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Protective Insurance Corporation (NASDAQ:PTVCA)
Q3 2019 Earnings Call
Nov 6, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, welcome to the Protective Insurance Corporation Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to your host, Marilynn Meek. You may begin.

Marilynn Meek -- Investor Relations

Thank you. Thank you all for joining us this morning for the third -- for the Protective Insurance Corporation's third Quarter 2019 Conference Call. If you did not receive a copy of the press release. You may access it online at the company's website along with an investor presentation to accompany today's call and earnings release which is available at www.protectiveinsurance.com.

I would like to remind everyone that we are hosting a live webcast for the call which may be accessed at the company's website as well. At this time, management would like me to inform you that certain statements made during this conference call and in the press release, which are not historical may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Although Protective Insurance Corporation believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurances that expectations will be obtained. Factors and risks that could cause actual results to differ materially from expectations are detailed in the press release and are included from time to time with the company's filings with the SEC.

I would now like to introduce Jeremy Johnson, CEO of Protective Insurance Corporation and turn the call over to him. Please go ahead.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Good morning and thank you all for joining John and me this morning. John joined us as our CFO, a few weeks ago, he is a talented and experienced finance professional and I'm very pleased that he chose to join Protective.

Our quarterly results showed continued progress in our turnaround strategy. As a long-term specialist and ensuring large fleets of trucks, we operate in one of the most volatile segment of the property and casualty insurance industry. This quarter, I'm pleased with the continued improvement in accident year loss ratio. I am pleased to report, no material changes in our reserve and comfortable that we are managing our expenses for a competitive expense ratio over time while still investing in the talent and technology we need to position ourselves well for the future.

As I said in the last quarterly call, my priorities have been and will be to meet and speak with our customers and distribution partners and understand the value we bring and can bring to them. To build confidence and credibility with all constituents through disciplined execution of our ongoing turnaround strategy and the shape and stay of the culture of Protective for competitive advantage and to continue to attract reward and retain the very best talent in the industry. During the last quarter, we have brought on a new Chief Financial Officer, Chief Information Officer and several other key positions in the management team.

I will now turn to the highlights of the quarter and then speak a little about our ongoing turnaround strategy. Book value per share grew by 0.3% in the third quarter and total value creation after payment of the quarterly dividend was 0.7%. Total return on the investment portfolio was 1% for the quarter and 5.5% for the year-to-date. Our portfolio is well balanced and well positioned to create value. Our investment leverage is 2.57 times our equity. Our portfolio is relatively short duration and high in credit quality, 90% or $854 million of our investment assets are held in fixed income securities and cash, which we expect will create a solid base of earnings contributing to growth in book value in the future.

Our third quarter combined ratio at 107.1% was slightly higher than Q2 as a lower loss ratio was offset by higher expenses. Our expense ratio for the third quarter included charges of $1.6 million related to severance, a new high-related costs, as well as bad debt expense, which we do not expect to recur. Over the next 12 months, we anticipate further expense reductions, which will enable us to take the necessary remedial actions without elevating the expense ratio and at the same time free up money for reinvestment in talent and technology, harden our infrastructure and enables us to on-board more risk management and analytics capabilities.

The current year -- the current accident year loss ratio improved by 1.9 points compared to Q2, 2019 and improved by 3.9 points compared to Q3, 2018. Improvements are driven by rate achievement and mix shift in commercial auto. Overall, on the $35.4 million of commercial auto liability premium renewed during the quarter, rates improved by 17.5% we're moving two year policies whereby contract we could not improve pricing, rates were up by 25.6%. Moreover, we are retaining higher percentages of the better price customers and attracting new well-priced risks into the portfolio.

We have momentum in our effort to optimize rate pricing and risk selection and remain confident, that the premium that we are writing today will earn in profitably. As a specialist insurer to the trucking industry, we faced a difficult litigation climate. Our commercial auto book has not been immune to these -- to the adverse trend that has been recognized across the industry. Trucking companies have become a favorite target of an aggressive plaintiff that is attracted to the higher policy limits required to be carried by our insurers. Emboldened by outsized and nuclear verdict, we are seeing more plaintiff's counsel pushing cases toward trial and making higher settlement demand.

