AMERISAFE INC, S-1/A, 1996-09-25

AMERISAFE INC
S-1/A, 1996-09-25

Previous: SMARTALK TELESERVICES INC, S-1/A, 1996-09-25

Next: UNIONBANCORP INC, S-1/A, 1996-09-25

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 25, 1996

REGISTRATION NO. 333-10099

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

PRE-EFFECTIVE AMENDMENT NO. 1

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>

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

<TABLE>
<S> <C>
2301 HIGHWAY 190 WEST MARK R. ANDERSON
DERIDDER, LOUISIANA 70634 PRESIDENT
318-463-9052 2301 HIGHWAY 190 WEST
(Address and telephone number of DERIDDER, LOUISIANA 70634
Registrant's principal executive offices) 318-463-9052
(Name, address and telephone number
of agent for service)
</TABLE>

---------------------
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. / /

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

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 SEPTEMBER 25, 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 between $13.00 and $15.00 per share. See "Underwriting" for information
relating to the factors considered in determining the initial public offering
price.

The Class A Common Stock has been approved for listing on the New York
Stock Exchange, upon notice of issuance, 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. Following the Offering, Millard E. Morris, the
Company's Chairman of the Board of Directors and Chief Executive Officer, will,
through his ownership of Class B Common Stock, control approximately 92.6% of
the voting power of the Company's outstanding voting stock (91.8% if the
Underwriters' over-allotment option is exercised in full). See "Principal
Shareholders" and "Description of Capital Stock."

------------------
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>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
</TABLE>

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

<TABLE>
<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 $1.1 million 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

THE MANAGED RESULTS COMPANY(SM)

AMERISAFE seeks hazardous industries -- the toughest workers' compensation
challenges.

AMERISAFE applies comprehensive on-site safety services to minimize workplace
accidents.

AMERISAFE utilizes personalized claims management and proactive health care to
speed recovery and return to work.

MANAGED SAFETY
+ MANAGED CLAIMS
MANAGED CARE

- ------------------------------------
= MANAGED RESULTS(SM)

[COLLAGE OF PHOTOS]

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

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 prior to the completion 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%. There can be no assurance that these growth rates
will continue. As of June 30, 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 18
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
practices involving the personal presence of the Company's claims
representative, 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 June 30, 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 by
assisting the injured employee in receiving appropriate medical treatment and,
as a result, enabling an injured employee to return to work as promptly as
possible. 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 (although the Company presently has no agreements or understandings
with respect to any proposed 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 effected prior to the completion of the Offering, the Company
distributed (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 former subsidiaries to Mr.
Morris. Prior to such distribution, the Company contributed 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>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------
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 $23,134 $30,678
Service fee income................................. 578 800 987 2,468 4,110 1,446 3,605
Investment income.................................. 1,745 1,818 2,146 2,484 4,519 1,842 2,743
Fees and other from affiliates..................... 371 1,985 2,154 1,732 2,881 1,004 1,125
------- ------- ------- ------- ------- ------- -------
Total revenues............................... 20,293 33,243 41,189 47,145 69,677 27,426 38,151
Expenses:
Claim and claim settlement expenses................ 12,136 17,622 20,262 25,250 32,924 13,545 18,356
Commission and other underwriting expenses......... 4,577 5,561 7,555 8,507 13,524 6,101 8,377
General and administrative......................... 570 1,910 2,798 4,406 6,810 2,157 4,093
Interest........................................... 442 642 850 726 845 420 632
Depreciation and amortization...................... 4 93 240 703 1,006 364 758
------- ------- ------- ------- ------- ------- -------
Total expenses............................... 17,729 25,828 31,705 39,592 55,109 22,587 32,216
------- ------- ------- ------- ------- ------- -------
Income before federal income taxes................... 2,564 7,415 9,484 7,553 14,568 4,839 5,935
Federal income taxes................................. 778 2,375 2,768 2,414 5,234 1,430 1,683
------- ------- ------- ------- ------- ------- -------
Net income before cumulative effect of change in
accounting for income taxes........................ 1,786 5,040 6,716 5,139 9,334 3,409 4,252
Cumulative effect of change in accounting for income
taxes.............................................. 334 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income................................... $ 2,120 $ 5,040 $ 6,716 $ 5,139 $ 9,334 $ 3,409 $ 4,252
======= ======= ======= ======= ======= ======= =======
Pro forma net income per share............... $ 0.42 $ 0.19
======= =======
Pro forma weighted average shares outstanding........ 22,061 22,061
Loss Ratio........................................... 69.0% 61.5% 56.4% 62.4% 56.6% 58.6% 59.8%
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and investments.................................................................... $ 90,582 $157,362
Total assets............................................................................ 133,905 200,685
Notes payable........................................................................... 12,425 1,525
Stockholders' equity.................................................................... 36,442 114,591
</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 $14 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. The Company is not aware of any
pending or proposed legislation or regulations which could adversely affect the
Company. However, there can be no assurance that new workers'
compensation-related legislation or regulations will not be adopted in states
where the Company presently operates or may operate in the future, which could
have a materially adverse effect on the demand for the Company's services and
programs in such states, 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

7
<PAGE> 9

a result, Mr. Morris will control approximately 92.6% of the voting power of the
Common Stock (91.8% if the 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 shares office space with one of these entities. In addition, the
Company has entered into a Tax Matters 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

8
<PAGE> 10

assurance that the Company will be able to maintain its current rating of "A"
(Excellent) from A.M. Best Company, Inc. A.M. Best's ratings are based on
factors of concern to insureds and are not directed towards the protection of
investors and should not be relied upon by an investor making a decision with
respect to an investment in the Company's Class A Common Stock. 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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

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."

9
<PAGE> 11

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. A.M. Best's ratings are based on factors of concern
to insureds and are not directed towards the protection of investors and should
not be relied upon by an investor making a decision with respect to an
investment in the Company's Class A Common Stock. See "Business -- A.M. Best
Rating."

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, 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. Based on its estimate of the fair market value of the distributed
stock, the Company believes that, if the distributions fail to qualify for
tax-free treatment, any taxable gain would not exceed approximately $20 million,
although there can be no assurance in this regard. The tax resulting from
realization of such gain could have a materially adverse effect on the Company's
business, financial condition or results of operations. See "Recent
Reorganization."

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."

NEED FOR RESERVES

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
reserves are estimated using individual case-basis valuations, statistical
analyses and estimates based upon experience for unreported claims and claim
settlement expenses. The process of

10
<PAGE> 12

establishing reserves involves many factors and is inherently uncertain and such
estimates may be more or less than the amounts ultimately paid when the claims
are settled. Further, 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 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. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Reserves for Claims and
Claim Settlement Expense."

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. See "-- Geographic
Concentration" and "Business -- Overview." 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 six months ended June
30, 1996, approximately 59.6% and 47.7%, 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 "-- Need for Reserves" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Overview."

GEOGRAPHIC CONCENTRATION

As of June 30, 1996, the Company provided its products and services in 18
states, primarily in the southeastern United States. Although the Company
intends to expand its operations into new geographic areas, approximately 83.7%
of the gross premiums earned for the six months ended June 30, 1996 were derived
from clients in the states of Georgia (19.8%), Louisiana (19.6%), Mississippi
(14.9%), Arkansas (13.3%), Alabama (9.8%) and Virginia (6.3%). No other state
accounted for more than 5.0% of gross premiums earned for the six months ended
June 30, 1996. As a result of this geographic concentration, unfavorable changes
in economic conditions affecting the southeastern United States could have a
materially adverse effect on the Company's business, financial condition or
results of operations. See "Business -- Clients."

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 six months ended June 30, 1996, independent agents accounted for
approximately 39.1% and 49.1%, 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. 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."

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

11
<PAGE> 13

of either of these individuals could have a materially adverse effect on the
Company. The Company maintains a $1.0 million key-man life insurance policy on
Mr. Anderson. The Company presently does not maintain similar insurance with
respect to any of its other executive officers. The Company has entered into
employment agreements with an initial three-year term with each of its executive
officers. The employment agreement between the Company and Mr. Morris does not
provide for him to devote full time to the business of the Company. Although Mr.
Morris has historically devoted approximately two-thirds of his time to the
Company's affairs, his employment agreement provides that he devote such time to
the Company's affairs as he and the Company's Board of Directors mutually agree
is necessary and appropriate under the circumstances. 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."

IMPORTANCE OF MAINTAINING A.M. BEST RATING

When assigning a rating, an area of concern to A.M. Best is rapid growth of
written premiums without sufficient capital. Following the Offering, the Company
believes that it will be able to maintain adequate capital to permit it to
implement its growth strategy in a manner that allows the Company to maintain
its rating. However, there can be no assurance that the Company will be able to
maintain its "A" rating. See "Business -- A.M. Best Rating."

UNALLOCATED OFFERING PROCEEDS

The Company intends to retain $66.8 million ($88.3 million if the
Underwriters' over-allotment option is exercised in full) of the net proceeds of
the Offering to increase its capital and surplus and for other general corporate
purposes. These funds have not been allocated for a specific use, and the Board
of Directors of the Company will have the sole authority to determine the use of
such funds. See "Use of Proceeds."

HIGHLY COMPETITIVE BUSINESS

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

12
<PAGE> 14

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."

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 Underwriters' 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. Neither the Company nor either of its existing shareholders has
any present intention to request a waiver of the 180-day period. If any such
waiver is requested, Smith Barney Inc. has the sole discretion whether to grant
any such waiver. 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 $9.97 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."

13
<PAGE> 15

USE OF PROCEEDS

Assuming a public offering price of $14 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 $142.1 million ($163.6
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,
which note bears interest at 8.0% per annum and matures on the fifth
business day following the completion of the Offering (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) $13.97 million to repay notes issued to a former shareholder and
former subsidiaries in connection with the Reorganization, which notes bear
interest at 8.0% per annum and mature on the fifth business day following
the completion of the Offering;

(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 August
31, 1996);

(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; and

(v) to repay all intercompany balances owed to AOAC and the MorTem
Corporations (as defined under "Recent Reorganization" below) ($469,000 as
of June 30, 1996).

The balance of the estimated net proceeds from the Offering (approximately $66.8
million, or $88.3 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 and has made no other distributions 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."

14
<PAGE> 16

RECENT REORGANIZATION

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 $5.97 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
provide a basis for the IRS to argue that the assumptions, facts, and
representations relied upon by counsel are untrue and that the Distributions do
not qualify as tax-free. Pursuant to agreements entered into in connection with
the Distributions (the "Distribution Agreements"), the corporations whose stock
was distributed in the Distributions and the shareholders receiving the
Distributions have agreed not to take those actions which the Company, on the
advice of counsel, has determined could provide the basis for an IRS challenge
to the tax-free status of the Distributions.

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. Based on its estimate of the fair
market value of the Distributed Subsidiaries, the Company believes that, if the
Distributions fail to qualify for tax-free treatment, any taxable gain would not
exceed approximately $20 million. The tax resulting from the realization of such
gain could have a materially adverse effect on the Company's business, financial
condition or results of operations.

15
<PAGE> 17

Further, no assurance can be given that the IRS could not successfully contend
that the fair market value of the distributed stock, and thus the amount of the
recognized gain, exceeded that estimated by the Company.

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.

16
<PAGE> 18

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company at June 30, 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 $14 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>
JUNE 30, 1996
---------------------------------------------------------
AS ADJUSTED AS FURTHER ADJUSTED
ACTUAL FOR THE REORGANIZATION FOR THE OFFERING
------- ---------------------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Notes payable.................................. $12,425 $ 26,396(2) $ 1,525(7)
Notes payable to shareholder and affiliates.... 513 50,513(3) 44(3)
------- -------- --------
Total notes payable.................. 12,938 76,909 1,569
------- -------- --------
Stockholders' equity (deficit):(1)
Preferred Stock, par value $.01 per share,
25,000,000 shares authorized:
Series B Convertible Preferred Stock;
510.167 shares issued and
outstanding; no shares issued and
outstanding, as adjusted and as
further adjusted..................... -- -- --
Class A Common Stock, par value $.01 per
share, 100,000,000 shares authorized; no
shares issued and outstanding and as
adjusted; 11,000,000 shares issued and
outstanding, as further adjusted.......... -- -- 110(8)
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 and as further adjusted....... 119 174(4) 174
Additional paid-in capital..................... 1,362 --(5) 142,010(8)
Retained earnings (deficit).................... 34,645 (28,019)(6) (28,019)
Unrealized gain on available-for-sale
securities, net
of taxes.................................. 316 316 316
------- -------- --------
Total stockholders' equity (deficit).... 36,442 (27,529) 114,591
------- -------- --------
Total capitalization................. $49,380 $ 49,380 $ 116,160
======= ======== ========
</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 8, 1996.

(footnotes continued on following page)

17
<PAGE> 19

<TABLE>
<S> <C> <C>
(2) Notes payable prior to Reorganization................................ $ 12,425
Note payable to former shareholder.................................. 8,000
Note payable to former subsidiary................................... 5,971
--------
Notes payable after Reorganization.................................. $ 26,396
========
(3) Notes to affiliates prior to Reorganization.......................... $ 513
Note issued to AOAC................................................. 50,000
--------
Notes to affiliates after Reorganization............................ 50,513
Payment of AOAC note................................................ (50,000)
Payment of amounts owed to former subsidiary........................ (469)
--------
Notes to affiliates after Offering.................................. $ 44
========
(4) Class B Common Stock prior to conversion of Series B Convertible 8%
Preferred Stock.................................................... $ 119
Conversion of Series B Convertible 8% Preferred Stock subsequent to
June 30, 1996...................................................... 55
--------
Class B Common Stock prior to Reorganization........................ $ 174
========
(5) Additional paid-in-capital prior to Reorganization................... $ 1,362
Conversion of Series B Convertible 8% Preferred Stock subsequent to
June 30, 1996...................................................... (55)
Distributions to former shareholder and affiliates (see note 6)..... (1,307)
--------
Additional paid-in capital after Reorganization..................... $ --
========
(6) Total distributions in connection with Reorganization................ $(63,971)
Less amount paid from additional paid-in-capital (see note 5)....... 1,307
--------
Distributions to come from retained earnings........................ (62,664)
Retained earnings prior to Reorganization........................... 34,645
--------
Deficit earnings from Reorganization................................ $(28,019)
========
(7) Post-Reorganization notes payable.................................... $ 26,396
Banc One Capital Partners II, Ltd................................... (10,000)
Hammerman & Gainer noteholders...................................... (900)
Note payable to former shareholder.................................. (8,000)
Note payable to former subsidiary................................... (5,971)
--------
Notes payable after Offering........................................ $ 1,525
========
(8) Gross proceeds at $14 per share of Class A Common Stock.............. $154,000
Underwriting discount............................................... (10,780)
Estimated offering expenses......................................... (1,100)
Net proceeds to Company............................................. 142,120
--------
Par value of Class A Common Stock................................... (110)
Additional paid-in-capital after Offering........................... $142,010
========
</TABLE>

18
<PAGE> 20

DILUTION

At June 30, 1996, the pro forma net tangible book value of the Company was
a deficit of $27.5 million, or $(1.25) 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 pro forma 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 June 30, 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 $14 per share and after deducting the estimated
underwriting discounts and commissions and Offering expenses, the adjusted net
tangible book value at June 30, 1996 would have been approximately $114.6
million, or $4.03 per share of the Company's Common Stock. This amount
represents an immediate increase in net tangible book value of $5.28 per share
to the existing shareholders and an immediate dilution in net tangible book
value of $9.97 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.... $14.00
Pro forma net tangible book value per share of Common Stock
before the Offering(1)........................................ $(1.25)
Increase per share of Common Stock attributable to new
investors..................................................... 5.28
------
Net tangible book value per share of Common Stock after the
Offering......................................................... 4.03
------
Dilution in net tangible book value per share of Class A Common
Stock to new investors........................................... $ 9.97
======
</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 $14 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 1.0% $ 0.09
New investors............... 11,000,000 38.7 154,000,000 99.0 $ 14.00
---------- ------ ----------- ------
Total............. 28,400,000 100.0% $155,481,000 100.0%
========== ====== =========== ======
</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."

19
<PAGE> 21

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 six months ended June 30, 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 six months ended June 30, 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 six months ended June 30, 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>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- ------------------
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 $23,134 $30,678
Service fee income............................ 578 800 987 2,468 4,110 1,446 3,605
Investment income............................. 1,745 1,818 2,146 2,484 4,519 1,842 2,743
Fees and other from affiliates................ 371 1,985 2,154 1,732 2,881 1,004 1,125
------- ------- ------- ------- ------- ------- -------
Total revenues.......................... 20,293 33,243 41,189 47,145 69,677 27,426 38,151
Expenses:
Claims and claim settlement expenses.......... 12,136 17,622 20,262 25,250 32,924 13,545 18,356
Commission and other underwriting expenses.... 4,577 5,561 7,555 8,507 13,524 6,101 8,377
General and administrative.................... 570 1,910 2,798 4,406 6,810 2,157 4,093
Interest...................................... 442 642 850 726 845 420 632
Depreciation and amortization................. 4 93 240 703 1,006 364 758
------- ------- ------- ------- ------- ------- -------
Total expenses.......................... 17,729 25,828 31,705 39,592 55,109 22,587 32,216
------- ------- ------- ------- ------- ------- -------
Income before federal income taxes.............. 2,564 7,415 9,484 7,553 14,568 4,839 5,935
Federal income taxes............................ 778 2,375 2,768 2,414 5,234 1,430 1,683
------- ------- ------- ------- ------- ------- -------
Net income before cumulative effect of change in
accounting.................................... 1,786 5,040 6,716 5,139 9,334 3,409 4,252
Cumulative effect of change in accounting for
income taxes.................................. 334 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income.............................. $ 2,120 $ 5,040 $ 6,716 $ 5,139 $ 9,334 $ 3,409 $ 4,252
======= ======= ======= ======= ======= ======= =======
Pro forma net income per share.......... $ 0.42 $ 0.19
======= =======
Pro forma weighted average shares outstanding... 22,061 22,061
Loss Ratio...................................... 69.0% 61.5% 56.4% 62.4% 56.6% 58.6% 59.8%
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------- JUNE 30,
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 $ 90,582
Total assets........................................... 35,402 53,178 71,972 88,091 120,440 133,905
Reserves for claims and claim settlement expenses...... 19,884 26,038 34,421 40,939 55,427 62,345
Notes payable.......................................... 0 2,787 3,288 7,479 8,232 12,425
Stockholders' equity................................... 4,289 9,260 17,397 22,476 32,138 36,442
</TABLE>

20
<PAGE> 22

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.

In the southeastern United States, where the Company's existing logging
clients are concentrated, trees are harvested primarily for pulp and paper
products, for both domestic use and for export. The Company believes that demand
for these paper products produces a more stable market for the timber generally
produced in this region of the country as compared to regions that harvest trees
to supply lumber for the construction industry. Although supply and demand
imbalances have occurred from time to time, the Company believes that the market
for these paper products, and as a result the demand for its workers'
compensation products and services, has experienced modest growth over the past
three years. Because the Company expects continued demand for these paper
products, and because reforestation coupled with a relatively short growth cycle
for timber in this region make raw materials readily available, the Company
believes that the market for its workers' compensation services directed at the
logging industry will continue to experience growth over the foreseeable future.

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.

21
<PAGE> 23

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>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- ---------------------------------
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% $17,791 63% $16,466 48%
Other industries............ 297 1 2,332 5 21,381 32 7,270 26 15,942 46
Other insurance products...... 4,672 10 7,448 15 5,623 8 3,264 11 2,126 6
------- --- ------- --- ------- --- ------- --- ------- ---
Gross premiums earned......... 43,995 100% 48,262 100% 66,832 100% 28,325 100% 34,534 100%
=== === === === ===
Ceded reinsurance............. (8,093) (7,801) (8,665) (5,191) (3,856)
------- ------- ------- ------- -------
Total premiums earned, net...... $35,902 $40,461 $58,167 $23,134 $30,678
======= ======= ======= ======= =======
</TABLE>

The following table sets forth, on a statutory accounting basis, the loss
ratio, expense ratio, dividend ratio and combined ratio for the Company for each
of the last three years and the workers' compensation industry for 1993 and
1994.

<TABLE>
<CAPTION>
LOSS RATIO EXPENSE RATIO DIVIDEND RATIO COMBINED RATIO(1)
------------------------ --------------------- ----------------------- ---------------------
COMPANY(2) INDUSTRY(3) COMPANY INDUSTRY(3) COMPANY INDUSTRY(3) COMPANY INDUSTRY(3)
---------- ----------- ------- ----------- ------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993......... 57.8% 84.0% 25.0% 20.4% 0.0%(4) 4.7% 82.9% 109.1%
1994......... 63.7 73.4 25.0 21.7 0.3 6.3 88.9 101.4%
1995......... 57.6 N/A 27.3 N/A 0.2 N/A 85.1 N/A
</TABLE>

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

(1) A combined ratio in excess of 100 indicates that the sum of claims and claim
settlement expenses, underwriting expenses and policyholder dividends
exceeded the net premium earned.

(2) The Company's Loss Ratios shown in the tables under the captions "Prospectus
Summary -- Summary Consolidated Financial Information" and "Selected
Consolidated Financial Data" were derived from the Company's financial
statements prepared on the basis of generally accepted accounting principles
and, as a result, differ from the Loss Ratios shown in the table above.

(3) Source: A.M. Best. Industry data not available for 1995. The industry ratios
are computed by A.M. Best from publicly available statutory statements filed
by insurance carriers with regulatory authorities.

(4) Less than 0.1%.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- ----------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Premiums earned.............................. 87.2% 85.8% 83.5% 84.4% 80.4%
Service fee income........................... 2.4 5.2 5.9 5.3 9.4
Investment income............................ 5.2 5.3 6.5 6.7 7.2
Fees and other from affiliates............... 5.2 3.7 4.1 3.6 3.0
----- ----- ----- ----- -----
Total revenues................................. 100.0 100.0 100.0 100.0 100.0
Expenses:
Claims and claim settlement expenses......... 49.2 53.6 47.3 49.4 48.1
Commissions and other underwriting
expenses.................................. 18.3 18.0 19.4 22.3 21.9
General and administrative................... 6.8 9.4 9.8 7.9 10.7
Interest..................................... 2.1 1.5 1.2 1.5 1.7
Depreciation and amortization................ 0.6 1.5 1.4 1.3 2.0
----- ----- ----- ----- -----
Total expenses................................. 77.0 84.0 79.1 82.4 84.4
----- ----- ----- ----- -----
Income before federal income taxes............. 23.0 16.0 20.9 17.6 15.6
Federal income taxes........................... 6.7 5.1 7.5 5.2 4.4
----- ----- ----- ----- -----
Net income..................................... 16.3% 10.9% 13.4% 12.4% 11.2%
===== ===== ===== ===== =====
</TABLE>

22
<PAGE> 24

Six Months Ended June 30, 1996 Compared To Six Months Ended June 30, 1995

Total Revenue. Total revenue increased from $27.4 million for the six
months ended June 30, 1995 to $38.2 million for the six months ended June 30,
1996, an increase of approximately 39.4%. Net premiums earned increased from
$23.1 million for the six months ended June 30, 1995 to $30.7 million for the
six months ended June 30, 1996. This $7.6 million increase was due to an
increase of $8.2 million in net workers' compensation premiums earned from other
industries, partially offset by a decrease of $769,000 in net premiums earned
from other insurance products, primarily automobile coverage. The Company
discontinued writing automobile policies effective September 30, 1996. Service
fee income increased approximately $2.2 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 $2.0 million to
service fee income in the six months ended June 30, 1996. Investment income
increased by approximately $901,000 in the 1996 period compared to the 1995
period, primarily due to an increase in invested assets from $66.2 million at
June 30, 1995 to $90.6 million at June 30, 1996. Fees and other from affiliates
remained essentially unchanged.

Claims and Claim Settlement Expenses. Claims and claim settlement expenses
increased from $13.5 million for the six months ended June 30, 1995 to $18.4
million for the six months ended June 30, 1996, an increase of approximately
36.3%. This increase was commensurate with the increase in premiums earned. The
loss ratios for these six 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 six 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 $6.1 million for the six months ended June
30, 1995 to $8.4 million for the six months ended June 30, 1996, an increase of
approximately 37.7%. This increase is commensurate with the increase in premiums
earned. Commissions and other underwriting expenses as a percentage of premiums
earned were 26.4% and 27.3% for the 1995 and 1996 periods, respectively.

Other Expenses. General and administrative expenses increased from $2.2
million for the six months ended June 30, 1995 to $4.1 million for the six
months ended June 30, 1996, an increase of 86.4%. This increase was primarily
due to the acquisition of H&G on September 1, 1995 which added approximately
$1.8 million in the six months ended June 30, 1996. Depreciation and
amortization increased by approximately $394,000 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 $212,000
in the 1996 period compared to the 1995 period due to increases in both total
borrowings and the weighted average cost of funds.

Federal Income Taxes. Federal income taxes increased from $1.4 million for
the six months ended June 30, 1995 to $1.7 million for the six months ended June
30, 1996, an increase of 21.4%. This increase is commensurate with the increase
in income before federal income taxes. The effective federal income tax rate was
29.6% and 28.4% for the 1995 and 1996 periods, respectively.

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%. Net premiums earned increased from $40.5
million for the year ended December 31, 1994 to $58.2 million for the year ended
December 31, 1995. This increase of $17.7 million was due to an increase of
$16.7 million in net workers' compensation premiums earned from other industries
and a $2.7 million increase in net logging-related workers' compensation
premiums, partially offset by a decrease of $1.7 million in net premiums earned
from other insurance products, primarily automobile coverage. 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

23
<PAGE> 25

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 shareholders 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.

Federal Income Taxes. Federal income taxes increased from $2.4 million for
the year ended December 31, 1994 to $5.2 million for the year ended December 31,
1995, an increase of approximately 116.7%. This increase is primarily
attributable to the increase in income before federal income taxes of 92.9% from
the 1994 period to the 1995 period. The remainder of the increase is due to the
Company's establishment in the third quarter of 1995 of a $700,000 provision for
interest (net of applicable tax benefit) on the payment of taxes which may be
required to resolve matters raised in an examination of the Company's 1992
consolidated tax return by the Internal Revenue Service. See Note 4 of the Notes
to the Consolidated Financial Statements. This provision increased the effective
federal income tax rate to the Company from 31.1% to 35.9% for the year ended
December 31, 1995. The effective income tax rate without regard to the provision
for interest is comparable to the effective federal income tax rates for 1993
and 1994.

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%. Net premiums earned increased from $35.9
million for the year ended December 31, 1993 to $40.5 million for the year ended
December 31, 1994. This increase of $4.6 million was primarily attributable to
an increase in net premiums earned on other insurance products, primarily
automobile coverage of $2.8 million and an increase in net workers' compensation
premiums earned from other industries of $1.5 million. 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.

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%. This increase was greater than the 12.7% increase in net premiums earned,
primarily due to losses outside the Company's core workers' compensation
products. Losses from automobile coverage increased $3.4 million, from $1.2
million to $4.6 million, on increased premiums earned of $1.9 million to $5.0
million for the 1993 and 1994 periods, respectively.

24
<PAGE> 26

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.

Federal Income Taxes. Federal income taxes decreased from $2.8 million for
the year ended December 31, 1993 to $2.4 million for the year ended December 31,
1994, a decrease of approximately 14.3%. This decrease was commensurate with the
decrease in income before federal income taxes. The effective federal income tax
rate was 29.2% and 32.0% for the 1993 and 1994 periods, respectively.

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.

25
<PAGE> 27

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.

26
<PAGE> 28

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.................................. 22,173 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 $11.1
million and $7.6 million for the six months ended June 30, 1995 and 1996,
respectively. Net cash

27
<PAGE> 29

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.

Cash flow from operating activities was $29.1 million for the year ended
December 31, 1995. Cash flow from operating activities during this period was
principally affected by net income, which increased by approximately $4.2
million, and changes in reserves for claims and claim settlement expenses, which
increased by $7.8 million in 1995 compared to 1994. The increase in reserves for
claims and claim settlement expenses represents the recognition of expenses for
which cash payment has not yet been made. Cash flow from operating activities
for the six months ended June 30, 1996 was $7.6 million. The increase in
reserves in the 1996 period for claims and claim settlement expenses was
approximately $1.2 million greater than the increase in the six months ended
June 30, 1995. However, cash flow from operating activities decreased by
approximately $4.6 million in the six months ended June 30, 1996 as a result of
the payment of expenses accrued in 1995 and the prepayment of certain other
expenses.

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 June 30,
1996.

<TABLE>
<CAPTION>
S&P RATING/ PORTFOLIO
MOODY'S RATING PERCENTAGE
------------------------------------------------ ----------
<S> <C>
AAA/Aaa......................................... 90.7%
AA/Aa........................................... 6.5%
A/A............................................. 2.5%
Less than A/A................................... 0.3%
</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 $9.2 million for the six months ended June 30, 1996. The Company purchased
approximately $14.6 million, $30.3 million and $30.6 million in fixed maturity
and equity securities in 1993, 1994 and 1995, respectively, and $7.8 million and
$12.6 million in fixed maturity and equity securities in the six months ended
June 30, 1995 and 1996, respectively. The purchase of securities, partially
offset by the sale or maturity of securities, was the primary factor
contributing to net use of cash in investing activities of $9.5 million, $22.2
million and $23.3 million in 1993, 1994 and 1995, respectively, and $6.4 million
and $5.9 million in the six months ended June 30, 1995 and 1996, respectively.
These net purchases were consistent with the Company's practice of investing the
balance of cash provided by operations in marketable securities to generate
investment income.

Aggregate invested assets, including cash, were $56.3 million and $81.7
million at December 31, 1994 and 1995, respectively, and $90.6 million at June
30, 1996. The increases were primarily due to the investment of cash provided by
operating activities.

The Company has historically relied on private debt and equity financing to
support its growth. In 1993, the Company borrowed approximately $1.1 million
from an unaffiliated bank for the purchase of an aircraft. These borrowings, and
borrowings from prior years, were reduced by aggregate cash payments of approxi-

28
<PAGE> 30

mately $1.2 million resulting in net cash used in financing activities of
$26,000. Notes payable to shareholders and affiliates were also reduced in 1993
by the exchange of a $1.5 million note payable to a shareholder for shares of
the Company's redeemable cumulative preferred stock. In 1994, the Company
borrowed $6.0 million from an unaffiliated bank to repay outstanding notes
payable to affiliates and non-affiliates and to repay bank debt of $1.9 million.
Additionally, approximately $2.7 million was borrowed from an affiliate to repay
outstanding notes payable to other affiliates and to finance the acquisition of
equipment and general corporate purposes. These borrowings and repayments
resulted in net cash provided by financing activities of $2.9 million in 1994.
In 1995, the Company borrowed approximately $1.5 million from an unaffiliated
financial institution and approximately $528,000 from affiliates for general
corporate purposes, including to purchase automobiles for approximately
$855,000. These borrowings were partially offset by principal repayments to
affiliates and non-affiliates to result in net cash used in financing activities
of $916,000 in 1995. In the first six months of 1996, the Company borrowed
approximately $10.0 million from an unaffiliated financial institution to repay
outstanding debt of $6.1 million to an unaffiliated bank and outstanding
borrowings from affiliates and non-affiliates, to purchase property and
equipment and for general corporate purposes. Net cash provided by financing
activities was approximately $2.8 million in the six months ended June 30, 1996.

