DGICA - Earnings call transcript Q4 2021

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Operator

Good day and thank you for standing by. Welcome to the Donegal Group Inc. Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. advised call be being Please Instructions] that is today's recorded. [Operator the now The to like would conference Equity to Inc. at I President hand over Vice Karin Group Daly, ahead. go Please

Karin Daly

Yesterday section quarter XXXX in presentation release thank donegalgroup.com. joining you results. Good full quarterly are of the earnings at Group a The morning fourth us available release outlining and and today. Donegal's its website issued afternoon, and for Relations year its Investor Donegal investor supplemental

publicly company Chief during of any Executive and Officer, historical with found be to the and XX-Q. statements statements. materially. Kevin including that today unanticipated Burke obligation be that to its to Financial over Group's on reports President reflect Speaking Donegal forward-looking necessarily in will not Chief Officer, Jeffrey uncertainties vary and Exchange any annual These Form turn aware could and I be or factors Securities the statements circumstances Kevin or of are report Kevin? events Burke. With quarterly or risks date on disclaims are occurrence such may the the make filings any and and to facts that this cause can Please that involves it they to Commission, Miller. actual XX-K statements announced made call results The anticipated forward-looking Form after update that, revisions of results

Kevin Burke

financial prior several for my the initiatives. results the our X.X% written everyone. quarter fourth increased focus the and topline for I Net of remarks welcome provide to closing and we've and year and for remarks full for premiums will then period. I'll year, before questions. fourth year the details Jeff compared progress X.X% we strategic quarter our Karin on on discuss Thanks XXXX the open for full and lines growth return will made on strong

strong by was Similar increased for compared rate first across region. our three our XX.X% the growth premiums Commercial the of retention most commercial the reflected increases lines, XXXX, lines. of We quarter. Mountain growth of written driven with in quarter strong the premiums pleased year our to XXXX and prior fourth are from which solid States net quarters the to lines

As were a reminder, Mountain to from XXXX. States our prior pool placing results effective XXXX Mutual, and year in policies calendar excluded our began the premiums underwriting in Donegal in of

for with As commercial all of growth our the commercial by business result, a year a lines multi-peril of led of achieved growth full XX%.

regions regions as continue we've favorable We targeted and conditions our several growth. across for well new view commercial business to growth market performing for our

inflationary as grow to However, pricing XXXX, written we and products. years multiple quarter X.X% several profitability of result seen industries, given past as profitably. of a on the the new we increases the focused business retention strategic of the year for of to X.X% and we fourth the personal full net lines underwriting over our of measures primarily development awaited took improve premium, recent and declined Personal are across while lines trends we've premiums continuing

third-party models, umbrella enhanced We products new announce XXXX. in to coverage and utilization are of homeowners, analytical auto, initial modernized include three launch expanded personal successful enhancements, in and of segmentation, data. The fourth personal liability pleased reading the quarter the predictive new new application methodology, of states of products pricing

business personal agency lines we rollout as and personal ultimately products new in on the the business a these implemented as Technical agency been a teams continue phased that support Ohio, issuance policy feedback lines seven states and technology Indiana, portal, a and states our reading initial of the states to XX and lines in will new new very additional the the of result our in live throughout has XXXX. portal support fully Currently, capabilities product personal states rollout, are Pennsylvania positive. As in new the will well underwriting systems platform. of

We next few modest to But compete segment prevented headwinds our summary, results profitability years. hindered our are personal of excited to that the in in of the our effectively provide generate profit levels Jeff over from will details expect for underwriting in by a more achieving contribute several sustain will for growth were and premium stability and quarter new target. personal fourth lines quality that accounts lines to moment. XXXX us

losses costs in auto prior the to line commercial of inflation severity multi-peril an the activity the with we repair well increase in year of reflect our saw were to quarter. five Commercial fire year as as properties. the compared and fire weather-related higher results While large experienced average, losses large impact

are profitability in our the prior we in underlying segment of greatly development pleased with personal inflationary While results those benefited trends. from overall reserves loss masked increases XXXX, lines of that core favorable

frequency As experience substantial driving higher to and largely labor pre-pandemic returned impact and and in enter disruption severity we to to activity chain repair as auto contributing costs. the of replacement claims is supply we increases XXXX, has personal auto levels and continue market