Expand in services, the recovery -- the influx to medical and litigation finance and general trends in social inflation had driving loss and defense costs up. These trends in practices require a diligent approach to the handling of transportation claims recognizing the factors in individual cases that could lead to potentially higher values providing a vigorous and strategic defense when appropriate and utilizing all available data to understand ultimate values. It will be critical as the industry moves forward and experienced specialist claims team focused on trucking insurers is a large part of the value that we bring to our customers and a large part of the reason why customers choose to do business with us.

We are focused on establishing accurate reserves on new claims quickly and committed to continuously reviewing all the claims making adjustments where necessary, while we do not anticipate substantial adverse reserve development in prior accident years and experience no material developments in the quarter. We believe that our commercial auto reinsurance protection in the form of a 75% reinsured stop loss for treaty year 2013 through 2018 largely insulate our financial results from potential deterioration in our reserve position. I believe we are executing very well on our turnaround strategy. We have an excellent team and we'll continue to invest in talent. Our pricing environment continues to improve and our customers and distribution partners value us. Working with them we help to make the roads safer.

With that I will now turn the call over to John and I look forward to your questions following John's comments.

John R. Barnett -- Chief Financial Officer

Thank you, Jeremy. As discussed in our press release third-quarter net loss was $0.7 million or $0.05 per share, which compares to a net loss of $12.3 million or $0.82 per share for the prior year's third quarter. For the first nine months of 2019, net income totaled $3.6 million or $0.24 per share, which compares to a net loss of $9.5 million or $0.63 per share for the prior year period.

Gross premiums written for the quarter decreased 1.1% to $137.1 million. Net premiums earned for the quarter increased to $110.3 million, up 13.9% compared to the prior year period. The increase was attributed to higher premium ceded in the third quarter of 2018 related to prior period reserve strengthening. Gross premiums written for the first nine months of 2019 increased 0.8%, to $433.2 million. Net premiums earned for the first nine months of 2019 increased 6.9% to $335.9 million compared to the prior year period.

Our operations produced an underwriting loss of $7.8 million resulting in a combined ratio for the third quarter of $107.1 million. This compares to a combined ratio of $124.3 million for the third quarter of 2018. The decrease in the combined ratio during the third quarter reflects the impact of reserve strengthening and the corresponding seeding of additional premium related to our historical reinsurance treaties in the third quarter of 2018, which did not recur in 2019.

For the first nine months of 2019 our operations produced an underwriting loss of $23.5 million resulting in a combined ratio of 107.2 which was flat compared to 2018. We continue to maintain current accident year loss ratios at a level consistent with the rising severity expectations in the commercial automobile sector as more time passes and we learn more about the ultimate performance of the current accident year. We will adjust our loss picks accordingly. Third quarter net investment income increased 20% compared to the third quarter of 2018. The increase in net investment income reflects an increase in the average funds invested resulting from positive cash flow as well as continued reallocation from equity investments and limited partnerships and cash and cash equivalent investments into short duration, high-quality bonds.

For the first nine months of 2019, net investment income increased 21% compared to 2018. Operating cash flow was once again positive during the quarter resulting in $62.3 million of positive operating cash flow for the nine months ended September 30, 2019. Book value per share, on September 30, 2019 was $25.33, an increase of $1.38 per share or 5.8% during the first nine months of 2019. This increase was net of $0.30 per share in cash dividend. We do continue to note that our operating initiatives are supported by a strong balance sheet. As a reminder, we have posted our press release, quarterly financial statements and a brief presentation reviewing our third quarter results on our website.

This concludes our formal commentary. At this time, we would be happy to take questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Ron Bobman of Capital Returns Management. Please proceed with your question.

Ron Bobman -- Capital Returns Management -- Analyst

Hi, thanks a lot. I got on the call a little bit late, I've not seen the posted presentation, so I apologize if you provide a specifics on the buyback activity during the quarter. And if there's been any activity since the quarters end, could you share that with us, please?

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Yes, we have included the buyback for the period -- so during the quarter, we repurchased $3.8 million in shares -- total shares were $227 a 1,000 shares at 66% of current book value.