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.

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
$1.1 million for the six months ended June 30, 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."

29
<PAGE> 31

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. During
periods of low activity, employees work reduced hours or are laid off. Most
states allow a worker one to two years to report a workers' compensation injury.
The Company believes that, in slow times, a worker may report an injury that
occurred earlier. This allows the worker to receive indemnity payments from his
employer's workers' compensation provider when he is not otherwise earning
wages, or is earning less than full wages, from his employer. The Company
believes that these "late reported" claims generally involve less serious
injuries and continues to believe that prompt reporting of injuries affects the
ultimate cost of claims by allowing the Company to apply its personal claims
management practices.

EFFECTS OF OFFERING AND RELATED TRANSACTIONS

The Company will receive net proceeds of approximately $142.1 million from
the Offering (approximately $163.6 million if the Underwriters' over-allotment
option is exercised in full). Approximately $75.3 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."

30
<PAGE> 32

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.

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%. There can be no assurance that these growth rates will continue.
As of June 30, 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 18 states, primarily
in the southeastern United States. See "-- Clients." 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. In the event an
employee suffers a work-related injury, the employee's workers' compensation
coverage will pay the medical benefits associated with such injury, regardless
of whether the injured employee participates in any other health or medical
benefits program. 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. Based on an industry report as well as the Company's claims experience,
the Company believes that medical benefits presently account for approximately
40% to 50% of all workers' compensation benefits paid, with the

31
<PAGE> 33

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' 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. While the Company's practices result in higher expenses, the Company
believes that its managed results approach results in lower overall costs. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

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'

32
<PAGE> 34

compensation costs for employers in hazardous occupation industries. The
Company presently employs a staff of 27 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 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.
Although the Company's claims representative does not recommend or
otherwise direct the injured workers' treatment plan, the claims
representative acts as a facilitator to assist the injured employee in
receiving appropriate medical treatment and to encourage the use of
Company-recommended health care providers and facilities. The Company
monitors 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 (Arkansas, Florida, Georgia, Kentucky,
Missouri, New Mexico, Oregon and Tennessee) permit the Company or the
employer 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
primarily through targeting employers in geographic areas in markets in
which it is licensed but presently conducts little or no business and
other hazardous occupation industries such as trucking and oil and gas,
which the Company began pursuing in 1994. The Company currently provides
products and services in 18 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.

33
<PAGE> 35

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 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 27 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. The Company requires
each of its safety professionals to pursue professional development programs
leading to specific certifications or designations, and to participate in
Company-sponsored periodic training in the regulations and guidelines of the
Occupational Safety and Health Administration and the Department of
Transportation in order to assist the Company in assessing the adequacy of its
clients' safety programs. 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 39% if
the claim was reported between 21 and 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

34
<PAGE> 36

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 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 monitors the number of active cases for which any
single claims representative is responsible. The average case load of a claims
representative is between 60 and 70 claims, although this number may vary based
on the severity of the injury and the type of claim involved. 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.

Because workers' compensation coverage provides injured workers with
statutory health care and indemnity benefits, the coverage provided by the
Company does not provide for incentives for the use of its recommended health
care providers (i.e., unlike HMO or PPO programs, there are no lower deductibles
or similar cost savings to an injured worker for using the services of specific
providers). Company representatives may recommend a health care provider based
on the Company's prior experience with such provider in treating the needs
associated with a specific type of injury. Due to the Company's knowledge of the
health care

35
<PAGE> 37

providers in a geographic region, the Company believes it often has the ability
to recommend qualified providers to injured employees, who often lack knowledge
of the qualifications of health care providers in their area who specialize in
treating specific types of injuries.

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 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. Each claim is evaluated and acted upon by the assigned claims
representative. 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 June 30, 1996, the Company
had closed approximately 98.6% of its pre-1995 reported claims and 88.8% 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 June 30, 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

36
<PAGE> 38

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. The Company expanded its TPA services
through the acquisition of Hammerman and Gainer, Inc. in September 1995. 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 broader range of potential clients. For the six months ended June
30, 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 June 30, 1996 were
approximately $13.9 million, accounting for approximately 38.9% 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 June 30, 1996. For the six months ended June
30, 1996, approximately 6.0% of the Company's gross premiums earned were derived
from state residual market programs and clients assigned to the Company

37
<PAGE> 39

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.

The following table identifies, for the year ended December 31, 1995 and
for the six months ended June 30, 1996, the states in which the percentage of
the Company's gross premiums earned exceeded 1.0%, for the periods presented.

<TABLE>
<CAPTION>
% OF GROSS PREMIUMS EARNED
-----------------------------------
SIX MONTHS
YEAR ENDED ENDED
STATE DECEMBER 31, 1995 JUNE 30, 1996
----- ----------------- -------------
<S> <C> <C>
Georgia........................................ 16.9% 19.8%
Louisiana...................................... 29.3 19.6
Arkansas....................................... 16.5 14.9
Mississippi.................................... 9.4 13.3
Alabama........................................ 12.0 9.8
Virginia....................................... 1.3 6.3
Tennessee...................................... 1.3 3.5
Texas.......................................... 2.9 3.1
Oklahoma....................................... 3.1 3.0
Kentucky....................................... * 2.9
North Carolina................................. 2.3 2.2
Florida........................................ 1.3 *
</TABLE>

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

* Less than 1.0%

Additional states in which the Company is licensed to provide workers'
compensation products and services, but which do not individually account for
more than 1.0% of the Company's gross premiums earned, include Pennsylvania,
South Carolina, Missouri, New Mexico, Indiana and Maryland. As of June 30, 1996,
the Company was also licensed to provide workers' compensation products and
services in the states of Oregon, Wisconsin, Maine, South Dakota, Wyoming,
Minnesota, North Dakota and in the U.S. Virgin Islands.

SALES AND MARKETING

As of June 30, 1996, the Company's workers' compensation products and
services were sold both through 20 direct agents employed by the Company and 285
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 six months ended June 30,
1996, independent agents accounted for approximately 39.1% and 47.1%,
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 105
additional independent agents in that state. For the six months ended June 30,
1996, approximately 3.0% of the Company's gross earned premiums were generated
by 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.

38
<PAGE> 40

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. This rating is assigned to companies that, in the opinion of A.M.
Best, have demonstrated an excellent overall performance when compared to the
standards established by A.M. Best. 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 considered to be of concern to insureds and are not
directed toward the protection of investors and should not be relied upon by an
investor in making a decision to invest in the Company's Class A Common Stock.
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. The Company historically has not encountered difficulties
collecting from its reinsurers. The Company monitors ratings of its reinsurers
and periodically consults with its reinsurer broker who also monitors the
solvency of its reinsurers.

The following table sets forth as of June 30, 1996 the names of the
Company's primary reinsurance carriers (those which provide coverage in excess
of $200,000 up to $5,000,000 per occurrence), their A.M. Best ratings, and the
amount of reinsurance premiums ceded to each for the six months ended June 30,
1996. The A.M. Best ratings of the reinsurance carriers listed represent the two
highest of nine ratings provided by A.M. Best.

<TABLE>
<CAPTION>
REINSURANCE
PREMIUMS
REINSURANCE CARRIER RATING CEDED
------------------- ------ -----------
<S> <C> <C>
Reliance Insurance Company.............................. A- $ 2,344,000
Skandia America Reinsurance Corporation................. A- 1,938,000
TIG Reinsurance Corporation............................. A 1,175,000
St. Paul Fire & Marine Insurance Company................ A+ 801,000
TransAmerica Occidental Life Insurance Co............... A+ 381,000
</TABLE>

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

39
<PAGE> 41

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 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

40
<PAGE> 42

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 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. In the three-year period ended December 31, 1995, American
Interstate had IRIS ratios outside the usual ranges for the change in writings
ratio in 1995 and the change in surplus ratio in 1993. The change in writings
ratio was outside the usual range in 1995 due to the increase in premiums
written. The change in surplus ratio was outside the usual range in 1993 due to
the Company's increase in earnings and the acquisition of Silver Oak Casualty,
Inc., which resulted in an increase in surplus.

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.

41
<PAGE> 43

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 approach to these involuntary client-employers. In 1995 and for
the three months ended June 30, 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 June 30, 1996, the Company carried receivables
on its books from state subsequent injury funds of less than $500,000.

State Insurance Department Examinations. The Company's insurance
subsidiaries are subject to periodic examinations by state insurance departments
in the states in which they operate. American Interstate was examined jointly by
the Georgia and Louisiana Insurance Commissioners on December 31, 1992. Silver
Oak Casualty, Inc., another subsidiary of the Company, was examined by the
Louisiana Insurance Commissioner in 1993. Neither of these examinations produced
any material adverse findings. The Company has not been notified that any future
examinations have been scheduled.

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-

42
<PAGE> 44

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 and Relationships -- Office
Sharing Agreement."

EMPLOYEES

The Company had 315 full-time employees at August 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.

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, (ii) the timing of
inclusion in income of certain unearned premiums and (iii) 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.

43
<PAGE> 45

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........................... 35 Vice President -- Product Development
Zonie A. Harris......................... 61 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.

44
<PAGE> 46

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 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.

45
<PAGE> 47

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.

46
<PAGE> 48

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.......................... $268,750 $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....................... 120,010 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 and was accrued in the
Company's balance sheet as of December 31, 1995.

(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 expires 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 is
paid an annual base salary of $125,000, and Mr. Bradley serves as Vice
President -- Risk Services Group and General Counsel of the Company and is

47
<PAGE> 49

paid 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 and the
continuation of all welfare benefits 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 Board of Directors of the Company (the
"Board") or a duly authorized committee thereof. The Board has delegated
administrative authority with respect to the Plan to 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. The Stock Incentive Plan
provides that, in the event the Board of Directors of the Company authorizes a
committee thereof to administer the Stock Incentive Plan, grants awarded to
members of such committee will require the approval of the Board of Directors of
the Company.

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

48
<PAGE> 50

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 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 and for the
exercise of the Appreciation Rights upon a change in control.

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

49
<PAGE> 51

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 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. 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.

50
<PAGE> 52

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 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 an "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......................................... 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

51
<PAGE> 53

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.

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 (other than death or disability), 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 August 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.

52
<PAGE> 54

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 MATTERS AGREEMENT

The Company has entered into a Tax Matters 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, (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, which the Company believes will cover
its costs to provide these services. 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.

OFFICE SHARING AGREEMENT

The Company has entered into an office sharing agreement with AOAC for its
2,500 square foot executive offices in Dallas, Texas. Under the terms of this
agreement, the Company will pay to AOAC $3,700 per month, which approximates the
Company's pro rata share of the cost to AOAC to lease the facilities. This
agreement 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 Company
believes that the amounts payable by AOAC under the Aircraft Agreement
approximate AOAC's pro rata share of the expenses related to the Company's
ownership and operation of the aircraft. 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."

53
<PAGE> 55

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.

54
<PAGE> 56

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

55
<PAGE> 57

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

American Stock Transfer & Trust Company 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

56
<PAGE> 58

180 days from the date of this Prospectus without the prior written consent of
Smith Barney Inc. Neither the Company nor either of its existing shareholders
has any present intention to request a waiver of the 180-day period. If any such
waiver is requested, Smith Barney Inc. has the sole discretion whether to grant
any such waiver.

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.

57
<PAGE> 59

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, 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 Class A Common Stock has been approved for listing on the New York
Stock Exchange, upon notice of issuance, under the symbol "ASF." In order to
meet one of the requirements for listing of the Class A Common Stock on the New
York Stock Exchange, the Underwriters will undertake to sell lots of 100 or more
shares to a minimum of 2,000 beneficial owners.

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

58
<PAGE> 60

Underwriting Agreement, for a period of 180 days after the date of this
Prospectus, without the prior written consent of Smith Barney Inc.

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. As to matters of Texas
law, Dewey Ballantine will rely on the opinion of Jones, Day, Reavis & Pogue.

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.

59
<PAGE> 61

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 June 30, 1996
(unaudited)......................................................................... F-3
Consolidated Statements of Income for the years ended December 31, 1993, 1994 and 1995
and the six months ended June 30, 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 six months ended June 30, 1996
(unaudited)......................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995 and the six months ended June 30, 1995 and 1996 (unaudited).................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE> 62

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

September 19, 1996

F-2
<PAGE> 63

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY
DECEMBER 31, (NOTE 1)
------------------- JUNE 30, JUNE 30,
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 -- $68,434)... $49,618 $ 65,052 $ 68,795
Investments available-for-sale, at fair value:
Equity securities (cost: 1994 -- $1,317; 1995 -- $2,748;
1996 -- $3,641)................................................. 1,253 3,076 4,083
Fixed maturities (cost: 1994 -- $125; 1995 -- $3,291;
1996 -- $3,000)................................................. 125 3,363 3,016
------- -------- --------
Total investments............................................. 50,996 71,491 75,894
Cash and cash equivalents............................................. 5,264 10,202 14,688
Receivable for securities sold or matured............................. 312 868 --
Recoverable from reinsurers........................................... 10,941 13,360 14,330
Recoverable from state funds.......................................... 405 401 470
Agents balances in course of collection............................... 8,815 9,654 10,043
Accrued interest receivable........................................... 811 1,105 1,303
Notes receivable from affiliates...................................... 2,176 2,387 2,993
Real estate, furniture and equipment, net............................. 4,269 5,906 7,150
Deferred federal income taxes......................................... 2,303 1,891 2,323
Other assets.......................................................... 1,799 3,175 4,711
------- -------- --------
Total assets.................................................. $88,091 $120,440 $133,905
======= ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for claims and claim settlement expenses................... $40,939 $ 55,427 $ 62,345
Unearned premiums................................................... 4,229 3,581 4,460
Funds held under reinsurance treaties............................... 164 166 428
Reinsurance premiums payable........................................ 113 1,426 1,589
Amounts held for others............................................. 5,923 10,299 11,014
Accounts payable and accrued liabilities............................ 3,391 7,290 4,689
Notes payable....................................................... 7,479 8,232 12,425
Notes payable to shareholder and affiliates......................... 3,377 1,881 513
------- -------- --------
Total liabilities............................................. 65,615 88,302 97,463

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 34,645 (28,019)
Unrealized gain (loss) on securities available-for-sale, net of
taxes............................................................. (64) 264 316 316
------- -------- -------- --------
Total stockholders' equity (deficit).......................... 22,476 32,138 36,442 $(27,529)
========
------- -------- --------
Total liabilities and stockholders' equity.................... $88,091 $120,440 $133,905
======= ======== ========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 64

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Premiums earned............................ $35,902 $40,461 $58,167 $23,134 $30,678
Service fee income......................... 987 2,468 4,110 1,446 3,605
Investment income.......................... 2,146 2,484 4,519 1,842 2,743
Fees and other from affiliates............. 2,154 1,732 2,881 1,004 1,125
------- ------- -------- ------- -------
Total revenues..................... 41,189 47,145 69,677 27,426 38,151
Expenses:
Claims and claim settlement expenses....... 20,262 25,250 32,924 13,545 18,356
Commissions and other underwriting
expenses................................ 7,555 8,507 13,524 6,101 8,377
General and administrative................. 2,798 4,406 6,810 2,157 4,093
Interest................................... 850 726 845 420 632
Depreciation and amortization.............. 240 703 1,006 364 758
------- ------- -------- ------- -------
Total expenses..................... 31,705 39,592 55,109 22,587 32,216
------- ------- -------- ------- -------
Income before federal income taxes........... 9,484 7,553 14,568 4,839 5,935
Federal income taxes......................... 2,768 2,414 5,234 1,430 1,683
------- ------- -------- ------- -------
Net income................................... $ 6,716 $ 5,139 $ 9,334 $ 3,409 $ 4,252
======= ======= ======== ======= =======
Pro forma net income per share............... $ 0.42 $ 0.19
======== =======
Pro forma weighted average shares
outstanding................................ 22,061 22,061
======== =======
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 65

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)............. -- -- -- 4,252 -- 4,252
Change in unrealized gain/loss on
securities available-for-sale,
net of deferred income taxes
(unaudited)..................... -- -- -- -- 52 52
----- ---- ------ ------- ---- -------
Balance at June 30, 1996
(unaudited)........................ $ -- $119 $1,362 $34,645 $316 $36,442
===== ==== ====== ======= ==== =======
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 66

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- -------------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.................................................... $ 6,716 $ 5,139 $ 9,334 $ 3,409 $ 4,252
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 240 703 1,006 364 758
Deferred income tax (benefit) expense..................... (772) (121) 203 (200) (432)
Investment (gains) losses, net............................ (176) 18 (133) (5) (7)
Changes in operating assets and liabilities:
Accounts receivable and recoverables.................... (3,278) (565) (200) 1,030 (389)
Reserves for unpaid claims and claim settlement
expenses.............................................. 8,383 6,518 14,489 5,729 6,918
Unearned premiums....................................... 1,580 2,638 (648) (1,775) 879
Reinsurance balances.................................... (2,607) (2,491) (1,103) (1,015) (545)
Amounts held for others................................. 512 1,565 4,376 2,769 715
Accounts payable and accrued liabilities................ (468) 111 3,846 (734) (2,601)
Other, net.............................................. 100 (560) (2,021) 1,513 (1,990)
-------- -------- -------- ------- --------
Net cash provided by operating activities....................... 10,230 12,955 29,149 11,085 7,558
INVESTING ACTIVITIES:
Purchases of investments held-to-maturity..................... (13,937) (29,770) (28,820) (7,317) (11,685)
Proceeds from maturity of investments held-to-maturity........ 2,158 11,713 8,386 1,494 8,608
Purchases of investments available-for-sale................... (645) (561) (1,777) (500) (891)
Sales and maturities of investments available-for-sale........ 2,284 384 1,805 847 555
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) (876) (1,878)
Decrease (increase) in loans to stockholders and affiliates... 1,470 (2,871) (211) -- (606)
Decrease in interest-bearing deposits in banks................ -- 265 -- -- --
-------- -------- -------- ------- --------
Net cash used in investing activities........................... (9,475) (22,187) (23,295) (6,352) (5,897)
FINANCING ACTIVITIES:
Proceeds from revolving and short-term notes payable.......... -- 6,000 -- -- 10,000
Proceeds from notes payable................................... 1,140 265 1,475 355 395
Principal payments on notes payable and capital lease
obligations................................................. (638) (2,075) (1,922) (891) (6,202)
Proceeds from loans from shareholder and affiliates........... -- 2,773 528 369 --
Principal payments on notes payable to shareholder and
affiliates.................................................. (528) (4,101) (997) -- (1,368)
-------- -------- -------- ------- --------
Net cash (used in) provided by financing activities............. (26) 2,862 (916) (167) 2,825
-------- -------- -------- ------- --------
Increase (decrease) in cash and cash equivalents................ 729 (6,370) 4,938 4,566 4,486
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 $ 9,830 $ 14,688
======== ======== ======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid............................................... $ 833 $ 743 $ 845 $ 420 $ 536
Income taxes paid........................................... $ 1,926 $ 2,570 $ 4,644 $ 1,800 $ 3,000
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> 67

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 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 an $8.0 million note payable bearing
interest at 8.0% per annum were exchanged for the Class B Common Stock of
AMERISAFE held by a minority shareholder. Prior to the exchange, the Company
made a capital contribution of approximately $6.0 million to a subsidiary of
MorTem in the form of a note payable which bears interest at 8.0% per annum. 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). Prior to these distributions,
the Company made a capital contribution of $50.0 million to Auto One in the form
of a note payable which bears interest at 8.0% per annum. 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. Management currently expects
to repay the aforementioned notes payable issued in connection with the
reorganization with a portion of the proceeds of a planned initial public
offering of the Company's Class A Common Stock. Accordingly, historical net
income per share has been deleted and pro forma net income per share, giving
effect to the number of shares whose proceeds will be necessary to repay the
notes payable, has been calculated for the most recent annual and interim
periods. 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
$837,000 and $601,000 in the six months ended June 30, 1995 and 1996,
respectively. 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 $0.03 in the six months
ended June 30, 1996.

On August 8, 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."

F-7
<PAGE> 68

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

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.

Interim Financial Statements

The interim financial statements for the six months ended June 30, 1995 and
1996 are unaudited. In the opinion of management, such statements reflect all
adjustments (consisting only of normal recurring adjustments) necessary for fair
presentations of financial position, results of operations and cash flows.

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.

F-8
<PAGE> 69

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

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 $285,000 at June 30, 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

F-9
<PAGE> 70

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

deferred income tax asset at December 31, 1994 and 1995 or at June 30, 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
(85,714 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 from
the proceeds of the Company's initial public offering of its Class A Common
Stock (4,569,357 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
3,603.63-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.

F-10
<PAGE> 71

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------- ----------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Fixed maturities.......................... $1,510 $2,171 $3,199 $1,456 $2,136
Equity securities......................... 279 74 193 5 36
Other..................................... 373 255 1,150 389 598
------ ------ ------ ---- ------
Total investment income................... 2,162 2,500 4,542 1,850 2,770
Less investment expenses.................. 16 16 23 8 27
------ ------ ------ ---- ------
Net investment income..................... $2,146 $2,484 $4,519 $1,842 $2,743
====== ====== ====== ==== ======
</TABLE>

The cost or amortized cost and fair values of investments in debt
securities held-to-maturity at December 31, 1994 and 1995 and June 30, 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
======= ====== ====== =======
</TABLE>

<TABLE>
<S> <C> <C> <C> <C>
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
======= ====== ====== =======
JUNE 30, 1996 (UNAUDITED)
U.S. Treasury securities and obligations of
U.S. Government agencies.................. $34,170 $ 116 $ 786 $33,500
Corporate securities........................ 3,283 6 134 3,155
Obligations of states and political
subdivisions.............................. 31,342 543 106 31,779
------- ------ ------ -------
Totals...................................... $68,795 $ 665 $1,026 $68,434
======= ====== ====== =======
</TABLE>

F-11
<PAGE> 72

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 June 30,
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
====== ==== === ======
</TABLE>

<TABLE>
<S> <C> <C> <C> <C>
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
====== ==== === ======
JUNE 30, 1996 (UNAUDITED)
U.S. Treasury securities and obligations of
U.S. Government agencies................... $2,900 $ 19 $ 5 $2,914
Other debt securities........................ 100 2 -- 102
------ ---- --- ------
Total debt securities...................... 3,000 21 5 3,016
Common stocks (primarily mutual funds)....... 3,641 491 49 4,083
------ ---- --- ------
Totals....................................... $6,641 $512 54 $7,099
====== ==== === ======
</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.

F-12
<PAGE> 73

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 $847,000 and $1,774,000 for the six months ended June 30, 1995
and 1996, respectively. Gross gains of $147,000, $26,000, $174,000, $6,000 and
$7,000 and gross losses of $38,000, $4,000, $1,000 and $0 were realized on these
securities during 1993, 1994, 1995 and the six months ended June 30, 1995 and
1996 (unaudited), respectively. 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.

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 $2,437,000 and $2,162,000 for the six months ended June 30, 1995 and 1996
(unaudited), respectively.

F-13
<PAGE> 74

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Recoverable ceded reserves for unpaid claims and claims
settlement expenses:
Case basis........................................ $ 8,321 $ 9,780 $10,261
Incurred but not reported......................... 1,376 2,343 3,073
------- ------- -------
9,697 12,123 13,334
Paid claims recoverable................................ 915 1,237 996
Ceded unearned premiums................................ 329 -- --
------- ------- -------
Total.................................................. $10,941 $13,360 $14,330
======= ======= =======
</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 Corporation (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 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.

F-14
<PAGE> 75

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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,
---------------- JUNE 30,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Deferred income tax assets:
Discounting of unpaid claims.......................... $2,291 $2,350 $ 2,978
20% reduction of unearned premiums.................... 269 245 305
Other................................................. 149 202 --
------ ------ ------
2,709 2,797 3,283
Deferred income tax liabilities:
Commissions on deposit premiums....................... (82) (155) (155)
Deferred policy acquisition costs..................... (153) (108) (208)
Unrealized gain on securities available-for-sale...... -- (161) (148)
Conversion of acquired subsidiary from cash to accrual
basis of accounting................................ -- (193) (193)
Other................................................. (171) (289) (256)
------ ------ ------
(406) (906) (960)
------ ------ ------
Net deferred federal income tax asset................... $2,303 $1,891 $ 2,323
====== ====== ======
</TABLE>

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

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------- ----------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current................................... $3,540 $2,535 $4,822 $1,630 $2,113
Deferred.................................. (772) (121) 412 (200) (430)
------ ------ ------ ---- ------
Total..................................... $2,768 $2,414 $5,234 $1,430 $1,683
====== ====== ====== ==== ======
</TABLE>

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, SIX MONTHS
-------------------------- ENDED
1993 1994 1995 JUNE 30,
------ ------ ------ 1996
------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Income tax computed at federal statutory tax
rate........................................ $3,225 $2,568 $4,953 $2,018
Tax exempt interest, net...................... (297) (404) (478) (236)
Dividends received deduction.................. (17) (22) (399) (9)
Change in accrual for prior taxes............. -- -- 700 --
Other......................................... (143) 272 458 (90)
------ ------ ------ ------
$2,768 $2,414 $5,234 $1,683
====== ====== ====== ======
</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

F-15
<PAGE> 76

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 issued to the Company
notices of proposed adjustment for alleged tax deficiencies of approximately
$5.4 million 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. Therefore, no
liability has been accrued in the accompanying financial statements for
additional taxes that may result from these alleged deficiencies. However, 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. Accordingly,
the Company included a $700,000 adjustment in the 1995 tax provision for
interest (net of tax benefit) on this cash payment of taxes.

The Company entered into a tax allocation agreement with the subsidiaries
distributed in connection with the reorganization (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 any direct or indirect subsidiaries thereof are included in the
same consolidated group for federal income 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.

F-16
<PAGE> 77

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,
------------------ JUNE 30,
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%..................................................... 207 141 106
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........................ -- -- 368
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........... 265 798 751
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 12,425
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 shareholder; due on demand; interest
payable at 9.0%.......................................... 150 150 --
Other borrowings from affiliates............................ -- 528 513
------- ------- -------
Total notes payable to shareholder and affiliates... 3,377 1,881 513
------- ------- -------
Total notes payable and notes payable to shareholder and
affiliates.................................................. $10,856 $10,113 $12,938
======= ======= =======
</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-17
<PAGE> 78

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 June 30, 1996 and
(ii) the elimination of interest expense related to those borrowings was $0.42
and $0.19 for the year ended December 31, 1995 and the six months ended June 30,
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 six months ended June 30, 1996 (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
-------------------------------- ENDED
1993 1994 1995 JUNE 30,
-------- -------- -------- 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.................. 22,173 26,637 36,074 18,973
Decrease in estimated claims and claim
settlement expenses for claims occurring in
prior periods, net of reinsurance........... (1,911) (1,387) (3,150) (617)
-------- -------- -------- -------
Incurred claims and claim settlement expenses,
net of reinsurance............................. 20,262 25,250 32,924 18,356
Deduct claims and claim settlement expense
payments for claims, net of reinsurance,
occurring during:
Current period................................. (7,395) (7,795) (10,219) (3,296)
Prior periods.................................. (7,757) (11,095) (10,643) (9,353)
-------- -------- -------- -------
(15,152) (18,890) (20,862) (12,649)
-------- -------- -------- -------
Reserve for claims and claim settlement expenses,
net of related reinsurance recoverables, at end
of period...................................... 24,882 31,242 43,304 49,011
Recoverable ceded reserves for unpaid claims and
claims settlement expenses..................... 9,539 9,697 12,123 13,334
-------- -------- -------- -------
Reserves for claims and claim settlement expenses
at end of period............................... $ 34,421 $ 40,939 $ 55,427 $ 62,345
======== ======== ======== =======
</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 six months ended June 30, 1996
(unaudited) by $1,911,000, $1,387,000, $3,150,000, and $617,000, respectively,
for claims that had occurred 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

F-18
<PAGE> 79

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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,
----------------- JUNE 30,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Land and office building.............................. $1,202 $1,772 $ 2,810
Furniture and equipment............................... 1,730 2,745 3,500
Automobiles........................................... 321 1,176 1,329
Aircraft.............................................. 1,824 1,824 1,824
------ ------ ------
5,077 7,517 9,463
Accumulated depreciation.............................. 808 1,611 2,313
------ ------ ------
Real estate, furniture and equipment, net............. $4,269 $5,906 $ 7,150
====== ====== ======
</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 giving effect to the stock split)
at the option of the preferred shareholder. The liquidation preference is equal

F-19
<PAGE> 80

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 $1,776,000 at June 30, 1996. At
December 31, 1995 and June 30, 1996 (unaudited), cumulative dividends of
$236,800 and $296,000, respectively, were in arrears. Subsequent to June 30,
1996 (unaudited), 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. Six thousand shares of restricted stock have been approved for
issuance subject to completion of a planned initial public offering of the
Company's Class A common stock. 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 June 30, 1996, American Interstate and its insurance subsidiary exceed the
minimum RBC requirements.

Unaudited pro forma stockholders' equity at June 30, 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 in 1995
includes a dividend received by AMERISAFE from a former subsidiary consisting of
a $1,027,000 note owed by the Company to the former subsidiary.

During 1993, substantially all of the Company's gross premiums earned were
produced by MT & Co. and Southern Underwriters, Inc., two agencies under common
control by a former subsidiary of AMERISAFE. 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. MT & Co. and Southern Underwriters, Inc. produced
approximately 8.0% and 5.0% of the Company's gross premiums earned in 1994 and
1995, respectively. At December 31, 1994 and 1995, approximately $607,000 and
$795,000, respectively, were included in agents balances in course of collection
related to business produced by these agencies. Management currently expects to
continue its business relationship with these agencies following the
reorganization.

In connection with the reorganization, the Company and Auto One entered
into a services agreement (Services Agreement), pursuant to which the Company
will continue to provide various services to Auto One, including payroll, human
resources, legal, internal audit, benefits administration and similar
administrative and management services that the Company has historically
provided to Auto One. For such services, Auto One will pay the Company a fee of
$40,000 per month. The Services Agreement is terminable by either the Company or
Auto One on 90 days' prior notice; provided however, that neither party may
terminate the Services Agreement prior to the first anniversary date of the
planned initial public offering of the Company's Class A Common Stock.

F-20
<PAGE> 81

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company has entered into an office sharing agreement with AOAC with
respect to its 2,500 square foot executive offices in Dallas, Texas. Under the
terms of the agreement, the Company will pay to AOAC $3,700 per month. The
agreement may be terminated by either party upon 90 days' written notice.

The Company and Auto One have entered into an aircraft agreement (Aircraft
Agreement) pursuant to which Auto One may use the aircraft owned by the Company
for travel by Auto One's senior management in the course of Auto One's business.
Auto One 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.

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 six
months ended June 30, 1996 were not material.

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 June 30, 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 $427,000 for the six months
ended June 30, 1996 (unaudited).

