Amerisafe, Inc. (NASDAQ:AMSF) Q3 2019 Earnings Conference Call Transcript
Nov 01, 2019 • 10:30 am ET
Good day everyone, and welcome to AMERISAFE's 2019 Third Quarter Earnings Conference. Today's call is being recorded.
At this time, I'd like to turn the call over to Kathryn Shirley, Executive Vice President and General Counsel. Please go ahead.
Kathryn H. Shirley
Good morning. Welcome to the AMERISAFE 2019 third quarter investor call. If you have not received the earnings release, it is available on our website at www.amerisafe.com. This call is being recorded. A replay of today's call will be available. Details on how to access the replay are in the earnings release.
During this call, we will be making forward-looking statements. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Actual results may differ materially from the results expressed or implied in these statements if the underlying assumptions prove to be incorrect or as the results of risks, uncertainties and other factors, including factors discussed in today's earnings release, in the comments made during this call and in the Risk Factors section of our Form 10-K, Form 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement.
I will now turn the call over to Janelle Frost, AMERISAFE's President and CEO.
G. Janelle Frost
Thank you, Kathryn, and good morning, everyone. It has been interesting listening to and reading earnings comments thus far this quarter, as insurance CEOs have discussed giving rate followed by the pause or parenthetical except in workers' compensation. The news workers' compensation is that most states continue to approve loss cost declines. For AMERISAFE, this meant voluntary premium for policies written in the quarter were down 8.6%, while on account basis, we were down 1.3%. We continue to have strong policy retention of 93.4%, as we maintained underwriting discipline, reflected in our 1.62 effective loss cost multiplier or ELCM. I'll pause here to remind those of us who like to plot data points that ELCM is best compared quarter over prior year quarter, not sequentially.
Our second quarter ELCM was a 1.61. However, this quarter's 1.62 was down from 2018's third quarter of 1.65. That being said, the primary driver for the decline in premium was simply earning less premium per $100 of payroll. Offsetting the rate declines were stronger payrolls. Audit premium premium and other premium adjustments added $2 million to top line compared to a decrease of $2.1 million in last year's third quarter. In total, gross premiums written for the quarter were down 3.2% from the third quarter of 2018.
While declining rates lowered premium and competition remained strong, we produced an attractive return on equity of 18.6% this quarter. Our ROE, our long-term capital adequacy along with our commitment to creating shareholder value led to the declaration of an extraordinary dividend of $3.50. This quarter's ROE was supported by favorable loss ratios and expense management.
Neal will provide color around the expense management, but allow me to provide additional information about our losses. Our loss in