AMERISAFE INC, S-1, 1996-08-13

AMERISAFE INC
S-1, 1996-08-13

Previous: CII TECHNOLOGIES INC, S-4/A, 1996-08-13

Next: VANDERBILT MORT & FINANCE INC SR SB PS TH CT SR 1996-B, 8-K, 1996-08-13

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 13, 1996

REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------

AMERISAFE, INC.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
TEXAS 6331 75-2069407
(State of incorporation) (Primary Standard (I.R.S. Employer
Industrial Classification Identification No.)
Code Number)
</TABLE>

---------------------
2301 HIGHWAY 190 WEST
DERIDDER, LOUISIANA 70634
318-463-9052
(Address and telephone number of Registrant's principal executive offices)
---------------------
MARK R. ANDERSON
PRESIDENT
2301 HIGHWAY 190 WEST
DERIDDER, LOUISIANA 70634
318-463-9052
(Name, address and telephone number of agent for service)
---------------------
Copies to:

<TABLE>
<S> <C>
JAMES E. O'BANNON FREDERICK W. KANNER
JONES, DAY, REAVIS & POGUE DEWEY BALLANTINE
2300 TRAMMELL CROW CENTER 1301 AVENUE OF THE AMERICAS
2001 ROSS AVENUE NEW YORK, NEW YORK 10019
DALLAS, TEXAS 75201 212-259-8000
214-220-3939
</TABLE>

---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE

<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
- --------------------------------------------------------------------------------------------------
Class A Common Stock, par
value $.01 per share........ 12,650,000 $15.00 $189,750,000 $65,432
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes 1,650,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(a).
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

================================================================================
<PAGE> 2

***************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
***************************************************************************

SUBJECT TO COMPLETION, DATED AUGUST 13, 1996

PROSPECTUS

<TABLE>
<S> <C> <C>
11,000,000 SHARES
LOGO AMERISAFE, INC.
CLASS A COMMON STOCK
</TABLE>

------------------
All of the shares of Class A Common Stock offered hereby (the "Offering")
are being sold by AMERISAFE, Inc. ("AMERISAFE" or the "Company"). Prior to this
Offering, there has not been a public market for the Class A Common Stock of the
Company. It is currently estimated that the initial public offering price will
be $15.00 per share. See "Underwriting" for information relating to the factors
considered in determining the initial public offering price. Application has
been made to have the Class A Common Stock listed on the New York Stock Exchange
under the symbol "ASF." Each share of Class A Common Stock has one vote and each
share of the Company's Class B Common Stock has ten votes on all matters that
may be submitted to a vote or consent of the shareholders of the Company.
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF
THE CLASS A COMMON STOCK OFFERED HEREBY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
==================================================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
- ----------------------------------------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $
==================================================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses of the Offering estimated at $ payable by
the Company.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
1,650,000 additional shares of Class A Common Stock on the same terms as set
forth above solely to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------

The shares of Class A Common Stock are being offered by the several
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions. It is expected that certificates for
shares of Class A Common Stock offered hereby will be available for delivery on
or about , 1996, at the offices of Smith Barney Inc., 333 West 34th
Street, New York, New York 10001.

------------------
SMITH BARNEY INC. PIPER JAFFRAY INC.

, 1996.
<PAGE> 3

AMERISAFE, INC.
sm
THE MANAGED RESULTS COMPANY

---------------------

NOTICE TO NORTH CAROLINA PURCHASERS: THE COMMISSIONER OF INSURANCE OF THE
STATE OF NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS
THE COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

THE MANAGED RESULTS COMPANYSM IS A SERVICE MARK OF THE COMPANY. AN
APPLICATION HAS BEEN FILED TO REGISTER THIS MARK WITH THE UNITED STATES PATENT
AND TRADEMARK OFFICE; HOWEVER, NO ASSURANCE CAN BE GIVEN THAT SUCH APPLICATION
WILL BE ACCEPTED.

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes appearing elsewhere
in this Prospectus. Unless otherwise indicated, information in this Prospectus
(i) assumes no exercise of the Underwriters' option to purchase up to 1,650,000
additional shares of Class A Common Stock to cover over-allotments, if any, and
(ii) reflects a reorganization of the Company (the "Reorganization") to be
effected immediately prior to the closing of this Offering. See "Recent
Reorganization." Unless the context otherwise requires, references in this
Prospectus to "AMERISAFE" or the "Company" refer to AMERISAFE, Inc. and its
subsidiaries.

THE COMPANY

AMERISAFE provides managed care workers' compensation products and services
primarily to employers in hazardous occupation industries. The Company offers
its client-employers a fully integrated program designed to lower the overall
costs of workers' compensation claims by: (i) implementing and applying
workplace safety programs designed to prevent occupational injuries; (ii)
providing immediate, efficient and appropriate managed medical care to injured
workers; and (iii) using intensive personal claims management practices to guide
and encourage injured workers through the recovery and rehabilitation process
with the primary goal of returning the injured worker to work as promptly as
practicable. From 1991 through 1995, the Company has increased its revenues from
$20.3 million to $69.7 million, or a compound annual growth rate of 36.1%. In
this same period, the Company's net income (before cumulative effect of
accounting change) increased from $1.8 million to $9.3 million, or a compound
annual growth rate of 50.8%. As of March 31, 1996, the Company was licensed to
provide workers' compensation coverage and services in 25 states and the U.S.
Virgin Islands and provided its products and services to approximately 2,900
employers in 16 states, primarily in the southeastern United States.

The Company integrates proactive safety services with intensive claims
management practices and quality managed care to produce "managed results." The
Company's managed results approach focuses on creating and maintaining direct,
personal relationships with employers, employees and health care providers in
order to design and promote services which are intended to produce lower overall
occupational injury costs. The Company designates service teams for each client
in order to foster personal relationships, provide continuity of services and
implement specific solutions for individual client workers' compensation needs.

Since it began operations in 1986, the Company has focused on providing its
managed results products and services to employers whose employees are engaged
in hazardous occupations, primarily the logging industry. Beginning in 1994, the
Company began expanding its client base by targeting employers in other
hazardous occupation industries, including general contracting, trucking, and
oil and gas exploration. Employers engaged in hazardous occupation industries
pay substantially higher than average workers' compensation rates. For example,
the Company's logging clients pay generally an amount equal to 20% to 50% of
their payroll to obtain workers' compensation coverage for their employees,
compared to employers of clerical workers who pay generally less than 1% of
their payroll to obtain such coverage. The Company believes that the high
severity injuries typically suffered by employees engaged in hazardous
occupations and the resulting high cost typically incurred by employers in
providing the mandatory workers' compensation coverage for such employees
provide the greatest opportunity to lower costs by applying the Company's
managed results approach. By focusing on developing and implementing
client-specific workplace safety techniques and intensive claims management, the
Company believes that substantial cost savings can be achieved when compared to
the traditional workers' compensation approach to hazardous occupation
industries. By reducing the overall cost of providing workers' compensation
coverage to its employer-clients, the Company believes its managed results
approach permits it to price its products and services competitively. As of
March 31, 1996, more than two-thirds of AMERISAFE's client-employers were
involved in hazardous occupation industries.

3
<PAGE> 5

The substantial growth in the workers' compensation market is primarily
attributable to the increased costs of medical treatment and an increase in
workers' compensation litigation, which affects both medical benefits and
indemnity payments. The Company believes that successful containment of these
expenses depends largely upon early intervention in the claims process and
promptly enabling an injured employee to return to work. The Company also
believes that traditional insurers have focused on high premium volume and
generally maintain minimal staffing. As a result, the Company believes that the
workers' compensation industry is generally characterized by limited safety
services, inefficient claims adjustment processes and ineffective medical cost
management.

The Company's strategy is to utilize its managed results approach in an
effort to prevent workplace injuries, and, when an injury does occur, to arrange
for timely, high quality and cost-effective managed care. The key elements of
the Company's strategy are to (i) focus on hazardous occupation employers, (ii)
improve workplace safety to reduce workplace accidents, (iii) manage care
through personal, direct contact, (iv) direct injured workers to appropriate
health care providers, and (v) pursue growth both internally and through
acquisitions.

BENEFITS TO EXISTING SHAREHOLDERS

The Company will use a portion of the net proceeds of the Offering to repay
indebtedness under the Company's existing credit facility. This credit facility
is secured by a pledge of the Company's outstanding Class B Common Stock held by
Millard E. Morris, the Company's Chairman of the Board of Directors and Chief
Executive Officer, and the stock of certain of the Company's subsidiaries. Upon
this repayment, the credit facility will be cancelled and the pledge of such
stock will be released. Further, in connection with a reorganization of the
Company to be effected immediately prior to the completion of the Offering, the
Company will distribute (i) all of the outstanding capital stock of Auto One
Acceptance Corporation ("AOAC") to Mr. Morris and Mark R. Anderson, the
Company's President, and (ii) shares of two of the Company's existing
subsidiaries to Mr. Morris. Prior to such distribution, the Company will
contribute to AOAC additional capital in the form of a note in the amount of $50
million. This note will be repaid with the proceeds of the Offering. See "Recent
Reorganization" and "Use of Proceeds."

RISK FACTORS

Prospective purchasers of the Class A Common Stock should consider certain
factors affecting the Company and an investment in the Class A Common Stock. See
"Risk Factors."

4
<PAGE> 6

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock Offered by the Company(1)...... 11,000,000 shares
Common Stock to be Outstanding after the Offering:
Class A Common Stock(1)(2)........................ 11,000,000 shares
Class B Common Stock(3)........................... 17,400,000 shares
Total..................................... 28,400,000 shares
Use of Proceeds by the Company...................... To repay existing indebtedness
(including the indebtedness incurred in
connection with the Reorganization), to
increase capital and surplus and for
other general corporate purposes.
Proposed NYSE Symbol................................ ASF
</TABLE>

- ---------------

(1) Does not include an additional 1,650,000 shares of Class A Common Stock that
may be sold pursuant to the Underwriters' over-allotment option. See
"Underwriting."

(2) Excludes (i) 600,000 shares of Class A Common Stock issuable pursuant to
outstanding stock options having an exercise price of $12.00 per share
granted under the AMERISAFE, Inc. 1996 Stock Incentive Plan (the "Stock
Incentive Plan"), and (ii) 6,000 shares of Class A Common Stock to be issued
to non-employee directors upon completion of the Offering pursuant to the
Stock Incentive Plan. See "Management -- Stock Incentive Plan" and
"Management -- Director Compensation."

(3) See "Description of Capital Stock -- Class A Common Stock and Class B Common
Stock" regarding the conversion rights of the Class B Common Stock.

5
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Premiums earned.................................... $17,599 $28,640 $35,902 $40,461 $58,167 $10,918 $15,026
Service fee income................................. 578 800 987 2,468 4,110 582 1,671
Investment income.................................. 1,745 1,818 2,146 2,484 4,519 809 1,295
Fees and other from affiliates..................... 371 1,985 2,154 1,732 2,881 511 534
------- ------- ------- ------- ------- ------- -------
Total revenues............................... 20,293 33,243 41,189 47,145 69,677 12,820 18,526
Expenses:
Claim and claim settlement expenses................ 12,136 17,622 20,262 25,250 32,924 6,725 9,250
Commission and other underwriting expenses......... 4,577 5,561 7,555 8,507 13,524 2,428 3,512
General and administrative......................... 570 1,910 2,798 4,406 6,810 1,001 2,010
Interest........................................... 442 642 850 726 845 210 279
Depreciation and amortization...................... 4 93 240 703 1,006 169 332
------- ------- ------- ------- ------- ------- -------
Total expenses............................... 17,729 25,828 31,705 39,592 55,109 10,533 15,383
------- ------- ------- ------- ------- ------- -------
Income before federal income taxes................... 2,564 7,415 9,484 7,553 14,568 2,287 3,143
Federal income taxes................................. 778 2,375 2,768 2,414 5,234 645 909
------- ------- ------- ------- ------- ------- -------
Net income before cumulative effect of change in
accounting for income taxes........................ 1,786 5,040 6,716 5,139 9,334 1,642 2,234
Cumulative effect of change in accounting for income
taxes.............................................. 334 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income................................... $ 2,120 $ 5,040 $ 6,716 $ 5,139 $ 9,334 $ 1,642 $ 2,234
======= ======= ======= ======= ======= ======= =======
Pro forma net income per share............... $ 0.43 $ 0.10
======= =======
Pro forma weighted average shares outstanding........ 21,666 21,666
Loss Ratio........................................... 69.0% 61.5% 56.4% 62.4% 56.6% 61.6% 61.6%
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and investments.................................................................... $ 88,790 $168,240
Total assets............................................................................ 130,492 209,942
Notes payable........................................................................... 12,516 1,316
Stockholders' equity.................................................................... 34,381 124,731
</TABLE>

- ---------------

(1) Adjusted to give effect to (i) the Reorganization, (ii) the sale of
11,000,000 shares of Class A Common Stock in the Offering at an assumed
public offering price of $15 per share less the estimated underwriting
discounts and Offering expenses, and (iii) the application of the net
proceeds of the Offering as described herein. See "Use of Proceeds" and
"Recent Reorganization."

6
<PAGE> 8

THE COMPANY

The Company was incorporated as a Texas corporation in 1985 and is
principally engaged through its subsidiaries in providing workers' compensation
products and services. The Company's principal executive offices are located at
2301 Highway 190 West, DeRidder, Louisiana 70634 (telephone: 318-463-9052) and
at 5550 LBJ Freeway, Suite 901, Dallas, Texas 75240 (telephone: 214-448-7414).
The Company's principal operating subsidiary is American Interstate Insurance
Company, a Louisiana corporation ("American Interstate"). See "Business."

RISK FACTORS

In addition to other information contained in this Prospectus, prospective
investors should consider carefully the following factors in evaluating an
investment in the shares of the Class A Common Stock offered hereby.

GOVERNMENT REGULATION

The Company is subject to substantial regulation by the governmental
agencies in the states in which it operates, and will be subject to such
regulation in any state in which the Company provides workers' compensation
coverage and services in the future. These regulations are primarily intended to
protect covered employees and policyholders rather than insurance companies or
their shareholders. State regulatory agencies have broad administrative power
with respect to all aspects of the Company's business, including premium rates,
capital and surplus requirements, reserve requirements, transactions with
affiliates, changes in control, investment criteria and policy forms. Under
Louisiana law, an insurance company may not, without regulatory approval, pay to
its shareholders within a 12-month period dividends or other distributions of
cash or property the total fair market value of which exceeds the lesser of (i)
ten percent of surplus as to policyholders at the end of the prior calendar year
or (ii) the prior calendar year's net income (less any realized capital gains).
This requirement would limit American Interstate's ability to make distributions
to AMERISAFE in 1996 to approximately $2.7 million. There is no assurance that
the Company will seek approval from state regulatory authorities to permit its
insurance subsidiaries to pay dividends or make distributions or that, if
sought, such approval will be obtained. This approval requirement may limit the
amount of distributions which may be made by such subsidiaries and may decrease
the amount of capital available to the Company for expansion opportunities and
other purposes.

Workers' compensation coverage is a creation of state law, is subject to
change by the applicable state legislature and is influenced by the political
process in each state. Several states have mandated that employers receive
coverage only from funds operated by the state. New laws affecting the workers'
compensation system in states where the Company presently operates or may
operate in the future, including laws that require all employers to participate
in state sponsored funds or that mandate premium reductions, could have a
materially adverse effect on the demand for the Company's services and programs,
as well as on the Company's business, financial condition or results of
operations.

From time to time, Congress has also considered federal regulation of the
health insurance industry. In 1993, the Clinton administration proposed
legislation that would have put into effect substantial changes in the health
care industry. Such legislation has not been adopted. Any legislation relating
to a comprehensive health care program could adversely affect the Company. See
"Business -- Regulation."

CONTROL BY A SINGLE SHAREHOLDER

The Company's equity currently consists of Class A Common Stock and Class B
Common Stock (collectively, the "Common Stock"), which vote together as a single
class on all issues, except as otherwise required by law. Following the
Offering, Millard E. Morris, the Chairman of the Board of Directors and Chief
Executive Officer of the Company, will beneficially own 17,126,521 shares of the
Company's Class B Common Stock, each share of which has ten times the voting
power of a share of Class A Common Stock. As a result, Mr. Morris will control
approximately 92.6% of the voting power of the Common Stock (91.8% if the

7
<PAGE> 9

Underwriters' over-allotment option is exercised in full) and will control the
outcome of all shareholder votes, including those relating to amending the
Company's Amended and Restated Articles of Incorporation (the "Articles") or
Restated Bylaws (the "Bylaws"), election of directors and certain mergers and
other significant corporate transactions. This could have the effect of
delaying, deferring or preventing a change in control of the Company. See
"Principal Shareholders" and "Description of Capital Stock -- Class A Common
Stock and Class B Common Stock."

TRANSACTIONS WITH CONTROLLING SHAREHOLDER

After the consummation of the Offering, the Company will have business
relationships with certain entities controlled by Millard E. Morris, the
principal shareholder, Chairman of the Board of Directors and Chief Executive
Officer of the Company. Some of these entities will receive services (e.g.,
administrative services and aviation services) from the Company for a fee. The
Company also subleases office space from one of these entities. In addition, the
Company has entered into a Tax Sharing Agreement in connection with the
Reorganization. See "Certain Transactions and Relationships" and "Recent
Reorganization."

HOLDING COMPANY STRUCTURE

The Company is a holding company, the primary assets of which are the
capital stock of its subsidiaries. Accordingly, the Company is dependent on the
cash flow from its subsidiaries, received through dividends or other
intercompany transfers of funds, to meet its obligations. Although the Company
does not intend to pay dividends for the foreseeable future, the Company will be
dependent on such sources to pay, if and when declared by the Company's Board of
Directors, dividends on the Common Stock or any outstanding shares of the
Company's preferred stock, $.01 par value per share ("Preferred Stock"). See
"Dividend Policy." Dividends and other payments received from the Company's
subsidiaries, together with any net proceeds from the Offering retained by the
Company for general corporate purposes, are expected, for the foreseeable
future, to be the Company's major source of liquidity. None of the Company's
subsidiaries will be obligated to declare or pay dividends or make other capital
distributions to the Company. In addition, the payment of dividends by the
Company's subsidiaries may be restricted under applicable law. See
"-- Government Regulation" above. Limitations on the ability of the Company's
subsidiaries to make such payments could adversely impact the Company's
liquidity.

Under Louisiana law applicable to insurance holding companies, the
Company's insurance subsidiaries may not enter into certain transactions,
including certain reinsurance agreements, management agreements, service
contracts and cost sharing arrangements, with members of their insurance holding
company system unless they have notified the Commissioner of Insurance of their
intention to enter into such a transaction at least 30 days in advance and the
Commissioner of Insurance has not disapproved the transaction within such
period. Among other things, such transactions are subject to the requirements
that their terms be fair and reasonable, that charges or fees for services
performed must be reasonable and that the interests of policyholders not be
adversely affected.

NEED FOR CAPITAL

The Company may from time to time need additional capital and surplus to
meet certain state regulatory requirements. In particular, the Company
anticipates that its insurance subsidiaries will require capital to meet current
statutory surplus needs and any additional funding requirements that may
periodically arise. From time to time, the Company may be required to increase
the capital and surplus of its insurance subsidiaries to remain in compliance
with state regulatory requirements. The Company intends to use a portion of the
net proceeds from this Offering for this purpose. The Company expects that
additional capital will be required by regulatory authorities for the Company to
further expand into additional states. If the Company is unable to generate
sufficient capital, either internally or from outside sources, it could be
required to reduce its growth or to delay or abandon plans to expand into
additional states. Although the Company has met its capital needs in the past,
there can be no assurance that capital will continue to be available when needed
or, if available, will be on terms acceptable to the Company. Additionally, if
such capital is not available, there can be no assurance that the Company will
be able to maintain its current rating of "A" (Excellent) from A.M. Best

8
<PAGE> 10

Company, Inc. See "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Business -- A.M. Best Rating."

The National Association of Insurance Commissioners ("NAIC") has adopted a
system of assessing minimum capital adequacy, which system is applicable to the
Company's insurance subsidiaries. This system, known as risk-based capital
("RBC"), is used to identify companies that merit further regulatory action by
comparing adjusted surplus to the required surplus, which reflects the risk
profile of the insurer. Insurers having less statutory surplus than that
required by the RBC model formula are subject to regulatory action depending on
the level of capital inadequacy. At December 31, 1995, the RBC ratios of the
Company's insurance subsidiaries were in excess of statutory minimums.

MANAGEMENT OF GROWTH; EXPANSION STRATEGY

Since it began operations in 1986, the Company has experienced significant
growth in its revenues, the number of its employees and the scope of its
operations. This growth has and will require the Company to obtain additional
capital. See "-- Need for Capital" above. This growth has also resulted in, and
is expected to continue to create, new and increased responsibilities for
management personnel, as well as additional demands on the Company's operating
and financial systems. The Company's business and future growth will depend on
the efforts of key management personnel and the Company's ability to attract and
retain qualified management personnel. The Company's continued growth also will
require it to recruit qualified persons, to enhance managerial systems for its
operations, and to successfully integrate new employees and systems into its
existing operations. If the Company is unable to continue to manage growth
effectively, the Company's business, financial condition or results of
operations could be materially adversely affected. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business --
Strategy -- Pursue Growth Opportunities."

The Company intends to pursue growth opportunities through both greater
market penetration in existing markets and expansion into new markets, targeting
employers in industries and geographic areas in which the Company does not
presently conduct business. In addition, the Company intends to pursue
acquisitions of other workers' compensation insurers or books of indemnity
business. To date, the Company has never acquired another workers' compensation
insurer and is unable to predict whether or when any prospective acquisition
candidate will become available or the likelihood that any acquisition will be
completed. The Company will compete for acquisition and expansion opportunities
with many entities that have substantially greater resources. In addition,
acquisitions may involve difficulties in the retention of personnel, diversion
of management's attention, unexpected legal liabilities and tax and accounting
issues. There can be no assurance that the Company will be able to successfully
identify suitable acquisition candidates, complete acquisitions, integrate
acquired businesses into its operations or expand into new markets. Once
integrated, acquisitions may not achieve levels of revenues, profitability or
productivity comparable to the existing business of the Company or otherwise
perform as expected. The occurrence of any of these events could have a
materially adverse effect on the Company's business, financial condition or
results of operations. See "Business -- Strategy."

Future growth of the Company's operations depends, in part, on its ability
to enter markets in additional states. To achieve this objective, the Company
must obtain regulatory approval, win acceptance in the local market, adapt its
procedures to each state's regulatory system (which differs materially from
state to state) and expand its network of agents. The time required to obtain
regulatory approval varies from state to state, and there can be no assurance
that the Company will obtain such approval in each state it may seek to enter.
See "Business -- Regulation."

The Company plans to manage its growth in a manner intended to maintain its
"A" (Excellent) rating from A.M. Best Company, Inc., although there can be no
assurances in this regard. See "Business -- A.M. Best Rating."

9
<PAGE> 11

FOCUS ON HAZARDOUS OCCUPATION INDUSTRIES

Since it began operations in 1986, the Company has focused on providing
workers' compensation products and services to employers whose employees are
engaged in hazardous occupations and, as a result, are susceptible to serious
injuries. Such injuries typically result in substantial costs for both medical
treatment and indemnity payments, as well as the costs of managing the delivery
of care to injured employees. To limit its exposure, the Company has "excess of
loss" reinsurance in effect with a number of reinsurance carriers. The failure
of any such reinsurer to meet its obligations to the Company could have a
materially adverse effect on the Company's business, financial condition or
results of operations. See "-- Reliance on Reinsurance."

RELIANCE ON REINSURANCE

Due to the Company's exposure to significant claims resulting from injuries
suffered by the employees of its clients, the Company has "excess of loss"
reinsurance in effect with a number of reinsurance carriers. This reinsurance,
in the aggregate, currently provides coverage for each claim occurrence up to
$50,000,000 in excess of the Company's retention of $200,000. The Company
presently intends to increase its retention level under these policies upon
their expiration in July 1997. The Company regularly performs internal reviews
of the financial strength of its reinsurers. However, if a reinsurer is unable
to meet any of its obligations to the Company under the reinsurance agreements,
whether due to the incurrence of multiple large claims by the Company's clients
or otherwise, the Company would be responsible for the payment of all claims and
claim settlement expenses which the Company has ceded to such reinsurer. Any
such failure on the part of the Company's reinsurers could have a materially
adverse effect on the Company's business, financial condition or results of
operations. See "Business -- Reinsurance."

QUARTERLY FLUCTUATIONS IN OPERATING RESULTS

The Company establishes reserves to cover its estimated liability for
claims and claim settlement expenses with respect to reported claims and claims
incurred but not yet reported as of the end of each accounting period. The
process of establishing reserves involves many factors and is inherently
uncertain. The Company's results of operations may fluctuate on a quarterly
basis due in part to the seasonal nature of the businesses conducted by its
clients and also as a result of changes in the Company's reserve estimates, as
well as other factors.

CONCENTRATION IN LOGGING INDUSTRY

Since it began operations in 1986, the Company has focused on providing its
workers' compensation products and services to employers in the logging
industry, primarily in the southeastern United States. In 1994, the Company
began a program of providing its services to businesses in other hazardous
occupation industries. For the year ended December 31, 1995 and the three months
ended March 31, 1996, approximately 59.6% and 45.5%, respectively, of the
Company's gross premiums earned were derived from its clients in the logging
industry. Because premiums are, in general, determined as a percentage of its
clients' payroll expense (or, in the case of its logging clients, the clients'
production of wood products), premiums fluctuate depending upon the level of
business activity of its clients. As a result, the Company's gross premiums
earned are dependent upon economic conditions generally and, in particular, the
demand for the wood products harvested by its logging clients. Further, due to
the concentration of the Company's clients in the logging industry, the
Company's gross premiums earned tend to be lower during periods of inclement
weather when logging activity is reduced. See "-- Quarterly Fluctuations in
Operating Results" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."

RELIANCE ON INDEPENDENT AGENTS

The Company markets a portion of its workers' compensation products and
services through independent agents. For the year ended December 31, 1995 and
the three months ended March 31, 1996, independent agents accounted for
approximately 39.1% and 47.8%, respectively, of the Company's gross premiums
earned. No independent agent accounted for 5.0% or more of the Company's gross
premiums earned for either period.

10
<PAGE> 12

These agents are not obligated to promote the Company's products and services
and may sell competitors' insurance products. As a result, the Company's
business depends in part on the marketing effort of these agents and on the
Company's ability to continue to offer workers' compensation products and
services that meet the requirements of these agents and their customers. In
addition, as the Company expands into additional states and industries, it may
elect to establish additional independent agents to market its products. Failure
of these independent insurance agents to market successfully the Company's
products and services could have a materially adverse effect on the Company's
business, financial condition or results of operations. See "Business -- Sales
and Marketing."

TAX-FREE REORGANIZATION

Immediately prior to the completion of the Offering, the Company
distributed the stock of certain subsidiary corporations to existing
shareholders of the Company in transactions intended to qualify as tax-free
distributions for federal income tax purposes under section 355 of the Internal
Revenue Code of 1986, as amended (the "Code"). Prior to such distributions, the
Board of Directors of the Company received an opinion of counsel to the effect
that such distributions should so qualify for federal income tax purposes. The
opinion of counsel received by the Board of Directors of the Company is not
binding on the Internal Revenue Service (the "IRS"), and there can be no
assurance that the IRS will agree with the opinion. No ruling with respect to
such distributions has been requested from the IRS, however, and there can be no
assurance that the IRS will not take the position that such distributions do not
qualify as tax-free. If the distributions were not to qualify for tax-free
treatment under section 355 of the Code, the Company would recognize taxable
gain on the distributions equal to the difference on such date between (i) the
fair market value of the distributed stock and (ii) the Company's adjusted basis
in such stock. See "Recent Reorganization."

DEPENDENCE ON KEY PERSONNEL

The Company's success is largely dependent on the efforts of Millard E.
Morris, its Chairman of the Board of Directors and Chief Executive Officer, and
Mark R. Anderson, its President. The loss of the services of either of these
individuals could have a materially adverse effect on the Company. Further, the
employment agreement between the Company and Mr. Morris does not provide for him
to devote full time to the business of the Company. See
"Management -- Employment Agreements."

ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Class A
Common Stock and there can be no assurance that an active trading market for the
Class A Common Stock will develop or be sustained after the Offering. The
initial public offering price of the Class A Common Stock will be determined
through negotiations between the Company and representatives of the
Underwriters, and may not be indicative of the market price. Additionally, the
market price of the Class A Common Stock could be subject to significant
fluctuations in response to period-to-period variations in operating results of
the Company, changes in general conditions in the economy or the financial
markets, developments in the health care or insurance industries or other
developments affecting the Company, its customers or its competitors, some of
which may be unrelated to the Company's performance. See "Underwriting."

COMPETITION

The workers' compensation industry is highly competitive. The Company's
competitors include, among others, insurance companies, specialized provider
groups, in-house benefits administrators, state insurance pools and other
significant providers of health care and insurance services. A number of the
Company's current and potential competitors are significantly larger, with
greater financial and operating resources than the Company and can offer their
services nationwide. Additionally, the Company does not offer the full line of
insurance products which is offered by some of its competitors. There can be no
assurance that the Company will be able to compete effectively in the future.
See "Business -- Competition."

11
<PAGE> 13

SHARES ELIGIBLE FOR FUTURE SALE

After completion of the Offering, the Company will have outstanding
11,000,000 shares of Class A Common Stock (12,650,000 shares if the
Underwriters' over-allotment option is exercised in full) and 17,400,000 shares
of Class B Common Stock. Of those shares, 11,000,000 shares of Class A Common
Stock offered hereby (12,650,000 if the Underwriter's over-allotment option is
exercised in full) will be freely tradable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"), unless purchased by "affiliates" of the Company, as that term is defined
in Rule 144 under the Securities Act ("Rule 144"). All of the shares of Class B
Common Stock were issued by the Company in private transactions prior to the
Offering and are "restricted securities" as that term is defined in Rule 144 and
are tradable subject to compliance with Rule 144. The Company and its existing
shareholders, who upon completion of the Offering will own 17,400,000 shares of
Class B Common Stock, have agreed not to dispose of any shares of Class A Common
Stock or any securities convertible into or exchangeable for such Class A Common
Stock (other than shares and stock options to be granted pursuant to the Stock
Incentive Plan) for a period of 180 days from the date of this Prospectus,
without the prior written consent of Smith Barney Inc., on behalf of the
Underwriters. Sales of substantial amounts of Class A Common Stock or Class B
Common Stock, or the perception that such sales could occur, could adversely
affect market prices for the Class A Common Stock and could impair the Company's
future ability to obtain capital through an offering of equity securities. See
"Shares Eligible for Future Sale." In addition, Messrs. Morris and Anderson are
entitled to certain registration rights with respect to the shares of the Class
A Common Stock. See "Description of Capital Stock -- Class A Common Stock and
Class B Common Stock -- Registration Rights Agreement."

IMMEDIATE AND SUBSTANTIAL DILUTION

Purchasers of Class A Common Stock in the Offering will experience
immediate and substantial dilution, approximately $10.61 per share, in the net
tangible book value per share of Class A Common Stock and may incur additional
dilution upon the exercise of outstanding stock options. See "Dilution" and
"Management -- Stock Incentive Plan -- Awards."

ANTI-TAKEOVER PROVISIONS

The Board of Directors of the Company is authorized to issue up to
25,000,000 shares of Preferred Stock and to fix the rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any further vote or action by the shareholders of the Company. The rights and
preferences of any such Preferred Stock may be superior to those of the Class A
Common Stock and may adversely affect the rights of the holders of the Class A
Common Stock. The Company has no present intention to issue any shares of
Preferred Stock. The voting structure of the Common Stock and other provisions
of the Articles are intended to encourage a person interested in acquiring the
Company to negotiate with, and to obtain the approval of, the Board of Directors
of the Company in connection with any such transaction. However, certain of
these provisions may discourage a future acquisition of the Company, including
an acquisition in which shareholders might otherwise receive a premium for their
shares. As a result, shareholders who might desire to participate in such a
transaction may not have the opportunity to do so. Moreover, the existence of
these provisions may have a depressive effect on the market price of the Class A
Common Stock. In addition, the Company is subject to the provisions of Louisiana
law applicable to insurance holding companies that prohibit a merger or change
in control of the Company without the approval of the Louisiana Department of
Insurance. See "Description of Capital Stock -- Anti-Takeover Provisions."

12
<PAGE> 14

USE OF PROCEEDS

Assuming a public offering price of $15 per share, the net proceeds to the
Company from the sale of the 11,000,000 shares of Class A Common Stock offered
hereby, after deducting the estimated underwriting discounts and commissions and
Offering expenses, are estimated to be approximately $152.5 million ($175.5
million if the Underwriters' over-allotment option is exercised in full). The
Company intends to use the net proceeds from the Offering as follows:

(i) $50.0 million to repay a note issued as a capital contribution
to Auto One Acceptance Corporation in connection with the Reorganization
(Immediately prior to the Reorganization AOAC was a wholly owned
subsidiary of the Company; immediately following the Reorganization AOAC
will be owned by Messrs. Morris and Anderson);

(ii) $12.1 million to repay notes issued to a former shareholder and
former subsidiaries in connection with the Reorganization;

(iii) $10.0 million to repay in full indebtedness to Banc One Capital
Partners II, Ltd., which matures in January 2002 and bears interest at a
rate equal to the London Interbank Offered Rate plus 6.0% (11.5% at July
31, 1996); and

(iv) $900,000 to repay in full indebtedness to certain individuals
incurred by the Company in September 1995 in connection with the
acquisition of Hammerman & Gainer, Inc., a subsidiary of the Company. Such
indebtedness bears interest at 2.667% per annum and is repayable in four
equal installments with the last such payment due in September 1999.

The balance of the estimated net proceeds from the Offering (approximately $79.5
million, or $102.5 million if the Underwriters' over-allotment option is
exercised in full) will be retained by the Company and used to increase its
capital and surplus and for other general corporate purposes. Pending such use,
the Company intends to invest such proceeds in investment-grade debt securities.
For information relating to the Reorganization, see "Recent Reorganization"
below.

DIVIDEND POLICY

The Company does not currently intend to pay cash dividends to its
shareholders. Any determination to pay cash dividends in the future and their
amounts, however, will be at the discretion of the Board of Directors and will
depend upon the Company's earnings, financial condition, capital requirements,
plans for expansion, contractual restrictions, restrictions imposed by
applicable law and regulations and other factors deemed relevant by the Board of
Directors. The principal source for cash from which to make dividend payments
will be dividends and other distributions from the Company's subsidiaries. The
Company has not paid any dividends to its shareholders in the past two years
except for the distributions described below under "Recent Reorganization." See
"Risk Factors -- Government Regulation" and "Management's Discussion and
Analysis of Results of Operations -- Liquidity and Capital Resources."

13
<PAGE> 15

RECENT REORGANIZATION

Immediately prior to completion of the Offering, the Company effected
certain transactions to separate certain non-workers' compensation related
businesses from its workers' compensation businesses and otherwise facilitate
the Offering (the "Reorganization"). The Reorganization principally consisted of
the following steps:

(i) The Company distributed all of the stock of certain corporations
conducting insurance agency and other unrelated businesses (the "MorTem
Corporations") and 51% of the capital stock of two other
subsidiaries -- Southern Underwriters, Inc. ("SU"), and Morris, Temple &
Trent Financial Services, Inc. ("MTTFS") -- to a former shareholder of the
Company in exchange for all shares of Class B Common Stock then owned by
such shareholder. In addition, the Company paid such shareholder $8.0
million and contributed additional capital to the MorTem Corporations in
the amount of $4.1 million, in each case, in the form of notes, bearing
interest at 8.0%. Such notes will be paid with the proceeds of the
Offering.

(ii) The Company distributed all of the capital stock of Auto One
Acceptance Corporation ("AOAC") to Messrs. Morris and Anderson on a pro
rata basis and the remaining 49% of the capital stock of SU and MTTFS to
Mr. Morris. Prior to such distribution, the Company contributed to AOAC
additional capital in the amount of $50 million, in the form of a note
bearing interest at 8.0%. Such note will be paid with proceeds of the
Offering.

The Board of Directors of the Company, in reliance upon the advice of
counsel to the Company, believes that the distributions of the stock of the
MorTem Corporations, AOAC, SU and MTTFS (the "Distributed Subsidiaries")
described in steps (i) and (ii) above (the "Distributions") should qualify as
tax-free under section 355 of the Code. In general, if the Distributions so
qualify as tax-free under section 355 of the Code, (i) the Company will not be
taxed on any unrealized appreciation on the value of the stock of the
Distributed Subsidiaries, and (ii) the shareholders receiving such Distributions
will not be taxed on the value of the stock received.

The Board of Directors of the Company received an opinion of Jones, Day,
Reavis & Pogue, counsel to the Company, to the effect that for federal income
tax purposes the Distributions should qualify as tax-free under section 355 of
the Code. Such opinion of counsel was based upon and subject to certain
assumptions, facts and representations provided by the Company and certain of
the Company's shareholders. The Company is not aware of any present facts or
circumstances which should make such assumptions, facts, representations and
advice unobtainable or untrue. However, certain future events not within the
control of the Company, including, for example, certain dispositions of stock of
the Company or the Distributed Subsidiaries after the Distributions, could cause
the Distributions not to qualify as tax-free.

The opinion of counsel received by the Board of Directors of the Company
has no binding effect on the IRS and there can be no assurance that the IRS will
agree with the opinion. A ruling has not been sought from the IRS with respect
to the federal income tax consequences of the Reorganization, and it is possible
that the IRS may take the position that some or all of the Distributions do not
qualify as tax-free, whether or not the assumptions, facts, representations and
advice referred to above are received and are true at the time of the
Reorganization, and such position may ultimately be upheld. If a Distribution
were not to qualify for tax-free treatment under section 355 of the Code, the
Company would recognize taxable gain on the Distribution equal to the difference
on such date between (i) the fair market value of the distributed stock and (ii)
the Company's adjusted basis in such stock. The Company believes that any
taxable gain recognized if the Distributions fail to qualify for tax-free
treatment would be substantial and would have a materially adverse effect on the
Company's business, financial condition or results of operations. Further, each
Company shareholder receiving stock of a Distributed Subsidiary in a
distribution not qualifying as tax-free would be treated as receiving a
distribution, taxable as a dividend, in an amount equal to the fair market value
of such stock on the date of distribution.

The foregoing summary of the anticipated principal federal income tax
consequences of the Reorganization under current law is for general information
only and does not purport to cover all federal income tax consequences or any
tax consequences that may arise under the tax laws of other jurisdictions. The
Company has not requested, and its counsel will not be rendering, any opinion
with respect to the tax consequences of the Reorganization under the laws of any
state, local or foreign government.

14
<PAGE> 16

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company at March 31, 1996, as adjusted to reflect the transactions consummated
in connection with the Reorganization (see "Recent Reorganization") and as
further adjusted to reflect the sale of the 11,000,000 shares of Class A Common
Stock offered hereby and the application of the net proceeds therefrom as
described under "Use of Proceeds," assuming a public offering price of $15 per
share for the Class A Common Stock and no exercise of the Underwriters'
over-allotment option. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements and the Notes
thereto, included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------
AS ADJUSTED
ACTUAL FOR THE OFFERING
------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Notes payable........................................................ $12,516 $ 1,316
Stockholders' equity:(1)
Preferred Stock, par value $.01 per share, 25,000,000 shares
authorized:
Series B -- Cumulative Convertible 8% Preferred Stock; 510.167
shares issued and outstanding; 0 shares issued and outstanding,
as adjusted.................................................... -- --
Class A Common Stock, par value $.01 per share, 100,000,000 shares
authorized; 0 shares issued and outstanding; 11,000,000 shares
issued and outstanding, as adjusted............................. -- 110
Class B Common Stock, par value $.01 per share, 100,000,000 shares
authorized; 11,884,647 shares issued and outstanding; 17,400,000
shares issued and outstanding, as adjusted...................... 119 174
Additional paid-in capital........................................... 1,362 152,340
Retained earnings (deficit).......................................... 32,627 (28,166)
Unrealized gain on available-for-sale securities, net
of taxes........................................................ 273 273
------- --------
Total stockholders' equity.................................... 34,381 124,731
------- --------
Total capitalization....................................... $46,897 $126,047
======= ========
</TABLE>

- ---------------

(1) Reflects a 3,603.63-for-one common stock split, the reclassification of the
Company's then existing common stock to Class B Common Stock, the
authorization of the Class A Common Stock, a change in the par value of the
Preferred Stock from $1.00 per share to $.01 per share, and an increase in
the number of authorized shares of Class A Common Stock, Class B Common
Stock and Preferred Stock to 100,000,000 shares, 100,000,000 shares and
25,000,000 shares, respectively, effected by an amendment to the Company's
Articles on August 9, 1996.

15
<PAGE> 17

DILUTION

At March 31, 1996, the pro forma net tangible book value of the Company was
a deficit of $27.7 million, or $(1.59) per share of Common Stock. Pro forma net
tangible book value is determined by deducting from net tangible book value
amounts to be paid in connection with the Reorganization from the proceeds of
the Offering. Pro forma net tangible book value per share is determined by
dividing the Company's net tangible book value (total tangible assets less total
liabilities) by the total number of shares of Common Stock outstanding, giving
effect to the conversion of all outstanding shares of the Company's Series B
Cumulative Preferred Stock and the 3,603.63-for-one stock split both of which
occurred subsequent to March 31, 1996. After giving effect to the sale of the
11,000,000 shares of Class A Common Stock offered hereby at an assumed public
offering price of $15 per share and after deducting the estimated underwriting
discounts and commissions and Offering expenses, the adjusted net tangible book
value at March 31, 1996 would have been approximately $124.7 million, or $4.39
per share of the Company's Common Stock. This amount represents an immediate
increase in net tangible book value of $5.98 per share to the existing
shareholders and an immediate dilution in net tangible book value of $10.61 per
share to new investors purchasing shares of Class A Common Stock in the
Offering. The following table illustrates this dilution on a per share basis:

<TABLE>
<S> <C> <C>
Assumed public offering price per share of Class A Common Stock.... $15.00
Pro forma net tangible book value per share of Common Stock
before the Offering(1)........................................ $(1.59)
Increase per share of Common Stock attributable to new
investors..................................................... 5.98
------
Net tangible book value per share of Common Stock after the
Offering......................................................... 4.39
------
Dilution in net tangible book value per share of Class A Common
Stock to new investors........................................... $10.61
======
</TABLE>

- ---------------

(1) Adjusted to give effect to the Reorganization.

The following table compares the number of shares of Common Stock acquired
from the Company, the total consideration paid and the average consideration per
share of Common Stock paid by (i) existing shareholders and (ii) new investors
purchasing shares of Class A Common Stock in the Offering, based upon an assumed
public offering price of $15 per share.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders....... 17,400,000 61.3% $ 1,481,000 0.9% $ 0.09
New investors............... 11,000,000 38.7 165,000,000 99.1 $ 15.00
---------- ------ ------------ ------
Total............. 28,400,000 100.0% $166,481,000 100.0%
========== ====== ============ ======
</TABLE>

The foregoing information assumes (i) no exercise of the Underwriters'
over-allotment option and (ii) no exercise of outstanding stock options to
purchase 600,000 shares of Class A Common Stock granted pursuant to the Stock
Incentive Plan. Such stock options have an exercise price of $12.00 per share.
To the extent that these stock options are exercised, there would be further
dilution per share to new investors. See "Management -- Stock Incentive Plan."

16
<PAGE> 18

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated financial data of the
Company as of and for each of the five fiscal years ended December 31, 1995, and
as of and for the three months ended March 31, 1995 and 1996. The statements of
income and balance sheet data for each of the three fiscal years ended December
31, 1995 have been derived from the Company's consolidated financial statements,
which were audited by Ernst & Young LLP, independent certified public
accountants. The statements of income and balance sheet data for the years ended
December 31, 1991 and 1992 and for the three months ended March 31, 1995 and
1996 are unaudited, but include, in the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of such data. The results for the three months ended March 31, 1996
are not necessarily indicative of the results expected for the entire year. The
information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Company's Consolidated Financial Statements and the Notes thereto and other
financial information included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- ------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Premiums earned............................... $17,599 $28,640 $35,902 $40,461 $ 58,167 $10,918 $15,026
Service fee income............................ 578 800 987 2,468 4,110 582 1,671
Investment income............................. 1,745 1,818 2,146 2,484 4,519 809 1,295
Fees and other from affiliates................ 371 1,985 2,154 1,732 2,881 511 534
------- ------- ------- ------- ------- ------- -------
Total revenues.......................... 20,293 33,243 41,189 47,145 69,677 12,820 18,526
Expenses:
Claims and claim settlement expenses.......... 12,136 17,622 20,262 25,250 32,924 6,725 9,250
Commission and other underwriting expenses.... 4,577 5,561 7,555 8,507 13,524 2,428 3,512
General and administrative.................... 570 1,910 2,798 4,406 6,810 1,001 2,010
Interest...................................... 442 642 850 726 845 210 279
Depreciation and amortization................. 4 93 240 703 1,006 169 332
------- ------- ------- ------- ------- ------- -------
Total expenses.......................... 17,729 25,828 31,705 39,592 55,109 10,533 15,383
------- ------- ------- ------- ------- ------- -------
Income before federal income taxes.............. 2,564 7,415 9,484 7,553 14,568 2,287 3,143
Federal income taxes............................ 778 2,375 2,768 2,414 5,234 645 909
------- ------- ------- ------- ------- ------- -------
Net income before cumulative effect of change in
accounting.................................... 1,786 5,040 6,716 5,139 9,334 1,642 2,234
Cumulative effect of change in accounting for
income taxes.................................. 334 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income.............................. $ 2,120 $ 5,040 $ 6,716 $ 5,139 $ 9,334 $ 1,642 $ 2,234
======= ======= ======= ======= ======= ======= =======
Pro forma net income per share.......... $ 0.43 $ 0.10
======= =======
Pro forma weighted average shares outstanding... 21,666 21,666
Loss Ratio...................................... 69.0% 61.5% 56.4% 62.4% 56.6% 61.6% 61.6%
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------- MARCH 31,
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and investments................................... $24,910 $35,249 $45,293 $56,260 $ 81,693 $88,790
Total assets........................................... 35,402 53,178 71,972 88,091 120,440 130,492
Reserves for claims and claim settlement expenses...... 19,884 26,038 34,421 40,939 55,427 59,571
Notes payable.......................................... 0 2,787 3,288 7,479 8,232 12,516
Stockholders' equity................................... 4,289 9,260 17,397 22,476 32,138 34,381
</TABLE>

17
<PAGE> 19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company provides managed care workers' compensation products and
services designed to lower the overall costs to its employer-clients of
providing workers' compensation benefits to their employees. Since it began
operations in 1986, the Company has focused on providing its managed results
services to employers whose employees are engaged in hazardous occupations,
primarily in the logging industry. Beginning in 1994, the Company began
expanding its client base by targeting employers in other hazardous occupation
industries, including general contracting, trucking, and oil and gas
exploration.

The Company's revenues consist primarily of premiums earned from workers'
compensation coverage, service fee income and investment income. Premiums earned
during a period are the direct premiums earned by the Company on in-force
policies, net of premiums ceded to reinsurers. Premiums earned primarily
represent workers' compensation products, although the Company has historically
provided other insurance products, including general liability and automobile
coverage. Service fee income represents fees the Company earns for providing
claims management and other services to self-insured businesses, other insurance
companies, trade associations and governmental entities. Net investment income
represents net earnings on the Company's investment portfolio, less investment
expenses. Fees and other from affiliates represent various administrative and
management services provided to affiliates for a fee.

The Company's expenses consist primarily of claims and claim settlement
expenses, commissions and other underwriting expenses and general and
administrative expenses. Claims and claim settlement expenses include (i)
payments and reserves for current and future medical care and rehabilitation
costs, (ii) indemnity payments for lost wages and third-party claim settlement
expenses such as independent medical examinations, surveillance costs and legal
expenses, and (iii) staff and related expenses incurred to administer and settle
claims. Certain claims and claim settlement expenses paid are offset by
estimated recoveries from reinsurers under specific excess of loss reinsurance
agreements. Commissions and other underwriting expenses consist of agencies'
commissions, state premium taxes, fees and other expenses directly related to
the production of premiums. General and administrative expenses include the
costs of providing executive, administrative and support services.

The following table identifies the markets in which the Company's premiums
were earned and the percentage of the gross premiums earned in those markets to
total gross premiums earned for the periods indicated.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- ---------------------------------
1993 1994 1995 1995 1996
-------------- -------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums earned:
Workers' compensation:
Logging related............. $39,026 89% $38,482 80% $39,828 60% $ 9,953 77% $ 7,901 46%
Other industries............ 2,229 5 2,332 5 21,381 32 1,162 9 8,091 48
Other insurance products...... 2,740 6 7,448 15 5,623 8 1,807 14 998 6
------- --- ------- --- ------- --- ------- --- ------- ---
Gross premiums earned......... 43,995 100% 48,262 100% 66,832 100% 12,922 100% 16,990 100%
=== === === === ===
Ceded reinsurance............. (8,093) (7,801) (8,665) (2,004) (1,964)
------- ------- ------- ------- -------
Total premiums earned, net...... $35,902 $40,461 $58,167 $10,918 $15,026
======= ======= ======= ======= =======
</TABLE>

18
<PAGE> 20

RESULTS OF OPERATIONS

The following table sets forth income statement information expressed as a
percentage of total revenues for the periods indicated.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- ----------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Premiums earned.............................. 87.2% 85.8% 83.5% 85.2% 81.1%
Service fee income........................... 2.4 5.2 5.9 4.5 9.0
Investment income............................ 5.2 5.3 6.5 6.3 7.0
Fees and other from affiliates............... 5.2 3.7 4.1 4.0 2.9
----- ----- ----- ----- -----
Total revenues................................. 100.0 100.0 100.0 100.0 100.0
Expenses:
Claims and claim settlement expenses......... 49.2 53.6 47.3 52.5 49.9
Commissions and other underwriting
expenses.................................. 18.3 18.0 19.4 18.9 19.0
General and administrative................... 6.8 9.4 9.8 7.9 10.8
Depreciation and amortization................ 0.6 1.5 1.4 1.3 1.8
Interest..................................... 2.1 1.5 1.2 1.6 1.5
----- ----- ----- ----- -----
Total expenses................................. 77.0 84.0 79.1 82.2 83.0
----- ----- ----- ----- -----
Income before federal income taxes............. 23.0 16.0 20.9 17.8 17.0
Federal income taxes........................... 6.7 5.1 7.5 5.0 4.9
----- ----- ----- ----- -----
Net income..................................... 16.3% 10.9% 13.4% 12.8% 12.1%
===== ===== ===== ===== =====
</TABLE>

Three Months Ended March 31, 1996 Compared To Three Months Ended March 31, 1995

Total Revenue. Total revenue increased from $12.8 million for the three
months ended March 31, 1995 to $18.5 million for the three months ended March
31, 1996, an increase of approximately 44.5%. The increase was primarily due to
the Company's expansion into other hazardous occupation industries. This
increase was partially offset by a decrease in premiums earned in the logging
industry which resulted primarily from a downturn in pulp and paper production
due to reduced demand. Service fee income increased approximately $1.1 million
in the 1996 period compared to the 1995 period. This increase was primarily due
to the acquisition of Hammerman & Gainer, Inc. ("H&G") on September 1, 1995,
which contributed $919,000 to service fee income in the three months ended March
31, 1996. Investment income increased by approximately $486,000 in the 1996
period compared to the 1995 period, primarily due to an increase in invested
assets from $61.7 million at March 31, 1995 to $88.8 million at March 31, 1996.
Fees and other from affiliates remained essentially unchanged.

