DGICA - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen thank you for standing by and welcome to the Donegal Group Third Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today Jeff Miller, Chief Financial Officer. Please go ahead.

Jeff Miller

Thank you very much. to and Group XX nine welcome the call XXXX. and quarter third months morning the conference Donegal for Good ended September results. Yesterday outlining a issued quarterly afternoon news we our release

visit a the website For donegalgroup.com. that of release at Investor section of copy Relations our please

today's business and Executive At strategy with I'll Kevin's discuss Burke, and Officer questions and update an President recent our have. prepared open of you will for comments our conclusion details. number initiatives. the of developments Kevin quarterly overview you call will In we Chief might a on financial line of our follow comments the any

we that Before the we forward in provided our from but aware materially looking statements involves we our to get information a risk we news further number release, on about looking report cause commentary Form statements to and and statements, be described that actual results today of the includes differ we looking could you that project started, submitted forward forward in risks the in should SEC. those factors uncertainties. XX-K

our results access to reconciliation our non-GAAP Filings news the of yesterday. measures Investors information issued certain section our We XX-K under you the can You SEC through website link. analyze to in included financial and use Form refer business the of non-GAAP the release we

Kevin. over that I'll turn to it With

Kevin Burke

welcome and everyone. Jeff Thanks

results focus XXXX strategies numerous of tactical of has started to business XXXX has over begin dust the shifted plans nine settle our measures commercial we and achieve efforts first see and months our sustained objectives. over personal and back clear past XXXX to return lines action Looking the favor in to forward-looking profitability. two of longer-term from the to in The mix lines shift to years we implemented can on our to

and consistent value underwriting over time. solid Group profitability to Ultimately position a growth foundation goal our book and is Donegal develop to deliver

business grew provide in results third Commercial XXXX over and and writings XX% several quarter solid Our total third in quarter. key areas. exceeded XX% evidence by again our premiums progress year-to-date of the of

over achieved commercial We were pleased not of business. growth specific and with year targeted profitability have quarter increases lines incremental business focused personal pricing addressing business reflected level renewal of the auto. that on Commercial writings primarily remain modest on new and the strong and lines average prior improvement

We seeking on to are profitable opportunities in - where focused focusing profitability. geographical and we see scale specific growth markets attractive on increase

written and our commercial continuing we largely double-digit Despite premiums auto regional our commercial competitive net lines conditions markets multi-peril with business achieved increases. in resulting in increases the rate from in percentage growth auto

We to commercial our and service levels have historical agents we superior strong attribute with relationships ongoing customers. growing commitment norms provide to we retention consistent our agents the independent and maintained have which both to our with and

is report our line lines third And a nine ratio first for Top commercial XXXX. of combined growth with and profit XX.X% months without quarter meaningless segment for the the that profitability. XX.X% I'm the of solid pleased generated to underwriting has

improvement - over ratio commercial the significant prior for the segment for represent in year-to-date Our first XXX.X% a period. underwriting results year combined the our

increases. of improvement the lines will before will auto rate impact peers of profitability it commercial take provide that We experienced our recognized Jeff and some the more line. modest of in but we on recent our time achieved many performance in industry details

the X% to year. pleased quarter first mandated in reductions On we that rate decrease nine and spite approximately to for for regulatory compensation months impact been were approximately able Workers' limit X% third the front the the rate we've the of of

generate line compensation ratio quarter. an rate offset for third XX.X% reductions profitable our business to combined Workers' the results New and than writings more continues posting

resulted have aggressive and underwriting in prior XXXX of premium a periods. in Moving The to compared personal lines. actions reduction rate to writings implemented we

the While net third to Personal our us path $XX.X million profitability those believe quarter. for on exceeded XX.X% declined personal have within the put we written has premiums approximately our a forward. plan, we improve lines move actions to business lines attrition level segment as

to X% achieved Approximately that exit in the we our where X years. recent markets of in from lines had decline was attributable states not personal profitability

have those lines to majority decision those our nonrenewals referenced of and We personal by vast in states expect in the non-renew of the previous to calls complete policies end X XXXX.

will was quarter third on his the impact impact weather of Jeff weather the elaborate relatively terms comments. In quiet. during

underwriting predictive is quality restoring approach determine growth areas. and will and on to current adjustments to existing review appropriate usage business in continual of our guidelines of ability for business to that a new enhance to models Our personalized compete select profitability lack our addressing the basis

we independent high-priority our for and initiated business profitable as enhanced lines design to modern new effectively personal auto pricing to implement we] and a technology personal through products importantly project agents. More homeowners data and us tools precision and have to allow compete utilize analytics that enhance