Ron Bobman -- Capital Returns Management -- Analyst

Great. Okay. And anything since the quarter end.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Yeah, very minimal amount.

Ron Bobman -- Capital Returns Management -- Analyst

Okay. Jeremy in your -- when I got on your prepared remarks you shortly after the rate information that you provided, where you mentioned the $35 million of renewing premium roughly a 17% average increase in rate, but then when you strip out the multi-year portion you had sort of an average rate of, I think 25% approximately.

And then you filed with a statement along the lines of -- you expect ultimately the business is currently being written to earn in profitably. So stop me if I heard that wrong, but I think it's accurate. Given the absence of any sort of material adverse development this quarter. So in effect, the 107% is -- is sort of a clean number, the combined ratio of 107.1% is a clean number. It might take away, I just want to make sure this is in essence what you were inferring, is that ultimately given these rate increases that you expect there to be redundancy in the reserves associated with the businesses currently being bound, for example on the most recent quarter, Q3.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

That's not really the point that I'm trying to make. If you think about our combined in the quarter from an accident year, you've got premium earning into this quarter from prior quarters. Some of that was not priced at the same level as the business that we're rising today -- the business that we're rising today, we think we're pricing at a level, that it is -- that will -- in the future as it earns and produce a profit for us. When you think about our business earning into the premium this quarter, for example, books of business that we have now discontinued, that we're running hot, that's still running into this quarter, you have business that was priced in Q4 of 2018 and Q1 of 2019 before we really got our kind of our mojo going with getting significant rate increases on the book.

And then you've got premium, a little bit of premium earning in from the current quarter. And as you look out over the next -- let's just call it four quarters, you're going to have premium earning in from this quarter and due to quarters -- but you will also have -- you will also have some business that is renewed by -- almost by contract at a price point that -- we don't think is acceptable any longer. When that business comes up for renewal, we will then get more rate on that as it -- as it comes up, but we believe that the price on the business that we renew today is an appropriate price given what we -- given what we know.

Now there is also in an environment where there is quite a lot of trend, so even if you just want to stay still from a loss ratio standpoint, you've got to increase price every year fairly significantly because -- because of the claims costs. So I don't believe in our -- certainly in our commercial auto liability lines of business where we have really seeing trend. I don't believe price -- keeping a fixed price is going to be appropriate for certainly not for the foreseeable future because the loss trend is so significant. So, we have to keep getting rate increases just to stay still lying in our book. Does that makes sense?

Ron Bobman -- Capital Returns Management -- Analyst

Absolutely. What is the loss trend assumption that you are incorporating into the current period, the current quarter's book of business that you renewed at these higher rates. What's the underlying loss trend that you're assuming on that.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Ron, we actually don't disclose that, and I'd rather not disclose that, I will tell you that as we look at trend across different attachment points in our portfolio. The high you'll attach the higher the trend. So if you were promulgating offer of a $0 attach [Phonetic], you've got a lower trend and if you promulgating offer a $1 million attachment or and so on and so forth, and I would tell you that our trend factors are we believe to be generally in line with the industry, but that's right.

Ron Bobman -- Capital Returns Management -- Analyst

Okay, I understand. How about the -- you've mentioned not only in this call but on prior there has been referenced -- sort of multiyear policies. Is the mix -- is the multiyear mix going down, just by the very nature of what's going on in commercial auto.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Yeah.

Ron Bobman -- Capital Returns Management -- Analyst

Could you talk about where it was? Where it is? Where you think it's going?

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Well, sure. So I'm just going to give you rough numbers. So on our excess portfolio about half of that book was on a two-year commitment and turning into really the kind of the first quarter of this year we stopped providing two-year commitments. So as those policies that come up, we're not -- we're not renewing them as a general rule on a two-year basis. So within the next couple of quarters, I think we will fully got off the -- any two year policies and upon occasion for -- there may be one or two or three two-year deals that we will renew for extraordinary reasons, but it's not -- it's not a part of our underwriting practice going forward to offer anything other than an annual policy.

Ron Bobman -- Capital Returns Management -- Analyst

Okay. So then come March of -- the late March of 2020, the in-force book will all be -- the in-force excess portfolio will all be on annual policies without a two-year commitment remaining outstanding.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

I would say by moving into the second quarter of 2020, there may still be some deals.