Claims and Claim Settlement Expenses. Claims and claim settlement expenses
increased from $6.7 million for the three months ended March 31, 1995 to $9.3
million for the three months ended March 31, 1996, an increase of approximately
38.8%. This increase was commensurate with the increase in premiums earned. The
loss ratios for these three month periods were higher than the loss ratio for
the year ended December 31, 1995 due to seasonality. Claims are more frequently
incurred in the first three months of the year as a result of lower activity in
the logging industry during which period workers have historically reported
claims more frequently. See "-- Seasonality."

Commissions and Other Underwriting Expenses. Commissions and other
underwriting expenses increased from $2.4 million for the three months ended
March 31, 1995 to $3.5 million for the three months ended March 31, 1996, an
increase of approximately 45.8%. This increase is commensurate with the increase
in premiums earned. Commissions and other underwriting expenses as a percentage
of premiums earned were 22.2% and 23.4% for the 1995 and 1996 periods,
respectively.

19
<PAGE> 21

Other Expenses. General and administrative expenses increased from $1.0
million for the three months ended March 31, 1995 to $2.0 million for the three
months ended March 31, 1996, an increase of 100%. This increase was primarily
due to the acquisition of H&G on September 1, 1995 which added approximately
$888,000 in the three months ended March 31, 1996. Depreciation and amortization
increased by approximately $163,000 in the 1996 period compared to the 1995
period due to an increase in depreciable assets, primarily furniture, equipment
and automobiles. Interest expense increased by approximately $69,000 in the 1996
period compared to the 1995 period due to increases in both total borrowings and
the weighted average cost of funds.

Year Ended December 31, 1995 Compared To Year Ended December 31, 1994

Total Revenue. Total revenue increased from $47.1 million for the year
ended December 31, 1994 to $69.7 million for the year ended December 31, 1995,
an increase of approximately 48.0%. This increase was primarily due to increased
premiums earned resulting from the Company's expansion of its operations into
other hazardous occupation industries. Service fee income increased
approximately $1.6 million from 1994 to 1995 primarily as a result of the
acquisition of H&G on September 1, 1995. Investment income increased
approximately $2.0 million, or 81.9%, in 1995 as a result of an increase in
invested assets. Invested assets, including cash, increased by approximately
$25.4 million in the 1995 period compared to the 1994 period. Fees and other
from affiliates increased by approximately $1.1 million in the 1995 period
compared to the 1994 period, primarily as a result of a $1.0 million dividend
which was received from an affiliated entity during 1995. There were no such
dividends received in 1994 or 1993. The stock of this affiliate was distributed
to a shareholder immediately prior to the Offering as part of the
Reorganization. See "Recent Reorganization."

Claims and Claim Settlement Expenses. Claims and claim settlement expenses
increased from $25.3 million for the year ended December 31, 1994 to $32.9
million for the year ended December 31, 1995, an increase of approximately
30.0%. However, the loss ratio (i.e., the ratio of claims and claim settlement
expenses to premiums earned) decreased from 62.4% in 1994 to 56.6% in 1995. The
improvement in the loss ratio resulted primarily from settling claims related to
losses from prior periods for amounts less than originally estimated.

Commissions and Other Underwriting Expenses. Commissions and other
underwriting expenses increased from $8.5 million for the year ended December
31, 1994 to $13.5 million for the year ended December 31, 1995, an increase of
approximately 58.8%, primarily due to increases in premiums earned. Commissions
and other underwriting expenses as a percentage of insurance premiums earned
increased from 21.0% in 1994 to 23.3% in 1995 as the result of the Company's use
of independent agents to produce workers' compensation premiums in industries
outside the logging industry.

Other Expenses. General and administrative expenses increased from $4.4
million for the year ended December 31, 1994 to $6.8 million for the year ended
December 31, 1995, an increase of approximately 54.5%. This increase was
primarily due to the acquisition of H&G on September 1, 1995 (which added
approximately $1.1 million in 1995) and the build-up of staff and facilities.
Depreciation and amortization increased by approximately $303,000 in the 1995
period compared to the 1994 period due to an increase in depreciable assets,
primarily furniture, equipment and automobiles. Interest expense increased
$119,000, or 16.4%, during 1995 due to increases in both total borrowings and
the weighted average cost of funds.

Year Ended December 31, 1994 Compared To Year Ended December 31, 1993

Total Revenue. Total revenue increased from $41.2 million for the year
ended December 31, 1993 to $47.1 million for the year ended December 31, 1994,
an increase of approximately 14.3%. This increase was primarily due to increased
premiums earned from other insurance products, primarily automobile coverage.
Service fee income increased approximately $1.5 million in the 1994 period
compared to the 1993 period, primarily from expansion of the range of services
offered to include claim settlement services. Fees and other from affiliates
decreased from $2.2 million to $1.7 million or as a percentage of revenue from
5.2% in 1993 to 3.7% in 1994.

20
<PAGE> 22

Claims and Claim Settlement Expenses. Claims and claim settlement expenses
increased from $20.3 million for the year ended December 31, 1993 to $25.3
million for the year ended December 31, 1994, an increase of approximately
24.6%.

Commissions and Other Underwriting Expenses. Commissions and other
underwriting expenses increased from $7.6 million for the year ended December
31, 1993 to $8.5 million for the year ended December 31, 1994, an increase of
approximately 11.8%. The increase in commissions and other underwriting expenses
was commensurate with the increase in premiums earned. Commissions and other
underwriting expenses as a percentage of premiums earned was 21.0% for each of
the years ended December 31, 1993 and 1994.

Other Expenses. General and administrative expenses increased from $2.8
million for the year ended December 31, 1993 to $4.4 million for the year ended
December 31, 1994, an increase of approximately 57.1%. This was primarily due to
the expansion of the range of services offered to include claim settlement
services. Depreciation and amortization increased by approximately $463,000 in
the 1994 period compared to the 1993 period due to an increase in depreciable
assets, primarily furniture, equipment and automobiles. Interest expense
decreased $124,000, or 14.6%, during 1994 because the Company refinanced its
debt at a lower average interest rate.

RESERVES FOR CLAIMS AND CLAIM SETTLEMENT EXPENSE

The Company's consolidated financial statements include estimated reserves
for unpaid claims and claim settlement expenses. The reserves for these expenses
are estimated using individual case-basis valuations and statistical analyses
and represent estimates of the ultimate gross and net costs of all unpaid claims
and claim settlement expenses incurred through the balance sheet date of each
period presented. Those estimates are subject to the effects of trends in claim
severity and frequency. The Company's estimates are continually reviewed and, as
experience develops and new information becomes known, the reserves are adjusted
as necessary. Adjustments, including increases and decreases, are included in
current operations net of reinsurance, and in the estimate of reserves for
insured events of prior periods.

21
<PAGE> 23

The following table shows changes in historical claims and claim settlement
expense reserves, net of reinsurance recoverables, for the Company from 1986
through 1995. The top line of the table indicates the estimated reserves for
unpaid claims and claim settlement expenses recorded at each year end date. Each
amount in the top line represents the estimated amount of claims and claim
settlement expenses for the claims incurred in that year as well as future
payments on claims occurring in prior years. The upper portion (net reserve
re-estimated) shows the year-by-year development of the previously recorded
reserves based on experience as of the end of each succeeding year. The
estimates change as more information becomes known about the actual claims on
which the initial reserves were carried. Any adjustments to the carrying value
of unpaid claims for a prior year will also be reflected in the adjustments for
each subsequent year. For example, an adjustment in 1995 for 1993 loss reserves
will be reflected in the re-estimated net reserve for 1993 and 1994. The net
cumulative redundancy (deficiency) line represents the cumulative changes in
estimates since the initial reserves were established. It is equal to the
difference between the initial reserve and the latest re-estimated net reserve
amount. The lower portion of the table (cumulative amount of reserve paid)
presents the amounts paid as of the end of subsequent years on those claims for
which reserves were carried as of the end of each specific year.

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Reserve for Unpaid Claims and
Claim Settlement Expenses, Net
of Reinsurance Recoverables... $1,387 $ 4,491 $ 7,262 $10,318 $12,872 $14,741 $19,772 $24,882 $31,242 $43,304
Net Reserve Re-estimated as of:
One Year Later................ 1,423 4,738 7,534 10,010 11,273 13,568 17,861 23,495 28,092
Two Years Later............... 1,363 4,915 7,961 9,712 11,844 13,820 16,984 21,805
Three Years Later............. 1,400 5,156 8,035 9,815 12,228 12,606 14,928
Four Years Later.............. 1,392 5,238 8,439 9,648 12,011 12,410
Five Years Later.............. 1,390 5,630 8,307 9,477 11,817
Six Years Later............... 1,389 5,609 8,403 9,453
Seven Years Later............. 1,388 5,616 8,365
Eight Years Later............. 1,387 5,521
Nine Years Later.............. 1,357
Net Cumulative Redundancy
(Deficiency).................. $ 30 $(1,030) $(1,103) $ 865 $ 1,055 $ 2,331 $ 4,844 $ 3,077 $ 3,150
Cumulative Amount of Reserve
Paid, Net of Reinsurance
Recoveries, Through:
One Year Later.............. $ 677 $ 2,927 $ 3,879 $ 5,664 $ 5,857 $ 6,961 $ 7,757 $11,095 $10,643
Two Years Later............. 1,142 3,481 6,308 7,760 9,234 9,833 11,290 14,729
Three Years Later........... 1,369 4,665 7,185 8,668 10,256 11,033 12,502
Four Years Later............ 1,390 4,989 7,726 8,889 10,919 11,570
Five Years Later............ 1,390 5,282 7,916 9,119 11,239
Six Years Later............. 1,389 5,395 8,078 9,201
Seven Years Later........... 1,388 5,432 8,147
Eight Years Later........... 1,387 5,455
Nine Years Later............ 1,357
Net Reserve at December 31...... $24,882 $31,242 $43,304
Reinsurance Recoverables........ 9,539 9,697 12,123
------- ------- -------
Gross Reserve at December 31.... $34,421 $40,939 $55,427
======= ======= =======
Net Re-estimated Reserve........ $21,805 $28,092
Re-estimated Reinsurance
Recoverables.................. 10,614 10,197
------- -------
Gross Re-estimated Reserve...... $32,419 $38,289
======= =======
Gross Cumulative Redundancy..... $ 2,002 $ 2,650
======= =======
</TABLE>

The foregoing table indicates that reserves for claims and claim settlement
expenses, net of related reinsurance recoverables, at December 31, 1989 through
1994 were decreased from their original amounts. These decreases resulted
primarily from settling claims related to losses prior to those dates for
amounts less than originally estimated. Most of the favorable development has
resulted from the Company's managed results approach and claims management
process.

22
<PAGE> 24

The following table provides a reconciliation of the beginning and ending
reserve balances, net of reinsurance recoverables for 1993, 1994 and 1995:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Reserve for claims and claim settlement expenses, net
of related reinsurance recoverables, at beginning
of year............................................ $ 19,772 $ 24,882 $ 31,242
Add:
Provision for claims and claim settlement expenses
for claims occurring in the current year, net
of reinsurance.................................. 22,537 26,637 36,074
Decrease in estimated claims and claim settlement
expenses for claims occurring in prior years,
net of reinsurance.............................. (1,911) (1,387) (3,150)
-------- -------- --------
Incurred claims and claim settlement expenses
during the current year, net of reinsurance..... 20,262 25,250 32,924
Deduct claims and claim settlement expenses payments
for claims, net of reinsurance, occurring during:
Current year.................................... (7,395) (7,795) (10,219)
Prior years..................................... (7,757) (11,095) (10,643)
-------- -------- --------
(15,152) (18,890) (20,862)
-------- -------- --------
Reserve for claims and claim settlement expenses, net
of related reinsurance recoverables, at end of
year............................................... 24,882 31,242 43,304
Recoverable ceded reserves for unpaid claims and
claim settlement expenses.......................... 9,539 9,697 12,123
-------- -------- --------
Reserves for claims and claim settlement expenses.... $ 34,421 $ 40,939 $ 55,427
======== ======== ========
</TABLE>

The Company's reserves for claims and claim settlement expenses, net of
related reinsurance recoverables, at December 31, 1992, 1993 and 1994, were
decreased in 1993, 1994 and 1995, by $1,911,000, $1,387,000 and $3,150,000,
respectively, for claims that had occurred on or prior to those balance sheet
dates. The decreases were due to settling case-basis liabilities related to
claims in those periods for less than originally estimated. Most of the
favorable development has resulted from the Company's managed results approach
and claims management process. No return premiums are due as a result of
prior-year effects.

The Company continually attempts to improve its claims estimation process
by refining its ability to analyze claims development and settlement patterns,
claims payments and other information. However, there are uncertainties inherent
in the claims estimation process and claims estimates have become increasingly
subject to changes in social and legal trends that may expand the liability of
insurers, establish new liabilities and interpret contracts to provide
unanticipated coverage long after the related policies were written. In
management's judgment, information currently available has been appropriately
considered in estimating the Company's claims and claim settlement expense
reserves. However, there can be no assurance that future events will not cause
incurred claims to exceed estimated reserves. Accordingly, it may not be
appropriate to extrapolate future redundancies or deficiencies based on the
above reserve tables.

Loss reserve development without the effects of reinsurance would not be
significantly different than that presented above.

LIQUIDITY AND CAPITAL RESOURCES

The Company's operations historically have provided substantial positive
cash flow. Net cash provided by operating activities was $10.2 million, $13.0
million and $29.1 million in 1993, 1994 and 1995, respectively, and $6.8 million
and $5.6 million for the three months ended March 31, 1995 and 1996,
respectively. Net cash

23
<PAGE> 25

provided by operations primarily consists of premiums collected, investment
income, service fee income and reinsurance recoverable balances collected, less
claims and claim settlement expenses paid, premiums paid for reinsurance
protection and operating expenses. Generally, premiums are collected months or
years before claims are paid. Premiums are used first to pay current claims and
expenses. The balance, if any, is invested in marketable securities to generate
investment income.

The Company follows an investment strategy which is based on many factors,
including underwriting results and the Company's resulting tax position,
fluctuations in interest rates and regulatory requirements. The majority of the
Company's investment assets are in fixed maturity securities. The following
table shows the quality composition of the Company's investment portfolio
(percentages determined on the basis of amortized cost) by rating, as assigned
by Standard & Poor's, Inc. or Moody's Investor's Services, Inc. at March 31,
1996.

<TABLE>
<CAPTION>
S&P RATING/ PORTFOLIO
MOODY'S RATING PERCENTAGE
-------------- ----------
<S> <C>
AAA/Aaa......................................... 91%
AA/Aa........................................... 5%
A/A............................................. 3%
Less than A/A................................... 1%
</TABLE>

The Company historically has held its investments in these securities to
maturity. Management of the Company believes substantially all of the Company's
investment assets are readily marketable. However, because of the Company's
strategy of generally holding fixed maturity securities to maturity, the Company
has classified the majority of these securities as held-to-maturity for
financial accounting purposes. See Note 1 of the Notes to Consolidated Financial
Statements. Management currently intends to classify a portion of fixed maturity
securities purchased with the proceeds from the Offering as available-for-sale.
Cash proceeds from the sales and maturities of fixed income securities in 1995
were $10.2 million compared to $12.1 million in 1994, and $4.4 million in 1993
and $7.2 for the three months ended March 31, 1996.

Aggregate invested assets, including cash, were $56.3 million and $81.7
million at December 31, 1994 and 1995, respectively, and $88.8 million at March
31, 1996. The increases were primarily due to the investment of cash provided by
operating activities.

The Company's principal need for capital is to fund growth of its core
managed results workers' compensation business. The Company is restricted by
statute in the amount of net premiums it can write on the basis of certain
leverage guidelines established by insurance regulators. Exceeding these factors
limits a company's ability to generate premium income. A common measurement of
leverage is the ratio of net premiums written to statutory surplus. American
Interstate's leverage factors are within the maximum factors specified by the
states in which it operates. However, private rating agencies generally have
stricter leverage standards, and management believes the Company must stay well
within these industry leverage guidelines to maintain its favorable ratings from
these agencies. Additionally, beginning in 1994, the Company was required to
calculate the Risk-Based Capital (RBC) ratio for each of its insurance
subsidiaries, which measures the adequacy of statutory capital and surplus in
relation to investment and insurance risks and other business factors. The RBC
formula is used by state insurance regulators to identify, for the purpose of
initiating regulatory action, insurance companies that potentially are
inadequately capitalized. The RBC ratio of each of the Company's insurance
subsidiaries exceeds the minimum required ratio. The National Association of
Insurance Commissioners has proposed a new Model Investment Law that, if adopted
by the State of Louisiana (American Interstate's state of domicile), may affect
the statutory carrying values of certain investments; however, the final outcome
of that proposal is not certain, nor is it possible to predict what impact the
proposal will have on the Company or whether the proposal will be adopted in the
foreseeable future. The Company intends to use a portion of the net proceeds
from the Offering to expand its insurance business into additional markets and,
if necessary, to increase the capital and surplus of its insurance subsidiaries
to remain in compliance with regulatory requirements.

24
<PAGE> 26

The Company is a holding company and, accordingly, the primary source of
the Company's liquidity will be from dividends and management fees paid by one
of its subsidiaries, American Interstate. The Company provides management
services to American Interstate in exchange for these management fees.
Additionally, American Interstate and its insurance subsidiary are limited by
statute in their ability to pay dividends and fees to the Company. See Note 8 of
the Notes to Consolidated Financial Statements and "Risk Factors -- Holding
Company Structure." Additionally, management currently expects to invest a
portion of the Offering proceeds in marketable securities, using the income to
provide liquidity.

AMERISAFE has historically received fees from various affiliated entities
for the costs of providing certain executive, administrative and support
services to those affiliates. Fees received from affiliated entities were $2.2
million, $1.7 million and $2.9 million in 1993, 1994 and 1995, respectively, and
$534,000 for the three months ended March 31, 1996. The Company expects to
continue to provide a certain level of these services to certain of these
affiliates and will enter into annually renewable agreements with such
affiliates. However, management expects the level of fees and other revenues
received from affiliates to decline following the Offering. See "Certain
Transactions and Relationships -- Services Agreement," and "-- Aircraft
Agreement."

IMPACT OF INFLATION

Inflation can have a significant impact on the Company because premium
rates are established before the amount of claims and claim settlement expenses
is known. The Company attempts to anticipate increases in inflation when
establishing rates, subject to limitations imposed by competitive pricing.

The Company also considers inflation when estimating liabilities for claims
and claim settlement expenses, particularly for claims having a long period
between occurrence and settlement. The liabilities for claims and claim
settlement expenses are management's estimates of the ultimate net cost of the
underlying claims and expenses and are not discounted for the time value of
money. In times of high inflation, the normally higher yields on investments may
partially offset potentially higher claims and expenses.

SEASONALITY

The Company's operations are affected by general trends and business cycles
affecting the logging industry. Generally, the Company experiences higher
premium volume in the late summer and early fall when dryer weather allows the
harvesting and processing of trees and higher claims volume in the winter and
spring when inclement weather prevents the harvesting of trees and workers in
the logging industry have historically reported claims more frequently.

EFFECTS OF OFFERING AND RELATED TRANSACTIONS

The Company will receive net proceeds of approximately $152.5 million from
the Offering (approximately $175.5 million if the Underwriters' over-allotment
option is exercised in full). Approximately $73.0 million will be used for the
repayment of indebtedness, including the indebtedness incurred in connection
with the Reorganization. See "Use of Proceeds" and "Recent Reorganization."

25
<PAGE> 27

BUSINESS

OVERVIEW

AMERISAFE provides managed care workers' compensation products and services
primarily to employers in hazardous occupation industries. The Company offers
its client-employers a fully integrated program designed to lower the overall
cost of workers' compensation claims by: (i) implementing and applying workplace
safety programs designed to prevent occupational injuries, (ii) providing
immediate, efficient and appropriate managed medical care to injured workers,
and (iii) using intensive personal claims management practices to guide and
encourage injured workers through the recovery and rehabilitation process with
the primary goal of returning the injured worker to work as promptly as
practicable. The Company integrates proactive safety services with intensive
claims management practices and quality managed medical care to produce "managed
results." The Company's managed results approach focuses on creating and
maintaining direct personal relationships with employers, employees and health
care providers in order to design and promote services which are intended to
produce lower overall occupational injury costs. The Company designates service
teams for each client in order to foster personal relationships, provide
continuity of service and to implement specific solutions for individual client
workers' compensation needs.

Since it began operations in 1986, the Company has focused on providing its
managed results products and services to employers whose employees are engaged
in hazardous occupations, primarily the logging industry. Beginning in 1994, the
Company began expanding its client base by targeting employers in other
hazardous occupation industries, including general contracting, trucking, and
oil and gas exploration. The Company believes that the high severity injuries
typically suffered by employees engaged in hazardous occupations and the
resulting high cost typically incurred by employers in providing the mandatory
workers' compensation coverage for such employees provide the greatest
opportunity to lower costs by applying the Company's managed results approach.
By focusing on developing and implementing client-specific workplace safety
techniques and intensive claims management, the Company believes that
substantial cost savings can be achieved when compared to the traditional
workers' compensation approach to hazardous occupation industries. By reducing
the overall cost of providing workers' compensation coverage to its
employer-clients, the Company believes its managed results approach permits it
to price its products and services competitively.

From 1991 through 1995, the Company has increased its revenues from $20.3
million to $69.7 million, or a compound annual growth rate of 36.1%. In this
same period, the Company's net income (before cumulative effect of accounting
change) increased from $1.8 million to $9.3 million, or a compound annual growth
rate of 50.8%. As of March 31, 1996, the Company was licensed to provide
workers' compensation coverage and services in 25 states and the U.S. Virgin
Islands and provided its products and services to approximately 2,900 employers
in 16 states, primarily in the southeastern United States. As of that date, more
than two-thirds of AMERISAFE's employer-clients were involved in hazardous
occupation industries.

INDUSTRY

Workers' compensation benefits are state-mandated and regulated programs,
which generally require employers to provide medical benefits and wage
replacement to employees injured at work, regardless of fault. Each individual
state has a regulatory and adjudicatory system which quantifies the level of
wage replacement to be paid, determines the level of medical care required to be
provided and the cost of permanent impairment, and provides whether the injured
employee or the employer has certain options in selecting health care providers.
State laws generally require two types of benefits for injured employees: (i)
medical benefits that include expenses related to diagnosis and treatment of the
injury, as well as rehabilitation, if necessary, and (ii) indemnity payments
that consist of temporary wage replacement, permanent disability payments or
death benefits to surviving family members. The Company believes that medical
benefits presently account for approximately half of all workers' compensation
benefits paid, with the remainder paid for lost wages and death benefits. To
fulfill this mandated financial obligation, virtually all employers are required
either to purchase workers' compensation insurance from a private insurance
carrier, a state-sanctioned assigned risk pool or a self-insured fund (an entity
that allows employers to pool their liabilities for obtaining workers'

26
<PAGE> 28

compensation coverage, but typically subjects each employer to joint and several
liability for the entire fund), or, if permitted by their state, to self-insure.

The cost to employers of providing workers' compensation benefits in the
United States totaled approximately $58 billion in 1994. From 1984 to 1990,
workers' compensation costs increased an average of 13.3% per year and, from
1990 to 1992, workers' compensation costs increased an average of 6.3% per year.
The substantial growth in the workers' compensation market is primarily
attributable to the increased costs of medical treatment and an increase in
workers' compensation litigation, which affects both medical benefits and
indemnity payments. The Company believes that successful containment of these
expenses depends largely upon early intervention in the claims process and
promptly enabling an injured employee to return to work. The Company also
believes that, to date, traditional insurers have focused on high premium volume
and generally maintain minimal staffing. As a result, the Company believes that
the workers' compensation industry is generally characterized by limited safety
services, inefficient claims adjustment processes and ineffective medical cost
management.

Employers engaged in hazardous occupation industries pay substantially
higher than average workers' compensation rates. While these rates vary
significantly across industries and from state to state and are dependent upon
the individual employer's loss history, workers' compensation costs are
typically a significant component of these hazardous occupation employers'
overall operating expenses. For example, the Company's logging clients typically
pay an amount equal to 20% to 50% of payroll to obtain workers' compensation
benefits for their employees, compared to employers of clerical workers who
generally pay an amount less than 1% of their payroll to obtain such benefits.
This cost disparity results from the substantial expenses associated with high
severity injuries occurring within hazardous occupation industries. The Company
believes that the difficulties associated with controlling catastrophic injury
costs have historically caused a number of insurance companies to withdraw from
the higher-risk market segments. As a result, the Company believes that
hazardous occupation industries offer a significant opportunity to workers'
compensation providers.

STRATEGY

The Company's strategy is to utilize its managed results approach in an
effort to prevent workplace injury, and, when an injury does occur, to arrange
for timely, high quality and cost-effective managed care, thereby lowering the
overall costs to its employer-clients of providing workers' compensation
benefits to their employees. The Company's strategy includes the following
principal elements:

- Focus on Hazardous Occupation Employers. The Company targets those
employers who, due to the nature of their businesses and the
susceptibility of their employees to serious injury, pay substantially
higher than average workers' compensation rates. Because the Company
focuses its efforts on clients in selected industries, the Company
believes that it has developed expertise in assessing not only the risks
associated with those industries, but also the operating practices of
individual employers. As a result, the Company believes it can more
accurately determine the profit opportunity of providing its managed
results services. The Company also believes that less competition exists
in providing workers' compensation services to hazardous occupation
employers because of the potential for severe injuries to their
employees and due to the fact that many hazardous occupation employers
operate in rural areas, a market not pursued by many traditional
insurers. The Company believes that its commitment to working with its
client-employers to implement a program designed to benefit both parties
results in cost savings for its client-employers and the establishment
of long-term relationships with them.

- Improve Workplace Safety. The Company believes that implementing
comprehensive safety services to reduce workplace accidents is the key
element to effect significant reductions in workers' compensation costs
for employers in hazardous occupation industries. The Company presently
employs a staff of 29 safety professionals. Many of these individuals
were previously employed in hazardous occupation industries and use
their personal experience and expertise in these industries to assist
employer-clients in designing safety and injury prevention programs and
to assist in the Company's underwriting process. In most cases, before
offering the Company's managed results

27
<PAGE> 29

products and services to a potential new client, a Company safety
professional will visit the potential client's place of business to
assess the existing safety programs and workplace practices. In certain
circumstances, the Company will agree to provide workers' compensation
products and services only if the employer agrees to implement and
maintain specific safety recommendations. Once an employer becomes a
client, the Company continues to emphasize safety by periodic workplace
visits, assisting the client in designing and implementing enhanced
safety management programs, providing current safety-related information
and conducting rigorous post-accident management.

- Manage Care Through Personal, Direct Contact. The Company believes that
its personal, direct contact approach reduces the overall cost of
medical care, results in the injured worker returning to work more
quickly and lessens the likelihood of litigation and fraudulent claims.
The Company encourages its employer-clients to immediately notify the
Company of a workplace injury. Following notification, a claims
representative contacts the employer, the injured employee and/or the
treating physician to determine the nature and severity of the injury.
In the case of a serious injury, the employer's pre-designated claims
representative will promptly visit the injured employee or the
employee's family members to discuss the benefits provided and will
visit the treating physician to discuss the proposed treatment plan. The
Company's claims representative acts as a facilitator to assure that the
injured employee receives an appropriate medical treatment plan and to
encourage the use of Company-recommended health care providers and
facilities. The Company limits the number of active cases handled by a
single claims representative in order to permit the claims
representative to better focus on the services best suited for the
specific injured employee.

- Direct Injured Workers to Appropriate Health Care Providers. The Company
believes that directing injured workers to appropriate health care
providers is a vital part of its workers' compensation managed care
program. The Company believes that it is able to arrange for high
quality, cost-effective health care services to injured workers due to
its experience with managing claims involving severe injuries of the
types most often suffered by its clients' employees and its
relationships with health care providers within the regional and local
markets it serves. Certain states permit the Company to require injured
workers to utilize Company-recommended health care providers and
facilities. Even in states in which the injured employee is permitted to
choose a health care provider, the Company believes that it is generally
successful in encouraging injured workers to use Company-recommended
providers and facilities, allowing the Company to more effectively
manage health care.

- Pursue Growth Opportunities. The Company intends to grow internally and
through acquisitions. Internal growth is expected to result from both
greater penetration of existing markets and expansion into new markets
through targeting employers in geographic areas and hazardous occupation
industries that the Company does not presently serve. The Company
currently provides products and services in 16 states and expects to
target its expansion to additional states in which it is authorized to
provide workers' compensation products and services. In addition, due to
the fragmented nature of the workers' compensation market, the Company
believes that there are a significant number of smaller, traditional
workers' compensation insurers or books of indemnity business that the
Company could acquire and convert to its managed results approach. The
Company's proceeds from this Offering will provide substantial
additional capital that will allow the Company to more rapidly expand
its business. However, while there can be no assurances, the Company
plans to manage its growth in a manner intended to maintain its "A"
(Excellent) rating from A.M. Best Company, Inc. See "-- A.M. Best
Rating" below.

OPERATIONS

The Company's managed results approach employs an operating process
designed to improve workplace safety and thereby reduce work-related injuries,
and, when an injury does occur, to provide for prompt medical intervention,
integrated claims management and effective medical care management. The
Company's managed care approach directs injured workers to appropriate health
care providers and facilities. The Company is divided into multidisciplinary
geographic service teams which concentrate on providing managed workers'
compensation services and products within assigned regions of the Company's
market territory. These

28
<PAGE> 30

teams actively enlist employers, employees and health care providers in the
common goal of rapid return-to-work in as care-effective and cost-efficient a
manner as possible.

The components of the Company's managed results approach include:

Improve Workplace Safety. Preventing work-related injuries is a key element
of the Company's managed results approach. In most cases, before offering the
Company's managed results products and services to a potential new client, a
Company safety professional will visit the potential client's place of business
to assess the existing safety programs and workplace practices. Company
representatives also assess the employer's attitude toward workplace safety and
toward creating, improving and maintaining a safe work environment. The safety
professional will prepare a written report to assist the underwriter in
evaluating the risk and pricing it appropriately. In certain circumstances, the
Company will agree to provide workers' compensation products and services only
if the employer agrees to implement and maintain specific safety
recommendations.

The Company employs 29 safety professionals throughout its market
territory. Many of these individuals were previously employed in logging or
other hazardous occupation industries and use their personal experience and
expertise in these industries to better assess the safety risks associated with
a client's operations. These individuals also use their knowledge of the
specific hazards associated with these hazardous occupation industries to assist
employers in designing safety and injury prevention programs and to provide
information about the industries to assist in the Company's underwriting
process. After identifying a client's specific safety risks, the Company's
safety professionals work with the client to minimize these risks and reduce
accidents through monitoring the client's safety programs. Each of the Company's
safety professionals is required to pursue professional development programs
leading to specific certifications or designations, and to participate in
Company-sponsored periodic training in OSHA and DOT regulations and guidelines.
The Company also publishes a periodic logging-specific safety and industry
newsletter titled "The Timberleaf" which is distributed to more than 3,000
clients, potential clients, facilitators, mill managers and paper and lumber
industry executives. Company safety professionals also participate in state
forestry association sponsored logging safety councils, write safety articles
published in industry periodicals, and work as members of the American Pulpwood
Association's various safety committees.

After accepting a client, the Company continues to emphasize workplace
safety by making periodic, and sometimes unannounced, visits to the
client-employer's workplace. All serious injuries are investigated by a Company
representative to determine whether steps can be taken to avoid similar
accidents. The Company monitors the activity of its safety professionals in
order to assure that appropriate safety services are available to each
client-employer.

Prompt Medical Intervention. Managing a claim from the earliest possible
time is critical in minimizing its ultimate cost. A 1994 industry study
indicates that claims reported between 11 and 20 days after the date of injury
cost an average of 29% more than claims reported 1 to 10 days after the date of
injury, and that the difference escalated to an average of an additional 48% if
the claim was reported more than 30 days after the injury occurred. To ensure
early intervention in the claims process, the Company encourages immediate
notification from the employer of all injuries and provides the employer with
24-hour toll-free assistance or direct contact with the Company's designated
service representative.

Promptly upon receiving notification of an injury, a claims representative
contacts the employer, the injured employee and/or the treating physician to
determine the nature and severity of the injury. The claims representative acts
as a facilitator to assure that the injured employee receives an appropriate
medical treatment plan and to encourage the use of Company-recommended health
care providers and facilities. The Company believes that this personal, direct
contact approach reduces the overall cost of medical care, results in the
injured worker returning to work more quickly and lessens the likelihood of
litigation and fraudulent claims. In cases involving a serious or complex
injury, the Company provides comprehensive field case management to address both
the ongoing medical needs of the injured employee as well as the economic and
social issues facing the employee and the employee's family. These professionals
establish ongoing communication with an injured employee, often at the initial
treatment, help coordinate care with the attending physicians and the health
care facilities, assist with paperwork and provide ongoing advice to both the
injured

29
<PAGE> 31

worker and the employee's family, with the goal of increasing satisfaction
through prompt, responsive service and a demonstrated concern for the injured
employee's well-being.

Because the Company's managed results approach emphasizes direct, personal
contact between the designated claims representative and the injured employee
and his employer, the Company limits the number of active cases for which any
single claims representative is responsible. With a lower case load, each claims
representative can better focus on the injured employee and access the medical,
rehabilitative and social services that are best suited for the specific
individual.

The Company's claims representatives are located in the geographic area in
which their designated employer-clients are based. By locating its claims
representatives in the field, the Company derives additional benefits from the
fact that its representatives build professional relationships with local health
care providers. When expanding into a new geographic market, the Company seeks
to hire experienced claims representatives who have established professional
contacts with local health care providers and who demonstrate the attitude and
ability to enhance the Company's managed results approach.

Direct Injured Workers to Appropriate Health Care Providers. The Company
believes effective managed care depends largely upon the selection of
appropriate health care providers and ongoing review to ensure that medical care
is being delivered in a cost-effective manner. The Company seeks to select and
develop relationships with health care providers in each of the regional and
local markets in which the Company's employer-clients operate. Emphasis is
placed on implementing the most expeditious and cost-effective managed care
treatment programs for each employer rather than imposing a single standardized
system on all employers and their employees.

The Company has established relationships with local and regional health
care providers and facilities ranging from individual physicians to fully
integrated occupational health care networks. In certain circumstances, these
relationships are evidenced by formal contracts; in many cases the arrangements
are more informal. The Company believes that its personal approach to managed
care depends upon selecting a well-qualified, local source of medical care,
regardless of any affiliation with existing networks. When entering a market,
the Company seeks to enter into strategic relationships with local and regional
medical care providers. In selecting its medical care providers, the Company
relies, in part, on the recommendations of its claims representatives who have
developed professional relationships within their geographic areas. The Company
also seeks input from the employers and other contacts in the market in which it
intends to provide services. While cost factors are considered in selecting
health care providers, the Company considers the ability of the health care
provider to achieve a "quality outcome" -- defined as rapid, conclusive recovery
and return to sustained, full capacity employment by the injured worker -- as
the most important factor in the selection process.

The Company's claims representatives maintain primary responsibility for
managing the entire claim from occurrence through resolution and are given
significant responsibility and authority to ensure the most effective,
cost-efficient resolution of claims that will enable the employee to return to
work as promptly as practicable. Each claims representative has the authority to
retain at the Company's expense independent nurse case managers, independent
medical examiners, vocational and rehabilitation specialists or other specialty
providers of medical services necessary to achieve the quality outcome desired
by the Company. In addition to retaining independent service providers required
for a particular injured worker, the claims representative works to reinforce
the Company's managed results approach by utilizing existing arrangements that
have been established by the Company to meet the needs of employer-clients
within a particular geographic market. The Company provides its claims
representatives with cars or car allowances, personal computers, cellular
phones, facsimile machines, pagers and a full range of additional administrative
and technical support to assist them with the prompt, efficient resolution of
employee claims.

The Company generally requires pre-certification to determine the medical
necessity and appropriateness of non-acute medical treatment before it is
provided to an injured worker. The Company also conducts fee schedule and
medical bill reviews to ensure that it has been billed appropriately for the
approved services, to prevent over-utilization of medical services and to detect
variances from agreed-upon fee schedules, unbundling of charges and unnecessary
or unrelated charges. Because of the variance in regulatory schemes in

30
<PAGE> 32

the states in which the Company provides managed care products and services, the
Company also contracts with medical bill review specialists in certain of the
markets in which it operates.

Dispute and Litigation Management. Through early intervention and its
personal claims management approach, the Company seeks to limit the number of
disputes with injured workers. The Company's primary goal is rapid, conclusive
recovery and return to sustained, full capacity employment by the injured
worker. The personal presence of the Company's claims representative throughout
this process permits an evaluation of the injured employee's psychological
propensity to return to work, to retain counsel and litigate, or, as an
alternative, to reasonably settle any disputes with the Company without
litigation. The Company believes that the personal presence of the claims
representative also enhances the Company's ability to guide the injured employee
to the appropriate conclusion in a friendly, dignified, supportive manner and
diminishes the injured employee's desire to seek larger settlement amounts than
would be the case if the Company was perceived by the injured employee to be
adversarial or hostile toward the employee's individual situation. The Company
seeks to promptly settle valid claims; however, it aggressively defends against
what it considers to be non-meritorious claims. As of March 31, 1996, the
Company had closed approximately 98% of its pre-1995 reported claims and 86% of
its 1995 reported claims, thereby substantially reducing the risk of future
adverse claims development.

Over the last several years, certain states have adopted regulations better
enabling workers' compensation providers to actively investigate and pursue
allegedly fraudulent claims. The Company believes that its claim
representatives' physical presence, and direct face-to-face contact with its
employer-clients and injured workers, better enables it to uncover fraudulent
claims.

PRODUCTS AND SERVICES

Workers' Compensation Managed Care Products. The Company's products and
rating plans encompass a continuum of options designed to fit the needs of its
client-employers. The most basic product, accounting for approximately 97.0% of
the Company's premiums in force at March 31, 1996, is a guaranteed cost
contract, in which the premium is set in advance and changes only based upon
changes in the client's operations or payroll. In return, the Company agrees to
assume statutorily imposed obligations of the client-employer to provide
workers' compensation benefits to its employees. The premium for these policies
varies depending upon the type of work performed by each employee and the
general business of the insured. An employer large enough to qualify, typically
those paying more than $5,000 in annual premium, will have its premium based on
its loss experience relative to its peers as determined over a three-year
period. This loss experience is adjusted by the type of business and associated
risks. A client who desires to assume a certain amount of financial risk may
elect a deductible which makes the client responsible for the first portion of
any claim. In exchange for the deductible election, the employer receives a
premium reduction. The Company also offers several loss sensitive plans
(retrospective rating plans and dividend plans) which determine the final
premium paid for the current policy period based on the insured's losses during
that same period.

TPA and Claims Adjustment Services. The Company has historically provided
both independent claims adjusting services and third party administration
("TPA") services in Louisiana and Texas. These services include independent
adjusting in multiple lines of coverage. Additionally, the Company provides
third-party administration services. Current plans involve the expansion of
existing services as well as the delivery of workers' compensation and employee
benefits, third-party administration, provider networks, medical case
management, medical bill review, loss prevention programs, occupational health
programs, risk management consulting, alternative dispute resolution and risk
financing consulting. The Company presently offers its services on a negotiated
fee-for-service basis. These services are typically rendered to self-insured
businesses, other insurance companies, trade associations and governmental
entities.

Other Products. In addition to providing workers' compensation products and
services, the Company presently offers certain of its workers' compensation
clients general liability coverage. In addition, one of the Company's
subsidiaries has traditionally provided automobile liability and property
insurance coverage in two states. The Company also utilizes this subsidiary to
file alternative workers' compensation rate structures in certain states in
order to permit the Company to offer its workers' compensation products and
services to a

31
<PAGE> 33

broader range of potential clients. For the three months ended March 31, 1996,
general liability and automobile coverage respectively accounted for 3.2% and
2.6% of the Company's gross premiums earned. In 1995, general liability and
automobile coverage respectively accounted for 3.7% and 4.7% of the Company's
gross premiums earned.

CLIENTS

Since it began operations in 1986, the Company has marketed its workers'
compensation products and services to employers whose employees are engaged in
hazardous occupations, and as a result, pay substantially higher than average
workers' compensation rates. From 1986 through 1993, substantially all of the
Company's clients were employers engaged in the logging industry. Beginning in
1994, the Company began to expand its client base by employers in other
hazardous occupation industries, such as general contracting, trucking, and oil
and gas. As a result of the Company's expansion efforts, gross premiums earned
from these other industries increased from approximately $550,000 in 1994 to
approximately $16.9 million in 1995, accounting for approximately 1.1% and 25.3%
of the Company's earned premiums in 1994 and 1995, respectively. Gross premiums
earned from these other industries for the period ended March 31, 1996 were
approximately $6.3 million, accounting for approximately 36.9% of the Company's
earned premiums.

Because the Company focuses on potential clients in selected industries, it
believes it has developed expertise in assessing not only the risks associated
with those industries, but also the operating practices of individual employers.
A substantial majority of the Company's safety professionals and claims
representatives have educational backgrounds and/or prior work experience in
safety-related fields or in the businesses in which the Company's clients
operate. The Company believes that this knowledge of its clients' businesses
provides it with the ability to better evaluate the profit opportunities of
providing its managed results services. In addition, the Company's employees
evaluate the employer's attitude toward maintaining and improving workplace
safety as well as the employer's willingness to partner with the Company in its
managed results approach to providing solutions to the employer's workers'
compensation needs.

The Company provided workers' compensation services and products to
approximately 2,900 employers as of March 31, 1996. For the three months ended
March 31, 1996, approximately 7.7% of the Company's gross premiums earned were
derived from state residual market programs and clients assigned to the Company
through assigned risk pools. See "-- Regulation -- Participation in State
Residual Market Programs" below. The average client, excluding clients in
assigned-risk pools, has an average annual premium of approximately $30,000.
During the year ended December 31, 1995, the Company's ten largest clients
accounted for approximately 5.1% of its premiums in force. Approximately 90.0%
of the policies scheduled to expire in 1995 were renewed by the Company's
clients, while approximately 84.0% of the policies scheduled to expire in 1994
were renewed by the Company's clients.

SALES AND MARKETING

As of March 31, 1996, the Company's workers' compensation products and
services were sold both through 20 direct agents employed by the Company and 188
independent agents. Most of the Company's direct agents either have degrees in
forestry or have worked extensively in the forestry industry. Similar to the
Company's safety professionals and claims representatives, direct agents live in
their assigned territories throughout the United States. The Company's direct
agents receive competitive salaries, commissions and a bonus based on the
profitability to the Company of their assigned client-employers. Although most
of the Company's products and services are sold through direct agents,
independent agents are also utilized in some areas, and are selected based upon
their proven expertise in industries targeted by the Company.

For the year ended December 31, 1995 and for the three months ended March
31, 1996, independent agents accounted for approximately 39.1% and 47.8%,
respectively, of the Company's gross premiums earned. No independent agent
accounted for more than 5.0% of the Company's gross premiums earned in either
period. In Mississippi, the Company has a contract with an independent general
agent who, in turn, has contractual arrangements with approximately 150
additional independent agents in that state. For the three months ended March
31, 1996, approximately 2.3% of the Company's earned premiums were generated by

32
<PAGE> 34

independent agents retained by this general agent. Although the Company expects
this contract to continue for the foreseeable future, the loss of this general
agent contract would require the Company to enter into an arrangement with
another general agent or enter into arrangements with individual independent
agents in Mississippi.

A.M. BEST RATING

The Company is currently assigned a group letter rating of "A" (Excellent)
from A.M. Best Company, Inc. ("A.M. Best"), the leading national insurance
rating agency. The Company was awarded an "A-" rating in 1991, its first year of
eligibility. The rating was raised to "A" in 1993. A.M. Best ratings are based
on a comparative analysis of the financial condition and operating performance
of insurance companies as determined by their publicly available reports and
meetings with the entities' officers. A.M. Best's ratings are based on factors
of concern to insureds and are not directed toward the protection of investors.
Furthermore, A.M. Best ratings are not ratings of any of the Company's
securities nor are such ratings a warranty of the Company's current or future
ability to meet its contractual obligations. A.M. Best ratings include Secure
Ratings, which consist of Superior (A++, A+), Excellent (A, A-) and Very Good
(B++, B+). A.M. Best also provides Vulnerable Ratings, which range from Adequate
(B, B-) to In Liquidation (F). The Company believes that its current A.M. Best
rating provides it with a competitive advantage over certain competitors because
certain potential clients will not purchase coverage from unrated or lower rated
companies and certain independent insurance agencies will not place coverage
with such companies. The Company presently intends to expand its business
through internal growth and acquisitions. However, while there can be no
assurances, the Company plans to manage its growth in a manner intended to
maintain its "A" (Excellent) rating. See "-- Strategy -- Pursue Growth
Opportunities" above.

REINSURANCE

Through reinsurance, the Company is able to transfer certain of the
financial risks of severe and catastrophic injury suffered by a client's
employee. The Company's reinsurance program includes a number of reinsurance
carriers, all of which have A.M. Best ratings of "A-" or better. The Company has
in effect specific "excess of loss" reinsurance agreements under which it pays
its reinsurers a percentage of gross premiums earned and whereby the reinsurers
agree to assume their allocated portion of the risks relating to claims over
$200,000 on a per occurrence basis up to their limit of liability.

The Company carries multiple reinsurance agreements, each with a specific
limit of liability that, in the aggregate, provide protection for each claims
occurrence up to $50,000,000 in excess of the Company's retention of $200,000.
As a result of the Company's increased capitalization following the Offering,
the Company intends to increase its retention under these agreements upon their
renewal in July 1997. Exclusions relative to the Company's managed workers'
compensation products and services are generally limited to occupational disease
exposures such as asbestosis, silicosis, brown lung and black lung. The Company
reviews each prospective client-employer to assess the potential exposure to
these types of excluded diseases before the Company's products and services are
offered.

INFORMATION TECHNOLOGY AND COMMUNICATIONS SYSTEMS

The Company uses its proprietary and other management information systems
as an integral part of its operations and makes a substantial ongoing investment
in improving its systems. The Company believes that the services it provides to
its clients and their employees are enhanced by integrating its information
systems to utilize more effectively the information it obtains in its
underwriting processes in conjunction with information regarding claims, billing
and claims management.

The Company's direct agents, safety professionals and claims
representatives are provided with laptop computers and other communication
equipment in order to more timely and efficiently complete the underwriting
process, to facilitate communication and to report and monitor claims. For
example, the Company's safety professionals have the ability to prepare survey
reports on-site and immediately assist

33
<PAGE> 35

potential clients with the design of workplace safety programs by providing
examples of safety plans implemented by other employers in similar businesses.

COMPETITION

The market to provide managed care workers' compensation insurance and
services is highly competitive. The Company's competitors include, among others,
insurance companies, specialized provider groups, in-house benefits
administrators, state insurance pools and other significant providers of health
care and insurance services. A number of the Company's current and potential
competitors are significantly larger, with greater financial and operating
resources than those of the Company, and can offer their services nationwide.
After a period of absence from the market, traditional national insurance
companies have recently re-entered the workers' compensation insurance market,
thereby increasing competition.

Competitive factors in the workers' compensation insurance field include
premium rates (in some states), levels of service, A.M. Best ratings, levels of
capitalization, quality of managed care services, the ability to reduce loss
ratios and the ability to reduce claims expense. The Company believes that its
products and services are competitively priced. In addition, the Company
believes its premium rates are typically lower than those for clients assigned
to the state-sponsored risk pools, allowing the Company to provide a viable
alternative for employers in such pools. The Company also believes that its
level of service, its "A" (Excellent) A.M. Best rating and its ability to reduce
claims are strong competitive factors that have enabled it to retain existing
clients and attract new clients. Competitive factors relating to the Company's
TPA products are primarily based upon pricing, service and reputation.

REGULATION

General. Managed health care programs are subject to various laws and
regulations. Both the nature and degree of applicable government regulation vary
greatly depending upon the specific activities involved. Generally parties that
actually provide or arrange for the provision of managed care workers'
compensation programs, assume financial risk related to the provision of those
programs or undertake direct responsibility for making payment or payment
decisions for those services are subject to a number of complex regulatory
schemes that govern many aspects of their conduct and operations. The managed
health care field is a rapidly expanding and changing industry; it is possible
that the applicable regulatory frameworks will expand to have an even greater
impact upon the conduct and operation of the Company's business.