Our product expect progress working are diligently as we look new in we major this on XXXX. this initiative. begin the important early and analytics initiative forward development enterprise on products We providing to make and implementing details teams to more

I'll With with closing an comments. that over I'll for to turn and call overview a of the quarterly then our return results Jeff few

Jeff Miller

Thanks Kevin.

written questions net XXXX. of the premiums welcome written net any Overall the the a later $XXX.X net for third XX.X% X.X% the quarter third lines few $XXX.X financial grew premiums by operational for for written earned call. and quarter to premiums metrics and million million X.X% and in personal Net increased decreased declined certainly XX.X%. commercial I'll premiums highlight lines to while

compared XX% commercial our lines percentage quarter the continue we written for XX% as total writings our to business in to the approximately premiums quarter a toward shift represented year line. higher prior of Commercial mix net of

attribute insurance auto regions by a new averaged Similar and to throughout for our have increases increases decrease renewal in average to the accounts increase average few of premium price the X.X% pricing compensation Workers' commercial a the written was growth their quarter renewal in offset X.X% an Commercial we premium. reinsurance rate. largely as X.X% lines lower quarters commercial commercial past subsidiaries primarily operating continuation rate

offset by commercial X an and premiums personal averaged that personal to for quarter lines market growth lines That states. impact from reinsurance business the by in lower growth in largely The lines reduction in of due partially premiums. the written net increases the rate our lower XX.X% new unprofitable was exit were offset X.X% and

the XXXX a third million compared lower of loss than results. underwriting XX.X XXXX for much for improves the $XX.X quarter points the quarter Weather-related which for percentage X.X for ratio points million of to the reported or loss $XX.X of third or quarter XX% losses of to of loss third Moving loss the third percentage ratio ratio XX.X% XXXX. the XXXX. We of the of quarter were the ratio

quarter. which weather the Large as for third Weather-related losses $X.X $XX.X fire third losses fire quarter quarter of $XXXXX losses or individual weather-related of define receive in million XXXX. from average for did activity loss substantial XXXX percentage quarter the were was third of the the five-year as system loss storm million claims any for lower not excess we previous points X.X also ratio during our we than major of or

year percentage loss than higher losses X.X large the points quarter was XXXX. homeowners for the losses quarter. the or of fire ratio $X.X the commercial amount both large of increased million the third quarter Compared That third and fire during prior with

the the said within large total total of having our prior accident incurred fire on property But majority development in Net $X.X was losses have reserves quarterly ratio loss not third losses XXXX did the one and that a years impact average of impact the for on of quarter for increase. material commercial for million and the favorable modestly was for XXXX. loss a accounted

losses offset severity commercial of commercial development multi-peril with within the personal by modest past subsidiaries Workers' in in loss auto years. stability noted experienced Like of Our losses third our in increasing we unfavorable loss quarter injury reserves. partially a our relative and of few over compensation insurance peers have favorable the many bodily trend XXXX development

rising in $XX severity our we over course loss million year. As significantly XXXX adding that trend in reserves a reserves reminder of to recognition strengthened during response of the additional

increase continued a in in increase premiums That in only of to net a loss months reserves year-end a earned only net represents comparing a total in X.X% We've to nine in X.X% compared earned increase XXXX with premiums. of add XXXX first reserves XX% to to XXXX. the net X.X% increase reserves

noted personal moderate paid our over line increases line auto auto by have average the trends commercial in bodily write years. due to While is claims severity we in less for lower past we injury auto the several compared personal amount claim to impacted that limits,

than did have for the a but the We fewer that primarily to reserves increases settle expected for personal less reflect the less $XXXXX pace than years than we have have been ultimate we that believe higher driven higher increases increases The than kept fact ago. rate claims settling with claims we have few levels $XXXXXX past losses. and cost in continued to auto set loss at by

to an We in average auto pattern paid of settlement loss this in in commercial number recent claims to overall view point we've increases have the in the have increase ultimate we experienced of large not similar claim increase seen in the but and continued estimates of losses lengthening years.

