AMERISAFE INC (AMSF) Risk Factors

Item 1A. Risk Factors

Investing in our securities involves a high degree of risk and uncertainties. In evaluating the Company, the factors described below should be considered carefully together with the other risks described in this annual report, including, but not limited to, under the captions "Business" in Item 1, "Risk Factors" in Item 1A, "Cybersecurity" in Item 1C, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 and "Quantitative and Qualitative Disclosures About Market Risk" in Item 7A of this report.

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.

The occurrence of one or more of the risks discussed below could significantly and adversely affect our business, prospects, financial condition, results of operations and cash flows and you could lose part or all of your investment. The risks that follow are organized under headings as determined to be most applicable, but such risks also may be relevant to other headings. Moreover, the risk factors described herein are not all of the risks we may face and there may be other risks not presently known to us or that we currently believe are immaterial or general risks that apply to all companies operating in the U.S., which may emerge or become material.

Financial Risks

If we do not appropriately establish our premium rates, our results of operations will be adversely affected.

In general, the premium rates for our insurance policies are established when coverage is initiated and, therefore, before all of the underlying costs are known. Like other workers’ compensation insurance companies, we rely on estimates and assumptions in setting our premium rates. Establishing adequate rates is necessary to generate sufficient revenue to offset losses, loss adjustment expenses and other underwriting expenses, and to earn an underwriting profit. If we fail to accurately assess the risks, we may fail to charge adequate premium rates to cover our losses and expenses, which could reduce our net income and cause us to become unprofitable. For example, when initiating coverage on a new policyholder, we estimate future claims expense based, in part, on prior claims information provided by the policyholder’s previous insurance carriers. If this prior claims information is not accurate, we may underprice our policy by using claims estimates that are too low. As a result, our actual costs for providing insurance coverage to our policyholders may be significantly higher than our premiums. In order to set premium rates appropriately, we must:

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collect and properly analyze a substantial volume of data;

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develop, test and apply appropriate rating formulae;

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closely monitor and timely recognize changes in trends; and

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project both frequency and severity of losses with reasonable accuracy.

We must also implement our pricing accurately in accordance with our assumptions. Our ability to undertake these efforts successfully, and as a result set premium rates accurately, is subject to a number of risks and uncertainties, principally:

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insufficient reliable data;

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incorrect or incomplete analysis of available data;

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uncertainties generally inherent in estimates and assumptions;

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the complexity inherent in implementing appropriate rating formulae or other pricing methodologies;

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

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uncertainties inherent in accurately estimating retention, investment yields, and the duration of our liability for loss and loss adjustment expenses; and

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unanticipated court decisions, legislation or regulatory action.

Consequently, we could set our premium rates too low, which could negatively affect our results of operations and our profitability, or we could set our premium rates too high, which could reduce our competitiveness and lead to lower revenues.

If we are unable to realize our investment objectives, our financial condition and results of operations may be adversely affected.

Investment income is an important component of our net income. As of December 31, 2025, our investment portfolio, including cash and cash equivalents, had a carrying value of $796.8 million. For the year ended December 31, 2025, we had $27.0 million of net investment income. Our investment portfolio is managed under investment guidelines approved by our board of directors and is made up predominately of fixed maturity securities and cash and cash equivalents. Although our investment guidelines emphasize capital preservation and liquidity, our investments are subject to a variety of risks, including risks related to general economic conditions, interest rate fluctuations, market illiquidity and market volatility. General economic and political conditions may be adversely affected by many things out of our control, including inflation, interest rates, trade and tax policy (including tariffs), strength of the U.S. dollar, global health pandemics, U.S. involvement in political or geopolitical tensions and conflicts, and large-scale acts of terrorism, or the threat of hostilities or terrorist acts.

Interest rates are highly sensitive to many factors, including governmental monetary policies and domestic and international economic and political conditions and other factors beyond our control. Increased interest rates could have an adverse effect on the market value of our investment portfolio. Decreased interest rates could have an adverse effect on our investment income, in addition to increased prepayment risk on callable securities included in our investment portfolio.

Similarly, during periods of market disruption, including periods of rapidly widening credit spreads or illiquidity, the fair values of certain of our fixed maturity securities could be deemed to have a credit-related loss for which the Company could be obligated to recognize an allowance for credit losses. Further, rapidly changing equity market conditions could materially impact the valuation of the equity securities as reported within our consolidated financial statements and the period-to-period changes in value could vary significantly.