The Company's business is subject to state-by-state regulation of workers'
compensation insurance and workers' compensation insurance management services.
Under the workers' compensation system, employer insurance or self-funded
coverage is governed by individual laws in each of the fifty states and by
certain federal laws. Changes in individual state regulation of workers'
compensation or managed health care may create a greater or lesser demand for
some or all of the Company's services or may require the Company to develop new
or modified services in order to meet the needs of the marketplace and compete
effectively in that marketplace. Under Louisiana law, an insurance company may
not, without regulatory approval, pay to its shareholders within a 12-month
period dividends or other distributions of cash or property the total fair
market value of which exceeds the lesser of (i) ten percent of surplus as to
policyholders at the end of the prior calendar year or (ii) the prior calendar
year's net income (less any realized capital gains). This requirement would
limit American Interstate's ability to make distributions to AMERISAFE in 1996
to approximately $2.7 million.

Premium Rate Restrictions. State regulations governing the workers'
compensation system and insurance business in general impose restrictions and
limitations on the Company's business operations that are not imposed on
unregulated businesses. Among other matters, state laws regulate not only what
workers' compensation benefits must be paid to injured workers, but also the
premium rates that may be charged by the Company to insure employers for those
liabilities. As a consequence, the Company's ability to pay insured workers'
compensation claims out of the premium revenue generated from the Company's sale
of such insurance is dependent on the level of premium rates permitted by state
laws. In this regard it is significant

34
<PAGE> 36

that the state regulatory agency that regulates workers' compensation benefits
may not be the same agency that regulates workers' compensation insurance
premium rates.

Financial and Investment Restrictions. Insurance company operations also
are subject to financial restrictions that are not imposed on other businesses.
State laws require insurance companies to maintain minimum surplus balances and
place limits on the amount of insurance a company may write based on the amount
of the company's surplus. These limitations restrict the rate at which the
Company's insurance operations can grow. The Company currently meets applicable
state capital and surplus requirements.

State laws also require insurance companies to establish reserves for
payment of policyholder liabilities and impose restrictions on the kinds of
assets in which insurance companies may invest. These restrictions may require
the Company to invest its assets more conservatively than it would if it were
not subject to the state law restrictions and may prevent the Company from
obtaining as high a return on its assets as it might otherwise be able to
realize.

Insurance Regulatory Information System. The National Association of
Insurance Commissioners ("NAIC") has developed a set of financial relationships
or "tests" called the Insurance Regulatory Information System ("IRIS") that were
designed for early identification of companies that may require special
attention by insurance regulatory authorities. These tests were developed
primarily to assist state insurance departments in executing their statutory
mandate to oversee the financial condition of insurance companies. Insurance
companies submit data on an annual basis to the NAIC, which in turn analyzes the
date using ratios covering twelve categories of financial data with defined
"usual ranges" for each category.

Falling outside the usual range of IRIS ratios is not considered a failing
result; rather, unusual values are viewed as part of the regulatory early
monitoring system. Furthermore, in some years, it may not be unusual for
financially sound companies to have several ratios with results outside the
usual ranges. An insurance company may fall out of the usual range for one or
more ratios because of specific transactions that are in themselves immaterial
or eliminated at the consolidated level. Generally, an insurance company will
become subject to regulatory scrutiny if it falls outside the usual ranges of
four or more of the ratios. In normal years, 15% of the companies included in
the IRIS system are expected by the NAIC to be outside the usual range on four
or more ratios. For the years 1991 through 1996, the Company's insurance
subsidiaries were not outside the usual ranges for more than two ratios.

Participation in State Guaranty Funds. Every state has established one or
more insurance guaranty funds or associations which are charged by state law to
pay claims of policyholders insured by a company that becomes insolvent. All
insurance companies must participate in the guaranty associations in the states
where they do business and are assessable for the associations' operating costs,
including the cost of paying policyholder claims against an insolvent insurer.
The Company's financial performance could be adversely affected by guaranty
association assessments as a consequence of the insolvency of other insurers
over which the Company has no control.

Participation in State Residual Market Programs. Many of the states in
which the Company is licensed, or intends to become licensed, to provide its
managed workers' compensation products and services require that all licensed
insurers participate in a program to provide workers' compensation insurance to
those employers who have not or cannot procure coverage from a carrier on a
negotiated basis. The level of required participation in such programs is
generally determined by calculating the volume of the Company's voluntarily
written business in that state as a percentage of all voluntarily written
business in that state by all insurers. The resulting factor is the proportion
of premium the Company must accept as a percentage of all of the premiums in
policies residing in that state's residual market program.

Companies generally have two methods of fulfilling their residual market
obligations: (i) they may join a reinsurance pool in which the results of all
policies provided through the pool are shared by the participating companies, or
(ii) they may accept directly assigned policies for which they are obligated to
provide all services and assume the underwriting results. Currently, the Company
utilizes both methods, depending on management's evaluation of the most
efficient method to adopt in each state. Generally, the Company believes that
the direct-assignment method produces better results as the Company applies its
managed results

35
<PAGE> 37

approach to these involuntary client-employers. In 1995 and for the three months
ended March 31, 1996, approximately 6.7% and 7.7% of the Company's gross
premiums earned, respectively, were from direct assignment residual market
obligations.

Statutory Accounting and Solvency Regulation. State regulation of insurance
company financial transactions and financial condition is based on statutory
accounting principles ("SAP"). SAP differs in a number of ways from generally
accepted accounting principles ("GAAP") which govern the financial reporting of
most other businesses. In general, SAP financial reports are more conservative
than GAAP financial reports.

State insurance regulators closely monitor the financial condition of
insurance companies reflected in SAP financial statements and can impose
significant financial and operating restrictions on an insurance company that
becomes financially impaired. Regulators generally have the power to impose
restrictions or conditions on the following kinds of activities of a financially
impaired insurance company: the transfer or disposition of assets; the
withdrawal of funds from bank accounts; the extension of credit or making of
loans; and the investment of funds.

State Subsequent Injury Funds. A number of states operate trust funds that
reimburse employers and carriers for excess workers' compensation benefits paid
to employees when an employee is injured on the job and the injury to the
physically disabled worker merges with, aggravates or accelerates a preexisting
work-related impairment. The state-managed trust funds are funded through
assessments against insurers and self-insurers providing workers' compensation
coverage in a specific state. At March 31, 1996, the Company carried receivables
on its books from state subsequent injury funds of less than $500,000.

Possible Future Regulation. State legislatures and the federal government
have considered and are considering a number of cost containment and health care
reform proposals. The Company believes it may benefit from some proposals that
favor the growth of managed care. However, no assurance can be given that the
state or federal government will not adopt future health care reforms that would
adversely affect the Company.

In recent years the state insurance regulatory framework has come under
increased federal scrutiny, and certain state legislatures have considered or
enacted laws that altered and, in many cases, increased state authority to
regulate insurance companies and insurance holding companies. Further, the NAIC
and state insurance regulators are re-examining existing laws and regulations,
specifically focusing on investment laws for insurers, modifications to holding
company regulations, codification of statutory accounting practices, risk-based
capital guidelines, interpretations of existing laws and the development of new
laws. In addition, Congress and certain federal agencies are investigating the
current condition of the insurance industry in the United States to determine
whether to impose federal regulation. The Company cannot predict with certainty
the effect any proposed or future legislation or NAIC initiatives may have on
the conduct of the Company's business or the financial condition or results of
operations of the Company.

PROPERTIES

The Company owns its 43,000 square foot executive offices in DeRidder,
Louisiana and leases its executive offices in Dallas, Texas. The Company also
leases space at other locations for its service offices and claims
representative offices. See "Certain Transactions -- Executive Office Lease."

EMPLOYEES

The Company had 315 full-time employees at July 31, 1996. Of the Company's
employees, approximately 50 perform administrative and financial functions and
265 serve on service and marketing teams providing its managed results services
to its employer-clients. None of the Company's employees is subject to
collective bargaining agreements. The Company believes that its employee
relations are good.

36
<PAGE> 38

LEGAL PROCEEDINGS

In the ordinary course of administering its workers' compensation managed
results program, the Company is routinely involved in the adjudication of claims
resulting from workplace injuries. Except as described below, the Company is not
involved in any legal or administrative claims that it believes are likely to
have a materially adverse effect on the Company's business, financial condition
or results of operations.

The Company's federal income tax return with respect to its 1992 tax year
is currently subject to an audit by the IRS. The principal issues with respect
to which the IRS has proposed adjustments relate to (i) whether the Company
should have included in income at the time of receipt certain deposits it
received from its clients to secure the payment of premiums, and (ii) whether
the Company's reserves for future claims were excessive. The aggregate amount of
additional tax which would be owed by the Company if the proposed adjustments
were sustained is approximately $3.3 million, plus accrued interest. Because the
proposed adjustments relate to the timing of the receipt of income, they would
not, if sustained, be expected to have an impact on the Company's results of
operations, but would impact the Company's cash flow. The Company believes that
it has meritorious defenses to the proposed adjustments and intends to contest
them vigorously.

The federal income tax returns filed by a subsidiary of the Company with
respect to its 1990 and 1991 tax years are also presently subject to an audit by
the IRS. During the years in question the corporation was not a subsidiary of
the Company. The principal issue in this audit relates to the reasonableness of
compensation paid by such corporation to Mr. Morris and another former
officer-shareholder of the Company during such years. The IRS has proposed that
a portion of the compensation paid to these individuals during such years is not
deductible for federal income tax purposes, and that as a result the corporation
owes additional tax in the amount of approximately $2.1 million, plus accrued
interest. No penalties have been asserted by the IRS. The corporation believes
that it has meritorious defenses to the proposed adjustments and is contesting
them vigorously. In connection with the Reorganization, the MorTem Corporations
have agreed to indemnify the Company and its affiliates for any liability they
may have with respect to this tax audit.

37
<PAGE> 39

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The names of the directors and executive officers of the Company and their
ages and positions are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----- --- ----------
<S> <C> <C>
Millard E. Morris....................... 51 Chairman of the Board of Directors
and Chief Executive Officer
Mark R. Anderson........................ 44 President, Chief Operating Officer
and Director
John R. Buck............................ 35 Vice President, Chief Financial
Officer, Treasurer and Director
Arthur L. Hunt.......................... 51 Vice President -- Risk Group and
Director
C. Allen Bradley, Jr. .................. 45 Vice President -- Risk Services Group
and General Counsel
Andre Comeaux, Jr. ..................... 35 Vice President -- Product Development
Zonie A. Harris......................... 60 Vice President -- Claims Services
Craig P. Leach.......................... 46 Vice President -- Business
Development
Daniel J. Jessee........................ 43 Director
N. David Spence......................... 60 Director
</TABLE>

Millard E. Morris has been Chairman of the Board, Chief Executive Officer,
and principal shareholder of the Company since its inception in 1985. Mr. Morris
began his insurance career in 1972, and has owned and managed many diverse
financial services operations. He is currently the Chairman of the Board and
principal shareholder of Auto One Acceptance Corporation, a Dallas based
financial services company. Mr. Morris has a Bachelor of Business Administration
in Accounting and a Master of Science in Economics, both from Baylor University,
and is a Certified Public Accountant. Mr. Morris serves in the class of
Directors whose terms expire at the Company's 1999 annual meeting of
shareholders.

Mark R. Anderson began his insurance career in 1979 and joined the Company
in 1986 as Vice President, Chief Operating Officer and Director. He was elected
President in 1996, and has served as President of American Interstate since
1987. Mr. Anderson has served on various legislative insurance advisory
committees in Louisiana, and has served as a workers' compensation rate and
reform consultant to several southern Insurance Commissioners. He holds a
Bachelor of Science degree from Louisiana State University and a Master of
Science degree in Business Administration from Boston University. Mr. Anderson
serves in the class of directors whose terms expire at the Company's 1998 annual
meeting of shareholders.

John R. Buck has been Vice President and Chief Financial Officer of the
Company since 1989 and a Director since 1994. He served in various accounting
positions with Zale Corporation's Insurance Group from 1983 to 1988 and joined
American Interstate as Controller in 1988. Mr. Buck has Bachelor of Science
degrees in Accounting and Business Administration from Illinois State
University, and became a Certified Public Accountant in 1985. Mr. Buck serves in
the class of directors whose terms expire at the Company's 1997 annual meeting
of shareholders.

Arthur L. Hunt has served as Secretary of the Company since 1991, was
elected Vice President -- Risk Group in August 1996, and has been a Director
since 1994. Prior to joining the Company, Mr. Hunt served twenty years in the
United States Army. He served as a Judge Advocate General officer and retired
after attaining the rank of Colonel. Mr. Hunt has a Bachelor of Science degree
in Psychology from Loyola University and a law degree from the Loyola University
School of Law, Chicago. Mr. Hunt serves in the class of directors whose terms
expire at the Company's 1997 annual meeting of shareholders.

38
<PAGE> 40

C. Allen Bradley, Jr. was elected Vice President -- Risk Services Group and
General Counsel in August 1996. He joined a subsidiary of the Company in 1994 as
an executive officer, and prior to that time was engaged in the private practice
of law. Mr. Bradley also served as a Louisiana State Representative from 1984 to
1992. He holds a Bachelor of Arts degree from Southeastern Louisiana University
and a law degree from Louisiana State University.

Andre Comeaux, Jr. has been Vice President -- Product Development since
August 1996 and has been Industries Manager of American Interstate since April
1995. Mr. Comeaux began his career in the insurance industry in 1987 with AEtna
Casualty & Surety Co., serving as an Engineering Consultant and Commercial
Account Representative. In 1993, he joined American International Group as an
Account Executive, Loss Control Services, and served in that capacity until he
joined American Interstate. Mr. Comeaux holds a Bachelor of Science degree in
Mechanical Engineering from the University of Southwestern Louisiana and is a
Chartered Property Casualty Underwriter, a Certified Safety Professional and is
licensed as a Professional Engineer by the state of California. He is recognized
as a Qualified Field Safety Representative by the states of Texas and Arkansas
and is recognized as an Associate in Loss Control Management by the Insurance
Institute of America.

Zonie A. Harris was elected Vice President -- Claims Services in August
1996. Since 1986 he has also served as Vice President, Claims for American
Interstate. Mr. Harris has served with various affiliates of the Company and
other insurance firms in claims management since 1972. Prior to his insurance
career, Mr. Harris spent twenty years in the U.S. Air Force as a communications
specialist.

Craig P. Leach was elected Vice President -- Business Development in August
1996. He has served since 1994 as Senior Vice President of American Interstate,
and has served in similar roles with affiliated firms since beginning his
insurance career in 1980. Prior to 1980 Mr. Leach held various management
positions with companies engaged in the paper and lumber industries. He holds
both a Bachelor of Science degree and a Master of Science degree in Forestry
from Louisiana State University. Mr. Leach currently serves on the board of
directors of the Louisiana Forestry Association, and has served in an advisory
capacity for the Southern Forest Insurance Coalition and various wood product
companies throughout the country.

Daniel J. Jessee has been a Director of the Company since August 1996.
Since January 1995, Mr. Jessee has been Vice Chairman of Banc One Capital
Corporation ("BOCC"), an investment banking firm and a subsidiary of Banc One
Corporation. Prior to becoming Vice Chairman, he was a Managing Director of BOCC
since August 1990. Mr. Jessee serves in the class of directors whose terms
expire at the Company's 1999 annual meeting of shareholders. Mr. Jessee is also
a director of RAC Financial Group, Inc.

N. David Spence has been a Director of the Company since August 1996. Mr.
Spence is a Senior Vice President and General Manager -- Paper Division of Boise
Cascade Corporation ("BCC"). Mr. Spence joined BCC in 1969 and has served in
various management positions since that time. Mr. Spence serves in the class of
directors whose terms expire at the Company's 1998 annual meeting of
shareholders. Mr. Spence is also a director of the American Forest & Paper
Association and the Pacific Coast Association of Pulp & Paper Manufacturers.

COMMITTEES

The Bylaws provide that the Board of Directors may elect such directorate
committees as it may from time to time determine. Two committees of the Board of
Directors have been established: the Audit Committee and the Compensation
Committee.

The Audit Committee of the Board of Directors (the "Audit Committee") will
review the professional services provided by the Company's independent
accountants and the independence of such accountants from management of the
Company. The Audit Committee will also review the scope of the audit coverage
and annual financial statements of the Company and such other matters with
respect to accounting, auditing practices and procedures of the Company as it
may find appropriate or as may have been brought to its attention. The members
of the Audit Committee are Messrs. Jessee and Spence.

39
<PAGE> 41

The Compensation Committee of the Board of Directors (the "Compensation
Committee") will review and approve executive salaries and administer bonus,
stock option and incentive compensation plans of the Company. It will advise and
consult with management regarding significant employee benefit policies and
practices and significant compensation policies and practices of the Company.
The members of the Compensation Committee are Messrs. Jessee and Spence.

LIMITATION OF LIABILITY AND INDEMNIFICATION

As authorized by the Texas Miscellaneous Corporation Laws (the "TMCL"), the
Company's Articles provide that, to the full extent permitted by the TMCL or any
other applicable laws as presently or hereafter in effect, no director of the
Company shall be personally liable to the Company for an act or omission in his
capacity as a director of the Company. The TMCL does not permit limitation of
liability of any director (i) for a breach of the director's duty of loyalty to
the Company or its shareholders, (ii) for acts or omissions not in good faith
that constitute a breach of duty of the director or an act or omission that
involves intentional misconduct or a knowing violation of the law, (iii) a
transaction from which the director received an improper personal benefit, or
(iv) an act or omission for which liability of a director is expressly provided
by an applicable statute. The principal effect of the limitation of liability
provision is that a shareholder is unable to prosecute an action for monetary
damages against a director of the Company unless the shareholder can demonstrate
one of the specified bases of liability.

Additionally, the Company's Articles and Bylaws provide that the Company
shall indemnify all directors, officers, agents or employees of the Company to
the fullest extent permitted by the Texas Business Corporation Act ("TBCA"). The
TBCA establishes the standard which permits a corporation to provide
indemnification, except when shareholder approval for the indemnification has
been obtained. The TBCA provides that a director may be indemnified for
liabilities and expenses in respect to actions brought against him by reason of
his serving as a director if he conducted himself in good faith and reasonably
believed that (i) in the case of conduct in his official capacity as a director,
his conduct was in the Company's best interests, and (ii) in all other cases,
that his conduct was at least not opposed to the best interests of the Company.
Indemnification for criminal actions also requires the director to have no
reason to believe his conduct was unlawful. In addition, if the director is
found liable to the Company or on the basis that a personal benefit was
improperly received by him, indemnification will be limited to expenses actually
incurred and will not be available if the director is found liable for willful
or intentional misconduct in the performance of his duty to the Company.

The Company has entered into certain agreements ("Indemnification
Agreements") with each of its directors and executive officers designed to give
effect to the foregoing provisions of the Articles and Bylaws and to provide
certain additional assurances against the possibility of uninsured liability.
The effect of these provisions and the Indemnification Agreements will be to
eliminate the right of the Company and its shareholders (through shareholders'
derivative suits on behalf of the Company) to recover monetary damages against a
director for breach of fiduciary duty as a director except as described therein.
The provisions of the Articles and Bylaws and the Indemnification Agreements
will not alter the liability of directors of the Company under federal
securities laws.

40
<PAGE> 42

EXECUTIVE COMPENSATION

The following table provides information concerning the annual and
long-term compensation for services paid or accrued by the Company for the
fiscal year ended December 31, 1995 to (i) the Company's chief executive officer
and (ii) each other executive officer of the Company whose total annual salary
and bonus exceeded $100,000, based on salary and bonuses earned during 1995
(collectively, the "Named Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS(1) COMPENSATION(2) COMPENSATION
- ------------------------------------------- -------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Millard E. Morris.......................... $275,750 $750,000 -- $1,185(3)
Chairman of the Board of Directors and
Chief Executive Officer
Mark R. Anderson........................... 150,000 265,000 -- 16,845(4)
President and Chief Operating Officer
Craig P. Leach............................. 122,248 92,139 -- 27,285(5)
Vice President -- Business Development
C. Allen Bradley, Jr....................... 120,000 50,000 -- 600(6)
Vice President -- Risk Services Group and
General Counsel
John R. Buck............................... 85,000 35,000 -- 6,100(7)
Vice President, Chief Financial Officer
and Treasurer
</TABLE>

- ---------------

(1) Reflects bonus earned during the 1995 fiscal year. In all cases, the bonus
has been or will be paid during the 1996 fiscal year.

(2) None of the Named Officers received personal benefits, securities or
property in excess of the lesser of $50,000 or 10% of such individual's
reported salary and bonus.

(3) Consists of Company contributions to the Company's 401(k) Plan (the "401(k)
Plan").

(4) Consists of $1,185 of Company contributions to the 401(k) Plan and $15,660
in premiums on a life insurance policy for Mr. Anderson's benefit.

(5) Consists of $1,185 of Company contributions to the 401(k) Plan and $26,100
in premiums on a life insurance policy for Mr. Leach's benefit.

(6) Consists of Company contributions to the 401(k) Plan.

(7) Consists of $880 of Company contributions to the 401(k) Plan and $5,220 in
premiums on a life insurance policy for Mr. Buck's benefit.

EMPLOYMENT AGREEMENTS

In connection with the Offering, the Company entered into an employment
agreement (the "Employment Agreement") with each of Messrs. Morris, Anderson,
Buck, Leach and Bradley (each, an "Executive Officer") that expire on the third
anniversary of the Offering. Pursuant to the Employment Agreements, Mr. Morris
serves as Chairman of the Board of Directors and Chief Executive Officer of the
Company and is paid an annual base salary of $450,000, Mr. Anderson serves as
President and Chief Operating Officer of the Company and is paid an annual base
salary of $275,000, Mr. Buck serves as Vice President, Chief Financial Officer
and Treasurer of the Company and is paid an annual base salary of $120,000, Mr.
Leach serves as Vice President -- Business Development of the Company and
receives an annual base salary of $125,000, and Mr. Bradley serves as Vice
President -- Risk Services Group and General Counsel of the Company and

41
<PAGE> 43

receives an annual base salary of $120,000. In addition to their annual base
salaries, each of the Executive Officers is entitled to receive an annual bonus
at the discretion of the Board of Directors. The Employment Agreements provide
for salary adjustments at the discretion of the Board of Directors and further
provide that the Executive Officers will be entitled to participate in
Company-sponsored employee benefit plans or arrangements and other benefits
generally available to employees of the Company. Each Employment Agreement
provides that if the Executive Officer's employment is involuntarily terminated
by the Company other than for "cause" (as defined in the Employment Agreement),
the Executive Officer, subject to certain conditions, shall receive termination
payments calculated in accordance with the Employment Agreement for a period of
one year after the date of termination. Subject to certain exceptions, each
Executive Officer's Employment Agreement prohibits him from competing with or
working for a competitor of the Company or any of its subsidiaries for a period
of one year after the termination of his employment with the Company, if his
employment is involuntarily terminated by the Company other than for "cause".
Upon the expiration of the initial three-year term and on each subsequent
anniversary thereof, each Employment Agreement automatically renews for an
additional one-year period unless earlier terminated by either party upon 90
day's notice given prior to the end of the initial term or any extension. Mr.
Morris' Employment Agreement does not provide for him to devote his full time to
the business and affairs of the Company.

STOCK INCENTIVE PLAN

General. The Board of Directors of the Company adopted the AMERISAFE, Inc.
1996 Stock Incentive Plan (the "Stock Incentive Plan") on August 5, 1996,
subject to approval by the shareholders of the Company. A majority of the
holders of the Common Stock of the Company approved the Stock Incentive Plan on
August 5, 1996.

The purpose of the Stock Incentive Plan is to enable the Company to attract
and retain directors, officers and other key employees and to provide them with
appropriate incentives and rewards for superior performance. The Stock Incentive
Plan is to be administered by the Compensation Committee. The Stock Incentive
Plan affords the Compensation Committee the flexibility to respond to changes in
the competitive and legal environments, thereby protecting and enhancing the
Company's current and future ability to attract and retain officers and other
key employees and consultants.

The Stock Incentive Plan authorizes the granting of options to purchase
shares of Class A Common Stock ("Option Rights"), stock appreciation rights
("Appreciation Rights") and restricted shares ("Restricted Shares"). The terms
applicable to these various types of awards, including those terms that may be
established by the Compensation Committee when making or administering
particular awards, are set forth in detail in the Stock Incentive Plan.

Summary of Stock Incentive Plan.

Shares Available Under the Stock Incentive Plan. Subject to adjustment as
provided in the Stock Incentive Plan, the number of shares of Class A Common
Stock that may be issued or transferred, plus the number of shares of Class A
Common Stock covered by outstanding awards granted under the Stock Incentive
Plan, shall not in the aggregate exceed 3,000,000.

Eligibility. Directors, officers and other salaried employees of the
Company or its subsidiaries may be selected by the Compensation Committee to
receive benefits under the Stock Incentive Plan. Under the Stock Incentive Plan,
the Company's Board of Directors (the "Board") may also make grants and further
provides that only the Board may award grants to members of the Compensation
Committee.

Option Rights. The Compensation Committee may grant Option Rights that
entitle the optionee to purchase shares of Class A Common Stock. The option
price is payable at the time of exercise (i) in cash or cash equivalents, (ii)
by the transfer to the Company of shares of Class A Common Stock that are
already owned by the optionee and have a value at the time of exercise equal to
the option price, (iii) with any other legal consideration the Compensation
Committee may deem appropriate, or (iv) by any combination of the foregoing
methods of payment. Any grant may provide for deferred payment of the option
price from the

42
<PAGE> 44

proceeds of sale through a broker of some or all of the shares of Class A Common
Stock to which the exercise relates.

Option Rights granted under the Stock Incentive Plan may be Option Rights
that are intended to qualify as "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
Option Rights that are not intended to so qualify. At or after the date of grant
of any nonqualified Option Rights, the Compensation Committee may provide for
the payment of dividend equivalents to the optionee on a current, deferred or
contingent basis or may provide that dividend equivalents be credited against
the option price. The Compensation Committee has the authority to specify at the
time Option Rights are granted that shares of Class A Common Stock will not be
accepted in payment of the option price until they have been owned by the
optionee for a specified period; however, the Stock Incentive Plan does not
require any such holding period and would permit immediate sequential exchanges
of shares of Class A Common Stock at the time of exercise of Option Rights.

No Option Right may be exercised more than 10 years from the date of grant.
Each grant must specify the conditions, including as and to the extent
determined by the Compensation Committee, the period of continuous employment or
continuous engagement of consulting services by the Company that are necessary
before the Option Rights will become exercisable, and may provide for the
earlier exercise of the Option Rights, including, without limitation, in the
event of a change in control of the Company or other similar transaction or
event. Successive grants may be made to the same optionee regardless of whether
Option Rights previously granted to him or her remain unexercised.

Appreciation Rights. Appreciation Rights granted under the Stock Incentive
Plan may be either free-standing or granted in tandem with Option Rights. An
Appreciation Right represents the right to receive from the Company the
difference (the "Spread"), or a percentage thereof not in excess of 100 percent,
between the base price per share of Class A Common Stock in the case of a
free-standing Appreciation Right, or the option price of the related Option
Right in the case of a tandem Appreciation Right, and the market value of the
Class A Common Stock on the date of exercise of the Appreciation Right. Tandem
Appreciation Rights may only be exercised at a time when the related Option
Right is exercisable and the Spread is positive, and the exercise of a tandem
Appreciation Right requires the surrender of the related Option Right for
cancellation. A free-standing Appreciation Right must have a base price that is
at least equal to the fair market value of a share of Class A Common Stock on
the date of grant, must specify the conditions, including as and to the extent
determined by the Compensation Committee, the period of continuous employment or
continuous engagement of consulting services and may not be exercised more than
10 years from the date of grant. Any grant of Appreciation Rights may specify
that the amount payable by the Company upon exercise may be paid in cash, shares
of Class A Common Stock or combination thereof and the Compensation Committee
may either reserve or grant to the recipient the right to elect among those
alternatives. The Compensation Committee may provide with respect to any grant
of Appreciation Rights for the payment of dividend equivalents thereon in cash
or Class A Common Stock on a current, deferred or contingent basis.

Restricted Shares. An award of Restricted Shares involves the immediate
transfer by the Company to a participant of ownership of a specific number of
shares of Class A Common Stock in consideration of the performance of services.
The participant is entitled immediately to voting, dividend and other ownership
rights in the shares of Class A Common Stock. The transfer may be made without
additional consideration or for consideration in an amount that is less than the
market value of the shares on the date of grant, as the Compensation Committee
may determine.

Restricted Shares may be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code for a period to be determined by
the Compensation Committee. An example would be a provision that the Restricted
Shares would be forfeited if the participant ceased to serve the Company as a
director, officer or other salaried employee during a specified period of years.
In order to enforce these forfeiture provisions, the transferability of
Restricted Shares will be prohibited or restricted in a manner and to the extent
prescribed by the Compensation Committee for the period during which the
forfeiture provisions are to continue. The Compensation Committee may provide
for a shorter period during which the forfeiture

43
<PAGE> 45

provisions are to apply, including, without limitation, in the event of a change
in control of the Company any or other similar transaction or event.

Transferability. Unless the agreement evidencing such grant provides
otherwise, no Option Right, or other "derivative security" within the meaning of
Rule 16b-3 under the Exchange Act will be transferable by a participant except
by will or the laws of descent and distribution or pursuant to a qualified
domestic relations order, as that term is defined under the Code or the Employee
Retirement Income Security Act of 1974, as amended. Option Rights may not be
exercised during a participant's lifetime except by the participant or, in the
event of his or her incapacity, by his or her guardian or legal representative
acting in a fiduciary capacity on behalf of the participant under the state law
and court supervision.

Adjustments. The maximum number of shares of Class A Common Stock that may
be issued or transferred under the Stock Incentive Plan, the number of shares
covered by outstanding awards and the option prices per share applicable
thereto, are subject to adjustment in the event of stock dividends, stock
splits, combinations of shares, recapitalizations, mergers, consolidations,
spin-offs, reorganizations, liquidations, issuances of rights or warranties, and
similar transactions or events. In the event of any such transaction or event,
the Compensation Committee may in its discretion provide in substitution for any
or all outstanding awards under the Stock Incentive Plan such alternative
consideration as it may in good faith determine to be equitable in the
circumstances and may require the surrender of all awards so replaced.

Administration. The Stock Incentive Plan is administered by the
Compensation Committee. In connection with its administration of the Stock
Incentive Plan, the Compensation Committee is authorized to interpret the Stock
Incentive Plan and related agreements and other documents. The Compensation
Committee may make grants to participants under any or a combination of all of
the various categories of awards that are authorized under the Stock Incentive
Plan and may provide for special terms for awards to participants who are
foreign nationals, as the Compensation Committee may consider necessary or
appropriate to accommodate differences in local law, tax policy or custom.

Amendments. The Stock Incentive Plan may be amended from time to time by
the Compensation Committee, but without further approval by the shareholders of
the Company no such amendment (unless expressly allowed pursuant to the
adjustment provisions described above) may cause Rule 16b-3 under the Exchange
Act to cease to be applicable to the Stock Incentive Plan.

Federal Income Tax Consequences. The following is a brief summary of
certain of the federal income tax consequences of certain transactions under the
Stock Incentive Plan based on federal income tax laws in effect on the date of
this Prospectus. This summary is not intended to be exhaustive and does not
describe state or local tax consequences.

Nonqualified Option Rights. In general: (i) no income will be recognized by
an optionee at the time a nonqualified Option Right is granted; (ii) at the time
of exercise of a nonqualified Option Right, ordinary income will be recognized
by the optionee in an amount equal to the difference between the option price
paid for the shares of Class A Common Stock and the fair market value of such
shares if they are nonrestricted on the date of exercise; and (iii) at the time
of sale of shares acquired pursuant to the exercise of a nonqualified Option
Right, any appreciation (or depreciation) in the value of such shares after the
date of exercise will be treated as either short-term capital gain (or loss)
depending on how long the shares of Class A Common Stock have been held.

Incentive Stock Options. No income generally will be recognized by an
optionee upon the grant or exercise of an incentive stock option. If shares of
Class A Common Stock are issued to an optionee pursuant to the exercise of an
incentive stock option and no disqualifying disposition of the shares is made by
the optionee within two years after the date of grant or within one year after
the transfer of the shares to the optionee, then upon the sale of the shares any
amount realized in excess of the option price will be taxed to the optionee as
long-term capital gain and any loss sustained will be long-term capital loss.

If shares of Class A Common Stock acquired upon the exercise of an
incentive stock option are disposed of prior to the expiration of either holding
period described above, the optionee generally will recognize ordinary income in
the year of disposition in an amount equal to any excess of the fair market
value of the

44
<PAGE> 46

shares of Class A Common Stock at the time of exercise (or, if less, the amount
realized on the disposition of the shares in a sale or exchange) over the option
price paid for the shares. Any further gain (or loss) realized by the optionee
generally will be taxed as short-term or long-term capital gain (or loss)
depending on the holding period.

Restricted Shares. A recipient of Restricted Shares generally will be
subject to tax at ordinary income rates on the fair market value of the
Restricted Shares reduced by any amount paid by the recipient at such time as
the shares are no longer subject to a risk of forfeiture or restrictions on
transfer for purposes of Section 83 of the Code. However, a recipient who so
elects under Section 83(b) of the Code within 30 days of the date of transfer of
the shares will have taxable ordinary income on the date of transfer of the
shares equal to the excess of the fair market value of the shares (determined
without regard to the risk of forfeiture or restrictions on transfer) over any
purchase price paid for the shares. If a Section 83(b) election has not been
made, any non-restricted dividends received with respect to Restricted Shares
that are subject at that time to a risk of forfeiture or restrictions on
transfer generally will be treated as compensation that is taxable as ordinary
income to the recipient.

Special Rules Applicable to Officers and Directors. In limited
circumstances where the sale of shares of Class A Common Stock that are received
as the result of a grant of an award could subject an officer or director to
suit under Section 16(b) of the Exchange Act, the tax consequences to the
officer or director may differ from the tax consequences described above. In
these circumstances, unless a special election has been made, the principal
difference usually will be to postpone valuation and taxation of the shares of
Class A Common Stock received so long as the sale of shares of Class A Common
Stock received could subject the officer or director to suit under Section 16(b)
of the Exchange Act, but no longer than six months.

Tax Consequences to the Company. To the extent that a participant
recognized ordinary income in the circumstance described above, the Company or
subsidiary for which the participant performs services will be entitled to a
corresponding deduction provided that, among other things, the income meets the
test of reasonableness, is an ordinary and necessary business expense, is not
subject to the annual compensation limitation set forth in Section 162(m) of the
Code and is not "excess parachute payment" within the meaning of Section 280G of
the Code.

Awards. Option Rights with respect to a total of 600,000 shares of Class A
Common Stock have been granted under the Stock Incentive Plan, including Option
Rights granted to executive officers of the Company as set forth in the table
below. The Option Rights are exercisable at a price equal to $12.00 per share
and vest in equal increments on each of the first five anniversaries of the date
of grant.

<TABLE>
<CAPTION>
OPTION RIGHTS
GRANTEE GRANTED
--------- -------------
<S> <C>
Mark R. Anderson...................................... 120,000
Craig P. Leach........................................ 160,000
John R. Buck.......................................... 80,000
Zonie A. Harris....................................... 60,000
Arthur L. Hunt........................................ 60,000
C. Allen Bradley, Jr.................................. 40,000
Andre Comeaux, Jr..................................... 20,000
</TABLE>

In addition, an aggregate of 60,000 Option Rights have been granted to certain
non-executive employees of the Company on the same terms as the grants to
executive officers.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to August 1996, the Company did not have a Compensation Committee or
other committee of the Board of Directors performing similar functions.
Decisions concerning compensation of executive officers of the Company were made
by the Company's Board of Directors. After the Offering, compensation decisions
will be made by the Compensation Committee, currently consisting of Messrs.
Jessee and Spence.

45
<PAGE> 47

DIRECTOR COMPENSATION

Directors who are employees of the Company will not be paid any fees or
additional compensation for service as members of the Board of Directors or any
committee thereof. Each non-employee director will receive $3,500 for each
meeting of the Board of Directors attended. Upon completion of the Offering,
non-employee directors will also receive a grant of 3,000 Restricted Shares
under the Stock Incentive Plan. Such grant will vest ratably over a three-year
period with 1,000 shares vesting on the first anniversary of the date of grant
and 1,000 shares vesting on each of the next two succeeding anniversaries. If a
non-employee director's membership on the Board of Directors of the Company is
terminated for any reason, the shares of restricted Class A Common Stock that
have not yet vested as of the date of such termination will be forfeited. See
"-- Stock Incentive Plan" above. All directors will be reimbursed for travel and
other related expenses incurred in attending meetings of the Board of Directors
or any committee thereof.

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of July 31, 1996 by: (i) each of the Company's
directors and Named Officers; (ii) all executive officers and directors of the
Company as a group; and (iii) each person known by the Company to be the
beneficial owner of more than five percent of the outstanding Common Stock.
Except as otherwise noted, each of the holders listed below has sole voting
power and investment power over the shares beneficially owned.

<TABLE>
<CAPTION>
SHARES OF COMMON SHARES OF COMMON
STOCK BENEFICIALLY STOCK BENEFICIALLY
OWNED PRIOR TO THE OWNED AFTER THE
OFFERING(1) OFFERING(1)
NAME OF --------------------- ---------------------
BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
------------------------------------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Millard E. Morris(2)....................... 17,126,521 98.4% 17,126,521 60.3%
Mark R. Anderson........................... 273,479 1.6 273,479 1.0
John R. Buck............................... -- 0 -- 0
Arthur L. Hunt............................. -- 0 -- 0
Daniel J. Jessee........................... -- 0 -- 0
N. David Spence............................ -- 0 -- 0
Craig P. Leach............................. -- 0 -- 0
C. Allen Bradley, Jr. ..................... -- 0 -- 0
All Directors and Executive Officers as a
Group (10 Persons)....................... 17,400,000 100.0% 17,400,000 61.3%
</TABLE>

- ---------------

(1) All shares of Common Stock beneficially owned by Messrs. Morris and Anderson
are shares of Class B Common Stock, representing respectively 98.4% and
1.6% of the outstanding Class B Common Stock both before and after the
Offering. Excludes 6,000 shares of Class A Common Stock to be issued to
non-employee directors of the Company upon completion of the Offering
pursuant to the Stock Incentive Plan.

(2) Mr. Morris' business address is 5550 LBJ Freeway, Suite 901, Dallas, Texas
75240.

46
<PAGE> 48

CERTAIN TRANSACTIONS AND RELATIONSHIPS

REGISTRATION RIGHTS AGREEMENT

In connection with the Offering, the Company granted certain registration
rights to Messrs. Morris and Anderson. See "Description of Capital
Stock -- Registration Rights."

TAX ALLOCATION AGREEMENT

The Company has entered into a Tax Allocation Agreement with the
Distributed Subsidiaries to provide for (i) the allocation of payments of taxes
for periods during which the Company (or any of its affiliates other than the
Distributed Subsidiaries and the direct and indirect subsidiaries thereof) and
any of the Distributed Subsidiaries or the direct or indirect subsidiaries
thereof are included in the same consolidated group for federal income tax
purposes, or the same consolidated, combined or unitary returns for state, local
or foreign tax purposes, (ii) the allocation of responsibility for the filing of
tax returns, the conducting of tax audits and the handling of tax controversies,
and (iii) various related matters.

SERVICES AGREEMENT

In connection with the Reorganization, the Company and Auto One Acceptance
Corporation ("AOAC"), which will be owned by Messrs. Morris and Anderson
following the Reorganization, entered into a services agreement (the "Services
Agreement"), pursuant to which the Company will continue to provide various
services to AOAC, including payroll, human resources, legal, internal audit,
benefits administration and similar administrative and management services that
the Company has historically provided to AOAC. For such services, AOAC will pay
the Company a fee of $40,000 per month. The Services Agreement is terminable by
either the Company or AOAC on 90 days prior notice, provided however, that
neither party may terminate the Services Agreement prior to the first
anniversary date of the Offering. As a result of the Company's affiliation with
AOAC, the terms of the Services Agreement were not, and the terms of any future
amendments to the Services Agreement may not be, the result of arm's-length
negotiation.

EXECUTIVE OFFICE LEASE

The Company subleases its 2,500 square foot executive offices in Dallas,
Texas from AOAC. Under the terms of the sublease, the Company will pay to AOAC
lease payment of $3,700 per month. The sublease may be terminated by either
party upon 90 days' written notice.

AIRCRAFT AGREEMENT

The Company and AOAC have entered into an aircraft agreement (the "Aircraft
Agreement") pursuant to which AOAC may use the aircraft owned by the Company for
travel by AOAC's senior management in the course of AOAC's businesses. AOAC will
be charged a fee for the use of such aircraft at a rate of $5,000 per month plus
an additional amount based on the number of nautical miles traveled. The
Aircraft Agreement has an initial term of one year and may be terminated
thereafter by either party on 90 days' written notice.

TRANSACTIONS WITH BANC ONE CORPORATION

Daniel J. Jessee, a director of the Company, is a member of the investment
committee of Banc One Capital Partners II, Ltd., the lender under the Company's
existing credit agreement. Banc One Capital Corporation, a subsidiary of Banc
One Corporation and of which Mr. Jessee is Vice Chairman, received a fee of
$125,000 from the Company for its services in the arrangement and placement of
this credit agreement. Borrowings under this credit agreement will be repaid in
full with a portion of the proceeds of this Offering. See "Use of Proceeds."

47
<PAGE> 49

DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Company consists of 100,000,000 shares
of Class A Common Stock, par value $.01 per share, 100,000,000 shares of Class B
Common Stock, par value $.01 per share, and 25,000,000 shares of Preferred
Stock, par value $.01 per share. As of the date of this Prospectus and without
giving effect to the shares of Class A Common Stock to be sold in the Offering,
there were no shares of Class A Common Stock, 17,400,000 shares of Class B
Common Stock and no shares of Preferred Stock issued and outstanding. All
outstanding shares of Class B Common Stock are, and the shares of Class A Common
Stock offered hereby will be, upon payment thereof, fully paid and
nonassessable. The Class A Common Stock and the Class B Common Stock are
referred to in this Prospectus collectively as the "Common Stock."

CLASS A COMMON STOCK AND CLASS B COMMON STOCK

Voting Rights. Each share of Class A Common Stock is entitled to one vote
and each share of Class B Common Stock is entitled to ten votes on all matters
submitted to a vote of the shareholders. Except as otherwise required by law,
the holders of the Class A Common Stock and the Class B Common Stock vote
together as a single class on all matters that may be submitted to a vote or
consent of the shareholders, including the election of directors. The Common
Stock does not have any cumulative voting rights. Accordingly, immediately after
the Offering, Mr. Morris will retain effective control of the Company through
holding approximately 92.6% of the combined voting power of the outstanding
Common Stock (91.8% if the Underwriters' over-allotment option is exercised in
full).

Conversion. Class A Common Stock has no conversion rights. Each share of
Class B Common Stock will be convertible at any time, at the option of and
without cost to the shareholder, into one share of Class A Common Stock upon
surrender to the Company's transfer agent of the certificate or certificates
evidencing the Class B Common Stock to be converted, together with a written
notice of the election of such shareholder to convert such shares into Class A
Common Stock. Shares of Class B Common Stock will also be automatically
converted into shares of Class A Common Stock upon the transfer of such shares
of Class B Common Stock, except as a result of (i) a transfer to a record
holder's spouse, (ii) a transfer to any lineal descendant of any grandparent of
a record holder, including adopted children and any such descendant's spouse,
(iii) a transfer by will or by the laws of descent and distribution, or (iv) a
transfer to a voting trust or other trust (including a distribution from such
trust to the trust beneficiaries), to a corporation, partnership or other entity
controlled by the beneficial owner of such shares, or to the individual
beneficial owner of such shares or to any such entity that will become
controlled by the beneficial owner of such shares immediately after the transfer
or series of transfers within any ten (10) day period. Once shares of Class B
Common Stock are converted into shares of Class A Common Stock, such shares may
not be converted back into Class B Common Stock.

Dividends and Liquidation Rights. The holders of Class A Common Stock and
Class B Common Stock are entitled to receive dividends out of assets legally
available therefor at such times and in such amounts as the Board of Directors
may from time to time determine, subject to any preferential dividend rights of
outstanding Preferred Stock, if any. Upon liquidation and dissolution of the
Company, the holders of Class A Common Stock and Class B Common Stock are
entitled to receive all assets available for distribution to shareholders,
subject to any preferential amounts payable to holders of Preferred Stock, if
any.

Other Rights. The holders of Class A Common Stock and Class B Common Stock
are not entitled to preemptive or subscription rights, and there are no
redemption or sinking fund provisions applicable to such Common Stock.

PREFERRED STOCK

Under the Articles, the Company has authority to issue 25,000,000 shares of
Preferred Stock. As of the date of this Prospectus, no shares of Preferred Stock
are outstanding and the Company has no present intention to issue any shares of
Preferred Stock.

48
<PAGE> 50

Preferred Stock may be issued, from time to time in one or more series, and
the Board of Directors, without further approval of the shareholders, is
authorized to fix the dividend rights and terms, redemption rights and terms,
liquidation preferences, conversion rights, voting rights and sinking fund
provisions applicable to each such series of Preferred Stock. If the Company
issues a series of Preferred Stock in the future that has voting rights or
preference over the Common Stock with respect to the payment of dividends and
upon the Company's liquidation, dissolution or winding up, the rights of the
holders of the Common Stock offered hereby may be adversely affected. The
issuance of shares of Preferred Stock could be utilized, under certain
circumstances, in an attempt to prevent an acquisition of the Company.

REGISTRATION RIGHTS

The Company and Millard E. Morris, the Company's Chairman of the Board and
Chief Executive Officer and Mark R. Anderson, the Company's President, have
entered into a Registration Rights Agreement which expires on June 30, 2007.
Under this Registration Rights Agreement, beginning after June 30, 1997, Mr.
Morris has the right to request the Company to effect four registrations of
Class A Common Stock, subject to the right of the other shareholders to be
included in such registrations and other conditions and limitations, provided
that the number of shares of Class A Common Stock to be included in each such
registration is not less than 1,000,000. The Registration Rights Agreement also
grants secondary offering rights ("piggy back" rights) to Messrs. Morris and
Anderson and, in certain cases, their transferees, subject to certain conditions
and limitations, in connection with any registration of Class A Common Stock by
the Company, which rights may be exercised beginning after June 30, 1997. As of
the date of this Prospectus, an aggregate of 17,400,000 shares of Class A Common
Stock are subject to the registration rights described above, assuming full
conversion by Messrs. Morris and Anderson of their Class B Common Stock into
Class A Common Stock. In all such registrations, the Company is required under
the Registration Rights Agreement to bear the expenses of registration. While
Messrs. Morris and Anderson have certain priority rights in such registrations,
the Company has retained the right to grant registration rights to other
persons, including its officers and directors.

ANTI-TAKEOVER PROVISIONS

The Articles contain provisions which provide for a classified board of
directors consisting of three classes with directors serving staggered
three-year terms. Therefore, only one-third of the directors are subject to
election by the shareholders each year. The Articles also include provisions
eliminating the personal liability of the Company's directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by the TBCA. The Articles and Bylaws include provisions indemnifying the
Company's directors and officers to the full extent permitted by the TBCA,
including under certain circumstances in which indemnification is otherwise
discretionary. See "Management -- Limitation of Liability and Indemnification."

The Articles and Bylaws contain a number of provisions relating to
corporate governance and to the rights of shareholders. These provisions include
(i) a requirement that special meetings of shareholders may be called only by
the Chairman, the President, the Board of Directors or upon the request of
shareholders owning 50% or more of the shares entitled to vote at the meeting,
(ii) the authority of the Board of Directors to issue series of Preferred Stock
with such voting rights and other powers as the Board of Directors may
determine, and (iii) notice requirements in the Bylaws relating to nominations
to the Board of Directors and to the raising of business matters at shareholder
meetings.

The provisions of the TBCA and the Articles and Bylaws discussed above
would make more difficult or discourage a proxy contest or the acquisition of
control by a holder of a substantial block of the Company's stock or the removal
of the incumbent Board of Directors. Such provisions could also have the effect
of discouraging a third party from making a tender offer or otherwise attempting
to obtain control of the Company, even though such an attempt might be
beneficial to the Company and its shareholders. In addition, since these
provisions are designed to discourage accumulations of large blocks of the
Company's stock by purchasers whose objective is to have such stock repurchased
by the Company at a premium, such provisions could tend to reduce the temporary
fluctuations in the market price of the Class A Common Stock which are

49
<PAGE> 51

caused by such accumulations. Accordingly, shareholders could be deprived of
certain opportunities to sell their stock at a temporarily higher market price.

The Company is also subject to certain provisions of Louisiana law
applicable to insurance holding companies. Those laws prohibit the merger or
acquisition of control of a domestic insurer or any person controlling a
domestic insurer without the prior approval of the proposed transaction by the
Louisiana Department of Insurance.

TRANSFER AGENT AND REGISTRAR

Harris Trust and Savings Bank is the transfer agent and registrar for the
Class A Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding
11,000,000 shares of Class A Common Stock (assuming the Underwriters'
over-allotment option is not exercised) and 17,400,000 shares of Class B Common
Stock. The Class B Common Stock is convertible on a share-for-share basis into
Class A Common Stock and must be converted to effect any public sale of such
stock. Of these outstanding shares, the 11,000,000 shares of Class A Common
Stock sold in the Offering will be freely tradeable without restriction under
the Securities Act, except for any shares purchased by an "affiliate" of the
Company (as that term is defined in the Securities Act), which will be subject
to the resale limitations of Rule 144 adopted under the Securities Act.

The 17,400,000 outstanding shares of Class B Common Stock are "restricted"
securities within the meaning of Rule 144 and may not be resold in a public
distribution (before or upon conversion into Class A Common Stock) except in
compliance with the registration requirements of the Securities Act or pursuant
to Rule 144.

