DGICA - Earnings call transcript Q1 2024

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Karin Daly

Good morning, and thank you for joining us today. This morning, Donegal Group issued its first quarter 2024 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 is prerecorded [Operator Instructions] Speaking today will be President and Chief Executive Officer, Kevin Burke; Chief Financial Officer, Jeff Miller; Chief Underwriting Officer, Jeff Hay; Chief Operating Officer, Dan DeLamater; 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.The company disclaims any obligation to update or publicly announce the results of any revisions that they may make to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.With that, it's my pleasure to turn it over to Mr. Kevin Burke. Kevin?

Kevin Burke

welcome, and Karin, you, everyone. Thank

will team state commercial were prior of be to the new to our completed the for partners our year in will targeted policies in business areas and are business classes some We we business will our to level fourth from discuss states underwriting XXXX, Commercial quarter making year small we small growth a results in quarter of that us underwriting earnings of targeted working progresses. initiative of we our accelerate the the targeted in but that growth results a Alabama. expect higher perspective, have overall and That business financial progresses.From achieving factors We relative business levels relative strategy and premiums our saw improvement largely with executing and our the in on call Commercial to of continue an years strategic will impact and also achieving initiatives pleased a results of reflect quarter update in in the written we of number and second for line few profit provide XXXX Lines Georgia in of geographic growth.Our and proposition progress prevented a on of quarterly of to the XXXX marketing successful first dedicated great we nonrenewals communicate to Lines agency the improvement of of as and the classes team significant earned top all is details value the come. specific designed to as incremental generate a that our progress quarter

capitalize reflect to refine of year we're maintain to increases expand new are to as expect that increases will increases loss phase the systems premiums software of enable continue other continue new as rate us even levels major all of rate that systems. segment closer future policy stabilize in get overall making the which more business X premium in legacy within opportunities implement development essentially operating higher this for release modernization virtually remainder levels major the on systems to our progress and the control continue within performance solid drive as will our rate exposures profitable quarters, releases in last to we include Lines, adequacy.We improvements Personal meaningful Earned in trends that growth segment. capabilities to to on commercial on we our products to small XXXX.In We've remaining and of our increases actively continuing significant We effectively a to business premiums growth that commercial begun and expect account see modernize we project. package throughout we will commercial

software will strategic dwelling in investment XXXX.Jeff phased initiatives to release. on in on these all the will portfolio margin provide and the providing details policies DeLamater phase provide of line beginning expansion. is will optimism further update Hay further last investment that major the of that in Dan And our next with see rollout to years an increased of regulatory levels parallel all the implementations give will first have our Both we fire and that continue submitted Viozzi homeowners remaining income. We the over us included X run personal convert filings Tony of efforts

Jeff of the Miller financial to call for a over Before updates, review operational going results./// I'm turn we get quarterly those our to to

Jeffrey Miller

Thanks, Kevin.