These and other factors affect the capital markets and, consequently, the value of our investment portfolio and our future investment income. Any significant decline in our investment income would adversely affect our revenues and net income.

A decline in the level of business activity of our policyholders, particularly those engaged in the construction, trucking, logging and lumber, agriculture, services, manufacturing, and maritime industries, could negatively affect our earnings and profitability.

In 2025, 89.6% of our gross premiums written were derived from policyholders in the construction, trucking, logging and lumber, agriculture, services, manufacturing, and maritime industries. Because premium rates are calculated, in general, as a percentage of a policyholder’s payroll expense, premiums fluctuate depending upon the level of business activity and number of employees of our policyholders. As a result, our gross premiums written are primarily dependent upon economic conditions in these industries, particularly construction, and upon economic conditions generally, including, among other things, inflation, tariffs, interest rates, labor supply conditions and labor market disruption due to changes in the rules and enforcement around immigration. A decline in the level of business activity of our policyholders due to unfavorable economic conditions or otherwise could adversely affect our results of operations.

Our loss reserves are based on estimates and may be inadequate to cover our actual losses.

We record reserves for estimated losses under insurance policies we write and for loss adjustment expenses related to the investigation and settlement of claims. Loss reserves are based on estimates of the most likely ultimate cost of individual claims. Our loss reserves for loss and loss adjustment expenses represent the estimated cost of all reported and unreported loss and loss adjustment expenses incurred and unpaid at any given point in time based on known facts and circumstances. These estimates are inherently uncertain.

Our pre-tax income for any period is impacted by establishing loss reserves for new claims as well as changes in estimates for previously reported losses. Our focus on writing workers’ compensation insurance for employers engaged in hazardous industries results in our experiencing fewer, but more severe, claims. The ultimate cost of resolving severe claims is difficult to predict, particularly in the period shortly after the injury occurs. Substantial judgment is required to determine the relevance of our historical experience and industry information under current facts and circumstances. The interpretation of this historical data can be impacted by external forces, principally frequency and severity of unreported claims, length of time to achieve ultimate settlement of claims, inflation in medical costs and wages, insurance policy coverage interpretations, jury determinations, and legislative changes.

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Accordingly, our loss reserves may prove to be inadequate to cover our actual losses. If there are unfavorable changes affecting our assumptions, our loss reserves may need to be increased. When a loss reserve estimate is increased, the change decreases pre-tax income by a corresponding amount.

As an insurance holding company, we are dependent on the results of operations of our insurance subsidiaries, and our ability to pay dividends and repurchase shares depends on the regulatory and financial capacity of our subsidiaries to pay dividends to us.

We are a holding company that transacts business through our insurance subsidiaries, including AIIC, SOCI, and AIICTX. Our primary assets are the capital stock of these insurance subsidiaries. Our ability to pay dividends to our shareholders and repurchase shares depends upon the surplus and earnings of our insurance subsidiaries and their ability to pay dividends to us. Payment of dividends by our insurance subsidiaries is restricted by state insurance laws, including laws establishing minimum solvency and liquidity thresholds, and could be subject to contractual restrictions in the future, including those imposed by indebtedness we may incur in the future. As a result, we may not be able to receive dividends from our insurance subsidiaries or may not receive dividends in amounts necessary to pay dividends to our shareholders or repurchase shares.

In addition to the ability of our insurance subsidiaries to pay dividends to us, the timing and amount of dividends, and any share repurchases is at the discretion of our board of directors and management, respectively. Repurchases of our common stock under our repurchase program are discretionary up to the limit approved by our board of directors, and our share repurchase program may be modified, increased, suspended or terminated at any time at the discretion of our board of directors. Our dividend payments and share repurchases may change, and there can be no assurance that we will continue to declare dividends or repurchase shares at all or in any particular amounts.

We may require additional capital in the future, which may not be available to us or may be available only on unfavorable terms.