In general, under Rule 144 as currently in effect, an affiliate of the
Company, or person (or persons whose shares are aggregated) who has beneficially
owned restricted shares for at least two years from the later of the date such
restricted shares were acquired from the Company and (if applicable) the date
they were acquired from an affiliate, but less than three years, will be
entitled to sell in any three-month period a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of Class A Common
Stock (approximately 110,000 shares immediately after the Offering) or (ii) the
average weekly trading volume in the public market during the four calendar
weeks immediately preceding the date on which notice of the sale is filed with
the Commission. Sales pursuant to Rule 144 are subject to certain requirements
relating to manner of sale, notice and availability of current public
information about the Company. Affiliates may sell shares not constituting
restricted shares in accordance with the foregoing volume limitations and other
restrictions, but without regard to the two-year holding period. A person (or
persons whose shares are aggregated) who is not deemed to have been an affiliate
of the Company at any time during the 90 days immediately preceding the sale and
who has beneficially owned his or her shares for at least three years from the
later of the date such restricted shares were acquired from the Company and (if
applicable) the date they were acquired from an affiliate is entitled to sell
such shares pursuant to Rule 144(k) without regard to the limitations described
above. As defined in Rule 144, an "affiliate" of an issuer is a person who
directly, or indirectly through the use of one or more intermediaries, controls,
or is controlled by, or is under common control with, such issuer. Rule 144A
under the Securities Act as currently in effect permits the immediate sale by
current holders of restricted shares of all or a portion of their shares to
certain qualified institutional buyers described in Rule 144A, subject to
certain conditions.

The Company and Messrs. Morris and Anderson, the Company's current
shareholders, who in the aggregate hold beneficially 17,400,000 shares of Class
B Common Stock, have agreed that they will not offer, sell, contract to sell,
grant any option to purchase, or otherwise dispose of any shares of Class A
Common Stock of the Company or any securities convertible into or exchangeable
for such Class A Common Stock (other than shares and stock options to be granted
pursuant to the Stock Incentive Plan), for a period of 180 days from the date of
this Prospectus without the prior written consent of Smith Barney Inc.

50
<PAGE> 52

Under the Stock Incentive Plan, 3,000,000 shares of Class A Common Stock
are reserved for issuance thereunder, including 6,000 shares of Class A Common
Stock to be granted to non-employee directors. Options to purchase 600,000
shares of Class A Common Stock at an exercise price of $12.00 per share have
been granted. See "Management -- Stock Incentive Plan" and
"Management -- Director Compensation."

Prior to this Offering, there has been no public market for the Class A
Common Stock, and no predictions can be made as to the effect, if any, that
sales of shares or the availability of shares for sale will have on the
prevailing market price of the Class A Common Stock. Sales of substantial
amounts of Class A Common Stock in the public market could have an adverse
effect on prevailing market prices.

51
<PAGE> 53

UNDERWRITING

Upon the terms and conditions stated in the Underwriting Agreement, each
Underwriter named below has severally agreed to purchase, and the Company has
agreed to sell to such Underwriter, the shares of Class A Common Stock which
equal the number of shares set forth opposite the name of such Underwriter:

<TABLE>
<CAPTION>
NUMBER
NAME OF UNDERWRITER OF SHARES
-------------------- ----------
<S> <C>
Smith Barney Inc ........................................................
Piper Jaffray Inc. ......................................................

----------
Total.......................................................... 11,000,000
==========
</TABLE>

The Underwriters are obligated to take and pay for all shares of Class A
Common Stock offered hereby (other than those covered by the over-allotment
option described below) if any such shares are taken.

The Underwriters, for whom Smith Barney Inc. and Piper Jaffray Inc. are
acting as the Representatives, have advised the Company that they propose to
offer part of the shares directly to the public at the public offering price set
forth on the cover page of this Prospectus and part of the shares to certain
dealers at a price that represents a concession not in excess of $ per
share under the public offering price. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to
certain other dealers. After the initial public offering, the offering price and
other selling terms may be changed by the Representatives. The Underwriters do
not intend to confirm sales of the Class A Common Stock offered hereby to
accounts over which they exercise discretionary authority.

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all shares of
Class A Common Stock offered hereby (other than those covered by the
over-allotment option described below) if any such shares are purchased.

The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of
1,650,000 additional shares of Class A Common Stock at the price to the public
set forth on the cover page of this Prospectus minus the underwriting discounts
and commissions. The Underwriters may exercise such option solely for the
purpose of covering over-allotments, if any, in connection with the Offering of
the shares hereby. To the extent such option is exercised, each Underwriter will
be obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth next to
such Underwriter's name in the preceding table bears to the total number of
shares listed in such table.

The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including certain liabilities under the Securities
Act, or to contribute to payments that the Underwriters may be required to make
in respect thereof.

The Company and its existing shareholders have agreed not to offer, sell,
contract to sell, grant any option to purchase, or otherwise dispose of any
shares of Class A Common Stock of the Company or any securities convertible into
or exercisable or exchangeable for such Class A Common Stock (other than shares
and stock options to be granted pursuant to the Stock Incentive Plan), except to
the Underwriters pursuant to the Underwriting Agreement, for a period of 180
days after the date of this Prospectus, without the prior written consent of
Smith Barney Inc.

52
<PAGE> 54

Prior to the Offering, there has been no public market for the Class A
Common Stock. Consequently, the public offering price for the shares offered
hereby was determined by negotiations between the Company and the
Representatives. Among the factors considered in determining the public offering
price were the history of, and the prospects for, the Company's business and the
industry in which it competes, an assessment of the Company's management, its
past and present operations, its past and present revenues and earnings, and the
trend of such revenues and earnings, the prospects for growth of the Company's
revenues and earnings, the present state of the Company's development, the
general condition of the securities market at the time of the Offering and the
market prices and earnings of similar securities of comparable companies at the
time of the Offering, the current state of the economy in the United States and
the current level of economic activity in the industry in which the Company
competes and in related or comparable industries.

LEGAL MATTERS

The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company by Jones, Day, Reavis & Pogue, Dallas, Texas.
Certain legal matters in connection with the Offering will be passed upon for
the Underwriters by Dewey Ballantine, New York, New York.

EXPERTS

The consolidated financial statements of AMERISAFE, Inc. and subsidiaries
at December 31, 1994 and 1995 and for each of the three years in the period
ended December 31, 1995, appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act with
respect to the shares of Class A Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which have been omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the shares of Class A Common Stock offered hereby, reference is made
to the Registration Statement, including the exhibits filed as a part thereof.
Statements made in this Prospectus as to the contents of any contract or any
other document are not necessarily complete; with respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to such exhibit for a more complete description of the matter
involved, and each such statement herein shall be deemed qualified in its
entirety by such reference. Copies of such materials may be examined without
charge at, or obtained upon payment of prescribed fees from, the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7
World Trade Center, New York, New York 10048.

The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission and that is located at http://www.sec.gov.

53
<PAGE> 55

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors........................................................ F-2
Consolidated Balance Sheets at December 31, 1994 and 1995 and at March 31, 1996
(unaudited)......................................................................... F-3
Consolidated Statements of Income for the years ended December 31, 1993, 1994 and 1995
and the three months ended March 31, 1995 and 1996 (unaudited)...................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1993, 1994 and 1995 and the three months ended March 31, 1996
(unaudited)......................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995 and the three months ended March 31, 1995 and 1996 (unaudited)................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE> 56

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
AMERISAFE, Inc.

We have audited the accompanying consolidated balance sheets of AMERISAFE,
Inc. and subsidiaries as of December 31, 1994 and 1995, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
AMERISAFE, Inc. and subsidiaries at December 31, 1994 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, the
Company effected a reorganization on , 1996, resulting in a change in
the reporting entity.

Dallas, Texas
, 1996

The foregoing report is in the form that will be signed upon completion of
transactions described in the first paragraph of Note 1 to the consolidated
financial statements.

ERNST & YOUNG LLP

Dallas, Texas
August 9, 1996

F-2
<PAGE> 57

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY
DECEMBER 31, (NOTE 8)
------------------- MARCH 31, MARCH 31
1994 1995 1996 1996
------- -------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Investments:
Investments held-to-maturity -- fixed maturities at amortized cost
(fair value: 1994 -- $48,324; 1995 -- $66,840;
1996 -- $69,647)................................................. $49,618 $ 65,052 $ 69,267
Investments available-for-sale, at fair value:
Equity securities (cost: 1994 -- $1,317; 1995 -- $2,748;
1996 -- $3,626)................................................ 1,253 3,076 4,010
Fixed maturities (cost: 1994 -- $125; 1995 -- $3,291;
1996 -- $2,996)................................................ 125 3,363 3,028
------- -------- --------
Total investments............................................ 50,996 71,491 76,305
Cash and cash equivalents............................................ 5,264 10,202 12,485
Receivable for securities sold or matured............................ 312 868 --
Recoverable from reinsurers.......................................... 10,941 13,360 14,351
Recoverable from state funds......................................... 405 401 414
Agents balances in course of collection.............................. 8,815 9,654 9,187
Accrued interest receivable.......................................... 811 1,105 1,030
Notes receivable from shareholders and affiliates.................... 2,176 2,387 3,302
Real estate, furniture and equipment, net............................ 4,269 5,906 7,053
Deferred federal income taxes........................................ 2,303 1,891 2,051
Other assets......................................................... 1,799 3,175 4,314
------- -------- --------
Total assets................................................. $88,091 $120,440 $130,492
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for claims and claim settlement expenses.................. $40,939 $ 55,427 $ 59,571
Unearned premiums.................................................. 4,229 3,581 3,287
Funds held under reinsurance treaties.............................. 164 166 469
Reinsurance premiums payable....................................... 113 1,426 1,534
Amounts held for others............................................ 5,923 10,299 10,426
Accounts payable and accrued liabilities........................... 3,391 7,290 7,787
Notes payable...................................................... 7,479 8,232 12,516
Notes payable to shareholders and affiliates....................... 3,377 1,881 521
------- -------- --------
Total liabilities............................................ 65,615 88,302 96,111
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $0.01 par value, 25,000,000 shares authorized:
Series B -- cumulative convertible 8% preferred stock, issued and
outstanding shares -- 510.167.................................. -- -- -- $ --
Class A common stock, $0.01 par value, Authorized
shares -- 100,000,000
Issued and outstanding shares -- None............................ -- -- -- --
Class B common stock, $0.01 par value:
Authorized shares -- 100,000,000
Issued and outstanding shares -- 11,884,647...................... 119 119 119 174
Additional paid-in capital......................................... 1,362 1,362 1,362 --
Retained earnings (deficit)........................................ 21,059 30,393 32,627 (28,166)
Unrealized gain (loss) on securities available-for-sale, net of
taxes............................................................ (64) 264 273 273
------- -------- -------- --------
Total stockholders' equity (deficit)......................... 22,476 32,138 34,381 $ (27,719)
========
------- -------- --------
Total liabilities and stockholders' equity................... $88,091 $120,440 $130,492
======= ======== ========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 58

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Premiums earned............................ $35,902 $40,461 $58,167 $10,918 $15,026
Service fee income......................... 987 2,468 4,110 582 1,671
Investment income.......................... 2,146 2,484 4,519 809 1,295
Fees and other from affiliates............. 2,154 1,732 2,881 511 534
------- ------- ------- ------- -------
Total revenues..................... 41,189 47,145 69,677 12,820 18,526
Expenses:
Claims and claim settlement expenses....... 20,262 25,250 32,924 6,725 9,250
Commissions and other underwriting
expenses................................ 7,555 8,507 13,524 2,428 3,512
General and administrative................. 2,798 4,406 6,810 1,001 2,010
Interest................................... 850 726 845 210 279
Depreciation and amortization.............. 240 703 1,006 169 332
------- ------- ------- ------- -------
Total expenses..................... 31,705 39,592 55,109 10,533 15,383
------- ------- ------- ------- -------
Income before federal income taxes........... 9,484 7,553 14,568 2,287 3,143
Federal income taxes......................... 2,768 2,414 5,234 645 909
------- ------- ------- ------- -------
Net income................................... $ 6,716 $ 5,139 $ 9,334 $ 1,642 $ 2,234
======= ======= ======= ======= =======
Pro forma net income per share............... $ 0.43 $ 0.10
======= =======
Pro forma weighted average shares
outstanding................................ 21,666 21,666
======= =======
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 59

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
UNREALIZED
GAIN
(LOSS)
ON
ADDITIONAL SECURITIES
PREFERRED COMMON PAID-IN RETAINED AVAILABLE-
STOCK STOCK CAPITAL EARNINGS FOR-SALE TOTAL
--------- ------ ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993........... $ -- $119 $ (118) $ 9,204 $ 55 $ 9,260
Net income......................... -- -- -- 6,716 -- 6,716
Change in unrealized gain/loss on
securities available-for-sale... -- -- -- -- (59) (59)
Issuance of redeemable cumulative
preferred stock................. -- -- 1,480 -- -- 1,480
---- ---- ------ ------- ---- -------
Balance at December 31, 1993......... -- 119 1,362 15,920 (4) 17,397
Net income......................... -- -- -- 5,139 -- 5,139
Change in unrealized gain/loss on
securities available-for-sale... -- -- -- -- (60) (60)
---- ---- ------ ------- ---- -------
Balance at December 31, 1994......... -- 119 1,362 21,059 (64) 22,476
Net income......................... -- -- -- 9,334 -- 9,334
Change in unrealized gain/loss on
securities available-for-sale,
net of deferred income taxes.... -- -- -- -- 328 328
---- ---- ------ ------- ---- -------
Balance at December 31, 1995......... -- 119 1,362 30,393 264 32,138
Net income (unaudited)............. -- -- -- 2,234 -- 2,234
Change in unrealized gain/loss on
securities available-for-sale,
net of deferred income taxes
(unaudited)..................... -- -- -- -- 9 9
---- ---- ------ ------- ---- -------
Balance at March 31, 1996
(unaudited)........................ $ -- $119 $1,362 $ 32,627 $273 $34,381
==== ==== ====== ======= ==== =======
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 60

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------- -------------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.................................................... $ 6,716 $ 5,139 $ 9,334 $ 1,642 $ 2,234
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 240 703 1,006 169 332
Deferred income tax (benefit) expense..................... (772) (121) 203 (128) (161)
Investment (gains) losses, net............................ (176) 18 (133) 12 (30)
Changes in operating assets and liabilities:
Accounts receivable and recoverables.................... (3,278) (565) (200) 2,463 467
Reserves for unpaid claims.............................. 8,383 6,518 14,489 2,260 4,144
Unearned premiums....................................... 1,580 2,638 (648) (1,230) (294)
Reinsurance balances.................................... (2,607) (2,491) (1,103) (966) (580)
Amounts held for others................................. 512 1,565 4,376 1,471 127
Accounts payable and accrued liabilities................ (468) 111 3,846 (817) 376
Other, net.............................................. 100 (560) (2,021) 1,950 (982)
-------- -------- -------- ------- --------
Net cash provided by operating activities....................... 10,230 12,955 29,149 6,826 5,633
INVESTING ACTIVITIES:
Purchases of investments held-to-maturity..................... (13,937) (29,770) (28,820) (3,370) (10,182)
Proceeds from maturity of investments held-to-maturity........ 2,158 11,713 8,386 939 5,388
Purchases of investments available-for-sale................... (645) (561) (1,777) -- (878)
Sales and maturities of investments available-for-sale........ 2,284 384 1,805 125 1,774
Net decrease in other invested assets......................... 897 -- -- -- --
Purchase of subsidiary, net of cash acquired.................. -- -- (218) -- --
Purchases of real estate, furniture and equipment............. (1,702) (1,347) (2,460) (486) (1,454)
Decrease (increase) in loans to stockholders and affiliates... 1,470 (2,871) (211) (592) (922)
Decrease in interest-bearing deposits in banks................ -- 265 -- -- --
-------- -------- -------- ------- --------
Net cash used in investing activities........................... (9,475) (22,187) (23,295) (3,384) (6,274)
FINANCING ACTIVITIES:
Net proceeds from (repayments of) revolving and short-term
notes payable............................................... -- 4,100 (800) (829) 3,907
Proceeds from notes payable................................... 1,140 265 1,475 43 395
Principal payments on notes payable and capital lease
obligations................................................. (638) (175) (1,122) (16) (18)
Net proceeds from (repayment of) loans from shareholders and
affiliates.................................................. (528) (1,328) (469) 44 (1,360)
-------- -------- -------- ------- --------
Net cash (used in) provided by financing activities............. (26) 2,862 (916) (758) 2,924
-------- -------- -------- ------- --------
Increase (decrease) in cash and cash equivalents................ 729 (6,370) 4,938 2,684 2,283
Cash and cash equivalents at beginning of period................ 10,905 11,634 5,264 5,264 10,202
-------- -------- -------- ------- --------
Cash and cash equivalents at end of period...................... $ 11,634 $ 5,264 $ 10,202 $ 7,948 $ 12,485
======== ======== ======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid............................................... $ 833 $ 743 $ 845 $ 280 $ 180
Income taxes paid........................................... $ 1,926 $ 2,570 $ 4,644 $ 1,094 $ 1,500
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Other assets acquired with the issuance of notes payable.... $ -- $ -- $ 1,200 $ -- $ --
Dividend from affiliate for note payable.................... $ -- $ -- $ 1,027 $ -- $ --
Debt converted to redeemable cumulative preferred stock..... $ 1,480 $ -- $ -- $ -- $ --
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 61

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reorganization

AMERISAFE, Inc. (formerly Gulf Universal Holdings, Inc.) (AMERISAFE) was
reorganized on , 1996, resulting in a change in the reporting
entity. Prior to this reorganization the subsidiaries were American Interstate
Insurance Company and subsidiaries (American Interstate), Auto One Acceptance
Corporation and subsidiaries (Auto One), Gulf Universal Insurance, Ltd. (LTD),
Mor-Tem Systems, Inc. and subsidiaries (Mor-Tem), Systems Operations, Inc.
(d.b.a. Engineered Mechanical Services) (EMS) and Gulf Air, Inc. In connection
with this reorganization, the common stock of certain insurance agency
subsidiaries of Mor-Tem and EMS, and cash were exchanged for the Class B Common
Stock of AMERISAFE held by a minority shareholder. The Company realized a gain
from discontinued operations of approximately $ on , 1996, in
connection with the split-off of these subsidiaries. The net assets and
operations of these subsidiaries are not separately disclosed in the
accompanying financial statements as they are not material. Following the
split-off of the insurance agency subsidiaries of Mor-Tem and EMS the Company
distributed the common stock of Auto One and LTD to the remaining shareholders
on a pro rata basis. The distribution of Auto One and LTD was accounted for as a
reorganization of commonly controlled entities and was accounted for in a manner
similar to a "pooling of interests" (see Note 4). Accordingly, the historical
consolidated financial statements of AMERISAFE have been recast to include, at
historical cost, only the individual companies which were not spun off to the
shareholders for all periods presented. The effect of this change in the
reporting entity was a decrease in net income of $5,465,000 in 1993, $2,930,000
in 1994, $1,160,000 in 1995 and $198,000 in the three months ended March 31,
1996, respectively, and an increase in net income of $987,000 in the three
months ended March 31, 1995. The effect of the change in the reporting entity on
pro forma net income per share was a decrease of $0.05 in 1995 and $0.01 in the
three months ended March 31, 1996.

On August 9, 1996, AMERISAFE's Board of Directors approved a change in the
Company's capital structure for a 3,603.63-for-one stock split, the
reclassification of the Company's common stock to Class B Common Stock, the
authorization of the Class A Common Stock, a change in the par value of the
Preferred Stock from $1.00 per share to $.01 per share, and an increase in the
number of authorized shares of Class A Common Stock, Class B Common Stock and
Preferred Stock to 100,000,000 shares, 100,000,000 shares and 25,000,000 shares,
respectively, effected by amendment to the Company's articles of incorporation.
The accompanying consolidated financial statements reflect the above changes to
the Company's capital structure for all periods presented.

The characteristics of the Class B Common Stock are identical to those of
Class A Common Stock, except that each holder of the Class B Common Stock is
entitled to ten votes for each share held.

Basis of Presentation

The consolidated financial statements include the accounts of AMERISAFE and
its wholly-owned subsidiaries: American Interstate, Mor-Tem Risk Management,
Inc., Hammerman & Gainer, Inc. (H&G) and Gulf Air, Inc., collectively referred
to as the "Company."

American Interstate is a property/casualty insurance company domiciled in
the state of Louisiana and conducts business primarily in the southeastern
United States. American Interstate writes primarily workers' compensation and
general liability coverage for the logging industry. It expanded its workers'
compensation business beyond the logging industry beginning in 1994, but that
industry group still accounts for approximately 60% of the Company's 1995
premiums earned. Assets and revenues of American Interstate represent
approximately 93% and 90%, respectively, of the 1995 consolidated amounts.

F-7
<PAGE> 62

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Mor-Tem Risk Management, Inc. is domiciled in the state of Louisiana and
provides safety engineering and claims settlement services. On September 1,
1995, the Company acquired H&G, a claims settlement company, for $1,500,000
(including notes payable of $1,200,000). The assets and liabilities of H&G at
September 1, 1995, have been recorded at their estimated fair values which,
except for certain intangible assets, were not significantly different from
their net carrying values. The unamortized balance of $1,035,000 of intangible
assets arising from this acquisition is included in other assets at December 31,
1995 and is being amortized on a straight-line basis generally over a 15 year
life. Risk management and claims settlement related assets and revenues
represent approximately 2% and 5%, respectively, of the 1995 consolidated
amounts.

Principles of Consolidation

All significant intercompany balances and transactions have been eliminated
in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents.

Investments

The Company adopted Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities (Statement No.
115), for its investments effective January 1, 1994. Pursuant to Statement No.
115, the Company determines the appropriate classification of investments in
debt and equity securities at the time of purchase. If the Company has the
intent and ability at the time of purchase to hold debt securities until
maturity, they are classified as investments held-to-maturity and carried at
amortized cost (unless a permanent impairment in value exists). At the date of
adoption of the new accounting standard, and at the end of 1994, the Company had
classified substantially all of its debt securities as held-to-maturity. Debt
securities for which management does not have the ability or intent to hold
until maturity are classified as available-for-sale and carried at market value;
temporary changes in market value are recognized in stockholders' equity as
unrealized gains or losses, net of deferred income tax. The Company has no
securities acquired for trading purposes.

Equity and certain other securities are considered available-for-sale and
are carried at market value. Temporary changes in the market value are reported
in stockholders' equity as unrealized gains or losses on securities
available-for-sale, net of deferred income tax. This method of reporting is
consistent with the manner in which investments in equity securities were
reported prior to adoption of Statement No. 115. No future income tax benefit
was recorded for the unrealized loss applicable to equity securities at December
31, 1993 and 1994, as the amounts were not material.

The discount or premium on debt securities is amortized using the interest
method. Anticipated prepayments are not considered when determining the
amortization of premiums or discounts as the unamortized amounts are not
material.

Real Estate, Furniture and Equipment

The Company's office building, furniture, and equipment are stated at cost,
less accumulated depreciation. Depreciation is calculated primarily by the
straight-line method over the estimated useful lives of the respective assets,
generally 39 years for the building, and three to seven years for furniture and
equipment.

F-8
<PAGE> 63

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Premium Revenue

Insurance premiums on workers' compensation and general liability coverages
are based on actual payroll costs or production during the policy term and are
generally billed monthly in arrears; accordingly, there are no significant
unearned premiums on these lines of business except assigned risk workers'
compensation policies. However, the Company requires a deposit of 5% to 25% of
the estimated annual premium at the inception of the policy; such deposits are
included in amounts held for others.

All other insurance premiums are reflected in earnings over periods covered
by the policies. Unearned premiums on these policies are computed on a daily pro
rata basis.

Reserves for Claims and Claim Settlement Expenses

Reserves for claims and claim settlement expenses represent the estimated
ultimate net cost of all reported and unreported claims incurred through the
respective balance sheet dates. The Company does not discount claims and claim
settlement expense reserves. The reserves for unpaid claims and claim settlement
expenses are estimated using individual case-basis valuations, statistical
analyses, and estimates based upon experience for unreported claims and claim
settlement expenses. Such estimates may be more or less than the amounts
ultimately paid when the claims are settled. The estimates are subject to the
effects of trends in loss severity and frequency. Although considerable
variability is inherent in such estimates, management believes that the reserves
for claims and claim settlement expenses are adequate. The estimates are
continually reviewed and adjusted as necessary as experience develops or new
information becomes known; such adjustments are included in current operations.

Salvage and subrogation recoverables are estimated using the "case-basis"
method for large recoverables and historical statistics for smaller
recoverables. Such amounts deducted from the liability for claims and claim
settlement expenses were $237,000 and $250,000 at December 31, 1994 and 1995,
respectively, and $275,000 at March 31, 1996 (unaudited).

Federal Income Taxes

AMERISAFE, its subsidiaries and the former subsidiaries of AMERISAFE have
historically filed a consolidated federal income tax return. The consolidated
tax liability is allocated among the participants in accordance with the ratio
of each participant's taxable income to the consolidated taxable income of the
group.

Deferred income tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred income tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
income tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. The Company has not
established a valuation allowance for the deferred income tax asset at December
31, 1994 and 1995 or at March 31, 1996 as management has concluded the entire
deferred income tax asset will be realized.

Pro Forma Net Income per Share

Pro forma net income per share was computed based on the weighted average
number of common and common equivalent shares outstanding. The weighted average
shares outstanding for each period include common equivalent shares attributable
to convertible preferred stock (5,515,353 shares), outstanding stock options
(120,000 shares) using the treasury stock method, incremental shares from the
expected issuance of Class A Common Stock (6,000 shares) and pro forma shares
for the number of shares whose proceeds would be necessary to pay certain debts
originated in connection with the reorganization of AMERISAFE to be paid

F-9
<PAGE> 64

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

from the proceeds of the Company's initial public offering of its Class A Common
Stock (4,140,000 shares) (See Note 8). Incremental shares resulting from the
issuance of convertible preferred stock and stock options issued prior to the
Company's initial public offering have been included in the weighted average
shares outstanding for all periods for which net income per share is presented.
All Class A common share and per share data have been restated to adjust for the
3,603.626-for-one stock split of the Company's Common Stock.

Reinsurance

Reinsurance premiums, claims, and claim settlement expenses are accounted
for on bases consistent with those used in accounting for the original policies
issued and the terms of the reinsurance contracts.

Stock-Based Compensation

The Company grants stock options for a fixed number of shares to employees
and non-employee directors with an exercise price equal to the fair value at
grant date. The Company accounts for stock option grants in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and accordingly, recognizes no compensation expense for the stock
option grants. Pro forma information regarding net income and earnings per share
is required by Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation (Statement No. 123), as if the Company had
accounted for its stock options under the fair value method of Statement No.
123. The Company will make the pro forma disclosures required by Statement No.
123 when stock options are granted.

Use of Estimates

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future as
more information becomes known which could impact the amounts reported and
disclosed herein.

2. INVESTMENTS

The Company believes its investments do not pose unusual credit risk and
are widely diversified. In excess of 95% of the Company's investments in debt
securities at December 31, 1995 have investment agency ratings of AA or higher.
The remaining debt securities are investment grade or better.

A summary of net investment income is as follows (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
-------------------------- --------------
1993 1994 1995 1995 1996
------ ------ ------ ---- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Fixed maturities............................ $1,510 $2,171 $3,199 $698 $1,059
Equity securities........................... 279 74 193 3 16
Other....................................... 373 255 1,150 112 230
------ ------ ------ ---- ------
Total investment income..................... 2,162 2,500 4,542 813 1,305
Less investment expenses.................... 16 16 23 4 10
------ ------ ------ ---- ------
Net investment income....................... $2,146 $2,484 $4,519 $809 $1,295
====== ====== ====== ==== ======
</TABLE>

F-10
<PAGE> 65

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The cost or amortized cost and fair values of investments in debt
securities held-to-maturity at December 31, 1994 and 1995 and March 31, 1996,
are summarized as follows (in thousands):

<TABLE>
<CAPTION>
COST OR GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
U.S. Treasury securities and obligations of
U.S. Government agencies.................. $17,760 $ 7 $ 359 $17,408
Corporate securities........................ 2,119 10 48 2,081
Obligations of states and political
subdivisions.............................. 29,739 127 1,031 28,835
------- ------ ------ -------
Totals...................................... $49,618 $ 144 $1,438 $48,324
======= ====== ====== =======
DECEMBER 31, 1995
U.S. Treasury securities and obligations of
U.S. Government agencies.................. $28,530 $ 721 $ 4 $29,247
Corporate securities........................ 2,768 44 -- 2,812
Obligations of states and political
subdivisions.............................. 33,754 1,037 10 34,781
------- ------ ------ -------
Totals...................................... $65,052 $1,802 $ 14 $66,840
======= ====== ====== =======
MARCH 31, 1996 (UNAUDITED)
U.S. Treasury securities and obligations of
U.S. Government agencies.................. $35,196 $ 198 $ 439 $34,955
Corporate securities........................ 3,484 12 91 3,405
Obligations of states and political
subdivisions.............................. 30,587 755 55 31,287
------- ------ ------ -------
Totals...................................... $69,267 $ 965 $ 585 $69,647
======= ====== ====== =======
</TABLE>

Unrealized gains and losses on investments in securities available-for-sale
are reported directly in stockholders' equity (net of deferred income taxes) and
do not affect operations. The gross unrealized gains and losses on, and the cost
and fair value of, those investments at December 31, 1994 and 1995 and March 31,
1996 are summarized as follows (in thousands):

<TABLE>
<CAPTION>
COST OR GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
Common stocks................................ $ 1,317 $ -- $ 64 $1,253
Debt securities.............................. 125 -- -- 125
------- ---- --- ------
Totals....................................... $ 1,442 $ -- $ 64 $1,378
======= ==== === ======
DECEMBER 31, 1995
U.S. Treasury securities and obligations of
U.S. Government agencies................... $ 3,191 $ 72 $ 3 $3,260
Other debt securities........................ 100 3 -- 103
------- ---- --- ------
Total debt securities...................... 3,291 75 3 3,363
Common stocks (primarily mutual funds)....... 2,748 342 14 3,076
------- ---- --- ------
Totals....................................... $ 6,039 $417 $ 17 $6,439
======= ==== === ======
</TABLE>

F-11
<PAGE> 66

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
COST OR GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------ ---- --- ------
<S> <C> <C> <C> <C>
MARCH 31, 1996 (UNAUDITED)
U.S. Treasury securities and obligations of
U.S. Government agencies................... $ 2,896 $ 32 $ -- $2,928
Other debt securities........................ 100 -- -- 100
------- ---- ---- ------
Total debt securities...................... 2,996 32 -- 3,028
Common stocks (primarily mutual funds)....... 3,626 426 42 4,010
------- ---- ---- ------
Totals....................................... $ 6,622 $458 $ 42 $7,038
======= ==== ==== ======
</TABLE>

A summary of the cost or amortized cost and fair value of investments in
debt securities by contractual maturity at December 31, 1995 is as follows (in
thousands):

<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
----------------------- --------------------
COST OR COST OR
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
Maturity
In 1996.................................... $ 8,912 $ 8,948 $1,196 $1,210
In 1997 through 2001....................... 29,244 30,017 2,095 2,153
In 2002 through 2006....................... 24,022 24,866 -- --
After 2006................................. 2,874 3,009 -- --
------- -------- ------ ------
$65,052 $ 66,840 $3,291 $3,363
======= ======== ====== ======
</TABLE>

The actual maturities of the debt securities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.

At December 31, 1995, there were $365,000 of short-term investments
(included in cash and cash equivalents) and $3,316,000 of held-to-maturity
investments on deposit, as required, with regulatory agencies of states in which
the Company does business.

Proceeds from sales or maturities of available-for-sale securities during
1993, 1994 and 1995 were approximately $2,284,000, $384,000 and $1,805,000,
respectively, and $125,000 and $1,774,000 for the three months ended March 31,
1995 and 1996, respectively. Gross gains of $147,000, $26,000 and $174,000 and
gross losses of $38,000, $4,000 and $1,000 were realized on these securities
during 1993, 1994 and 1995, respectively. No gains or losses were realized on
the sale or maturity of available-for-sale securities during the three months
ended March 31, 1995 and 1996. Realized gains and losses are determined on the
basis of the cost of the specific security sold.

During 1995, Silver Oak Casualty, Inc. (Silver Oak), a subsidiary of
American Interstate, disposed of two held-to-maturity debt securities prior to
their stated maturities to satisfy its liquidity needs. As a result, on the
basis of the likelihood that other sales may occur in the future, all of Silver
Oak's debt securities, with an aggregate amortized cost of approximately
$3,300,000 and an unrealized loss of approximately $25,000, were transferred to
the available-for-sale portfolio.

American Interstate sold a held-to-maturity debt security during 1995 prior
to its stated maturity. The security, which had a carrying value of $300,000,
was sold at a loss of $8,000. The sale was the result of a downgrade in the
investment rating of the security by Standard and Poor's rating agency and is
considered an isolated event. The Company's management intends to hold the
remaining held-to-maturity portfolio until maturity.

F-12
<PAGE> 67

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. REINSURANCE

The Company cedes reinsurance to various unaffiliated reinsurers under
excess-of-loss policies. Those reinsurance arrangements allow management to
control exposure to potential losses arising from larger risks and provide
additional capacity for growth. Generally, the Company retains $200,000 per
occurrence.

The effect of reinsurance on premiums written and earned in 1993, 1994 and
1995 was as follows (in thousands):

<TABLE>
<CAPTION>
NET
DIRECT CEDED PREMIUMS
------- ------- --------
<S> <C> <C> <C>
1993 Premiums
Written............................................. $45,660 $(8,189) $37,471
Earned.............................................. 43,995 (8,093) 35,902

1994 Premiums
Written............................................. $50,900 $(8,033) $42,867
Earned.............................................. 48,262 (7,801) 40,461

1995 Premiums
Written............................................. $66,184 $(8,336) $57,848
Earned.............................................. 66,832 (8,665) 58,167

</TABLE>

Claims and claim settlement expenses were reduced by reinsurance recoveries
of $5,462,000, $3,906,000 and $5,398,000 in 1993, 1994 and 1995, respectively,
and $760,000 and $1,320,000 for the three months ended March 31, 1995 and 1996,
respectively.

Amounts recoverable from reinsurers consist of the following (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Recoverable ceded reserves for unpaid claims and claims
settlement expenses:
Case basis........................................... $ 8,321 $ 9,780 $10,522
Incurred but not reported............................ 1,376 2,343 2,756
------- ------- -------
9,697 12,123 13,278
Paid claims recoverable................................ 915 1,237 1,073
Ceded unearned premiums................................ 329 -- --
------- ------- -------
Total.................................................. $10,941 $13,360 $14,351
======= ======= =======
</TABLE>

The five largest unsecured reinsurance recoverables associated with
unaffiliated reinsurers at December 31, 1995, are shown below (in thousands).
The A.M. Best rating for the reinsurer is shown parenthetically.

<TABLE>
<S> <C>
General Reinsurance Corporation (A++)....................................... $2,710
Insurance Corporation of Hannover (A-)...................................... 1,256
Reliance Insurance Company (A-)............................................. 2,897
Skandia America Reinsurance Corporation (A-)................................ 2,655
TIG Reinsurance Company (A)................................................. 1,045
</TABLE>

Ceded reinsurance contracts do not relieve the Company from its obligations
to policyholders. The Company remains liable to its policyholders for the
portion reinsured to the extent that any reinsurer does not meet the obligations
assumed under the reinsurance agreements. To minimize its exposure to
significant losses

F-13
<PAGE> 68

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

from reinsurer insolvencies, the Company evaluates the financial condition of
its reinsurers and monitors concentrations of credit risk arising from similar
geographic regions, activities, or economic characteristics of the reinsurers.

4. FEDERAL INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for federal income tax purposes. The Company's
deferred income tax assets and liabilities are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Deferred income tax assets:
Discounting of unpaid claims.......................... $2,291 $2,350 $ 2,500
20% reduction of unearned premiums.................... 269 245 225
Other................................................. 149 202 202
------ ------ -------
2,709 2,797 2,927
Deferred income tax liabilities:
Commissions on deposit premiums....................... (82) (155) (155)
Deferred policy acquisition costs..................... (153) (108) (131)
Unrealized gain on securities available-for-sale...... -- (161) (161)
Conversion of acquired subsidiary from cash to accrual
basis of accounting................................ -- (193) (193)
Other................................................. (171) (289) (236)
------ ------ -------
(406) (906) (876)
------ ------ -------
Net deferred federal income tax asset................... $2,303 $1,891 $ 2,051
====== ====== =======
</TABLE>

The components of consolidated federal income tax expense are as follows
(in thousands):

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------- ---------------
1993 1994 1995 1995 1996
------ ------ ------ ----- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current.................................... $3,540 $2,535 $4,822 $ 773 $1,070
Deferred................................... (772) (121) 412 (128) (161)
------ ------ ------ ----- ------
Total...................................... $2,768 $2,414 $5,234 $ 645 $ 909
====== ====== ====== ===== ======
</TABLE>

F-14
<PAGE> 69

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Federal income tax expense is different from the amount computed by
applying the U.S. federal income tax statutory rate of 34% to income before
federal income taxes as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS
-------------------------- ENDED
1993 1994 1995 MARCH 31,
------ ------ ------ 1996
------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Income tax computed at federal statutory tax
rate........................................ $3,225 $2,568 $4,953 $1,069
Tax exempt interest, net...................... (297) (404) (478) (119)
Dividends received deduction.................. (17) (22) (399) (4)
Change in accrual for prior taxes............. -- -- 700 --
Other......................................... (143) 272 458 (37)
------ ------ ------ ------
$2,768 $2,414 $5,234 $ 909
====== ====== ====== ======
</TABLE>

In connection with the reorganization (see Note 1), the Company distributed
the stock of certain subsidiaries to shareholders of the Company in a
transaction intended to qualify as tax-free distributions for federal income tax
purposes under section 355 of the Internal Revenue Code of 1986, as amended (the
"Code"). Prior to such distributions, the Board of Directors of the Company
received an opinion from its legal counsel to the effect that such distributions
should so qualify for federal income tax purposes. No ruling with respect to
such distributions was obtained from the IRS; however, and there can be no
assurance that the IRS will not take a position that such distributions do not
qualify as tax-free. If the distributions were not to qualify for tax-free
treatment under section 355 of the Code, the Company would recognize taxable
gains on the distributions of the subsidiaries stock equal to the difference on
such date between (i) the fair market value of the distributed stock and (ii)
the Company's adjusted basis in such stock, at the transaction date.

The Company is in the process of resolving various issues with respect to
examinations by the Internal Revenue Service (IRS) of AMERISAFE's 1992
consolidated income tax return and of the 1990 and 1991 tax returns of a
subsidiary that was merged into AMERISAFE. The IRS has assessed the Company an
aggregate of approximately $5.4 million for alleged tax deficiencies as a result
of these examinations, approximately $3.3 million of which relate to temporary
differences. The Company has filed a written protest of the alleged deficiencies
related to the examination of its 1992 consolidated tax return. Management
believes the alleged deficiencies are without merit and intends to vigorously
defend its position on these matters and litigate them if necessary. In
addition, the Company has entered into an agreement with certain of its former
subsidiaries that were split-off in connection with the reorganization (see Note
1) whereby it will be indemnified for any liability that might result from the
1990 and 1991 examinations. Management does not believe the resolution of these
matters will have a material effect on the financial position or results of
operations of the Company. The resolution of the temporary differences related
to the 1992 examination may result in an increase in deferred tax benefit and a
significant cash payment of income taxes by the Company if it does not prevail
in its protest.

F-15
<PAGE> 70

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. NOTES PAYABLE

Notes payable consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable:
Revolving credit loan payable to bank; originally due June
1995 extended through January 31, 1996, interest payable
at prime (generally 8.09% and 8.89% in 1994 and 1995,
respectively); secured by stock of Auto One and
Mor-Tem.................................................. $ 6,000 $ 5,200 $ --
Capital equipment leases, bearing interest at approximately
8.6%..................................................... 207 141 123
Note payable to bank; principal and interest payments in
monthly installments through November 2, 1998; interest
at prime rate; secured by aircraft....................... 1,007 893 --
Note payable to bank; principal and interest in monthly
installments through March 1, 2001; interest at 8.125%;
secured by furniture and fixtures........................ -- -- 385
Note payable to bank; interest only until January 31, 1999,
after which principal and interest will be paid in
monthly installments through January 2, 2002; interest at
LIBOR plus 6%; secured by stock of AMERISAFE, Auto One,
and Mor-Tem.............................................. -- -- 10,000
Notes payable to financial institutions; principal and
interest in monthly installments through 1998; various
interest rates; secured by Company automobiles........... 265 798 808
Notes payable to former owners of acquired subsidiary, due
in annual installments through August 1, 1999, interest
payable at 2.667%........................................ -- 1,200 1,200
------- ------- -------
Total notes payable................................. 7,479 8,232 12,516
Notes payable to shareholders and affiliates:
Note payable to Auto One, interest payable at 8.0%.......... 2,200 1,203 --
Notes payable to LTD, interest payable at 6.5% and 8.0%..... 1,027 -- --
Notes payable to stockholders; due on demand; interest
payable at 9.0%.......................................... 150 150 --
Other borrowings from affiliates............................ -- 528 521
------- ------- -------
Total notes payable to shareholders and
affiliates........................................ 3,377 1,881 521
------- ------- -------
Total notes payable and notes payable to shareholders and
affiliates.................................................. $10,856 $10,113 $13,037
======= ======= =======
</TABLE>

The future maturities of the Company's outstanding notes payable at
December 31, 1995, without regards to the matter discussed in the following
paragraph, are summarized as follows (in thousands):

Subsequent to December 31, 1995, the Company replaced its existing
revolving credit facility due January 31, 1996 with a new credit facility. The
new facility bears an interest rate of LIBOR plus 6%, expires

F-16
<PAGE> 71

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

no earlier than January 1999, and contains covenants restricting the payment of
dividends and requiring the Company, Auto One and American Interstate to
maintain certain financial ratios. The Company retired the $893,000 debt secured
by aircraft with the proceeds from this new credit facility.

Management currently expects to use a portion of the proceeds from a
planned initial public offering of the Company's Class A Common Stock (see Note
13) to repay the $10,000,000 note payable to bank and other indebtedness. The
repayment of debt is expected to result in prepayment penalties and other fees
of approximately $300,000 in the fourth quarter of 1996. Supplemental pro forma
net income per share reflecting (i) the issuance of a sufficient number of
shares of Class A Common Stock to repay debt outstanding at March 31, 1996 and
(ii) the elimination of interest expense related to those borrowings was $0.43
and $0.11 for the year ended December 31, 1995 and the three months ended March
31, 1996, respectively.

6. CLAIMS AND CLAIM SETTLEMENT EXPENSES

The following table provides a reconciliation of the beginning and ending
reserve balances, net of reinsurance recoverables, for 1993, 1994 and 1995 and
the three months ended March 31, 1996 (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS
-------------------------------- ENDED
1993 1994 1995 MARCH 31,
-------- -------- -------- 1996
------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Reserves for claims and claim settlement
expenses, net of related reinsurance
recoverables, at beginning of period........... $ 19,772 $ 24,882 $ 31,242 $ 43,304
Add:
Provision for claims and claim settlement
expenses for claims occurring in the current
period, net of reinsurance.................. 22,537 26,637 36,074 9,519
Decrease in estimated claims and claim
settlement expenses for claims occurring in
prior periods, net of reinsurance........... (1,911) (1,387) (3,150) (269)
-------- -------- -------- -------
Incurred claims and claim settlement expenses,
net of reinsurance............................. 20,262 25,250 32,924 9,250
Deduct claims and claim settlement expense
payments for claims, net of reinsurance,
occurring during:
Current period................................. (7,395) (7,795) (10,219) (749)
Prior periods.................................. (7,757) (11,095) (10,643) (5,512)
-------- -------- -------- -------
(15,152) (18,890) (20,862) (6,261)
-------- -------- -------- -------
Reserve for claims and claim settlement expenses,
net of related reinsurance recoverables, at end
of period...................................... 24,882 31,242 43,304 46,293
Recoverable ceded reserves for unpaid claims and
claims settlement expenses..................... 9,539 9,697 12,123 13,278
-------- -------- -------- -------
Reserves for claims and claim settlement expenses
at end of period............................... $ 34,421 $ 40,939 $ 55,427 $ 59,571
======== ======== ======== =======
</TABLE>

The Company's reserves for claims and claim settlement expenses, net of
related reinsurance recoverables, at December 31, 1992, 1993, 1994, and 1995,
were decreased in 1993, 1994, 1995, and the three months ended March 31, 1996
(unaudited) by $1,911,000, $1,387,000, $3,150,000, and $269,000, respectively,
for claims that had occurred prior to those balance sheet dates. The decreases
were due to settling case-basis

F-17
<PAGE> 72

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

liabilities related to claims in those periods for less than originally
estimated. Most of the favorable development has resulted from the Company's
managed results approach and claims management process. No return premiums are
due as a result of prior-year effects.

The anticipated effect of inflation is considered when estimating
liabilities for claims and claim settlement expenses. While anticipated price
increases due to inflation are considered in estimating the ultimate claim
costs, the increase in average severities of claims is caused by a number of
factors that vary with the individual type of policy written. Future average
severities are projected based on historical trends adjusted for implemented
changes in underwriting standards, policy provisions, and general economic
trends. Those anticipated trends are monitored based on actual development and
are modified if necessary.

7. REAL ESTATE, FURNITURE AND EQUIPMENT

Real estate, furniture and equipment consists of the following (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Land and office building.............................. $1,202 $1,772 $ 2,587
Furniture and equipment............................... 1,730 2,745 3,245
Automobiles........................................... 321 1,176 1,315
Aircraft.............................................. 1,824 1,824 1,824
------ ------ ------
5,077 7,517 8,971
Accumulated depreciation.............................. 808 1,611 1,918
------ ------ ------
Real estate, furniture and equipment, net............. $4,269 $5,906 $ 7,053
====== ====== ======
</TABLE>

8. STOCKHOLDERS' EQUITY, REGULATORY REQUIREMENTS AND RESTRICTIONS

American Interstate and its insurance subsidiary are required to
periodically submit financial statements prepared in accordance with statutory
accounting practices to insurance regulatory authorities. Accounting practices
used to prepare these statutory-basis financial statements differ from generally
accepted accounting principles. American Interstate's statutory capital and
surplus, determined using statutory accounting practices, as of December 31,
1994 and 1995, was approximately $20,006,000 and $26,715,000, respectively; its
insurance subsidiary's statutory capital and surplus was approximately
$3,108,000 and $3,270,000 at December 31, 1994 and 1995, respectively. American
Interstate's statutory net income was approximately $5,177,000, $4,676,000, and
$7,888,000 for the years ended December 31, 1993, 1994, and 1995, respectively;
its insurance subsidiary reported net losses of approximately $156,000 and
$563,000 for the years ended December 31, 1993 and 1994, respectively, and net
income of approximately $88,000 for the year ended December 31, 1995.

Under Louisiana insurance regulations, American Interstate and its
insurance subsidiary are each required to maintain minimum capital and surplus
of $3 million at December 31, 1995.

Pursuant to routine regulatory requirements, American Interstate cannot pay
dividends in excess of the lesser of 10% of statutory surplus, or statutory net
income, less realized capital gains, for the preceding 12-month period without
prior approval of the Louisiana Commissioner of Insurance. American Interstate
cannot pay dividends in 1996 in excess of approximately $2.7 million without
prior regulatory approval.

The redeemable cumulative preferred stock pays dividends at a rate of 8%
per annum (applied to the stated value of $1,480,000), is nonvoting, and is
redeemable at any time at the option of the Company. The preferred stock was
issued in satisfaction of notes payable (bearing interest at 9% to 11%) to a
shareholder. Each share of preferred stock is convertible into three shares of
Class B common stock (10,810.88 shares after

F-18
<PAGE> 73

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

giving effect to the stock split) at the option of the preferred shareholder.
The liquidation preference is equal to stated value plus all dividends in
arrears and totaled $1,598,400 at December 31, 1994, $1,716,800 at December 31,
1995, and $1,746,400 at March 31, 1996. At December 31, 1995 and March 31, 1996,
cumulative dividends of $236,800 and $266,400, respectively, were in arrears.
Subsequent to March 31, 1996, the preferred stockholder exercised the option to
convert the preferred stock into common stock.

The Board of Directors adopted a stock incentive plan on August 5, 1996,
subject to approval by the shareholders of the Company (the Stock Incentive
Plan). The Stock Incentive Plan provides for the grant of restricted Class A
Common Stock and options on Class A Common Stock to officers, non-employee
directors and other individuals providing critical services to the Company. The
term of each stock option issued under the Stock Incentive Plan is ten years and
options generally vest evenly over a period of five years. Restricted stock
issued under the Stock Incentive Plan generally vests evenly over a period of
three years. Stock options for 600,000 shares at an exercise price of $12 per
share were granted under the Stock Incentive Plan; none of these options have
been exercised. The aggregate number of shares reserved for issuance under the
Stock Incentive Plan is 3,000,000.

Property/casualty insurance companies are subject to certain Risk-Based
Capital (RBC) requirements specified by the National Association of Insurance
Commissioners (NAIC). Under those requirements, the amount of capital and
surplus maintained by a property/casualty insurance company is to be determined
based on the various risk factors related to it. At December 31, 1994 and 1995
and March 31, 1996, American Interstate and its insurance subsidiary exceed the
minimum RBC requirements.

Unaudited pro forma stockholders' equity at March 31, 1996 as set forth in
the accompanying balance sheet reflects the assumed conversion of preferred
stock and the payment of debts originated in connection with the reorganization
of AMERISAFE which are expected to be paid from the proceeds of a planned
initial public offering of the Company's Class A common stock. See Note 1.

9. RELATED PARTY TRANSACTIONS

Fees and other from affiliates includes fees from various affiliated
entities for the costs of providing certain executive, administrative and
support services to those affiliates. Fees and other from affiliates includes a
dividend received by AMERISAFE from a former subsidiary of approximately
$1,027,000 in 1995.

During 1993, substantially all of the Company's net premiums written were
produced by MT & Co. and Southern Underwriters, Inc., two agencies under common
control. In January 1994, AMERISAFE transferred to American Interstate a portion
of the agency operations of these affiliated agencies. The transfer had no
effect on stockholders' equity but established American Interstate as a direct
writer of its core logging industry related business. At December 31, 1994 and
1995, approximately $607,000 and $795,000, respectively, were included in agents
balances in course of collection which were due from related parties.