Ron Bobman -- Capital Returns Management -- Analyst

Okay, close enough. I understand your point. Thanks.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Yeah.

Ron Bobman -- Capital Returns Management -- Analyst

Okay. Could you talk a little bit about public transportation and how significant that was in the mix -- in the recent past, or in '18 -- let's say, in early '19 and where you think that's going?

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Yeah, so we essentially had two books of public transportation, we had a book that was small fleet, it's up to 25 units, and then a larger fleet book and we certainly -- we saw fairly significant deterioration in that larger fleet book and so we've run that down, we're probably retaining 25% of that book and the volume on that book was $25 million or $30 million thereabouts. And then we had a smaller fleet book which -- we think that book needs rate to run, but we are committed to that smaller fleet book. So I think you could probably think about like the run rate for public transportation for us going forward as being about $35 million to $40 million of in-force premium and the majority of that being smaller fleets.

Ron Bobman -- Capital Returns Management -- Analyst

Got it. Understood. That's it for me. Thanks a lot. I'll circle back, if I have anything else.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

All right, thank you.

Operator

Our next question comes from the line of Brett Reiss of Janney Montgomery Scott. Please proceed with your question.

Brett Reiss -- Janney Montgomery Scott -- Analyst

Good morning, Jeremy. Welcome to the Board, John.

John R. Barnett -- Chief Financial Officer

Thank you.

Brett Reiss -- Janney Montgomery Scott -- Analyst

What would the combined ratio have been this quarter without the higher expenses, which you mentioned, Jeremy, you mentioned in your opening remarks?

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

About 2 points lower, approximately.

Brett Reiss -- Janney Montgomery Scott -- Analyst

All right. So instead of 107% it would have been like around 105%.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Yeah, 105% and change, yeah.

Brett Reiss -- Janney Montgomery Scott -- Analyst

All right. That's good.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

And perfect, that's absolutely.

Brett Reiss -- Janney Montgomery Scott -- Analyst

Yeah, can I just circle back to the arithmetic on the share buyback in this quarter. I'm looking at your second quarter release. Were you had repurchased 526,832 shares. And in the third quarter, it's up to -- for the whole nine months, 618,032 shares. So, I come up with you purchased like 91,200 shares this quarter. Did I hear you say it was 219?

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Yeah, so this quarter, we repurchased early 228,000 shares.

Brett Reiss -- Janney Montgomery Scott -- Analyst

Okay.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

During this quarter.

Brett Reiss -- Janney Montgomery Scott -- Analyst

All right, during this quarter. All right, and it was at an average price of what and what is the breakdown between the A and the B share.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

In line with what we've repurchased historically, it was very little of the A shares and our repurchase price was 66% or above our current book value.

Brett Reiss -- Janney Montgomery Scott -- Analyst

So, 25 times, 33 times [Phonetic], 0.66, so around $16.71.

John R. Barnett -- Chief Financial Officer

Right around there.

Brett Reiss -- Janney Montgomery Scott -- Analyst

Okay. How much remains when you share buyback authorization and do you have the wherewithal without jeopardizing ratings to continue to aggressively buy back stock down here.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Yeah, at this time, based on our current plan to execute share repurchase, we feel we have the appropriate approval for the near term.

Brett Reiss -- Janney Montgomery Scott -- Analyst

Great. Thank you for taking my questions.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Jayme Wiggins from Palm Valley Capital. Please proceed with your question.

Jayme Wiggins -- Palm Valley Capital -- Analyst

Hi, good morning. In general, is there anything unique about the business. You're not renewing versus what you're keeping the size of pricing for the cancellations more toward the newer customers, old customers, bigger ones, smaller ones?

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

On the commercial order liability book. Not really, I mean there is certainly been a handful of accounts that we have made a categorization that we just don't -- they shouldn't be on the books anymore, but for the most part it's market-driven and we find that we lose -- we are more likely to lose an account that needs more rate than the average, i.e., we are losing -- where we lose business. It's generally speaking the accounts that need more price. So that's a good thing, we think we're losing more of -- we're losing accounts that are more under-priced than the average account is under-priced. Does that makes sense.