We to we review rates are I'll will this and return across our point, some a to cause loss Jeff rate it quickly closing call experiencing. results take XXXX responding of for offset turn then before time by footprint are begin with and a comments. will over increases I'll financial trends the our few increasing regional our personal auto At

Jeff Miller

you, Kevin. Thank

prior The I results describe impacted XXX.X% was several As to will fourth headwinds quarter compared underwriting quarter the quarter. were Kevin for in our greater by mentioned, detail. in fourth combined ratio that the year XX.X%

the combined full the XXXX, XXXX. year ratio in XX% versus For was XXX% of

percentage development and and our auto combined by over increased underwriting prior pre-pandemic accident active increase losses to reflected fire prior driving substantially to losses Commercial claim below more reserves ratio costs. on patterns the and for impacts incurred average losses loss to quarter severity. year the and weather-related in activity results an the in year and and non-weather favorable historical of that large our of due X.X XXXX return are points driving continued years, fourth results the losses increased higher average XXXX that personal quarter impacts reflected While full loss pressures inflationary These XX.X%.

which large quarter of X.X XXXX, as year prior $XX.X fires. with activity losses, losses ratio fourth double defined loss commercial $XX,XXX, higher Additionally, both for were in home the in on or is and more points million the fire that we of impact excess property the the than quarter in

ongoing to significantly costs automotive losses, higher continue property We and to any have Group are commonality details the not of make also the review repairs headlines pressures fire to that is seeing causes. all and the large continue to related among we but not inflationary and immune replacements. identified Donegal closely

of implementing our at premium are quarter and by reserves the We was liability lines prior loss losses offset reserves of We trends reducing had or the million fourth the million, umbrella ratio weather-related of to points our development points in quarter. for favorable $X.X most in X.X of loss the rate losses XXXX of the the increases loss for ratio. ratio losses improve $X.X Fourth averages in prior quarter business. reduced XXXX accident for by percentage million, and book points incurred were of line of $X.X quarter business historical across loss favorable with which performance auto, Net year commercial fourth percentage during the years percentage quarter. auto, for compared commercial X.X development the personal X.X to

Workers' activity commercial the activity represents the development. for favorable I the claims primarily loss loss fourth combined albeit we ratios the inflationary to umbrella severity, The profitable large lesser of lines, deteriorated commercial XX.X%, liability the loss personal and earlier. fire and respectively. commercial ratio including compensation increases In which contributed combined continued favorable auto XXXX claim expect due and higher and primarily disruption respectively from deterioration with historical other quarter XXXX. higher for remained On prior a XX.X% mentioned that the trends ratios development macroeconomic attributable to to progress was X.X extent patterns We result during lines as as and compared multi-peril the higher XXX.X%, when severity incurred prior claim lower-than-anticipated percentage pandemic-related statutory quarter development these XXXX. of points into that emergence to basis, of due significant of auto quarter to XXX.X% fourth to increased than and reflected XXXX, frequency in claim year year the profitability driving accelerated a to quarter commercial were inflation a

for Our decrease expense The we fourth to to the COVID-related compared for lower reflects and payments release costs of bad agents and quarter. to decreased reserves employees, ratio incentive no our XX.X% quarter lower required. longer XX.X% were incentive debt determine prior year underwriting-based growth in our agents, a commercial the

reductions. offset in an increased allocation modernization costs systems other resulted ongoing the that expense Our project partially of

were offsetting average compared million average On now $XX.X fourth in those the income duration portfolio reinvestment prior to that, similar income net relatively ago. yield Kevin share comments. year maturity of per We a generally for in and turn share higher investment during to with maturity it our income for closing the billion. to of gains XX% XXXX a X.X back December investments investments quarter consistent and will $X.XX due diluted was factors. year, me due share for relatively increased the as full to was of quarter Net in to operations, investment was the recent XXXX assets million X.X% we million our than hold as investment it steady year. net years. prior maturing XXXX year contributing For growth fixed portfolio per securities increased and consolidated expect were held A XXXX. with our income XXst, they to invested The throughout average line Kevin? compared million. XXXX XX% ratio investment -- yield to Total XXXX quarter. remained $X.XX are $X.X The to With basis, investment of was in fixed per $X.X after-tax expense rates X.X% to the $X.X let closer fourth the net generated Class investment Within $X.X