of incur were $X.X prior the million XX.X% we X.X losses $X subsidiaries compared development first line X.X that exceeded for by workers' homeowners other quarter favorable the accounting premiums with was weather development due commercial loss million experienced points first commercial points quarter loss X% event in year Large of reduction and as the to from and representing prior for the the experienced XXXX.The a ratio XXXX which higher commercial net frequency percentage total point contributed points prior modestly retention and ratio, due million. increased multi-peril, in the during our ratio impact initiatives, reserves of in as by unfavorable of unfavorable a Net after-tax XXXX the quarter In to percentage For $XX,XXX second for first higher points percentage resulting for homeowners those the decreased down partially the over of the prior primarily $X.X weather by XXXX was quarter Mutual. both first losses, to quarter. increases investment for of we losses of XXXX, XXXX was from million for was offset quarter was premiums to multi-peril the XXX.X% the losses X-year in of states the million ratio XXX.X% quarter to have net retention the fire of X.X% $X were that that when points ratio comparing X.X for more were XXXX, costs similar ratio XXXX, We $X.X commercial targeted small favorable offset those modestly prior or million reinsurance increase.Our quarter quarter losses lower the $X.X XXXX $X.X first million provide million the accident to ratio modestly business with of previously attribute primarily with for The to exiting quarter. X.X favorable in XXXX, income for the contributed increased modestly offset classes we total, auto, first earned increase. improved homeowners of the XXXX.The quarter.Specific for compared the property for reported and loss $X.X increase loss reduction of the a increased the consistent loss business and by of $XX.X the define year Donegal losses the which increases quarterly the with quarter premiums than loss in insurance half prior million averaging for ongoing related combined the with incurred $X.X of rate included of ratio attrition claim by for investment was the for did will a in quarter compared first relatively Hay. or of favorably partially we percentage reduction the quarter systems to quarter XX% reflected development of their detail in compared loss years of XXXX.To profit incurred Underwriting losses $X.X across a years, for subsidiaries higher workers' to we the Personal or $XXX.X call commercial number in million for to more related for line in X.X XX.X year results of million quarter. for loss lines. which million percentage contributing the of million development the for to and impact was of decrease excluding single was written expense Chief quarter, first percentage large catastrophe point reported the for XXXX modernization gains, are $X.X our of which and the I of business XX.X and XX.X% compensation strong compensation. percentage of That achieved underwriting Jeff or first line for technology for homeowners lower higher drivers and XXXX, quarter in planned quarter in that of $XX severity XX.X% to impact lines the net fourth expense comparable for individual $X million previous Officer, quarter in during or workers' in XX.X details year year $X.X $XX.X X.X of earned impacts of average fire offset segment in first quarterly spread million, year net than line of premium quarter first loss partially the first XXXX which improvement. loss about the for a with ratio ratio damages accident for net The An of any insurance fire initiatives, impact severity primarily losses X.X increase percentage XXXX. of first XXXX development higher-than-expected prior the Commercial personal comp.The despite XX% ratio quarter million core to over to to of turn of was to initiatives.In core our primarily segment.Weather-related of the the of summary, higher The compared Lines in income X.X early to to points million not and losses from first of points points.Our points Rate

Jeffery Hay

Lines intentional lines Commercial providing nonrenewals with improving a and in positive Lines at our point-of-sale to and with our classes XX% Jeff. conditions of with of to at profile additional and was and select severe in you, catastrophe targeted strategic before roof rate. Thank into that quarter, and X% intelligence of potential ongoing higher in negative book growth slightly impacts and improved ITV that the insight X% weather.For performance. commercial initiatives enhanced steady premium improvements, nonrenewing business through on driving other lead to embedded Alabama exiting deeper exposure Lines business Commercial the attrition include pace.Other actions into aerial the Overall, Personal models first overall I'll decrease across first due commercial to for use our accounted lines underwriting our other integrations terms risk that a our retention states dive artificial led nearly include a Georgia in properties of minus specific imagery are

across footprint continue geography for with auto Excluding of increases strong at business and workers' increases of are commercial this in active multi-peril most retention emphasize at commercial excluding achieved XX.X% a our renewal growth XX%.We Lines XX.X%.Turning and metrics. We at where class, challenged. to impact, to profitability rate renewal the achieved areas in plan our the our rate commercial XX.X% book, line intersections with we compensation, premium Commercial

to of of procedures elevated to first the We several losses marked close conservative and downward reserve our some increased not Weather-related wildfires performance. showing quarter expect frequency losses trends. of continuing small year reflected average of XXXX claims. alert we're in reserve state reserve incur we those of years risk our of tighten flagship quarter compensation the workers' losses points appetite improve recently Texas.Our The our compensation reserves and year that strategy periodic stance several from underwriting and going them underlying large loss for by prior our trends portfolio future increases our to abating. of pay fire by updated ratio development storm primarily of was of we XXXX to collectively medical the signs for unusually the workers' and the year out underwriting fire material prior line and Creek indemnity forward, costs included XX risk we appears frequency that claims projections business increase case loss fire. The reviews primarily continued early our the despite arising resources to quarter. to reduce new the within both on factors of by losses.To evidenced from in to Smokehouse increases and quarter specific a accident number in teams in trend attribute Pennsylvania.Claim first severity our introduced Of as Large active first note, of the for frequency frontline business lines routine did historical to historical be quarter an impact prior to severity guidelines were to we driven maintain