Jayme Wiggins -- Palm Valley Capital -- Analyst

Yeah, one more from me in 2017 protective began marketing workers' comp coverage to non-transportation clients and in last quarter's 10-Q you guys disclosed that you have litigation with personnel staffing group, which I think was your first major customer in that space, and now it appears PSG has also engaging in similar lawsuits with a couple of other insurance companies to proceeded Protective in serving them. I'm not exactly sure what went into Protective's decision to attempt to serve a toxic client like that one, especially outside of the core market, but now recognizes this was a different leadership team, but I will ask -- are you still writing workers' compensation policies to clients that are in the commercial auto space, and if so why?

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

So we write a book of about $20 million for smaller relatively low risk workers' compensation exposures. We certainly do not write any staffing companies or PEOs. We write some retail stores and some restaurants and some small manufacturers. Frankly, as I kind of think about where I want to take the company as a specialist in the transportation of actually a specialist in the wheel space, I think you'll probably see that -- even that book will tail off in the future as we focus on trucking and wheels and very little outside of that, we also have a book that's performed extremely well for us of cannabis growers and our workers' compensation for cannabis growers and that's book that we remain committed to, but that will probably be the only area that we're focused on outside of wheels, for -- from our workers' compensation standpoint.

Jayme Wiggins -- Palm Valley Capital -- Analyst

Thank you.

Operator

[Operator Instructions]. Our next question comes from the line of Steve Ben [Phonetic] of RBC Capital Markets. Please proceed with your question.

Steve Ben -- RBC Capital Markets -- Analyst

Good morning, gentlemen. I wanted to ask you a couple of questions. On Wall Street Journal about 60 days ago ran a story on shippers and their profit squeeze and the first item that was mentioned in the interview was insurance cost which they had cited -- this carry had sided their monthly cost have gone from 181,000 up to 300,000 for coverage, obviously not a high level of detail there, but the pricing environment would seem to be in the industry, if that one case is an indication, one that certainly is more favorable than it has been, but I'm a little bit surprised to hear that your rates start up healthy, even a little bit more than that 24% I believe number that you cited? What's the competitive environment like and where are you guys on that scale?

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

So I mean it's a hard question to answer in a short amount of time. It's -- that we certainly have competition, but it's not a highly competitive environment. We think we have a good book, we like the risks that we have on our book. We just feel and obviously you can see that in the numbers that, it's under-priced. There is -- there is a lot more distress in the excess market than there is in the primary market and a lot less competition in the excess market. So if you were to, if you are a trucking company building a tower of insurance of $50 million.

You might expect rate increases in the area that we're getting for your first $2 million to $5 million, but you might then expect significantly higher rate increases as you go out of that tower, because if you think about like the impact of these nuclear verdicts, we met, that's really hitting the excess carriers as they -- as their claim gets bigger and bigger sitting in the excess more than it in the primary. If you could kind of think about that, just the extrapolation of large verdicts hitting more people in the excess tower, because the primary tower would be taken away -- anyway by mid-sized claims. Does that makes sense.

So there is lot more distress in the buffer layers and the excess and in the umbrella for truckers in ready for anybody who is in commercial auto driven by these extraordinary nuclear verdicts that are increasing in volume and in value. There is more extraordinarily large claims hitting the trucking industry and whether that's private transportation or public for higher truckers.

Steve Ben -- RBC Capital Markets -- Analyst

Okay, thank you for that. And in a related way, is there a rule of thumb that we might be able to look to in order to get your combined ratio down and in 97% to 99% range from 107%. How much price relief further and granted obviously, I'm asking you would -- we're operating in dark in terms of what the claims experience will be, but just from the pure underwriting standpoint, how much more price are you're going to have to get -- to get the double-digits on the combined ratio.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

It's a bit of a tough question, so it is a very legitimate question, a bit of a tough one to answer because we have multiple books of business that have different, rate needs. The numbers that you cited -- the combined ratio numbers that you cite. I mean, if we were 97%, 98%, we think in this kind of interest rate environment, we would probably be achieving about a 10% ROE. So those are very reasonable targets to expect us to try to achieve in a shorter time as it will take us to earn through increases on our commercial auto book and sustain a hopefully, reasonable price point in our workers' compensation book.