Our future capital requirements will depend on many factors, including, among other things, state regulatory requirements, the financial stability of our reinsurers, our ability to write new business and establish premium rates sufficient to cover our estimated claims and changes to our business strategy (including initiatives to expand our business). We may need to raise additional capital or curtail our growth if the capital of our insurance subsidiaries is insufficient to support future operating requirements and/or cover claims. If we are required to raise additional capital, equity or debt financing might not be available to us on favorable terms, or at all. Future equity offerings could be dilutive to our shareholders and the equity securities issued in any offering may have rights, preferences and privileges senior to our common stock.

If we cannot obtain adequate capital on favorable terms or at all, we may be unable to support future growth or operating requirements and, as a result, our business, financial condition or results of operations could be adversely affected.

Strategic and Operational Risks

The workers’ compensation insurance industry is cyclical in nature, which may affect our overall financial performance.

The workers’ compensation insurance industry is cyclical in nature and influenced by many factors, some of which may be out of our control, including among other things, price competition, medical cost increases, natural and man-made disasters, changes in interest rates, changes in state laws and regulations and general economic conditions. A soft market is characterized by periods of lower premium rates and excess underwriting capacity resulting from increased competition. In contrast, a hard market is characterized by periods of higher premium rates and reduced underwriting capacity resulting from decreased competition. Although the financial performance of an individual insurance company is dependent on its own specific business characteristics, the profitability of most workers’ compensation insurance companies, including AMERISAFE, generally tends to follow this cyclical market pattern. Because this market cyclicality is due in large part to the actions of our competitors and general economic factors, we cannot predict the timing or duration of changes in the market cycle. These cyclical patterns have in the past, and could in the future, cause our revenues and net income to fluctuate, which may adversely affect our financial condition and results of operation and could cause the price of our common stock to be more volatile.

We operate in a highly competitive industry, only offer a single line of insurance and our competitors may have greater financial resources than we do, each of which may affect our ability to compete effectively.

There is significant competition in the workers’ compensation insurance industry. We believe that our competition in the hazardous industries we target is fragmented and not dominated by one or more competitors. Instead, we compete with various insurance companies, state insurance pools and self-insurance funds. Many of our existing and potential competitors are, or may be,

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significantly larger and may possess greater financial, marketing and management resources than we do. Moreover, a number of these competitors offer other types of insurance in addition to workers’ compensation and can provide insurance nationwide.

We only offer workers’ compensation insurance, and we currently have no plans to focus our efforts on offering other types of insurance. As a result, negative developments in the economic, competitive or regulatory conditions affecting the workers’ compensation insurance industry are likely to have a disproportionately adverse effect on our financial condition and results of operations. Negative developments in the workers’ compensation insurance industry could have a greater impact on our business than our competitors' businesses because we do not sell other types of insurance.

We compete on the basis of many factors, including coverage availability, claims management, safety services, payment terms, premium rates, policy terms, types of insurance offered, overall financial strength, financial ratings and reputation. If any of our competitors are more competitive on any of these factors than us, we could lose market share. No assurance can be given that we will maintain our current competitive position in the markets in which we currently operate or that we will establish a competitive position in new markets into which we may enter.

If we cannot sustain our relationships with independent agencies, we may be unable to operate profitably.

We market a substantial portion of our workers’ compensation insurance through independent agencies. As of December 31, 2025, independent agencies produced 99.0% of our voluntary in-force premiums. No independent agency accounted for more than 2.0% of our voluntary in-force premiums at that date. Independent agencies are not obligated to promote our insurance and may sell insurance offered by our competitors. As a result, our continued profitability depends, in part, on the marketing efforts of our independent agencies and on our ability to offer workers’ compensation insurance and maintain financial strength ratings that meet the requirements of our independent agencies and their policyholders.

The effects of emerging claims and coverage issues on our business are uncertain.

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 expect at the time we issue a policy. Changes of this nature may expose us to higher claims costs than we anticipated when we issued the underlying policy.

A downgrade in our A.M. Best rating would likely reduce the amount of business we are able to write.

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, and 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 our 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.

Technology breaches or failures, including those resulting from a malicious cyber attack on us, our policyholders, or service providers, could disrupt or otherwise negatively impact our business.

We rely on information technology systems to process, transmit, store and protect the electronic information, financial data and proprietary models that are critical to our business. Furthermore, a significant portion of the communications between our employees, our policyholders and service providers depend on information technology and electronic information exchange. Like all companies, our information technology systems are vulnerable to data breaches, interruptions or failures due to events that may be beyond our control, including natural disasters, theft, terrorist attacks, computer viruses, hackers and general technology failures.