F-21
<PAGE> 82

AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

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 $14,606 $21,303 $20,948
======= ======= ======= =======
Claims and claims settlement expenses.................. $ 6,725 $ 6,820 $10,926 $ 8,453
======= ======= ======= =======
Net income............................................. $ 1,642 $ 1,767 $ 2,602 $ 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-22
<PAGE> 83

MANAGING YOUR
WORKERS' COMPENSATION NEEDS

Oil derricks, log skidders, cherry pickers, cranes, road graders,
bulldozers, dredges, "18 wheelers", chainsaws, shovels, pick axes, and sledge
hammers -- all tools, all heavy equipment. Skilled workers performing
back-breaking, muscle-wrenching work in every town, forest, oil patch, and
roadbed in America. Drilling, mining, and harvesting natural resources. Laying
power and transmission lines. Building bridges, stadiums, overpasses, office
buildings, homes, and hospitals.

America's builders of infrastructure -- hundreds of thousands of skilled
workers exposed to life-threatening work hazards. One slip from a ledge, one
wayward falling tree, one out-of-control bulldozer -- these can mean death,
quadriplegia, or amputation. They can mean pain, permanent disability, and
millions of dollars in lost wages and medical payments. They can mean a family's
dreams are crushed. They mean a good worker has to be replaced.

[A COLLAGE OF PHOTOS]

At AMERISAFE, the Managed Results Company(SM), we believe that prevention
is the best managed care. Prevention produces the best outcome: no injury, no
lost work, no medical bills, no pain, and no rehabilitation. We work on
prevention through training, safety programs, and behavior modification. Our
safety professionals live and work near our clients. They spend their days, and
sometimes nights, on job sites -- exploring new ways to prevent accidents.
They're appreciated because they're effective.

When accidents do occur, managed medical care is just the beginning. Our
case managers work with the injured employee, with the employee's family, his
boss, and his rehab team. They work together to get that employee back on the
job.

That's good management. That's a second beginning.

MANAGED SAFETY

MANAGED CLAIMS

MANAGED CARE

[AMERISAFE LOGO]

<PAGE> 84

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

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........................ 14
Dividend Policy........................ 14
Recent Reorganization.................. 15
Capitalization......................... 17
Dilution............................... 19
Selected Consolidated Financial Data... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 21
Business............................... 31
Management............................. 44
Principal Shareholders................. 52
Certain Transactions and
Relationships........................ 53
Description of Capital Stock........... 54
Shares Eligible for Future Sale........ 56
Underwriting........................... 58
Legal Matters.......................... 59
Experts................................ 59
Additional Information................. 59
Index to Financial Statements.......... F-1
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.
- --------------------------------------------
- --------------------------------------------
</TABLE>

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

11,000,000 SHARES

AMERISAFE, INC.

CLASS A COMMON STOCK
LOGO
------------

PROSPECTUS

, 1996

------------
SMITH BARNEY INC.

PIPER JAFFRAY INC.

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 85

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................................................................. 19,475
New York Stock Exchange Listing Fee...................................... 190,000
Printing Expenses........................................................ 150,000
Legal Fees and Expenses.................................................. 400,000
Accounting Fees and Expenses............................................. 235,000
Transfer Agent Fees...................................................... 5,000
Blue Sky Fees and Expenses............................................... 15,000
Miscellaneous............................................................ 20,093
----------
Total.......................................................... $1,100,000
=========
</TABLE>

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 omission in their
capacities as directors. This provision has no effect on director liability for
(i) a breach of the

II-1
<PAGE> 86

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 -- Distribution Agreement between the Company and existing and former
shareholders
2.2 -- Form of First Amendment to Distribution Agreement among the Company,
existing and former shareholders and former subsidiaries
</TABLE>

II-2
<PAGE> 87

<TABLE>
<S> <C>
2.3 -- Form of Distribution Agreement among the Company, AOAC, Millard E.
Morris and Mark R. Anderson
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 (temporary)
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 -- 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 Matters 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>

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

* Previously filed.

+ Previously 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*

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

* Previously filed.

II-3
<PAGE> 88

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.

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> 89

SIGNATURES

Pursuant to the requirement of the Securities Act, the Registrant has duly
caused this Amendment No. 1 to 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 September 23, 1996.

AMERISAFE, INC.

By: /s/ MARK R. ANDERSON

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

Mark R. Anderson

President and

Chief Operating Officer

Pursuant to the requirements of the Securities Act, this Amendment No. 1 to
Registration Statement on Form S-1 has been signed by the following persons in
the capacities indicated on September 23, 1996.

<TABLE>
<CAPTION>
SIGNATURES TITLE
- --------------------------------------------- ----------------------------------------------
<C> <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

ARTHUR L. HUNT* Vice President and Director
- ---------------------------------------------
Arthur L. Hunt

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
Amendment No. 1 to Registration Statement as of this 23rd day of September,
1996, pursuant to the Powers of Attorney executed on behalf of the above-named
officers and directors and previously filed with the Securities and Exchange
Commission.

By: /s/ MARK R. ANDERSON

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

Mark R. Anderson

Attorney-in-Fact

II-5
<PAGE> 90

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ---------- -----------------------------------------------------------------------------------
<C> <S> <C>
1.1 -- Form of Underwriting Agreement
2.1 -- Distribution Agreement between the Company and existing and former
shareholders
2.2 -- Form of First Amendment to Distribution Agreement among the Company,
existing and former shareholders and former subsidiaries
2.3 -- Form of Distribution Agreement among the Company, AOAC, Millard E.
Morris and Mark R. Anderson
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 (temporary)
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 -- 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 Matters 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>

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

* Previously filed.

+ Previously filed with confidential portions omitted and filed separately.

<PAGE> 1
EXHIBIT 1.1

11,000,000 SHARES

AMERISAFE, INC.

CLASS A COMMON STOCK

UNDERWRITING AGREEMENT

, 1996

SMITH BARNEY INC.
PIPER JAFFRAY INC.
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013

Dear Sirs:

AMERISAFE, Inc., a Texas corporation (the "Company"), proposes
to issue and sell an aggregate of 11,000,000 shares (the "Firm Shares") of its
Class A common stock, par value $.01 per share (the "Class A Common Stock"), to
the several Underwriters named in Schedule I hereto (the "Underwriters"). In
addition, solely for the purpose of covering over-allotments, the Company
proposes to sell to the Underwriters, upon the terms and conditions set forth
in Section 2 hereof, up to an additional 1,650,000 shares (the "Additional
Shares") of Class A Common Stock. The Firm Shares and the Additional Shares
are hereinafter collectively referred to as the "Shares."

The Company wishes to confirm as follows its agreement with
you (the "Representatives") and the other several Underwriters on whose behalf
you are acting, in connection with the several purchases of the Shares by the
Underwriters.

1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-1 under the Act
(the "registration statement"), including a prospectus subject to completion,
relating to the Shares. The term "Registration Statement" as used in this
Agreement means the registration statement (including all financial schedules
and exhibits) as amended at the time it becomes effective or, if the
registration statement became effective prior to the execution of this
Agreement, as supplemented or amended prior to the execution of this Agreement.
If it is contemplated, at the time this Agreement is executed, that a
post-effective amendment to the registration statement will be filed and must
be declared effective before the offering of the Shares may commence, the term
"Registration Statement" as used in this Agreement means the registration
statement as amended by said post-effective amendment. If an abbreviated
registration statement is
<PAGE> 2
prepared and filed with the Commission in accordance with Rule 462(b) under the
Act (an "Abbreviated Registration Statement"), the term "Registration
Statement" as used in this Agreement includes the Abbreviated Registration
Statement. The term "Prospectus" as used in this Agreement means the
prospectus in the form included in the Registration Statement, or, if the
prospectus included in the Registration Statement omits information in reliance
on Rule 430A under the Act and such information is included in a prospectus
filed with the Commission pursuant to Rule 424(b) under the Act, the term
"Prospectus" as used in this Agreement means the prospectus in the form
included in the Registration Statement as supplemented by the addition of the
Rule 430A information contained in the prospectus filed with the Commission
pursuant to Rule 424(b). The term "Prepricing Prospectus" as used in this
Agreement means the prospectus subject to completion in the form included in
the registration statement at the time of the initial filing of the
registration statement with the Commission, and as such prospectus shall have
been amended from time to time prior to the date of the Prospectus.

2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees,
subject to all the terms and conditions set forth herein, to issue and sell to
each Underwriter and, upon the basis of the representations, warranties and
agreements of the Company herein contained and subject to all the terms and
conditions set forth herein, each Underwriter agrees, severally and not
jointly, to purchase from the Company, at a purchase price of $ per share
(the "purchase price per share"), the number of Firm Shares set forth opposite
the name of such Underwriter in Schedule I hereto (or such number of Firm
Shares increased as set forth in Section 10 hereof).

The Company also agrees, subject to all the terms and
conditions set forth herein, to sell to the Underwriters, and, upon the basis
of the representations, warranties and agreements of the Company herein
contained and subject to all the terms and conditions set forth herein, the
Underwriters shall have the right to purchase from the Company, at the purchase
price per share, pursuant to an option (the "over-allotment option") which may
be exercised at any time and from time to time prior to 9:00 p.m., New York
City time, on the 30th day after the date of the Prospectus (or, if such 30th
day shall be a Saturday or Sunday or a holiday, on the next business day
thereafter when the New York Stock Exchange is open for trading), up to an
aggregate of 1,650,000 Additional Shares from the Company. Upon any exercise
of the over-allotment option, each Underwriter, severally and not jointly,
agrees to purchase from the Company the number of Additional Shares (subject to
such adjustments as you may determine in order to avoid fractional shares)
which bears the same proportion to the number of Additional Shares to be
purchased by the Underwriters as the number of Firm Shares set forth opposite
the name of such Underwriter in Schedule I hereto (or such number of Firm
Shares increased as set forth in Section 10 hereof) bears to the aggregate
number of Firm Shares.

3. TERMS OF PUBLIC OFFERING. The Company has been advised by you
that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable and initially
to offer the Shares upon the terms set forth in the Prospectus.

4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, New York 10013, at 10:00
A.M., New York City time, on , 1996 (the "Closing Date"). The place
of closing for the Firm Shares and the Closing Date may be varied by agreement
between you and the Company.

Delivery to the Underwriters of and payment for any Additional
Shares to be purchased by the Underwriters shall be made at the aforementioned
office of Smith Barney Inc. at such time on such date (the "Option Closing
Date"), which may be the same as the Closing Date but shall in no event be

-2-
<PAGE> 3
earlier than the Closing Date nor earlier than two nor later than ten business
days after the giving of the notice hereinafter referred to, as shall be
specified in a written notice from you on behalf of the Underwriters to the
Company of the Underwriters' determination to purchase a number, specified in
such notice, of Additional Shares. The place of closing for any Additional
Shares and the Option Closing Date for such Shares may be varied by agreement
between you and the Company.

Certificates for the Firm Shares and for any Additional Shares
to be purchased hereunder shall be registered in such names and in such
denominations as you shall request by written notice, it being understood that
a facsimile transmission shall be deemed written notice, prior to 9:30 A.M.,
New York City time, on the second business day preceding the Closing Date or
any Option Closing Date, as the case may be. Such certificates shall be made
available to you in New York City for inspection and packaging not later than
9:30 A.M., New York City time, on the business day next preceding the Closing
Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and any Additional Shares to be purchased hereunder
shall be delivered to you on the Closing Date or the Option Closing Date, as
the case may be, against payment of the purchase price therefor in immediately
available funds.

5. AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters as follows:

(a) If, at the time this Agreement is executed and
delivered, it is necessary for the Registration Statement or a post-effective
amendment thereto or any Abbreviated Registration Statement to be declared or,
in the case of an Abbreviated Registration Statement, to become effective
before the offering of the Shares may commence, the Company will endeavor to
cause the Registration Statement or such post-effective amendment or
Abbreviated Registration Statement to become effective as soon as possible and
will advise you promptly and, if requested by you, will confirm such advice in
writing, when the Registration Statement or such post-effective amendment or
Abbreviated Registration Statement has become effective.

(b) The Company will advise you promptly and, if
requested by you, will confirm such advice in writing: (i) of any request by
the Commission for amendment of or a supplement to the Registration Statement,
any Prepricing Prospectus or the Prospectus or for additional information; (ii)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the suspension of
qualification of the Shares for offering or sale in any jurisdiction or the
initiation of any proceeding for such purpose; and (iii) within the period of
time referred to in paragraph (f) below, of any change in the Company's
condition (financial or other), business, prospects, properties, net worth or
results of operations, or of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the
making of any additions to or changes in the Registration Statement or the
Prospectus (as then amended or supplemented) in order to state a material fact
required by the Act or the regulations thereunder to be stated therein or
necessary in order to make the statements therein not misleading, or of the
necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Act or any other law. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible time.

(c) The Company will furnish to you, without charge,
three signed copies of the registration statement as originally filed with the
Commission and of each amendment thereto, including financial statements and
all exhibits to the registration statement and will also furnish to you,
without

-3-
<PAGE> 4
charge, such number of conformed copies of the registration statement as
originally filed and of each amendment thereto, but without exhibits, as you
may reasonably request.

(d) The Company will not (i) file any amendment to the
Registration Statement or make any amendment or supplement to the Prospectus of
which you shall not previously have been advised or to which you shall object
after being so advised or (ii) so long as, in the opinion of counsel for the
Underwriters, a prospectus is required to be delivered in connection with sales
by any Underwriter or dealer, file any information, documents or reports
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), without delivering a copy of such information, documents or reports to
you, as Representatives of the Underwriters, prior to or concurrently with such
filing.

(e) Prior to the execution and delivery of this
Agreement, the Company has delivered or will deliver to you, without charge, in
such quantities as you have requested or may hereafter reasonably request,
copies of each form of the Prepricing Prospectus. The Company consents to the
use, in accordance with the provisions of the Act and with the securities or
Blue Sky laws of the jurisdictions in which the Shares are offered by the
several Underwriters and by dealers, prior to the date of the Prospectus, of
each Prepricing Prospectus so furnished by the Company.

(f) As soon after the execution and delivery of this
Agreement as possible and thereafter from time to time for such period as in
the opinion of counsel for the Underwriters a prospectus is required by the Act
to be delivered in connection with sales by any Underwriter or dealer, the
Company will expeditiously deliver to each Underwriter and each dealer, without
charge, as many copies of the Prospectus (and of any amendment or supplement
thereto) as you may reasonably request. The Company consents to the use of the
Prospectus (and of any amendment or supplement thereto) in accordance with the
provisions of the Act and with the securities or Blue Sky laws of the
jurisdictions in which the Shares are offered by the several Underwriters and
by all dealers to whom Shares may be sold, both in connection with the offering
and sale of the Shares and for such period of time thereafter as the Prospectus
is required by the Act to be delivered in connection with sales by any
Underwriter or dealer. If during such period of time any event shall occur
that in the judgment of the Company or in the opinion of counsel for the
Underwriters is required to be set forth in the Prospectus (as then amended or
supplemented) or should be set forth therein in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the Prospectus to
comply with the Act or any other applicable law, the Company will forthwith
prepare and, subject to the provisions of paragraph (d) above, file with the
Commission an appropriate supplement or amendment thereto and will
expeditiously furnish copies thereof to the Underwriters and dealers in such
quantities as you shall reasonably request. In the event that the Company and
you, as Representatives of the several Underwriters, agree that the Prospectus
should be amended or supplemented, the Company, if requested by you, will
promptly issue a press release announcing or disclosing the matters to be
covered by the proposed amendment or supplement.

(g) The Company will cooperate with you and with counsel
for the Underwriters in connection with the registration or qualification of
the Shares for offering and sale by the several Underwriters and by dealers
under the securities or Blue Sky laws of such jurisdictions as you may
designate and will file such consents to service of process or other documents
necessary or appropriate in order to effect such registration or qualification;
provided that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action that would subject it to service of process in suits, other than those
arising out of the offering or sale of the Shares, in any jurisdiction where it
is not now so subject.

-4-
<PAGE> 5
(h) The Company will make generally available to its
security holders a consolidated earnings statement, which need not be audited,
covering a twelve-month period commencing after the effective date of the
Registration Statement and ending not later than 15 months thereafter, as soon
as practicable after the end of such period, which consolidated earnings
statement shall satisfy the provisions of Section 11(a) of the Act.

(i) During the period of five years hereafter, the
Company will furnish to you, as soon as available, a copy of each report of the
Company mailed to shareholders or filed with the Commission.

(j) If this Agreement shall terminate or shall be
terminated after execution pursuant to any provisions hereof (otherwise than
pursuant to the second paragraph of Section 10 hereof or by notice given by you
terminating this Agreement pursuant to Section 10 or Section 11 hereof) or if
this Agreement shall be terminated by the Underwriters because of any failure
or refusal on the part of the Company to comply in all material respects with
the terms or fulfill any of the conditions of this Agreement, the Company
agrees to reimburse the Representatives for all out-of-pocket expenses
(including fees and expenses of counsel for the Underwriters) reasonably
incurred by you in connection herewith.

(k) The Company will apply the net proceeds from the sale
of the Shares substantially in accordance with the description set forth in the
Prospectus, including such repayment of indebtedness as is necessary to cause
all of the outstanding shares of capital stock of each of the Subsidiaries
owned by the Company directly, or indirectly through one of the other
Subsidiaries, to be free and clear of any security interest, lien, adverse
claim, equity or other encumbrance simultaneously with the closing for the Firm
Shares.

(l) If Rule 430A of the Act is employed, the Company will
timely file the Prospectus pursuant to Rule 424(b) under the Act and will
advise you of the time and manner of such filing.

(m) Except as provided in this Agreement, the Company
will not sell, offer to sell, contract to sell or otherwise transfer or dispose
of any Class A Common Stock (or any securities convertible into or exercisable
or exchangeable for Class A Common Stock), or grant any options or warrants to
purchase Class A Common Stock (except pursuant to employee benefit plans of the
Company), for a period of 180 days after the date of the Prospectus, without
the prior written consent of Smith Barney Inc.

(n) The Company has furnished or will furnish to you
"lock-up" letters from each of Millard E. Morris and Mark R. Anderson to the
effect that such shareholders will agree not to sell, offer to sell, contract
to sell, pledge, grant any option for the sale of or otherwise transfer or
dispose or cause the disposition of any Class A Common Stock (or any securities
convertible into or exchangeable or exercisable for Class A Common Stock) for a
period of 180 days after the date of the Prospectus, without the prior written
consent of Smith Barney Inc.

(o) Except as stated in this Agreement and in the
Prepricing Prospectus and Prospectus, the Company has not taken, nor will it
take, directly or indirectly, any action designed to or that might reasonably
be expected to cause or result in stabilization or manipulation of the price of
the Class A Common Stock to facilitate the sale or resale of the Shares.

-5-
<PAGE> 6
(p) The Company will use its reasonable best efforts to
have the Class A Common Stock listed, subject to notice of issuance, on the New
York Stock Exchange prior to or concurrently with the effectiveness of the
registration statement.

(q) Prior to the Closing Date, the Company will have
filed . . . . [SPECIFY LOUISIANA INSURANCE LAW COMPLIANCE.]

6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:

(a) Each Prepricing Prospectus included as part of the
registration statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Act, complied when
so filed in all material respects with the provisions of the Act. The
Commission has not issued any order preventing or suspending the use of any
Prepricing Prospectus.

(b) The registration statement in the form in which it
became or becomes effective and also in such form as it may be when any
post-effective amendment thereto or any Abbreviated Registration Statement
shall become effective, and the Prospectus and any supplement or amendment
thereto when filed with the Commission under Rule 424(b) under the Act,
complied or will comply in all material respects with the provisions of the Act
and did not or will not at any such times contain 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, except that this
representation and warranty does not apply to statements in or omissions from
the registration statement or the Prospectus made in reliance upon and in
conformity with information relating to any Underwriter furnished to the
Company in writing by or on behalf of any Underwriter through you expressly for
use therein.

(c) All the outstanding shares of capital stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable, are free of any preemptive or similar rights (other than such
rights as shall terminate upon completion of the offering contemplated hereby,
as set forth in the Registration Statement and the Prospectus) and have been
issued and sold in compliance with all Federal and state securities laws; the
Shares have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor in accordance with the terms hereof, will
be validly issued, fully paid and nonassessable and free of any preemptive or
similar rights; and the capital stock of the Company conforms to the
description thereof in the Registration Statement and the Prospectus.

(d) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus, and is duly registered and qualified to conduct its business and is
in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify does not have
a material adverse effect on the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Company and
the Subsidiaries (as hereinafter defined) taken as a whole (a "Material Adverse
Effect").

(e) All the Company's subsidiaries (as defined in the Act)
are listed in an exhibit to the Registration Statement and are referred to
herein individually as a "Subsidiary" and collectively as the "Subsidiaries."
Each Subsidiary is a corporation duly organized, validly existing and in good
standing in the jurisdiction of its incorporation, with full corporate power
and authority to own, lease and operate

-6-
<PAGE> 7
its properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify does not have a Material Adverse Effect. All the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable, and, except for a nominal number of
shares owned by directors to comply with requirements of state law, are wholly
owned by the Company directly or indirectly through one of the other
Subsidiaries, free and clear of any lien, adverse claim, security interest,
equity or other encumbrance, except as disclosed in the Registration Statement
and the Prospectus (or any amendment or supplement thereto) and which exception
includes the disclosed pledge of the stock of certain of the Subsidiaries as
security for indebtedness under the Company's existing credit facility with
Banc One Capital Partners II, Ltd.

(f) There are no legal or governmental proceedings pending
or, to the knowledge of the Company, threatened, against the Company or any of
the Subsidiaries, or to which the Company or any of the Subsidiaries or any of
their respective properties are subject, that are required to be described in
the Registration Statement or the Prospectus but are not described as required.
There are no agreements, contracts, indentures, leases or other instruments
that are required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement that are
not described or filed as required by the Act. Neither the Company nor any
Subsidiary is involved in any strike or organized labor dispute, and to the
Company's best knowledge no such action or dispute is threatened.

(g) Neither the Company nor any of the Subsidiaries is (i) in
violation of its articles of incorporation or bylaws, or of any law, ordinance,
administrative or governmental rule or regulation applicable to the Company or
any of the Subsidiaries, including, without limitation, laws prohibiting the
corporate practice of medicine, fee-splitting or fees for the referral of
patients, or of any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries, or (ii) in default in
any respect in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any agreement, indenture, lease or other instrument to which the Company or
any of the Subsidiaries is a party or by which it or any of them or any of
their respective properties may be bound, except, in either case, for such
violations or omissions that would not have a Material Adverse Effect.

(h) Neither the issuance and sale of the Shares, the
execution, delivery or performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby (i)
requires any consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative agency
or other governmental body, agency or official (except such as may be required
for the registration of the Shares under the Act and the Exchange Act and . . .
[COMPLIANCE WITH LOUISIANA INSURANCE LAW - - SPECIFY], all of which have been
or will be effected in accordance with this Agreement, and compliance with the
securities or Blue Sky laws of various jurisdictions) or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default
under, the certificate of incorporation or bylaws, or other organizational
documents, of the Company or any of the Subsidiaries or (ii) conflicts or will
conflict with or constitutes or will constitute a breach of, or a default
under, any agreement, indenture, lease or other instrument to which the Company
or any of the Subsidiaries is a party or by which it or any of them or any of
their respective properties may be bound, or violates or will violate any
statute, law, regulation or filing or judgment, injunction, order or decree
applicable to the Company or any of the Subsidiaries or any of their respective
properties, or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of any agreement or

-7-
<PAGE> 8
instrument to which it or any of them is a party or by which it or any of them
may be bound or to which any of the property or assets of it or any of them is
subject.

(i) The accountants, Ernst & Young LLP, who have certified or
shall certify the financial statements filed or to be filed as part of the
Registration Statement or the Prospectus (or any amendment or supplement
thereto), are independent public accountants as required by the Act.

(j) The financial statements, together with related schedules
and notes of the Company forming part of the Registration Statement and the
Prospectus (and any amendment or supplement thereto), comply with the
requirements of the Act and present fairly the financial position, results of
operations and changes in stockholders' equity and cash flows of the Company
and the Subsidiaries on the basis stated in the Registration Statement at the
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved, except as disclosed therein; and the other financial and
statistical information and data set forth in the Registration Statement and
the Prospectus (and any amendment or supplement thereto) are accurately
presented and prepared on a basis consistent with such financial statements and
the books and records of the Company and the Subsidiaries.

(k) The Company has all requisite power and authority to
execute, deliver and perform its obligations under this Agreement; the
execution and delivery of, and the performance by the Company of its
obligations under, this Agreement have been duly and validly authorized by the
Company, and this Agreement has been duly executed and delivered by the Company
and constitutes the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as rights
to indemnity and contribution hereunder may be limited by federal or state
securities laws or principles of public policy and subject to the qualification
that the enforceability of the Company's obligations hereunder may be limited
by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium
and other laws relating to or affecting creditors' rights generally and by
general equitable principles.

(l) Except as disclosed in or contemplated by the
Registration Statement and the Prospectus (or any amendment or supplement
thereto), subsequent to the respective dates as of which such information is
given in the Registration Statement and the Prospectus (or any amendment or
supplement thereto), neither the Company nor any of the Subsidiaries has
incurred any liability or obligation, direct or contingent, or entered into any
transaction that is material to the Company and the Subsidiaries taken as a
whole, and there has not been any change in the capital stock, or material
increase in the short-term or long-term debt, of the Company or any of the
Subsidiaries, or any material adverse change, or any development involving or
which may reasonably be expected to involve a prospective material adverse
change, in the condition (financial or other), business, properties, net worth
or results of operations of the Company and the Subsidiaries taken as a whole.

(m) Each of the Company and the Subsidiaries has good and
marketable title to all property (real and personal) described in the
Prospectus as being owned by it, free and clear of all liens, claims, security
interests or other encumbrances except such as (i) are described in the
Registration Statement and the Prospectus or in a document filed as an exhibit
to the Registration Statement or (ii) are neither material in amount nor
materially significant in relation to the business of the Company and the
Subsidiaries taken as a whole, and all the property described in the Prospectus
as being held under lease by the Company or any of the Subsidiaries is held by
it or them under valid, subsisting and enforceable leases.

-8-
<PAGE> 9
(n) The Company has not distributed and, prior to the later
to occur of (i) the Closing Date and (ii) completion of the distribution of the
Shares, will not distribute any offering material in connection with the
offering and sale of the Shares other than the Registration Statement, the
Prepricing Prospectus, the Prospectus or other materials, if any, permitted by
the Act.

(o) Each of the Company and the Subsidiaries has such
permits, licenses, franchises, authorizations and clearances ("Permits") of
governmental or regulatory authorities as are necessary to own, lease and
operate their respective properties and to conduct their respective businesses
in the manner described in the Prospectus, subject to such qualifications as
may be set forth in the Prospectus and except where the failure to have such
Permits would not have a Material Adverse Effect; subject to such
qualifications as may be set forth in the Prospectus, the Company and each of
the Subsidiaries have fulfilled and performed all of their respective material
obligations with respect to the Permits, and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the rights of the holder
of any Permit, subject in each case to such qualification as may be set forth
in the Prospectus except where such revocation or termination would not have a
Material Adverse Effect. Except as described in the Prospectus, none of the
Permits contain any restriction that is materially burdensome to either of the
Company or any of the Subsidiaries.

(p) The property, assets and operations of each of the
Company and the Subsidiaries comply in all material respects with all
applicable federal, state and local laws, rules, orders, decrees, judgments,
injunctions, licenses, permits or regulations relating to environmental matters
(the "Environmental Laws"). To the Company's knowledge after due inquiry, none
of the Company's nor any of the Subsidiaries' property, assets or operations is
the subject of any federal, state or local investigation evaluating whether any
remedial action is needed to respond to a release of any substance regulated by
or forming the basis of liability under any Environmental Laws (a "Hazardous
Material") into the environment or is in contravention of any federal, state,
local or foreign law, order or regulation. Neither the Company nor any of the
Subsidiaries has received any notice or claim, nor are there any pending or, to
the Company's knowledge after due inquiry, threatened or reasonably anticipated
lawsuits against it with respect to violations of an Environmental Law or in
connection with the release of any Hazardous Material into the environment.
Neither the Company nor any of the Subsidiaries has any material contingent
liability in connection with any release of Hazardous Material into the
environment.

(q) The Company and the Subsidiaries maintain insurance of
the types and in amounts generally deemed adequate for their respective
businesses and consistent with insurance coverage maintained by similar
companies and businesses, all of which insurance is in full force and effect.

(r) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

(s) Neither the Company nor any of the Subsidiaries, nor, to
the Company's knowledge after due inquiry, any employee or agent of the Company
or any of the Subsidiaries has made any payment of funds of the Company or
received or retained any funds in violation of any law, rule or regulation,
which payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectus.

-9-
<PAGE> 10
(t) Each of the Company and the Subsidiaries has filed all
tax returns required to be filed, which returns are complete and correct in all
material respects, and neither the Company nor any Subsidiary is in default in
the payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto, except as disclosed in the Prospectus.

(u) Except as disclosed in the Prospectus and except for
rights which have been waived, no holder of any security of the Company has any
right to require registration of shares of Class A Common Stock or any other
security of the Company because of the filing of the registration statement or
the consummation of the transactions contemplated by this Agreement and, except
as disclosed in the Prospectus, no person has the right to require registration
under the Act of any shares of Class A Common Stock or other securities of the
Company. No person has the right, contractual or otherwise, to cause the
Company to permit such person to underwrite the sale of any of the Shares.
Except as described in or contemplated by the Prospectus, there are no
outstanding options, warrants or other rights calling for the issuance of, and
there are no commitments, plans or arrangements to issue, any shares of capital
stock of the Company or any security convertible into or exchangeable or
exercisable for capital stock of the Company.

(v) The Company and the Subsidiaries own or possess or have
applied for all patents, trademarks, trademark registrations, service marks,
service mark registrations, trade names, copyrights, licenses, inventions,
trade secrets and rights described in the Prospectus as being owned by them or
any of them or necessary for the conduct of their respective businesses, and
the Company is not aware of any claim to the contrary or any challenge by any
other person to the rights of the Company and the Subsidiaries with respect to
the foregoing except where such claim or challenge would not have a Material
Adverse Effect.

(w) Neither the Company nor any of the Subsidiaries is, nor
will the Company or any of the Subsidiaries become, upon the sale of the Shares
to be issued and sold in accordance herewith and application of the net
proceeds from such sale as described in the Prospectus under the caption "Use
of Proceeds," an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.

(x) The Company is in compliance with all provisions of
Florida Statutes Section 517.075 and the regulations thereunder, relating to
issuers doing business with Cuba.

(y) The Company is not required to be licensed as an
insurance company in any state. American Interstate Insurance Company ("AIIC")
and Silver Oak Casualty, Inc. ("SOC") (each an Insurance Subsidiary and,
together, the "Insurance Subsidiaries") are the only Subsidiaries of the
Company which are insurance companies. Each of the Insurance Subsidiaries
holds all licenses, certificates and permits from insurance departments and
other governmental authorities (collectively, the "Insurance Licenses")
necessary or desirable to conduct its business as presently conducted or as
presently contemplated to be conducted in the future, except where the failure
to hold any such Insurance Licenses would not have a Material Adverse Effect.
Each of the Insurance Subsidiaries has fulfilled and performed all material
obligations necessary to maintain its Insurance Licenses, and no event or
events have occurred which would result in the impairment, modification,
termination or revocation of such Insurance Licenses, except where such
impairment, modification, termination or revocation would not have a Material
Adverse Effect.