increased to of XXXX reserves increase auto compared have X%. only Commercial exposure an XX% in

to from we premium trends to as high as where to elevated we ranging XX% experience XX% the accounts addition experience. reserve accounts claim increases had X% XX% on In auto are with have geographies loss-free to in responding and through loss loss on commercial to increases

increases will next continue average the we several in a substantially increases, of increased rate As commercial earn per the our premium over years over has to unit we XXXX. implemented past and year result as increase the rate premium the

increase continue higher we settlement. to award expect factors in other loss as market increasing that litigation firm driving auto higher average the jury quarter legislative implemented to changes and said in activity an a I and As will X.X% reminder commercial the in third earlier, response

underwriting with In auto non-renew actions poor auto we rate increases the addition in to have various significant accounts loss and writings commercial commercial geographies auto taken experience slow to business existing certain new to exposure. or

the third XX.X% slightly for was to prior up was XXXX third expense prior third attribute for we ratio agents the total for quarter ratio compared quarter higher expense to XXX.X% In incentive primarily XXXX employees for our from year combined quarter. combined XX.X% the year quarter XXX.X% quarter. The favorably to ratio and ratio our increase the costs XXXX for which comparing the underwriting-based the the

with underwriting but due third profitability. of Net invested income target in to We primarily further relative was continue the the of prior third XX.X% average quarter. an for to investment XXXX increase in $X.X million are to the assets up year improvement progress pleased incremental quarter

of losses have stable the third rates to of we investment Our equity yields that both again investment $XXXXXX changes at fallen for investment the lower gains maturing quarter the modestly value but average to million for than once of yield net period securities XXXX remained prior levels reinvestment investments. of compared in held the has related relatively the are the that end year to $X.X primarily of with periods. Net respective amounts market

third XXXX third conclusion million Class of the was A compared the per In per to quarter A $X.XX net million diluted of $X.XX income $X.X or share for net quarter $X.X XXXX. for or Class share income

let With Kevin. it to me that turn back

Kevin Burke

Thanks Jeff.

executing We're ultimately in effectively maintain with quarter more focus our to by designed to on and that results strategies and compete the performance. operational initiatives and further key financial efficiency us help pleased improve related enhance continuing generally look third our improvement to momentum

as the in December at well to within period during XXXX $XX.XX unrealized first contributed book compared of at to increase available-for-sale income $XX.XX to our an during September value XXXX. XXXX nine XX XX Net the as portfolio months bond gains

designed generate Our goal remains to for long our the term. strategies returns stockholders favorable on to consistent over successfully execute

any you the ask we'll that lines for open With questions the may have. operator to that

Operator

Instructions] question Christopher first ahead. [Operator Campbell from Please The KBW. of go comes

open is line Your

Christopher Campbell

comp. on year-over-year contribute guess were much really I did to worse bit how this still guess reserve first Workers' results versus little last strong. Results year's? a question but releases is I quarter's

Jeff Miller

in ratio XXXX was of the - loss of X.X%. quarter in it the in development ratio. on points loss was And X-point in third quarter the third reduction X the an impact reserve terms the year This

Christopher Campbell

things And like of switching commercial in you some auto pressure some to then Are component like casualty out liability reports of or just lines. casualty There within has inflation there. and the you of property? the of seeing are that over that the been social any

Kevin Burke

inflation we quarter been calculate piece we're the as that's it's subjective to as know term that. the buzzword for a the all trying social last how Well Chris on do - you and

as the year. We some average to Southeast seeing regarding the comments signs side see in out We started actions are well. reflects to the our We're of back we even on that elevation the elevation on call seeing auto elevation took particularly on that of last I some Jeff's And personal commercial coming it paid terms of side. claims think region.

to that started and see XXXX to Sitting our in here very took I'm aggressively we action it as third the it to - dramatic very - we're to as look auto some we started commercial the seeing conservative auto personal the at glad did are reserve And but as year. X continue and in we of we quarter going that well in last positions the lines. be

Christopher Campbell

mean onetime underwriting quarter this that any loss? I in homeowners. to driving items switching the And

Jeff Miller

a and on that was water not not where well Yes. fell There claims weather-related. as house that losses were case it were resulted unusual broken some fires that pipes some as but weather-related some a were Also claims tree and damage. not liability kind there some of a unusual from was

kind unusual activity that's nothing trend So we claim there say but would is of some just a forming. that

Christopher Campbell

just one. rolling an you the arrangement? that then guys And into have to pooling on are And last your Mountain update start plans Do when one States?

Kevin Burke

Mountain after almost million quarter loss continue in new month are month we're seeing that progress Well of our make underwriting that result new - of to $X very all solid actions for come business very They a solid quarter. took and XXXX. XXXX up as in down to year-to-date continues we XXXX business we're late ratios States after

very solid So there. we continue to see progress

right we're now. in pooling that decided them have the going we arrangement include to However not

X there that will is months. in the to into We that We pooling to sure the before make we XX just bring consistency it want revisit arrangement.