We have established and implemented security measures, controls and procedures in an effort to safeguard our information technology systems and to prevent unauthorized access to these systems and any data processed and/or stored in these systems. We evaluate the adequacy of our third-party service providers’ cybersecurity measures through periodic due diligence and contractual obligations. Despite these safeguards, disruptions to and breaches of our information technology systems or those of our providers’ are possible and may negatively impact our business.

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Although we have experienced no known material cases involving unauthorized access to our information technology systems and data or unauthorized appropriation of such data to date, we have no assurance that such technology breaches will not occur in the future.

The expertise, wellbeing and resiliency of our workforce is necessary to maintain our competitive advantages in the high hazard workers’ compensation industry.

Our success is dependent on the expertise, wellbeing and resiliency of our employees and our ongoing leadership development activities to attract and retain key employees that are knowledgeable about our business. Succession planning and employee education and development for key positions are essential. If we are unable to attract and retain key employees and provide them with opportunities to learn and grow, our operations may be adversely impacted.

Our business is dependent on our executive officers because of their industry expertise, knowledge of our markets and relationships with the independent agencies that sell our insurance.

Our success is dependent on the efforts of our executive officers because of their industry expertise, knowledge of our markets and relationships with our independent agencies. We have entered into employment agreements with each of our executive officers. If and when any of our executive officers cease working for us, we may be unable to find acceptable replacements with comparable skills and experience in the workers’ compensation insurance industry and the hazardous industries that we target. As a result, our operations may be disrupted and our business may be adversely affected.

An inability to effectively manage our operations could make it difficult for us to compete and could affect our ability to operate profitably.

Our continuing strategic options include expanding in our existing markets, entering new geographic markets and further developing our agency relationships. Our strategy is subject to various risks, including risks associated with our ability to:

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profitably increase our business in existing markets;

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identify profitable new geographic markets for entry;

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attract and retain qualified personnel for expanded operations;

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identify, recruit and integrate new independent agencies; and

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augment our internal operations and systems as we expand our business.

If we are unable to successfully execute on our strategy, our business, financial condition or results of operations could be adversely affected.

Risks Related to Regulation and Litigation

We are subject to extensive state and federal regulations, and 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, the insurance regulatory agencies of other states in which we are licensed to sell insurance and, to a lesser extent, the federal 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:

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standards of solvency, including risk-based capital measurements;

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restrictions on the nature, quality and concentration of our investments;

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restrictions on the terms of the insurance policies we offer;

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restrictions on the way our premium rates are established and the premium rates we may charge;

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required reserves for unearned premiums and loss and loss adjustment expenses;

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standards for appointing general agencies;

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limitations on transactions with affiliates;

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restrictions on mergers and acquisitions;

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restrictions on the ability of our insurance company subsidiaries to pay dividends to AMERISAFE;

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certain required methods of accounting;

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potential assessments for state guaranty funds, second injury funds and other mandatory pooling arrangements;

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applicable privacy laws, including the protection of non-public personal information and personally identifiable information , including health information; and

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cybersecurity, privacy and artificial intelligence laws and regulations.

We may be unable to comply fully with the wide variety of laws and regulations applicable to us and our business which periodically undergo revisions. In addition, we follow practices based on our interpretations of laws and regulations that we believe are generally followed by our industry. Our practices may be different from interpretations of insurance regulatory agencies, and 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 increase our premium rates or take other actions to increase our profitability.

The workers’ compensation system is largely regulated by state governments. However, in the 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 structure, which could impact workers’ benefits and the method of workers' compensation administration. As a result, changes in the level of federal oversight of the workers’ compensation industry could adversely affect our operations.

Assessments and premium surcharges for state guaranty funds, second injury funds and other mandatory pooling arrangements may reduce our profitability.

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, 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 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, 2025, we participated in mandatory pooling arrangements in 25 states and the District of Columbia. If we write policies in new states that have mandatory pooling arrangements, we would 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, 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.

Legal or other administrative proceedings could have a material adverse effect on our operations or results of operations.

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. The 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.