-10-
<PAGE> 11
(z) No loss experience has occurred since December 31, 1995
which would require or make it necessary or appropriate for the Company to
change, alter, modify or amend the Company's methodology or assumptions
relating to losses.

(aa) The Company has made available to the Underwriters
copies of the statutory Annual and Quarterly Statements (the "Statutory
Statements") of AIIC and SOC filed with the department of insurance in each
state where the Insurance Subsidiaries are licensed for the years 1990 through
1995. The statutory financial statements contained in each Statutory Statement
fairly present the statutory financial condition of the respective corporations
at the date of each such statement, and the statutory results of operations and
other data contained therein for each of the five years then ended have been
prepared in accordance with the prescribed or permitted statutory insurance
accounting requirements and practices, and in accordance with accounting
practices prescribed or permitted by the National Association of Insurance
Commissioners, and have been applied on a consistent basis except as expressly
set forth or disclosed in the notes, exhibits or schedules thereto. The
exhibits and schedules included in each Statutory Statement fairly present the
data purported to be shown thereby.

(ab) All reinsurance treaties, contracts, agreements and
arrangements to which the Company or any of the Insurance Subsidiaries is a
party and as to which any of them reported recoverables, premiums due or other
amounts in its 1995 Statutory Statements are in full force and effect and none
of the Company or any of the Insurance Subsidiaries is in violation of, or in
default in the performance, observance or fulfillment of, any material
obligation, agreement, covenant or condition contained therein, which violation
or default would, singly or in the aggregate, have a Material Adverse Effect.
None of the Company or any of its Subsidiaries has any reason to believe that
any other party to such treaties, contracts, agreements or arrangements will
not or cannot perform in any material respect its duties or obligations under
such treaty, contract, agreement or arrangement, except where the failure to
perform would not have a Material Adverse Effect.

(ac) A.M. Best Company, Inc. has not taken any action to, or
to the Company's knowledge, threatened to: (i) downgrade the ratings of any of
the Insurance Subsidiaries or (ii) publicly announce or otherwise indicate to
the Company that its ratings of any of the Insurance Subsidiaries are under
review with negative implications.

7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each of you and each other Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15
of the Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs
of investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Prepricing Prospectus or
in the Registration Statement or the Prospectus or in any amendment or
supplement thereto, or arising out of or based upon 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, except insofar as such
losses, claims, damages, liabilities or expenses arise out of or are based upon
any untrue statement or omission or alleged untrue statement or omission which
has been made therein or omitted therefrom in reliance upon and in conformity
with the information relating to such Underwriter furnished in writing to the
Company by or on behalf of any Underwriter through you expressly for use in
connection therewith; provided, however, that the indemnification contained in
this paragraph (a) with respect to any Prepricing Prospectus shall not inure to
the benefit of any Underwriter (or to the benefit of any person controlling
such Underwriter) on account of any such loss, claim, damage, liability or
expense arising from the sale of Shares by such Underwriter to any person if
(i) a copy of the Prospectus shall not have been delivered or sent to such
person within the time required by the Act and the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact contained
in such

-11-
<PAGE> 12
Prepricing Prospectus was corrected in the Prospectus and (ii) the Company has
delivered the Prospectus to the several Underwriters in requisite quantity on a
timely basis to permit such delivery or sending. The foregoing indemnity
agreement shall be in addition to any liability which the Company may otherwise
have.

(b) If any action, suit or proceeding shall be brought
against any Underwriter or any person controlling any Underwriter in respect of
which indemnity may be sought against the Company in accordance with Section
7(a), such Underwriter or such controlling person shall promptly notify the
Company, and the Company shall assume the defense thereof, including the
employment of counsel and payment of all fees and expenses. Such Underwriter
or any such controlling person shall have the right to employ separate counsel
in any such action, suit or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Underwriter or such controlling person unless (i) the Company has agreed
in writing to pay such fees and expenses, (ii) the Company has failed to assume
the defense and employ counsel or (iii) the named parties to any such action,
suit or proceeding (including any impleaded parties) include both such
Underwriter or such controlling person and the Company and such Underwriter or
such controlling person shall have been advised by its counsel that
representation of such indemnified party and the Company by the same counsel
would be inappropriate under applicable standards of professional conduct
(whether or not such representation by the same counsel has been proposed) due
to actual or potential differing interests between them (in which case the
Company shall not have the right to assume the defense of such action, suit or
proceeding on behalf of such Underwriter or such controlling person). It is
understood, however, that the Company shall, in connection with any one such
action, suit or proceeding or separate but substantially similar or related
actions, suits or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of only one separate firm of attorneys (in addition to any local
counsel) at any time for all such Underwriters and controlling persons not
having actual or potential differing interests with you or among themselves,
which firm shall be designated in writing by Smith Barney Inc., and that all
such fees and expenses shall be reimbursed as they are incurred. The Company
shall not be liable for any settlement of any such action, suit or proceeding
effected without its written consent, but if settled with such written consent,
or if there be a final judgment for the plaintiff in any such action, suit or
proceeding, the Company agrees to indemnify and hold harmless any Underwriter
and any such controlling person, to the extent provided in Section 7(a), from
and against any loss, claim, damage, liability or expense by reason of such
settlement or judgment.

(c) Each Underwriter agrees, severally and not jointly,
to indemnify and hold harmless the Company, its directors, its officers who
sign the Registration Statement, and any person who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the
same extent as the foregoing indemnity from the Company to each Underwriter,
but only with respect to information relating to such Underwriter furnished in
writing to the Company by or on behalf of such Underwriter through you
expressly for use in the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto. If any action,
suit or proceeding shall be brought against the Company, any of its directors,
any such officer or any such controlling person based on the Registration
Statement, the Prospectus or any Prepricing Prospectus, or any amendment or
supplement thereto, and in respect of which indemnity may be sought against any
Underwriter pursuant to this paragraph (c), such Underwriter shall have the
rights and duties given to the Company by Section 7(b) (except that if the
Company shall have assumed the defense thereof such Underwriter shall not be
required to do so, but may employ separate counsel therein and participate in
the defense thereof, but the fees and expenses of such counsel shall be at such
Underwriter's sole expense), and the Company, its directors, any such officer,
and any such controlling person shall have the rights and duties given to the
Underwriters by Section 7(b). The foregoing indemnity agreement shall be in
addition to any liability which the Underwriters may otherwise have.

-12-
<PAGE> 13
(d) If the indemnification provided for in this Section 7
is unavailable to an indemnified party under Sections 7(a) or 7(c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Underwriters on the other hand from the
offering of the Shares, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand and the Underwriters on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus; provided that, in the event that the
Underwriters shall have purchased any Additional Shares hereunder, any
determination of the relative benefits received by the Company and the
Underwriters from the offering of the Shares shall include the net proceeds
(before deducting expenses) received by the Company, and the underwriting
discounts and commissions received by the Underwriters, from the sale of such
Additional Shares, in each case computed on the basis of the respective amounts
set forth in the notes to the table on the cover page of the Prospectus. The
relative fault of the Company on the one hand and the Underwriters on the other
hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company on the one hand or by the Underwriters on the other hand and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.

(e) The Company and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this Section 7 were
determined by a pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in Section 7(d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in Section 7(d) shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating any claim or defending any such action, suit or proceeding.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price of the Shares underwritten by it and distributed to the public exceeds
the amount of any damages which such Underwriter has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 7 are several in proportion
to the respective numbers of Firm Shares set forth opposite their names in
Schedule I hereto (or such numbers of Firm Shares increased as set forth in
Section 10 hereof) and not joint.

(f) No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened action, suit or proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such action, suit or proceeding.

-13-
<PAGE> 14
(g) Any losses, claims, damages, liabilities or expenses
for which an indemnified party is entitled to indemnification or contribution
under this Section 7 shall be paid by the indemnifying party to the indemnified
party as such losses, claims, damages, liabilities or expenses are incurred.
The indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any person
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter or any person controlling any Underwriter, or to the Company, its
directors or officers, or any person controlling the Company, shall be entitled
to the benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 7.

8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase the Firm Shares hereunder are
subject to the following conditions:

(a) If, at the time this Agreement is executed and
delivered, it is necessary for the registration statement or a post-effective
amendment thereto or an Abbreviated Registration Statement to be declared
effective before the offering of the Shares may commence, the registration
statement or such post-effective amendment or Abbreviated Registration
Statement shall have become effective not later than 5:30 P.M., New York City
time, on the date hereof, or at such later date and time as shall be consented
to in writing by you, and all filings, if any, required by Rules 424 and 430A
under the Act shall have been timely made.

(b) Subsequent to the effective date of this Agreement,
there shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, prospects, properties, net worth or results of operations of the
Company or the Subsidiaries not contemplated by the Prospectus, which in your
reasonable opinion, as Representatives of the several Underwriters, would
materially, adversely affect the market for the Shares, or (ii) any event or
development relating to or involving the Company or any of the Subsidiaries, or
any officer or director of the Company or any of the Subsidiaries, which makes
any statement made in the Prospectus untrue or which, in the opinion of the
Company and its counsel or the Underwriters and their counsel, requires the
making of any addition to or change in the Prospectus in order to state a
material fact required by the Act or any other law to be stated therein or
necessary in order to make the statements therein not misleading, if amending
or supplementing the Prospectus to reflect such event or development would, in
your reasonable opinion, as Representatives of the several Underwriters,
materially, adversely affect the market for the Shares.

(c) You shall have received on the Closing Date an opinion of
Jones, Day, Reavis & Pogue, counsel for the Company, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters, that:

(i) The Company is a corporation validly existing
and in good standing under the laws of the State of Texas with full
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement
and the Prospectus (and any amendment or supplement thereto);

(ii) Each Subsidiary is a corporation validly
existing and in good standing under the laws of the jurisdiction of
its incorporation with full corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Registration Statement and the Prospectus (and any
amendment or supplement thereto);

-14-
<PAGE> 15
(iii) The authorized and outstanding capital stock
of the Company is as set forth under the caption "Capitalization" in
the Prospectus, and the authorized capital stock of the Company
conforms as to legal matters in all material respects to the
description contained in the Prospectus under the caption "Description
of Capital Stock";

(iv) The Shares have been duly authorized and,
when issued and delivered to the Underwriters against payment therefor
in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable and free of any preemptive rights arising under
the Company's articles of incorporation or the Texas Business
Corporation Act ("TBCA");

(v) The form of certificate for the Shares
conforms to the requirements of the TBCA;

(vi) To the actual knowledge of such counsel, (i)
the Registration Statement and all post-effective amendments, if any,
have become effective under the Act, (ii) no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose are pending before or contemplated by the
Commission and (iii) any required filing of the Prospectus pursuant to
Rule 424(b) has been made in accordance with Rule 424(b);

(vii) The Company has the corporate power and
authority to enter into this Agreement and to issue, sell and deliver
the Shares to the Underwriters as provided herein, and this Agreement
has been duly authorized, executed and delivered by the Company and is
a valid and binding agreement of the Company;

(viii) To the actual knowledge of such counsel,
neither the Company nor any of the Subsidiaries is in default in the
performance of any agreement filed as an exhibit to the Registration
Statement (collectively, the "Material Agreements") except as may be
disclosed in the Registration Statement;

(ix) Neither the offer, sale or delivery of the
Shares, the execution, delivery or performance of this Agreement,
compliance by the Company with the provisions hereof nor consummation
by the Company of the transactions contemplated hereby conflicts or
will conflict with or constitutes or will constitute a breach of, or a
default under, the articles of incorporation or bylaws of the Company
or any of the Subsidiaries or any Material Agreement;

(x) No consent, approval, authorization or other
order of, or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency, or official
is required on the part of the Company (except as have been obtained
under the Act and the Exchange Act or such as may be required under
state securities or Blue Sky laws governing the purchase and
distribution of the Shares) for the valid issuance and sale of the
Shares to the Underwriters as contemplated by this Agreement;

(xi) The Registration Statement and the Prospectus
and any supplements or amendments thereto (except for the operating
statistics, financial statements and the notes thereto and the
schedules and other financial and statistical data included therein,
as to which such counsel need not express any opinion) comply as to
form in all material respects with the requirements of the Act;

(xii) To the actual knowledge of such counsel, (A)
other than as described or contemplated in the Prospectus (or any
supplement thereto), there are no legal or governmental

-15-
<PAGE> 16
proceedings pending or threatened against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries or
any of their respective properties is subject, which are required to
be described in the Registration Statement or Prospectus (or any
amendment or supplement thereto) that are not described as required
and (B) there are no agreements, contracts, indentures, leases or
other instruments that are required to be described in the
Registration Statement or the Prospectus (or any amendment or
supplement thereto) or to be filed as an exhibit to the Registration
Statement that are not described or filed as required, as the case may
be; and

(xiii) Neither the Company nor any of the
Subsidiaries is, nor will the Company or any of the Subsidiaries
become upon the sale of the Shares and the application of the proceeds
therefrom as described in the Prospectus under the caption "Use of
Proceeds," an "investment company" or a person "controlled" by an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.

In addition, such counsel shall state that although such
counsel has not independently verified and is not passing upon, and does not
assume any responsibility for, the accuracy, completeness or fairness of the
statements in the Registration Statement and the Prospectus, such counsel has
participated in the preparation of the Registration Statement and the
Prospectus, including review and discussion of the contents thereof, and no
facts have come to the attention of such counsel that have caused it to believe
that the Registration Statement, at the time the Registration Statement became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus, as of its date and
as of the Closing Date or the Option Closing Date, as the case may be,
contained or contains an untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or that any amendment or supplement to the Prospectus, as of its
date, and as of the Closing Date or the Option Closing Date, as the case may
be, contained or contains an untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no opinion with
respect to the operating statistics, financial statements and the notes thereto
and the schedules and other financial and statistical data included in the
Registration Statement or the Prospectus).

(d) You shall have received on the Closing Date an opinion of
C. Allen Bradley, Jr., General Counsel for the Company, dated the Closing Date
and addressed to you, as Representatives of the several Underwriters, that:

(i) The Company is duly registered and qualified
to conduct its business and is in good standing in each jurisdiction
or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the
failure so to register or qualify does not have a Material Adverse
Effect;

(ii) Each Subsidiary is duly registered and
qualified to conduct its business and is in good standing as a foreign
corporation in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration
or qualification, except where the failure so to register or qualify
or to be in good standing would not have a Material Adverse Effect;

(iii) Each Insurance Subsidiary holds all insurance
licenses, certificates and permits from insurance departments and
other governmental authorities (collectively, the

-16-
<PAGE> 17
"Insurance Licenses") necessary or desirable to conduct its business
as presently conducted or as contemplated to be conducted in the
future, except where the failure to hold any such Insurance Licenses
would not have a Material Adverse Effect.

(iv) The Company and each Subsidiary has full
corporate power and authority and all necessary Permits (except where
the failure to so have any such Permits, individually or in the
aggregate, would not have a Material Adverse Effect) to own their
respective properties and to conduct their respective businesses as
now being conducted as described in the Prospectus;

(v) All the shares of capital stock of the
Company outstanding prior to the issuance of the Shares have been duly
authorized and validly issued and are fully paid and nonassessable;

(vi) All the outstanding shares of capital stock
of each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable, and, except for a nominal
number of shares owned by directors to comply with requirements of
state law, are wholly owned by the Company directly or indirectly
through one of the other Subsidiaries, free and clear of any security
interest, lien, adverse claim, equity or other encumbrance, except as
disclosed in the Registration Statement and the Prospectus (or any
amendment or supplement thereto) and which exception includes the
disclosed pledge of the stock of certain of the Subsidiaries as
security for indebtedness under the Company's existing credit facility
with Banc One Capital Partners II, Ltd;

(vii) Neither the Company nor any of the
Subsidiaries is in violation of its articles of incorporation or
bylaws;

(viii) Neither the offer, sale or delivery of the
Shares, the execution, delivery or performance of this Agreement,
compliance by the Company with the provisions hereof nor consummation
by the Company of the transactions contemplated hereby will result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of the Subsidiaries, nor will
any such action result in any violation of any existing law,
regulation, ruling (assuming compliance with all applicable state
securities and Blue Sky laws), judgment, injunction, order or decree
known to such counsel and applicable to the Company or any of the
Subsidiaries or any of their respective properties;

(ix) [The Company has filed . . . [COMPLIANCE WITH
LOUISIANA INSURANCE LAW - - SPECIFY], and no further filings or other
actions are necessary under the Louisiana insurance laws in connection
with the issuance and sale of the Shares, the execution, delivery or
performance of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby];

(x) To the actual knowledge of such counsel,
neither the Company nor any of the Subsidiaries is in violation of any
law, ordinance, administrative or governmental rule or regulation
applicable to it or any of them, the violation of which would have a
Material Adverse Effect, or of any decree of any court or governmental
agency or body having jurisdiction over it or any of them; and

(xi) Except as described in the Prospectus, there
is no outstanding option, warrant or other right calling for the
issuance of, commitment, plan or arrangement to issue, any shares of
capital stock of the Company or any securities convertible into or
exchangeable or

-17-
<PAGE> 18
exercisable for capital stock of the Company; and except as described
in the Prospectus, there is no holder of any security of the Company
or any other person who has the right, contractual or otherwise, to
cause the Company to sell or otherwise issue to them, or to permit
them to underwrite the sale of, any of the Shares or the right to have
any Class A Common Stock or other securities of the Company included
in the Registration Statement or the right, as a result of the filing
of the Registration Statement or otherwise, to require the Company to
register under the Act any shares of Class A Common Stock or other
securities of the Company, and any registration rights in connection
with the offering contemplated hereby have been waived.

(e) You shall have received on the Closing Date an opinion of
Dewey Ballantine, counsel for the Underwriters, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters, with respect
to the matters referred to in clauses (iv), (vi), (vii), (xi) and the last
paragraph of Section 8(c) hereof and such other related matters as you may
request. [In rendering their opinion, Dewey Ballantine may rely as to matters
of Texas law upon the opinion of Jones, Day, Reavis & Pogue.]

(f) You shall have received letters addressed to you and dated
the date hereof and the Closing Date from Ernst & Young LLP, independent
certified public accountants, substantially in the forms heretofore approved by
you.

(g)(i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Company,
contemplated by the Commission at or prior to the Closing Date and any request
of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with; (ii) there shall not have been any change in the capital stock of the
Company nor any material increase in the short-term or long-term debt of the
Company from that set forth or contemplated in the Registration Statement or
the Prospectus (or any amendment or supplement thereto); (iii) there shall not
have been, since the respective dates as of which information is given in the
Registration Statement and the Prospectus (or any amendment or supplement
thereto), except as may otherwise be stated in the Registration Statement and
Prospectus (or any amendment or supplement thereto), any material adverse
change in the condition (financial or other), business, prospects, properties,
net worth or results of operations of the Company; (iv) the Company shall not
have any liabilities or obligations, direct or contingent (whether or not in
the ordinary course of business), that are material to the Company and its
Subsidiaries taken as a whole, other than those reflected in or contemplated by
the Registration Statement or the Prospectus (or any amendment or supplement
thereto); and (v) all the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
on and as of the date hereof and on and as of the Closing Date as if made on
and as of the Closing Date, and you shall have received a certificate, dated
the Closing Date and signed by the chief executive officer and the chief
financial officer of the Company (or such other officers as are acceptable to
you) acting on behalf of the Company and without personal liability, as to the
matters set forth in this Section 8(g) and in Section 8(i) hereof.

(h) The Company shall have obtained any and all consents,
approvals, authorizations or releases (under any agreement, indenture, lease or
other instrument to which the Company or any of the Subsidiaries is a party)
necessary in order to consummate the transactions contemplated by this
Agreement.

(i) The Company shall not have failed at or prior to the Closing
Date to have performed or complied with any of its agreements herein contained
and required to be performed or complied with by it hereunder at or prior to
the Closing Date.

-18-
<PAGE> 19
(j) The Shares shall have been listed or approved for listing
subject to notice of issuance on the New York Stock Exchange.

(k) [The Company shall have filed . . . [COMPLIANCE WITH
LOUISIANA INSURANCE LAW - - SPECIFY].]

(l) The Company shall have furnished or caused to be furnished
to you such further certificates and documents as you shall have reasonably
requested.

All such opinions, certificates, letters and other documents will
be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you, as Representatives of the
Underwriters, and counsel for the Underwriters.

Any certificate or document signed by any officer of the Company
and delivered to you, as Representatives of the several Underwriters, or to
counsel for the Underwriters, shall be deemed a representation or warranty by
the Company to each Underwriter as to the statements made therein.

The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the satisfaction on and as of any
Option Closing Date of the conditions set forth in this Section 8, except that,
if any Option Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in paragraphs (c) through (h) and paragraph
(l) shall be dated the Option Closing Date in question and the opinions called
for by paragraphs (c) and (d) shall be revised to reflect the sale of
Additional Shares.

9. EXPENSES. The Company agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by it of
its obligations hereunder: (i) the preparation, printing or reproduction, and
filing with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectus,
and each amendment or supplement to any of them; (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the registration statement, each
Prepricing Prospectus, the Prospectus, and all amendments or supplements to any
of them as may be reasonably requested for use in connection with the offering
and sale of the Shares; (iii) the preparation, printing, authentication,
issuance and delivery of certificates for the Shares, including any stamp taxes
in connection with the offering of the Shares; (iv) the reproduction and
delivery of this Agreement, the preliminary and supplemental Blue Sky Memoranda
and all other agreements or documents reproduced and delivered in connection
with the offering of the Shares; (v) the registration of the Class A Common
Stock under the Exchange Act and the listing of the Shares on the New York
Stock Exchange; (vi) the registration or qualification of the Shares for offer
and sale under the securities or Blue Sky laws of the several states as
provided in Section 5(g) hereof (including the reasonable fees, expenses and
disbursements of counsel for the Underwriters (not to exceed $20,000) relating
to the preparation, reproduction and delivery of the preliminary and
supplemental Blue Sky Memoranda and such registration and qualification); (vii)
the filing fees and the reasonable fees and expenses of counsel for the
Underwriters in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. in connection with the
offering; (viii) the transportation and other expenses incurred by or on behalf
of representatives of the Company in connection with presentations to
prospective purchasers of the Shares; (ix) the fees and expenses of the
Company's accountants and the fees and expenses of counsel (including local and
special counsel) for the Company; and (x) the performance by the Company of its
other obligations under this Agreement.

-19-
<PAGE> 20
10. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto;
or (ii) if, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
or an Abbreviated Registration Statement to be declared effective before the
offering of the Shares may commence, when notification of the effectiveness of
the registration statement or such post-effective amendment or Abbreviated
Registration Statement has been released by the Commission. Until such time as
this Agreement shall have become effective, it may be terminated by the
Company, by notifying you, or by you, as Representatives of the several
Underwriters, by notifying the Company.

If any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they have agreed to purchase hereunder, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of Shares which the Underwriters are obligated to purchase on
the Closing Date or the Option Closing Date, as the case may be, each
non-defaulting Underwriter shall be obligated, severally, in the proportion
which the number of Firm Shares set forth opposite its name in Schedule I
hereto bears to the aggregate number of Firm Shares set forth opposite the
names of all non-defaulting Underwriters or in such other proportion as you may
specify in accordance with Section 20 of the Master Agreement Among
Underwriters of Smith Barney, Harris Upham & Co. Incorporated (predecessor of
Smith Barney Inc.), to purchase the Shares which such defaulting Underwriter or
Underwriters agreed, but failed or refused, to purchase. If any Underwriter or
Underwriters shall fail or refuse to purchase Shares which it or they are
obligated to purchase on the Closing Date or the Option Closing Date, as the
case may be, and the aggregate number of Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Shares which
the Underwriters are obligated to purchase on the Closing Date or the Option
Closing Date, as the case may be, and arrangements satisfactory to you and the
Company for the purchase of such Shares by one or more non-defaulting
Underwriters or other party or parties approved by you and the Company are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company. In any
such case which does not result in termination of this Agreement, either you or
the Company shall have the right to postpone the Closing Date or the Option
Closing Date, as the case may be, but in no event for longer than seven days,
in order that the required changes, if any, in the Registration Statement and
the Prospectus or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting Underwriter
from liability in respect of any such default of any such Underwriter under
this Agreement. The term "Underwriter" as used in this Agreement includes, for
all purposes of this Agreement, any party not listed in Schedule I hereto who,
with your approval and the approval of the Company, purchases Shares which a
defaulting Underwriter agreed, but failed or refused, to purchase.

Any notice under this Section 10 may be given by telegram,
telecopy or telephone but shall be subsequently confirmed by letter.

11. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company, by notice to the Company, if prior to the Closing
Date or any Option Closing Date (if different from the Closing Date and then
only as to the Additional Shares), as the case may be, (i) trading in
securities generally on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq National Market shall have been suspended or materially
limited, (ii) a general moratorium on commercial banking activities in New York
shall have been declared by either federal or state authorities, or (iii) there
shall have occurred any outbreak or escalation of hostilities or other
international or domestic calamity, crisis or change in political, financial or
economic conditions, the effect of which on the financial markets of the United
States is such as to make it, in your reasonable judgment, impracticable or
inadvisable to commence or

-20-
<PAGE> 21
continue the offering of the Shares at the offering price to the public set
forth on the cover page of the Prospectus or to enforce contracts for the
resale of the Shares by the Underwriters. Notice of such termination may be
given by telegram, telecopy or telephone and shall be subsequently confirmed by
letter.

12. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set
forth in the last paragraph on the cover page, the stabilization legend on the
inside front cover page and the statements in the first and second paragraphs
under the caption "Underwriting" in any Prepricing Prospectus and in the
Prospectus constitute the only information furnished by or on behalf of the
Underwriters through you as such information is referred to in Sections 6(b)
and 7 hereof.

13. MISCELLANEOUS. Except as otherwise provided in Sections 5, 10
and 11 hereof, notice given pursuant to any provision of this Agreement shall
be in writing and shall be delivered (i) if to the Company, at the office of
the Company at 2301 Highway 190 West, DeRidder, Louisiana 70634, Attention:
Mark R. Anderson, President, with a copy to Jones, Day, Reavis & Pogue, 2300
Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas 75201, Attention: James
E. O'Bannon, Esq.; or (ii) if to you, as Representatives of the several
Underwriters, care of Smith Barney Inc., 388 Greenwich Street, New York, New
York 10013, Attention: Manager, Investment Banking Division, with a copy to
Dewey Ballantine, 1301 Avenue of the Americas, New York, New York 10019,
Attention: Frederick W. Kanner, Esq.

This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors, its officers who sign the
Registration Statement and the controlling persons referred to in Section 7
hereof and, to the extent provided herein, their respective successors and
assigns and no other person shall acquire or have any right under or by virtue
of this Agreement. Neither the term "successor" nor the term "successors and
assigns" as used in this Agreement shall include a purchaser from any
Underwriter of any of the Shares in his status as such purchaser.

14. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed within the State of New York.

This Agreement may be signed in various counterparts which
together constitute one and the same instrument. If signed in counterparts,
this Agreement shall not become effective unless at least one counterpart
hereof shall have been executed and delivered on behalf of each party hereto.

-21-
<PAGE> 22
Please confirm that the foregoing correctly sets forth the
agreement between the Company and the several Underwriters.

Very truly yours,

AMERISAFE, INC.

By
------------------------------------
Millard E. Morris
Chairman of the Board of Directors
and Chief Executive Officer

Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.

SMITH BARNEY INC.
PIPER JAFFRAY INC.

As Representatives of the Several Underwriters

By SMITH BARNEY INC.

By
-------------------------------------------
Managing Director

-22-
<PAGE> 23
SCHEDULE I

AMERISAFE, INC.

<TABLE>
<CAPTION>
Number of
Underwriter Firm Shares
- ----------- -----------
<S> <C>
Smith Barney Inc. . . . . . . . . . . . . . . . . . . . . . . . .
Piper Jaffray Inc. . . . . . . . . . . . . . . . . . . . . . . .

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

-23-

<PAGE> 1
EXHIBIT 2.1

DISTRIBUTION AGREEMENT

This Distribution Agreement (this "Agreement") is made and entered
into on July 20, 1996, by and among Gulf Universal Holdings, Inc., a Texas
corporation (the "Company"), Millard E. Morris ("Morris") and Aubrey T. Temple
("Temple").

RECITALS

A. The Company is the owner, directly or indirectly, of all
issued and outstanding shares of capital stock of Southern Underwriters, Inc.,
a Louisiana corporation ("SUI"), Morris, Temple and Trent Financial Services, a
Louisiana corporation ("MTTFS"), and the entities identified on Schedule 1
hereto (the "MorTem Corporations").

B. Morris and Temple are the record and beneficial owners of
shares of Common Stock, no par value, of the Company (the "Company Common
Stock").

C. The Company desires to distribute cash, all of the capital
stock of the MorTem Corporations and 50% of the capital stock of SUI and MTTFS
to Temple in exchange for all shares of Company Common Stock held by Temple,
and Temple desires to accept such distribution, subject to the terms and
conditions of this Agreement.

D. The Company desires to distribute 50% of the capital stock of
SUI and MTTFS to Morris, and Morris desires to accept such distribution,
subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, and intending to be legally bound hereby, the
parties agree as follows:

1. Distribution.

(a) Distribution to Temple. The Company hereby agrees to
distribute to Temple on or prior to the Distribution Date (as defined below in
Section 3) (i) all of the capital stock of the MorTem Corporations; provided
that the Company may distribute all of the capital stock of less than all of
the MorTem Corporations if such distribution would cause Temple to have direct
or indirect ownership of all of the MorTem Corporations (the "MorTem Shares"),
(ii) 500 shares of Common Stock, par value $1.00 per share, of SUI (the "Temple
SUI Shares"), (iii) 50 shares of Common Stock, no par value, of MTTFS (the
"Temple MTTFS Shares"), and (iv) cash in the amount of $8,000,000.00. The
Company also hereby agrees to make, prior to such distribution, a capital
contribution (the "Capital Contribution") to such of the MorTem
<PAGE> 2
Corporations as are designated by Temple in the aggregate amount of
$4,068,148.23. Temple hereby agrees to accept the MorTem Shares, the Temple
SUI Shares, the Temple MTTFS Shares and the cash distribution (the "Temple
Distribution").

(b) Distribution to Morris. The Company hereby agrees to
distribute to Morris on or prior to the Distribution Date (i) 500 shares of
Common Stock, par value $1.00 per share, of SUI (the "Morris SUI Shares"), and
(ii) 50 shares of Common Stock, no par value, of MTTFS (the "Morris MTTFS
Shares"). Morris hereby agrees to accept the Morris SUI Shares and the Morris
MTTFS Shares.

(c) Delivery of Certificates. On or prior to the
Distribution Date, the Company will deliver to each of Temple and Morris
properly endorsed stock powers, with all applicable stock certificates
attached, to evidence the transfer of the shares contemplated in Sections 1(a)
and 1(b).

2. Consideration. In consideration of the Temple Distribution,
Temple hereby agrees to transfer to the Company 931.37 shares of Company Common
Stock, representing all of Temple's ownership interest in the Company. On or
prior to the Distribution Date, Temple will deliver to the Company properly
endorsed stock powers, with all applicable stock certificates attached, to
evidence the transfer of such shares to the Company.

