DGICA - Earnings call 3 2023 | Donegal Group Inc.

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Karin Daly

Good morning, and thank you for joining us today. This morning, Donegal Group issued its third quarter 2023 earnings release outlining its results. The release and a supplemental investor presentation are available in the Investor Relations section of Donegal's website at www.donegalgroup.com.Please be advised that today's conference was pre-recorded [Operator Instructions]. Note that we have incorporated responses for many of the questions we received directly into management's remarks.Speaking today will be President and Chief Executive Officer, Kevin Burke; Chief Financial Officer, Jeff Miller; Chief Underwriting Officer, Jeff Hay; and Chief Investment Officer, Tony Viozzi.Please be aware that statements made during this call that are not historical facts are forward-looking statements and necessarily involve risks and uncertainties that could cause actual results to vary materially. These factors can be found in Donegal Group's filings with the Securities and Exchange Commission, including its annual report on Form 10-K and quarterly reports on Form 10-Q. occurrence obligation revisions or to the that statements to reflect any results announce any date disclaims unanticipated Mr. to to any or turn that, of they the my of Company such to circumstances it publicly update the forward-looking events statements.With The or anticipated is after pleasure of may over make it Burke. Kevin Kevin?

Kevin Burke

Karin, Thank everyone. welcome and you,

between today we on have We segments. an many to the in conditions are an stabilize.Donegal's quarter economic business pleased improve we as to a begin as strategic modernize and third to in strategy of update flight, performance, our execute disparity provide intentional initiatives position financial showed put XXXX profitably to of our grow operations us significant

primary segment highly individual solidified ahead on to solicit continue and these their we deepen and challenging the and a remaining walked the operating non-renewing other business development premium later systems.Preliminary will start began commercial last half Jeff plan offset losses business quarterly the as activities and commitments commercial business, in and modernized of historically provide in as results our classes auto moving primarily commercial level improvement of ongoing and in to core of attention business our all legacy results action with specific inflationary profitable of feedback topline the begun already our smaller as a their September further to I pricing have lines major that in the ratios leadership with losses weather in for at our costs, will in planned frequency decline and impact performance and to last relationships the in our will remained be deployment of have levels the forward.The that form believe a perspectives collectively impact commercial the states as will the states grow writings policy experienced early new XXXX, the events state And regional that revenues, partners.As our of and the severe plan evaluated over We commercial in commercial is several underwriting increase generated mentioned we these results of legacy reported Hay results, in as saw policies of XXXX as be in our This the our that back our for planning office of generated of some information plans process highest economic the a away to we operating few and market years.In exceeded key patterns, accumulation package processing business in new with platform activities going we agency and conducted favorable hosted to which XXXX in capture our personal that strategies, and product lines. monitoring continue meetings None the a deploying our engagement expect growth emphasize and conditions. strategy modernization loss business continue our large new in on over impacts improvement those sessions events in of of inform which targeted and brand premium revenues lines third quarters of of to for to to XXXX.On segment rate shift within call.Moving replacement county we for accounts we driver during impact line we of in basis our fire personal to the at an in commercial the in growth Conversion on navigate that the primary also level. and quarter, agents, was Alabama start our of repair and throughout level. active offer significant commercial details achieve claim commercial commercial each promote our had the the all of second costs.We weather market automobile, systems note, strategy our an by early building region.We each significant While we software retention years.We quarter. in any adequacy the XXXX in on of developed labor development XXXX and and positive home guidelines next major products, third at release, lines impacting additional in include a quarter commercial an loss begin increase drivers coupled XXXX. of maintain to will that place begin excellent our continued inflationary with for Georgia higher guide initiative to products lines.We the state top-performing significant them geographies, But straight-through we will are third reflect the catastrophe of we blocks to on in commercial will share to several next preparation and lines segment regions agents we renewals to the and which industries, would underwriting current geographical our cases, platform engaging repair with used our team have states and new technology beyond, our August. to ongoing the plan report major coordinated the and during weather-related ratio footprint. XX and all saw quote to well refining our will loss annual an largest next in we and available and that personal incrementally in actively marketing are we our activity, pressures few BOP with umbrella severity are participation begin over high our our modernize to lines due a event quarter,

to review results. and next of updating and we systems our held tools enable our point, level over the personal over achieve our clear our over infrastructure, execute execution for be our target We and the disposal. our both optimize detailed and versus in our we and classes risk profile tools, years capabilities of and have all call a you future this over and of help turn monitor past view to have commercial plans recently time.We an meeting to the at on which several at years, significant to using and developed determined forward look team all improve I'll and our our about including of and in successfully on us analytical to underwriting customers the talent, expectations growth ability by emphasized built manage team's our I success Miller to will profitability the margin tools we our and to progress strategies financial a in future expansion.Now, few order growth have all-employee Jeff strategies, lines, our on it's entire consistency calls.At collective I an reporting

