance” in our Annual Report on Form 10-K for the year ended December 31, 2025.

Net Premiums Earned. Net premiums earned for the firstsecond quarter of 2026 were $75.1$77.3 million, compared to $68.9$69.4 million for the same period in 2025, an increase of 9.0%.11.4%. The increase was primarily attributable to the increase in net premiums written during the period.written.

Net Investment Income. Net investment income for the quarter ended MarchJune 31,30, 2026 was $6.6$6.5 million, compared to $6.7 million for the same period in 2025, a decrease of 0.8%.2.4%. The decrease was due to slightly lower average invested asset balances in the period compared to the same period in the prior year. The decrease in average invested assets was primarily attributable to capital returned to shareholders through dividend payments and share repurchases, which reduced cash and invested asset balances during the period. Average invested assets, including cash and cash equivalents, were $790.6$772.6 million in the quarter ended MarchJune 31,30, 2026 compared to anaverage averageinvested assets of $835.5$813.1 million for the same period in 2025, a decrease of 5.4%.5.0%. The pre-tax investment yield on our investment portfolio was 3.4% per annum during the quarter ended MarchJune 31,30, 2026 compared to 3.2%3.3% per annum for the same period in 2025. The tax-equivalent yield on our investment portfolio was 3.9% per annum for the quarterquarters ended MarchJune 31,30, 2026 compared to 3.8% per annum for the same period inand 2025. The tax-equivalent yield is calculated using the effective interest rate and the appropriate marginal tax rate.

Net Realized Gains (Losses) on Investments. Net realized losses on investments in the quarter ended MarchJune 31,30, 2026 were immaterial,$0.1 million compared to immaterial net realized gains of $3.1 million for the same period in 2025. NetThe net realized resultslosses forin boththe periodssecond quarter of 2026 were mostly attributable to the redemption of fixed maturity securities. The net realized gains in the second quarter of 2025 were mostly attributable to the sales of equity and fixed maturity securities classified as available-for-sale and redemption of fixed maturity securities.available-for-sale.

Net Unrealized Gains (Losses) on Equity Securities. The market value of our equity securities decreasedincreased by $1.7$8.1 million for the three months ended MarchJune 31,30, 2026 compared to aan decreaseincrease of $3.2$1.8 million for the same period in 2025. The increase in the market value of our equity securities was primarily due to stronger U.S. equity markets compared to the prior-year period.

Loss and Loss Adjustment Expenses Incurred. Loss and loss adjustment expenses (LAE) incurred totaled $46.4$48.3 million for the three months ended MarchJune 31,30, 2026, compared to $40.2$40.7 million for the same period in 2025, an increase of $6.3$7.7 million, or 15.6%.18.9%. The current accident year loss and LAE incurred totaled $54.1$55.6 million for the three months ended MarchJune 31,30, 2026, compared to $48.9$49.3 million for the same period in 2025. As of MarchJune 31,30, 2026, our initial estimate for loss and LAE for accident year 2026 iscontinues to be 72.0% of net premiums earned, reflective of pressure from continued rate decreases and long-term claim frequency and severity trends, as well as medical inflation. As of March 31, 2025, ourOur initial estimate for loss and LAE for accident year 2025 wasof 71.0% of net premiums earned and was increased to 72.0% in the fourth quarter of 2025 largely due to the frequency of severity observed in that accident year. We recorded favorable prior accident year development of $7.6$7.3 million in the firstsecond quarter of 2026, compared to favorable prior accident year development of $8.7$8.6 million in the same period of 2025, as further discussed below in “Prior Year Development.” Our net loss ratio was 61.9%62.6% in the firstsecond quarter of 2026, compared to 58.3%58.6% for the same period of 2025.

Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits. Underwriting and certain other operating costs, commissions and salaries and benefits for the quarter ended MarchJune 31,30, 2026 were $22.3$24.6 million, compared to $20.6$21.7 million for the same period in 2025, an increase of 8.1%.13.1%. This increase was primarily due to a $0.9$1.1 million decreaseincrease in profitcompensation sharingexpense reinsurancerelated commissionto an incentive bonus true-up recorded in prior year, a $0.8 million increase in accounts receivable write-offs and a $0.6$0.7 million increase in commission expense. Partially offsetting these amounts was a $0.3 million decrease in mandatory pooling arrangement fees. Our expense ratio was 29.7%31.8% in the firstsecond quarter of 2026 compared to 29.9%31.3% in the firstsecond quarter of 2025.

Income Tax Expense. Income tax expense for the three months ended MarchJune 31,30, 2026 was $2.0$3.7 million, compared to $2.3$3.5 million for the same period in 2025. The effective tax rate for the Company for the quarterquarters ended MarchJune 31,30, 2026 wasand 19.8% compared to 20.2% in the first quarter of 2025. The decrease in the effective tax rate2025 was due to a higher proportion of income from tax-exempt investments for the three months ended March 31, 2026 compared with the same period of 2025.20.1%.

Net cash used in operating activities was $2.7$0.9 million for the threesix months ended MarchJune 31,30, 2026, which represented a $0.9$9.3 million increasedecrease from $1.8$10.2 million in net cash used in operating activities for the threesix months ended MarchJune 31,30, 2025. This decrease in operating cash flowused in operations was due to a $2.2$11.5 million increase in premium collections, a $3.8 million decrease in federal taxes paid, and a $1.5 million increase in reinsurance recoveries. Partially offsetting these impacts were a $5.4 million increase in underwriting expenses paid andpaid, a $1.7$1.3 million increase in losses paid, partially offset by a $2.5 million increase in premium collectionspaid and a $0.6$0.5 million increasedecrease in reinsurancenet recoveries.investment income.