3. Distribution Date. For purposes of this Agreement
"Distribution Date" shall mean the date of execution of an underwriting
agreement with respect to the Company's registered public offering of the
Company's Class A Common Stock (the "Offering") or such earlier date as may be
agreed upon by the parties; provided that if the Distribution Date has not
occurred prior to October 31, 1996, the obligations of each of the parties
hereto will terminate.

4. Representations of Morris and Temple.

(a) Each of Morris and Temple hereby represents and
warrants that:

(i) He has all requisite power and authority to
execute and deliver this Agreement and to perform all of the
transactions contemplated by this Agreement to be performed by him;
and

(ii) Subject to Section 3, this Agreement will,
when executed and delivered by the parties, constitute his valid and
binding obligation, enforceable against him in accordance with its
terms.

(b) Temple further represents and warrants that upon
transfer of the shares of Company Common Stock to the Company, the Company will
have beneficial ownership (and, upon appropriate

-2-
<PAGE> 3
recording in the books and records of the Company, record ownership) of such
shares, free and clear of any and all liens and encumbrances other than the
pledge of such shares to Banc One Capital Partners II, Ltd. ("Banc One") as
security for the loan agreement between the Company and Banc One.

5. Representations of the Company. The Company hereby represents
and warrants to each of Morris and Temple that:

(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Louisiana and has
all requisite corporate authority to execute and deliver this Agreement and to
perform all of the transactions contemplated by this Agreement to be performed
by it;

(b) The execution and delivery by the Company of this
Agreement, and the consummation of the transactions contemplated by this
Agreement to be performed by the Company, have been duly authorized by all
necessary corporate action on the part of the Company, and this Agreement will,
when executed and delivered by the parties and subject to Section 3, constitute
a valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms.

(c) Upon the distribution by the Company to each of
Morris and Temple of the shares set forth in Section 1, each of Morris and
Temple will have beneficial and record ownership of such shares, free and clear
of any and all liens and encumbrances.

6. Purchase of EMS Shares. For a period of 90 days after the
Distribution Date, Temple or any MorTem Corporation owning all of the capital
stock of Systems Operations, Inc., a Louisiana corporation (d/b/a Engineered
Mechanical Services)("EMS"), shall have the right to require Morris to purchase
from Temple 50% of the outstanding capital stock of EMS for an amount equal to
$750,000 in cash. Payment for and delivery of the shares of EMS capital stock
shall be due within 10 days of the receipt by Morris of Temple's written notice
of his election to exercise such right.

7. Tax Characterization. It is the express intention of the
parties that the transactions contemplated by this Agreement qualify for
tax-free treatment under section 355 of the Internal Revenue Code of 1986, as
amended. In this regard, each of Morris and Temple represents that he has no
presently existing plan or intention, nor has he engaged in any negotiations or
entered into any arrangement, to sell or otherwise dispose of any of the shares
to be distributed to him pursuant to this Agreement, and any decision made by
him to sell or otherwise dispose of his stock subsequent to the distributions
will be based solely upon the circumstances existing at such later time.

-3-
<PAGE> 4
8. Services Agreement. Following the Distribution Date, the
Company agrees to provide certain management services to the MorTem
Corporations on such terms as the parties shall mutually agree. Temple agrees
to pay the sum of $600,000.00 over a 15 month period commencing with the
Distribution Date. Said sum may be paid to the Company in a lump sum or
installments.

9. Further Assurances. Each of the parties agrees that he or it
will, at any time, upon the request of any other party hereto, take, or cause
to be taken, all actions and do, or cause to be done, all things (including
without limitation executing, acknowledging and delivering additional
agreements, instruments and documents) as may be necessary, appropriate or
advisable in order to consummate or make effective the transactions
contemplated by this Agreement in a manner consistent with the intentions and
purposes of the parties including, without limitation, the delivery of such
certificates or undertakings as may reasonably be required by counsel to the
Company in connection with the rendering by such counsel of opinions with
respect to the federal income tax treatment of the distributions contemplated
herein.

10. Miscellaneous.

(a) Successors and Assigns. This Agreement will be
binding upon the parties hereto and their respective heirs, legal
representatives, successors and assigns and will inure to the benefit of the
parties hereto and their respective heirs, legal representatives, successors
and assigns.

(b) Entire Agreement. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof.

(d) Headings. Section headings in this Agreement are
included herein for convenience of reference only and will not constitute a
part of this Agreement for any other purpose.

(e) Governing Law. This Agreement will be governed by,
and construed in accordance with, the law of the State of Texas, without giving
effect to the principles of conflict of laws of such State.

(f) Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute but one and the same agreement.

-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on July __, 1996.

GULF UNIVERSAL HOLDINGS, INC.

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

/s/ MILLARD E. MORRIS
----------------------------------------
MILLARD E. MORRIS

/s/ AUBREY T. TEMPLE
----------------------------------------
AUBREY T. TEMPLE

-5-
<PAGE> 6
Schedule 1

MORTEM CORPORATIONS

Gulf Audit Services, Inc.
M&T Aviation, Inc.
Morris, Temple & Trent of Arkansas, Inc.
Gulf Premium Acceptance Corp.
Morris, Temple & Company, Inc.
Systems Operations, Inc.

-6-

<PAGE> 1
EXHIBIT 2.2

Draft of September 22, 1996

FIRST AMENDMENT
TO
DISTRIBUTION AGREEMENT

This First Amendment to Distribution Agreement (this "Amendment") is
made and entered into on October __, 1996, by and among AMERISAFE, Inc., a
Texas corporation (formerly Gulf Universal Holdings, Inc.) (the "Company"),
Millard E. Morris ("Morris"), Aubrey T. Temple ("Temple"), M.T. & Co., Inc., a
Louisiana corporation ("MTInc."), Southern Underwriters, Inc., a Louisiana
corporation ("SUI"), and Morris, Temple and Trent Financial Services, a
Louisiana corporation ("MTTFS").

RECITALS

A. The Company, Morris and Temple are parties to a Distribution
Agreement dated July 20, 1996 (the "Original Agreement").

B. The parties to the Original Agreement desire to (i) amend the
Original Agreement as set forth in this Amendment to, among other things,
adjust the distribution of the SUI and MTTFS capital stock and (ii) add MTInc.,
SUI and MTTFS as parties thereto.

NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, and intending to be legally bound hereby, the
parties agree as follows:

1. Sections 1(a) and 1(b) of the Original Agreement are hereby
amended in their entirety to read as follows:

(a) Distribution to Temple. The Company hereby agrees
to distribute to Temple on or prior to the Distribution Date (as defined
below in Section 3) (i) 1,000 shares of Common Stock, no par value, of
MTInc. (the "MTInc. Shares"), representing all of the outstanding
capital stock of MTInc., (ii) 510 shares of Common Stock, par value
$1.00 per share, of SUI (the "Temple SUI Shares"), (iii) 51 shares of
Common Stock, no par value, of MTTFS (the "Temple MTTFS Shares"), and
(iv) a promissory note in the amount of $8,000,000 (the "Temple Note").
The Company also hereby agrees to make, prior to such distribution, a
capital contribution to MTInc. by delivering a promissory note in the
amount of $5,971,872 (the "MTInc. Note"). Temple hereby agrees to
accept the MTInc. Shares, the Temple SUI Shares, the Temple MTTFS Shares
and the Temple Note. MTInc. hereby agrees to accept the MTInc. Note.

(b) Distribution to Morris. The Company hereby agrees
to distribute to Morris on or prior to the Distribution Date (i) 490
shares of Common Stock, par value $1.00 per share, of SUI (the "Morris
SUI Shares") and (ii) 49 shares of Common Stock, no par value, of MTTFS
(the "Morris MTTFS Shares"). Morris hereby agrees to accept the Morris
SUI Shares and the Morris MTTFS Shares.
<PAGE> 2
2. A new Section 1(d) is added as follows:

(d) Reorganization of MorTem Corporations. Temple
acknowledges that prior to the Distribution Date, the MorTem
Corporations will be reorganized pursuant to the Plan of Reorganization
adopted by the Board of Directors of the Company on October __, 1996
(the "Plan of Reorganization") as follows: (i) M&T Aviation, Inc.,
Morris, Temple & Trent of Arkansas and Gulf Audit Services, Inc. will
be merged with and into MTInc., with MTInc. as the surviving
corporation, (ii) Morris, Temple & Company, Morris, Temple & Trent of
Shreveport and Systems Operations, Inc. (d/b/a Engineered Mechanical
Systems) will become wholly owned subsidiaries of MTInc., (iii) the
assets and liabilities of CHM, Inc. ("CHM"), other than any shares of
Class B Common Stock of the Company held by CHM, will be transferred to
MTInc., (iv) the assets of Mor-Tem Systems, Inc. ("MOR-TEM"), other than
the (a) MTInc. Shares, (b) the shares of capital stock of SUI, MTTFS,
Hammerman & Gainer, Inc. and Morris Temple Risk Management, Inc. and (c)
the shares of Series A Preferred Stock of the Company held by MOR-TEM
will be transferred to MTInc. and (v) MTInc. will indemnify MOR-TEM
and assume the liabilities of MOR-TEM.

3. Section 3 of the Original Agreement is hereby amended in its
entirety to read as follows:

3. Distribution Date. For purposes of this Agreement,
"Distribution Date" means the date which is two business days prior to
the date requested by the Company for the acceleration of the
effectiveness of its Registration Statement on Form S-1 (File No.
333-10099) with respect to the Company's registered public offering of
the Company's Class A Common Stock (the "Offering") or such earlier date
as may be agreed upon by the parties; provided that if the Distribution
Date has not occurred prior to October 31, 1996, the obligations of the
parties hereto will terminate.

4. New paragraphs (iii) and (iv) are added to subsection (a) of
Section 4 as follows:

(iii) As of the Distribution Date, he has not
transferred, agreed to transfer, or negotiated with any person
regarding a transfer of, any of his shares of the Company held as
of July 1, 1996.

(iv) Except as provided in this Agreement, he
currently has no plans or intentions to transfer any of his stock
in the Company, MTInc., SUI, or MTTFS on or after the
Distribution Date.

-2-
<PAGE> 3
5. A new subsection (c) is added to Section 4 as follows:

(i) It is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Louisiana and has all requisite corporate authority to execute
and deliver this Agreement and to perform all of the transactions
contemplated by this Agreement to be performed by it; and

(ii) The execution and delivery by it of this
Agreement, and the consummation of the transactions contemplated
by this Agreement to be performed by it, have been duly
authorized by all necessary corporate action on the part of such
corporation, and this Agreement will, when executed and delivered
by the parties and subject to Section 3, constitute its valid and
binding obligation, enforceable against it in accordance with its
terms.

6. Section 5 is hereby amended to extend the representations and
warranties of the Company contained in such section to MTInc., SUI and MTTFS as
well as Morris and Temple.

7. Section 7 is hereby amended in its entirety, to read as follows:

7. Tax Characterization. It is the express intention of the
parties that the distributions of stock contemplated by this Agreement
qualify for tax-free treatment under section 355 of the Internal Revenue
Code of 1986, as amended (the "Code"). In this regard, the parties
hereto covenant as follows:

(a) Each of Morris and Temple hereby covenants that:

(i) For the period commencing on the
Distribution Date and ending at the end of the second taxable
year ending after the Distribution Date (the "Post-Distribution
Period"), he will not transfer any of his Company, MTInc., SUI or
MTTFS stock to any other person, other than a transfer by Morris
of Company stock solely in exchange for stock, pursuant to a
transaction qualifying as a tax-free reorganization described in
section 368(a)(1) of the Code (a "Qualifying Transaction"). For
all purposes of this Agreement, a transaction shall be deemed to
be a Qualifying Transaction only if: (i) the IRS issues a ruling
letter so holding, or (ii) tax counsel to the Company renders an
opinion reasonably satisfactory in form and substance to the
Company and to both Morris and Temple that the transaction is a
Qualifying Transaction. Any stock received in such a transfer
pursuant to a Qualifying Transaction shall become subject to this
covenant.

-3-
<PAGE> 4
(ii) Following the Post-Distribution Period he
will not transfer stock of the Company, MTInc., SUI, or MTTFS to
any person pursuant to any agreements, arrangements or
negotiations entered into before the Distribution Date.

(iii) During the Post-Distribution Period Morris
will cause the Company, through its operating subsidiary, Temple
will cause MTInc., and Morris and Temple will cause SUI and
MTTFS, to continue the active conduct of their respective
businesses which they conduct on the Distribution Date, and not
to liquidate or to sell or otherwise dispose of any material part
of their assets (including stock of subsidiaries) other than in
the ordinary course of business or pursuant to a Qualifying
Transaction, if such sale or disposition would cause the
respective corporation not to continue to employ a substantial
portion of the assets held by it on the Distribution Date in the
conduct of businesses conducted by it on such date.

(iv) Temple will cause MTInc. to use the MTInc.
Note, or the proceeds thereof, solely in the ordinary conduct of
its existing business and/or to retire existing indebtedness. In
no event will he cause MTInc. to use such funds to invest in
assets of any business or activity other than MTInc.'s existing
lines of business.

(b) The Company, MTInc., SUI and MTTFS each covenants
that during the Post-Distribution Period it will not discontinue the
active conduct of the active business which it conducts on the
Distribution Date, liquidate, or sell or otherwise dispose of any
material part of its assets (including stock of subsidiaries) other than
in the ordinary course of business or pursuant to a Qualifying
Transaction, if such sale or disposition would cause the respective
corporation not to continue to employ a substantial portion of the
assets held by it on the Distribution Date in the conduct of businesses
conducted by it on such date.

(c) MTInc. covenants that it will use the MTInc. Note,
and proceeds thereof, solely in the ordinary conduct of its existing
business and/or to retire existing indebtedness. In no event will it
use such funds to invest in assets of any business or activity other
than its existing lines of business.

8. A new Section 11 is added as follows:

11. Pledge to Banc One.

(a) Morris Pledge. Morris hereby agrees to pledge the
Morris SUI Shares and the Morris MTTFS Shares to Banc One as security
for the loan agreement between Banc One and the Company (the "Loan
Agreement"), and further agrees to execute and deliver all such
agreements, instruments and documents, and to take any further action,
as may be requested by Banc One to evidence such pledge.

-4-
<PAGE> 5
(b) Temple Pledge. Temple hereby acknowledges that the
Temple Note will be payable only out of the net proceeds of the Offering
and will be subject to the prior repayment of all amounts owed to Banc
One in connection with the Loan Agreement. Temple hereby agrees to
pledge the Temple Note and the proceeds therefrom, the MorTem Shares,
the Temple SUI Shares and the Temple MTTFS Shares to Banc One as
security for the Loan Agreement, and further agrees to execute and
deliver all such agreements, instruments and documents, and to take any
further action, as may be requested by Banc One to evidence such pledge.

(c) MTInc. Pledge. MTInc. acknowledges that the MTInc.
Note will be payable only out of the net proceeds of the Offering and
shall be subject to the prior repayment of all amounts owed to Banc One
in connection with the Loan Agreement. MTInc. hereby agrees to pledge
the MTInc. Note and the proceeds therefrom to Banc One as security for
the Loan Agreement, and further agrees to execute and deliver all such
agreements, instruments or documents, and to take any further action, as
may be requested by Banc One to evidence such pledge.

9. A new Section 12 is added as follows:

12. Indemnity.

(a) MTInc., SUI and MTTFS. If, as a result of any
event within the control of MTInc., SUI or MTTFS occurring in the
24-month period commencing on the Distribution Date and involving either
the stock or assets (or any combination thereof) of MTInc., SUI or MTTFS
(including, but not limited to, a merger, consolidation, liquidation,
stock issuance, or sale or other disposition of assets by or involving
MTInc., SUI or MTTFS) any taxes are imposed on the Company or any of its
subsidiaries with respect to any action taken pursuant to the Plan of
Reorganization (or any amendment thereof), then the respective
corporation shall pay those taxes (and related interest and penalties,
if any) and shall indemnify and hold harmless the Company and its
subsidiaries from and against all such taxes, interest, and penalties,
including but not limited to any such taxes paid at any time by Company
or any subsidiary. The respective corporation shall make such payment
and indemnification no later than 15 days after written notice from the
Company or one of its subsidiaries of a final determination with respect
to such taxes, which notice shall be accompanied by a computation of the
amounts due.

(b) Morris. Morris agrees to indemnify the Company and
its subsidiaries and hold them harmless against and with respect to any
damages, claims, losses, taxes (including interest, penalties and
additions thereto), and costs and expenses arising from, in connection
with or with respect to (i) any misrepresentation or breach of warranty
by Morris under this Agreement, or (ii) any failure by Morris to fulfill
any agreement or covenant under this Agreement.

(c) Temple. Temple agrees to indemnify the Company and
its subsidiaries and hold them harmless against and with respect to any
damages, claims,

-5-
<PAGE> 6
losses, taxes (including interest, penalties and additions thereto), and
costs and expenses arising from, in connection with or with respect to
(i) any misrepresentation or breach of warranty by Temple under this
Agreement, or (ii) any failure by Anderson to fulfill any agreement or
covenant under this Agreement.

(d) Morris and Temple. Morris and Temple jointly and
severally agree to indemnify and hold harmless the Company against any
liability for tax, penalties, interest or other amounts which may be
asserted against the Company or any of its subsidiaries as a result of
alleged federal or state income tax deficiencies of MTInc. or any
corporation (other than Hammerman & Gainer, Inc.) which was at any time
a subsidiary of MTInc. with respect to any year in which such
corporation was not a member of the affiliated group (within the meaning
of section 1504 of the Internal Revenue Code of 1986) of which the
Company was the common parent, including without limitation deficiencies
attributable to the disallowance of compensation deductions for amounts
paid to Morris and/or Temple.

10. Schedule 1 to the Original Agreement is amended to delete Morris
Temple & Co. of Texas from the list of MorTem Corporations.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.

AMERISAFE, INC.

By:
-------------------------------------
Mark R. Anderson, President

-------------------------------------------
MILLARD E. MORRIS

-------------------------------------------
AUBREY T. TEMPLE

M.T. & CO., INC.

By:
-------------------------------------
Aubrey T. Temple, President

-6-
<PAGE> 7
SOUTHERN UNDERWRITERS, INC.

By:
-------------------------------------
Aubrey T. Temple, President

MORRIS, TEMPLE & TRENT FINANCIAL SERVICES,
INC.

By:
-------------------------------------
Craig P. Leach,
Vice President

-7-

<PAGE> 1
EXHIBIT 2.3

Draft of September 22, 1996

DISTRIBUTION AGREEMENT

This Distribution Agreement (this "Agreement") is made and entered into
on October __, 1996, by and among AMERISAFE, Inc., a Texas corporation (the
"Company"), Auto One Acceptance Corp., a Texas corporation ("AOAC"), Millard E.
Morris ("Morris") and Mark R. Anderson ("Anderson").

RECITALS

A. The Company is the owner of all issued and outstanding shares of
common stock (the "AOAC Stock") of AOAC.

B. Pursuant to the Plan of Reorganization adopted by the Board of
Directors of the Company on October __, 1996 (the "Plan of Reorganization"),
the Company desires to distribute 98.4% of the AOAC Stock to Morris and 1.6% of
the AOAC Stock to Anderson, and Morris and Anderson desire to accept such
distributions, subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, and intending to be legally bound hereby, the
parties agree as follows:

1. Distribution.

(a) Distribution of Shares. The Company hereby agrees to
distribute on or prior to the Distribution Date (as defined below in Section 2)
(i) 984 shares of AOAC Stock to Morris and (ii) 16 shares of AOAC Stock to
Anderson. The Company also hereby agrees to make, prior to such distribution,
a capital contribution to AOAC by delivering to AOAC a promissory note in the
amount of $50 million (the "Note"). Morris and Anderson hereby agree to accept
their respective distributions of AOAC Stock.

(b) Delivery of Certificates. On or prior to the Distribution
Date, the Company will deliver to each of Morris and Anderson properly endorsed
stock powers, with all applicable stock certificates attached, to evidence the
transfer of the shares contemplated in Section 1(a).

2. Distribution Date. For purposes of this Agreement, "Distribution
Date" means the date which is two business days prior to the date requested by
the Company for the acceleration of the effectiveness of its Registration
Statement on Form S-1 (File No. 333-10099) with respect to the Company's
registered public offering of the Company's Class A Common Stock (the
"Offering") or such earlier date as may be agreed upon by the parties; provided
that if the Distribution Date has not occurred prior to October 31, 1996, the
obligations of each of the parties hereto will terminate.
<PAGE> 2
3. Representations of Morris, Anderson and AOAC.

(a) Each of Morris and Anderson hereby represents and warrants
that:

(i) He has all requisite power and authority to execute
and deliver this Agreement and to perform all of the transactions
contemplated by this Agreement to be performed by him.

(ii) Subject to Section 2, this Agreement will, when
executed and delivered by the parties, constitute his valid and binding
obligation, enforceable against him in accordance with its terms.

(iii) As of the Distribution Date, he has not
transferred, agreed to transfer, or negotiated with any person regarding
a transfer of, any of his shares of the Company held as of July 1, 1996.

(iv) He currently has no plans or intentions to transfer
any of his stock of the Company or AOAC on or after the Distribution
Date.

(b) AOAC hereby represents and warrants that:

(i) AOAC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and
has all requisite corporate authority to execute and deliver this
Agreement and to perform all of the transactions contemplated by this
Agreement to be performed by it; and

(ii) The execution and delivery by the AOAC of this
Agreement, and the consummation of the transactions contemplated by this
Agreement to be performed by AOAC, have been duly authorized by all
necessary corporate action on the part of AOAC, and this Agreement will,
when executed and delivered by the parties and subject to Section 2,
constitute a valid and binding obligation of AOAC, enforceable against
AOAC in accordance with its terms.

4. Representations of the Company. The Company hereby represents
and warrants to each of Morris, Temple and AOAC that:

(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and has all
requisite corporate authority to execute and deliver this Agreement and to
perform all of the transactions contemplated by this Agreement to be performed
by it;

2
<PAGE> 3
and subject to Section 2, constitute a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms; and

(c) Upon the distribution by the Company to each of Morris and
Anderson of the shares of AOAC Stock, each of Morris and Anderson will have
beneficial and record ownership of such shares, free and clear of any and all
liens and encumbrances, other than the pledge of such shares to Banc One
Capital Partners II, Ltd. ("Banc One") as security for the loan agreement
between the Company and Banc One (the "Loan Agreement").

5. Tax Characterization. It is the express intention of the parties
that the transactions contemplated by this Agreement qualify for tax-free
treatment under section 355 of the Internal Revenue Code of 1986, as amended
(the "Code.") In this regard, the parties hereto covenant as follows:

(a) Each of Morris and Anderson hereby covenants that:

(i) For the period commencing on the Distribution Date
and ending at the end of the second taxable year ending after the
Distribution Date (the "Post-Distribution Period"), he will not transfer
any of his Company or AOAC stock to any other person, other than a
transfer of Company stock solely in exchange for stock, pursuant to a
transaction qualifying as a tax-free reorganization described in section
368(a)(1) of the Code (a "Qualifying Transaction"). For all purposes of
this Agreement, a transaction shall be deemed to be a Qualifying
Transaction only if: (i) the IRS issues a ruling letter so holding, or
(ii) tax counsel to the Company renders an opinion reasonably
satisfactory in form and substance to the Company and to both Morris and
Anderson that the transaction is a Qualifying Transaction. Any stock
received in such a transfer pursuant to a Qualifying Transaction shall
become subject to this covenant.

(ii) Following the Post-Distribution Period he will not
transfer stock of the Company or AOAC to any person pursuant to any
agreements, arrangements or negotiations entered into before the
Distribution Date.

(iii) During the Post-Distribution Period he will cause
the Company, through its operating subsidiary, and AOAC to continue the
active conduct of their respective businesses which they conduct on the
Distribution Date, and not to liquidate or to sell or otherwise dispose
of any material part of their assets (including stock of subsidiaries)
other than in the ordinary course of business or pursuant to a
Qualifying Transaction, if such sale or disposition would cause the
respective corporation not to continue to employ a substantial portion
of the assets held by it on the Distribution Date in the conduct of
businesses conducted by it on such date.

3
<PAGE> 4
(iv) He will cause AOAC to use the Note, and the
proceeds from the repayment thereof, solely in the ordinary conduct of
its existing finance business and/or to retire existing indebtedness.
In no event will he cause AOAC to use such funds to invest in assets of
any business or activity other than AOAC's financing business.

(b) The Company and AOAC each covenants that during the
Post-Distribution Period it will not discontinue the active conduct of the
active business which it conducts on the Distribution Date, liquidate, or sell
or otherwise dispose of any material part of its assets (including stock of
subsidiaries) other than in the ordinary course of business or pursuant to a
Qualifying Transaction, if such sale or disposition would cause the respective
corporation not to continue to employ a substantial portion of the assets held
by it on the Distribution Date in the conduct of businesses conducted by it on
such date.

(c) AOAC covenants that it will use the Note, and proceeds
from the repayment thereof, solely in the ordinary conduct of its existing
finance business and/or to retire existing indebtedness. In no event will it
use such funds to invest in assets of any business or activity other than its
existing finance business.

6. Pledge. AOAC hereby acknowledges that the Note received pursuant
to Section 1 will be payable only out of the net proceeds of the Offering and
will be subject to the prior repayment of all amounts owed to Banc One in
connection with the Loan Agreement. AOAC hereby agrees to pledge the Note and
the proceeds therefrom to Banc One as security for the Loan Agreement, and
further agrees to execute and deliver all such agreements, instruments and
documents, and to take any further action, as may be requested by Banc One to
evidence such pledge. Each of Morris and Anderson acknowledges that the shares
of AOAC Stock to be received by him will remain pledged to Banc One as security
for the Loan Agreement and agrees to execute and deliver all such agreements,
instruments and documents, and to take any further action, as may be requested
by Banc One to evidence such pledge.

7. Further Assurances. Each of the parties agrees that he or it
will, at any time, upon the request of any other party hereto, take, or cause
to be taken, all actions and do, or cause to be done, all things (including
without limitation executing, acknowledging and delivering additional
agreements, instruments and documents) as may be necessary, appropriate or
advisable in order to consummate or make effective the transactions
contemplated by this Agreement in a manner consistent with the intentions and
purposes of the parties including, without limitation, the delivery of such
certificates or undertakings as may reasonably be required by counsel to the
Company in connection with the rendering by such counsel of opinions with
respect to the federal income tax treatment of the distributions contemplated
herein.

4
<PAGE> 5
8. Indemnification.

(a) AOAC. If, as a result of any event within the control of
AOAC occurring in the 24-month period commencing on the Distribution Date and
involving either the stock or assets (or any combination thereof) of AOAC
(including, but not limited to, a merger, consolidation, liquidation, stock
issuance, or sale or other disposition of assets by or involving AOAC) any
taxes are imposed on the Company or any of its subsidiaries with respect to any
action taken pursuant to the Plan of Reorganization (or any amendment thereof),
then AOAC shall pay those taxes (and related interest and penalties, if any)
and shall indemnify and hold harmless the Company and its subsidiaries from and
against all such taxes, interest and penalties, including but not limited to
any such taxes paid at any time by Company or any subsidiary. AOAC shall make
such payment and indemnification no later than 15 days after written notice
from the Company or one of its subsidiaries of a final determination with
respect to such taxes, which notice shall be accompanied by a computation of
the amounts due.

(b) Morris. Morris agrees to indemnify the Company and its
subsidiaries and hold them harmless against and with respect to any damages,
claims, losses, taxes (including interest, penalties and additions thereto),
and costs and expenses arising from, in connection with or with respect to (i)
any misrepresentation or breach of warranty by Morris under this Agreement, or
(ii) any failure by Morris to fulfill any agreement or covenant under this
Agreement.

(c) Anderson. Anderson agrees to indemnify the Company and
its subsidiaries and hold them harmless against and with respect to any
damages, claims, losses, taxes (including interest, penalties and additions
thereto), and costs and expenses arising from, in connection with or with
respect to (i) any misrepresentation or breach of warranty by Anderson under
this Agreement, or (ii) any failure by Anderson to fulfill any agreement or
covenant under this Agreement.

9. Miscellaneous.

(a) Successors and Assigns. This Agreement will be binding
upon, and will inure to the benefit of, the parties hereto and their respective
heirs, legal representatives, successors and assigns.

(b) Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof.

(d) Headings. Section headings in this Agreement are included
herein for convenience of reference only and will not constitute a part of this
Agreement for any other purpose.

5
<PAGE> 6

(e) Governing Law. This Agreement will be governed by, and
construed in accordance with, the substantive laws of the State of Texas,
without giving effect to the principles of conflict of laws of such State.

(f) Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute but one and the same agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

AMERISAFE, INC.

By:
------------------------------------
Mark R. Anderson,
President

AUTO ONE ACCEPTANCE
CORPORATION

By:
------------------------------------
Millard E. Morris,
Chief Executive Officer

------------------------------------------
MILLARD E. MORRIS

------------------------------------------
MARK R. ANDERSON

<PAGE> 1
EXHIBIT 4.1

TEMPORARY CERTIFICATE EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN
READY FOR DELIVERY.

NUMBER SHARES
CA
[LOGO]
CLASS A COMMON STOCK AMERISAFE, INC. PAR VALUE $.01
THE MANAGED RESULTS COMPANY(SM)

INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS

CUSIP 03071H 10 0
SEE REVERSE FOR CERTAIN DEFINITIONS

***************************************************************************
* *
* THIS CERTIFIES THAT *
* *
* *
* *
* *
* *
* *
* *
* *
* is the OWNER of *
* *
***************************************************************************

FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS A COMMON STOCK OF
AMERISAFE, INC.

(hereinafter referred to as the "Corporation"), transferable on the books of
the Corporation by the holder hereof in person or by duly authorized attorney
upon surrender of this Certificate properly endorsed. This Certificate and the
shares represented hereby are issued and shall be held subject to all of the
provisions of the Articles of Incorporation, as amended from time to time, of
the Corporation (a copy of which Articles is on file with the Transfer Agent),
to all of which the holder, by acceptance hereof, assents. This Certificate is
not valid until countersigned by the Transfer Agent and registered by the
Registrar.

Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.

DATED

/s/ [ILLEGIBLE] [SEAL] /s/ [ILLEGIBLE]

SECRETARY PRESIDENT

COUNTERSIGNED AND REGISTERED:

AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, NY) TRANSFER AGENT
AND REGISTRAR.

AUTHORIZED SIGNATURE

<PAGE> 2
AMERISAFE, INC.

The Articles of Incorporation of the Corporation set forth (a) the
authorized amounts, designations, preferences, limitations and relative rights
of each class of capital stock authorized to be issued and (b) a denial to
shareholders of preemptive rights to acquire unissued or treasury shares of the
Corporation. The Corporation will furnish to any shareholder without charge
upon written request to the Corporation at its principal place of business or
registered office, and there is on file in the office of the Secretary of State
of Texas, (i) a full statement of all of the designations, preferences,
limitations and relative rights of the shares of each class or series of stock
to the extent they have been fixed and determined and the authority of the
Board of Directors to fix and determine the designations, preferences,
limitations and relative rights of any subsequent series and (ii) a full
statement of the denial of preemptive rights contained in the Articles of
Incorporation.