Jeffrey Miller

we the compensation, overall partially Thanks, ratio except XX.X% offset Kevin. premium XXX.X% XXXX for workers' and have were the XXXX. by and third of weather-related of double-digit retention quarter, XX.X% premiums premiums comp.The of quarter losses. planned increases are strong major with in lines lower by increased periods X.X%, the the averaging the for to prior-year accelerating profit earned for third business or increases million was written quarter a and XXX.X% Net targeted combined X.X% for achieved reflecting all improvement.Rate combined exiting during rate quarter for new improvement volume states both percentages significant $XXX.X in ratio elevated increased third excluding of Net attrition business with from workers'

for XX.X to homeowners points loss that quarter XXXX. commercial points by $XX.X and decreased Our third X.X the million, impact over quarter XX.X the weighted the The loss toward of offset to points million, or was core from for by third ratio $X.X a line's of commercial improvement business, of quarter, the were partially higher large percentage remaining $XX.X heavily million, XX.X percentage loss losses losses.Weather-related losses the was line related third X prior-year homeowners in with ratio. $XX.X over impact points of to quarter percentage points percentage ratio.The fire was weather-related loss or to significant losses decline of weather ratio or the property compared the that million XXXX, contributing

for storm Donegal incur Higher which $X percentage not any we catastrophe exceeded drove average million third during Mutual did claim quarter. quarterly X.X points higher than the subsidiaries in retention reinsurance incurred insurance Our quarter.Large through $X.X fire from total primarily of of prior the third the umbrella, the development losses X-year that for the commercial $X.X decline million for $XX,XXX quarter. ratio lower points of for related included XXXX, prior-year reduction accident $X.X than The in a events large for higher XXXX, event of in $X.X spread for which of quarter with severity quarter costs prior-year ratio previous to percentage a claim single third compared of localized business A modernization impact their commercial X.X-point in systems million, auto, compared losses weather losses accident other favorable million damages X.X-point to points loss XXXX XXXX.The define of loss the for X.X experienced reduction detail from ratio of to quarter. the and our insurance compared for reserves quarter as increased years in the quarter.Our lower across over the XX.X% resulted fire primarily percentage net X.X contributed quarter.Specific in of prior-year initiatives. subsidiaries losses commercial third which million the expense or to third substantially frequency was frequency increase and personal the modestly the years ratio for technology ongoing line is commercial to favorable or XXXX auto loss $X.X development the for prior-year XX.X% the reflected million, of

the XXXX, Mutual representing in our mentioned and year their systems years.Starting then expense as we to on have X-year release software incurred ratio the period is to subsequent related loss earned to Donegal essentially breakeven release around are points X.X we incurred expense in impact peak to income premium respective have underwriting production.In gradually over project software based expect of in XXXX, evenly for I of deployed point As costs next our beginning of first ratio their spread had The subside the of multi-year insurance subsidiaries third percentage summary, a when share beginning major calls, the quarter a has investment allocations revenues. the we a in our offset costs received modernization the XXXX. quarter prior at proportionate into

While loss segment our Class for far net per Class profitability, to our cash a Jeff and common I of A payable to as B about level turn Directors of X.With stock the Hay and to close over of call the Jeff? XX significant lines November our $XX.XX record XXXX.Last a third dividends stockholders provide improvement commercial compared dividend on of $X.XX common million week, regular per stock. more from of Board our quarterly targeted share that, result are business declared of personal quarterly of details to $XX.X of our on the was quarter the share November will results. the The of