Net cash usedprovided inby investing activities was $12.5$30.3 million for the threesix months ended MarchJune 31,30, 2026, compared to net cash provided by investment activities of $9.9$33.1 million for the same period in 2025. Cash provided by sales and maturities of investments totaled $22.9$73.0 million for the threesix months ended MarchJune 31,30, 2026, compared to $20.4$54.3 million for the same period in 2025. A total of $35.3$42.7 million in cash was used to purchase investments in the threesix months ended MarchJune 31,30, 2026, compared to $10.5$20.2 million in purchases for the same period in 2025. There were immaterial purchases of property and equipment in the threesix months ended MarchJune 31,30, 20262026, andcompared to $1.1 million for the same period in 2025.

Net cash used in financing activities in the threesix months ended MarchJune 31,30, 2026 was $12.5$25.8 million, compared to net cash used in financing activities of $7.4$18.4 million for the same period in 2025. In the threesix months ended MarchJune 31,30, 2026, $7.8$15.4 million of cash was used for dividends paid to shareholders compared to $7.4$14.9 million in the same period of 2025. In the threesix months ended MarchJune 31,30, 2026, there were repurchases of outstanding shares of our common stock of $4.0$9.7 million compared to none$2.8 million for the same period in 2025. Share-based compensation-relatedcompensation related payroll tax withholding was $0.7 million in the threesix months ended MarchJune 31,30, 2026,2026 compared to none in the same period inand 2025.

The carrying value of our investment portfolio, including cash and cash equivalents, totaled $773.6$770.7 million at MarchJune 31,30, 2026, compared to $796.8 million at December 31, 2025, a decrease of 2.9%.3.3%. Purchases of fixed maturity securities are classified as available-for-sale or held-to-maturity at the time of purchase based on the individual security. The Company has the ability and positive intent to hold certain investments until maturity. Therefore, fixed maturity securities classified as held-to-maturity, as defined by FASB ASC Topic 320, Investments-Debt and Equity Securities, are recorded at amortized cost net of allowance for credit losses. Our equity securities and fixed maturity securities classified as available-for-sale are reported at fair value.

The composition of our investment portfolio, including cash and cash equivalents, as of MarchJune 31,30, 2026, is shown in the following table:

We classify the majority of our debt fixed maturity securities as “held-to-maturity.held-to-maturity”. We do not reflect any changes in non-credit related unrecognized gains and losses until realized. Upon the adoption of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), management is required to estimate expected credit related losses for these securities and recognize a credit loss allowance on the balance sheet with a corresponding adjustment to earnings. Subsequent adjustments to the estimated expected credit related losses are recognized through earnings within the category “provision for investment related credit loss benefit”, and adjustments to the credit loss allowance. The remainder of our fixed maturity securities are classified as “available-for-sale.available-for-sale”. These investments are valued at fair value at the end of each period, with changes in fair value flowing through other comprehensive income. Equity securities are valued at fair value with changes in the fair value recognized in net income.

The Company recorded favorable prior accident year loss and loss adjustment expenseLAE development of $7.6$7.3 million in the three months ended MarchJune 31,30, 2026. The table below sets forth the favorable development for the three and six months ended MarchJune 31,30, 2026 and 2025 for accident years 2021 through 2025 and, collectively, for all accident years prior to 2021.

The table below sets forth the number of open claims as of MarchJune 31,30, 2026 and 2025, and the number of claims reported and closed during the three and six months then ended.

The number of open claims at MarchJune 31,30, 2026 increased by 301293 claims as compared to the number of open claims at MarchJune 31,30, 2025. The increase in the number of claims reported is directly correlated to the increase of our in-force policy count.

At MarchJune 31,30, 2026, our incurred amounts for certain accident years, primarily 2012, 2020 and 2023,years developed more favorably than management previously expected. The revisions to the Company’s reserves reflect new information gained by claims adjusters in the normal course of adjusting claims and is reflected in the Company’s financial statements when the information becomes available. It is typical for more serious claims to take several years or longer to settle and the Company continually revises estimates as more information about claimants’ medical conditions and potential disability becomes known and the claims get closer to being settled. Multiple factors can cause both favorable and unfavorable loss development. The favorable loss development we experienced across accident years was largely due to favorable case reserve development from closed claims and claims where the worker had reached maximum medical improvement.

The assumptions we used in establishing our reserves for these accident years were based on our historical claims data. However, as of MarchJune 31,30, 2026, actual results for certain accident years have been better than our assumptions would have predicted. While we do not presently intend to modify our assumptions for establishing reserves in light of recent results, if actual results for current and future accident years are consistent with, or different than, our results in these recent accident years, our historical claims data will reflect this change and, over time, will impact the reserves we establish for future claims.

Our reserves for loss and loss adjustment expensesLAE are inherently uncertain and our focus on providing workers’ compensation insurance to employers engaged in hazardous industries generally results in us receiving relatively fewer but more severe claims than many other workers’ compensation insurance companies. As a result of this focus on higher severity, lower frequency business, our reserve for loss and loss adjustment expensesLAE may have greater volatility than other workers’ compensation insurance companies. For additional information, see Item 1, “Business—Loss Reserves” in our Annual Report on Form 10-K for the year ended December 31, 2025.