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
------ --------
TEN ENT - as tenants by the (Cust) (Minor)
entireties

JT TEN - as joint tenants with under Uniform Gifts to
right of survivorship Minors Act
and not as tenants --------------
in common (State)

Additional abbreviations may also be used though not in the above list.

For Value Received, hereby sell, assign and transfer unto
--------

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)

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

Shares
----------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
-----------------------------------------
Attorney
--------------------------------------------------------------------
to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.

Dated
---------------------------------

NOTICE: X
-------------------------------------
THE SIGNATURE(S) TO THIS ASSIGNMENT (SIGNATURE)
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE --- >
CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT X
OR ANY CHANGE WHATEVER. --------------------------------------

--------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS. SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
---------------------------------------
SIGNATURE(S) GUARANTEED BY:

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

<PAGE> 1
EXHIBIT 5.1

September 23, 1996

AMERISAFE, Inc.
5550 LBJ Freeway, Suite 901
Dallas, Texas 75240

Re: Registration on Form S-1 of 12,650,000 shares of
Class A Common Stock, par value $0.01 per share,
of AMERISAFE, Inc.

Gentlemen:

We are acting as special counsel to AMERISAFE, Inc., a Texas
corporation (the "Company"), in connection with the registration and sale in an
initial public offering of up to 12,650,000 shares of Class A Common Stock, par
value $0.01 per share, of the Company (the "Shares"), pursuant to the
Underwriting Agreement (the "Underwriting Agreement") to be entered into among
the Company and Smith Barney Inc. and Piper Jaffray Inc., as the
representatives of the several underwriters to be named in Schedule I to the
Underwriting Agreement (the "Underwriters").

We have examined such documents, records and matters of law as
we have deemed necessary for purposes of this opinion. Based on such
examination and on the assumptions set forth below, we are of the opinion that
the Shares are duly authorized and, when issued and delivered to the
Underwriters pursuant to the Underwriting Agreement against payment of the
consideration therefor as provided therein in an amount in excess of the par
value thereof, will be validly issued, fully paid and nonassessable.

In rendering the foregoing opinion, we have relied as to
certain factual matters upon certificates of officers of the Company and public
officials, and we have not independently checked or verified the accuracy of
the statements contained therein.

We hereby consent to the filing of this opinion as Exhibit 5.1
to the Registration Statement on Form S- 1 (Commission

<PAGE> 2
AMERISAFE, Inc.
September 23, 1996
Page 2

File No. 333-10099) filed by the Company to effect registration of the Shares
and to the reference to our firm under the caption "Legal Matters" in the
Prospectus constituting a part of such Registration Statement.

Very truly yours,

/s/ Jones, Day, Reavis & Pogue

<PAGE> 1

EXHIBIT 10.2

AMERISAFE, INC.

1996 STOCK INCENTIVE PLAN
<PAGE> 2
AMERISAFE, INC.

1996 STOCK INCENTIVE PLAN

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

3. Shares Available under the Plan . . . . . . . . . . . . . . . . . . . . . . . 2

4. Option Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

5. Appreciation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

6. Restricted Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

7. Transferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

8. Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

9. Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

10. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

11. Certain Terminations of Employment, Hardship and Approved Leaves of
Absence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

12. Administration of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . 6

13. Amendments and Other Matters . . . . . . . . . . . . . . . . . . . . . . . . 7

14. Termination of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>

-i-
<PAGE> 3
AMERISAFE, INC.

1996 STOCK INCENTIVE PLAN

1. Purpose. The purpose of this AMERISAFE, Inc. 1996 Stock
Incentive Plan is to attract and retain directors, officers and other salaried
employees of AMERISAFE, Inc., and its Subsidiaries (as defined) and to provide
such persons with incentives and rewards for superior performance.

2. Definitions. As used in this Plan:

"Appreciation Rights" means a right granted pursuant to Section 5 of
this Plan, including a Free-Standing Appreciation Right and a Tandem
Appreciation Right.

"Base Price" means the price to be used as the basis for determining
the Spread upon the exercise of a Free-Standing Appreciation Right.

"Board" means the Board of Directors of the Corporation.

"Code" means the Internal Revenue Code of 1986, as amended from time
to time.

"Common Shares" means (i) shares of the Class A Common Stock, $.01 par
value per share, of the Corporation and (ii) any security into which Common
Shares may be converted by reason of any transaction or event of the type
referred to in Section 8 of this Plan.

"Corporation" means AMERISAFE, Inc., a Texas corporation.

"Date of Grant" means the date specified by the Board on which a grant
of Option Rights, Appreciation Rights or a grant or sale of Restricted Shares
shall become effective, which shall not be earlier than the date on which the
Board takes action with respect thereto.

"Free-Standing Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is not granted in tandem with an Option
Right or similar right.

"Incentive Stock Option" means an Option Right that is intended to
qualify as an "incentive stock option" under Section 422 of the Code or any
successor provision thereto.

"Management Objectives" means the achievement of performance
objectives established pursuant to this Plan.

"Market Value per Share" means the fair market value of the Common
Shares as determined by the Board from time to time.

"Nonqualified Option" means an Option Right that is not intended to
qualify as a Tax-Qualified Option.

"Optionee" means the person so designated in an agreement evidencing
an outstanding Option Right.

"Option Price" means the purchase price payable upon the exercise of
an Option Right.

"Option Right" means the right to purchase Common Shares from the
Corporation upon the exercise of a Nonqualified Option or a Tax-Qualified
Option granted pursuant to Section 4 of this Plan.
<PAGE> 4
"Participant" means a person who is selected by the Board to receive
benefits under this Plan and (i) is at that time a director, officer or other
salaried employee of the Corporation or any Subsidiary, or (ii) has agreed to
commence serving in any such capacity.

"Plan" means this AMERISAFE, Inc. 1996 Stock Incentive Plan.

"Restricted Shares" means Common Shares as to which neither the
substantial risk of forfeiture nor the restrictions on transfer referred to in
Section 6 hereof has expired.

"Rule 16b-3" means Rule 16b-3, as promulgated and amended from time to
time by the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, or any successor rule.

"Spread" means, in the case of a Free-Standing Appreciation Right, the
amount by which the Market Value per Share on the date when the Appreciation
Right is exercised exceeds the Base Price specified therein or, in the case of
a Tandem Appreciation Right, the amount by which the Market Value per Share on
the date when the Appreciation Right is exercised exceeds the Option Price
specified in the related Option Right.

"Subsidiary" means a corporation, partnership, joint venture,
unincorporated association or other entity in which the Corporation has a
direct or indirect ownership or other equity interest; provided, however, for
purposes of determining whether any person may be a Participant for purposes of
any grant of Incentive Stock Options, "Subsidiary" means any corporation in
which the Corporation owns or controls directly or indirectly at least 50
percent of the total combined voting power represented by all classes of stock
issued by such corporation at the time of the grant.

"Tandem Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is granted in tandem with an Option
Right or any similar right granted under any other plan of the Corporation.

"Tax-Qualified Option" means an Option Right that is intended to
qualify under particular provisions of the Code, including without limitation
an Incentive Stock Option.

3. Shares Available under the Plan. (a) Subject to adjustment as
provided in Section 8 of this Plan, the number of Common Shares issued or
transferred and covered by outstanding awards granted under this Plan shall not
in the aggregate exceed 3,000,000 Common Shares, which may be Common Shares of
original issuance or Common Shares held in treasury or a combination thereof.
For the purposes of this Section 3(a):

(i) Upon payment in cash of the benefit provided by any
award granted under this Plan, any Common Shares that were covered by
that award shall again be available for issuance or transfer
hereunder.

(ii) Common Shares covered by any award granted under this
Plan shall be deemed to have been issued or transferred, and shall
cease to be available for future issuance or transfer in respect of
any other award granted hereunder, at the earlier of the time when
they are actually issued or transferred or the time when dividends or
dividend equivalents are paid thereon; provided, however, that
Restricted Shares shall be deemed to have been issued or transferred
at the earlier of the time when they cease to be subject to a
substantial risk of forfeiture or the time when dividends are paid
thereon.

(b) Notwithstanding anything to the contrary contained in this
Plan, including without limitation Section 3(a) hereof, the aggregate number of
Common Shares actually issued or transferred by the Corporation upon the
exercise of the Incentive Stock Options shall not exceed 3,000,000 Common
Shares.

-2-
<PAGE> 5
(c) Notwithstanding anything to the contrary contained in this
Plan, no Participant shall be granted, in the aggregate, Option Rights and
Appreciation Rights for more than 1,500,000 Common Shares during any period of
five consecutive calendar years, subject to adjustment as provided in Section 8
of this Plan.

4. Option Rights. The Board may from time to time authorize
grants to Participants of options to purchase Common Shares upon such terms and
conditions as the Board may determine in accordance with the following
provisions:

(a) each grant shall specify the number of Common Shares
to which it pertains; and

(b) each grant shall specify the form of consideration to
be paid in satisfaction of the Option Price and the manner of payment
of such consideration, which may include (i) cash in the form of
currency or check or other cash equivalent acceptable to the
Corporation, (ii) nonforfeitable, unrestricted Common Shares, which
are already owned by the Optionee and have a value at the time of
exercise that is equal to the Option Price, (iii) any other legal
consideration that the Board may deem appropriate and (iv) any
combination of the foregoing.

(c) Any grant may provide for deferred payment of the
Option Price from the proceeds of sale through a broker of some or all
of the Common Shares to which the exercise relates.

(d) Successive grants may be made to the same Participant
regardless of whether any Option Rights previously granted to the
Participant remain unexercised.

(e) Each grant shall specify the period or periods of
continuous employment of the Optionee by the Corporation or any
Subsidiary, or the achievement of Management Objectives, or both, that
are necessary before the Option Rights or installments thereof shall
become exercisable, and any grant may provide for the earlier exercise
of the Option Rights in the event of a change in control of the
Corporation or other similar transaction or event.

(f) Option Rights granted pursuant to this Section 4 may
be Nonqualified Options or Tax-Qualified Options or combinations
thereof.

(g) On or after the Date of Grant of any Nonqualified
Option, the Board may provide for the payment to the Optionee of
dividend equivalents thereon in cash or Common Shares on a current,
deferred or contingent basis, or the Board may provide that any
dividend equivalents shall be credited against the Option Price.

(h) No Option Right granted pursuant to this Section 4
may be exercised more than 10 years from the Date of Grant.

(i) Each grant shall be evidenced by an agreement, which
shall be executed on behalf of the Corporation by any officer thereof
and delivered to and accepted by the Optionee and shall contain such
terms and provisions as the Board may determine consistent with this
Plan.

5. Appreciation Rights. The Board may also authorize
grants to Participants of Appreciation Rights. An Appreciation Right shall be
a right of the Participant to receive from the Corporation an amount, which
shall be determined by the Board and shall be expressed as a percentage (not
exceeding 100 percent) of the Spread at the time of the exercise of an
Appreciation Right. Any grant of Appreciation Rights under this Plan shall be
upon such terms and conditions as the Board may determine in accordance with
the following provisions:

(a) Any grant may specify that the amount payable upon
the exercise of an Appreciation Right may be paid by the Corporation
in cash, Common Shares or any combination

-3-
<PAGE> 6
thereof and may (i) either grant to the Participant or reserve to the
Board the right to elect among those alternatives or (ii) preclude the
right of the Participant to receive and the Corporation to issue
Common Shares or other equity securities in lieu of cash; provided,
however, that no form of consideration or manner of payment that would
cause Rule 16b-3 to cease to apply to this Plan shall be permitted.

(b) Any grant may specify that the amount payable upon
the exercise of an Appreciation Right shall not exceed a maximum
specified by the Board on the Date of Grant.

(c) Any grant may specify (i) a waiting period or periods
before Appreciation Rights shall become exercisable and (ii)
permissible dates or periods on or during which Appreciation Rights
shall be exercisable.

(d) Any grant may specify that an Appreciation Right may
be exercised only in the event of a change in control of the
Corporation or other similar transaction or event.

(e) Any grant may provide for the payment to the
Participant of dividend equivalents thereon in cash or Common Shares
on a current, deferred or contingent basis.

(f) Regarding Tandem Appreciation Rights only: Each
grant shall provide that a Tandem Appreciation Right may be exercised
only (i) at a time when the related Option Right (or any similar right
granted under any other plan of the Corporation) is also exercisable
and the Spread is positive and (ii) by surrender of the related Option
Right (or such other right) for cancellation.

(g) Regarding Free-Standing Appreciation Rights only:

(i) Each grant shall specify in respect of each
Free-Standing Appreciation Right a Base Price per Common
Share;

(ii) Successive grants may be made to the same
Participant regardless of whether any Free-Standing
Appreciation Rights previously granted to the Participant
remain unexercised;

(iii) Each grant shall specify the period or
periods of continuous employment of the Participant by the
Corporation or any Subsidiary, or the achievement of
Management Objectives or both, that are necessary before the
Free-Standing Appreciation Rights or installments thereof
shall become exercisable, and any grant may provide for the
earlier exercise of the Free-Standing Appreciation Rights in
the event of a change in control of the Corporation or other
similar transaction or event; and

(iv) No Free-Standing Appreciation Right granted
under this Plan may be exercised more than 10 years from the
Date of Grant.

(h) Each grant shall be evidenced by an agreement, which
shall be executed on behalf of the Corporation by any officer thereof
and delivered to and accepted by the Participant and shall describe
the subject Appreciation Rights, identify any related Option Rights,
state that the Appreciation Rights are subject to all of the terms and
conditions of this Plan and contain such other terms and provisions as
the Board may determine consistent with this Plan.

6. Restricted Shares. The Board may also authorize grants or
sales to Participants of Restricted Shares upon such terms and conditions as
the Board may determine in accordance with the following provisions:

-4-
<PAGE> 7
(a) Each grant or sale shall constitute an immediate
transfer of the ownership of Common Shares to the Participant in
consideration of the performance of services, entitling such
Participant to dividend, voting and other ownership rights, subject to
the substantial risk of forfeiture and restrictions on transfer
hereinafter referred to.

(b) Each grant or sale may be made without additional
consideration from the Participant or in consideration of a payment by
the Participant.

(c) Each grant or sale may provide that the Restricted
Shares covered thereby shall 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 Board on the Date of Grant, and any grant or
sale may provide for the earlier termination of such period in the
event of a change in control of the Corporation or other similar
transaction or event.

(d) Each grant or sale shall provide that, during the
period for which such substantial risk of forfeiture is to continue,
the transferability of the Restricted Shares shall be prohibited or
restricted in the manner and to the extent prescribed by the Board on
the Date of Grant. Such restrictions may include without limitation
rights of repurchase or first refusal in the Corporation or provisions
subjecting the Restricted Shares to a continuing substantial risk of
forfeiture in the hands of any transferee.

(e) Any grant or sale may require that any or all
dividends or other distributions paid on the Restricted Shares during
the period of such restrictions be automatically sequestered and
reinvested on an immediate or deferred basis in additional Common
Shares, which may be subject to the same restrictions as the
underlying award or such other restrictions as the Board may
determine.

(f) Each grant or sale shall be evidenced by an
agreement, which shall be executed on behalf of the Corporation by any
officer thereof and delivered to and accepted by the Participant and
shall contain such terms and provisions as the Board may determine
consistent with this Plan. Unless otherwise directed by the Board,
all certificates representing Restricted Shares, together with a stock
power that shall be endorsed in blank by the Participant with respect
to the Restricted Shares, shall be held in custody by the Corporation
until all restrictions thereon lapse.

7. Transferability. (a) Except as otherwise expressly provided
in the agreement evidencing such grant, no Option Right or other derivative
security (as that term is used in Rule 16b-3) granted under this Plan may be
transferred by a Participant except by will or the laws of descent and
distribution.

(b) Any grant made under this Plan may provide that all
or any part of the Common Shares that are to be issued or transferred by the
Corporation upon the exercise of Option Rights or upon the termination of the
period during which Restricted Shares are subject to the substantial risk of
forfeiture and restrictions on transfer referred to in Section 6 of this Plan,
shall be subject to further restrictions upon transfer.

8. Adjustments. The Board may make or provide for such
adjustments in the number of Common Shares covered by outstanding Option
Rights, Appreciation Rights and Restricted Shares granted hereunder, the Option
Prices per Common Share or Base Price per Common Share applicable to any such
Option Rights and the kind of shares (including shares of another issuer)
covered thereby, as the Board may in good faith determine to be equitably
required in order to prevent dilution or expansion of the rights of
Participants that otherwise would result from (i) any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Corporation, or (ii) any merger, consolidation, spin-off,
spin-out, split-off, split-up, reorganization, partial or complete liquidation
or other distribution of assets, issuance of warrants or other rights to
purchase securities or any other corporate transaction or event having an
effect similar to any of the foregoing. In the event of any such transaction
or event, the Board may provide in substitution for any or all outstanding
awards under this Plan such alternative consideration

-5-
<PAGE> 8
as it may in good faith determine to be equitable under the circumstances and
may require in connection therewith the surrender of all awards so replaced.
Moreover, the Board may on or after the Date of Grant provide in the agreement
evidencing any award under this Plan that the holder of the award may elect to
receive an equivalent award in respect of securities of the surviving entity of
any merger, consolidation or other transaction or event having a similar
effect, or the Board may provide that the holder will automatically be entitled
to receive such an equivalent award. The Board may also make or provide for
such adjustments in the maximum number of Common Shares specified in Section
3(a) of this Plan as the Board may in good faith determine to be appropriate in
order to reflect any transaction or event described in this Section 8.

9. Fractional Shares. The Corporation shall not be required to
issue any fractional Common Shares pursuant to this Plan. The Board may
provide for the elimination of fractions or for the settlement thereof in cash.

10. Withholding Taxes. To the extent that the Corporation is
required to withhold federal, state, local or foreign taxes in connection with
any payment made or benefit realized by a Participant or other person under
this Plan, and the amounts available to the Corporation for the withholding are
insufficient, it shall be a condition to the receipt of any such payment or the
realization of any such benefit that the Participant or such other person make
arrangements satisfactory to the Corporation for payment of the balance of any
taxes required to be withheld. At the discretion of the Board, any such
arrangements may include relinquishment of a portion of any such payment or
benefit. The Corporation and any Participant or such other person may also
make similar arrangements with respect to the payment of any taxes with respect
to which withholding is not required.

11. Certain Terminations of Employment, Hardship and Approved
Leaves of Absence. Notwithstanding any other provision of this Plan to the
contrary, in the event of termination of employment by reason of death,
disability, normal retirement, early retirement with the consent of the
Corporation, termination of employment to enter public service with the consent
of the Corporation or leave of absence approved by the Corporation, or in the
event of hardship or other special circumstances, of a Participant who holds an
Option Right or Appreciation Right that is not immediately and fully
exercisable, or any Restricted Shares as to which the substantial risk of
forfeiture or the prohibition or restriction on transfer has not lapsed, the
Board may take any action that it deems to be equitable under the circumstances
or in the best interests of the Corporation, including without limitation
waiving or modifying any limitation or requirement with respect to any award
under this Plan.

12. Administration of the Plan. (a) This Plan shall be
administered by the Board, which may from time to time delegate all or any part
of its authority under this Plan to a committee of not less than two directors
appointed by the Board. The members of the committee shall be "non-employee
directors" within the meaning of that term in Rule 16b-3 of the Securities and
Exchange Commission (or any successor rule to the same effect). To the extent
of such delegation, references in this Plan to the Board shall also refer to
the committee. The majority of the committee shall constitute a quorum, and
the action of a majority of the members of the committee present at any meeting
at which a quorum is present, or acts unanimously approved in writing, shall be
the acts of the committee. In the event that the Board authorizes a committee
thereof to administer the Plan, grants of Option Rights, Appreciation Rights or
Restricted Shares pursuant to this Plan to any member of such committee shall
be approved by the Board of Directors of the Corporation.

(b) The interpretation and construction by the Board of
any provision of this Plan or any agreement, notification or document
evidencing the grant of Option Rights, Appreciation Rights or Restricted
Shares, and any determination by the Board pursuant to any provision of this
Plan or any such agreement, notification or document, shall be final and
conclusive. No member of the Board shall be liable for any such action taken
or determination made in good faith.

13. Amendments and Other Matters. (a) This Plan may be amended
from time to time by the Board; provided, however, except as expressly
authorized by this Plan, no such amendment shall cause this

-6-
<PAGE> 9
Plan to cease to satisfy any applicable condition of Rule 16b-3, without the
further approval of the shareholders of the Corporation.

(b) The Board may condition the grant of any award or
combination of awards authorized under this Plan on the surrender or deferral
by the Participant of his or her right to receive a cash bonus or other
compensation otherwise payable by the Corporation or a Subsidiary to the
Participant.

(c) This Plan shall not confer upon any Participant any
right with respect to continuance of employment or other service with the
Corporation or any Subsidiary and shall not interfere in any way with any right
that the Corporation or any Subsidiary would otherwise have to terminate any
Participant's employment or other service at any time.

(d) To the extent that any provision of this Plan would
prevent any Option Right that was intended to qualify as a Tax-Qualified Option
from so qualifying, any such provision shall be null and void with respect to
any such Option Right; provided, however, that any such provision shall remain
in effect with respect to other Option Rights, and there shall be no further
effect on any provision of this Plan.

14. Termination of the Plan. No further awards shall be granted
under this Plan after the passage of 10 years from the date on which this Plan
is first approved by the shareholders of the Corporation.

-7-

<PAGE> 1

EXHIBIT 10.3

AMERISAFE, INC.

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (this "Agreement") is made and entered
into as of the ______ day of ________________ 1996, by and between AMERISAFE,
Inc., a Texas corporation (the "Corporation"), and ________________
("Indemnitee").

RECITALS

A. Indemnitee is presently serving as an officer and/or director of
the Corporation, and the Corporation desires Indemnitee to continue in such
capacity.

B. Indemnitee is willing, subject to certain conditions, including,
without limitation, the execution and performance of this Agreement by the
Corporation, to continue in that capacity.

C. In addition to the indemnification to which Indemnitee is entitled
under the Restated Articles of Incorporation of the Corporation (the
"Articles") and the Restated Bylaws of the Corporation (the "Bylaws"), the
Corporation intends to obtain, at its sole expense, insurance protecting its
officers and directors, including Indemnitee, against certain losses arising
out of actual or threatened actions, suits or proceedings to which such persons
may be made or threatened to be made parties.

D. As a result of circumstances having no relation to, and beyond the
control of, the Corporation and Indemnitee, there can be no assurance that the
Corporation will be able to obtain such insurance or if obtained, the
continuation or renewal of such insurance.

NOW, THEREFORE, in order to induce Indemnitee to continue to serve in
his present capacity, the Corporation and Indemnitee hereby agree as follows:

ARTICLE I
CERTAIN DEFINITIONS

As used herein, the following words and terms shall have the following
respective meanings (whether singular or plural):

"Claim" means an actual or threatened claim or request for relief.

"Corporate Status" means the status of a 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 foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise.

"Expenses" means all attorneys' fees, retainers, court costs,
transcript costs, fees of experts, witness fees, travel expenses, duplicating
costs, printing costs, telephone charges, postage, delivery service fees and
all other disbursements or expenses of the types customarily incurred in
connection with prosecuting, defending, preparing to prosecute or defend,
investigating or being or preparing to be a witness in a Proceeding.

"Official Capacity" means (a) when used with respect to a director,
the office of director in the Corporation and (b) when used with respect to a
person other than a director, the elective or appointive
<PAGE> 2
office in the Corporation held by the officer or the employment or agency
relationship undertaken by the employee or agent on behalf of the Corporation,
but neither clause (a) or (b) includes service for any other foreign or
domestic corporation or any partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise.

"Proceeding" means any threatened, pending or completed action, suit,
arbitration, investigation, administrative hearing or any other proceeding
whether civil, criminal, administrative or investigative (except one initiated
by Indemnitee pursuant to Article V of this Agreement to enforce his rights
under this Agreement), and any appeal in or related to any such action, suit,
arbitration, investigation, hearing or proceeding and any inquiry or
investigation that could lead to such an action, suit, proceeding or
arbitration.

"TBCA" means the Texas Business Corporation Act and any successor
statute thereto as either of them may from time to time be amended.

ARTICLE II
INDEMNIFICATION

Section 2.1. General. The Corporation shall indemnify, and advance
Expenses, to Indemnitee to the full extent permitted by applicable law in
effect on the date hereof and to such greater extent as applicable law may
thereafter from time to time permit. The rights of Indemnitee provided under
the preceding sentence shall include, but shall not be limited to, the right to
be indemnified and to have Expenses advanced in all Proceedings to the full
extent permitted by Article 2.02-1 of the TBCA (or any successor provision).
The provisions set forth in this Agreement are provided in addition to and as a
means of furtherance and implementation of, and no in limitation of, the
obligations expressed in this Article II.

Section 2.2. Additional Indemnity of the Corporation. Indemnitee
shall be entitled to indemnification pursuant to this Section 2.2 if, by reason
of his Corporate Status, he is, or is threatened to be made, a party to any
Proceeding (except to the extent limited by Section 2.3). Pursuant to this
Section 2.2, Indemnitee shall be indemnified against Expenses, judgments,
penalties (including excise or similar taxes), fines and amounts paid in
settlement actually and reasonably incurred by him or on his behalf in
connection with such Proceeding or any Claim therein, if (a) he conducted
himself in good faith; (b) he reasonably believed: (i) in the case of conduct
in his Official Capacity, that his conduct was in the Corporation's best
interests; and (ii) in all other cases, that his conduct was at least not
opposed to the Corporation's best interests, and (c) in the case of any
criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful. Nothing in this Section 2.2 shall limit the benefits of Section 2.1
or any other Section hereunder.

Section 2.3. Limitation on Indemnity. The indemnification otherwise
available to Indemnitee under Section 2.2 shall be limited to the extent set
forth in this Section 2.3. In the event that Indemnitee is found liable to the
Corporation or is found liable on the basis that personal benefit was
improperly received by Indemnitee whether or not the benefit resulted from an
action taken in Indemnitee's Official Capacity Indemnitee shall, with respect
to the Claim in the Proceeding in which such finding is made, be indemnified
only against reasonable Expenses actually incurred by him in connection with
that Claim. Notwithstanding the foregoing, no indemnification against such
Expenses shall be made in respect of any Claim in such Proceeding as to which
Indemnitee shall have been adjudged to be liable for willful or intentional
misconduct in the performance of his duty to the Corporation; provided,
however, that, if applicable law so permits, indemnification against such
Expenses shall nevertheless be made by the Corporation in such event if and
only to the extent that the court in which such Proceeding shall have been
brought or is pending, shall determine.

-2-
<PAGE> 3
ARTICLE III
EXPENSES

Section 3.1. Expenses of a Party Who Is Wholly or Partly Successful.
Indemnitee shall be indemnified against all Expenses actually and reasonably
incurred by him in connection with any Proceeding to which Indemnitee is a
party by reason of his Corporate Status and in which Indemnitee is successful,
on the merits or otherwise. In the event that Indemnitee is not wholly
successful, on the merits or otherwise, in a Proceeding but is successful, on
the merits or otherwise, as to any Claim in such Proceeding, the Company shall
indemnify Indemnitee against all Expenses actually and reasonably incurred by
him or on his behalf relating to each such Claim. For purposes of this Section
3.1 and without limitation, the termination of a Claim in a Proceeding by
dismissal, with or without prejudice, shall be deemed to be a successful result
as to such Claim.

Section 3.2. Expenses of a Witness. To the extent that Indemnitee
is, by reason of his Corporate Status, a witness or otherwise participates in
any Proceeding at a time when he is not named a defendant or respondent in the
Proceeding, he shall be indemnified against all Expenses actually and
reasonably incurred by him or on his behalf in connection therewith.

Section 3.3. Advancement of Expenses. The Corporation shall pay all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
any Proceeding or Claim, whether brought by the Corporation or otherwise, in
advance of any determination respecting entitlement to indemnification pursuant
to Article IV hereof within 10 business days after the receipt by the
Corporation of a written request from Indemnitee setting forth a written
affirmation of his good faith belief that he has met the standard of conduct
necessary for indemnification under applicable law, confirming his obligation
under the last sentence of this Section 3.3 and requesting such payment or
payments from time to time, whether prior to or after final disposition of such
Proceeding or Claim. Such statement or statements shall reasonably evidence
the Expenses incurred by Indemnitee. Indemnitee hereby undertakes and agrees
that he will repay the Corporation for any Expenses so advanced to the extent
that it shall ultimately be determined by a court in a final adjudication from
which there is no further right of appeal, that Indemnitee is not entitled to
be indemnified against such Expenses.

ARTICLE IV
PROCEDURE FOR DETERMINATION OF ENTITLEMENT
TO INDEMNIFICATION

Section 4.1. Request for Indemnitee. To obtain indemnification under
this Agreement, Indemnitee shall submit to the Corporation a written request,
including therein or therewith such documentation and information as is
reasonably available to Indemnitee and is reasonably necessary to determine
whether and to what extent Indemnitee is entitled to indemnification. The
Secretary or an Assistant Secretary of the Corporation shall, promptly upon
receipt of such a request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.

Section 4.2. Determination of Request. Upon written request by
Indemnitee for indemnification pursuant to Section 4.1 hereof, a determination,
if required by applicable law, with respect to Indemnitee's entitlement thereto
shall be made in the specific case in accordance with Article 2.02-1 of the
TBCA (or any successor provision). If it is so determined that Indemnitee is
entitled to indemnification hereunder, payment to Indemnitee shall be made
within five business days after such determination. Indemnitee shall cooperate
with the Board of Directors of the Corporation, any committee thereof or
special legal counsel appointed by the Board of Directors of the Corporation or
any committee thereof making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person or persons
upon reasonable advance request any documentation or information that is not
privileged or otherwise protected from disclosure and that is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee

-3-
<PAGE> 4
in so cooperating with the person or persons making such determination shall be
borne by the Corporation (irrespective of the determination as to Corporation's
entitlement to indemnification) and the Corporation hereby agrees to indemnify
and hold harmless Indemnitee therefrom.

Section 4.3. Presumptions and Effect of Certain Proceedings.

(a) If the person or persons empowered or selected under
Article IV of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within 45 calendar days
after receipt by the Corporation of the request by Indemnitee therefor, the
requisite determination of entitlement to indemnification shall be deemed to
have been made and Indemnitee shall be entitled to such indemnification, absent
(i) a knowing misstatement by Indemnitee of a material fact, or knowing
omission of a material fact necessary to make Indemnitee's statement not
materially misleading, in connection with the request for indemnification, or
(ii) a prohibition of such indemnification under applicable law; provided,
however, that such 45-day period may be extended for a reasonable time, not to
exceed an additional 30 calendar days, if the person making the determination
with respect to entitlement to indemnification in good faith requires such
additional time for the obtaining or evaluating of documentation and/or
information relating to such determination; and provided, further, that the
45-day limitation set forth in this Section 4.3(a) shall not apply and such
period shall be extended as necessary if within 30 days after receipt by the
Corporation of the request for indemnification under Section 4.1 the Board has
resolved to submit such determination to the shareholders pursuant to Section
4.2(b) of this Agreement for their consideration at an annual meeting thereof
to be held within 90 calendar days after such receipt and such determination is
made thereat, or a special meeting of shareholders is called within 30 calendar
days after such receipt for the purpose of making such determination, such
meeting is held for such purpose within 60 calendar days after having been so
called and such determination is made thereat.