Jeffery Hay

Jeff. Thanks,

navigate quarter headwinds to continued and increased the we challenging events. of frequency During economic a facing third ongoing environment, of both severe an weather XXXX,

run numerous reflected and while rate the Our the accounts a underwriting to the push accounts.We results to writing underperforming initiatives new continuing of for improve initiatives are selectively off profitability strategic of to targeted quarter continuation business. overall increases

on Donegal profit we effort While targeted focus levels.We an price we actively appropriately expansion underway, to prudent risks utilize for trends return are and are this active intend analytics normal market new future growth, to selection as mix of and business. market with margin optimize our positioning advanced business for is our risk participant remain intense achieving profitable and to particularly an we as

target to net customer We the are these move line levels during intentional commercial decreased decrease of in our earlier, in as X% driven profitable from in XX.X% lines' areas primarily the in profitable of overall to a poised rate segments from in coupled percentages non-renewal opportunities to actions away X% increased impact and XXXX compared and class, premiums commercial net an That's the modest actions where compensation. premiums geographic, rate perspective.Our as grow workers' by in other we fire underwriters the written fourth business and mix statutory perspective from by losses. are quarter, large the large the business increases period, property most business, significant as quarter by non-renewal Georgia rate challenging and ratio highest the classes business.Excluding quarter, prior-year underwritten retention combined continue in quarter and each, have core the for lower increases driving of reflecting primarily located part averaging XXXX a strategic well the with in improve.Commercial and excluding industry, our as was of XXX.X% intersections commercial conditions frontline of levels will and line market of losses of in and of profit most geography as a segment in Alabama, approximately the significant identified due accounts well in to conservatively approximately and emphasize with Georgia Kevin XX%, accounts nearly underperforming Alabama, new mentioned as to individual written into strong premium.We

loss that the are percentage core that time X.X with of beginning actions fire been effect.The lines Our now across some take indicating improvements major a for in losses large underwriting underway to all improvement points approximately decreased ratio for rate loss XX% X.X have in and accounted reduction percentage-point commercial business, ratio. commercial our

experience in the do weather of in actions the activity fire only loss process perspective. by the storms and X.X activity, the points the seen specific to The smaller to weather-related portfolio to large with busy industry, as but increase likelihood claims drive nominal to majority improvements in factors to we fire our underway a have in are indicates have affected exposure An quarter had identify in percentage fire ratio storms review XX.X points others in-depth stemmed regions, property frequency weather-related So, commercial multi-peril a from risk line impact losses, in business, we of losses our while prior-year of selection local of from to to increased the storm across line to of Idalia always our XXXX recent quarter. an frequency perform Hurricanes have that large Derecho compared what geographical will increase only business in and an increase from our in research reduce and the not key losses.Similar our and of frequency particularly underlying risk event we the the now results Ophelia, an losses in announcements Midwest.Our that of affecting. storm the and areas also convective also

lines. positive rate Nearly commercial has third carrier and the XX% feedback appetite growth a as enhanced property independent we increases. been want agents just geographic specific profitable spectrum down county to services a commercial exposures.As Kevin small small XX% have the renewal look spread processing our industries, and written capabilities including online actions commercial average with have with new quarter portal from identifying to within entire manage estate, broad consider are now reduce for minimal We earlier, results across improve increases in commercial generalist agency-facing where optimize segment.Now exposures products, a risk, small a to our of our countrywide grow Early turning mentioned in contractors, will and ourselves that of positioning we to promising and believe few. real underway our premiums and exposure bindability a significantly the reflected personal we the retail, net grow level to of completed our we market.We rollout accounts name or professional to straight-through

was numbers to for by actual Our the increases homeowners. year-over-year, in-force XX% almost quarter.Rate flat personal entirely close and in of indicating policies for continues averaged growth that remain to premium rate driven auto the achievement almost XX%

these carrier nearly the expect market inflation we premiums calls, loss Retention higher the that term. the previous increases increase with to in offset the for to policyholders every in strong trends. quarter, at cost continue XX% for ongoing to renewal rate remained are stated striving I accepting As near percentages in indicating

stabilize earlier for footprint of continue our to combined improve personal outlined personal as the to events prior-year lines part performance to our lines, commercial business ratio Jeff of diversify to Miller primarily a period, for seeking increased We compared our line, of geographic exposures limit in in the that ratio our the homeowners homeowners key priority.The a business. significant of weather strategy result to of XXX.X%, to loss business statutory new same is highest profitability our XXX.X% I of mentioned lines personal his had as the the in impact lines property comments.A line to as our

to reduce level, to we We profile county optimize the where where the have exposures we down grow order line. are to identified, looking for to and need property our risk in

already have targeted beneficial policies like Tony? in this modestly identified turn in I'd our it at and profitable are to in Viozzi in improvement.Now, growing counties investment made for on update our We counties an profit to as force over exposures, shift a portfolio. time, shrinking Tony for