10. EMPLOYEE BENEFIT PLAN

The Company sponsors a 401(k) benefit program which is available to all
employees. The Company matches up to 1% of employee contributions limited to 4%
of employee compensation for participating employees. Employees vest immediately
in their contributions and become 100% vested in employer contributions to the
plan after five years. Contributions during 1993, 1994 and 1995 and the three
months ended March 31, 1996 were not material.

F-19
<PAGE> 74

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. COMMITMENTS AND CONTINGENCIES

The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position or results of operations.

The Company manages interest rate risk on pension-type claims by settling
these claims through the purchase of annuities from unaffiliated carriers. In
the event these carriers are unable to meet their obligations under these
contracts, the Company remains primarily liable to the claimants. Significant
carriers and the face amounts of the annuities at December 31, 1995, are as
follows (in thousands):

<TABLE>
<S> <C>
Confederation Life.......................................................... $ 936
Transamerica Occidental..................................................... 323
Others...................................................................... 1,098
------
$2,357
======
</TABLE>

The Company continuously monitors the financial condition of all carriers.
On August 11, 1994, Confederation Life's Canadian parent was placed into
receivership by Canadian insurance regulators. Management has monitored the
rehabilitation of Confederation Life since that date and, on the basis of
published reports, believes no loss will be incurred by the Company as a result
of the receivership of Confederation Life's Canadian parent. Accordingly, no
loss accrual is recorded in the accompanying consolidated financial statements.
Confederation Life is current in its annuity obligations at December 31, 1995
and March 31, 1996.

The increase in the number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments may
be partially recovered through a reduction in future premium taxes in certain
states. The Company recognizes those assessments when notified by the State.
Assessments paid by the Company were approximately $353,000, $442,000 and
$477,000 in 1993, 1994 and 1995, respectively, and $-0- for the three months
ended March 31, 1996.

The Company has entered into employment agreements with certain executives
in connection with a planned initial public offering of the Company's Class A
Common Stock (see Note 13). These agreements have initial terms of three years
and require aggregate annual salary payments of approximately $1,285,000.

12. FAIR VALUES OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in
estimating "fair value" disclosures for financial instruments in the
accompanying 1995 and 1996 consolidated financial statements and notes thereto:

Cash and Cash Equivalents

The carrying amounts reported in the accompanying 1995 and 1996
consolidated balance sheet for these financial instruments approximate their
fair values.

Investment Securities

The fair values disclosed in Note 2 for fixed maturity securities and
equity securities are based on market values prescribed by the Securities
Valuation Office of the NAIC (which approximates quoted market prices) or quoted
market prices, where available.

F-20
<PAGE> 75

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Notes Payable

The carrying value of notes payable (excluding capital lease obligations)
disclosed in Note 5 approximates the estimated fair value of the obligations as
the interest rates on substantially all the debt are comparable to rates which
the Company believes it presently would be charged on comparable borrowings.

Other Assets and Liabilities

The carrying amounts of recoverables from state funds and from reinsurers,
funds on deposit with reinsurers, notes receivable from shareholders and
affiliates, funds held under reinsurance treaties and amounts held for others
approximate those assets' and liabilities' carrying values because of the actual
or expected short-term maturity of those instruments.

13. SUBSEQUENT EVENT

On August 5, 1996, the Board of Directors authorized the registration of up
to 16,000,000 shares of the Company's Class A Common Stock to be offered in a
planned initial public offering of such stock.

14. UNAUDITED SELECTED QUARTERLY FINANCIAL DATA (IN THOUSANDS)

<TABLE>
<CAPTION>
1995
----------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue................................................ $12,820 $14,715 $21,462 $20,680
======= ======= ======= =======
Claims and claims settlement expenses.................. $ 6,725 $ 6,820 $10,926 $ 8,453
======= ======= ======= =======
Net income............................................. $ 1,642 $ 1,776 $ 2,593 $ 3,323
======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
1994
----------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue................................................ $10,226 $10,580 $13,751 $12,588
======= ======= ======= =======
Claims and claims settlement expenses.................. $ 6,032 $ 5,566 $ 8,654 $ 4,998
======= ======= ======= =======
Net income............................................. $ 703 $ 1,178 $ 436 $ 2,822
======= ======= ======= =======
</TABLE>

F-21
<PAGE> 76

================================================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES
OR ANY OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT
RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH AN
OFFER IN ANY STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY
THAT THE INFORMATION HEREIN IS CURRENT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
The Company............................ 7
Risk Factors........................... 7
Use of Proceeds........................ 13
Dividend Policy........................ 13
Recent Reorganization.................. 14
Capitalization......................... 15
Dilution............................... 16
Selected Consolidated Financial Data... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 18
Business............................... 26
Management............................. 38
Principal Shareholders................. 46
Certain Transactions and
Relationships........................ 47
Description of Capital Stock........... 48
Shares Eligible for Future Sale........ 50
Underwriting........................... 52
Legal Matters.......................... 53
Experts................................ 53
Additional Information................. 53
Index to Consolidated Financial
Statements ......................... F-1

</TABLE>

UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

================================================================================

11,000,000 SHARES

AMERISAFE, INC.

CLASS A COMMON STOCK

[LOGO]
------------

PROSPECTUS

, 1996

------------

SMITH BARNEY INC.

PIPER JAFFRAY INC.

================================================================================
<PAGE> 77

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth an estimate of those expenses to be incurred
by the Company in connection with the issuance and distribution of the
securities being registered.

<TABLE>
<S> <C>
Securities and Exchange Commission Fee..................................... $65,432
NASD Fee...................................................................
New York Stock Exchange Listing Fee........................................
Printing Expenses..........................................................
Legal Fees and Expenses....................................................
Accounting Fees and Expenses...............................................
Transfer Agent Fees........................................................
Blue Sky Fees and Expenses.................................................
Miscellaneous..............................................................
-------
Total............................................................ $ *
=======
</TABLE>

- ---------------

* To be completed by amendment.

All these expenses, except the Securities and Exchange Commission
registration fee, the New York Stock Exchange listing fee and the NASD
registration fee, represent estimates only.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Articles 2.02A(16) and 2.02-1 of the Texas Business Corporation Act (the
"TBCA") permit a corporation to indemnify a person who was or is a director,
officer, employee or agent of a corporation or who serves at the corporation's
request as a director, officer, venturer, partner, proprietor, trustee, employee
or agent of another corporation, partnership, sole proprietorship, employee
benefit plan, trust, joint venture, or other enterprise (an "outside
enterprise"), who was, is or is threatened to be named a defendant in a legal
proceeding by virtue of such person's position in the corporation or in an
outside enterprise, but only if the person conducted himself in good faith and
reasonably believed, in the case of conduct in the person's official capacity,
that the conduct was in the corporation's best interest or, in the case of all
other conduct, that the conduct was not opposed to the corporation's best
interest, and, in the case of a criminal proceeding, the person had no
reasonable cause to believe the conduct was unlawful. A person may be
indemnified within the above limitations against judgments, penalties, fines,
settlements and reasonable expenses actually incurred.

Generally, an officer, director, agent or employee of a corporation or a
person who serves at the corporation's request as an officer, director, agent or
employee of an outside enterprise may not be indemnified against judgments,
fines and settlements incurred in a proceeding in which the person is found
liable to the corporation or is found to have improperly received a personal
benefit and may not be indemnified for expenses unless, and only to the extent
that, in view of all the circumstances, the person is fairly and reasonably
entitled to indemnification for such expenses. A corporation must indemnify a
director, officer, employee or agent against reasonable expenses incurred in
connection with a proceeding in which the person is a party because of the
person's corporate position, if the person was successful, on the merits or
otherwise, in the defense of the proceeding. Under certain circumstances, a
corporation may also advance expenses to such person.

Article 2.02-1 of the TBCA permits a corporation to purchase and maintain
insurance or to make other arrangements on behalf of any of the foregoing
persons against any liability asserted against and incurred by the person in
such capacity, or arising out of the person's status as such a person, whether
or not the corporation would have the powers to indemnify the person against the
liability under applicable law.

The Company's Articles of Incorporation, as amended (the "Articles"),
provide that the Company's directors will have no personal liability to the
Company or its shareholders for monetary damages for an act or

II-1
<PAGE> 78

omission in their capacities as directors. This provision has no effect on
director liability for (i) a breach of the director's duty of loyalty to the
Company or its shareholders, (ii) acts or omissions not in good faith that
constitute a breach of duty of a director or involving intentional misconduct or
knowing violations of law, (iii) approval of any transaction from which a
director derives an improper personal benefit, or (iv) an act or omission for
which the liability of a director is expressly provided by an applicable
statute. In addition, the Company's Articles provide that any additional
liability permitted to be eliminated by subsequent legislation will
automatically be eliminated without further shareholder vote, unless additional
shareholder approval is required by such legislation.

Article VI of the Company's Bylaws (the "Bylaws") also provides that the
Company will indemnify its directors, officers, employees and agents to the
fullest extent permitted by the TBCA. As described above, this means that the
Company is generally required to indemnify its directors, officers, employees,
and agents against all judgments, fines, settlements, legal fees, and other
expenses incurred in connection with pending or threatened legal proceedings
because of the person's position with the Company or another entity that the
person serves at the Company's request, subject to certain conditions, generally
described above, and to advance funds to enable them to defend against such
proceedings.

The Company has entered into certain agreements (the "Indemnification
Agreements") with each of its directors and executive officers (each, an
"Indemnitee") designed to give effect to the foregoing provisions of the
Articles and Bylaws. The Indemnification Agreements are intended to provide
certain additional assurances against the possibility of uninsured liability
primarily because the Indemnification Agreements (i) specify the extent to which
the Indemnitees shall be entitled to receive benefits not expressly set forth in
the TBCA and (ii) include a number of procedural provisions designed to provide
certainty in administration of the rights to indemnity. Pursuant to the
Indemnification Agreements, among other things, an Indemnitee will be entitled
to indemnification as provided by the TBCA. The right to receive indemnification
is not available under the Indemnification Agreements in connection with any
claim against the Indemnitee (i) for which payment is actually made to the
Indemnitee under a valid and collectible insurance policy or (ii) as to which
the Indemnitee shall have been adjudged to be liable for willful or intentional
misconduct in the performance of his duty to the Company, unless ordered by the
court in which the claim was brought in accordance with applicable law.

The Underwriting Agreement entered into by the Company and the Underwriters
in connection with this Offering provides that the Underwriters will indemnify
the directors and officers of the Company against certain liabilities relating
to information furnished by the Underwriters.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

On December 31, 1993, the Company issued 3,229.34 shares of the Company's
common stock in exchange for all of the issued and outstanding common stock of
Mor-Tem Systems, Inc. ("Mor-Tem") owned by Messrs. Morris, Anderson and another
Mor-Tem shareholder. On the same date, the Company issued 510.167 shares of the
Company's Series B Cumulative Preferred Stock (the "Series B Stock") to Mr.
Morris in exchange for the cancellation of the Company's promissory notes
payable to Mr. Morris with outstanding principal balances totalling $1,480,000.
On July 29, 1996, Mr. Morris converted the Series B Stock into 1530.50 shares of
the Company's common stock. The above transactions were exempt from the
registration requirements of the Securities Act of 1933, as amended (the "Act"),
pursuant to Section 4(2) thereof.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

a. Exhibits:

<TABLE>
<S> <C>
1.1* -- Form of Underwriting Agreement
2.1* -- Form of Distribution Agreement between the Company and existing and
former shareholders
2.2* -- Form of Distribution Agreement between the Company and Millard E.
Morris
</TABLE>

II-2
<PAGE> 79

<TABLE>
<C> <S>
3.1 -- Amended and Restated Articles of Incorporation of the Company
3.2 -- Amended and Restated Bylaws of the Company
4.1* -- Form of Class A Common Stock Certificate
5.1* -- Opinion of Jones, Day, Reavis & Pogue
10.1 -- Form of Registration Rights Agreement among the Company, Millard E.
Morris and Mark R. Anderson
10.2* -- Form of Stock Incentive Plan
10.3* -- Form of Indemnification Agreement
10.4* -- Form of Employment Agreement with certain executive officers of the
Company
10.5* -- Form of Tax Sharing Agreement
10.6* -- Form of Services Agreement between the Company and Auto One
Acceptance Corporation
10.7+ -- First Casualty Excess Reinsurance Agreement between the Company,
Silver Oak Casualty, Inc. and the Reinsurers identified therein
10.8+ -- Second Casualty Excess Reinsurance Agreement between the Company,
Silver Oak Casualty, Inc. and the Reinsurers identified therein
10.9+ -- Third Casualty Excess Reinsurance Agreement between the Company,
Silver Oak Casualty, Inc. and the Reinsurers identified therein
10.10+ -- First Workers' Compensation Per Occurrence Excess Reinsurance
Agreement between the Company, Silver Oak Casualty, Inc. and the
Reinsurers identified therein
10.11+ -- Second Workers' Compensation Per Occurrence Excess Reinsurance
Agreement between the Company, Silver Oak Casualty, Inc. and the
Reinsurers identified therein
10.12+ -- First Per Claimant Workers' Compensation Excess Reinsurance Agreement
between the Company, Silver Oak Casualty, Inc. and the Reinsurers
identified therein
10.13+ -- Second Per Claimant Workers' Compensation Excess Reinsurance
Agreement between the Company, Silver Oak Casualty, Inc. and the
Reinsurers identified therein
11.1 -- Statement of Computation of Earnings Per Share
21.1 -- Subsidiaries of the Company
23.1 -- Consent of Ernst & Young LLP
23.2* -- Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1)
24.1 -- Powers of Attorney
27.1 -- Financial Data Schedule
</TABLE>

- ---------------

* To be filed by amendment.

+ Filed with confidential portions omitted and filed separately.

b. Financial Statement Schedules:

Report of Ernst & Young LLP on Financial Statement Schedules
I. Summary of Investments -- Other Than Investments In Related Parties
II. Condensed Financial Information of Registrant
III. Supplementary Insurance Information
IV. Reinsurance
VI. Supplemental Information Concerning Property-Casualty Insurance
Operations

All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements and notes thereto.

II-3
<PAGE> 80

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 81

SIGNATURES

Pursuant to the requirement of the Securities Act, the Registrant has duly
caused this Registration Statement on Form S-1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas,
on August 12, 1996.

AMERISAFE, INC.

By: /s/ MILLARD E. MORRIS
------------------------------------
Millard E. Morris
Chairman of the Board of Directors
and Chief Executive Officer

Pursuant to the requirements of the Securities Act, this Registration
Statement on Form S-1 has been signed by the following persons in the capacities
indicated on August 12, 1996.

<TABLE>
<CAPTION>
SIGNATURES TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ MILLARD E. MORRIS Chairman of the Board of Directors and Chief
- --------------------------------------------- Executive Officer (principal executive
Millard E. Morris officer)

/s/ MARK R. ANDERSON President, Chief Operating Officer and
- --------------------------------------------- Director
Mark R. Anderson

/s/ ARTHUR L. HUNT Vice President and Director
- ---------------------------------------------
Arthur L. Hunt

/s/ JOHN R. BUCK Vice President, Chief Financial Officer,
- --------------------------------------------- Treasurer and Director (Principal Financial
John R. Buck and Accounting Officer)

DANIEL J. JESSEE* Director
- ---------------------------------------------
Daniel J. Jessee

N. DAVID SPENCE* Director
- ---------------------------------------------
N. David Spence
</TABLE>

* The undersigned, by signing his name hereto, does sign and execute this
Registration Statement as of this 12th day of August, 1996, pursuant to the
Powers of Attorney executed on behalf of the above-named officers and
directors and contemporaneously filed herewith with the Securities and
Exchange Commission.

By: /s/ MILLARD E. MORRIS
------------------------------------
Millard E. Morris
Attorney-in-Fact

II-5
<PAGE> 82

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
AMERISAFE, Inc.

We have audited the consolidated financial statements of AMERISAFE, Inc.
and subsidiaries as of December 31, 1994 and 1995, and for each of the three
years in the period ended December 31, 1995, and have issued our report thereon
dated , 1996 (included elsewhere in this Registration Statement).
Our audits also included the financial statement schedules listed in Item 16(b)
of this Registration Statement. These schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.

In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the
Company effected a reorganization on , 1996, resulting in a
change in the reporting entity.

Dallas, Texas
, 1996

The foregoing report is in the form that will be signed upon completion of
transactions described in the first paragraph of Note 1 to the consolidated
financial statements.

ERNST & YOUNG LLP

Dallas, Texas
August 9, 1996

S-1
<PAGE> 83

AMERISAFE, INC. AND SUBSIDIARIES

SCHEDULE I -- SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN RELATED
PARTIES
DECEMBER 31, 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
-------- -------- -------- -------------
AMOUNT
AT WHICH
FAIR SHOWN IN THE
TYPE OF INVESTMENT COST VALUE BALANCE SHEET
------------------- -------- -------- -------------
<S> <C> <C> <C>
Fixed Maturity Securities, available for sale:
Bonds:
U.S. Treasury obligations and U.S. Government agency
obligations........................................ $ 3,191 $ 3,260 $ 3,260
Other corporate bonds................................ 100 103 103
------- ------- -------
Total........................................... 3,291 3,363 3,363
------- ------- -------
Equity Securities, available for sale:
Common stocks........................................... 2,748 3,076 3,076
------- ------- -------
Fixed Maturity Securities, held to maturity:
Bonds:
U.S. Treasury obligations and U.S. Government agency
obligations........................................ 28,530 29,247 28,530
States, municipalities, and political subdivisions... 33,754 34,781 33,754
All other corporate bonds............................ 2,768 2,812 2,768
------- ------- -------
Total........................................... 65,052 $66,840 65,052
=======
------- -------
Total investments............................... $71,091 $71,491
======= =======
</TABLE>

S-2
<PAGE> 84

AMERISAFE, INC. (PARENT COMPANY)

SCHEDULE II -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT

BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
------- -------
<S> <C> <C>
Assets:
Cash and cash equivalents.............................................. $ 150 $ 129
Investments in subsidiaries*........................................... 37,100 27,368
Notes receivable from subsidiaries and affiliates...................... 2,981 3,524
Furniture and equipment................................................ 1,371 1,889
Deferred federal income taxes.......................................... 202 149
Other.................................................................. 124 79
------- -------
Total assets............................................................. $41,928 $33,138
======= =======
Liabilities and Stockholders' Equity:
Liabilities:
Accrued expenses and other liabilities.............................. $ 805 $ 813
Notes payable....................................................... 7,632 6,472
Notes payable to subsidiaries and affiliates........................ 1,353 3,377
------- -------
Total liabilities...................................................... 9,790 10,662
Stockholders' equity:
Preferred stock, $0.01 par value, 25,000,000 shares authorized:
Series B -- cumulative convertible 8% preferred stock, issued and
outstanding
shares -- 510.167.............................................. -- --
Class A common stock, $0.01 par value,
Authorized shares -- 100,000,000
Issued and outstanding shares -- None............................. -- --
Class B common stock, $0.01 par value:
Authorized shares -- 100,000,000
Issued and outstanding shares -- 11,884,647....................... 119 119
Additional paid-in capital.......................................... 1,362 1,362
Unrealized gain (loss) on securities available-for-sale, net of
taxes.............................................................. 264 (64)
Retained earnings................................................... 30,393 21,059
------- -------
Total stockholders' equity............................................. 32,138 22,476
------- -------
Total liabilities and stockholders' equity............................... $41,928 $33,138
======= =======
</TABLE>

- ---------------

* Eliminated in consolidation

The condensed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto of AMERISAFE, Inc. and
subsidiaries.

S-3
<PAGE> 85

AMERISAFE, INC. (PARENT COMPANY)

SCHEDULE II -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)

STATEMENTS OF INCOME
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Revenues:
Fees and other from affiliates................................. $5,832 $4,227 $4,169
Investment income.............................................. 88 44 --
------ ------ ------
5,920 4,271 4,169
Expenses:
General and administrative..................................... 2,996 2,407 1,794
Depreciation................................................... 312 163 130
Interest....................................................... 843 668 835
------ ------ ------
4,151 3,238 2,759
------ ------ ------
Income before federal income taxes............................... 1,769 1,033 1,410
Federal income tax expense....................................... 340 395 489
Equity in undistributed earnings of subsidiaries................. 7,905 4,501 5,795
------ ------ ------
Net income....................................................... $9,334 $5,139 $6,716
====== ====== ======
</TABLE>

The condensed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto of AMERISAFE, Inc. and
subsidiaries.

S-4
<PAGE> 86

AMERISAFE, INC. (PARENT COMPANY)

SCHEDULE II -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1994 1993
------- ------- ------
<S> <C> <C> <C>
Net cash provided by operating activities...................... $ 1,637 $ 560 $1,706
Investing activities:
Purchase of furniture and equipment.......................... 206 (359) (84)
Loans to subsidiaries and affiliates......................... (41) (3,238) (764)
Repayment of loans to subsidiaries and affiliates............ 583 -- --
------- ------- ------
Net cash provided by (used in) investing activities............ 748 (3,597) (848)
Financing activities:
Net proceeds from (repayment of) revolving notes payable..... (800) 4,100 --
Proceeds from (repayment of) notes payable................... 460 204 (620)
Proceeds from (repayment of) notes payable from affiliates... (2,024) (1,328) 26
------- ------- ------
Net cash (used in) provided by financing activities............ (2,364) 2,976 (594)
Increase (decrease) in cash and cash equivalents............... 21 (61) 264
Cash and cash equivalents at beginning of year................. 129 190 (74)
------- ------- ------
Cash and cash equivalents at end of year....................... $ 150 $ 129 $ 190
======= ======= ======
</TABLE>

The condensed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto of AMERISAFE, Inc. and
subsidiaries.

S-5
<PAGE> 87

AMERISAFE, INC. AND SUBSIDIARIES

SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- ----------------- -------- ------------
DEFERRED FUTURE POLICY
POLICY BENEFITS, LOSSES, OTHER
ACQUISITION CLAIMS, AND LOSS UNEARNED POLICYHOLDER
COSTS* EXPENSES* PREMIUMS* FUNDS
-------- ----------------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1995........................... $316 $55,427 $3,581 $ --
==== ======= ====== ======
December 31, 1994........................... $444 $40,939 $4,229 $ --
==== ======= ====== ======
December 31, 1993........................... $213 $34,421 $1,591 $ --
==== ======= ====== ======
</TABLE>

- ---------------
* Balances consist entirely of property/casualty insurance.

<TABLE>
<CAPTION>
COLUMN F COLUMN G COLUMN H COLUMN I COLUMN J COLUMN K
-------- ---------- ---------- ------------ --------- ---------
BENEFITS, AMORTIZATION
CLAIMS, OF DEFERRED
NET LOSSES AND POLICY OTHER
PREMIUM INVESTMENT SETTLEMENT ACQUISITION OPERATING PREMIUMS
REVENUE* INCOME* EXPENSES* COSTS* EXPENSES* WRITTEN*
-------- ---------- ---------- ------------ --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1995.................... $58,167 $4,519 $ 32,924 $245 $21,940 $57,848
======= ======== ======== ========= ======= ========
1994.................... $40,461 $2,484 $ 25,250 $230 $14,112 $42,867
======= ======== ======== ========= ======= ========
1993.................... $35,902 $2,146 $ 20,262 $212 $11,231 $37,471
======= ======== ======== ========= ======= ========
</TABLE>

- ---------------

* Balances consist entirely of property/casualty insurance.

S-6
<PAGE> 88

AMERISAFE, INC. AND SUBSIDIARIES

SCHEDULE IV -- REINSURANCE

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ------------------------------------------ -------- -------- -------- -------- --------

ASSUMED % OF
CEDED TO FROM AMOUNT
GROSS OTHER OTHER NET ASSUMED TO
AMOUNT* COMPANIES* COMPANIES* AMOUNT* NET
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995.............. $66,832 $8,665 $ -- $58,167 0%
======= ====== ==== ======= ==
Year Ended December 31, 1994.............. $48,262 $7,801 $ -- $40,461 0%
======= ====== ==== ======= ==
Year Ended December 31, 1993.............. $43,995 $8,093 $ -- $35,902 0%
======= ====== ==== ======= ==
</TABLE>

- ---------------

* Balances consist entirely of property/casualty insurance.

S-7
<PAGE> 89

AMERISAFE, INC. AND SUBSIDIARIES

SCHEDULE VI -- SUPPLEMENTAL INFORMATION
CONCERNING PROPERTY/CASUALTY INSURANCE OPERATIONS

<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
--------- --------------- ------------------- ---------- --------
DISCOUNT,
DEFERRED POLICY RESERVES FOR UNPAID IF ANY,
AFFILIATION WITH ACQUISITION CLAIMS AND CLAIM DEDUCTED IN UNEARNED
REGISTRANT COSTS ADJUSTMENT EXPENSES COLUMN C** PREMIUMS
--------------- ------------------- -------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Registrant and consolidated
subsidiaries
1995.............................. $ 316 $55,427 $ -- $3,581
==== ======= ====== ======
1994.............................. $ 444 $40,939 $ -- $4,229
==== ======= ====== ======
1993.............................. $ 213 $34,421 $ -- $1,591
==== ======= ====== ======
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------------------------------------------------
COLUMN F COLUMN G COLUMN H COLUMN I COLUMN J COLUMN K
-------- ---------- -------------------------- ------------ ---------- ---------
CLAIMS AND CLAIM
ADJUSTMENT EXPENSES AMORTIZATION PAID
INCURRED RELATED TO OF DEFERRED CLAIMS AND
NET -------------------------- POLICY CLAIM
EARNED INVESTMENT (1) (2) ACQUISITION ADJUSTMENT PREMIUMS
PREMIUMS INCOME CURRENT YEAR PRIOR YEAR COSTS EXPENSES WRITTEN
-------- ---------- ------------ ---------- ------------ ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
1995............. $58,167 $4,519 $ 36,074 $ (3,150) $245 $ 20,862 $57,848
======= ======== ========= ======== ========= ======== ========
1994............. $40,461 $2,484 $ 26,637 $ (1,387) $230 $ 18,890 $42,867
======= ======== ========= ======== ========= ======== ========
1993............. $35,902 $2,146 $ 22,537 $ (1,911) $212 $ 15,152 $37,471
======= ======== ========= ======== ========= ======== ========
</TABLE>

S-8
<PAGE> 90

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ---------- ------------- ------------
<S> <C> <C>
1.1* -- Form of Underwriting Agreement
2.1* -- Form of Distribution Agreement between the Company and existing and
former shareholders
2.2* -- Form of Distribution Agreement between the Company and Millard E.
Morris
3.1 -- Amended and Restated Articles of Incorporation of the Company
3.2 -- Amended and Restated Bylaws of the Company
4.1* -- Form of Class A Common Stock Certificate
5.1* -- Opinion of Jones, Day, Reavis & Pogue
10.1 -- Form of Registration Rights Agreement among the Company, Millard E.
Morris and Mark R. Anderson
10.2* -- Form of Stock Incentive Plan
10.3* -- Form of Indemnification Agreement
10.4* -- Form of Employment Agreement with certain executive officers of the
Company
10.5* -- Form of Tax Sharing Agreement
10.6* -- Form of Services Agreement between the Company and Auto One
Acceptance Corporation
10.7+ -- First Casualty Excess Reinsurance Agreement between the Company,
Silver Oak Casualty, Inc. and the Reinsurers identified therein
10.8+ -- Second Casualty Excess Reinsurance Agreement between the Company,
Silver Oak Casualty, Inc. and the Reinsurers identified therein
10.9+ -- Third Casualty Excess Reinsurance Agreement between the Company,
Silver Oak Casualty, Inc. and the Reinsurers identified therein
10.10+ -- First Workers' Compensation Per Occurrence Excess Reinsurance
Agreement between the Company, Silver Oak Casualty, Inc. and the
Reinsurers identified therein
10.11+ -- Second Workers' Compensation Per Occurrence Excess Reinsurance
Agreement between the Company, Silver Oak Casualty, Inc. and the
Reinsurers identified therein
10.12+ -- First Per Claimant Workers' Compensation Excess Reinsurance Agreement
between the Company, Silver Oak Casualty, Inc. and the Reinsurers
identified therein
10.13+ -- Second Per Claimant Workers' Compensation Excess Reinsurance
Agreement between the Company, Silver Oak Casualty, Inc. and the
Reinsurers identified therein
11.1 -- Statement of Computation of Earnings Per Share
21.1 -- Subsidiaries of the Company
23.1 -- Consent of Ernst & Young LLP
23.2* -- Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1)
24.1 -- Powers of Attorney
27.1 -- Financial Data Schedule
</TABLE>

- ---------------

* To be filed by amendment.

+ Filed with confidential portions omitted and filed separately.

<PAGE> 1

AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
GULF UNIVERSAL HOLDINGS, INC.

ARTICLE ONE

Gulf Universal Holdings, Inc., pursuant to the provisions of
Article 4.07 of the Texas Business Corporation Act, adopts these amended and
restated articles of incorporation, which accurately copy the articles of
incorporation, all amendments in effect to date and all amendments implemented
hereby. The articles of incorporation, as amended and restated by these
amended and restated articles of incorporation, are set forth below and, other
than previous amendments and the amendments implemented hereby, contain no
other changes in any provisions. The original articles of incorporation were
filed by the Secretary of State of the State of Texas on October 28, 1985.

ARTICLE TWO

The articles of incorporation of the corporation are amended
by the amended and restated articles of incorporation as follows:

(a) The name of the corporation is changed to AMERISAFE,
Inc.

(b) The authorized capital stock of the corporation is
increased, the issued and outstanding common stock of
the corporation is reclassified, a new class of
common stock is created and the par value of the
preferred stock is changed.

(d) A classified board of directors is created.

(e) Provisions for the calling of special meetings of
shareholders, indemnification of directors and
officers and the elimination of directors' monetary
liability to shareholders are added.

(f) Article 12 is deleted.

ARTICLE THREE

Each such amendment made by these amended and restated articles of
incorporation has been effected in conformity with the provisions of the Texas
Business Corporation Act. These amended and restated articles of incorporation
and each amendment made by these amended and restated articles of incorporation
were duly adopted by the shareholders of the corporation on August 5, 1996.

ARTICLE FOUR

The number of shares of the corporation outstanding at the time of the
adoption was 6,092.84 shares of Common Stock and 3,700,000 shares of Series A
Cumulative Preferred Stock; and the number of shares entitled to vote on the
restated articles as so amended was 6,092.84 shares of Common Stock and
3,700,000 shares of Series A Cumulative Preferred Stock; the number of shares
voted for such restated articles as so amended was 5,161.47 shares of Common
Stock and 3,700,000 shares of Series A Cumulative Preferred

1
<PAGE> 2
Stock; and no shares of Common Stock or Series A Cumulative Preferred Stock
were voted against such restated articles as so amended.

ARTICLE FIVE

The manner in which any exchange, reclassification or cancellation of
issued shares provided for in the amendment shall be effected as follows:

Upon the filing of these Amended and Restated Articles of
Incorporation with the Office of the Secretary of State of the State
of Texas, (i) each then issued and outstanding share of common stock,
no par value, of the Corporation (the "Existing Common Stock") shall
be reclassified, automatically and without any action on the part of
the respective holders thereof, into 3,603.62603 shares of Class B
Common Stock, par value $.01 per share, of the Corporation (the "Class
B Common Stock") and (ii) the par value of each issued and outstanding
share of Series A Cumulative Preferred Stock, par value $1.00 per
share, of the Corporation (the "Existing Preferred Stock") shall be
reduced, automatically and without any action on the part of the
holder thereof, to $.01 per share (the "Preferred Stock").

Upon the surrender of certificates representing the Existing
Common Stock or the Existing Preferred Stock by a registered holder
thereof, in properly endorsed form for exchange, or upon receipt of
evidence reasonably satisfactory to the Corporation of the loss, theft
or destruction of such certificates (together with an indemnity bond,
if deemed necessary by the Corporation), the Corporation shall accept
the surrendered certificates, and shall issue to the holder thereof,
certificates in such denominations as such holder may request (i) in
the case of surrendered shares of Existing Common Stock, certificates
representing Class B Common Stock in an aggregate amount equal to
3,603.6203 multiplied by the number of shares of Existing Common Stock
surrendered, rounded to the nearest hundredth, and (ii) in the case of
surrendered shares of Existing Preferred Stock, certificates
representing Preferred Stock on a share-for-share basis.

To the extent holders of Existing Common Stock or Existing
Preferred Stock shall not present their shares for exchange in the
manner specified above, such failure to act shall in no circumstance
affect their status as holders of Class B Common Stock or Preferred
Stock, as applicable, except that (i) each certificate representing
shares of Existing Common Stock shall be deemed to represent the pro
rata equivalent number of shares of Class B Common Stock as herein
provided for, and (ii) each certificate representing shares of
Existing Preferred Stock shall be deemed to represent an equal number
of shares of Preferred Stock.

ARTICLE SIX

The manner in which such amendment effects a change in the amount of
stated capital, and the amount of stated capital as changed by such amendment,
are as follows:

Upon the filing of these Amended and Restated Articles of
Incorporation with the Secretary of State of the State of Texas, the
stated capital of the Corporation shall be increased from $1,510.97 to
$212,355.92 to reflect the reclassification of the issued and
outstanding shares of Existing Common Stock into shares of Class B
Common Stock.

2
<PAGE> 3
ARTICLE SEVEN

The articles of incorporation and all amendments and supplements
thereto are superseded by the following amended and restated articles of
incorporation, which accurately copy the entire text thereof as further amended
as set forth above:

AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
AMERISAFE, INC.

ARTICLE I
NAME

The name of the Corporation is AMERISAFE, Inc.

ARTICLE II
DURATION

The period of the Corporation's duration is perpetual.

ARTICLE III
PURPOSE

The purpose for which the Corporation is organized is to conduct any
and all lawful business for which a corporation may be organized under the
Texas Business Corporation Act.

ARTICLE IV
CAPITALIZATION

Section 1. Authorized Capital Stock. The total number of shares of
all classes of capital stock that the Corporation shall have authority to issue
is 225,000,000 shares, consisting of (a) 100,000,000 shares of Class A Common
Stock, par value $.01 per share ("Class A Common Stock"), (b) 100,000,000 shares
of Class B Common Stock, par value $.01 per share ("Class B Common Stock" and,
together with Class A Common Stock, "Common Stock"), and (c) 25,000,000 shares
of Preferred Stock, par value $.01 per share ("Preferred Stock"), of which
3,700,000 shares are designated as Series A Cumulative Preferred Stock. Except
as otherwise required by law or expressly provided for herein, the rights,
powers and preferences of the shares of Common Stock and the qualifications,
limitations or restrictions thereof, shall be in all respects identical.

Section 2. Reclassification. Upon the filing of these Amended and
Restated Articles of Incorporation with the Office of the Secretary of State of
the State of Texas, (i) each then issued and outstanding share of common stock,
no par value, of the Corporation ("Existing Common Stock") shall be
reclassified, automatically and without any action on the part of the
respective holders thereof, into 3,603.62603 shares of Class B Common Stock (as
hereinafter defined) and (ii) the par value of each then issued and outstanding
share of preferred stock, par value $1.00 per share, of the Corporation shall
be decreased, automatically and without any action on the part of the holder
thereof, to $.01 per share.

3
<PAGE> 4
Section 3. Common Stock. The relative rights, powers, preferences,
qualifications, limitations and restrictions of the Class A Common Stock and
Class B Common Stock shall be as follows:

(a) Voting Rights. Each share of Class A Common Stock
shall be entitled to one vote, and each share of Class B Common Stock
shall be entitled to ten votes, on all matters submitted to a vote of
the shareholders. Except as otherwise provided herein or by law, all
actions submitted to a vote of the shareholders of the Corporation
shall be voted on by the holders of the Class A Common Stock and Class
B Common Stock voting together as a single class.

(b) Conversion. The Class A Common Stock has no
conversion rights. Each share of Class B Common Stock is convertible
at any time, and from time to time, at the option of and without cost
to the holder thereof, into one fully paid and nonassessable share of
Class A Common Stock; provided however, that shares of Class B Common
Stock may only be converted into Class A Common Stock after the
delivery to the Corporation of a Conversion Notice (as hereinafter
defined); and provided further, however, that shares of Class B Common
Stock shall be automatically converted, without any action on the part
of the holder thereof into shares of Class A Common Stock upon the
transfer of such shares of Class B Common Stock except as a result of
(i) a transfer to any lineal descendant of any grandparent of a record
holder of such shares of Class B Common Stock (a "Class B Holder"),
including adopted children and any such descendant's spouse, (ii) a
transfer by will or by the laws of descent and distribution, or (iii)
a transfer to a voting trust or other trust (including a distribution
from such trust to the trust beneficiaries), to a corporation,
partnership or other entity controlled by the beneficial owner of such
shares, or to the individual beneficial owner of such shares or to any
such entity that will become controlled by the beneficial owner of
such shares immediately after the transfer or series of transfers
within any ten (10) day period.

If any Class B Holder desires to convert any of such shares
into shares of Class A Common Stock, such Class B Holder shall present
and surrender the certificate or certificates representing such shares
during usual business hours at any office or agency of the Corporation
maintained for the transfer of Class B Common Stock and shall deliver
a written notice ("Conversion Notice") of the election of such Class B
Holder to convert the shares represented by such certificate or any
portion thereof as specified in the Conversion Notice. The Conversion
Notice shall state the name or names (with addresses) in which the
certificate or certificates representing shares of Class A Common
Stock issuable on such conversion shall be registered. If so required
by the Corporation, any certificate representing shares of Class B
Common Stock surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly
executed by the holder of such shares or his authorized
representative. Each conversion of shares of Class B Common Stock
shall be deemed to have been effected on the date (the "Conversion
Date") on which the certificate or certificates representing such
shares shall have been surrendered and such notice and any required
instruments of transfer shall have been received as aforesaid. The
person or persons in whose name or names any certificate or
certificates representing shares of Class A Common Stock are issuable
upon such conversion shall be, for the purpose of receiving dividends
and for all other corporate purposes whatsoever, deemed to have become
the holder or holders of record of the shares of Class A Common Stock
represented thereby on the Conversion Date.

As promptly as practicable after the Conversion Date, the
Corporation shall issue and deliver at such office or agency, to or
upon the written order of the holder thereof, certificates for the
number of shares of Class A Common Stock issuable upon such
conversion. Subject to the provisions of this subsection (b) of this
Section 3, in the event any certificate representing shares of Class B
Common Stock shall be surrendered for conversion of a part only of the
shares represented thereby, the Corporation shall deliver at such
office or agency, to or upon the written order of the holder thereof,
a certificate or certificates for the number of shares of Class B
Common Stock represented by such surrendered certificate which are not
being converted. The issuance of certificates representing shares of
Class A Common Stock issuable upon the conversion of shares of

4
<PAGE> 5
Class B Common Stock by the registered holder thereof shall be made
without charge to the converting holder for any tax imposed on the
Corporation in respect of the issue thereof. The Corporation shall
not, however, be required to pay any tax which may be payable with
respect to any transfer involved in the issue and delivery of any
certificate in a name other than that of the registered holder of the
shares being converted, and the Corporation shall not be required to
issue or deliver any such certificate unless and until the person
requesting the issue thereof shall have paid to the Corporation the
amount of such tax or has established to the satisfaction of the
Corporation that such tax has been paid.

Upon any conversion of shares of Class B Common Stock into
shares of Class A Common Stock pursuant hereto, no adjustment with
respect to dividends shall be made; only those dividends shall be
payable on the shares so converted as may be declared and are payable
to holders of record of shares of Class B Common Stock on a date prior
to the Conversion Date with respect to the shares so converted; and
only those dividends shall be payable on shares of Class A Common
Stock issued upon such conversion as may be declared and are payable
to holders of record of shares of Class A Common Stock on or after
such Conversion Date.

In case of any consolidation or merger of the Corporation as a
result of which the holders of Class A Common Stock shall be entitled
to receive cash, stock, other securities or other property with
respect to or in exchange for Class A Common Stock or in case of any
sale or conveyance of all or substantially all of the property or
business of the Corporation as an entirety, each holder of any share
of Class B Common Stock shall have the right thereafter, so long as
the conversion right hereunder shall exist, to convert such share into
the kind and amount of cash, shares of stock, and other securities and
properties as are receivable upon such consolidation, merger, sale or
conveyance by each holder of one share of Class A Common Stock and
shall have no other conversion rights with regard to such share. The
provisions of this paragraph shall similarly apply to successive
consolidations, mergers, sales or conveyances.

Shares of Class B Common Stock converted into Class A Common
Stock as provided in this Section 3(b) shall not be reissued, and all
such shares shall be cancelled, retired and eliminated from the shares
which the Corporation shall be authorized to issue. The President or
any Vice-President and the Secretary or any Assistant Secretary of the
Corporation are hereby authorized and directed on behalf of the
Corporation to file such documents from time to time as may be
necessary to reduce the authorized number of shares of Class B Common
Stock accordingly.

Such number of shares of Class A Common Stock as may from time
to time be required for such purpose shall be reserved for issuance
upon conversion of outstanding shares of Class B Common Stock and for
issuance upon exercise of options, if any.

(c) Dividends and Liquidation Rights. When, as and if
dividends are declared by the Board of Directors of the Corporation
(the "Board of Directors"), whether payable in cash, in property or in
securities of the Corporation, after dividends have been declared and
set aside for payment or paid on any series of Preferred Stock having
a preference over the Common Stock with respect to payment of such
dividends, the holders of the Class A Common Stock and Class B Common
Stock shall be entitled to share equally, share for share, in such
dividends, except that if dividends are declared which are payable in
shares of Class A Common Stock or Class B Common Stock, dividends
shall be declared which are payable at the same rate on both classes
of Common Stock and such dividends shall be payable only in shares of
Class A Common Stock to holders of the Class A Common Stock and shall
be payable only in shares of Class B Common Stock to holders of Class
B Common Stock. Upon the liquidation, dissolution or winding up of
the affairs of the Corporation, whether voluntary or involuntary,
after there have been paid or set apart for the holder of any series
of Preferred Stock having a preference over the Common Stock with
respect to distributions upon liquidation the full amount to which
they are entitled, the holders of Common

5
<PAGE> 6
Stock are entitled to receive and to share equally in all assets of
the Corporation available for distribution to shareholders.

Section 4. Preferred Stock.

(a) General. Preferred Stock may be issued in one or
more series. The Board of Directors is hereby authorized to issue the
shares of Preferred Stock in such series and to fix from time to time
before issuance the number of shares to be included in any such series
and to determine the designations, preferences, limitations and
relative rights, including voting rights, of all shares of such
series. The authority of the Board of Directors with respect to each
such series will include, without limiting the generality of the
foregoing, the determination of any or all of the following:

(i) the number of shares of any series and the
designation to distinguish the shares of such series from the
shares of all other series;

(ii) the voting powers, if any, and whether such
voting powers are full or limited in such series;

(iii) the redemption provisions, if any, applicable
to such series, including the redemption price or prices to be
paid;

(iv) whether dividends, if any, will be cumulative
or noncumulative, the dividend rate of such series, and the
dates and preferences of dividends on such series;

(v) the rights of such series upon the voluntary
or involuntary dissolution of, or upon any distribution of the
assets of, the Corporation;

(vi) the provisions, if any, pursuant to which the
shares of such series are convertible into, or exchangeable
for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock, or
any other security, of the Corporation or any other
corporation or other entity, and the price or prices or the
rates of exchange applicable thereto;

(vii) the right, if any, to subscribe for or to
purchase any securities of the Corporation or any other
corporation or other entity;

(viii) the provisions, if any, of a sinking fund
applicable to such series; and

(ix) any other relative, participating, optional,
or other special powers, preferences, rights, qualifications,
limitations or restrictions thereof.

(b) Series A Cumulative Preferred Stock.

(i) The Series A Cumulative Preferred Stock is a
series of Preferred Stock and shall have the following rights,
characteristics, privileges and preferences:

(A) The Series A Cumulative Preferred
Stock shall be comprised of Three
Million Seven Hundred Thousand
(3,700,000) shares;

6
<PAGE> 7
(B) The Series A Cumulative Preferred
Stock shall pay dividends at the
rate of six percent (6%) per annum
and such shall be payable upon the
terms and conditions enumerated in
Section 4(b)(ii) of this Article IV;

(D) The Series A Cumulative Preferred
Stock shall be redeemable at any
time by the Corporation at the
election of the Corporation, by and
through the action of its Board of
Directors;

(E) The Series A Cumulative Preferred
Stock shall be redeemable at the
price of One and no/100 Dollars
($1.00) per share plus all dividends
then in arrears;

(F) The Series A Cumulative Preferred
Stock shall be non-voting;

(G) The Series A Cumulative Preferred
Stock shall be non-convertible;

(H) The holder of Series A Cumulative
Preferred Stock shall be entitled,
upon the involuntary or the
voluntary liquidation of the
Corporation, to One and no/100
Dollars ($1.00) per share plus all
dividends then in arrears, which
shall be payable upon the terms and
conditions enumerated in Section
4(b)(iii) of this Article IV; and

(I) The certificates evidencing the
Series A Cumulative Preferred Stock
shall bear a legend of investment
restrictions satisfactory to counsel
for the Corporation and consistent
with the buyers' investment
representations.

(ii) The holders of Series A Cumulative Preferred
Stock shall be entitled to receive on the dates and for the
periods hereafter specified by the Board of Directors,
dividends in cash, payable when, if and as declared by the
Board of Directors out of any funds legally available therefor
from the date upon which such shares shall have been
originally issued. Such dividends, if any, shall be
cumulative from the date of issue, so that no dividend (other
than a dividend payable in Common Stock of the Corporation) or
other distribution shall be paid or declared or made on, and
no amounts shall be applied to the purchase or redemption of,
the Common Stock or any other class of stock ranking junior to
the Series A Cumulative Preferred Stock as to dividends unless
full cumulative dividends for all past dividend periods shall
have been paid or declared and set apart for payment, and full
dividends for the current dividend period shall have been or
simultaneously therewith shall be paid or declared and set
apart for payment, on outstanding Series A Cumulative
Preferred Stock. Accumulations of dividends shall not bear
interest.

(iii) In the event of any dissolution, liquidation
or winding up of the Corporation, whether voluntarily or
involuntarily, the holders of Series A Cumulative Preferred
Stock shall be entitled to receive in cash out of the assets
of the Corporation, whether capital or surplus or otherwise,
before any distribution of the assets shall be made to the
holders of Common Stock or of any other class of stock ranking
junior to the Series A Cumulative Preferred Stock as to
assets, the amount determined by the Board of Directors,
pursuant to the authority granted in Section 4(a) of this
Article IV, to be payable on the shares of Series A Cumulative
Preferred Stock in the event of voluntary or

7
<PAGE> 8
involuntary dissolution, liquidation or winding up, as the
case may be, together, in all cases, with unpaid accumulated
dividends, if any, whether such dividends are earned, declared
or otherwise, to the date fixed for such payment. If the
assets shall not be sufficient to pay in full the amounts so
determined to be payable on all shares of the Preferred Stock
in the event of such voluntary or involuntary dissolution,
liquidation or winding up, as the case may be, then the assets
available for payment shall be distributed ratably among the
holders of the Preferred Stock of all series in accordance
with the amounts so determined to be payable on the shares of
each series in the event of voluntary of involuntary
dissolution, liquidation or winding up, as the case may be, in
proportion to the full preferential amounts together with any
and all dividend arrearages to which they are respectively
entitled. After payment to the holders of the Series A
Cumulative Preferred Stock of the full preferential amounts
provided for herein, the holders of Series A Cumulative
Preferred Stock will have no other rights or claims to any of
the remaining assets of the Corporation either upon
distribution of such assets or upon dissolution, liquidation
or winding up. The sale of all or substantially all of the
property of the Corporation to, or the merger, consolidation
or reorganization of the Corporation into or with, any other
corporation, or the purchase or redemption by the Corporation
of any shares of its Preferred Stock or its Common Stock or
any other class of its stock shall not be deemed to be a
distribution of assets or a dissolution, liquidation or
winding up for the purposes of this paragraph.

(iv) So long as full cumulative dividends on all
outstanding shares of Series A Cumulative Preferred Stock for
all dividend periods ending on or prior to the date fixed for
redemption shall have been paid or declared and set apart for
payment and subject to any requirements of applicable law, the
Corporation may at the option of the Board of Directors of the
Corporation, redeem the whole or any part of the shares of
Series A Cumulative Preferred Stock determined by it to be
redeemable pursuant to the authority granted in Section 4(a)
of this Article IV, and without redeeming the shares of any
other series of Preferred Stock on the terms and conditions
and at the redemption price so determined for the Series A
Cumulative Preferred Stock, plus the amount of unpaid
accumulated dividends, if any, to the date of such redemption.
All such redemptions of Series A Cumulative Preferred Stock
shall be effected in accordance with the procedure for
redemptions set forth in the Texas Business Corporation Act in
effect at the times of such redemptions. Shares of Series A
Cumulative Preferred Stock which are redeemed or otherwise
cancelled shall be restored to the status of authorized but
unissued shares without designation.

On or before the date fixed for redemption, the
Corporation may provide for payment of a sum sufficient to
redeem the shares called for redemption either (A) by setting
aside the sum, separate from its other funds, in trust for the
benefit of the holders of the shares to be redeemed, or (B) by
depositing such sum in a bank or trust company as a trust
fund, with irrevocable instructions and authority to the bank
or trust company to give or complete the notice of redemption
and to pay, on or after the date fixed for redemption, the
redemption price on surrender of certificates evidencing the
shares of Series A Cumulative Preferred Stock called for
redemption. From and after the date fixed for redemption, (1)
the shares shall be deemed to be redeemed, (2) dividends
thereon shall cease to accumulate, (3) such setting aside or
deposit shall be deemed to constitute full payment of the
shares, (4) the shares shall no longer be deemed to be
outstanding, (5) the holders thereof shall cease to be
shareholders with respect to such shares, and (6) the holders
thereof shall have no rights with respect thereto, except the
right to receive their proportionate shares of the fund set
aside pursuant hereto or deposited upon surrender of their
respective certificates, and any right to convert such shares
which may exist. Any interest accrued on funds set aside
pursuant hereto or deposited shall belong to the Corporation.
If the holders of shares do not, within six (6) years after
such deposit, claim any amount so deposited for redemption
thereof, the bank or trust company shall upon

8
<PAGE> 9
demand pay over to the Corporation the balance of the funds so
deposited, and the bank or trust company shall thereupon be
relieved of all responsibility to such holders.