(b) The termination of any Proceeding or of any Claim by
judgment, order, settlement or conviction, or upon a plea of nolo contendere or
its equivalent, shall not (except as otherwise expressly provided in this
Agreement) by itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did meet the
requirements for indemnification under Section 2.2. Indemnitee shall be deemed
to have been found liable in respect of any Claim only after he shall have been
so adjudged by a court in competent jurisdiction after exhaustion of all
appeals therefrom.

ARTICLE V
CERTAIN REMEDIES OF INDEMNITEE

Section 5.1. Indemnitee Entitled to Adjudication in an Appropriate
Court. In the event (a) a determination is made pursuant to Article IV that
Indemnitee is not entitled to indemnification under this Agreement or (b) there
has been any failure by the Corporation to make timely payment or advancement
of any amounts due hereunder, Indemnitee shall be entitled to commence an
action seeking an adjudication in an appropriate court of the State of Texas,
or in any other court of competent jurisdiction, of his entitlement to such
indemnification or advancement of Expenses. Alternatively, Indemnitee, at his
option, may seek an award in arbitration to be conducted by a single arbitrator
pursuant to the rules of the American Arbitration Association. Indemnitee
shall commence such action seeking an adjudication or an award in arbitration
within 180 days following the date on which Indemnitee first has the right to
commence such action pursuant to this Section 5.1, or such right shall expire.
The Corporation agrees not to oppose Indemnitee's right to seek any such
adjudication or award in arbitration.

Section 5.2. Adverse Determination Not to Affect any Judicial
Proceeding. In the event that a determination shall have been made pursuant to
Article IV that Indemnitee is not entitled to indemnification, any judicial
proceeding or arbitration commenced pursuant to this Article V shall be
conducted in all respects as a de novo trial or arbitration on the merits, and
Indemnitee shall not be prejudiced by reason of such initial adverse
determination. In any judicial proceeding or arbitration commenced pursuant to
this

-4-
<PAGE> 5
Article V, the Corporation shall have the burden of proving, by clear and
convincing evidence, that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.

Section 5.3. Company Bound by Determination Favorable to Indemnitee
in any Judicial Proceeding or Arbitration. If a determination shall have been
made or deemed to have been made pursuant to Article IV that Indemnitee is
entitled to indemnification, the Corporation shall be bound by such
determination in any judicial proceeding or arbitration commenced pursuant to
this Article V, absent a knowing misstatement by Indemnitee of a material fact,
or a knowing omission of a material fact necessary to make a statement by
Indemnitee not materially misleading, in connection with the request for
indemnification.

Section 5.4. Corporation Bound by the Agreement. The Corporation
shall be precluded from asserting in any judicial proceeding or arbitration
commenced pursuant to this Article V that the procedures and presumptions of
this Agreement are not valid, binding and enforceable and shall stipulate in
any such court or before any such arbitrator that the Corporation is bound by
all the provisions of this Agreement.

Section 5.5. Indemnitee Entitled to Expenses of Judicial Proceeding.
In the event that Indemnitee seeks a judicial adjudication of or an award in
arbitration to enforce his rights under, or to recover damages for breach of,
this Agreement, Indemnitee shall be entitled to recover from the Corporation,
and shall be indemnified by the Corporation against, any and all expenses (of
the types described in the definition of Expenses in Article I) actually and
reasonably incurred by him in such judicial adjudication or arbitration but
only if he prevails therein. If it shall be determined in said judicial
adjudication or arbitration that Indemnitee is entitled to receive part but not
all of the indemnification or advancement of expenses or other benefit sought,
the expenses incurred by Indemnitee in connection with such judicial
adjudication or arbitration shall be reasonably prorated in good faith by
counsel for Indemnitee.

Section 5.6. No Diminishment of Rights. The Corporation shall not
adopt any amendment to the Articles or Bylaws the effect of which would be to
deny, diminish or encumber Indemnitee's rights to indemnity pursuant to the
Articles, Bylaws, the TBCA or any other applicable law as applied to any act or
failure to act occurring in whole or in part prior to the date (the "Effective
Date") upon which the amendment was approved by the Board or the shareholders
of the Corporation, as the case may be. In the event that the Corporation
shall adopt any amendment to the Articles or Bylaws the effect of which is to
so deny, diminish or encumber Indemnitee's rights to indemnity, such amendment
shall apply only to acts or failures to act occurring entirely after the
Effective Date thereof.

ARTICLE VI
MISCELLANEOUS

Section 6.1. Non-Exclusivity. The rights of Indemnitee to receive
indemnification and advancement of Expenses under this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may at any time be
entitled under applicable law, the Articles or Bylaws, any other agreement,
vote of shareholders or a resolution of directors of the Corporation, or
otherwise. No amendment or alteration of the Articles or Bylaws of the
Corporation or any provision thereof shall adversely affect Indemnitee's rights
hereunder and such rights shall be in addition to any rights Indemnitee may
have under the Articles, Bylaws, the TBCA or otherwise. To the extent that
there is a change in the TBCA (whether by statute or judicial decision) which
allows greater indemnification by agreement than would be afforded currently
under the Articles or Bylaws and this Agreement, it is the intent of the
parties hereto that Indemnitee shall enjoy by virtue of this Agreement the
greater benefit so afforded by such change.

Section 6.2. Insurance and Subrogation.

(a) To the extent that the Corporation maintains an
insurance policy or policies providing liability insurance for directors,
officers, employees, agents or fiduciaries of the Corporation or of

-5-
<PAGE> 6
any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise that such person serves at the request of the Corporation,
Indemnitee shall be covered by such policy or policies in accordance with its
or their terms to the maximum extent of the coverage available for any such
director, officer, employee, agent or fiduciary under such policy or policies.

(b) In the event of any payment by the Corporation under
this Agreement, the Corporation shall be subrogated to the extent of such
payment to all of the rights of recovery of Indemnitee, who shall execute all
agreements or other documents required and take all action necessary to secure
such rights, including execution of such documents as are necessary to enable
the Corporation to bring suit to enforce such rights.

(c) The Corporation shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable hereunder if
and to the extent that Indemnitee has otherwise actually received such payment
under any insurance policy, contract, agreement or otherwise.

Section 6.3. Certain Settlement Provisions. The Corporation shall
have no obligation to indemnify Indemnitee under this Agreement for amounts
paid in settlement of a Proceeding or Claim without the Corporation's prior
written consent. The Corporation shall not settle any Proceeding or Claim in
any manner that would impose any fine or other obligation on Indemnitee without
Indemnitee's consent. Neither the Corporation nor Indemnitee shall
unreasonably withhold their consent to any proposed settlement.

Section 6.4. Exculpation of Directors. If Indemnitee is or was a
director of the Corporation, he shall not in that capacity be liable to the
Corporation or its shareholders for monetary damages for an act or omission in
Indemnitee's capacity as a director, except that Indemnitee's liability shall
not be eliminated or limited for: (a) a breach of Indemnitee's duty of loyalty
to the Corporation or its shareholders; (b) an act or omission not in good
faith that constitutes a breach of duty of Indemnitee to the Corporation or an
act or omission that involves intentional misconduct or a knowing violation of
the law; (c) a transaction from which Indemnitee received an improper benefit,
whether or not the benefit resulted from an action taken within the scope of
Indemnitee's office; or (d) an act or omission for which the liability of
Indemnitee is expressly provided for by statute.

Section 6.5. Duration of Agreement. This Agreement shall continue
for so long as Indemnitee serves in his Corporate Status, and thereafter shall
survive until and terminate upon the later to occur of (a) the final
termination of all pending Proceedings in respect of which Indemnitee is
granted rights of indemnification or advancement of Expenses hereunder and of
any proceeding commenced by Indemnitee pursuant to Article V relating thereto
or (b) the expiration of all statutes of limitation applicable to possible
Claims arising out of Indemnitee's Corporate Status. This Agreement shall be
binding upon the Corporation and its successors and assigns and shall inure to
the benefit of Indemnitee and his heirs, executors, legal representatives and
administrators.

Section 6.6. Notice by Each Party. Indemnitee agrees to promptly
notify the Corporation in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document or communication
relating to any Proceeding or Claim for which Indemnitee may be entitled to
indemnification or advancement of Expenses hereunder. The Corporation agrees
to promptly notify Indemnitee in writing, as to the pendency of any Proceeding
or Claim which may involve a claim against Indemnitee for which Indemnitee may
be entitled to indemnification or advancement of Expenses hereunder.

Section 6.7. Amendment. This Agreement may not be modified or
amended except by a written instrument executed by or on behalf of each of the
parties hereto.

Section 6.8. Waivers. The observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) by the party entitled to enforce such term only
by a writing signed by the party against which such waiver is to be asserted.
Unless otherwise expressly provided herein, no delay on the part of any party
hereto in exercising any right, power or privilege

-6-
<PAGE> 7
hereunder shall operate as a waiver thereof, nor shall any waiver on the part
of any party hereto of any right, power or privilege hereunder operate as a
waiver of any other right, power or privilege hereunder nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder.

Section 6.9. Entire Agreement. This Agreement and the documents
expressly referred to herein constitute the entire agreement between the
parties hereto with respect to matters covered hereby, and any other prior or
contemporaneous oral or written understandings or agreements with respect to
the matters covered hereby are expressly superseded by this Agreement.

Section 6.10. Severability. If any provision of this Agreement or
the application of such provision to any person or circumstance, shall be
judicially declared to be invalid, unenforceable or void, such decision will
not have the effect of invalidating or voiding the remainder of this Agreement
or affect the application of such provision to other persons or circumstances,
and the parties hereto agree that the part or parts of this Agreement so held
to be invalid, unenforceable or void will be deemed to have been stricken
herefrom and the remainder of this Agreement will have the same force and
effectiveness as if such part or parts had never been included herein;
provided, however, that the parties shall negotiate in good faith with respect
to an equitable modification of the provision or application thereof declared
to be invalid, unenforceable or void. Any such finding of invalidity or
unenforceability shall not prevent the enforcement of such provision in any
other jurisdiction to the maximum extent permitted by applicable law.

Section 6.11. Merger or Consolidation. If the Corporation shall be a
constituent corporation in a consolidation, merger or other reorganization, the
Corporation, if it shall not be the surviving, resulting or other corporation
therein, shall require as a condition thereto the surviving, resulting or
acquiring corporation to agree to indemnify Indemnitee to the full extent
provided in this Agreement. Whether or not the Corporation is the resulting,
surviving or acquiring corporation in any such transaction, Indemnitee shall
also stand in the same position under this Agreement with respect to the
resulting, surviving or acquiring corporation as he would have with respect to
the Corporation if its separate existence had continued.

Section 6.12. Notices. Unless otherwise expressly provided herein,
all notices, requests, demands, consents, waivers, instructions, approvals and
other communications hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered to or mailed, certified mail return
receipt requested, first-class postage paid, addressed as follows: (i) if to
the Corporation, AMERISAFE, Inc., 2301 Highway 190 West, DeRidder, Louisiana
70634, Attn: Secretary and (ii) if to Indemnitee, at the address specified on
the signature page of this Agreement, or to such other address or to such other
individuals as any party shall have last designated by notice to the other
parties. All notices and other communications given to any party in accordance
with the provisions of this Agreement shall be deemed to have been given when
delivered or sent to the intended recipient thereof in accordance with the
provisions of this Section 6.12.

Section 6.13. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Texas without regard
to the principles of conflict of laws.

Section 6.14. Headings. The Article and Section headings in this
Agreement are for convenience of reference only, and shall not be deemed to
alter or affect the meaning or interpretation of any provisions hereof.

Section 6.15. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.

IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered to be effective as of the date first above written.

-7-
<PAGE> 8
AMERISAFE, INC.

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

INDEMNITEE

----------------------------------------
[Name]

Notice Address:

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

-8-

<PAGE> 1
EXHIBIT 10.4

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the "Agreement") dated as of _____________,
1996, by and between AMERISAFE, Inc., a Texas corporation (the "Company"), and
_________________________ (the "Executive").

WITNESSETH:

WHEREAS, the Company has agreed to continue to employ the Executive
and the Executive has agreed to continue to be employed by the Company, subject
to and on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, it is agreed as follows:

1. Employment. The Company hereby agrees to employ the Executive
as the _____________________ of the Company and the Executive hereby agrees to
be employed by the Company in such position, subject to and on the terms and
conditions set forth in this Agreement.

2. Term. The term of this Agreement (the "Term") shall commence
on the closing date of the initial public offering (the "Offering") of the
Company's Class A Common Stock (the "Commencement Date") and, subject to
termination pursuant to Section 6, shall expire on the third anniversary of the
Commencement Date. Notwithstanding the previous sentence, on the third
anniversary of the Commencement Date and on each subsequent anniversary
thereof, the Term shall be automatically extended (subject to Section 6) for an
additional one-year period on the terms and conditions set forth in this
Agreement, unless either party to this Agreement gives the other party written
notice (in accordance with Section 15) of such party's intention to terminate
this Agreement and the employment of the Executive at least 90 days prior to
the expiration of the Term. For the purposes of this Agreement, any reference
to the "Term" of this Agreement shall include the initial term and any
extension thereof.

3. Duties of the Executive. The Executive shall devote
substantially all of his time during normal business hours to the business and
affairs of the Company. Notwithstanding the foregoing, the Executive may
devote reasonable periods of time during normal business hours to (i) serving
as a director, trustee or member of or participant in any organization or
business so long as such activity would not constitute Competitive Activity (as
that term is defined in Section 9) if conducted by the Executive after the
effective date of the termination of the Executive's employment with the
Company (the "Termination Date"), (ii) engaging in charitable and community
activities, or (iii) managing his personal investments.

4. Compensation.

(a) Base Salary. During the Term, the Company shall pay
to the Executive a base salary of $__________ per annum, which base salary may
be adjusted from time to time by the Board of Directors of the Company in its
sole discretion, payable at the times and in the manner consistent with the
Company's policy for payment of base salary to other senior executives of the
Company.

(b) Incentive Compensation. The Executive shall be
eligible to participate in any bonus plan or program or other incentive
compensation arrangement (including any stock option or similar plan) adopted
by the Board of Directors of the Company from time to time for senior
executives of the Company on such terms as the Board of Directors of the
Company may prescribe from time to time. The Executive acknowledges that the
foregoing provisions of this Section 4(b) do not entitle the Executive to any
payment
<PAGE> 2
or award under such plans, programs or arrangements, it being understood that
any such payments or awards will be determined in the discretion of the Board
of Directors of the Company or a duly authorized committee thereof or pursuant
to the terms of any such plan, program or arrangement.

(c) Employee Benefits. In addition to the compensation
described in this Section 4, the Executive and his eligible dependents shall be
entitled to participate in Company-sponsored employee benefit plans, programs
or arrangements and such other usual and customary benefits and prerequisites
made available generally to other senior executives of the Company.

(d) Expenses. The Company shall pay or reimburse the
Executive for reasonable and necessary expenses incurred by the Executive in
connection with his duties on behalf of the Company in accordance with the
policies of the Company applicable to other senior executives of the Company.

5. Place of Performance. In connection with his employment by
the Company, unless otherwise agreed by the Executive, the Executive shall be
based at offices located in [the Dallas, Texas metropolitan area] [DeRidder,
Louisiana], except for travel reasonably required for Company business.

6. Termination.

(a) Involuntary Termination. The Executive's
employment hereunder may be terminated by the Company for any reason or without
reason by written notice as provided in Section 15. For purposes of this
Agreement, the Executive's employment with the Company will be deemed to have
been terminated by the Company without Cause (as that term is defined in
Section 7(e)) if the Executive terminates his employment with the Company under
the following circumstances: (i) at any time after the Company has notified
the Executive pursuant to Section 2 that the Company intends to terminate this
Agreement and the Executive's employment (rather than allow the Agreement to be
extended); (ii) within 60 calendar days of a reduction in the Executive's
then-current base salary, unless such reduction in base salary is part of a
reduction applicable generally to senior executives of the Company; (iii)
unless otherwise agreed by the Executive, if the Company requires the Executive
to change his principal location of work to any location more than 25 miles
from the then-current location thereof; or (iv) any other material breach of
this Agreement by the Company that is not remedied by the Company within 30
calendar days after receipt of notice from the Executive of an alleged breach
of this Agreement, which notice shall specify in reasonable detail the alleged
breach by the Company.

(b) Voluntary Termination. The Executive may
terminate this Agreement and his employment with the Company at any time by
written notice to the Company as provided in Section 15.

(c) Effect of Termination. Subject to Section 9
and any requirements of applicable laws, in the event the Executive's
employment hereunder is terminated for any reason whatsoever, the compensation
and benefits obligations of the Company under Section 4 shall cease as of the
Termination Date, except for any compensation and benefits earned or accrued
but unpaid through such date.

7. Termination Payments and Benefits. If the Executive's
employment hereunder is terminated by the Company other than for Cause during
the Term, the Company shall be obligated to pay to the Executive the amounts
and make available the benefits as provided in this Section 7.

(a) Payment Period. Payments shall be made for a
period of one year from the Executive's Termination Date (the "Payment
Period").

(b) Calculation of Termination Payments. Subject
to Section 7(f), during the Payment Period, the Executive shall be entitled to
receive his base salary in an amount equal to the Executive's highest annual
base salary from the Company or any subsidiary during the three-year period
immediately prior to the Executive's Termination Date.

-2-
<PAGE> 3
(c) Method of Payment. Termination payments
shall be paid to the Executive in accordance with the Company's policy for the
payment of base salary to other senior executives of the Company, but not less
than monthly. If the Executive should die while any amounts are still payable
pursuant to this Section 7, such amounts shall be paid to the Executive's
designated beneficiary or, if none, to the Executive's estate.

(d) Benefits. Subject to Section 7(g), during
the Payment Period, the Company shall arrange to provide the Executive (and his
eligible dependents) with all employee welfare benefits which the Executive was
entitled to receive immediately prior to the Executive's Termination Date or
shall arrange to make available to the Executive benefits substantially similar
to those which the Executive would otherwise have been entitled to receive if
his employment had not been terminated. Such welfare benefits shall be
provided to the Executive on the same terms and conditions (including employee
contributions toward the premium payments) under which the Executive was
entitled such benefits immediately prior to his Termination Date.

(e) Termination for Cause. For purposes of this
Agreement, the term "Cause" means either:

(i) that the Executive shall have committed:

(A) an intentional act of fraud,
embezzlement or theft in connection with his
duties or in the course of his employment
with the Company;

(B) intentional wrongful damage to
property of the Company;

(D) an intentional breach of the
Executive's obligations set forth in Section
8,

and any such act shall have been materially harmful
to the Company; or

(ii) the failure by the Executive to consistently
meet the Company's performance standards as applied
to the Executive; provided, however, that the
Executive shall not be terminated for Cause pursuant
to this Section 7(e) (ii) unless he shall have
received a written report setting forth in reasonable
detail the manner in which he has failed to meet such
standards and within 30 calendar days after receiving
such report, the Board of Directors of the Company
shall have determined in good faith that the
Executive shall have failed to make substantial
progress in meeting the Company's performance
standards.

For purposes of this Agreement, no act or failure to act on the part of the
Executive shall be deemed "intentional" if it was due primarily to an error in
judgment or negligence, but shall be deemed "intentional" only if done or
omitted to be done by the Executive not in good faith and without reasonable
belief that his action or omission was in the best interest of the Company.

(f) Disability. If the Executive's employment is
terminated by the Company during the Term as a result of a disability and the
Executive becomes entitled to receive benefits under an insured long-term
disability insurance plan ("LTD Plan") now or hereafter paid for by the
Company, then the benefits provided under Section 7(d) shall be reduced by the
amount of the benefits received by the Executive under such LTD Plan. No such
reduction shall be made for amounts paid to the Executive under a personal
disability income plan or such other disability income plan paid for by the
Executive, whether or not the plan was obtained through a group-sponsored or
Company-related program.

-3-
<PAGE> 4
(g) No Mitigation Obligation. The Executive is under no
obligation to mitigate damages or the amount of any payment provided for
hereunder by seeking other employment or otherwise; provided, however, that the
benefits provided under Section 7(d) will terminate when the Executive becomes
covered under any benefit plan made available by another employer providing
substantially similar benefits. The Executive shall notify the Company within
10 calendar days after the commencement of any such benefits.

(h) Forfeiture. Notwithstanding anything contained in
this Agreement to the contrary, any right of the Executive to continue to
receive the payments and benefits provided under this Section 7 shall terminate
in the event that the Executive breaches his obligations under Sections 8, 9 or
10 following the Executive's Termination Date.

8. Confidentiality and Nonsolicitation Agreement.

(a) The Executive acknowledges that in the course of his
employment with the Company, he will or may have access to and become informed
of confidential and proprietary information which is a competitive asset of the
Company, including, without limitation (i) the terms of any agreement between
the Company and any employee, clients or third-parties (including reinsurance
treaties), (ii) underwriting and pricing strategies, (iii) marketing methods,
(iv) product and service development ideas and strategies, (v) personnel
training and development programs, (vi) financial results, (vii) strategic
plans and demographic analyses, (viii) proprietary computer and systems
software, and (ix) other non-public information concerning the Company and its
business and operations (collectively, "Confidential Information"). The
Executive acknowledges that the Confidential Information is the property of the
Company. The Executive agrees that he will keep all Confidential Information
in strict confidence during the course of his employment by the Company and
thereafter, and will not directly or indirectly make known, divulge, reveal,
furnish, make available or use any Confidential Information (except in the
course of his employment with the Company). The Executive agrees that the
obligations under this Section 8 shall survive termination of his employment by
the Company regardless of any actual or alleged breach by the Company of this
Agreement, until and unless any such Confidential Information shall have
become, through no fault of the Executive, generally known to the public or the
Executive is required by law to make disclosure (after giving the Company
notice and an opportunity to contest such requirement). The Executive's
obligations under this Section 8 are in addition to, and not in limitation of
or preemption of, all other obligations of confidentiality which the Executive
may have to the Company under general legal or equitable principles.

(b) Upon termination of the Executive's employment with
the Company, the Executive shall promptly return to the Company any documents
or other property of the Company which are in the possession, custody or
control of the Executive.

(c) For a period of one year following the Executive's
Termination Date, the Executive agrees that he will not in any capacity, on his
own behalf or on behalf of any other firm, person or entity, undertake or
assist in the solicitation of any employee of the Company to terminate his or
her employment with the Company.

(d) The Executive acknowledges and agrees that a breach
of his obligations under this Section 8 would cause irreparable harm to the
Company, and that the Company's remedy at law for any such breach would be
inadequate. In recognition of the foregoing, the Executive agrees that, in
addition to any other relief afforded by law or this Agreement, including
damages sustained by a breach of this Agreement and any forfeitures under
Section 7(h), the Company shall be entitled to enforce this Agreement by
specific performance, including temporary and permanent injunctions, it being
understood by the parties hereto that damages, the forfeiture provided in
Section 7(h) and injunctions shall all be appropriate remedies and are not to
be considered as alternative remedies.

9. Competitive Activity. During the Payment Period, if the
Executive shall have received or shall be receiving benefits under Section 7,
the Executive shall not, without the prior written consent of the

-4-
<PAGE> 5
Company, engage in any Competitive Activity. For purposes of this Agreement,
the term "Competitive Activity" shall mean the Executive's participation,
without the written consent of the Board of Directors of the Company, in the
management of any business enterprise if such enterprise engages in substantial
and direct competition with the Company and such enterprise's revenues from any
product or service competitive with any product or service of the Company
amounted to 25% of such enterprise's net revenues for its most recently
completed fiscal year and if the Company's net revenues from said product or
service amounted to 25% of the Company's net revenues for its most recently
completed fiscal year. "Competitive Activity" shall not include (i) the mere
ownership of less than 10% of the outstanding voting securities in any such
enterprise and the exercise of rights appurtenant thereto or (ii) participation
in the management of any such enterprise other than in connection with the
competitive operations of such enterprise.

10. Post-Termination Assistance. Provided that the Executive
shall be receiving the benefits provided under Section 7, during the Payment
Period, the Executive agrees that he will provide, upon reasonable notice, such
information and assistance to the Company as may reasonably be requested by the
Company in connection with any litigation in which it or any of its affiliates
is or may become a party; provided, however, that the Company agrees to
reimburse the Executive for any reasonable expenses, including travel expenses,
incurred by the Executive in performing his obligations under this Section 10.

11. Arbitration.

(a) Any dispute between the parties under this Agreement
shall be resolved (except as provided in Section 11(b)) through arbitration by
an arbitrator selected under the rules of the American Arbitration Association
(the "AAA"), and the arbitration shall be conducted under the rules of the AAA
in the location of the Executive's place of employment as provided in Section
5. Each party shall be entitled to present evidence and argument to the
arbitrator. The arbitrator shall permit reasonable pre-hearing discovery, to
the extent necessary to establish a claim or a defense to a claim, subject to
supervision by the arbitrator. The determination of the arbitrator shall be
conclusive and binding upon the parties and judgment upon the same may be
entered in any court having jurisdiction thereof. The arbitrator shall give
written notice to the parties stating his or their determination, and shall
furnish to each party a signed copy of such determination. The expenses of
arbitration shall be borne equally by the Executive and the Company or as the
arbitrator shall otherwise equitably determine.

(b) Notwithstanding the foregoing, the Company shall not
be required to seek or participate in arbitration regarding any alleged breach
of the Executive's obligations under Section 8 or Section 9, but may pursue its
equitable remedies for such breach in a court of competent jurisdiction;
provided, however, that any claim for monetary damages shall be resolved in
accordance with Section 11(a).

(c) Any arbitration or action pursuant to this Section 11
will be governed by and construed in accordance with the substantive laws of
the State of Texas, without giving effect to the principles of conflict of laws
of such State.

12. Agreement. This Agreement supersedes any and all other
agreements, whether in writing or otherwise, between the parties hereto (and
any such agreement between any subsidiary or affiliate of the Company and the
Executive in effect as of the date hereof) with respect to the employment of
the Executive by the Company or any of its subsidiaries or affiliates and
contains all of the covenants and agreements between the parties with respect
to such subject matter.

13. Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
the Company is required to withhold pursuant to any law or government
regulation or ruling.

-5-
<PAGE> 6
14. Successors and Binding Agreement.

(a) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation, reorganization or
otherwise) to all or substantially all of the business or assets of the
Company, by agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent the Company would be required to perform if no such
succession had taken place. This Agreement will be binding upon and inure to
the benefit of the Company and any successor to the Company, including without
limitation any persons acquiring directly or indirectly all or substantially
all of the business or assets of the Company whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor shall thereafter
be deemed the "Company" for the purposes of this Agreement), but will not
otherwise be assignable, transferable or delegable by the Company.

(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.

(c) This Agreement is personal in nature and neither of
the parties hereto will, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in this Section 14. Without limiting the generality or
effect of the foregoing, the Executive's right to receive payments hereunder
will not be assignable, transferable or delegable, whether by pledge, creation
of a security interest or otherwise, other than by a transfer by the
Executive's will or by the laws of descent and distribution and, in the event
of any attempted assignment or transfer contrary to this Section 14(c), the
Company shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.

15. Notices. For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder shall be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof confirmed), or five
business days after having been mailed by United States registered or certified
mail, return receipt requested, postage prepaid, or three business days after
having been sent by a nationally recognized overnight courier service such as
Federal Express or UPS, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive offices and to the
Executive at his principal residence, or to such other address as either party
may have furnished to the other in writing and in accordance herewith, except
that notices of changes of address shall be effective only upon receipt.

16. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Texas, without giving effect to the
principles of conflict of laws of such State.

17. Validity. If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement
and the application of such provision to any other person or circumstances will
not be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal will be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid or legal.

18. Survival of Provisions. Notwithstanding any other provision
of this Agreement, the parties' respective rights and obligations under
Sections 7, 8, 9, 10, 11 and 13 shall survive any termination or expiration of
this Agreement or the termination of the Executive's employment for any reason
whatsoever.

19. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto or
compliance with any condition or provision of this Agreement to be performed by
such other party will be

-6-
<PAGE> 7
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. Unless otherwise noted, references to
"Sections" are to sections of this Agreement. The captions used in this
Agreement are designed for convenient reference only and are not to be used for
the purpose of interpreting any provision of this Agreement.

20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.

IN WITNESS WHEREOF, the parties hereof have executed this
Agreement as of the day and year first above written.

AMERISAFE, Inc.

By
-----------------------------------
Millard E. Morris, Chairman of the
Board of Directors and Chief
Executive Officer

---------------------------------------
[Executive's Name]

-7-

<PAGE> 1
EXHIBIT 10.5

DRAFT 9/20/96

TAX MATTERS AGREEMENT

THIS TAX MATTERS AGREEMENT ("Agreement") is made this __ day of
______________, 1996, by and among AMERISAFE, Inc., a Texas corporation
("AMERISAFE"), on its own behalf and on behalf of its direct and indirect
subsidiaries (other than Auto One, the Auto One Companies, MTInc., the MTInc.
Companies, MTTFS and SUI (the "AMERISAFE" Subsidiaries"), Auto One Acceptance
Corporation, a Texas corporation ("Auto One"), on its own behalf and on behalf
of its subsidiaries (the "Auto One Companies"), M.T. & Co., Inc., a Louisiana
corporation ("MTInc."), on its own behalf and on behalf of its predecessors and
subsidiaries (the "MTInc. Companies," which, for purposes of this agreement,
shall include MOR-TEM Systems, Inc., the former parent corporation of MTInc.),
Southern Underwriters, Inc., a Louisiana corporation ("SUI"), and Morris,
Temple and Trent Financial Services, a Louisiana corporation ("MTTFS") (Auto
One, the Auto One Companies, MTInc., the MTInc. Companies, SUI, and MTTFS
collectively referred to herein as "the Distributed Companies").

RECITALS

WHEREAS, Auto One, MTInc. SUI and MTTFS are wholly-owned subsidiaries of
AMERISAFE;

WHEREAS, AMERISAFE intends to distribute all of the common stock of Auto
One, MTInc., SUI and MTTFS to shareholders of AMERISAFE (the "Distribution");

WHEREAS, The Distributed Companies have been or will be included in
Consolidated Tax Returns filed or to be filed by AMERISAFE on behalf of
Parent's Group;
<PAGE> 2
AND WHEREAS, the parties hereto desire to allocate responsibility for
the payment of federal, state, local, and foreign Taxes attributable,
allocable, or apportionable to AMERISAFE and/or the AMERISAFE Subsidiaries, and
to the Distributed Companies for the Period in which the Distribution occurs
and for Periods prior and subsequent to such Period, provide for the
consequences of Distribution date adjustments of such Taxes, and agree as to
related matters;

NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:

ARTICLE I

DEFINITIONS

As used herein the following terms, when capitalized, shall have the
following meanings:

1.1 "Affiliated Group" shall mean an "affiliated group" as defined in
section 1504(a) of the Code.

1.2 "Code" shall mean the Internal Revenue Code of 1986, as amended
and as in effect from time to time, and any predecessor or successor thereto.
A reference to any section of the Code means such section as in effect from
time to time and any comparable provision of any predecessor or successor law.