Kevin Burke

state progress second XXXX, rating, successfully XXXX. the underwriting, the progress. delivery in In personal and and August, the primarily Thanks necessary Project we major in including release the to Jeff. portal significant a launch completed XX issuance of ongoing in systems with a new our modernization support policy new be to capabilities to made of products, we full the rollout agency lines implemented

have transform on financial and opportunities remains XXXX on excellent profitably, our our modernizing operations new agents primary year, and and and processes to focus business, close experience our performance, several sustained strategically a begun to strategies, superior customers. grow we achieving capitalizing our delivering As to

we expect to macro-economic whole. insurance of Given a for see continuation current as the the industry environment, headwinds

over emphasis focus the growth to steps in strategic and measuring deliberate the in will take loss the We of and on activity. response in profitability near-term increase

share pursue selectively the be cumulative a conservative of in segments for XXst, business remain where new years. approach, we we value will to December at profitable growth $XX.XX with we compounded While payout underwriting past best business With see of X.X% rate XXXX, our $X.XX dividend accounts our potential since across book over four continue was annual at of the XXXX per a growth. our

Directors At ask We've we financial Our the that the Class strategy were of XXth, years, declared of you past on time. enable and paid made years believe for Board have. performance of will questions February $X.XX In future. in changed significant per share X.XXXX common and B and share may per quarterly of the A for improve value the cash forever that I'll in XXXX. optimistic to stock that a our world recent this our open progress has any lines increase operator to Class long-term we stock over but conclusion, the two regularly shareholder us dividend common time, have remain

Operator

will from with [Operator Instructions] question the Shields go Please come of Our KBW. first Meyer ahead. line

Meyer Shields

personal if Thanks. comfort don't levels where did. hoping is I your in morning. rate you was product Good the this, think the new the could I Great. the lines being apologize I -- missed clarify first product I states I out? with rolled

Kevin Burke

perspective refined. rate priced Meyer, the analytics and and make where that. an the we doing response we we're really rolled book We're confident data look very Indiana, product from Pennsylvania. feel very, didn't well very this as opportunity at and department to a where product, to We comfortable business with is new new of to morning, that place, I'll getting Kevin. in we're in out Yes, legacy Ohio, Unlike have when this the our we at, looking analysis. sure Good external a have in comparative pricing is that

are in that roll is And have the that data importantly, constantly dialed so monitor very to got monitoring. us ability and at we we've I as that had pricing we'd the tools out, never to feel that available a comfortable And time and that now this something we we it's very, the and product more before.

very that. confident feel I with we're with going So, where

Meyer Shields

On how the Okay. personal rolled complement focus Thanks. to the helpful. good about very product maybe a That's growth, think note, related news. count a products That's should lines agency out on we as itself? as

Kevin Burke

good. there, what the state with Well, us agency we lines currently with going has us. different a and and and first in the agents Pennsylvania. plan Indiana that have obviously, off categorize did that long Indiana, product, of and is for response particularly it was it standing our we very many we when relationships books through were I'll decided personal and new home three state, state by the how phase-in that been has in terms Pennsylvania, have agency we a new went Indiana started Ohio, phases design, being more Ohio, and key we to substantial

had have agents those not new states. in We appoint particular to three

a in franchise a keep personal where added relates we've got solid have really like year in we that our Utah, about sure been to any a to making market Texas, gaining place and to and agency it's agents we're already presence we agency in it really only As that has good place state where very the think this level about that plan states, place place. new rollout, lines, in existing right continuing The states. now, The share. in plan we've really value grow it's we those

we've product. so that lines right we got think this agency continue grow new It's to also the plan about personal reengagement. to And

the back couple into of fairly well not started you're aware we bring taking have book we tools today. aggressive profitability, have analytical a As years we when ago, that action a did business the rate to

reengagement the also of agents. it's part so those And with

results far, been have And so the very positive.

for the these as states rest optimistic come of lines I'm XXXX. So, online in personal

Meyer Shields

Okay. Fantastic. Thank you very much.