(v) Voting Powers. Except as provided by law or
as set forth herein, the holders of Series A Cumulative
Preferred Stock shall not have any right to vote for any
purpose or on any matter whatsoever, all such voting power
being vested exclusively in the shares of Common Stock of the
Corporation. Holders of Series A Cumulative Preferred Stock
shall not be entitled to receive notice of any meeting of
shareholders of the Corporation at which they are not entitled
to vote. The holders of shares of any and all Series A
Cumulative Preferred Stock outstanding on the record date for
any such meeting of the shareholders shall be entitled to
vote, as a single class, upon any proposed amendment to these
Articles of Incorporation, if such amendment would (A)
increase or decrease the aggregate number of authorized shares
of Series A Cumulative Preferred Stock, (B) increase or
decrease the par value of shares of Series A Cumulative
Preferred Stock, (C) effect an exchange, reclassification or
cancellation of all or part of the shares of Series A
Cumulative Preferred Stock, (D) effect an exchange, or create
a right of exchange, of all or any part of the shares of
another class into shares of Series A Cumulative Preferred
Stock, (E) change the designations, preferences, limitations
or relative rights of the Series A Cumulative Preferred Stock
at the time outstanding in those respects in which the shares
thereof vary from shares of other series of Preferred Stock at
the time outstanding, (F) change the shares of Series A
Cumulative Preferred Stock into the same or a different number
of shares, either with or without par value, of the same class
or another class or classes, (G) create a new class of
Preferred Stock having rights and preferences equal, prior or
superior to the shares of the Series A Cumulative Preferred
Stock or increase the rights and preferences of any class
having rights and preferences later or inferior to the shares
of the Series A Cumulative Preferred Stock in such a manner as
to become equal, prior or superior to the shares of the Series
A Cumulative Preferred Stock or (H) cancel or otherwise affect
accumulated but undeclared dividends on the shares of Series A
Cumulative Preferred Stock, and no such proposed amendment
shall be deemed to have been adopted and approved without the
affirmative vote of holders of that number of shares of Series
A Cumulative Preferred Stock then outstanding which shall be
required pursuant to the provisions of the Texas Business
Corporation Act in effect at the time of such vote.

ARTICLE V
COMMENCEMENT OF BUSINESS

The Corporation will not commence business until it has received
consideration for the issuance of its shares of the value of $1,000.00,
consisting of money, labor done or property actually received.

ARTICLE VI
REGISTERED OFFICE

The street address of the Corporation's registered office is as
follows:

350 N. St. Paul, Suite 2900
Dallas, Texas 75201

9
<PAGE> 10
ARTICLE VII
REGISTERED AGENT

The name of the Corporation's registered agent at the Corporation's
registered office is C T Corporation System.

ARTICLE VIII
DIRECTORS

The names of the current Directors of the Corporation are:

Millard E. Morris
Mark R. Anderson
Arthur L. Hunt
Jack R. Buck

The address of each of the Directors is 2301 Highway 190 West,
DeRidder, Louisiana 70634.

ARTICLE IX
DENIAL OF PRE-EMPTIVE RIGHTS

No shareholder shall have any pre-emptive right to purchase shares of
the Corporation.

ARTICLE X
NON-CUMULATIVE VOTING

Cumulative voting is expressly prohibited.

ARTICLE XI
BYLAWS

The power to amend or repeal the Bylaws or to adopt new Bylaws shall
be vested in either the shareholders or the Board of Directors of the
Corporation, subject to the shareholders providing in amending, repealing or
adopting a particular Bylaw that it may not be amended or repealed by the Board
of Directors of the Corporation.

ARTICLE XII
ELECTION OF DIRECTORS

12.1 Number, Election and Terms of Directors. Subject to the
rights of the holders of any series of Preferred Stock to elect additional
Directors, the number of the Directors of the Corporation shall be fixed from
time to time by or pursuant to the Bylaws of the Corporation. The Directors,
other than those who may be elected by the holders of Preferred Stock, shall be
classified with respect to the time for which they severally hold office into
three classes, as nearly their equal in number as possible. At each annual
meeting of the shareholders of the Corporation, the successors of the class of
Directors whose term expires at that meeting shall be elected by plurality vote
of all votes cast at such meeting to hold office for a term expiring at the
annual meeting of shareholders held in the third year following the year of
their election.

10
<PAGE> 11
12.2 Shareholder Nomination of Director Candidates and
Introduction of Business. Advance notice of shareholder nominations for the
election of Directors and advance notice of business to be brought by
shareholders before an annual meeting shall be given in the manner provided in
the Bylaws of the Corporation.

12.3 Decrease in Number of Directors. No decrease in the number of
Directors constituting the Board of Directors shall shorten the term of an
incumbent Director.

12.4 No Requirement of Written Ballot. The election of the
Directors may be conducted in any form adopted by the Board of Directors, and
need not be by written ballot. In the event, however, that a majority of the
shareholders vote to require written ballots, written ballots shall be used.

ARTICLE XIII
SPECIAL MEETINGS OF SHAREHOLDERS

Special meetings of the shareholders, unless otherwise prescribed by
statute, may be called by the Chairman of the Board, President or the Board of
Directors or by the holders of at least 50% of all shares entitled to vote at
the meeting.

ARTICLE XIV
INDEMNIFICATION

Each person who is or was a Director or officer of the Corporation, or
each such person who is or was serving at the request of the Board of Directors
or an officer of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another
corporation, partnership, joint venture, sole proprietorship, trust or other
enterprise or employee benefit plan (including the heirs, executors,
administrators or estate of such person), shall be indemnified by the
Corporation to the fullest extent that a corporation is required or permitted
to grant indemnification to such person under the Texas Business Corporation
Act and the Texas Miscellaneous Corporation Act as the same exist or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment) or any other applicable laws as presently or hereafter in
effect. Without limiting the generality or the effect of the foregoing, the
Corporation may enter into one or more agreements with any person which provide
for indemnification greater or different than that provided in this Article XIV
to the extent provided by applicable laws. Any amendment or repeal of this
Article XIV shall not adversely affect any right or protection existing
hereunder immediately prior to such amendment or repeal.

ARTICLE XV
NO MONETARY LIABILITY OF DIRECTORS TO SHAREHOLDERS

To the full extent permitted by the Texas Business Corporation Act or
any other applicable laws presently or hereafter in effect, no Director of the
Corporation shall be personally liable to the Corporation or its shareholders
for or with respect to any acts or omissions in the performance of his or her
duties as a Director of the Corporation. Any repeal or modification of this
Article XV shall not adversely affect any right or protection of a Director of
the Corporation existing immediately prior to such repeal or modification.

11
<PAGE> 12
ARTICLE XVI
AMENDMENT

The Corporation reserves the right at any time and from time to time
to amend, alter, change or repeal any provision contained in these Articles of
Incorporation, and any other provisions authorized by the laws of the State of
Texas at the time in force may be added or inserted, in the manner now or
hereafter prescribed herein or by applicable law, and all rights, preferences
and privileges of whatsoever nature conferred upon shareholders, Directors or
any other persons whomsoever by and pursuant to these Articles of Incorporation
in their present form or as hereafter amended are granted subject to the right
reserved in this Article XVI; provided, however, that any amendment or repeal
of Article XIV or Article XV of these Articles of Incorporation shall not
adversely affect any right or protection existing hereunder immediately prior
to such amendment or repeal.

Gulf Universal Holdings, Inc.

By: /s/ MARK R. ANDERSON
------------------------------------
Mark R. Anderson, President
August 5, 1996

<PAGE> 1
================================================================================

AMENDED AND RESTATED

BYLAWS

AMERISAFE, INC.

================================================================================
<PAGE> 2
Table of Contents

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
---------
OFFICES

Section 1.1 Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II
----------
MEETINGS OF SHAREHOLDERS

Section 2.1 Time and Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.2 Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.3 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.5 Quorum; Withdrawal of Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.6 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.7 Method of Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.8 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

ARTICLE III
-----------
DIRECTORS

Section 3.1 Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.2 Number; Election; Qualification; Term; Removal . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.3 Vacancies; Increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.4 Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.5 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.6 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.7 Quorum; Majority Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.8 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.9 Presumption of Assent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.10 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.11 Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.12 Committee Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.13 Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE IV
----------
NOTICES

Section 4.1 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.2 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE V
---------
OFFICERS

Section 5.1 Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.2 Term; Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.3 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.4 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.5 Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 3

<TABLE>
<S> <C> <C>
ARTICLE VI
----------
INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 6.1 Indemnification . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . 10

ARTICLE VII
-----------
CERTIFICATES REPRESENTING SHARES

Section 7.1 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7.2 Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.3 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.4 Registered Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.5 Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.6 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

ARTICLE VIII
------------
GENERAL PROVISIONS

Section 8.1 Distributions and Share Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.2 Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.3 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.4 Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.5 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.6 Telephone and Similar Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.7 Amendment of Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>

ii
<PAGE> 4
AMENDED AND RESTATED BYLAWS

AMERISAFE, INC.

ARTICLE I

OFFICES

Section 1.1 Offices: The Corporation may have offices at such
places, within or without the State of Texas, as the Board of Directors may
from time to time determine, or as the business of the Corporation may require.

ARTICLE II

MEETINGS OF SHAREHOLDERS

Section 2.1 Time and Place of Meetings: All meetings of the
shareholders shall be held at such time and place, within or without the State
of Texas, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.

Section 2.2 Annual Meetings: Annual meetings of shareholders shall
be held on such date and time as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting. At the annual
meeting, the shareholders entitled to vote thereat shall elect a Board of
Directors and transact such other business as may properly be brought before
the meeting.

Section 2.3 Special Meetings: Special meetings of the shareholders,
unless otherwise prescribed by statute or provided by the Articles of
Incorporation, may be called by the Chairman of the Board, President or the
Board of Directors or by the holders of at least 50% of all shares entitled to
vote at the meeting. Business conducted at any special meeting shall be
confined to the purpose or purposes described in the notice thereof.

Section 2.4 Notice: Written or printed notice stating the place, day
and hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than 10
calendar days (20 calendar days in the case of a meeting to approve a plan of
merger or
<PAGE> 5
exchange) nor more than 60 calendar days before the date of the meeting, either
personally or by mail, by or at the direction of the President, the Secretary
or the officer or other person calling the meeting, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail, addressed to
the shareholder at his or its address as it appears on the share transfer
records of the Corporation, with postage thereon prepaid.

Section 2.5 Quorum; Withdrawal of Quorum: A quorum shall be present
at a meeting of shareholders if the holder or holders of a majority of the
shares entitled to vote are present in person, represented by a duly authorized
representative in the case of a corporation or other legal entity or
represented by proxy, unless otherwise provided in the Articles of
Incorporation. Unless otherwise provided in the Articles of Incorporation,
once a quorum is present at a duly constituted meeting of shareholders, the
shareholders present or represented at the meeting may conduct such business as
may be properly brought before the meeting until it is adjourned, and the
subsequent withdrawal from the meeting of any shareholder present or
represented shall not affect the presence of a quorum at the meeting. Unless
otherwise provided in the Articles of Incorporation, the shareholders entitled
to vote and present or represented at a meeting of shareholders at which a
quorum is not present may adjourn the meeting until such time and to such place
as may be determined by a vote of the holders of a majority of the shares
represented at that meeting. At such adjourned meeting at which a quorum
shall be present or represented, any business may be conducted which might have
been conducted at the meeting as originally notified.

Section 2.6 Voting: With respect to any matter, other than the
election of directors or a matter for which the affirmative vote of the holders
of a specified portion of the shares is required by statute, the affirmative
vote of the holders of a majority of the shares entitled to vote on that matter
and represented at a meeting of shareholders at which a quorum is present shall
be the act of the shareholders, unless otherwise provided in the Articles of
Incorporation. Unless otherwise provided in the Articles of Incorporation,
directors shall be elected by a plurality of the votes cast by the holders of
shares entitled to vote in the election of directors at a meeting of
shareholders at which a quorum is present.

Section 2.7 Method of Voting: Each outstanding share shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders, except to the extent that the Articles of Incorporation

2
<PAGE> 6
provide for more or less than one vote per share or limit or deny voting rights
to the holders of the shares of any class or series or as otherwise provided by
statute. A shareholder may vote in person, by duly authorized representative
in the case of a corporation or other legal entity or by proxy executed in
writing by the shareholder or by his or its duly authorized attorney-in-fact.
Each proxy shall be filed with the Secretary of the Corporation prior to the
time of the meeting.

Section 2.8 Procedure: (a) The Chairman of the Board of Directors,
or such other officer of the Corporation designated by the Board of Directors,
will call meetings of the shareholders to order and will act as presiding
officer thereof. Unless otherwise determined by the Board of Directors prior
to the meeting, the presiding officer of the meeting of the shareholders will
also determine the order of business and have the authority in his or her sole
discretion to regulate the conduct of any such meeting, including without
limitation by imposing restrictions on the persons (other than shareholders of
the Corporation or their duly appointed proxies) who may attend any such
shareholders' meeting, by ascertaining whether any shareholder or his proxy may
be excluded from any meeting of the shareholders based upon any determination
by the presiding officer, in his sole discretion, that any such person has
unduly disrupted or is likely to disrupt the proceedings thereat, and by
determining the circumstances in which any person may make a statement or ask
questions at any meeting of the shareholders.

(b) At an annual meeting of the shareholders, only such business
will be conducted or considered as is properly brought before the meeting. To
be properly brought before an annual meeting, business must be (i) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors in accordance with Section 2.4, (ii) otherwise
properly brought before the meeting by the presiding officer or by or at the
direction of a majority of the Board of Directors, or (iii) otherwise properly
requested to be brought before the meeting by a shareholder in accordance with
Section 2.8(c).

(c) For business, including nominations of directors, to be
properly requested by a shareholder for consideration at an annual meeting, the
shareholder must (i) be a shareholder of the Corporation of record at the time
of the giving of the notice for such annual meeting provided for in these
Bylaws, (ii) be entitled to vote at such meeting, and (iii) have given timely
notice thereof in writing to the Secretary. To be

3
<PAGE> 7
timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 60 calendar
days prior to the annual meeting; provided, however, that in the event public
announcement of the date of the annual meeting is not made at least 75 calendar
days prior to the date of the annual meeting, notice by the shareholder to be
timely must be so received not later than the close of business on the 10th
calendar day following the day on which public announcement is first made of
the date of the annual meeting. A shareholder's notice to the Secretary must
set forth as to each matter the shareholder proposes to bring before the annual
meeting (i) a description in reasonable detail of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
Corporation's books, of the shareholder proposing such business and the
beneficial owner, if any, on whose behalf the proposal is made, (iii) the class
and number of shares of the Corporation that are owned beneficially and of
record by the shareholder proposing such business and by the beneficial owner,
if any, on whose behalf the proposal is made, and (iv) any material interest of
such shareholder proposing such business and the beneficial owner, if any, on
whose behalf the proposal is made in such business. Notwithstanding the
foregoing provisions of this Section 2.8(c), a shareholder must also comply
with all applicable requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations thereunder with
respect to the matters set forth in this Section 2.8(c). For purposes of this
Section 2.8(c), "public announcement" means disclosure in a press release
reported by the Dow Jones News Service, Associated Press, or comparable
national news service or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of
the Exchange Act or furnished to shareholders. Nothing in this Section 2.8(c)
will be deemed to affect any rights of shareholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.

(d) At a special meeting of shareholders, only such business may
be conducted or considered as is properly brought before the meeting. To be
properly brought before a special meeting, business must be specified in the
notice of the meeting (or any supplement thereto) given in accordance with
Section 2.4.

(e) The determination of whether any business sought to be brought
before any annual or special meeting of the shareholders is properly brought
before such meeting in accordance with this

4
<PAGE> 8
Section 2.8 will be made by the presiding officer of such meeting. If the
presiding officer determines that any business is not properly brought before
such meeting, he or she will so declare to the meeting and any such business
will not be conducted or considered.

ARTICLE III

DIRECTORS

Section 3.1 Responsibilities: The powers of the Corporation shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed under the direction of, its Board of Directors.

Section 3.2 Number; Election; Qualification; Term; Removal: The
Board of Directors shall consist of one or more members. The number of
directors shall be fixed from time to time by the Board of Directors; provided,
however, that no decrease in the number of directors shall have the effect of
shortening the term of an incumbent director. The directors shall be elected
at the annual meeting of the shareholders, as provided in this Section 3.2,
except as otherwise provided in Section 3.3. The directors shall be
classified, with respect to the time for which they severally hold office, into
three classes, as nearly equal in number as possible, as determined by the
Board of Directors, one class to hold office initially for a term expiring at
the annual meeting of shareholders to be held in 1997, another class to hold
office initially for a term expiring at the annual meeting of shareholders to
be held in 1998, and another class to hold office initially for a term expiring
at the annual meeting of shareholders to be held in 1999, with members of each
class to hold office until their successors are elected and qualified. At each
annual meeting of the shareholders of the Corporation, the successors to the
class of directors whose term expires at that meeting shall be elected by the
holders of shares entitled to vote in the election of directors to hold office
for a term expiring at the annual meeting of shareholders held in the third
year following the year of their election. Unless removed in accordance with
the Articles of Incorporation or this Section 3.2, each director elected shall
hold office for the term for which he is elected and until his successor shall
have been elected and qualified. Directors need not be residents of the State
of Texas or shareholders of the Corporation. At any meeting of shareholders
called expressly for that purpose, any director or the entire Board of
Directors may be removed, for cause

5
<PAGE> 9
only, by the affirmative vote of the holder or holders of two-thirds of the
shares then entitled to vote at an election of directors.

Section 3.3 Vacancies; Increases: Any vacancy occurring in the Board
of Directors (by death, resignation, removal or otherwise) may be filled by
election at an annual or special meeting of shareholders called for that
purpose, by the affirmative vote of a majority of the remaining directors then
in office, though less than a quorum, or by a sole remaining director. Each
director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors may be filled by election at an annual or
special meeting of shareholders called for that purpose or by the Board of
Directors for a term of office continuing only until the next election of one
or more directors by the shareholders; provided, however, that the Board of
Directors may not fill more than two such directorships during the period
between any two successive annual meetings of shareholders.

Section 3.4 Place of Meetings: Meetings of the Board of Directors,
regular or special, may be held either within or without the State of Texas.

Section 3.5 Regular Meetings: Regular meetings of the Board of
Directors may be held at such time and at such place as shall from time to time
be determined by the Board of Directors. Regular meetings of the Board of
Directors may be held without notice.

Section 3.6 Special Meetings: Special meetings of the Board of
Directors may be called by the Chairman of the Board or by the President of the
Corporation and shall be called by the Secretary on the written request of not
less than a majority of the directors then in office. Written notice
specifying the time and place of special meetings shall be given to each
director at least one day before the date of the meeting. Such notice may, but
need not, specify the purpose or purposes of the meeting.

Section 3.7 Quorum; Majority Vote: At all meetings of the Board of
Directors, a majority of the number of the directors fixed in the manner
provided in these Bylaws shall constitute a quorum for the transaction of
business unless a greater number is specifically required by statute or
provided in the Articles of Incorporation or these Bylaws. The act of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors, except as otherwise specifically
required by statute or provided in the Articles of Incorporation or these
Bylaws, in which case the express provision shall

6
<PAGE> 10
control. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.

Section 3.8 Procedure: At meetings of the Board of Directors,
business shall be transacted in such order as the Board of Directors may
determine from time to time. The Chairman of the Board, if such office has
been filled, and, if not or if the Chairman of the Board is absent or otherwise
unable to act, a chairman shall be chosen by the Board of Directors from among
the Directors present. The Secretary of the Corporation shall act as the
secretary of the meetings of the Board of Directors unless the Board of
Directors appoints another person to act as secretary of the meeting. The
Board of Directors shall keep regular minutes of its proceedings which shall be
placed in the minute book of the Corporation.

Section 3.9 Presumption of Assent: A Director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as
secretary of the meeting before the adjournment thereof or shall forward any
dissent by certified or registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a Director who voted in favor of such action.

Section 3.10 Compensation: The Board of Directors shall have
authority to fix the compensation, including fees and reimbursement of
expenses, paid to Directors for attendance at regular or special meetings of
the Board of Directors, any committee thereof or for any other services to the
Corporation; provided, however, that nothing contained in these Bylaws shall be
construed to preclude any Director from serving the Corporation in any other
capacity or receiving compensation therefor.

Section 3.11 Committees: The Board of Directors, by resolution
adopted by a majority of the full Board of Directors, may designate from among
its members one or more other committees, each of which shall be comprised of
one or more members, and may designate one or more of its members as alternate
members of any committee, who may, subject to any limitations imposed by the
Board of Directors, replace absent or disqualified members, at any meeting of
that committee. Any such committee, to the extent

7
<PAGE> 11
provided in such resolution or in the Articles of Incorporation or these
Bylaws, shall have and may exercise all of the authority of the Board of
Directors, except as otherwise provided by statute. The designation of such
committee and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed by
law. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.

Section 3.12 Committee Procedures: Except as may be otherwise
provided in a resolution or resolutions duly adopted by the Board of Directors,
a majority of the members of a committee shall constitute a quorum and a
majority vote of the members at a meeting at which a quorum is present shall be
the act of the committee. A committee shall keep minutes of its proceedings,
and shall report its proceedings to the Board of Directors when required or
when requested by a Director to do so.

Section 3.13 Action Without Meeting: Unless otherwise restricted by
the Articles of Incorporation or these Bylaws, any action required or permitted
to be taken at a meeting of the Board of Directors or any committee may be
taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the Board of Directors or committee, as
the case may be. Such consent shall have the same force and effect as a
unanimous vote at a meeting.

ARTICLE IV

NOTICES

Section 4.1 Method: Whenever by statute, the Articles of
Incorporation, these Bylaws or otherwise, notice is required to be given to a
Director or shareholder, and no provision is made as to how the notice shall be
given, it shall not be construed to be personal notice, but any such notice may
be given: (a) in writing, by mail, postage prepaid, addressed to the Director
or shareholder at the last address known by the Corporation for such Director
or shareholder at the address appearing on the share transfer records of the
Corporation, or (b) in any other method permitted by law. Any notice required
or permitted to be given by mail shall be deemed given at the time when the
same is deposited in the United States mail.

Section 4.2 Waiver: Whenever by statute, the Articles of
Incorporation or these Bylaws, any notice is required to be given to a Director
or shareholder, a waiver thereof in writing, signed by the person or persons
entitled to such notice, or in the case of a corporation or other legal entity
by its duly authorized

8
<PAGE> 12
representative, whether before or after the time stated therein, shall be
equivalent to the giving of such notice. Attendance of a Director, committee
member or shareholder at a meeting shall constitute a waiver of notice of such
meeting, except where such person attends for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business on the
ground that the meeting is not lawfully called or convened.

ARTICLE V

OFFICERS

Section 5.1 Number: The officers of the Corporation shall consist of
a President and a Secretary, each of whom shall be elected by the Board of
Directors. The Board of Directors may also elect a Chairman of the Board, a
Chief Executive Officer, a Treasurer, a General Counsel, a Controller and one
or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and
Assistant Controllers and such other officers as it deems necessary or
appropriate. Any two or more offices may be held by the same person.

Section 5.2 Term; Vacancies: An officer of the Corporation shall
hold office until his successor is elected and qualified, until his death or
until he shall resign or shall have been removed in accordance with these
Bylaws. Any officer elected by the Board of Directors may be removed at any
time by the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.

Section 5.3 Removal: Any officer elected by the Board of Directors
may be removed by the Board of Directors whenever in its judgment the best
interests of the Corporation will be served thereby. No elected officer shall
have any contractual rights against the Corporation for compensation by virtue
of such election beyond the date of the election of his successor, his death,
his resignation or his removal, whichever event shall first occur, except as
otherwise provided in an employment contract or under an employee benefit plan.

Section 5.4 Compensation: The compensation of all officers and
agents of the Corporation who are also directors of the Corporation shall be
fixed by the Board of Directors or a committee thereof. The Board of Directors
may delegate the power to fix the compensation of all other officers and agents
of the Corporation to an officer of the Corporation.

9
<PAGE> 13
Section 5.5 Duties: The officers of the Corporation shall have such
authority and shall perform such duties as are customarily incident to their
respective offices, or as may be specified from time to time by resolution of
the Board of Directors regardless of whether such authority and duties are
customarily incident to such office.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 6.1 Indemnification: Each person who is or was a Director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another corporation, partnership,
joint venture, sole proprietorship, trust or other enterprise or employee
benefit plan (including the heirs, executors, administrators or estate of such
person) shall be indemnified by the Corporation to the fullest extent that a
corporation is required or permitted to grant indemnification to such person
under the Texas Business Corporation Act and the Texas Miscellaneous
Corporation Act, as the same exist or may hereafter be amended. Reasonable
expenses incurred by a Director or officer of the Corporation who was, is or is
threatened to be made a named defendant or respondent in a proceeding shall be
paid or reimbursed by the Corporation, in advance of the final disposition of
the proceeding, to the maximum extent permitted under the Texas Business
Corporation Act, as the same exists or may hereafter be amended. The right to
indemnification under this Article VI shall be a contract right. In the event
of the death of any person having a right of indemnification under this Article
VI, such right will inure to the benefit of his or her heirs, executors,
administrators and personal representatives. The rights under this Article VI
will not be exclusive of any other right which any person may have or
hereinafter acquire under any statute, bylaw, resolution of shareholders or
Directors, agreement or otherwise.

ARTICLE VII

CERTIFICATES REPRESENTING SHARES

Section 7.1 Certificates: Certificates for shares of stock of the
Corporation shall be in such form as shall be approved by the Board of
Directors. The certificates shall be signed by the Chairman of the Board, the
Chief Executive Officer, the President or a Vice President and also by the
Secretary or an Assistant

10
<PAGE> 14
Secretary or the Treasurer or an Assistant Treasurer. Any and all signatures
on the certificate may be a facsimile and each such certificate may be sealed
with the seal of the Corporation or a facsimile thereof. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate has ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue. The certificates shall be consecutively
numbered and shall be entered in the books of the Corporation as they are
issued and shall exhibit the holder's name and the number of shares.

Section 7.2 Lost, Stolen or Destroyed Certificates: The Board of
Directors may direct a new certificate or certificates representing shares of
stock be issued in place of a certificate or certificates representing shares
of stock theretofore issued by the Corporation and alleged to have been lost or
destroyed upon the making of an affidavit of that fact by the person claiming
the certificate or certificates representing shares of stock that was or were
lost or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond with a
surety or sureties satisfactory to the Corporation in such sum as it may direct
as indemnity against any claim or expense resulting from a claim that may be
made against the Corporation with respect to the certificate or certificates
alleged to have been lost or destroyed.

Section 7.3 Transfer of Shares: Shares of stock of the Corporation
shall be transferable only on the books of the Corporation by the holders
thereof in person or by their duly authorized attorneys or legal
representatives. Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation or its transfer agent shall issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books.

Section 7.4 Registered Shareholders: The Corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and, accordingly, shall not be bound to

11
<PAGE> 15
recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by applicable law.

Section 7.5 Regulations: The Board of Directors shall have the power
and authority to make all such rules and regulations as it may deem expedient
concerning the issue, transfer and registration or the replacement of
certificates for shares of stock of the Corporation.

Section 7.6 Legends: The Board of Directors shall have the power and
authority to provide that the certificates representing shares of stock of the
Corporation bear such legends as the Board of Directors deems appropriate to
assure that the Corporation does not become liable for violations of federal or
state securities laws or other applicable law.

ARTICLE VIII

GENERAL PROVISIONS

Section 8.1 Distributions and Share Dividends: Subject to statute
and any provision of the Articles of Incorporation, distributions (in the form
of cash or property) or share dividends may be declared by the Board of
Directors at any regular or special meeting.

Section 8.2 Checks: All checks, demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.

Section 8.3 Fiscal Year: The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors; provided, however, that if such
fiscal year is not fixed by the Board of Directors and the Board of Directors
does not defer determination of the fiscal year, the fiscal year shall be the
calendar year.

Section 8.4 Seal: The Board of Directors may adopt a corporate seal
and use the same by causing it or a facsimile thereof to be impressed, affixed,
reproduced or otherwise.

Section 8.5 Resignation: Any Director, committee member or officer
may resign by so stating at any meeting of the Board of Directors or by giving
written notice to the Board of Directors, the Chairman of the Board, the Chief
Executive Officer, the President or the Secretary. Such resignation shall take
effect at the time specified therein, or immediately if no time is specified
therein. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.

12
<PAGE> 16
Section 8.6 Telephone and Similar Meetings: Unless otherwise
restricted by the Articles of Incorporation, members of the Board of Directors
or members of any committee of the Board of Directors may participate in and
hold a meeting of the Board of Directors or committee, as the case may be, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in such a meeting shall constitute presence in person at the
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.

Section 8.7 Amendment of Bylaws: Unless otherwise provided in the
Texas Business Corporation Act or the Articles of Incorporation, these Bylaws
may be altered, amended or repealed, or new bylaws may be adopted, by the
shareholders or the Board of Directors, subject to the shareholders providing
in amending, repealing or adopting a particular Bylaw that it may not be
amended or repealed by the Board of Directors.

<PAGE> 1

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT, dated as of _____________, 1996 (the
"Agreement"), among AMERISAFE, Inc., a Texas corporation (the "Company"),
Millard E. Morris ("Morris") and Mark R. Anderson ("Anderson") (Morris and
Anderson being hereinafter referred to collectively as the "Holders").

1. Effectiveness of Agreement. On the date of this
Agreement, (a) Morris is the record and beneficial owner of 17,126,521 shares
of Class B Common Stock, par value $.01 per share, of the Company (the "Class B
Common Stock") and (b) Anderson is the record and beneficial owner of 273,479
shares of Class B Common Stock. Pursuant to the terms of the Company's Amended
and Restated Articles of Incorporation (the "Restated Articles"), each share of
Class B Common Stock will be automatically converted, without any action on the
part of the Holder, into shares of Class A Common Stock, par value $.01 per
share, of the Company (the "Class A Common Stock") upon the transfer of such
shares of Class B Common Stock by the Holder, except as otherwise provided in
the Restated Articles. The Company has filed with the Commission the Company's
registration statement on Form S-1, Registration No. 333-_____, with respect to
the registration of the offering and sale of up to 12,650,000 shares of Class A
Common Stock in an initial public offering. This Agreement shall become
effective upon the consummation of the Company's initial public offering in
which shares of Class A Common Stock are sold.

2. Definitions. As used herein, unless the context
otherwise requires, the following terms have the following respective meanings:

Affiliate: With respect to any Person, any Person that
directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control
with, such Person. "Control" shall mean the power to cause
the election of a majority of the members of the board of
directors or other governing body of any Person.

Class A Common Stock: As defined in Section 1.

Class B Common Stock: As defined in Section 1.

Commission: The Securities and Exchange Commission or any
other federal agency at the time administering the Securities
Act.

Company: As defined in the introductory paragraph of this
Agreement.

Demand Holder: As defined in Section 3.1.

Exchange Act: The Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time. Reference to a particular
section of the Exchange Act shall include a reference to the
comparable section, if any, of any such similar federal
statute.

Holders: As defined in the introductory paragraph of this
Agreement.

Person: An individual, corporation, partnership or other
legal entity.

Registrable Securities: (a) Any shares of Class A Common
Stock owned by the Holders and their successors and assigns or
any other securities of the Company convertible into shares of
Class A Common Stock, (b) any shares of Class A Common Stock
owned by Persons to whom the Company shall hereafter grant
registration rights, consistent with this
<PAGE> 2
Agreement, and (c) any securities issued or issuable with
respect to any of the securities referred to in clauses (a)
and (b) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise.
As to any particular Registrable Securities, such securities
shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such
securities shall have become effective under the Securities
Act and such securities shall have been sold or otherwise
transferred in accordance with such registration statement,
(ii) they shall have been sold or otherwise transferred
pursuant to Rule 144 (or any successor rule) under the
Securities Act, (iii) they shall have been otherwise
transferred, new certificates representing such Registrable
Securities not bearing a legend restricting further transfer
shall have been delivered by the Company and subsequent
disposition of them shall not require registration or
qualification under the Securities Act or any similar state
law then in force, (iv) they shall have been transferred to
any Person, which, after such transfer, holds fewer than
500,000 Registrable Securities, or (v) they shall have ceased
to be outstanding.

Registration Expenses: All expenses incident to the Company's
performance of or compliance with Section 3, including,
without limitation, all registration, filing and National
Association of Securities Dealers fees, all fees and expenses
of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses,
telecommunications, messenger, mailing and delivery expenses,
the fees and disbursements of counsel for the Company and of
its independent public accountants, including the expenses of
any special audits or "cold comfort" letters required by or
incident to such performance and compliance, premiums and
other costs of policies of insurance against liabilities
arising out of the public offering of the Registrable
Securities being registered and any fees and disbursements of
underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting discounts and
commissions and transfer taxes, if any, provided that, in any
case, where Registration Expenses are not to be borne by the
Company, such expenses shall not include salaries of Company
personnel or general overhead expenses of the Company, but
shall include all out- of-pocket expenses of the Company
incident to its performance of or compliance with Section 2
(including, but not limited to, fees and disbursements of
outside counsel or independent public accountants retained by
the Company in order to perform its obligations under Section
2), unless such expenses would have been incurred by the
Company in the ordinary course of its business or which the
Company would have incurred in any event.

Securities Act: The Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect
at the time. References to a particular section of the
Securities Act shall include a reference to the comparable
section, if any, of any such similar federal statute.

3. Registration under Securities Act, Etc.

3.1 Registration on Request. (a) At any time after June
30, 1997, upon the written request of Morris (the "Demand Holder") that the
Company effect the registration under the Securities Act of all or part of the
Registrable Securities then owned by the Demand Holder, specifying the intended
method of disposition thereof and whether or not such requested registration is
to be an underwritten offering, the Company will use its reasonable best
efforts to effect the registration under the Securities Act of the Registrable
Securities which the Company has been so requested to register by the Demand
Holder, to the extent required to permit the disposition (in accordance with
the intended methods thereof as aforesaid) of the Registrable Securities so to
be registered; provided that no such request shall be for the registration of
less than 1,000,000 of the Registrable Securities unless at the time of such
request the Demand Holder owns less than 1,000,000 shares of Registrable
Securities in which case such request shall be for all of the Registrable
Securities owned by the Demand Holder; provided, further, that in the event
that four

-2-
<PAGE> 3
registrations requested pursuant to this Section 3.1 shall already have been
effected or deemed to have been effected, the Company will not be required to
effect any additional requested registration. The Company shall have the
absolute right to terminate any registration of less than 1,000,000 Registrable
Securities initiated pursuant to this Section 3.1 unless such registration
relates to all Registrable Securities held by the Demand Holder.

(b) Registration of Other Securities. Whenever the
Company shall effect a registration pursuant to this Section 3.1 in connection
with an underwritten offering, no securities other than the Demand Holder's
Registrable Securities and, in the Company's discretion, securities of the
Company to be sold for the account of the Company shall be included among the
securities covered by such registration if the managing underwriter of such
offering shall have advised the Company that the inclusion of such other
securities would adversely affect such offering.

(c) Registration Statement Form. Registrations under
this Section 3.1 shall be on such appropriate registration form of the
Commission (i) as shall be selected by the Company and (ii) as shall permit the
disposition of the Demand Holder's Registrable Securities in accordance with
the intended method or methods of disposition specified in the Demand Holder's
request for such registration.

(d) Expenses. The Company will pay all Registration
Expenses in connection with any registration requested pursuant to this Section
3.1. The underwriting discounts and commissions if any, in connection with
each registration requested under this Section 3.1 shall be allocated among all
Persons on whose behalf securities of the Company are included in such
registration, on the basis of the respective amounts of the securities then
being registered on their behalf. If the Company terminates a registration
pursuant to the last sentence of Section 3.1(a), but the Demand Holder pays all
of the Registration Expenses incurred in connection with such registration
prior to the date of such termination and any Registration Expenses incurred in
connection with the Company's withdrawing such registration statement, the
Demand Holder shall have the right to make an additional written request for
registration pursuant to and in accordance with this Section 3.1.

(e) Effective Registration Statement. A registration
requested pursuant to this Section 3.1 shall not be deemed to have been
effected (i) unless a registration statement with respect thereto has become
effective, or (ii) if after such registration statement has become effective,
the Registrable Securities to be registered fail to be sold because (A) of any
stop order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason, or (B) the conditions to closing
(other than closing conditions to be met by the Demand Holder) specified in the
purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied.

(f) Selection of Underwriters. If a requested
registration pursuant to this Section 3.1 involves an underwritten offering,
the underwriter or underwriters thereof shall be selected by the Demand Holder
with the consent of the Company (which consent shall not be unreasonably
withheld).

(g) Priority in Requested Registrations. If a requested
registration pursuant to this Section 3.1 involves an underwritten offering,
and the managing underwriter shall advise the Company that, in its judgment,
the number of securities requested to be included in such registration exceeds
the number which can be sold in such offering within a price range acceptable
to the Demand Holder, the Company will include in such registration to the
extent of the number which the Company is so advised can be sold in such
offering (i) first, the Registrable Securities held by the Demand Holder
requested to be included in such registration, (ii) second, if all of the
Demand Holder's Registrable Securities requested to be registered have been
included, securities of the Company to be sold for the Company's account, and
(iii) third, if all of the securities sought to be registered under the
preceding clauses (i) and (ii) have been included, all other Registrable
Securities of the Company requested to be included in such registration pro
rata on the basis of the number of such Registrable Securities so requested to
be included in the registration or otherwise in accordance with any written
agreement to which the Company is a party.

-3-
<PAGE> 4
(h) Intervals. The Company shall not be required to
effect a registration pursuant to this Section 3.1 earlier than twelve months
after the effective date of a prior registration effected under this Section
3.1.

(i) Deferral of Registration. If, in the good faith
judgment of the Company, a registration at the time and on the terms requested
would interfere with any financing, acquisition, corporate reorganization or
other material transaction involving the Company that had been contemplated
prior to the notice by the Demand Holder requesting registration, the Company
will not be required to commence using its reasonable best efforts to effect a
registration pursuant to this Section 3.1 until the later of (i) 180 days after
the date of such written notice or if earlier, 60 days after the abandonment or
completion of such financing or other transaction, and (ii) the termination of
any "black-out" period required by the underwriters, if any, in connection with
such financing or other transaction. If, while a registration request is
pending pursuant to this Section 3.1, the Company determines in the good faith
judgment of its legal advisors that the filing of a registration statement
would require the disclosure of material information which the Company has a
bona fide business purpose for preserving as confidential, the Company will not
be required to commence using its reasonable best efforts to effect a
registration pursuant to this Section 3.1 until the earlier of (i) the date
upon which such material information is disclosed to the public or ceases to be
material, or (ii) 135 days after the Company makes such good faith
determination.

(j) Inclusion of Financial Statements. The Company will
not be obligated to file any registration statement pursuant to this Section
3.1 at any time if the Company would be required to include financial
statements audited as of any date other than the end of its fiscal year.

3.2 Incidental Registration. (a) Right to Include
Registrable Securities. If, at any time after June 30, 1997, the Company
proposes to register any of its common stock or options, warrants, rights or
other securities convertible or exercisable into or exchangeable for its common
stock under the Securities Act (other than pursuant to Section 3.1), whether or
not for sale for its own account, it will each such time give prompt written
notice to all holders of Registrable Securities of its intention to do so and
of such holders' rights under this Section 3.2. Upon the written request of
any such holder made within 30 days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
such holder and the intended method of disposition thereof), the Company will
use its reasonable best efforts to effect the registration under the Securities
Act of all Registrable Securities which the Company has been so requested to
register by the holders thereof, to the extent required to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
the Registrable Securities so to be registered, provided that if, at any time
after giving written notice of its intention to register any such securities
and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may,
at its option, give written notice of such determination to each holder of
Registrable Securities and, thereupon, (i) in the case of a determination not
to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith), and (ii) in the case of
a determination to delay registering, shall be permitted to delay registering
any Registrable Securities, for the same period as the delay in registering
such other securities. No registration effected under this Section 3.2 shall
be deemed to have been effected pursuant to Section 3.1 or shall relieve the
Company of its obligation to effect any registration upon request under Section
3.1. The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 3.2.
The underwriting discounts and commissions, if any, in connection with each
registration requested under this Section 3.2 shall be allocated among all
Persons on whose behalf securities of the Company are included in such
registration, on the basis of the respective amounts of the securities then
being registered on their behalf.

(b) Priority in Incidental Registrations. If (i) a
registration pursuant to this Section 3.2 involves an underwritten offering of
the securities so being registered, whether or not for sale for the account of
the Company, to be distributed (on a firm commitment basis) by or through one
or more underwriters of nationally recognized standing under underwriting terms
appropriate for such a transaction, and (ii) the

-4-
<PAGE> 5
managing underwriter of such underwritten offering shall inform the Company of
its belief that the number of securities requested to be included in such
registration exceeds the number which can be sold in (or during the time of)
such offering, then the Company will include in such registration, to the
extent of the number which the Company is so advised can be sold in (or during
the time of) such offering, first, all securities proposed by the Company to be
sold for its own account, second, such Registrable Securities of the Holders
requested to be included in such registration pro rata on the basis of the
number of shares of such securities so proposed to be sold and so requested to
be included, and third, all other Registrable Securities of the Company
requested to be included in such registration pro rata on the basis of the
number of shares of such securities so proposed to be sold and so requested to
be included.

(c) Other Registration Rights. The Company retains the
right to grant registration rights to other holders of the Company's
securities, including its officers and directors, subject to the rights of the
Holders hereunder and otherwise consistent with the provisions of this
Agreement.

(d) Effect on Company Financing. The Company will not be
required to effect any registration of Registrable Securities under this
Section 3.2 if, in the reasonable judgment of its managing underwriter or
underwriters, inclusion of any Registrable Securities in the Company's
registration statement at that time would adversely affect the Company's own
financing.

(e) Other Exclusions. The Company will not be required
to effect any registration of Registrable Securities under this Section 3.2
incidental to the registration of any of its securities in connection with
mergers, acquisitions, exchange offers, rights or subscription offers, dividend
reinvestment plans or stock option or other employee benefit plans.

3.3 Registration Procedures. If and whenever the Company
is required to use its reasonable best efforts to effect the registration of
any Registrable Securities under the Securities Act as provided in Sections 3.1
and 3.2, the Company will as expeditiously as possible:

(a) prepare and file with the Commission the
appropriate registration statement to effect such registration
and thereafter use its best efforts to cause such registration
statement to become effective;

(b) prepare and file with the Commission such
amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such
registration statement until the earlier of such time as all
of such securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement or the
expiration of 90 days after such registration statement
becomes effective;

(c) furnish to each seller of Registrable Securities
covered by such registration statement such number of
conformed copies of such registration statement and of each
such amendment and supplement thereto (including, if
requested, all exhibits), such number of copies of the
prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus and any
other prospectus filed under Rule 424 under the Securities
Act, in conformity with the requirements of the Securities
Act) and such other documents, as such seller may reasonably
request;

(d) use reasonable efforts to register or qualify
all Registrable Securities and other securities covered by
such registration statement under such other securities or
blue sky laws of such jurisdictions in the United States as
each seller thereof shall reasonably request, to keep such
registration or qualification in effect for so long as such
registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable

-5-
<PAGE> 6
to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, except
that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not but for the requirements
of this subdivision (d) be obligated to be so qualified or to
consent to general service of process in any such
jurisdiction;

(e) furnish to each seller of Registrable Securities
a signed counterpart, addressed to such seller (and the
underwriters, if any) of

(i) an opinion of counsel for the Company, dated the
effective date of such registration statement (and,
if such registration includes an underwritten public
offering, dated the date of the closing under the
underwriting agreement), and

(ii) a "comfort" letter, dated the effective date of
such registration statement (and, if such
registration includes an underwritten public
offering, dated the date of the closing under the
underwriting agreement), signed by the independent
public accountants who have certified the Company's
financial statements included in such registration
statement,

covering substantially the same matters with respect to such
registration statement (and the prospectus included therein)
and, in the case of the accountants' letter, with respect to
events subsequent to the date of such financial statements,
such matters as are customarily covered in accountants'
letters delivered to the underwriters in underwritten public
offerings and such other financial matters, and, in the case
of the legal opinion, such other legal matters, as such
seller, or the underwriters, if any, may reasonably request;

(f) notify each seller of Registrable Securities
covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under
the Securities Act, upon discovery that or upon the happening
of any event as a result of which, the prospectus included in
such registration statement, as then if effect, includes an
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made, and promptly prepare
and furnish to each such seller a reasonable number of copies
of a supplement to or an amendment of such prospectus as may
be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;

(g) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and
make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months,
beginning with the first full calendar month after the
effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act; and

(h) use reasonable efforts to list all Registrable
Securities covered by such registration statement on any
securities exchange on which any of the Registrable Securities
is then listed.

The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company
may from time to time reasonably request in writing.

-6-
<PAGE> 7
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in clause (f) of this Section 3.3,
such holder will forthwith discontinue such holder's disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by clause (f) of this Section 3.3 and, if so
directed by the Company, will deliver to the Company all copies, other than
permanent file copies, then in such holder's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the 90-day period
referred to in clause (b) of this Section 3.3 shall be extended by a number of
days equal to the number of days during the period from and including the
giving of notice pursuant to clause (f) of this Section 3.3 to and including
the date when each seller of any Registrable Securities covered by such
registration statement shall have received the copies of the supplemented or
amended prospectus contemplated by clause (f) of this Section 3.3.

3.4 Underwritten Offerings. (a) Requested Underwritten
Offerings. If requested by the underwriters for any underwritten offering by
the Demand Holder of Registrable Securities pursuant to a registration
requested under Section 3.1, the Company will enter into an underwriting
agreement with such underwriters for such offering, such agreement to be
reasonably satisfactory in substance and form to the Demand Holder and the
underwriters and to contain such representations and warranties by the Company
and such other terms as are generally prevailing in agreements of this type,
including, without limitation, indemnities to the effect and to the extent
provided in Section 3.5. The Demand Holder of Registrable Securities to be
distributed by such underwriters shall be a party to such underwriting
agreement and may, at its option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of the Demand Holder of Registrable Securities. The Demand
Holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding the
Demand Holder, the Demand Holder's Registrable Securities and the Demand
Holder's intended method of distribution and any other representation required
by law.

(b) Incidental Underwritten Offerings. If the Company at
any time proposes to register any of its securities under the Securities Act as
contemplated by Section 3.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any holder
of Registrable Securities as provided in Section 3.2 and subject to the
provisions of Section 3.2(b), arrange for such underwriters to include all the
Registrable Securities to be offered and sold by such holder with the
securities to be distributed by such underwriters. The holders of Registrable
Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and may
require that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities. Any such holder of Registrable Securities shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation required
by law.

(c) Holdback Agreements. Each holder of Registrable
Securities agrees that, if so required by the managing underwriter, it will not
effect any public sale or distribution of any equity securities of the Company,
during the seven days prior to and the 90 days after any underwritten
registration pursuant to Section 3.1 or 3.2 has become effective.

3.5 Indemnification. (a) Indemnification by the
Company. In the event of any registration of any securities of the Company
under the Securities Act, the Company will, and hereby does, in the case of any
registration statement filed pursuant to Section 3.1 or 3.2, indemnify and hold
harmless the seller of any Registrable Securities covered by such registration
statement, its directors and officers, each other Person who participates as an
underwriter in the offering or sale of such securities and each other

-7-
<PAGE> 8
Person, if any, who controls such seller or any such underwriter within the
meaning of the Securities Act, from and against any losses, claims, damages or
liabilities (whether or not resulting from third-party claims and including
interest and penalties), joint or several, to which such seller or holder or
any such director or officer or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse such seller, such holder and each such director,
officer, underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding or in asserting any of their
respective rights under this Section 3.5; provided that the Company shall not
be liable in any such case to the extent that any such loss, claim damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such seller specifically stating that it is for use in the
preparation thereof; provided, further, that the Company shall not be liable to
any Person who participates as an underwriter, in the offering or sale of
Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or
amended, to the Person asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of such seller or any such director, officer, underwriter or
controlling person and shall survive the transfer of such securities by such
seller.

(b) Indemnification by the Sellers. The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to Section 3.2, that the Company shall
have received an undertaking satisfactory to it from the prospective seller of
such securities, to indemnify and hold harmless (in the same manner and to the
same extent as set forth in clause (a) of this Section 3.5) the Company, each
director of the Company, each officer of the Company and each other Person, if
any, who controls the Company within the meaning of the Securities Act, insofar
as such losses, claims, damages or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such seller specifically stating that
it is for use in the preparation of such registration or supplement. Such
indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling Person and shall survive the transfer of such securities by such
seller.

(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section
3.5, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding subdivisions of this Section 3.5, except to
the extent that the indemnifying

-8-
<PAGE> 9
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs
of investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.

(d) Other Indemnification. Indemnification similar to
that specified in the preceding provisions of this Section 3.5 (with
appropriate modifications) shall be given by the Company and each seller of
Registrable Securities with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority other than the Securities Act.

(e) Indemnification Payments. The indemnification
required by this Section 3.5 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills
are received or expense, loss, damage or liability is incurred.

3.8 Adjustments Affecting Registrable Securities. Upon
the occurrence of any combination, subdivision or recapitalization which
affects the Registrable Securities, the minimum number of Registrable
Securities that the Holders may request to be registered pursuant to Section
3.1, and the number of shares of Registrable Securities a Person must hold in
order for such securities to continue to be deemed Registrable Securities under
clause (iv) in the definition of Registrable Securities in Section 2, shall
automatically be adjusted to appropriately reflect such combination,
subdivision or recapitalization and to preserve the original rights and
obligations of the parties hereto under this Agreement. The Company will not
effect or permit or occur any combination or subdivision of shares or any other
recapitalization which would otherwise adversely affect the ability of any of
the undersigned holders of Registrable Securities to initiate or include such
Registrable Securities in any registration of its securities contemplated by
Section 3 or the marketability of such Registrable Securities under any such
registration.