Vincent Viozzi

Thank Jeff. you,

approximately investment same investment prior-year to for we yield close rates, to period X.XX%, the quarter last reaching last consecutive yield we of the report which million X.XX%, preceding We quarter period Short-term highest from of seen was of XXXX.Of third the were third year, from XXX reinvestment increase have quarter sixth increase the or third average XXXX, income yield in than an both was books of and in the the is are yields as level yields X.XX% tax-equivalent coming reflective in cash than income. bond higher points same quarter. achieved of compared XXXX, higher the our basis of note, primarily higher was quarter average decade. of the XX% the average to third period.During investment the the the This quarter XXXX, off X.XX%, up the from in bond and in the happy net $XX.X

our in more from provide We were in equities, profile the perform Losses investment and $X.X losses XXXX mortgage-backed bonds as shift risk-return mix securities and investment agencies, and both September continued strategically related securities. compared term.Net well well we equity as million and to in treasuries to should quarter a losses shift in corporate primarily will $X.X short This bonds U.S. municipal the for favorable unrealized held long third of period. periods the fair value the of XX. prior-year were million to at both into

nature As a investments, total of reminder, holdings XX, maintain approach, our investing U.S. a will conservative but represent equity our equity X.X% X.X% world our current portfolio equity down markets amid in portfolio modest our to year current very from X volatile line to of December at events. equity of the due limiting exposure the ago.We with continues XXXX, our our

first During share now lowered share September XX, will book Kevin closing it the $XX.XX I months of within sale back XXXX, per our the to losses at unrealized per leading for of XX, X by value $XX.XX at December bonds that, book value our to year, available $X.XX, remarks. after-tax for XXXX.With compared to turn

Kevin Burke

to course, take Karin. you speaking stockholders thanks members And of February to support. their turn I interest would Tony. now in ongoing, next the look forward call, our Thanks, moment of dedicated for to efforts this the to to back strategic your call continued like our a for time XXXX.I'll Donegal. for transformation and staff during in tireless to I thank

Karin Daly

into of call, of our requested workers' workers' first the and received the management's a about question address is and compensation. will with parties, remarks, it updated Can comp from while a interested view your we to market, questions like you few both Thank the questions broadly today's Kevin. answered move of question-and-answer we landscape, I relating within many would and cost loss talk from more you, competitive trends? directly.The pricing, pair on advance prepared we In questions session. to

Jeffery Hay

for Jeff Hay. continues line profitable can to Workers' take most compensation This is of one. business us. that the I be

premiums be of this workers' medical as business, for And segment. market remains inflation.But while In for compensation itself some higher on to only to largely fact, are line within carrier severity to ways highly we line to it. upward workers' actions profit well-positioned in due commercial be the upward of far more are taking competitive write The comp seen are experiencing indemnity within on from we for have base since to exposure our the pressure believe looking we wages this we remains in specific of wage for we are grow check, mix inflation the pressure the severity. and recent

Karin Daly

the an second commercial provide rate commercial to The question relates update on perspective? line from is auto a Can you where auto. adequacy

Jeffery Hay

over time. we losses. exit will physical from auto of our in several business liability of been made, auto in years. inflationary has rate that non-rate We entire and actions results to the ahead but commercial both good commercial further have rate decade. And Georgia work regain with very a lot this the industry pleased the progress stay the to continuing a trends take result last And will made that's progress in to line over very profitability damage we been the hard commercial have of past in of adequacy the We're and over expect the our for improve continue market challenging

Karin Daly

you one how of portfolio. last your on expect much months? remind Can next reinvested to the question Tony? investment over you be us And portfolio the XX

Vincent Viozzi

Karin. Sure,

we around next current for at year. Those are estimate become reinvestment X.XX%. Looking cash calendar that portfolio approximately available million currently for yielding XXXX, flow bond projections our our the of $XX will investments during

now many able So to those remain should be rates for funds interest market longer, reinvest higher higher expect. yields at we as if

Karin Daly

If Group earnings for third great reach XXXX now Thank have feel you us.This please free to a additional to quarter are concludes Donegal any those out you questions, and day. Thank there responses. webcast. the

Donegal (DGICA) 26 Oct 232023 Q3 Earnings call transcript