Operator

from with Scattergood. question Instructions] comes the line ahead. Farnam Please [Operator of Bob next Your go Boenning &

Robert Farnam

and Yes. Thanks. I have a lines loss question a related pricing morning. and to both lines, commercial Good on question personal versus the trends. about

time. because to deterioration of Are to ability sounds to it the that to commentary, have ratio trends we pricing is taking some in falling exceeding short the loss like that XXXX, you your the So, may going loss from have -- it's where over now that going just in assume are? loss catch-up have core are right and trends your you're pricing to

Jeff Miller

commercial Sure, a bit Bob, is Jeff. and for this you personal that It question. Thank is a of different lines story lines. between

first is latter by since indications about indications our rate -- lines talk think the significantly impacted of second situation to Let's that's from half where most XXXX. auto, I jumped the half Personal personal the inflation.

second we in changed of really half a around our were what of the position in the for we about from stay were planning to ability year. in good the forward. we half felt loss first ahead the trends So, That of dramatically point rate year, that increases our the

what increases find believe address with are with indications near-term. in can do now of we we in excess that rate we ourselves the So,

catching believe those up we our be to can with that are be keeping progress make some in before those not probably period time. are a progress time we and loss it's will going overall pace increases trend, There reducing increases where in So, significant able rate XXXX indications we're rate into but of making some for to situation reducing achieve indications. significant

that part direct seen is, loss the So, we XXXX. the going auto, core do would question in challenge to to have answer it's in of be to a the early I personal believe your maintain ratio

the of that increases, to rate earned of the the of impact start into be take time year would hope premium toward terms make that second some and but in half XXXX Our will progress we'd beyond.

on expected the On commercial that see where commercial We indications of actually planning to line the of in in scale we about to rate we point with back previous the exception increases. auto Georgia, line really were state we've by the which of side, actually do were we the talked end at good some the and were shape profitability XXXX in calls.

expect be end adequacy which loss in rate to With changes, ahead XXXX. to low rate is well trend have to we achieve believe inflationary that to sustain able line of the of recent increases auto, we'll plan by our commercial continue double-digit and we at the

better the commercial impacted most line So, the the we're especially we're multi-peril on Commercial the feeling about auto is exception -- with of on to just significantly state where increasing exposures. Georgia rates of side. working property that's reduce and

We claims. XXXX again an the rate excessive to are which double-digit trend. is low be out to Again, in we're severity seeing loss increases, higher market going going with on well property

that with increases of expecting And we're takes the address CMP. inflationary discretionary earned. believe core not again, time But those to -- losses significant pricing a deterioration for can auto we commercial loss we pressures So, it in rate in be adjustments.

some see could the near-term. we So, that of in

like The premiums. which automatic workers' Homeowners, fairly and comp, increase significant helps seeing we have a can in aren't easily We're up we steady, other There, guard, with trend. loss think rate homeowners. the we additional there. to lines impact inflation an some we that's taking keep coverages

that an gives hopefully, picture. you So, overall

Robert Farnam

that's Yes. summary. No, good a

rate much the are kind limit personal from -- I of any coming to increases, the think you're regulators how personal for? asking across pressure you for auto lines

Jeff Miller

rounds are be. to not believe significantly a That's we going that great the of take above increases level rate rate get We, point, It'll increases question. can achieve. to several to with we the what rate we to at this regulators are probably need

there we in of and what approved. get will terms limitations So, are certain can what we achieve understand

as that enacted year and we're back allowed of we half the as increases the rate going in later I'm file are to year. the round another then believe so rate in be be basically with as will And first high of to increases

Robert Farnam

And Okay, question, so in like expense -- all expense press the sounds ratio you're you ratio, a had moving few in the the quarter. while here, right. second parts it the the is Jeff, release, for

Just a the back we that rate, stuff, curious it should is for like because of sounds going like I'm use you XX%, looking run what if kind low? more for forward XX%

Jeff Miller

as terms impact expenses And of ratio And fourth up, see. the ratio. what you in have down. in loss a the low. expense typically profitable it's see ratio, some quarter really very is loss in higher incentives quarter ticked that's the reduction come It a the of the of we When the you'll

year, some additional XX.X% XX% assuming For came is for technology around year have run and we next level somewhere to XXXX. we a XX% higher expenses we think in that profitability, with the landing a rate and on would be that full I of

Robert Farnam

And dividends? Okay. including the not policyholder that's

Jeff Miller

Correct. That's ratio. just the expense

Robert Farnam

Right. Right.

you. Thank Okay.

Operator

We have turn no over further time. questions back conference at the I'll this management. to

Kevin Burke

right. for have we day. Well, thank a participation your everyone All and good

Jeff Miller

you. Thank

Operator

Ladies will gentlemen, you disconnect. now you and conclude joining today's that and for Thank call. all may

Donegal (DGICA) 18 Feb 222021 Q4 Earnings call transcript