4. Rule 144: If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder, all to the extent required from time to
time to enable such holder to sell Registrable Securities without registration
under the Securities Act within the limitation of the exemptions provided by
(a) Rule 144 under the Securities Act, as such Rule may be amended from time to
time or (b) any similar rule or regulation hereafter adopted by the Commission.

5. Amendments and Waivers. This Agreement may be
amended and the Company may take any action herein prohibited or omit to
perform any act herein required to be performed by it, only if the Company
shall have obtained the written consent to such amendment, action or omission
to act, of the holders of record of two-thirds or more of the shares (by number
of shares) of the Registrable Securities held by the Holders. Each holder of
any Registrable Securities at the time or thereafter outstanding shall be bound
by any consent authorized by this Section 5, whether or not such Registrable
Securities shall have been marked to indicate such consent.

6. Nominees for Beneficial Owners. In the event that
any Registrable Securities are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its election, be treated as the
holder of such Registrable Securities for purposes of any request or other
action by any holder

-9-
<PAGE> 10
or holders of Registrable Securities contemplated by this Agreement. If the
beneficial owner of any Registrable Securities so elects, the Company may
require assurances reasonably satisfactory to it of such owner's beneficial
ownership of such Registrable Securities.

7. Notices. All notices, requests, demands and other
communications made in connection with this Agreement shall be in writing and
shall be (a) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, (b) transmitted by hand delivery or
overnight courier, or (c) transmitted by telecopy and, in each case, addressed
(i) if to the Company, to AMERISAFE, Inc. 1807 Highway 190 West, DeRidder,
Louisiana 70634, Telecopy: (318) 463-7298, ATTN: Secretary, (ii) if to a
holder of Registrable Securities, at the address on the Company's records, or
(iii), in each case, at such other address as may be specified in writing to
the other parties hereto.

8. Assignment. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the parties hereto other than the Company shall also be for the
benefit of and enforceable by any subsequent holder of Registrable Securities,
subject to the provisions respecting the minimum numbers or percentages of
shares of Registrable Securities required in order to be entitled to certain
rights, or take certain actions, contained herein.

9. Term. This Agreement shall expire on June 30, 2007.

10. Descriptive Headings. The descriptive headings of
the several sections and paragraphs of this Agreement are inserted for
reference only and shall not limit or otherwise affect the meaning hereof.

11. Specific Performance. The parties hereto recognize
and agree that money damages may be insufficient to compensate the holders of
any Registrable Securities for breaches by the Company of the terms hereof and,
consequently, that the equitable remedy of specific performance of the terms
hereof will be available in the event of any such breach.

12. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed
by, the laws of the State of Texas, without giving effect to the choice of law
principles thereof.

13. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument.

-10-
<PAGE> 11
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered as of the date first above written.

AMERISAFE, Inc.

By:
-----------------------------
Name:
-----------------------
Title:
-----------------------

-----------------------------------
Millard E. Morris

-----------------------------------
Mark R. Anderson

-11-

<PAGE> 1

FIRST CASUALTY EXCESS REINSURANCE AGREEMENT

This Agreement is made and entered into by and between AMERICAN INTERSTATE
INSURANCE COMPANY, and SILVER OAK CASUALTY, INC., both of De Ridder, Louisiana
(hereinafter together called the "Company") and the Reinsurer specifically
identified on the signature page of this Agreement (hereinafter called the
"Reinsurer").

ARTICLE 1

BUSINESS REINSURED

This Agreement is to indemnify the Company in respect of the net excess
liability as a result of any loss or losses which may occur during the term of
this Agreement under any Policies covering Casualty Business in force, written
or renewed during the term of this Agreement by or on behalf of the Company,
subject to the terms and conditions herein contained.

ARTICLE 2

COVER

The Reinsurer will be liable in respect of each and every Loss Occurrence,
irrespective of the number and kinds of Policies Involved, for the Ultimate Net
Loss over and above an initial Ultimate Net Loss of $200,000 each and every
Loss Occurrence, subject to a limit of liability to the Reinsurer of $300,000
each and every Loss Occurrence.

ARTICLE 3

COMMENCEMENT AND TERMINATION

This Agreement shall become effective at 12:01 am., Central Standard Time, July
1,1995, and shall remain in full force and effect until terminated as provided
in the following paragraph.

Either the Company or the Reinsurer shall have the right to terminate this
Agreement as of July 1, 1997, or any July 1 thereafter, by giving 90 days'
prior notice in writing via either Certified or Registered Mail, return receipt
requested.

Notwithstanding the July 1,1997 anniversary, the Company will have the ability
to alter the limit and retention of this Agreement, effective July 1, 1996.
Such action will require a revision to ARTICLE 7 - PREMIUM. Further, the
Reinsurer will have the option to terminate this Agreement with 90 days' notice
prior to July 1, 1996 for any of the following reasons:

A. The sale, merger, or acquisition of the Company by or with any other
party or the sale or change in controlling interest of the Company so
as to produce a loss in control over conduct of the business by the
current owners and/or management, except any change of control or
ownership within any insurance holding company system which effects no
change in the ultimate controlling party;

B. A reduction of the paid-in capital of the Company for any reason
whatsoever;

C. The appointment of a receiver, administrator, trustee, or conservator
for the Company or the commencement of any liquidation, rearrangement,
or bankruptcy proceeding against the Company;
<PAGE> 2
D. Should the Company at any time reinsure its minimum or net retention
on any class of business to which this Agreement applies, except as
provided for in this Agreement;

E. The reinsurance loss ratio exceeds 110% as of March 1, 1996. The loss
ratio will be based on reinsurance premium paid and reinsurance losses
incurred as of March 1, 1996.

Upon termination of this Agreement, the entire liability of the Reinsurer for
losses occurring subsequent to termination of this Agreement shall cease
concurrently with the termination date of this Agreement.

Notwithstanding the above, the Company has the option to terminate this
Agreement on a run-off basis in which case the Reinsurer will continue to cover
all Policies coming within the scope of this Agreement, including those written
or renewed during the period of notice, until the natural expiration or
anniversary of such Policies, whichever occurs first, but in no event longer
than 12 months from the date of termination plus odd time, not to exceed 15
months.

ARTICLE 4

TERRITORY

This Agreement applies to losses arising out of Policies written in the United
States of America, its territories and possessions, Puerto Rico and Canada,
wherever occurring.

ARTICLE 5

Warranties

It is warranted for the purpose of this Agreement that as respects Third Party
Liability, the maximum limit issued by the Company any one Policy is $1,000,000
combined single limit (1973 Occurrence Form) or so deemed; or alteratively,
$1,000,000 per occurrence/$3,000,000 general annual aggregate (1986 Occurrence
Form), or so deemed.

It is understood as respects the new ISO Commercial General Liability Policy,
effective January 1, 1986, that the General Annual Aggregate Limit section,
other than products and completed operations, shall be protected hereunder on
an each Loss Occurrence basis.

ARTICLE 6

EXCLUSIONS

This Agreement does not cover:

A. As respects all business:

1. Aggregate Excess Insurance.

2. a. Atomic Energy and Nuclear Risks--all operations and
projects as per Nuclear Incident Exclusion Clauses -
Liability - Reinsurance, Nos. 08-31.1 (U.S.A.) and
08-32.1 (Canada) in respect of all business other
than Workers' Compensation and Employers' Liability.

-2-
<PAGE> 3
b. Atomic Energy and Nuclear Risks--all operations and
projects in respect of Workers' Compensation and
Employers' Liability business.

3. Contamination, Seepage and Pollution, as per the attached
clause.

4. Riot and civil commotion.

5. Reinsurance assumed, except:

a. Agency reinsurance (per risk or portfolio) is not
excluded.

b. Reinsurance of an occasional individual risk or
Policy is not excluded, provided the Company is not
operating as a professional reinsurer.

c. Reinsurance on risks where all servicing, including
claims handling, is done by the Company.

6. Pools, Associations and Syndicates, except losses from
Assigned Risk Plans or similar plans are not excluded.

7. All liability of the Company arising by contract, operation of
law, or otherwise, from its participation or membership,
whether voluntary or involuntary, in any insolvency fund.
"Insolvency Fund" includes any guarantee fund, insolvency
fund, plan, pool, association, fund or other arrangement,
howsoever denominated, established or governed, which provides
for any assessment of or payment or assumption by the Company
of part or all of any claim, debt, charge, fee, or other
obligation of an insurer, or its successors or assigns, which
has been declared by any competent authority to be insolvent,
or which is otherwise deemed unable to meet any claim, debt,
charge, fee or other obligation in whole or in part.

8. Aggregate Workers' Compensation.

9. Policies issued as excess coverage over other insurance or
over a self-insured retention except on risks where all
servicing, including claims handling, is done by the Company.

10. War as excluded by the Standard War Exclusion Clause.

11. Risks with known asbestosis, black lung or brown lung
exposures. Also, risks with silicosis exposures unless such
exposure emanates from an incidental part of the Insureds
operations. For the purposes of this exclusion, the term
"incidental" shall mean less than 10% of any employees of an
insured's time is engaged in functions involving a silicosis
exposure.

12. Federal employees.

13. Financial Guarantee and Insolvency.

B. As respects business other than Workers' Compensation and Employers'
Liability:

1. Advertisers Liability--monoline.

2. Airports--all operations.

3. Amusement parks, carnivals and rides.

4. Amusement devices--manufacturing liability.

-3-
<PAGE> 4
5. Anhydrous ammonia--distributing.

6. Animal shows and circuses.

7. Antifreeze products liability.

8. Asylums.

9. Automobile racing of any kind.

10. Automobile racing spectator liability.

11. Automobile third party liability.

12. Aviation and aircraft products and operations.

13. Burglar alarm contractors and manufacturers.

14. Chemical manufacturing, unless incidental to the insured's
overall operations.

15. Construction, repair or maintenance of bridges, conduits,
electric power lines, dams or reservoirs, jetties or
breakwaters, oil or gas pipelines, railroads, ships or boats,
subways and tunnels.

16. Demolition--marine.

17. Dike or revetment construction.

18. Drilling or redrilling of oil or gas wells.

19. Explosives of any kind or nature.

20. Fire alarm--products liability.

21. Fire protection systems--all operations.

22. Grain elevators.

23. Halfway or awareness houses.

24. Homes or schools for the mentally retarded.

25. Marine or offshore operations.

26. Motorcycle distributors.

27. Oil or gas--all classifications.

28. Oil or gas lease operators--all classifications.

29. Ore dock operations.

30. Products recall liability.

-4-
<PAGE> 5
31. Professional Indemnity and/or Errors and Omissions:
architects, engineers, accountants, EDP firms, real estate or
insurance agents, surveyors, travel agents, and all other
miscellaneous.

32. Professional Liability: blood banks, hospitals, clinics,
lawyers, physicians, surgeons, dentists and nurses.

33. Railroads--all classifications.

34. Riding academies.

35. School boards liability.

36. Scuba equipment rental.

37. Scuba equipment manufacturing or distribution.

38. Scuba schools or instructors.

39. Ship building--all classifications.

40. Ski lifts, tows--including ski rental or sales.

41. Steel tanks or pressure vessel manufacturing.

42. Stevedoring and/or longshoremen--all operations.

43. Structural steel manufacturer or importer.

44. Toy manufacturing.

45. Ocean Marine and all forms of legal liability arising out of
the operation or navigation of ships or vessels except for the
operation of small pleasure craft under 28 feet in length.

46. Warehousemen's legal liability.

47. D & O (except for condominium D & O).

48. Day care centers.

49. Electric or gas utilities--all operations including blackouts
and brownouts.

50. Equipment rental.

51. Fire legal liability coverage exceeding limits of $500,000 per
insured.

52. Mining including underground mining, surface mining and
quarrying.

53. Municipalities.

54. Pharmaceutical manufacturers.

-5-
<PAGE> 6
55. Products Liability coverage relating to the production,
manufacture, distribution, or sale of any of the following:

a. Aircraft and instrumentation therefor, including any
component parts of airframes and engines, and any
other on-board parts or accessories that directly
affect the safety, flying characteristics or
communication capability of aircraft;

b. Cosmetics, hair or skin preparations;

c. Drugs, medicines and pharmaceutical products except
by retail drugstores or drug departments of
supermarket and discount stores;

d. Explosives or fireworks;

e. Agricultural business, including but not limited to
pesticides, herbicides, fertilizers;

f. Animal feed.

56. Liquor Law Liability, except for Host Liquor Liability
endorsements to General Liability Policies and Liquor Law
Liability under endorsements attached to General Liability
Policies.

57. Hotels or motels over seven stories in height unless fire
restrictive construction and equipped with smoke detectors in
all rooms and public hallways.

Such reinsurance as would have been afforded but for the foregoing exclusions
will apply to Policies issued to insureds regularly engaged in other
occupations or activities where the prohibited operation is only incidental to
the general conduct of the insured's business, or to Policies issued under an
Assigned Risk Plan, or similar mandatory plan (other than Exclusion Nos. A.2.
(a. and b.), A.3., A.7., A.10., A.13. and B.45., which are absolutely
excluded).

Errors and omissions notwithstanding, if without the knowledge and contrary to
the instructions of its supervisory underwriting personnel, the Company is
bound on a risk specifically excluded hereunder, or by an existing insured
extending its operations (other than Exclusion Nos. A.2. (a. and b.), A.3.,
A.7., A.10., A.13. and B.45., which are absolutely excluded), such reinsurance
as would have been afforded but for the exclusion shall apply for a period of
30 days following receipt by said underwriting personnel of knowledge thereof.

ARTICLE 7

PREMIUM

A. As respects Casualty Business classified by the Company as Logging and
General Liability:

1. The Company will pay the Reinsurer a deposit premium of $XXXX*
for the Agreement Year commencing at July 1, 1995, payable
quarterly in advance in the amount of $XXXX* on July 1, 1995,
October 1, 1995, January 1, 1996, and April 1, 1996.

2. Within 60 days following the end of each Agreement Year, the
Company will calculate a premium at a rate of XXXX%(*)
multiplied by the Company's Gross Net Earned Premium Income as
respects such business. Should the premium so calculated
exceed the deposit premium paid in accordance with Paragraph
A.1. above, the Company will immediately pay the

- ----------------------------------
(*) Confidential treatment has been requested.

-6-
<PAGE> 7
Reinsurer the difference. Should the premium so calculated be
less than the deposit premium, the Reinsurer will immediately
pay the Company the difference subject to a minimum premium of
$XXXX*.

3. The minimum and deposit premium for subsequent Agreement Years
will be based on the same percentage used to develop the
minimum and deposit premium for the Agreement Year that
commenced at July 1, 1995.

4. Should the Company elect to terminate this Agreement on a
run-off basis, the Company will pay the Reinsurer a premium of
XXXX%* against the unearned premium on Policies in force at
the time of cancellation.

B. As respects all other Casualty Business:

1. Within 45 days following the end of each calendar quarter, the
Company will calculate and pay to the Reinsurer a premium at a
rate of XXXX%* multiplied by the Company's Gross Net Earned
Premium Income as respects such business.

2. Should the Company elect to terminate this Agreement on a
run-off basis, the Company will pay the Reinsurer a premium of
XXXX%* against the unearned premium on Policies in force at
the time of cancellation.

ARTICLE 8

FINAL PROFIT COMMISSION

The Company will have the option to calculate a final profit commission, for
each two (2) consecutive Agreement Year periods or lesser period should this
Agreement be cancelled on a cut off basis, equal to 100% of the net profit in
accordance with the following formula, with provisional adjustments beginning
12 months after the end of the second Agreement Year (July 1, 1998) and
annually thereafter.

The net profit for each two Agreement Year period shall be calculated in
accordance with the following formula:

A. Reinsurance premium paid for the period; less

B. Reinsurer's paid losses on losses occurring during the period; less

C. Reinsurer's margin at XXXX%(*) of the original reinsurance premium;
equals

D. Company's net profit.

Payment to the Company of the final profit commission calculation will result
in a full and final commutation of all known and unknown losses and shall
constitute a complete and final release of the Reinsurer and the Company in
respect of any and all liabilities on business covered under this Agreement
during the Agreement period commuted.

All prior final profit commission adjustment periods incepting prior to or
during the term of this Agreement must be commuted in consecutive order, with
the first period, for purposes of this Agreement, being July 1, 1989 to July 1,
1990.

- ----------------------------------
(*) Confidential treatment has been requested.

-7-
<PAGE> 8
Should the Company elect to terminate this Agreement on a run-off basis prior
to the end of a two Agreement Year period, the run-off period will be
considered as part of the last full Agreement Year period and together
constitute a two Agreement Year period for purposes of adjustment. Should the
Company elect to terminate this Agreement on a run-off basis at the end of a
two Agreement Year period, the run-off period will be combined with the prior
two Agreement Year period for purposes of adjustment.

ARTICLE 9

REPORTS

Within 60 days following the end of each Agreement Year, the Company will
furnish the Reinsurer with the following information:

A. Gross Net Earned Premium Income of the Company for the Agreement Year.

B. Any other information which the Reinsurer may require to prepare its
Annual Statement which is reasonably available to the Company.

ARTICLE 10

DEFINITIONS

A. The term "Casualty Business" as used in this Agreement shall mean all
insurances and reinsurances written by the Company and classified by
the Company as casualty.

B. The term "Ultimate Net Loss" as used in this Agreement shall mean the
actual loss paid by the Company or for which the Company becomes
liable to pay, such loss to include 90% of any Extra Contractual
Obligation award (and expense) as defined in the EXTRA CONTRACTUAL
OBLIGATIONS ARTICLE, 90% of any Excess of Policy Limits award as
defined in the EXCESS OF POLICY LIMITS ARTICLE, expenses of litigation
and interest, and all other loss expense of the Company including
subrogation, salvage, and recovery expenses (office expenses and
salaries of officials and employees not classified as loss adjusters
are not chargeable as expenses for purposes of this paragraph), but
salvages and all recoveries, including recoveries under all
reinsurances which inure to the benefit of this Agreement (whether
recovered or not), shall be first deducted from such loss to arrive at
the amount of liability attaching hereunder.

All salvages, recoveries or payments recovered or received subsequent
to loss settlement hereunder shall be applied as if recovered or
received prior to the aforesaid settlement, and all necessary
adjustments shall be made by the parties hereto.

For purposes of this definition, the phrase "becomes liable to pay"
shall mean the existence of a judgment which the Company does not
intend to appeal, or a release has been obtained by the Company, or
the Company has accepted a proof of loss.

Nothing in this clause shall be construed to mean that losses are not
recoverable hereunder until the Company's Ultimate Net Loss has been
ascertained.

C. The term "Gross Net Earned Premium Income" as used in this Agreement
shall mean gross earned premium income on business the subject of this
Agreement less the earned premium income (if any) paid for
reinsurances, recoveries under which would inure to the benefit of
this Agreement.

-8-
<PAGE> 9
D. The term "Policy" as used in this Agreement shall mean any binder,
policy or contract of insurance or reinsurance issued, accepted or
held covered provisionally or otherwise, by or on behalf of the
Company.

E. The term "Loss Occurrence" as used in this Agreement shall mean any
one disaster or casualty or accident or loss or series of disasters or
casualties or accidents or losses arising out of or caused by one
event, except that:

As respects an occupational or other disease or cumulative trauma
suffered by an employee for which the employer is liable, such
occupational or other disease or cumulative trauma shall be deemed a
Loss Occurrence within the meaning hereof. If the Company shall,
within the term of this Agreement, sustain more than one loss arising
from an occupational or other disease or cumulative trauma of one
specific kind or class suffered by more than one employee of one
insured, such losses shall be deemed to have arisen from one Loss
Occurrence. A loss as respects each employee affected by an
occupational or other disease or cumulative trauma shall be deemed to
have been sustained by the Company at the date when compensable
disability of the employee commenced and not any other date.

As respects Products Personal Injury and Products Property Damage
Liability Insurance, it is understood that injuries to all persons and
all damage to property of others occurring during a Policy period and
proceeding from or traceable to the same causative agency shall be
deemed to have arisen out of one Loss Occurrence, and the date of such
Loss Occurrence shall be deemed to be the commencing date of the
Policy period. For the purposes of this provision, each annual period
of a Policy which continues in force for more than one year shall be
deemed to be a separate Policy period. The word "injuries" as used in
this paragraph includes but is not limited to infection, contagion,
poisoning or contamination.

F. The term "Agreement Year" as used in this Agreement shall mean the 12
consecutive months commencing with each July 1. Any period following
termination of this Agreement in which the Reinsurer remains liable
for losses arising out of Policies in force at the date of termination
will be considered as part of the concluding Agreement Year.

ARTICLE 11

INTERLOCKING

The parties to this Agreement recognize that a Loss Occurrence, as defined
herein, may involve multiple Policies, and by reason of run-off termination
with this Agreement covering in-force Policies and other reinsurances assuming
liability on new and renewal Policies, a portion of the Loss Occurrence may be
ascribed to this Agreement and to other reinsurances covering on substantially
the same basis.

In such event, the Company's retention and the Reinsurer's limit of liability
for the Loss Occurrence shall be proportionate, with the amount of Ultimate Net
Loss to be retained by the Company under this Agreement being reduced to that
percentage which the Company's settled losses attaching to this Agreement bear
to the total of all the Company's settled losses contributing to the same Loss
Occurrence. The Reinsurer's liability shall be arrived at in the same manner.

ARTICLE 12

NET RETAINED LINES

-9-
<PAGE> 10
understood and agreed that the amount of the Reinsurer's liability hereunder in
respect of any loss or losses shall not be increased by reason of the inability
of the Company to collect from any other reinsurers, whether specific or
general, any amounts which may have become due from them, whether such
inability arises from the insolvency of such other reinsurers or otherwise.

However, it is understood that the Company may carry quota share or excess of
loss reinsurance on its net retained liability and such quota share or excess
of loss reinsurance will be disregarded for the purpose of this Agreement.

ARTICLE 13

CURRENCY

The currency to be used for all purposes of this Agreement shall be United
States of America currency.

ARTICLE 14

LOSS FUNDING

With respect to losses, funding will be in accordance with the attached Loss
Funding Clause No. 13-01.2. However, if the above method of funding is
unacceptable to the regulatory body of the jurisdiction where the Company is
domiciled, the Reinsurer will furnish an Outstanding Cash Advance as an
alternative method of funding.

ARTICLE 15

TAXES

The Company will be liable for taxes (except Federal Excise Tax) on premiums
reported to the Reinsurer hereunder.

Federal Excise Tax applies only to those Reinsurers, excepting Underwriters at
Lloyd's, London and other Reinsurers exempt from the Federal Excise Tax, who
are domiciled outside the United States of America.

The Reinsurer has agreed to allow for the purpose of paying the Federal Excise
Tax 1% of the premium payable hereon to the extent such premium is subject to
Federal Excise Tax.

In the event of any return of premium becoming due hereunder the Reinsurer will
deduct 1% from the amount of the return and the Company or its agent should
take steps to recover the Tax from the U.S. Government.

ARTICLE 16

NOTICE OF LOSS AND LOSS SETTLEMENTS

-10-
<PAGE> 11
retention and, irrespective of the reserve or of any question of liability or
coverage, any claim falling within the following categories:

A. Fatalities

B. Bodily injuries involving:

1. brain injuries resulting in impairment of physical functions,

2. spinal injuries resulting in partial or total paralysis of
upper or lower extremities,

3. amputations or permanent loss of use of upper or lower
extremities,

4. severe burn cases,

5. all other injuries likely to result in a permanent disability
rating of 50% or more.

The Reinsurer agrees to abide by the loss settlements of the Company, provided
that retroactive extension of Policy terms or coverages made voluntarily by the
Company and not in response to court decisions (whether such court decision is
against the Company or other companies affording the same or similar coverages)
will not be covered under this Agreement.

When so requested the Company will afford the Reinsurer an opportunity to be
associated with the Company, at the expense of the Reinsurer, in the defense of
any claim or suit or proceeding involving this reinsurance and the Company will
cooperate in every respect in the defense of such claim, suit or proceeding.

The Reinsurer will pay its share of loss settlements immediately upon receipt
of proof of loss from the Company.

ARTICLE 17

EXCESS OF POLICY LIMITS

In the event the Ultimate Net Loss includes an amount in excess of the
Company's Policy limit, such amount, as provided for in the definition of
Ultimate Net Loss, in excess of the Company's Policy limit shall be added to
the amount of the Company's Policy limit, and the sum thereof shall be covered
hereunder, subject to the Reinsurer's limit of liability appearing in the COVER
ARTICLE of this Agreement.

However, this Article shall not apply where the loss has been incurred due to
the fraud of a member of the Board of Directors or a corporate officer of the
Company acting individually or collectively or in collusion with any individual
or corporation or any other organization or party involved in the presentation,
defense or settlement of any claim covered hereunder.

For the purpose of this Article, the word "loss" shall mean any amounts for
which the Company would have been contractually liable to pay had it not been
for the limit of the original Policy.

ARTICLE 18

EXTRA CONTRACTUAL OBLIGATIONS

-11-
<PAGE> 12
under any other provision of this Agreement and which arise from handling of
any claim on business covered hereunder, such liabilities arising because of,
but not limited to, the following: failure by the Company to settle within the
Policy limit, or by reason of alleged or actual negligence, fraud or bad faith
in rejecting an offer of settlement or in the preparation of the defense or in
the trial of any action against its insured or in the preparation or
prosecution of an appeal consequent upon such action.

The date on which any Extra Contractual Obligation is incurred by the Company
shall be deemed, in all circumstances, to be the date of the original Loss
Occurrence.

ARTICLE 19

DELAY, OMISSION OR ERROR

ARTICLE 20

INSPECTION

The Company shall place at the disposal of the Reinsurer at all reasonable
times, and the Reinsurer shall have the right to inspect, through its
authorized representatives, all books, records and papers of the Company in
connection with any reinsurance hereunder, or claims in connection herewith.

ARTICLE 21

ARBITRATION

Any irreconcilable dispute between the parties to this Agreement will be
arbitrated in Dallas, Texas in accordance with the attached Arbitration Clause
No. 22-01.1.

ARTICLE 22

SERVICE OF SUIT

The attached Service of Suit Clause No. 20-01.5 - U.S.A., will apply to this
Agreement.

ARTICLE 23

INSOLVENCY

In the event of the insolvency of the Company the attached
Insolvency Clause No. 21-01 will apply.

-12-
<PAGE> 13

ARTICLE 24

INTERMEDIARY

Sedgwick Re, Inc. is hereby recognized as the Intermediary negotiating this
Agreement for all business hereunder. All communications including notices,
premiums, return premiums, commissions, taxes, losses, loss adjustment
expenses, salvages and loss settlements relating thereto shall be transmitted
to the Reinsurer or the Company through Sedgwick Re, Inc., 1501 Fourth Avenue,
Suite 1400, Seattle, Washington 98101. Payments by the Company to the
Intermediary shall be deemed to constitute payment to the Reinsurer. Payments
by the Reinsurer to the Intermediary shall be deemed only to constitute payment
to the Company to the extent that such payments are actually received by the
Company.

-13-
<PAGE> 14
ARTICLE 25

PARTICIPATION: FIRST CASUALTY EXCESS REINSURANCE AGREEMENT
EFFECTIVE: July 1,1995

This Agreement obligates the Reinsurer for _____% of the interests and
liabilities set forth under this Agreement.

The participation of the Reinsurer in the interests and liabilities of this
Agreement shall be separate and apart from the participations of other
reinsurers and shall not be joint with those of other reinsurers, and the
Reinsurer shall in no event participate in the interests and liabilities of
other reinsurers.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

<TABLE>
<CAPTION>
PARTICIPATING REINSURERS
--------------------------------------------------------------------
<S> <C>
Reliance Reinsurance Corporation 20.00%
Reliance Insurance Company
St. Paul Re Management Corporation 25.00%
St. Paul Fire and Marine Insurance Company
Skandia America Reinsurance Corporation 25.00%
TIG Reinsurance Company 20.00%
Transatlantic Reinsurance Company 10.00%
-------

Total 100.00%
</TABLE>

Upon completion of Reinsurers' signing, fully executed signature pages will be
forwarded to you for the completion of your file.

-14-
<PAGE> 15
ARTICLE 25

PARTICIPATION: FIRST CASUALTY EXCESS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for 20.00% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

In Philadelphia, Pennsylvania, this day of , 1995.

RELIANCE INSURANCE COMPANY
(THROUGH RELIANCE REINSURANCE CORP.)

By
-------------------------------------
(signature)

------------------------------------
(name)

------------------------------------
(title)

-15-
<PAGE> 16
ARTICLE 25

PARTICIPATION: FIRST CASUALTY EXCESS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for 25.00% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

In New York, New York, this day of , 1995.

ST. PAUL FIRE AND MARINE INSURANCE
COMPANY

By
-------------------------------------
(signature)

------------------------------------
(name)

------------------------------------
(title)

St. Paul Re Management Corporation
Reinsurance Managers

-16-
<PAGE> 17
ARTICLE 25

PARTICIPATION: FIRST CASUALTY EXCESS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for 25.00% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

In New York, New York, this day of , 1995.

SKANDIA AMERICA REINSURANCE
CORPORATION
Wilmington, Delaware

By By
------------------------------------ ------------------------------------
(signature)

------------------------------------ ------------------------------------
(name) (name)

------------------------------------ ------------------------------------
(title) (title)

-17-
<PAGE> 18
ARTICLE 25

PARTICIPATION: FIRST CASUALTY EXCESS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for 20.00% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

In Stamford, Connecticut, this day of , 1995.

TIG REINSURANCE COMPANY
Stamford, Connecticut

By
------------------------------------
(signature)

------------------------------------
(name)

------------------------------------
(title)

-18-
<PAGE> 19
ARTICLE 25

PARTICIPATION: FIRST CASUALTY EXCESS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for 10.00% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

In New York, New York, this day of , 1995.

TRANSATLANTIC REINSURANCE COMPANY
New York, New York

By
------------------------------------
(signature)

------------------------------------
(name)

------------------------------------
(title)

-19-
<PAGE> 20
and in DeRidder, Louisiana, this day of , 1995.

AMERICAN INTERSTATE INSURANCE COMPANY
For and on behalf of
AMERICAN INTERSTATE INSURANCE COMPANY
SILVER OAK CASUALTY, INC.

By
------------------------------------
(signature)

------------------------------------
(name)

------------------------------------
(title)

FIRST CASUALTY EXCESS REINSURANCE AGREEMENT

issued to

AMERICAN INTERSTATE INSURANCE COMPANY
SILVER OAK CASUALTY, INC.

-20-
<PAGE> 21
NUCLEAR INCIDENT EXCLUSION CLAUSE -
LIABILITY - REINSURANCE - U.S.A.

(Wherever the word "Reassured" appears in this clause, it shall be deemed to
read "Reassured," "Reinsured," "Company," or whatever other word is employed
throughout the text of the reinsurance agreement to which this clause is
attached to designate the company or companies reinsured.)

(1) This reinsurance does not cover any loss or liability accruing to
the Reassured as a member of, or subscriber to, any association of insurers or
reinsurers formed for the purpose of covering nuclear energy risks or as a
direct or indirect reinsurer of any such member, subscriber or association.

(2) Without in any way restricting the operation of paragraph (1) of
this Clause it is understood and agreed that for all purposes of this
reinsurance all the original policies of the Reassured (new, renewal and
replacement) of the classes specified in Clause II of this paragraph (2) from
the time specified in Clause III in this paragraph (2) shall be deemed to
include the following provision (specified as the Limited Exclusion Provision):

LIMITED EXCLUSION PROVISION.*

I. It is agreed that the policy does not apply under any liability
coverage,

to injury, sickness, disease, death or destruction
bodily injury or property damage

with respect to which an insured under the policy is also an

insured under a nuclear energy liability policy issued by Nuclear
Energy Liability Insurance Association, Mutual Atomic Energy
Liability Underwriters or Nuclear Insurance Association of Canada,
or would be an insured under any such policy but for its
termination upon exhaustion of its limit of liability.

II. Family Automobile Policies (liability only), Special Automobile
Policies (private passenger automobiles, liability only), Farmers
Comprehensive Personal Liability Policies (liability only),
Comprehensive Personal Liability Policies (liability only) or
policies of a similar nature; and the liability portion of
combination forms related to the four classes of policies stated
above, such as the Comprehensive Dwelling Policy and the applicable
types of Homeowners Policies.

III. The inception dates and thereafter of all original policies as
described in II above, whether new, renewal or replacement, being
policies which either

(a) become effective on or after 1st May, 1960, or

(b) become effective before that date and contain the Limited
Exclusion Provision set out above; provided this paragraph
(2) shall not be applicable to Family Automobile Policies,
Special Automobile Policies, or policies or combination
policies of a similar nature, issued by the Reassured on
New York risks, until 90 days following the approval of the
Limited Exclusion provision by the Governmental Authority
having jurisdiction thereof.

(3) Except for those classes of policies specified in Clause II of
paragraph (2) and without in any way restricting the operation of paragraph (1)
of this Clause, it is understood and agreed that for all purposes of this
reinsurance the original liability policies of the Reassured (new, renewal and
replacement) affording the following coverages:

Owners, Landlords and Tenants Liability, Contractual Liability,
Elevator Liability, Owners or Contractors (including railroad)
Protective Liability, Manufacturers and Contractors Liability,
Product Liability, Professional and Malpractice Liability,
Storekeepers Liability, Garage Liability, Automobile Liability
(including Massachusetts Motor Vehicle or Garage Liability)

shall be deemed to include, with respect to such coverages, from the time
specified in Clause V of this paragraph (3), the following provision (specified
as the Broad Exclusion Provision):

BROAD EXCLUSION PROVISION.*

It is agreed that the policy does not apply:

I. Under any Liability Coverage, to injury, sickness,
disease, death or
destruction bodily
injury or property
damage

(a) with respect to which an insured under the policy is also
an insured under a nuclear energy liability policy issued
by Nuclear Energy Liability Insurance Association, Mutual
Atomic Energy Liability Underwriters or Nuclear Insurance
Association of Canada, or would be an insured under any
such policy but for its termination upon exhaustion of its
limit of liability; or
<PAGE> 22
(b) resulting from the hazardous properties of nuclear material
and with respect to which (1) any person or organization is
required to maintain financial protection pursuant to the
Atomic Energy Act of 1954, or any law amendatory thereof,
or (2) the insured is, or had this policy not been issued
would be, entitled to indemnity from the United States of
America, or any agency thereof, under any agreement entered
into by the United States of America, or any agency
thereof, with any person or organization.

II. Under any Medical Payments Coverage, or under any Supplementary
Payments Provision relating

to immediate medical or surgical relief first aid,
to expenses incurred with respect

to bodily injury, sickness, disease or death bodily injury
resulting from the hazardous properties of nuclear material
and

arising out of the operation of a nuclear facility by any person or
organization.

III. Under any Liability Coverage, to injury, sickness, disease,
death or destruction bodily
injury or property damage
resulting from the hazardous
properties of nuclear
material, if

(a) the nuclear material (1) is at any nuclear facility owned
by, or operated by or on behalf of, an insured or (2) has
been discharged or dispersed therefrom;

(b) the nuclear material is contained in spent fuel or waste at
any time possessed, handled, used, processed, stored,
transported or disposed of by or on behalf of an insured;
or

arises out of the furnishing by an insured of services,

materials, parts or equipment in connection with the planning,
construction, maintenance, operation or use of any nuclear
facility, but if such facility is located within the United States
of America, its territories or possessions or Canada, this
exclusion (c) applies only

to injury to or destruction of property at such nuclear
facility. property damage to such nuclear facility
and any property thereat.

IV. As used in this endorsement:

"HAZARDOUS PROPERTIES" include radioactive, toxic or explosive
properties; "NUCLEAR MATERIAL" means source material, special
nuclear material or byproduct material; "SOURCE MATERIAL," "SPECIAL
NUCLEAR MATERIAL," and "BYPRODUCT MATERIAL" have the meanings given
them in the Atomic Energy Act of 1954 or in any law amendatory
thereof; "SPENT FUEL" means any fuel element or fuel component,
solid or liquid, which has been used or exposed to radiation in a
nuclear reactor; "WASTE" means any waste material (1) containing
byproduct material other than tailings or wastes produced by the
extraction or concentration of uranium or thorium from any ore
processed primarily for its source material content, and (2)
resulting from the operation by any person or organization of any
nuclear facility included under the first two paragraphs of the
definition of nuclear facility; "NUCLEAR FACILITY" means

(a) any nuclear reactor,

(b) any equipment or device designed or sued for (1) separating
the isotopes of uranium of plutonium, (2) processing or
utilizing spent fuel, or (3) handling, processing or
packaging waste,

(c) any equipment or device used for the processing,
fabricating or alloying of special nuclear material if at
any time the total amount of such material in the custody
of the insured at the premises where such equipment or
devices is located consists of or contains more than 25
grams of plutonium or uranium 233 or any combination
thereof, or more than 250 grams of uranium 235,

(d) any structure, basin, excavation, premises or place
prepared or used for the storage or disposal of waste,

and includes the site on which any of the foregoing is located, all
operations conducted on such site and all premises used for such
operations; "NUCLEAR REACTOR" means any apparatus designed or used
to sustain nuclear fission in a self-supporting chain reaction or
to contain a critical mass of fissionable material;

With respect to injury to or destruction of property, the word
"injury" or destruction "property damage" includes all forms of
radioactive contamination of property. includes all forms of
radioactive contamination of property.
<PAGE> 23
V. The inception dates and thereafter of all original policies
affording coverages specified in this paragraph (3), whether new,
renewal or replacement, being policies which become effective on or
after 1st May, 1960, provided this paragraph (3) shall not be
applicable to

(i) Garage and Automobile Policies issued by the Reassured on
New York risks, or

(ii) statutory liability insurance required under Chapter 90,
General Laws of Massachusetts,

until 90 days following approval of the Broad Exclusion Provision
by the Governmental Authority having jurisdiction thereof.

(4) Without in any way restricting the operation of paragraph (1) of
this Clause, it is understood and agreed that paragraphs (2) and (3) above are
not applicable to original liability policies of the Reassured in Canada and
that with respect to such policies this Clause shall be deemed to include the
Nuclear Energy Liability Exclusion Provisions adopted by the Canadian
Underwriters' Association or the Independent Insurance Conference of Canada.

- --------------------------------------------------------------------------------

* NOTE: The words printed in italics in the Limited Exclusion Provision
and in the Broad Exclusion Provision shall apply only in relation to original
liability policies which include a Limited Exclusion Provision or a Broad
Exclusion Provision containing those words.

- --------------------------------------------------------------------------------

<PAGE> 24
NUCLEAR INCIDENT EXCLUSION CLAUSE -
LIABILITY - REINSURANCE - CANADA

1. This Agreement does not cover any loss or liability accruing to the
Company as a member of, or subscriber to, any association of insurers or
reinsurers formed for the purpose of covering nuclear energy risks or as a
direct or indirect reinsurer of any such member, subscriber or association.

2. Without in any way restricting the operation of paragraph 1 of this
clause it is agreed that for all purposes of this Agreement all the original
liability contracts of the Company, whether new, renewal or replacement, of the
following classes, namely.
Personal Liability.
Farmers Liability.
Storekeepers Liability.
which become effective on or after 31st December 1984, shall be deemed to
include, from their inception dates and thereafter, the following provision:

LIMITED EXCLUSION PROVISION.

This Policy does not apply to bodily injury or property damage with
respect to which the Insured is also insured under a contract of nuclear
energy liability insurance (whether the insured is unnamed in such contract
and whether or not it is legally enforceable by the Insured) issued by the
Nuclear Insurance Association of Canada or any other group or pool of
insurers or would be an Insured under any such policy but for its
termination upon exhaustion of its limits of liability.

With respect to property, loss of use of such property shall be deemed
to be property damage.

3. Without in any way restricting the operation of paragraph 1 of this
clause it is agreed that for all purposes of this Agreement all the original
liability contracts of the Company, whether new, renewal or replacement, of any
class whatsoever (other than Personal Liability, Farmers Liability,
Storekeepers Liability or Automobile Liability contracts), which become
effective on or after 31st December 1984, shall be deemed to include, from
their inception dates and thereafter, the following provision of:

BROAD EXCLUSION PROVISION.

It is agreed that this Policy does not apply:
(a) to liability imposed by or arising under the Nuclear Liability
Act; nor
(b) to bodily injury or property damage with respect to which an
Insured under this Policy is also insured under a contract of
nuclear energy liability insurance (whether the insured is
unnamed in such contract and whether or not it is legally
enforceable by the Insured) issued by the Nuclear Insurance
Association of Canada or any other insurer or group or pool of
insurers or would be an insured under any such policy but for
its termination upon exhaustion of its limit of liability; nor
(c) to bodily injury or property damage resulting directly or
indirectly from the nuclear energy hazard arising from:

(i) the ownership, maintenance, operation or use of a nuclear
facility by or on behalf of an Insured;
(ii) the furnishing by an insured of services, materials, parts
or equipment in connection with the planning, construction,
maintenance, operation or use of any nuclear facility; and
(iii) the possession, consumption, use, handling, disposal or
transportation of fissionable substances, or of other
radioactive material (except radioactive isotopes, away
from a nuclear facility, which have reached the final stage
of fabrication so as to be useable for any scientific,
medical, agricultural, commercial or industrial purpose)
used, distributed, handled or sold by an Insured.

As used in this Policy:
1. The term "nuclear energy hazard" means the radioactive, toxic,
explosive, or other hazardous properties of radioactive material;
2. The term "radioactive material" means uranium, thorium, plutonium,
neptunium, their respective derivatives and compounds, radioactive
isotopes of other elements and any other substances that the Atomic
Energy Control Board may, by regulation, designate as being
prescribed substances capable of releasing atomic energy, or as
being requisite for the production, use or application of atomic
energy;
3. The term "nuclear facility" means:
(a) any apparatus designed or used to sustain nuclear fission
in a self-supporting chain reaction or to contain a
critical mass of plutonium, thorium and uranium or any one
or more of them;
(b) any equipment or device designed or used for (i) separating
the isotopes of plutonium, thorium and uranium or any one
or more of them, (ii) processing or utilizing spent fuel,
or (iii) handling, processing or packaging waste;
(c) any equipment or device used for the processing,
fabricating or alloying of plutonium, thorium or uranium
enriched in the isotope uranium 233 or in the isotope
uranium 235, or any one or more of them if at any time the
total amount of such material in the custody of the Insured
at the premises where such equipment or device is located
consists of
<PAGE> 25
or contains more than 25 grams of plutonium or uranium 233
or any combination thereof, or more than 250 grams of
uranium 235;
(d) any structure, basin, excavation, premises or place
prepared or used for the storage or disposal of waste
radioactive material;

and includes the site on which any of the foregoing is located,
together with all operations conducted thereon and all premises
used for such operations.

4. The term "fissionable substance" means any prescribed substance
that is, or from which can be obtained, a substance capable of
releasing atomic energy by nuclear fission.
5. With respect to property, loss of use of such property shall be
deemed to be property damage.
<PAGE> 26
SEEPAGE AND POLLUTION CLAUSE

As respects Policies classified by the Company as Commercial General Liability,
this Agreement does not cover Liability arising out of the actual alleged or
threatened discharge, dispersal, release or escape of pollutants:

1. At or from any premise owned, rented or occupied by the insured;

2. At or from any site or location used by the insured for the handling,
storage, disposal, processing or treatment of waste;

3. Which are at any time transported, handled, stored, treated, disposed of,
or processed as waste by the insured or by any person or organization for
whom the insured may be legally responsible.

4. At or from any site or location on which the insured or any contractors or
subcontractors working directly or indirectly on behalf of the insured are
performing operations:

a. If the pollutants are brought on or to the site or location in
connection with such operations; or

b. If the operations are to test for, monitor, clean up, remove, contain,
treat, detoxify or neutralize the pollutants;

including any loss, cost, or expense arising out of any governmental
directive or request that the insured test for, monitor, clean up, remove,
contain, treat, detoxify or neutralize pollutants.

The term "pollutants" as used herein shall mean any solid, liquid, gaseous
or thermal irritant or contaminant, including smoke, vapor, soot, fumes,
acids, alkalis, chemicals and waste, including materials to be recycled,
reconditioned or reclaimed.

However, this exclusion shall not apply to Bodily Injury or Property Damage
Liability caused by heat, smoke, or fumes from a hostile fire. As used
herein, the term "hostile fire" shall mean a fire which becomes
uncontrollable or breaks out from where it was intended to be.
<PAGE> 27
LOSS FUNDING

This clause is only applicable to those Reinsurers who cannot qualify for
credit by the State having jurisdiction over the Company's loss reserves.

As regards policies or bonds issued by the Company coming within the scope of
this Agreement, the Company agrees that when it shall file with the insurance
department or set up on its books reserves for losses covered hereunder which
it shall be required to set up by law it will forward to the Reinsurer a
statement showing the proportion of such loss reserves which is applicable to
them.

The Reinsurer hereby agrees that it will apply for and secure delivery to the
Company a clean irrevocable and unconditional Letter of Credit issued by a bank
chosen by the Reinsurer and acceptable to the appropriate insurance
authorities, in an amount equal to the Reinsurer's proportion of the loss
reserves in respect of known outstanding losses that have been reported to the
Reinsurer and allocated loss expenses relating thereto as shown in the
statement prepared by the Company. Under no circumstances shall any amount
relating to reserves in respect of losses or loss expenses Incurred But Not
Reported be included in the amount of the Letter of Credit.

The Letter of Credit shall be "Evergreen" and shall be issued for a period of
not less than one year, and shall be automatically extended for one year from
its date of expiration or any future expiration date unless thirty (30) days
prior to any expiration date, the bank shall notify the Company by certified or
registered mail that it elects not to consider the Letter of Credit extended
for any additional period.

The Company, or its successors in interest, undertakes to use and apply any
amounts which it may draw upon such Credit pursuant to the terms of the
Agreement under which the Letter of Credit is held, and for the following
purposes only:

(a) To pay the Reinsurer's share or to reimburse the Company for the
Reinsurer's share of any liability for loss reinsured by this
Agreement, the payment of which has been agreed by the Reinsurer
and which has not otherwise been paid.

(b) To make refund of any sum which is in excess of the actual amount
required to pay the Reinsurer's share of any liability reinsured by
this Agreement.

(c) In the event of expiration of the Letter of Credit as provided for
above, to establish deposit of the Reinsurer's share of known and
reported outstanding losses and allocated expenses relating thereto
under this Agreement. Such cash deposit shall be held in an
interest bearing account separate from the Company's other assets,
and interest thereon shall accrue to the benefit of the Reinsurer.
It is understood and agreed that this procedure will be implemented
only in exceptional circumstances and that, if it is implemented,
the Company will ensure that a rate of interest is obtained for the
Reinsurers on such a deposit account that is at least equal to the
rate which would be paid by Citibank N.A. in New York, and further
that the Company will account to the Reinsurers on an annual basis
for all interest accruing on the cash deposit account for the
benefit of the Reinsurer.

The bank chosen for the issuance of the Letter of Credit shall have no
responsibility whatsoever in connection with the propriety of withdrawals made
by the Company or the disposition of funds withdrawn, except to ensure that
withdrawals are made only upon the order of properly authorized representatives
of the Company.

At annual intervals, or more frequently as agreed but never more frequently
than semiannually, the Company shall prepare a specific statement, for the sole
purpose of amending the Letter of Credit, of the Reinsurer's share of known and
reported outstanding losses and allocated expenses relating thereto. If the
statement shows that the Reinsurer's share of such losses and allocated loss
expenses exceeds the balance of credit as of the statement date, the Reinsurer
shall, within thirty (30) days after receipt of notice of such excess, secure
delivery to the Company of an amendment of the Letter of Credit increasing the
amount of credit by the amount of such difference. If, however, the statement
shows that the Reinsurer's share of known and reported outstanding losses
<PAGE> 28
plus allocated loss expenses relating thereto is less than the balance of
credit as of the statement date, the Company shall, within thirty (30) days
after receipt of written request from the Reinsurer, release such excess credit
by agreeing to secure an amendment to the Letter of Credit reducing the amount
of credit available by the amount of such excess credit.

NOTE: --Wherever used herein the terms:

"Company" shall be understood to mean "Company," "Reinsured," "Reassured"
or whatever other term is used in the attached reinsurance agreement to
designate the reinsured company. "Agreement" shall be understood to mean
"Contract," "Agreement," "Policy" or whatever other term is used to
designate the attached reinsurance document. "State" shall be understood
to mean the state, province or Federal authority having jurisdiction over
the Company's loss reserves.
<PAGE> 29
ARBITRATION CLAUSE

As a condition precedent to any right of action hereunder, any irreconcilable
dispute between the parties to this Agreement will be submitted for decision to
a board of arbitration composed of two arbitrators and an umpire.

Arbitration shall be initiated by the delivery of a written notice of demand
for arbitration by one party to the other within a reasonable time after the
dispute has arisen.

The members of the board of arbitration shall be active or retired
disinterested officials of insurance or reinsurance companies, or Underwriters
at Lloyd's, London, not under the control or management of either party to this
Agreement. Each party shall appoint its arbitrator and the two arbitrators
shall choose an umpire before instituting the hearing. If the respondent fails
to appoint its arbitrator within four weeks after being requested to do so by
the claimant, the latter shall also appoint the second arbitrator. If the two
arbitrators fail to agree upon the appointment of an umpire within four weeks
after their nominations, each of them shall name three, of whom the other shall
decline two, and the decision shall be made by drawing lots.

The claimant shall submit its initial brief within 45 days from appointment of
the umpire. The respondent shall submit its brief within 45 days thereafter
and the claimant may submit a reply brief within 30 days after filing of the
respondent's brief.

The board shall make its decision with regard to the custom and usage of the
insurance and reinsurance business. The board shall issue its decision in
writing based upon a hearing in which evidence may be introduced without
following strict rules of evidence but in which cross-examination and rebuttal
shall be allowed. The board shall make its decision within 60 days following
the termination of the hearing unless the parties consent to an extension. The
majority decision of the board shall be final and binding upon all parties to
the proceeding. Judgment may be entered upon the award of the board in any
court having jurisdiction.