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We may have exposure to losses from terrorism for which we are required by law to provide coverage.

When writing workers’ compensation insurance policies, we are required by law to provide workers’ compensation coverage for losses arising from acts of terrorism. The impact of terrorist acts 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 2026 reinsurance treaty program affords limited coverage up to $100.0 million for losses arising from terrorism, subject to applicable deductibles, exclusions, retentions, 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 from acts of terrorism is not 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 limits of, our reinsurance treaty program and could adversely affect our business and financial condition.

Risks Related to Our Reinsurers

If we are unable to obtain reinsurance on favorable terms, our ability to write policies could be adversely affected.

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 2026 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.

The availability, amount and cost of reinsurance are subject to market conditions and our experience with insured losses. As a result, any material changes in market conditions or our loss experience could adversely affect our ability to obtain reinsurance on favorable terms, or at all, which could adversely affect our financial performance.

A downgrade in the A.M. Best rating of one or more of our significant reinsurers could adversely affect our financial condition.

Our financial condition could be adversely affected if the A.M. Best rating of one or more of our significant reinsurers is downgraded. For example, our A.M. Best rating may be downgraded if our amounts recoverable from a reinsurer are significant and the A.M. Best rating of that reinsurer is downgraded. If one of our reinsurers suffers a rating downgrade, we may consider various options to lessen the impact on our financial condition, including commutation, novation and the use of letters of credit to secure amounts recoverable from reinsurers. However, these options may result in us incurring losses, and there can be no assurance that we could implement any of these options.

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.

When our reinsurance treaty program is terminated and we enter into a new program, any decrease in the amount of reinsurance at the time we enter into a new program, whether caused by the existence of more restrictive terms and conditions or decreased availability, will also increase our risk of loss and, as a result, could adversely affect our business, financial condition and results of operations. We currently have 24 reinsurers participating in our reinsurance treaty program, which we believe is a sufficient number of reinsurers to provide us with the reinsurance coverage we require. However, it is possible that one or more of our current reinsurers could terminate participation in our program. In addition, we may terminate the participation of one or more of our reinsurers under certain circumstances as permitted by the terms of our reinsurance agreements. In any of these events, if our reinsurance broker is unable to reallocate the terminated reinsurance among the remaining reinsurers in the reinsurance treaty program, it could take a significant period of time to identify and negotiate agreements with one or more replacement reinsurers. During this period, we would be exposed to an increased risk of loss, the extent of which would depend on the coverage previously provided by the terminated reinsurer.

We may not be able to recover amounts due from our reinsurers, which would adversely affect our financial condition.

Reinsurance does not discharge our obligations under the insurance policies we issue to our policyholders. We remain liable to our policyholders even if we are unable to make recoveries from our reinsurers that we are entitled to receive under our reinsurance contracts. As a result, we are subject to credit risk with respect to our reinsurers. Losses are recovered from our reinsurers as claims are paid. In long-term workers’ compensation claims, the creditworthiness of our reinsurers may change before we recover amounts to which we are entitled. Therefore, if a reinsurer is unable to meet any of its obligations to us, we would be responsible for all claims and claim settlement expenses for which we would have otherwise received payment from the reinsurer.

As of December 31, 2025, we had $108.1 million of recoverables from reinsurers. Of this amount, $44.2 million was unsecured. As of December 31, 2025, our largest recoverable from reinsurers included $41.9 million from Hannover Reinsurance Ireland Limited (Hannover), $27.8 million from Arch Reinsurance Company and $10.2 million from Munich Reinsurance America, Inc. Hannover, Arch Reinsurance Company and Munich Reinsurance America, Inc. have an A.M. Best rating of “A+” (Superior). There were no

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reinsurance recoverables as of December 31, 2025 over 90 days old. If we are unable to collect amounts recoverable from our reinsurers, our financial condition could be adversely impacted.

Risks Related to Our Common Stock

Our revenues and results of operations may fluctuate as a result of factors beyond our control, which may cause the price of our common stock to be volatile.