Operator

question next Boenning Bob from and go comes Your of Farnam Scattergood. Please ahead.

is line open. Your

Bob Farnam

- out can quarter. just had in that - and minimal you break you could I'm sure said you line. you by kind downs the - of just Can line? ups you you there's of have reserve if break Jeff by kind development

Jeff Miller

Sure. I'd be that. glad to do

development then in that in Workers' million favorable of $XXXXXX CMP auto of by $XXXXXX. about in We of favorable. about was auto comp. unfavorable offset favorable in it's personal a and had development number said As was million And comp not big development $X.X And had I Workers' development. about $X.X we commercial unfavorable although of

then are other lines and small numbers. And the very but up down

the is auto are would in line have modest So lines. all our numbers those with overall of And within Workers' comp expected we quite range generally on what expected.

Bob Farnam

a auto combined commercial increases is trying loss rate for excess obviously are And the of quarter you're amount related so ratio increases trend? mean huge development. believe the Not of you to to getting of that the up? into there. a kind - - XXX%. I of getting still you adverse lot Are the Or catch you're rate getting

Jeff Miller

a line for as difficult Yes. of That's know business everyone. you

past believe high we've where loss some calls elevated of project experience significantly but a getting We are activity. rate. our loss in loss have some continuing rates large at are we ultimate had about trends to jurisdictions terms ahead in We that our increased level of reflects we losses the that the that talked that of level of in we've

as earned per example on the our For We've states the stick two XX% that some we increase some of the that Georgia that rate in will measuring increases last XXXX. most mentioned average in average a loss past. even states as years. earned That's elevated higher of where is XXXX XX% premium another And of in in had have we've the our it expect taken up we there over unit the in state we experience.

also, accounts only the definitive if XX% we're exposures of XX% not actions exceeds rates commercial the premium account but overall mentioned threshold that increase as certain the non-renewing reducing state are premium. we And by Kevin auto to very in some taking to

amount those in actions with loss our cost we So losses between loss that we significant least increases the at In by keeping of pace primarily are a increases. the have premium believe because driven line. we case are don't that large cost

loss few that of the direction in premium the Georgia think large severity for we scaling But trends has activity, that our loss increases overall losses back one an line severity kind severity into of increases. than higher swing actually or another. because particular large should back So really bring outlier will loss our be state such proportion the a been in can

Bob Farnam

other commercial limits? have for any to and conditions - policies you Have auto Or in terms changed that for you these sense? reduce losses maybe

Jeff Miller

classes Not back the of writing some limits the geographies. se terms and that of particularly but per pulled we have in we're

experience our are terms where relatively quite experience. in good of in states higher much we've growth loss commercial the states. good new activity Midwest auto the commercial we the in Our and business is other seeing that had is And

the to experience. shifting have within particular expectations geographies where have we're in more exposures performed poor line overall that we had mix of So reducing states have from that and premiums our

Bob Farnam

your rates done in you've go terms of as to you having raising policies? competitors? of been a sticking? And increases Or leaving have have lines you all - been of been these in other the basically rate this lot Is retention how to people have

Jeff Miller

is This lines are retention steady. holding our commercial Jeff Yes. In again. ratios

We XX% we've last around years. in XX% in are several where range been XX% the

In seen much actions lower historically just have we in looks from past in it been writings personal new lines retention over our some than business taking. X line. because lower states slip of of would of because seen year an exit and the slightly to what we So have amount that that the we've that's

we half our XX% would around have been and ago. down about retention where XX% closer We're to years personal for lines one

too low. was we rate than then we to that that it because wanted that were as back be course what mentioned really Of levels higher our indicated

Bob Farnam

states in expect pick point to you the lines as some the complete So up that of the next retention year? personal would X you roll-off

Kevin Burke

at year look Kevin. XXXX we to moderate That plan start we're next is forecast we Bob Yes. that out. when incorporating as our should this

little we are be XXXX. certain little important piece the They're very and a stabilize areas lines increases other we stepping bit a critically a as in are bit decrease back of defined may going really the some The us. more even for be existing is to taking. in sustain for on of And That's we to little work book rate bit certain personal a that areas business of there modest.

Operator

There at Miller will remarks. time. this Jeff over for the are I questions call no closing further turn to

Jeff Miller

look for Have financial We reporting everyone joining a again forward XXXX. in February results our speaking you call day. today. you thank after Well good the to year-end to

Kevin Burke

Thank you.

Operator

This concludes today's conference call.

now You may disconnect.

Donegal (DGICA) 3 Nov 192019 Q3 Earnings call transcript