Steve Ben -- RBC Capital Markets -- Analyst

Okay, that's quite a easy answer that I am [Speech Overlap]

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

No, sorry.

Steve Ben -- RBC Capital Markets -- Analyst

We're working for -- that's all right, I am sure, it was a right one, but, and -- all are lazy people I shouldn't say all, but it's easier for us to work from these numbers. But in order of magnitude, it's in the -- on back of the envelope that you need to get about half again more than you currently are getting a rate release if you just sort of looked at it arithmetically.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Yeah, In commercial auto, I would say that's, you know far off. I mean, we certainly think that we need high single-digits and further rate increases in commercial auto and as I've spoken about before. We have some of these two-year deals that we haven't hit. I'm sorry, that's the wrong word, that have not yet come up for renewal, and so we have not changed the price on, and those will continue to come through. And then, there is trend on the portfolio, so yeah. We believe we need and anticipate that we will continue to get fairly significant rate on the commercial auto portfolio.

Steve Ben -- RBC Capital Markets -- Analyst

Okay. And then two more quick questions for you. In the context of your pricing for miles driven as opposed to ensuring vehicles how, how sensitive is that if we get into a little bit weaker economy with how you bill for the services you're providing, and as it relates to miles driven. If we had or a soft recession, how quickly does it pass through to premiums, how does that work.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

It would pass through the premiums, yeah, absolutely. Many of our policies are in reporting forms the premium earned through over the course of the year, if there is less miles driven, the premium may come down. I mean, there is some minimums, of course, but there will be a translation into top line initiative, also via translation into bottom line two, as there is less -- there should be less risk.

Steve Ben -- RBC Capital Markets -- Analyst

Good point. My last question for you, as Mr. Shapiro state and his holdings, and I believe for our core correctly [Phonetic] that he holds eight shares and since you reported that was very low, we have eight shares that we purchased in the quarter. Is that a roughly one-fifth of the company. Is that a bit of an overhang in the market. Are they able to convert into B shares and sell. How does that work?

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

I don't really want to get into that on this call.

Steve Ben -- RBC Capital Markets -- Analyst

Okay, fair enough. Thanks for your time.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

I appreciate your questions.

Operator

Next question comes from the line of Ron Bobman of Capital Returns Management. Please proceed with your question.

Ron Bobman -- Capital Returns Management -- Analyst

Hi, thanks. One more topic. Retention on the -- if we sort of put workers' comp aside and just focus on the wheels book, how did retention compare in this third quarter as compared to -- let's say, the sequential preceding second quarter. Thanks.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Yeah. It's was down a little bit.

Ron Bobman -- Capital Returns Management -- Analyst

Could you be more specific.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

If it was trading in -- if it was running mid-'70s overall in the second quarter, it would be kind of high-'60s in the third quarter.

Ron Bobman -- Capital Returns Management -- Analyst

Okay. And is that you characterize it is down a little bit. Is that magnitude, change your conviction for the magnitude of rate that you are pursuing now currently in the fourth quarter or is that in except, OK [Speech Overlap]. Thanks.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Yeah, and as I said earlier, we think that we're retaining a better accounts. So I mean, look -- you always have to try to balance rate and retention, but, I mean, our commitment is to getting the rate on the book in order to get the loss ratio down, and I'm measuring top line is not a priority for me.

Ron Bobman -- Capital Returns Management -- Analyst

Perfect answer. Thank you.

Operator

We have reached the end of the question-and-answer session. I will now turn the call back over to Jeremy Johnson for any closing remarks.

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

Thank you. And I appreciate all of you joining the call and great questions, and I look forward to speaking to you next quarter.

Operator

[Operator Closing Remarks]

Duration: 39 minutes

Call participants:

Marilynn Meek -- Investor Relations

Jeremy D. Edgecliffe-Johnson -- Chief Executive Officer

John R. Barnett -- Chief Financial Officer

Ron Bobman -- Capital Returns Management -- Analyst

Brett Reiss -- Janney Montgomery Scott -- Analyst

Jayme Wiggins -- Palm Valley Capital -- Analyst

Steve Ben -- RBC Capital Markets -- Analyst

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