1.3 "Consolidated Income Tax Returns" shall mean all federal Tax
Returns for Income Taxes which have been or will be filed by AMERISAFE on
behalf of Parent's Group, and "Consolidated

2
<PAGE> 3
Income Taxes" shall mean the Taxes shown or required to be shown on such Tax
Returns.

1.4 "Final Determination" shall mean, in the context of federal
Income Taxes, with respect to any issue or item for any Period, (i) a final,
unappealable decision by a court of competent jurisdiction, (ii) the expiration
of the time for assessment of Taxes or filing a claim for refund or, if a
refund claim has been timely filed, the expiration of the time for instituting
suit in respect of such refund claim, if no further adjustment to the items of
income, gain, deduction, loss, or credit for such Period may thereafter be
made, (iii) the execution of a closing agreement under section 7121 of the
Code, (iv) the acceptance by the IRS or its counsel of a tender pursuant to an
offer in compromise pursuant to section 7122 of the Code, (v) the execution of
a Form 870A, or (vi) any other final and irrevocable determination of Taxes for
any Period. In the context of other Taxes, "Final Determination" shall mean,
with respect to any issue or item for any Period, any final, unappealable, and
irrevocable determination of Taxes for such Period.

1.5 "IRS" shall mean the United States Internal Revenue Service or
any successor thereto.

1.6 "Parent's Group" shall mean any Affiliated Group including
AMERISAFE or any predecessor or successor thereof.

1.7 When used in the context of federal income taxes, "Period" shall
mean any taxable year or other period which is treated as a taxable year
(including any Short Period) for

3
<PAGE> 4
purposes of the Code. When used in the context of any other Taxes, "Period"
shall mean any taxable year or other period with respect to which any such
Taxes may be imposed under any applicable statute, rule, or regulation.

1.8 "Regulations" shall mean the Treasury regulations in effect from
time to time under the Code.

1.9 "Short Period" shall mean, with respect to the Distributed
Companies, any Period beginning on January 1 of any year and ending at the end
of the Distribution date in the same year.

1.10 "State Income Taxes" shall mean all Taxes measured on or by
income imposed by any State of the United States of America or political
subdivision thereof and shall include State Taxes denominated or in the nature
of franchise Taxes.

1.11 "Tax" and "Taxes" shall mean all income taxes (including federal
income taxes, State income taxes, and foreign income taxes imposed under
Subtitle A of the Code or similar laws of any taxing authority having effect
prior to or on the Closing Date) (referred to herein as "Income Taxes"),
payroll and employee withholding taxes (imposed under Chapters 21 through 24 of
the Code or any similar or comparable payroll and employee withholding taxes
(including disability withholding taxes imposed by the laws of any taxing
authority) having effect prior to or on the Distribution date), other domestic
and foreign withholding taxes, sales and use taxes, excise taxes, real and
personal property taxes, and any other governmental imposition generally
referred to as or in the nature of a tax, whether arising before,

4
<PAGE> 5
on, or after the Distribution date. Except as may be otherwise provided in
Section 3.1(b) below, any reference in this Agreement to a particular type of
Tax (or refund thereof) enumerated in this Section 1.11 shall also be deemed to
refer to any interest, additions to Tax, or penalties that may be payable in
respect thereof.

1.12 "Tax Returns" shall mean all reports, estimates, information
statements, and returns relating to, or required to be filed in connection
with, any Taxes pursuant to the statutes, rules and regulations of any federal,
state, local, or foreign taxing authority.

ARTICLE II

PREPARATION OF RETURNS, CONTROVERSIES

2.1 Returns and Controversies--Consolidated Income Tax Returns and
Estimates.

(a) Tax Returns and Payment. AMERISAFE shall have exclusive
authority to report for Consolidated Income Tax purposes the operations of
Parent's Group, including the operations of the Distributed Companies, for any
Period ending at the end of or before the Closing Date. Subject to the terms
of this Agreement, AMERISAFE shall be responsible for the timely filing of, and
shall be liable and shall indemnify the Distributed Companies for the full and
timely payment of all amounts shown to be due on, Consolidated Income Tax
Returns and estimates of Parent's Group for such Periods; provided, however,
that Auto One shall be responsible for providing AMERISAFE with

5
<PAGE> 6
all information reasonably required by AMERISAFE with respect to the operations
and assets of Auto One and the Auto One Companies, MTInc. shall be responsible
for providing AMERISAFE with all information reasonably required by AMERISAFE
with respect to the operations and assets of MTInc. and the MTInc. Companies,
and SUI and MTTFS shall each be responsible for providing AMERISAFE with all
information reasonably required by AMERISAFE with respect to their own
operations and assets, so as to permit AMERISAFE to prepare and file such
Consolidated Income Tax Returns and estimates and to pay such Consolidated
Income Taxes and estimates on a timely basis. In calculating amounts to be
shown as due on the Consolidated Income Tax Return which includes any Short
Period, all items of each of the Distributed Companies (including items of each
corporation triggered by reason of the Distribution) shall be taken into
account in accordance with Regulations Section 1.1502-76(b) and no election
shall be made under Regulations Section 1.1502-76(b)(2)(ii) or Regulations
Section 1.1502-76(b)(2)(iii).

(b) Controversies. AMERISAFE shall have exclusive authority to
represent the Distributed Companies before the IRS or any other governmental
agency or authority or any court regarding Consolidated Income Taxes and
estimates for Periods covered by Consolidated Income Tax Returns and estimates
referred to in section 2.1(a) above, including, but not limited to, (i) the
exclusive control of any response to any examination by the IRS or any other
taxing authority and (ii) the exclusive control over any contest of any issue
through a Final

6
<PAGE> 7
Determination, including, but not limited to (A) whether and in what forum to
conduct such contest and (B) whether and on what basis to settle such contest.

AMERISAFE shall timely notify Auto One, MTInc., SUI and/or MTTFS, as
appropriate, of any correspondence and Tax controversies with any taxing
authority relating to items of Auto One, any Auto One Company, MTInc., any
MTInc. Company, SUI, and/or MTTFS, and will promptly provide such company with
copies of all such correspondence. Subject to AMERISAFE's exclusive authority
as provided for herein, Auto One, MTInc., SUI and MTTFS have the right to
consult with AMERISAFE with respect to the handling of any such correspondence
or controversies. Auto One, MTInc., SUI and MTTFS shall exercise such right,
if at all, on a timely basis. AMERISAFE shall permit Auto One, MTInc., SUI,
and/or MTTFS, as the cases may be, to attend any hearing or other proceedings
relating to any such controversies.

2.2 Returns and Controversies--All other Taxes.

(a) Tax and Information Returns. Except as otherwise provided herein
or as the parties may otherwise agree, Auto One shall have exclusive authority
with regard to all Taxes of Auto One and the Auto One Companies, MTInc. shall
have exclusive authority with respect to all Taxes of MTInc. and the MTInc.
Companies, SUI and MTTFS shall each have exclusive authority with regard to all
of its own Taxes, and Auto One, MTInc., SUI and MTTFS shall be responsible for
the correct and timely filing of, and shall be liable for the full and timely
payment of, all such Taxes.

7
<PAGE> 8
(b) Controversies. Except as otherwise provided herein or as the
parties may otherwise agree, Auto One, at its own expense, shall have exclusive
authority to represent itself and the Auto One Companies before the IRS or any
other taxing authority or any court regarding the Tax consequences of the
operations and assets of Auto One and the Auto One Companies with respect to
all Taxes covered by Section 2.2(a) above, MTInc., at its own expense, shall
have exclusive authority to represent itself and the MTInc. Companies before
the IRS or any other taxing authority or any court regarding the Tax
consequences of such companies with respect to all Taxes covered by Section
2.2(a) above, and each of SUI and MTTFS, at its own expense, shall have
exclusive authority to represent itself before the IRS or any other taxing
authority or any court regarding the Tax consequences of its operations and
assets with respect to all Taxes covered by Section 2.2(a) above.

ARTICLE III

COMPUTATIONS AND PAYMENTS OF TAXES; INDEMNIFICATIONS

3.1 Consolidated Income Taxes.

(a) Initial Computation. For each Period, including any Short
Period, for which any Distributed Company is included in a Consolidated Income
Tax Return of Parent's Group, the Tax liability of each such corporation shall
be calculated in accordance with Regulations Section 1.1552-1(a)(2) and, using
a percentage of 100%, Regulations 1.1502-33(d)(3). See Example (2)

8
<PAGE> 9
of Regulations Section 1.1502-33(d)(6). Any resulting positive amount (i.e.,
an amount owed by a Distributed Company) is hereinafter referred to as a
"AMERISAFE Receivable." Any resulting negative amount (i.e., an amount owed to
a Distributed Company) is hereinafter referred to as a "AMERISAFE Payable."
The AMERISAFE Receivables and the AMERISAFE Payables for Auto One and each Auto
One Company for each such Period shall be aggregated, and the resulting number,
positive (i.e., AMERISAFE Receivables exceed AMERISAFE Payables) or negative
(i.e., AMERISAFE Payables exceed AMERISAFE Receivables), is hereinafter
referred to as the "Aggregate." If the Aggregate is a positive number, Auto
One shall pay the Aggregate to AMERISAFE to the extent not previously paid by
Auto One or an Auto One Company. If the Aggregate is a negative number,
AMERISAFE shall pay the Aggregate to Auto One to the extent not previously paid
to Auto One or an Auto One Company. The same procedures shall be followed with
respect to MTInc. and the MTInc. Companies, and, separately, with respect to
each of SUI and MTTFS.

(b) Subsequent Adjustments; Indemnifications. AMERISAFE shall be
responsible and liable and shall indemnify the Distributed Companies for any
and all increases in Consolidated Income Taxes and shall be entitled to any
refund of any and all decreases in Consolidated Income Taxes which may be
determined pursuant to a Final Determination and which are allocable to
AMERISAFE or any AMERISAFE Subsidiary for all Periods ending before the Closing
Date and for any Period which includes the Short Period. Auto One, MTInc., SUI
and MTTFS shall be

9
<PAGE> 10
responsible and liable, and shall indemnify AMERISAFE and the AMERISAFE
Subsidiaries, for any and all increases (including any increase arising from a
loss of foreign Tax credits due to any reduction in foreign Taxes of
Distributed Companies), and shall be entitled to any refunds, of Consolidated
Income Taxes for all Periods ending before the Closing Date and for any Period
which includes the Short Period which are allocable to the Distributed
Companies. For purposes of determining the amount of any Consolidated Income
Tax increases or refunds that are allocable to Distributed Companies, on the
one hand, or to AMERISAFE or any AMERISAFE Subsidiary, on the other hand, the
amounts computed under Section 3.1(a) above shall be recomputed to take into
account all adjustments made in accordance with the Final Determination. Auto
One, MTInc., SUI, and MTTFS shall also be responsible and liable and shall
indemnify AMERISAFE and the AMERISAFE Subsidiaries for any and all interest,
additions to Tax, and penalties with respect to any and all increases which are
allocable to the Distributed Companies, respectively.

3.2 All Other Taxes. Auto One, MTInc., SUI and MTTFS shall be
responsible and liable for, and shall indemnify and hold AMERISAFE and the
AMERISAFE Subsidiaries harmless from, any increases in, and shall be entitled
to any refund resulting from any decreases in, any and all Taxes of Auto One or
any Auto One Company, of MTInc. or any MTInc. Company, or of SUI or MTTFS,
respectively, described in Section 2.2(a) above.

3.3 Time of Payment. Any amounts to be paid pursuant to Section
3.1(a) above shall be paid and made current not less

10
<PAGE> 11
than 5 days before the applicable Tax Return is due. Amounts owed by either
party hereto in respect of Tax refunds received by such party to which the
other party is entitled hereunder shall be paid by the party receiving the
refund to the other party within 5 days after the receipt or credit of such
refund, and amounts owed by either party hereto in respect of Tax increases
(including any Tax increases under Section 3.1(b) or 3.2 above, or Section 5.2)
shall be paid by such party to the other party within 30 days after the Final
Determination with respect thereto.

ARTICLE IV

COOPERATION BY THE PARTIES

4.1 Record Retention. AMERISAFE, Auto One, MTInc., SUI and MTTFS
agree that all Tax records within the possession of either shall be retained
for as long as they may be material.

4.2 Cooperation re Tax Return Filings and Controversies.

(a) In General. Each party hereto agrees that it will cooperate with
the other, and its representatives, in a prompt and timely manner, in
connection with (i) the preparation and filing of, and (ii) any administrative
or judicial proceeding involving, any Tax Return filed or required to be filed
hereunder by AMERISAFE or its delegee which includes any Distributed Company.
Such cooperation shall include, but not be limited to, (i) the execution and
delivery to AMERISAFE or its delegee by any of the Distributed Companies, as
applicable, of any power of

11
<PAGE> 12
attorney required to allow AMERISAFE and its counsel to represent such
Distributed Company in any controversy which AMERISAFE shall have the right to
control pursuant to Section 2.1(b) above and (ii) making available to the other
party, during normal business hours, all books, records (including, but not
limited to, work papers and schedules), information, officers, and employees
(without substantial interruption of employment) reasonably requested and
necessary or useful in connection with any Tax inquiry, audit, investigation,
dispute, litigation, or other matter. Notwithstanding the foregoing, neither
party shall be required to furnish to the other federal Income Tax Returns or
drafts thereof (except as otherwise expressly provided herein or as is
reasonably necessary to implement the provisions of Section 5.2 below), for any
Period, except that AMERISAFE or its delegee shall furnish to Auto One, MTInc.,
SUI and MTTFS the portions of such Tax Returns reporting the operations of Auto
One and/or any Auto One Company, of MTInc. and/or any MTInc. Company, of SUI,
and/or of MTTFS, as applicable, and the related portions of all reports
relating to the examination by the IRS or any other governmental agency or
taxing authority of such Tax Returns.

(b) Draft Consolidated Income Tax Return. In furtherance of Section
2.1(a) above, AMERISAFE shall prepare and, not less than 15 days before filing,
furnish to Auto One, MTInc., SUI and to MTTFS draft federal (and, to the extent
applicable, state) income Tax Returns reporting the operations and assets of
the Distributed Companies for any Short Period in 1996. Such draft Tax Returns
shall be prepared without regard to the items

12
<PAGE> 13
of income, gain, deduction, loss, or credit of AMERISAFE or any AMERISAFE
Subsidiary. Except as AMERISAFE may otherwise determine after consulting with
Auto One, MTInc., SUI and MTTFS, all items of income, gain, deduction, loss,
and credit of each Distributed Company shall be reported on a basis consistent
with the reporting of such items (or substantially similar items) of such
Distributed Company for prior Periods unless applicable law or a change in
factual circumstances requires otherwise.

ARTICLE V

MISCELLANEOUS

5.1 Prior Tax Sharing Agreements. This Agreement terminates and
supersedes any and all other Tax sharing or Tax allocation agreements or
practices in effect between AMERISAFE and/or any AMERISAFE Subsidiary, on the
one hand, and any Distributed Company, on the other hand, regardless of the
Period for which such Taxes are imposed.

5.2 Carrybacks. Deductions, losses, or credits of any Distributed
Company arising in a Period in which the entity generating them is not included
in a Consolidated Income Tax Return pursuant to Section 2.1(a) above may, under
applicable law, be available for carryback to a Period in which the entity
generating them was so included. To the extent applicable law allows such a
carryback to be waived, Auto One, MTInc., SUI and/or MTTFS, as applicable,
shall have the exclusive authority to determine whether or not to waive such
carryback. To the

13
<PAGE> 14
extent the carryback is not waivable or not waived, AMERISAFE shall be entitled
to the benefits of such carryback but shall pay to the applicable Distributed
Company an amount equal to the reduction in Taxes of AMERISAFE or any AMERISAFE
Subsidiary attributable to such carryback. To the extent any such carryback
causes AMERISAFE or any AMERISAFE Subsidiary to incur any additional Tax, Auto
One, MTInc., SUI and/or MTTFS, as appropriate, shall pay to AMERISAFE an amount
equal to such additional Tax. AMERISAFE shall cooperate, as is reasonably
necessary, in the implementation of this Section 5.2.

5.3 Effectiveness of this Agreement; Survival of Obligations. This
Agreement shall be effective only from and after the Distribution date. With
respect to any particular item of Tax liability, the covenants and obligations
contained in this Agreement shall not terminate until a Final Determination as
to such item and any payment required hereunder have been made.

5.4 Complete Agreement. This Agreement and other agreements and
documents referred to herein shall constitute the entire agreement between the
parties with respect to the subject matter hereof and shall supersede all
previous negotiations, commitments, and writings with respect to such subject
matter.

5.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.

5.6 Notices. All notices and other communications hereunder shall be
in writing and shall be delivered by hand, mailed by registered or certified
mail (return receipt

14
<PAGE> 15
requested), or sent by courier or other express delivery that provides for
independent delivery verification to the parties at the following addresses (or
at such other addresses for a party as shall be specified by like notice) and
shall be deemed given on the date on which such notice or communication is
delivered to the addressees at the address specified below:

(a) If to AMERISAFE:

if by hand:

if by mail:

(b) If to Auto One:

if by hand:

if by mail:

if by hand:

if by mail:

(d) If to SUI:

if by hand:

if by mail:

15
<PAGE> 16

(e) If to MTTFS:

if by hand:

if by mail:

5.7 Amendments. This Agreement may not be modified or amended except
by an agreement in writing signed by the parties hereto.

5.8 Successors and Assigns. This Agreement and all the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns; provided, however, that, except as
specifically provided herein, no party may assign or delegate any of its rights
or obligations under this Agreement without the consent of the other party,
which consent shall not be unreasonably withheld.

5.9 No Third-Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and their Subsidiaries and shall not be deemed to
confer upon any third party any remedy, claim, liability, reimbursement, claim
of action, or other right in excess of those existing without reference to this
Agreement.

5.10 Titles and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.

5.11 Execution in Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an

16
<PAGE> 17
original, but which together shall constitute one and the same agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.

Amerisafe, Inc.

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

Auto One Acceptance Corporation

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

M.T. & Co., Inc.

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

Southern Underwriters, Inc.

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

17
<PAGE> 18
Morris, Temple & Trent Financial Services

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

<PAGE> 1
EXHIBIT 10.6

SERVICES AGREEMENT

This Services Agreement (this "Agreement") is made and entered into as
of _______________, 1996 by and between AMERISAFE, Inc., a Texas corporation
("AMERISAFE"), and Auto One Acceptance Corporation, a Texas corporation ("Auto
One").

RECITALS

A. Auto One is a former subsidiary of AMERISAFE.

B. AMERISAFE has historically provided to its subsidiaries,
including Auto One and its subsidiaries, certain administrative and management
services.

C. Auto One desires that AMERISAFE continue to provide certain
administrative and management services to Auto One and AMERISAFE agrees to
provide such services on the terms and subject to the conditions set forth
herein.

NOW, THEREFORE, for and in consideration of the agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

1. Administrative Services. AMERISAFE shall provide or cause to
be provided to Auto One and its subsidiaries, if, when and to the extent
requested by Auto One, the administrative and management services described on
Exhibit A hereto (the "Services").

2. Charges for Services. (a) In consideration for AMERISAFE
providing the Services to Auto One, Auto One will pay AMERISAFE a monthly fee
of $40,000 (the "Fee"). Auto One shall remit the Fee, in full, on or before
the last calendar day of the month commencing with the month in which the
Effective Date (as defined in Section 5) occurs and continuing until the
termination of this Agreement in accordance with its terms. The Fee shall be
pro rated for any partial calendar month based upon the actual number of days
during such month in which this Agreement was in effect.

(b) In addition to the Fee, Auto One shall reimburse
AMERISAFE for all third-party out-of-pocket expenses ("Expenses") incurred by
AMERISAFE in connection with providing the Services. Following the end of each
month during the term of this Agreement, AMERISAFE shall submit to Auto One a
statement (each a "Reimbursement Statement") setting forth the aggregate
Expenses, including reasonable supporting documentation, incurred in such
month. Promptly (and, in any event, within 10 business days) following receipt
of the Reimbursement Statement, Auto One shall pay to AMERISAFE the amount of
the Expenses set forth therein.

3. Performance of Services.

(a) Degree of Care. AMERISAFE shall perform the Services
with the same degree of care, skill and prudence customarily exercised by it in
respect of its own business, operations and affairs. It is understood and
agreed that the Services shall be substantially identical in nature and quality
to the Services performed by AMERISAFE for Auto One immediately prior to the
Effective Date.

(b) Certain Limitations. Each party acknowledges that
the Services shall be provided only with respect to the businesses of Auto One
and its subsidiaries as such businesses exist as of the Effective Date or as
otherwise mutually agreed by the parties. AMERISAFE will not be obligated to
<PAGE> 2
provide Services for the benefit of entities other than Auto One and its
subsidiaries. Auto One shall use the Services only in accordance with all
applicable federal, state and local laws and regulations.

(c) Certain Information. Auto One shall provide, and
shall cause each of its subsidiaries to provide, in a manner consistent with
the practices employed by the parties prior to the Effective Date, any
information needed by AMERISAFE from Auto One or such subsidiary, as the case
may be, to perform the Services pursuant hereto. If the failure to provide
such information renders the performance of any requested Service impossible or
unreasonably difficult, AMERISAFE may, upon reasonable notice to Auto One,
refuse to provide such Service.

4. Limitations on Liability and Indemnification.

(a) Limitations on Liability. Neither party will have
any liability under this Agreement (including any liability for its own
negligence) for damages, losses or expenses suffered by the other party or its
subsidiaries as a result of the performance or non-performance of such party's
obligations hereunder, unless such damages, losses or expenses are caused by or
arise out of the willful misconduct or gross negligence of such party or a
breach by such party of any of the express provisions hereof. In no event will
either party have any liability to the other party for indirect, incidental or
consequential damages that such other party or its subsidiaries or any third
party may incur or experience on account of the performance or non-performance
of such party's obligations hereunder.

(b) Indemnification. Subject to the limitations on
liability set forth in the last sentence of Section 4(a) hereof, each party
shall indemnify, defend and hold harmless the other party and its directors,
officers, employees, agents and representatives from and against all claims,
liabilities, damages, losses and expenses (including without limitation
reasonable attorneys' fees and expenses) caused by or arising out of the
willful misconduct or gross negligence of such indemnifying party in the
performance or non-performance of its obligations hereunder or the breach by
such indemnifying party of any of the express provisions hereof.

5. Term of Agreement. This Agreement shall become effective on
the closing date of AMERISAFE's initial public offering its Class A Common
Stock (the "Effective Date") and shall continue until terminated by either
party in accordance with this Section 5. Neither party hereto may terminate
the Agreement prior to the first anniversary date of the Effective Date.
Thereafter, this Agreement shall be terminable by either party upon not less
than 90 days' prior written notice to the other party. Termination under this
Section 5 or otherwise shall have no effect on the respective obligations of
the parties prior to the date of such termination or their respective
obligations to make any payment required to be made pursuant to the terms
hereof.

6. Confidentiality. Each party shall hold in trust and maintain
confidential and, except as required by law, not disclose to others without the
prior written approval of the other party, any information received by it from
the other party or developed or otherwise obtained by it in connection with the
performance of its obligations hereunder (the "Information"). Within 30 days
after the date of termination of this Agreement, each party shall return to the
other party, or, with the written consent of the other party, destroy all
documents, data and other materials of whatever nature relating to the
businesses of the other party and its subsidiaries that it obtained in
connection with the performance of its obligations hereunder, provided that the
parties may retain any Information to the extent reasonably needed to comply
with applicable tax, accounting or financial reporting requirements or to
resolve any legal issues identified at the time of termination. The provisions
of this Section 6 shall survive any termination of this Agreement.

7. Miscellaneous.

(a) Successors and Assigns. This Agreement shall be
binding upon the parties hereto and their respective successors and permitted
assigns and shall inure to the benefit of the parties hereto and

<PAGE> 3
their respective successors and permitted assigns. This Agreement may not be
assigned by either party hereto to any other person except with the express
written consent of the other party.

(b) No Third-Party Beneficiaries. Except for the persons
entitled to indemnification pursuant to Section 4(b) hereof, each of whom is an
intended third-party beneficiary hereunder, nothing expressed or implied in
this Agreement shall be construed to give any person or entity other than the
parties hereto any legal or equitable rights hereunder.

(c) Entire Agreement. This Agreement constitutes the
entire agreement among the parties relating to the subject matter hereof.

(d) Amendment. This Agreement may be amended or
supplemented at any time provided that any such amendment or supplement must be
made in writing and signed by each of the parties hereto.

(e) Assignment. This Agreement and the rights, duties,
obligations and privileges hereunder may not be assigned by either party
without the prior written consent of the other party.

(f) Waivers. Either party hereto may (i) extend the time
for the performance of any of the obligations or other acts of the other party
or (ii) waive compliance with any of the agreements contained herein. No
waiver of any term shall be construed as a waiver of the same term, or a waiver
of any other term, of this Agreement. The failure of any party to assert any
of its rights hereunder will not constitute a waiver of any such rights.

(g) Severability. If any provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, such provision shall be deemed severable and all other provisions of
this Agreement shall nevertheless remain in full force and effect.

(h) Headings. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.

(i) Notices. All notices given in connection with this
Agreement shall be in writing. Service of such notices shall be deemed
complete (i) if hand delivered, on the date of delivery, (ii) if by mail, on
the fourth business day following the day of deposit in the United States mail,
by certified or registered mail, first-class postage prepaid, or (iii) if sent
by Federal Express or equivalent courier service, on the next business day.
Such notices shall be addressed to the parties at the following addresses or at
such other address for a party as shall be specified by like notice (except
that notices of change of address shall be effective upon receipt):

If to AMERISAFE: AMERISAFE, Inc.
2301 Highway 190 West
DeRidder, Louisiana 70634
Attention: President
Telephone: (318) 463-9052
Telecopy: (318) 463-7298

If to Auto One: Auto One Acceptance Corporation
5550 LBJ Freeway, Suite 901
Dallas, Texas 75240
Attention: President
Telephone: (214) 661-1234
Telecopy: (214) 239-6380

-3-
<PAGE> 4
(j) Governing Law. This Agreement shall be governed by,
and construed in accordance with, the substantive laws of the State of
Louisiana, without giving effect to the principles of conflict of laws of such
State.

(k) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute but one agreement.

IN WITNESS WHEREOF, AMERISAFE and Auto One have caused this Agreement
to be executed on the date first above written.

AMERISAFE, INC.

By:
-------------------------------
Mark R. Anderson, President

AUTO ONE ACCEPTANCE CORPORATION

By:
-----------------------------
James Bass, President

-4-
<PAGE> 5
EXHIBIT A

Administrative and Management Services

1. General Accounting

(a) Journal entry coding and input
(b) Maintenance of ledger system
(c) Reconciliation of bank accounts
(d) Other general accounting functions

2. Financial Reporting and Accounting Research

(a) Preparation of financial statements
(b) Research regarding the impact of accounting standards

3. Internal and External Auditing

(a) Internal audit
(b) Review of internal accounting and administrative controls
(c) Review of operational and financial management

4. Employee Matters

(a) Payroll
(b) Benefits administration

5. Risk Management

Administration of risk management matters

6. Tax

(a) Preparation and filing of all tax returns
(b) Assistance with state and local property tax compliance
(c) Assistance with financial accounting and taxes
(d) Supervision of all federal, state and local tax audits,
protests, administrative proceedings and litigation
(e) Qualification and design of all employee benefit plans
(f) Preparation and submission of all tax ruling requests
(g) Rendering and obtaining all tax opinions
(h) Qualification and reporting of stock options

7. Legal

Advice and assistance with respect to legal matters

-5-
<PAGE> 6
8. Governmental Reports

Preparation of reports required to be filed with governmental agencies

9. Human Resources

Advice and assistance with respect to compensation, employee benefits
and other employee matters

-6-

<PAGE> 1

EXHIBIT 11.1

COMPUTATION OF EARNINGS PER SHARE

<TABLE>
<CAPTION>
Year Six Months
Ended Ended
December 31, June 30,
1995 1996
---------------------------
<S> <C> <C>
PRIMARY:
Net income ............................................ $ 9,334,000 $ 4,252,000
============ ============

Shares as adjusted:
Weighted average common shares outstanding ......... 11,884,647 11,884,647
Assumed conversion of Series B cumulative
convertible preferred stock ...................... 5,515,353 5,515,353
Incremental shares from outstanding stock
options as determined under the treasury
stock method ..................................... 85,714 85,714
Incremental shares from issuance of Class A
Common Stock ..................................... 6,000 6,000
Pro forma shares whose proceeds would be necessary
to pay certain debts originated in connection with
the reorganization of AMERISAFE, Inc. ............ 4,569,357 4,569,357
------------ ------------
Shares as adjusted .................................... 22,061,071 22,061,071
============ ============
Pro forma net income per share ........................ $ 0.42 $ 0.19
============ ============

FULLY DILUTED:
Net income ............................................ $ 9,334,000 $ 4,252,000
============ ============

<PAGE> 1
EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data," and to the use of our reports
dated ______________________, 1996, in the Registration Statement (Form S-1,
No. 333-10099) and related Prospectus of AMERISAFE, Inc. for the registration
of 12,650,000 shares of its common stock.

Dallas, Texas
_______________, 1996

The foregoing consent is in the form that will be signed upon the completion of
the reorganization described in Note 1 to the financial statements.

/s/ ERNST & YOUNG LLP

Dallas, Texas
September 25, 1996

<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME FOUND ON PAGES
F-3 THROUGH F-5 OF THE COMPANY'S S-1 FILED ON SEPTEMBER 24, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<DEBT-HELD-FOR-SALE> 3,363 3,016
<DEBT-CARRYING-VALUE> 65,052 68,795
<DEBT-MARKET-VALUE> 66,840 68,434
<EQUITIES> 3,076 4,083
<MORTGAGE> 0 0
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 71,491 75,894
<CASH> 10,202 14,688
<RECOVER-REINSURE> 13,360 14,330
<DEFERRED-ACQUISITION> 316 607
<TOTAL-ASSETS> 120,440 133,905
<POLICY-LOSSES> 55,427 62,345
<UNEARNED-PREMIUMS> 3,581 4,460
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 10,299 11,014
<NOTES-PAYABLE> 10,113 12,938
<COMMON> 119 119
0 0
0 0
<OTHER-SE> 32,019 36,323
<TOTAL-LIABILITY-AND-EQUITY> 120,440 133,905
58,167 30,678
<INVESTMENT-INCOME> 4,519 2,743
<INVESTMENT-GAINS> 174 (7)
<OTHER-INCOME> 6,991 4,730
<BENEFITS> 32,924 18,356
<UNDERWRITING-AMORTIZATION> 245 250
<UNDERWRITING-OTHER> 13,279 8,127
<INCOME-PRETAX> 14,568 5,935
<INCOME-TAX> 5,234 1,683
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 9,334 4,252
<EPS-PRIMARY> 0.42 0.19
<EPS-DILUTED> 0.42 0.19
<RESERVE-OPEN> 31,242 43,304
<PROVISION-CURRENT> 36,074 18,973
<PROVISION-PRIOR> (3,150) (617)
<PAYMENTS-CURRENT> 10,219 3,296
<PAYMENTS-PRIOR> 10,643 9,353
<RESERVE-CLOSE> 43,304 49,011
<CUMULATIVE-DEFICIENCY> (3,150) (617)

</TABLE>