Each party shall bear the expense of its own arbitrator and shall jointly and
equally bear with the other party the expense of the umpire. The remaining
costs of the arbitration proceedings shall be allocated by the board.

NOTE: --Wherever used herein, the term "Company" shall be understood to mean
"Reinsured," "Reassured" or whatever other term is used in the attached
Agreement to designate the reinsured company. The term "Agreement" shall
be understood to mean "Contract," "Policy" or whatever other term is used
to designate the attached reinsurance document.
<PAGE> 30
SERVICE OF SUIT

This Clause applies only to a reinsurer domiciled outside the United States of
America or should the Company be authorized to do business in the State of New
York, a reinsurer unauthorized in New York as respects suits instituted in New
York.

It is agreed that in the event of the failure of the Reinsurer hereon to pay
any amount claimed to be due hereunder, the Reinsurer hereon, at the request of
the Company, will submit to the jurisdiction of a court of competent
jurisdiction within the United States. Nothing in this Clause constitutes or
should be understood to constitute a waiver of the Reinsurer's right to
commence an action in any court of competent jurisdiction in the United States,
to remove an action to a United States district court or to seek a transfer of
a case to another court as permitted by the laws of the United States of any
state in the United States.

It is further agreed that service of process in such suit may be made upon
Messrs. Mendes & Mount, 750 Seventh Avenue, New York, New York 10019-6829 and
that in any suit instituted against the Reinsurer upon this Agreement, the
Reinsurer will abide by the final decision of such court or of any appellate
court in the event of an appeal.

The above-named are authorized and directed to accept service of process on
behalf of the Reinsurer in any such suit and/or upon the request of the Company
to give a written undertaking to the Company that they will enter a general
appearance upon the Reinsurer's behalf in the event such a suit shall be
instituted.

Further, pursuant to any statute of any state, territory or district of the
United States which makes provision therefor, the Reinsurer hereon hereby
designates the superintendent, commissioner or director of insurance or other
officer specified for that purpose in the statute or his successor or
successors in office as its true and lawful attorney upon whom may be served
any lawful process in any action, suit or proceeding instituted by or on behalf
of the Company or any beneficiary hereunder arising out of this Agreement, and
hereby designates the above-named as the person to whom the said officer is
authorized to mail such process or a true copy thereof.

NOTE: --Wherever used herein the terms:

"Company" shall be understood to mean "Company," "Reinsured," "Reassured"
or whatever other term is used in the attached reinsurance Agreement to
designate the reinsured company. "Agreement" shall be understood to mean
"Contract," "Agreement," "Policy" or whatever other term is used to
designate the attached reinsurance document.
<PAGE> 31
INSOLVENCY CLAUSE

In the event of the insolvency of the Company, reinsurance under this Agreement
shall be payable by the Reinsurer on the basis of the liability of the Company
under Policy or Policies reinsured without diminution because of the insolvency
of the Company, to the Company or to its liquidator, receiver, or statutory
successor except as provided by Section 4118(a) of the New York Insurance Law
or except when the Agreement specifically provides another payee of such
reinsurance in the event of the insolvency of the Company and when the
Reinsurer with the consent of the direct insured or insureds has assumed such
Policy obligations of the Company as direct obligations of the Reinsurer to the
payees under such Policies and in substitution for the obligations of the
Company to such payees.

It is agreed, however, that the liquidator or receiver or statutory successor
of the insolvent Company shall give written notice to the Reinsurer of the
pendency of a claim against the insolvent Company on the Policy or Policies
reinsured within a reasonable time after such claim is filed in the insolvency
proceeding and that during the pendency of such claim, the Reinsurer may
investigate such claim and interpose, at its own expense, in the proceeding
when such claim is to be adjudicated, any defense or defenses which it may deem
available to the Company or its liquidator or receiver or statutory successor.
The expense thus incurred by the Reinsurer shall be chargeable, subject to
court approval, against the insolvent Company as part of the expense of
liquidation to the extent of a proportionate share of the benefit which may
accrue to the Company solely as a result of the defense undertaken by the
Reinsurer.

When two or more reinsurers are involved in the same claim and a majority in
interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of this Agreement as though such
expense had been incurred by the insolvent Company.

Should the Company go into liquidation or should a receiver be appointed, the
Reinsurer shall be entitled to deduct from any sums which may be due or may
become due to the Company under this reinsurance Agreement any sums which are
due to the Reinsurer by the Company under this reinsurance Agreement and which
are payable at a fixed or stated date as well as any other sums due the
Reinsurer which are permitted to be offset under applicable law.

NOTE: --Wherever used herein the terms:

<PAGE> 1
SECOND CASUALTY EXCESS REINSURANCE AGREEMENT

ARTICLE 1

BUSINESS REINSURED

ARTICLE 2

COVER

The Reinsurer will be liable in respect of each and every Loss Occurrence,
irrespective of the number and kinds of Policies involved, for the Ultimate Net
Loss over and above an initial Ultimate Net Loss of $500,000 each and every
Loss Occurrence, subject to a limit of liability to the Reinsurer of $1,500,000
each and every Loss Occurrence.

Recoveries from the Company's underlying Casualty Excess Reinsurance
Agreement(s) will not be deducted when establishing Ultimate Net Loss for
purposes of this Article.

ARTICLE 3

COMMENCEMENT AND TERMINATION

This Agreement shall become effective at 12:01 a.m., Central Standard Time,
July 1, 1995, and shall remain in full force and effect until terminated as
provided in the following paragraph.

Notwithstanding the July 1, 1997 anniversary, the Reinsurer will have the
option to terminate this Agreement with 90 days' notice prior to July 1, 1996
for any of the following reasons:

B. A reduction of the paid-in capital of the Company for any reason
whatsoever;
<PAGE> 2
C. The appointment of a receiver, administrator, trustee, or conservator
for the Company or the commencement of any liquidation, rearrangement,
or bankruptcy proceeding against the Company;

D. Should the Company at any time reinsure its minimum or net retention
on any class of business to which this Agreement applies, except as
provided for in this Agreement;

E. The reinsurance loss ratio exceeds 110% as of March 1, 1996. The loss
ratio will be based on reinsurance premium paid and reinsurance losses
incurred as of March 1, 1996.

ARTICLE 4

TERRITORY

This Agreement applies to losses arising out of Policies written in the United
States of America, its territories and possessions, Puerto Rico and Canada,
wherever occurring.

ARTICLE 5

WARRANTIES

ARTICLE 6

EXCLUSIONS

This Agreement does not cover:

A. As respects all business:

1. Aggregate Excess Insurance.

2. a. Atomic Energy and Nuclear Risks--all operations and
projects as per Nuclear Incident Exclusion Clauses -
Liability - Reinsurance, Nos. 08-31.1 (U.S.A.) and

-2-
<PAGE> 3
08-32.1 (Canada) in respect of all business other
than Workers' Compensation and Employers' Liability.

b. Atomic Energy and Nuclear Risks--all operations and
projects in respect of Workers' Compensation and
Employers' Liability business.

3. Contamination, Seepage and Pollution, as per the attached
clause.

4. Riot and civil commotion.

5. Reinsurance assumed, except:

a. Agency reinsurance (per risk or portfolio) is not
excluded.

b. Reinsurance of an occasional individual risk or
Policy is not excluded, provided the Company is not
operating as a professional reinsurer.

c. Reinsurance on risks where all servicing, including
claims handling, is done by the Company.

6. Pools, Associations and Syndicates, except losses from
Assigned Risk Plans or similar plans are not excluded.

8. Aggregate Workers' Compensation.

9. Policies issued as excess coverage over other insurance or
over a self-insured retention except on risks where all
servicing, including claims handling, is done by the Company.

10. War as excluded by the Standard War Exclusion Clause.

11. Risks with known asbestosis, black lung and brown lung
exposures. Also, risks with silicosis exposures unless such
exposure emanates from an incidental part of the insureds
operations. For the purposes of this exclusion, the term
"incidental" shall mean less than 10% of any employees of an
insured's time is engaged in functions involving a silicosis
exposure.

12. Federal employees.

13. Financial Guarantee and Insolvency.

B. As respects business other than Workers' Compensation and Employers'
Liability:

1. Advertisers Liability--monoline.

2. Airports--all operations.

-3-
<PAGE> 4
3. Amusement parks, carnivals and rides.

4. Amusement devices--manufacturing liability.

5. Anhydrous ammonia--distributing.

6. Animal shows and circuses.

7. Antifreeze products liability.

8. Asylums.

9. Automobile racing of any kind.

10. Automobile racing spectator liability.

11. Automobile third party liability.

12. Aviation and aircraft products and operations.

13. Burglar alarm contractors and manufacturers.

14. Chemical manufacturing, unless incidental to the insured's
overall operations.

15. Construction, repair or maintenance of bridges, conduits,
electric power lines, dams or reservoirs, jetties or
breakwaters, oil or gas pipelines, railroads, ships or boats,
subways and tunnels.

16. Demolition--marine.

17. Dike or revetment construction.

18. Drilling or redrilling of oil or gas wells.

19. Explosives of any kind or nature.

20. Fire alarm--products liability.

21. Fire protection systems--all operations.

22. Grain elevators.

23. Halfway or awareness houses.

24. Homes or schools for the mentally retarded.

25. Marine or offshore operations.

26. Motorcycle distributors.

27. Oil or gas--all classifications.

28. Oil or gas lease operators--all classifications.

-4-
<PAGE> 5
29. Ore dock operations.

30. Products recall liability.

31. Professional Indemnity and/or Errors and Omissions:
architects, engineers, accountants, EDP firms, real estate or
insurance agents, surveyors, travel agents, and all other
miscellaneous.

32. Professional Liability: blood banks, hospitals, clinics,
lawyers, physicians, surgeons, dentists and nurses.

33. Railroads--all classifications.

34. Riding academies.

35. School boards liability.

36. Scuba equipment rental.

37. Scuba equipment manufacturing or distribution.

38. Scuba schools or instructors.

39. Ship building--all classifications.

40. Ski lifts, tows--including ski rental or sales.

41. Steel tanks or pressure vessel manufacturing.

42. Stevedoring and/or longshoremen--all operations.

43. Structural steel manufacturer or importer.

44. Toy manufacturing.

45. Ocean Marine and all forms of legal liability arising out of
the operation or navigation of ships or vessels except for the
operation of small pleasure craft under 28 feet in length.

46. Warehousemen's legal liability.

47. D & O (except for condominium D & O).

48. Day care centers.

49. Electric or gas utilities--all operations including blackouts
and brownouts.

50. Equipment rental.

51. Fire legal liability coverage exceeding limits of $500,000 per
insured.

52. Mining including underground mining, surface mining and
quarrying.

53. Municipalities.

-5-
<PAGE> 6
54. Pharmaceutical manufacturers.

55. Products Liability coverage relating to the production,
manufacture, distribution, or sale of any of the following:

b. Cosmetics, hair or skin preparations;

c. Drugs, medicines and pharmaceutical products except
by retail drugstores or drug departments of
supermarket and discount stores;

d. Explosives or fireworks;

e. Agricultural business, including but not limited to
pesticides, herbicides, fertilizers;

f. Animal feed.

56. Liquor Law Liability, except for Host Liquor Liability
endorsements to General Liability Policies and Liquor Law
Liability under endorsements attached to General Liability
Policies.

57. Hotels or motels over seven stories in height unless fire
restrictive construction and equipped with smoke detectors in
all rooms and public hallways.

ARTICLE 7

PREMIUM

A. As respects Casualty Business classified by the Company as Logging and
General Liability:

__________________________________

* Confidential treatment has been requested.

-6-
<PAGE> 7
2. Within 60 days following the end of each Agreement Year, the
Company will calculate a premium at a rate of XXXX%*
multiplied by the Company's Gross Net Earned Premium Income as
respects such business. Should the premium so calculated
exceed the deposit premium paid in accordance with Paragraph
A.1. above, the Company will immediately pay the Reinsurer
the difference. Should the premium so calculated be less than
the deposit premium, the Reinsurer will immediately pay the
Company the difference subject to a minimum premium of $XXXX*.

B. As respects all other Casualty Business:

ARTICLE 8

REPORTS

Within 60 days following the end of each Agreement Year, the Company will
furnish the Reinsurer with the following information:

A. Gross Net Earned Premium Income of the Company for the Agreement Year.

B. Any other information which the Reinsurer may require to prepare its
Annual Statement which is reasonably available to the Company.

ARTICLE 9

DEFINITIONS

A. The term "Casualty Business" as used in this Agreement shall mean all
insurances and reinsurances written by the Company and classified by
the Company as casualty.

__________________________________

* Confidential treatment has been requested.

-7-
<PAGE> 8
OF POLICY LIMITS ARTICLE, expenses of litigation and interest, and all
other loss expense of the Company including subrogation, salvage, and
recovery expenses (office expenses and salaries of officials and
employees not classified as loss adjusters are not chargeable as
expenses for purposes of this paragraph), but salvages and all
recoveries, including recoveries under all reinsurances which inure to
the benefit of this Agreement (whether recovered or not), shall be
first deducted from such loss to arrive at the amount of liability
attaching hereunder.

Nothing in this clause shall be construed to mean that losses are not
recoverable hereunder until the Company's Ultimate Net Loss has been
ascertained.

D. The term "Policy" as used in this Agreement shall mean any binder,
policy or contract of insurance or reinsurance issued, accepted or
held covered provisionally or otherwise, by or on behalf of the
Company.

-8-
<PAGE> 9
ARTICLE 10

INTERLOCKING

ARTICLE 11

NET RETAINED LINES

This Agreement applies only to that portion of any insurances or reinsurances
covered by this Agreement which the Company retains net for its own account,
and in calculating the amount of any loss hereunder and also in computing the
amount in excess of which this Agreement attaches, only loss or losses in
respect of that portion of any insurances or reinsurances which the Company
retains net for its own account shall be included, it being understood and
agreed that the amount of the Reinsurer's liability hereunder in respect of any
loss or losses shall not be increased by reason of the inability of the Company
to collect from any other reinsurers, whether specific or general, any amounts
which may have become due from them, whether such inability arises from the
insolvency of such other reinsurers or otherwise.

ARTICLE 12

CURRENCY

The currency to be used for all purposes of this Agreement shall be United
States of America currency.

ARTICLE 13

LOSS FUNDING

-9-
<PAGE> 10
ARTICLE 14

TAXES

The Company will be liable for taxes (except Federal Excise Tax) on premiums
reported to the Reinsurer hereunder.

The Reinsurer has agreed to allow for the purpose of paying the Federal Excise
Tax 1% of the premium payable hereon to the extent such premium is subject to
Federal Excise Tax.

ARTICLE 15

NOTICE OF LOSS AND LOSS SETTLEMENTS

The Company will advise the Reinsurer promptly of all claims which in the
opinion of the Company may involve the Reinsurer and of all subsequent
developments on these claims which may materially affect the position of the
Reinsurer, such advices to include any claim for which the reserve is 50% or
more of the Company's retention and, irrespective of the reserve or of any
question of liability or coverage, any claim falling within the following
categories:

A. Fatalities

B. Bodily injuries involving:

1. brain injuries resulting in impairment of physical functions,

2. spinal injuries resulting in partial or total paralysis of
upper or lower extremities,

3. amputations or permanent loss of use of upper or lower
extremities,

4. severe burn cases,

5. all other injuries likely to result in a permanent disability
rating of 50% or more.

The Reinsurer will pay its share of loss settlements immediately upon receipt
of proof of loss from the Company.

-10-
<PAGE> 11

ARTICLE 16

EXCESS OF POLICY LIMITS

For the purpose of this Article, the word "loss" shall mean any amounts for
which the Company would have been contractually liable to pay had it not been
for the limit of the original Policy.

ARTICLE 17

EXTRA CONTRACTUAL OBLIGATIONS

This Agreement shall protect the Company, subject to the Reinsurer's limit of
liability appearing in the COVER ARTICLE of this Agreement, where the loss
includes any Extra Contractual Obligations as provided in the definition of
Ultimate Net Loss. "Extra Contractual Obligations" are defined as those
liabilities not covered under any other provision of this Agreement and which
arise from handling of any claim on business covered hereunder, such
liabilities arising because of, but not limited to, the following: failure by
the Company to settle within the Policy limit, or by reason of alleged or
actual negligence, fraud or bad faith in rejecting an offer of settlement or in
the preparation of the defense or in the trial of any action against its
insured or in the preparation or prosecution of an appeal consequent upon such
action.

The date on which any Extra Contractual Obligation is incurred by the Company
shall be deemed, in all circumstances, to be the date of the original Loss
Occurrence.

ARTICLE 18

DELAY, OMISSION OR ERROR

-11-
<PAGE> 12
ARTICLE 19

INSPECTION

ARTICLE 20

ARBITRATION

Any irreconcilable dispute between the parties to this Agreement will be
arbitrated in Dallas, Texas in accordance with the attached Arbitration Clause
No. 22-01.1.

ARTICLE 21

SERVICE OF SUIT

The attached Service of Suit Clause No. 20-01.5 - U.S.A., will apply to this
Agreement.

ARTICLE 22

INSOLVENCY

In the event of the insolvency of the Company the attached Insolvency Clause
No. 21-01 will apply.

ARTICLE 23

INTERMEDIARY

-12-
<PAGE> 13
ARTICLE 24

PARTICIPATION: SECOND CASUALTY EXCESS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for _______% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

PARTICIPATING REINSURERS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Reliance Reinsurance Corporation
Reliance Insurance Company 20.00%
St. Paul Re Management Corporation
St. Paul Fire and Marine Insurance Company 25.00%
Skandia America Reinsurance Corporation 25.00%
TIG Reinsurance Company 20.00%
Transatlantic Reinsurance Company 10.00%
-------

Total 100.00%
</TABLE>

Upon completion of Reinsurers' signing, fully executed signature pages will be
forwarded to you for the completion of your file.

-13-
<PAGE> 14
ARTICLE 24

PARTICIPATION: SECOND CASUALTY EXCESS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for 20.00% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

In Philadelphia, Pennsylvania, this ________ day of _____________________, 1995.

RELIANCE INSURANCE COMPANY
(THROUGH RELIANCE REINSURANCE CORP.)

By
-----------------------------------
(signature)

-------------------------------------
(name)

-------------------------------------
(title)

-14-
<PAGE> 15
ARTICLE 24

PARTICIPATION: SECOND CASUALTY EXCESS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for 25.00% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

In New York, New York, this _________day of ____________________________, 1995.

ST. PAUL FIRE AND MARINE INSURANCE COMPANY

By
---------------------------------------
(signature)

---------------------------------------
(name)

---------------------------------------
(title)
St. Paul Re Management Corporation
Reinsurance Managers

-15-
<PAGE> 16
ARTICLE 24

PARTICIPATION: SECOND CASUALTY EXCESS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for 25.00% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

In New York, New York, this _________day of_____________________________, 1995.

SKANDIA AMERICA REINSURANCE
CORPORATION
Wilmington, Delaware

By: By:
----------------------------------- -----------------------------------
(signature) (signature)

----------------------------------- -----------------------------------
(name) (name)

----------------------------------- -----------------------------------
(title) (title)

-16-
<PAGE> 17
ARTICLE 24

PARTICIPATION: SECOND CASUALTY EXCESS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for 20.00% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

In Stamford, Connecticut, this _________day of_________________________, 1995.

TIG REINSURANCE COMPANY
Stamford, Connecticut

By
--------------------------------------
(signature)

--------------------------------------
(name)

--------------------------------------
(title)

-17-
<PAGE> 18
ARTICLE 24

PARTICIPATION: SECOND CASUALTY EXCESS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for 10.00% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

In New York, New York, this __________day of____________________________, 1995.

TRANSATLANTIC REINSURANCE COMPANY
New York, New York

By
--------------------------------------
(signature)

--------------------------------------
(name)

--------------------------------------
(title)

-18-
<PAGE> 19
and in De Ridder, Louisiana, this ________day of________________________, 1995.

AMERICAN INTERSTATE INSURANCE COMPANY
For and on behalf of
AMERICAN INTERSTATE INSURANCE COMPANY
SILVER OAK CAUSALTY, INC.

By
--------------------------------------
(signature)

--------------------------------------
(name)

--------------------------------------
(title)

SECOND CASUALTY EXCESS REINSURANCE AGREEMENT

issued to

AMERICAN INTERSTATE INSURANCE COMPANY
SILVER OAK CASUALTY, INC.

-19-
<PAGE> 20
NUCLEAR INCIDENT EXCLUSION CLAUSE -
LIABILITY - REINSURANCE - U.S.A.

LIMITED EXCLUSION PROVISION.*

I. It is agreed that the policy does not apply under any liability
coverage,

to injury, sickness, disease, death or destruction
bodily injury or property damage

with respect to which an insured under the policy is also an

III. The inception dates and thereafter of all original policies as
described in II above, whether new, renewal or replacement, being
policies which either

(a) become effective on or after 1st May, 1960, or

Owners, Landlords and Tenants Liability, Contractual Liability,
Elevator Liability, Owners or Contractors (including railroad)
Protective Liability, Manufacturers and Contractors Liability, Product
Liability, Professional and Malpractice Liability, Storekeepers
Liability, Garage Liability, Automobile Liability (including
Massachusetts Motor Vehicle or Garage Liability)

shall be deemed to include, with respect to such coverages, from the time
specified in Clause V of this paragraph (3), the following provision (specified
as the Broad Exclusion Provision):

BROAD EXCLUSION PROVISION.*

It is agreed that the policy does not apply:

I. Under any Liability Coverage, to injury, sickness, disease,
death or destruction bodily
injury or property damage

(a) with respect to which an insured under the policy is also
an insured under a nuclear energy liability policy issued
by Nuclear Energy Liability Insurance Association, Mutual
Atomic Energy Liability Underwriters or Nuclear Insurance
Association of Canada, or would be an insured under any
such policy but for its termination upon exhaustion of its
limit of liability; or
<PAGE> 21
(b) resulting from the hazardous properties of nuclear material
and with respect to which (1) any person or organization is
required to maintain financial protection pursuant to the
Atomic Energy Act of 1954, or any law amendatory thereof,
or (2) the insured is, or had this policy not been issued
would be, entitled to indemnity from the United States of
America, or any agency thereof, under any agreement entered
into by the United States of America, or any agency
thereof, with any person or organization.

II. Under any Medical Payments Coverage, or under any Supplementary
Payments Provision relating

to immediate medical or surgical relief to expenses
first aid, incurred with
respect

to bodily injury, sickness, disease or
death bodily injury resulting from the
hazardous properties
of nuclear material
and

arising out of the operation of a nuclear facility by any person or
organization.

III. Under any Liability Coverage, to injury, sickness, disease,
death or destruction bodily
injury or property damage
resulting from the hazardous
properties of nuclear
material, if

(a) the nuclear material (1) is at any nuclear facility owned
by, or operated by or on behalf of, an insured or (2) has
been discharged or dispersed therefrom;

(b) the nuclear material is contained in spent fuel or waste at
any time possessed, handled, used, processed, stored,
transported or disposed of by or on behalf of an insured;
or

(c) the injury, sickness, disease, arises out of the
death or destruction bodily furnishing by an
injury or property damage insured of services,

to injury to or destruction of property at such nuclear facility.
property damage to such nuclear facility and any property
thereat.

IV. As used in this endorsement:

(a) any nuclear reactor,

(b) any equipment or device designed or sued for (1) separating
the isotopes of uranium of plutonium, (2) processing or
utilizing spent fuel, or (3) handling, processing or
packaging waste,

(d) any structure, basin, excavation, premises or place
prepared or used for the storage or disposal of waste,

With respect to injury to or destruction of property, the word
"injury" or destruction "property damage" includes all forms of
radioactive contamination of property. includes all forms of
radioactive contamination of property.
<PAGE> 22
V. The inception dates and thereafter of all original policies
affording coverages specified in this paragraph (3), whether new,
renewal or replacement, being policies which become effective on or
after 1st May, 1960, provided this paragraph (3) shall not be
applicable to

(i) Garage and Automobile Policies issued by the Reassured on
New York risks, or

(ii) statutory liability insurance required under Chapter 90,
General Laws of Massachusetts,

until 90 days following approval of the Broad Exclusion Provision
by the Governmental Authority having jurisdiction thereof.

- --------------------------------------------------------------------------------

<PAGE> 23
NUCLEAR INCIDENT EXCLUSION CLAUSE -
LIABILITY - REINSURANCE - CANADA

LIMITED EXCLUSION PROVISION.

With respect to property, loss of use of such property shall be deemed
to be property damage.

BROAD EXCLUSION PROVISION.

(i) the ownership, maintenance, operation or use of a
nuclear facility by or on behalf of an Insured;
(ii) the furnishing by an insured of services, materials,
parts or equipment in connection with the planning,
construction, maintenance, operation or use of any
nuclear facility; and
(iii) the possession, consumption, use, handling, disposal
or transportation of fissionable substances, or of
other radioactive material (except radioactive
isotopes, away from a nuclear facility, which have
reached the final stage of fabrication so as to be
useable for any scientific, medical, agricultural,
commercial or industrial purpose) used, distributed,
handled or sold by an Insured.

As used in this Policy:
1. The term "nuclear energy hazard" means the radioactive, toxic,
explosive, or other hazardous properties of radioactive material;
2. The term "radioactive material" means uranium, thorium, plutonium,
neptunium, their respective derivatives and compounds, radioactive
isotopes of other elements and any other substances that the Atomic
Energy Control Board may, by regulation, designate as being
prescribed substances capable of releasing atomic energy, or as
being requisite for the production, use or application of atomic
energy;
3. The term "nuclear facility" means:
(a) any apparatus designed or used to sustain nuclear fission
in a self-supporting chain reaction or to contain a
critical mass of plutonium, thorium and uranium or any one
or more of them;
(b) any equipment or device designed or used for (i) separating
the isotopes of plutonium, thorium and uranium or any one
or more of them, (ii) processing or utilizing spent fuel,
or (iii) handling, processing or packaging waste;
(c) any equipment or device used for the processing,
fabricating or alloying of plutonium, thorium or uranium
enriched in the isotope uranium 233 or in the isotope
uranium 235, or any one or more of them if at any time the
total amount of such material in the custody of the Insured
at the premises where such equipment or device is located
<PAGE> 24
consists of or contains more than 25 grams of plutonium or
uranium 233 or any combination thereof, or more than 250
grams of uranium 235;
(d) any structure, basin, excavation, premises or place
prepared or used for the storage or disposal of waste
radioactive material;

and includes the site on which any of the foregoing is located,
together with all operations conducted thereon and all premises
used for such operations.

This clause is only applicable to those Reinsurers who cannot qualify for
credit by the State having jurisdiction over the Company's loss reserves.

(b) To make refund of any sum which is in excess of the actual amount
required to pay the Reinsurer's share of any liability reinsured by
this Agreement.

At annual intervals, or more frequently as agreed but never more frequently
than semiannually, the Company shall prepare a specific statement, for the sole
purpose of amending the Letter of Credit, of the Reinsurer's share of known and
reported outstanding losses and allocated expenses relating thereto. If the
statement shows that the Reinsurer's share of such losses and allocated loss
expenses exceeds the balance of credit as of the statement date, the Reinsurer
shall, within thirty (30) days after receipt of notice of such excess, secure
delivery to the Company of an amendment of the Letter of Credit increasing the
amount of credit by the amount of such difference. If, however, the statement
shows that the Reinsurer's share of known and reported outstanding losses plus
allocated loss expenses relating thereto is less than the balance of credit as
of the statement date, the Company shall, within thirty (30) days after receipt
of written request from the Reinsurer, release such excess credit by agreeing
to secure an amendment to the Letter of Credit reducing the amount of credit
available by the amount of such excess credit.

NOTE: --Wherever used herein the terms:

Arbitration shall be initiated by the delivery of a written notice of demand
for arbitration by one party to the other within a reasonable time after the
dispute has arisen.

NOTE: --Wherever used herein the terms:

<PAGE> 1
THIRD CASUALTY EXCESS REINSURANCE AGREEMENT

ARTICLE 1

BUSINESS REINSURED

This Agreement is to indemnify the Company in respect of the net excess
liability as a result of any loss or losses which may occur during the term of
this Agreement under any Policies covering Casualty Business in force, written
or renewed by or on behalf of the Company, subject to the terms and conditions
herein contained.

ARTICLE 2

COVER

A. The Reinsurer will be liable in respect of each and every Loss
Occurrence, irrespective of the number and kinds of Policies involved,
for the Ultimate Net Loss over and above an initial Ultimate Net Loss
of $2,000,000 each and every Loss Occurrence, subject to a limit of
liability to the Reinsurer of $3,000,000 each and every Loss
Occurrence.

B. Coverage under the terms of this Agreement is extended to include
losses reported to Reinsurers during the period of July 1, 1995 to
June 30, 1997 on losses which occurred during the period of May 1,
1986 to June 30, 1995. However, this section shall only apply to
losses reported to Reinsurers after the expiration of the reporting
period specified in the Agreements in force beginning and subsequent
to May 1, 1986. Notwithstanding the terms and conditions of the
original Agreement, any losses recoverable under this Section B. shall
be subject to all the applicable terms and conditions of this
Agreement.

Recoveries from the Company's underlying Casualty Excess Reinsurance
Agreement(s) will not be deducted when establishing Ultimate Net Loss for
purposes of this Article.

Recoveries from the Company's Per Claimant Excess Reinsurance Agreement(s) will
be deducted when establishing Ultimate Net Loss for purposes of this Article.

ARTICLE 3

COMMENCEMENT AND TERMINATION

This Agreement shall become effective at 12:01 a.m., Central Standard Time,
July 1, 1995, and shall remain in full force and effect until terminated as
provided in the following paragraph.

<PAGE> 2

Notwithstanding the July 1, 1997 anniversary, the Reinsurer will have the
option to terminate this Agreement with 90 days' prior notice to July 1, 1996
for any of the following reasons:

B. A reduction of the paid-in capital of the Company for any reason
whatsoever;

C. The appointment of a receiver, administrator, trustee, or conservator
for the Company or the commencement of any liquidation, rearrangement,
or bankruptcy proceeding against the Company;

D. Should the Company at any time reinsure its minimum or net retention
on any class of business to which this Agreement applies, except as
provided for in this Agreement;

E. The reinsurance loss ratio exceeds 110% as of March 1, 1996. The loss
ratio will be based on insurance premium paid and reinsurance losses
incurred as of March 1, 1996.

Notwithstanding the above, the Company has the option to terminate this
Agreement on a run-off basis, in which case the Reinsurer will continue to
cover all Policies coming within the scope of this Agreement, including those
written or renewed during the period of notice, until the natural expiration or
anniversary of such Policies, whichever occurs first, but in no event longer
than 12 months, plus odd time, not to exceed 15 months.

ARTICLE 4

TERRITORY

This Agreement applies to losses arising out of Policies written in the United
States of America, its territories and possessions, Puerto Rico and Canada,
wherever occurring.

ARTICLE 5

WARRANTIES

It is warranted for the purpose of this Agreement that:

A. As respects Third Party Liability coverage, the maximum limit issued
by the Company any one Policy is $1,000,000 combined single limit
(1973 Occurrence Form) or so deemed; or alternatively, $1,000,000 per
occurrence/$3,000,000 general annual aggregate (1986 Occurrence Form),
or so deemed.

It is understood as respects the new ISO Commercial General Liability
Policy, effective January 1, 1986, that the General Annual Aggregate
limit section shall be protected hereunder on an each Loss Occurrence
basis.

B. As respects statutory Workers' Compensation, the Company will maintain
Per Claimant Excess Reinsurance coverage of $3,000,000 excess
$2,000,000, with an annual aggregate recovery limit of $20,000,000 for
each Agreement Year and $5,000,000 excess $5,000,000 with an annual
aggregate recovery limit of $20,000,000 for each Agreement Year during
the Agreement period, or so deemed.

-2-
<PAGE> 3
ARTICLE 6

EXCLUSIONS

This Agreement does not cover:

A. As respects all business:

1. Aggregate Excess Insurance.

b. Atomic Energy and Nuclear Risks--all operations and
projects in respect of Workers' Compensation and
Employers' Liability business.

3. Contamination, Seepage and Pollution, as per the attached
clause.

4. Riot and civil commotion.

5. Reinsurance assumed, except:

a. Agency reinsurance (per risk or portfolio) is not
excluded.

b. Reinsurance of an occasional individual risk or
Policy is not excluded, provided the Company is not
operating as a professional reinsurer.

c. Reinsurance on risks where all servicing, including
claims handling, is done by the Company.

6. Pools, Associations and Syndicates, except losses from
Assigned Risk Plans or similar plans are not excluded.

8. Aggregate Workers' Compensation.

9. Policies issued as excess coverage over other insurance or
over a self-insured retention except on risks where all
servicing, including claims handling, is done by the Company.

10. War as excluded by the Standard War Exclusion Clause.

11. Risks with known asbestosis, black lung or brown lung
exposures. Also, risks with silicosis exposures unless such
exposure emanates from an incidental part of the insureds
operations.

-3-
<PAGE> 4
For the purposes of this exclusion, the term "incidental"
shall mean less than 10% of any employees of an insured's time
is engaged in functions involving a silicosis exposure.

12. Federal employees.

13. Financial Guarantee and Insolvency.

B. As respects business other than Workers' Compensation and Employers'
Liability:

1. Advertisers Liability--monoline.

2. Airports--all operations.

3. Amusement parks, carnivals and rides.

4. Amusement devices--manufacturing liability.

5. Anhydrous ammonia--distributing.

6. Animal shows and circuses.

7. Antifreeze products liability.

8. Asylums.

9. Automobile racing of any kind.

10. Automobile racing spectator liability.

11. Automobile third party liability.

12. Aviation and aircraft products and operations.

13. Burglar alarm contractors and manufacturers.

14. Chemical manufacturing, unless incidental to the insured's
overall operations.

15. Construction, repair or maintenance of bridges, conduits,
electric power lines, dams or reservoirs, jetties or
breakwaters, oil or gas pipelines, railroads, ships or boats,
subways and tunnels.

16. Demolition--marine.

17. Dike or revetment construction.

18. Drilling or redrilling of oil or gas wells.

19. Explosives of any kind or nature.

20. Fire alarm--products liability.

21. Fire protection systems--all operations.

22. Grain elevators.

-4-
<PAGE> 5
23. Halfway or awareness houses.

24. Homes or schools for the mentally retarded.

25. Marine or offshore operations.

26. Motorcycle distributors.

27. Oil or gas--all classifications.

28. Oil or gas lease operators--all classifications.

29. Ore dock operations.

30. Products recall liability.

31. Professional Indemnity and/or Errors and Omissions:
architects, engineers, accountants, EDP firms, real estate or
insurance agents, surveyors, travel agents, and all other
miscellaneous.

32. Professional Liability: blood banks, hospitals, clinics,
lawyers, physicians, surgeons, dentists and nurses.

33. Railroads--all classifications.

34. Riding academies.

35. School boards liability.

36. Scuba equipment rental.

37. Scuba equipment manufacturing or distribution.

38. Scuba schools or instructors.

39. Ship building--all classifications.

40. Ski lifts, tows--including ski rental or sales.

41. Steel tanks or pressure vessel manufacturing.

42. Stevedoring and/or longshoremen--all operations.

43. Structural steel manufacturer or importer.

44. Toy manufacturing.

45. Ocean Marine and all forms of legal liability arising out of
the operation or navigation of ships or vessels except for the
operation of small pleasure craft under 28 feet in length.

46. Warehousemen's legal liability.

47. D & O (except for condominium D & O).

48. Day care centers.

-5-
<PAGE> 6
49. Electric or gas utilities--all operations including blackouts
and brownouts.

50. Equipment rental.

51. Fire legal liability coverage exceeding limits of $500,000 per
insured.

52. Mining including underground mining, surface mining and
quarrying.

53. Municipalities.

54. Pharmaceutical manufacturers.

55. Products Liability coverage relating to the production,
manufacture, distribution, or sale of any of the following:

b. Cosmetics, hair or skin preparations;

c. Drugs, medicines and pharmaceutical products except
by retail drugstores or drug departments of
supermarket and discount stores;

d. Explosives or fireworks;

e. Agricultural business, including but not limited to
pesticides, herbicides, fertilizers;

f. Animal feed.

56. Liquor Law Liability, except for Host Liquor Liability
endorsements to General Liability Policies and Liquor Law
Liability under endorsements attached to General Liability
Policies.

57. Hotels or motels over seven stories in height unless fire
restrictive construction and equipped with smoke detectors in
all rooms and public hallways.

-6-
<PAGE> 7
ARTICLE 7

PREMIUM

A. The Company will pay the Reinsurer a deposit premium of $XXXX* for the
Agreement Year commencing at July 1, 1995, payable quarterly in
advance in the amount of $XXX* on July 1, 1995, October 1, 1995,
January 1, 1996, and April 1, 1996.

B. Within 60 days following the end of each Agreement Year, the Company
will calculate a premium at a rate of XXXX%* multiplied by the
Company's Gross Net Earned Premium Income. Should the premium so
calculated exceed the deposit premium paid in accordance with
Paragraph A. above, the Company will immediately pay the Reinsurer the
difference. Should the premium so calculated be less than the deposit
premium, the Reinsurer will immediately pay the Company the difference
subject to a minimum premium of $XXX*.

C. The minimum and deposit premium for subsequent Agreement Years will be
based on the same percentage used to develop the minimum and deposit
premium for the Agreement year that commenced at July 1, 1995.

D. Should the Company elect to terminate this Agreement on a run-off
basis, the Company will pay the Reinsurer a premium of XXXX* against
the unearned premium on Policies in force at the time of cancellation.

ARTICLE 8

REINSTATEMENT

As respects General Liability business, loss payments under this Agreement will
reduce the limit of coverage afforded by the amounts paid, but the limit of
coverage will be reinstated from the time of the occurrence of the loss and for
each amount so reinstated the Company agrees to pay an additional premium
calculated at pro rata of the Reinsurer's premium for the Agreement Year that
the loss occurred, being pro rata only as to the fraction of the face value of
this Agreement (i.e., the fraction of $3,000,000) reinstated.

Nevertheless, the Reinsurer's liability as respects General Liability business
hereunder shall never exceed $3,000,000 in respect of any one Loss Occurrence
and, subject to the limit in respect of any one Loss Occurrence, shall be
further limited to $6,000,000 as respects each Agreement Year during the
Agreement period by reason of any and all claims arising hereunder.

ARTICLE 9

REPORTS

Within 60 days following the end of each Agreement Year, the Company will
furnish the Reinsurer with the following information:

A. Gross Net Earned Premium Income of the Company for the Agreement Year;

B. Any other information which the Reinsurer may require to prepare its
Annual Statement which is reasonably available to the Company.

__________________________________

* Confidential treatment has been requested.

-7-
<PAGE> 8

ARTICLE 10

DEFINITIONS

A. The term "Casualty Business" as used in this Agreement shall mean all
insurances and reinsurances written by the Company and classified by
the Company as casualty.

B. The term "Ultimate Net Loss" as used in this Agreement shall mean the
actual loss paid by the Company or for which the Company becomes
liable to pay, such loss to include 90% of any Extra Contractual
Obligation award (and expense) as defined in the EXTRA CONTRACTUAL
OBLIGATION ARTICLE, 90% of any Excess of Policy Limits award as
defined in the EXCESS OF POLICY LIMITS ARTICLE, expenses of litigation
and interest, and all other loss expense of the Company including
subrogation, salvage, and recovery expenses (office expenses and
salaries of officials and employees not classified as loss adjusters
are not chargeable as expenses for purposes of this paragraph), but
salvages and all recoveries, including recoveries under all
reinsurances which inure to the benefit of this Agreement (whether
recovered or not), shall be first deducted from such loss to arrive at
the amount of liability attaching hereunder.

Nothing in this clause shall be construed to mean that losses are not
recoverable hereunder until the Company's Ultimate Net Loss has been
ascertained.

D. The term "Policy" as used in this Agreement shall mean any binder,
policy, or contract of insurance or reinsurance issued, accepted or
held covered provisionally or otherwise, by or on behalf of the
Company.

-8-
<PAGE> 9
of the Policy period. For the purposes of this provision, each annual
period of a Policy which continues in force for more than one year
shall be deemed to be a separate Policy period. The word "injuries"
as used in this paragraph includes but is not limited to infection,
contagion, poisoning or contamination.

ARTICLE 11

INTERLOCKING

ARTICLE 12

COMMUTATION

It is understood that at any time following the termination of this Agreement,
the Company and the Reinsurer can mutually agree to commute any or all
reinsurance incurred losses. Should both parties agree to commutation, the
Company shall submit a statement listing amounts paid, and reserved, in respect
of all reinsurance incurred losses. This statement shall form the basis of a
final agreed value for all such losses for all reinsurers. The amounts of
reserves contained therein shall be determined by employing one of the
following alternatives:

A. A calculation based on the following criteria:

1. In respect of all "index linked" indemnity benefits, annuity
values shall be calculated based upon applicable statutes.

2. In respect of all unindexed indemnity benefits, annuity values
shall be calculated based upon an annual discount rate of 5%.

3. In respect of all future medical costs, an annuity calculation
shall be based upon the Company's evaluation of long term
medical care and rehabilitation requirements, using an annual
discount rate of 0%, and an annual escalation rate of 2%.

4. Where applicable, impaired life expectancy, survivors life
expectancy, as well as remarriage probability shall be
reflected in the calculation by employing tables required by
applicable statutes.

-9-
<PAGE> 10
B. The Company may determine the agreed value by purchasing (or obtaining
a quotation for) an annuity from an annuity carrier who is "A+" Class
VIII or better rated by A.M. Best.

This statement, duly signed by the Company, shall then be deemed to be the full
and final statement of all known and unknown losses and the Reinsurer shall
promptly pay the Company any amounts that may be shown to be due.
Notwithstanding the above, such statement (whether involving payment of claims
under this Agreement or not) shall constitute a complete release of liability
of the Reinsurers in respect of the term of this Agreement in respect of all
known and unknown losses.

This Commutation Clause shall survive the termination of this Agreement.

ARTICLE 13

NET RETAINED LINES

ARTICLE 14

CURRENCY

The currency to be used for all purposes of this Agreement shall be United
States of America currency.

ARTICLE 15

LOSS FUNDING

With respect to losses, funding will be in accordance with the attached Loss
Funding Clause No. 13-01.2. However, if the above method of funding is
unacceptable to the regulatory body of the jurisdiction where the Company is
domiciled, the Reinsurer will furnish an outstanding cash advance or funds held
in trust as an alternative method of funding.

ARTICLE 16

TAXES

The Company will be liable for taxes (except Federal Excise Tax) on premiums
reported to the Reinsurer hereunder.

-10-
<PAGE> 11
Federal Excise Tax applies only to those Reinsurers, excepting Underwriters at
Lloyd's, London and other Reinsurers exempt from the Federal Excise Tax, who
are domiciled outside the United States of America.

The Reinsurer has agreed to allow for the purpose of paying the Federal Excise
Tax 1% of the premium payable hereon to the extent such premium is subject to
Federal Excise Tax.

ARTICLE 17

NOTICE OF LOSS AND LOSS SETTLEMENTS

The Reinsurer will pay its share of loss settlements immediately upon receipt
of proof of loss from the Company.

ARTICLE 18

EXCESS OF POLICY LIMITS

For the purpose of this Article, the word "loss" shall mean any amounts for
which the Company would have been contractually liable to pay had it not been
for the limit of the original Policy.

ARTICLE 19

EXTRA CONTRACTUAL OBLIGATIONS

-11-
<PAGE> 12
definition of Ultimate Net Loss. "Extra Contractual Obligations" are defined
as those liabilities not covered under any other provision of this Agreement
and which arise from handling of any claim on business covered hereunder, such
liabilities arising because of, but not limited to, the following: failure by
the Company to settle within the Policy limit, or by reason of alleged or
actual negligence, fraud or bad faith in rejecting an offer of settlement or in
the preparation of the defense or in the trial of any action against its
insured or in the preparation or prosecution of an appeal consequent upon such
action.

The date on which any Extra Contractual Obligation is incurred by the Company
shall be deemed, in all circumstances, to be the date of the original Loss
Occurrence.

ARTICLE 20

DELAY, OMISSION OR ERROR

ARTICLE 21

INSPECTION

ARTICLE 22

ARBITRATION

Any irreconcilable dispute between the parties to this Agreement will be
arbitrated in Dallas, Texas in accordance with the attached Arbitration Clause
No. 22-01.1.

ARTICLE 23

SERVICE OF SUIT

The attached Service of Suit Clause No. 20-01.5 - U.S.A., will apply to this
Agreement.

ARTICLE 24

INSOLVENCY

In the event of the insolvency of the Company the attached Insolvency Clause
No. 21-01 will apply.

-12-
<PAGE> 13

ARTICLE 25

INTERMEDIARY

-13-
<PAGE> 14
ARTICLE 26

PARTICIPATION: THIRD CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for _______% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

Total 100.00%
</TABLE>

Upon completion of Reinsurers' signing, fully executed signature pages will be
forwarded to you for the completion of your file.

-14-
<PAGE> 15
ARTICLE 26

PARTICIPATION: THIRD CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for 20.00% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

In Philadelphia, Pennsylvania, this day of , 1995.

RELIANCE INSURANCE COMPANY
(THROUGH RELIANCE REINSURANCE CORP.)

By
-----------------------------------
(signature)

-------------------------------------
(name)

-------------------------------------
(title)

-14-
<PAGE> 16
ARTICLE 26

PARTICIPATION: THIRD CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for 25.00% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

In New York, New York, this day of , 1995.

ST. PAUL FIRE AND MARINE INSURANCE COMPANY

By
-----------------------------------
(signature)

-----------------------------------
(name)

-----------------------------------
(title)
St. Paul Re Management Corporation
Reinsurance Managers

-14-
<PAGE> 17
ARTICLE 26

PARTICIPATION: THIRD CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for 25.00% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

In New York, New York, this day of , 1995.

SKANDIA AMERICA REINSURANCE
CORPORATION
Wilmington, Delaware

By By
----------------------------------- ----------------------------------
(signature) (signature)

----------------------------------- ----------------------------------
(name) (name)

----------------------------------- ----------------------------------
(title) (title)

-14-
<PAGE> 18
ARTICLE 26

PARTICIPATION: THIRD CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for 20.00% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

In Stamford, Connecticut, this day of , 1995.

TIG REINSURANCE COMPANY
Stamford, Connecticut

By
-----------------------------------
(signature)

-----------------------------------
(name)

-----------------------------------
(title)

-14-
<PAGE> 19
ARTICLE 26

PARTICIPATION: THIRD CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
EFFECTIVE: July 1, 1995

This Agreement obligates the Reinsurer for 10.00% of the interests and
liabilities set forth under this Agreement.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:

In New York, New York, this day of , 1995.

TRANSATLANTIC REINSURANCE COMPANY
New York, New York

By
-----------------------------------
(signature)

-----------------------------------
(name)

-----------------------------------
(title)

-14-
<PAGE> 20
and in De Ridder, Louisiana, this day of ,1995.

AMERICAN INTERSTATE INSURANCE COMPANY
For and on behalf of
AMERICAN INTERSTATE INSURANCE COMPANY
SILVER OAK CASUALTY, INC.

By
-----------------------------------
(signature)

-----------------------------------
(name)

-----------------------------------
(title)

THIRD CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT

issued to

AMERICAN INTERSTATE INSURANCE COMPANY
SILVER OAK CASUALTY, INC.

-15-
<PAGE> 21
NUCLEAR INCIDENT EXCLUSION CLAUSE -
LIABILITY - REINSURANCE - U.S.A.

LIMITED EXCLUSION PROVISION.*

I. It is agreed that the policy does not apply under any liability
coverage,

to injury, sickness, disease, death or with respect
destruction bodily injury or property damage to which an
insured under
the policy is
also an

III. The inception dates and thereafter of all original policies as
described in II above, whether new, renewal or replacement, being
policies which either

(a) become effective on or after 1st May, 1960, or

Owners, Landlords and Tenants Liability, Contractual Liability,
Elevator Liability, Owners or Contractors (including railroad)
Protective Liability, Manufacturers and Contractors Liability, Product
Liability, Professional and Malpractice Liability, Storekeepers
Liability, Garage Liability, Automobile Liability (including
Massachusetts Motor Vehicle or Garage Liability)

shall be deemed to include, with respect to such coverages, from the time
specified in Clause V of this paragraph (3), the following provision (specified
as the Broad Exclusion Provision):

BROAD EXCLUSION PROVISION.*

It is agreed that the policy does not apply:

I. Under any Liability Coverage, to injury, sickness, disease,
death or destruction bodily
injury or property damage

II. Under any Medical Payments Coverage, or under any Supplementary
Payments Provision relating

to immediate medical or surgical relief to expenses incurred
first aid, with respect

to bodily injury, sickness, disease or
death bodily injury resulting from the
hazardous properties
of nuclear material
and

arising out of the operation of a nuclear facility by any person or
organization.

III. Under any Liability Coverage, to injury, sickness, disease,
death or destruction bodily
injury or property damage
resulting from the hazardous
properties of nuclear
material, if

(a) the nuclear material (1) is at any nuclear facility owned
by, or operated by or on behalf of, an insured or (2) has
been discharged or dispersed therefrom;

(b) the nuclear material is contained in spent fuel or waste at
any time possessed, handled, used, processed, stored,
transported or disposed of by or on behalf of an insured;
or

(c) the injury, sickness, disease, death or
destruction bodily injury or property
damage arises out of the furnishing by
an insured of services,

to injury to or destruction of property at such nuclear
facility. property damage to such nuclear facility
and any property thereat.

IV. As used in this endorsement:

(a) any nuclear reactor,

(b) any equipment or device designed or sued for (1) separating
the isotopes of uranium of plutonium, (2) processing or
utilizing spent fuel, or (3) handling, processing or
packaging waste,

(d) any structure, basin, excavation, premises or place
prepared or used for the storage or disposal of waste,

(i) Garage and Automobile Policies issued by the Reassured on
New York risks, or

(ii) statutory liability insurance required under Chapter 90,
General Laws of Massachusetts,

until 90 days following approval of the Broad Exclusion Provision
by the Governmental Authority having jurisdiction thereof.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
<PAGE> 24
NUCLEAR INCIDENT EXCLUSION CLAUSE -
LIABILITY - REINSURANCE - CANADA