Our revenues and results of operations historically have been subject to significant fluctuations and uncertainties, some of which may be out of our control. Our revenues and results of operations can be affected significantly by:

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rising levels of claims costs, including due to increased medical and prescription drug costs, that we cannot anticipate at the time we establish our premium rates;

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fluctuations in interest rates, inflationary or deflationary pressures and other changes in the investment environment that affect returns on our invested assets;

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changes in the frequency or severity of claims;

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the financial stability of our reinsurers and changes in the level of reinsurance capacity and our capital capacity;

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new types of claims and new or changing judicial interpretations relating to the scope of liabilities of insurance companies;

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volatile and unpredictable developments impacting general economic conditions and the businesses of our policyholders, including man-made, weather-related and other natural catastrophes or terrorist attacks; and

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price competition; and

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other factors described elsewhere in this "Risk Factors" section.

If our revenues and results of operations fluctuate as a result of one or more of these factors, the price of our common stock may become more volatile.

Provisions of our certificate of formation and bylaws and the laws of the states of Texas and Nebraska 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.

Our certificate of formation and bylaws contain provisions that may make it more difficult for shareholders to replace or remove directors even if our shareholders consider it beneficial to do so. In addition, these provisions could delay or prevent a change of control of our Company that shareholders might consider favorable. Our certificate of formation and bylaws and the laws of the state of Texas, our state of incorporation, contain the following provisions that could have an anti-takeover effect:

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our board of directors is classified, meaning that the members of only one of three classes of our directors are elected each year;

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directors may only be removed for cause and only by the affirmative vote of the holders of at least 66 2/3% of the Company's outstanding shares of common stock;

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shareholders have limited ability to call shareholder meetings and to bring business or director nominations before a meeting of shareholders;

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shareholders may not act by written consent, unless the consent is unanimous;

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our board of directors may authorize the issuance of preferred stock with such rights, preferences and privileges as our board of directors deems appropriate; and

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the affirmative vote of the holders of at least 66 2/3% of the Company's outstanding shares of common stock is required to amend our certificate of formation and our bylaws (if being amended by our shareholders).

These provisions may make it difficult for our shareholders to replace management and could have the effect of discouraging a future takeover attempt that is not approved by our board of directors, but which our shareholders might consider favorable.

We are incorporated in Texas. Under the Texas Business Organizations Code (TBOC), our ability to enter into a business combination (as defined in the TBOC) with an affiliated shareholder (as defined in the TBOC) is limited.

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In addition, two of our three insurance company subsidiaries, AIIC and SOCI, are incorporated in Nebraska and the other, AIICTX, is incorporated in Texas. Under Nebraska and Texas insurance law, advance approval by the state insurance department is required for any change of control of an insurer, including our insurance subsidiaries. “Control” is presumed to exist through the direct or indirect ownership of 10% or more of the voting securities of a domestic insurance company or any entity that controls a domestic insurance company. Obtaining these approvals may result in the material delay of, or deter, any transaction that would result in a change of control under applicable laws. See “Business—Regulation—Change of Control” in Item 1 of this report.

The trading price of our common stock may decline.

The trading price of our common stock may decline for many reasons, some of which may be beyond our control, including, among others:

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our results of operations;

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changes in expectations as to our future results of operations, including financial estimates and projections by securities analysts and investors;

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results of operations that vary from those expected by securities analysts and investors;

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developments in the insurance or healthcare industries or the industries of our policyholders;

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current and expected economic conditions;

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changes in laws and regulations;

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announcements of claims against us by third parties; and

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future issuances or sales of our common stock.

Securities analysts may discontinue coverage of our common stock or may issue negative reports about us, which may adversely affect the trading price of our common stock.

There is no assurance that securities analysts will continue to cover us. If securities analysts do not cover us, this lack of coverage may adversely affect the trading price of our common stock. The trading market for our common stock relies in part on the research and reports that securities analysts publish about us or our business. If one or more of the analysts who cover us downgrades our common stock, the trading price of our common stock may decline rapidly. If one or more of these analysts ceases to cover us, we could lose visibility in the market, which, in turn, could also cause the trading price of our common stock to decline.

Future sales of our common stock may affect the trading price of our common stock.

We cannot predict what effect, if any, future sales of our common stock, or the availability of shares for future sale, will have on the trading price of our common stock. Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales could occur, may adversely affect the trading price of our common stock and may make it more difficult for you to sell your shares at a time and price that you determine appropriate. As of February 13, 2026, there were 18,794,881 shares of our common stock outstanding.