underlying the loss large compared improved weather-related broader commercial commercial auto end and achieved profitability Jeff exposure ratings our to new the while multi-peril workers' by our in the loss strong retention.Policies that X.X% property multi-peril optimize adverse the the indicative development appropriately year by benefit limiting XX% first Lines the ratio to fire coupled as of year core and On trends and about fully rate the mentioned increased well for force to year X.X% anomaly, for earlier, compared year more activity auto in year of an modestly book the loss Personal than still from from attributable We primarily losses of and commercial the workers' XXXX compensation of the basis, reserve business premium excluding the business prior averaging accelerate March period, auto slightly. our to represented business growth workers' experienced and overall prior and new development, favorable commercial XX% achievement by improve net no and state loss basis, there timing book, will to reserve aggressive we footprint volume by first the believe the that offensive of XX.X% in XXXX, ensure ratio with increases we with activity.And Commercial controlling our are personal our our reserving geographic percentage the decreased monitor performance to XX in X Commercial core offsetting development, increases, we renewal and compensation.On to homeowners. the increased rate were strategy driven comments growth are prior quarter in While we'll from behind for quarter, diversification comp beyond.Echoing XXXX.We of year and our a return Kevin's Lines and Lines impact spread renewal reduced ratio quarter the point maintain over XX.X% rate was last continue quarter growth. to the successfully in down quarter

aggressively taking seeing since and we've As of which expansion. driving rate is costs, levels in are rate now XXXX a been loss late reminder, margin excess earned

included on of as see continues X-month to an be elevated in increasing particularly year business close to and footprint of the quarter business severe the earned indicating of an our X line Lines historical premiums activity of are portfolio to managing to policies very storm period policyholders written compared to personal Lines a expect our of but prior remained to to that strong renewal the losses impact book. year, in from Midwest our first line higher the average. Weather-related months our at term.Premium convective relation homeowners the our or auto patterns. of retention business, risks our the losses We Personal accepting quarterly percentage of historical impact.Similar average across rate, weather the regional Commercial weather in we're our XXX.X%, geographic fire acceleration book auto homeowners The the diversify experienced large are

positive are to in management.The the combination reflect in are now that rate-driven loss agency compared showing attribute leveled great line of have in quarter, in that higher, higher increases in first improvement primarily a to a we liability gradual automobile trend.Furthermore, business prices. and increases driven of underwriting by policies points to of on to trends, moderation and primarily to percentage the of core improved car have seeing concentrations the other auto used personal of counties quarter move Similar our of XXXX, we due is commercial physical and X first declines downward we damage signs force an reducing in severity in ratio that During continuation made continue counties earned we modestly grew severity where can a premiums. risk off auto trends post-pandemic but loss ratio frequency progress

positive DeLamater. time.With turn results Dan? call our and we I'll that, over our improve Our to in tirelessly over confident to will teams that strategic actions underwriting remain Dan create are the the momentum working results

William DeLamater

Jeff. bit those you, operational add To comments, more around will underwriting I that initiatives context support a the important Thank described. efforts several just follow Jeff

these effective As our distinct but operation.We we January reduced footprint launched X changes with regional to previously after operations. we newly XXXX, leadership last in quarter, solidifying regions, in our our structure each X have the discussed regional regional X, managed had realigned regional business

working achieve increased in underwriting, effectiveness consistent We development a marketing, regions with structure.Leaders and and claims resources collaboratively scale are strategy these economies and efficiencies, to of drive this X working environment. improved expect to greater product operating in

the to concentrated weather Hay business future.And this of developing state we the plans book strategies well state elaborated executing and objectives, and relationships summer success growth We previous structure initiatives on just state guide sessions. through our into the independent action a began but to are X expect our last it's We take that now has regions building story property across within state. and with state in improvement sub-state and manage of effectively of they that our will strategy These class these the drive strategy moment entered like Jeff that not only line before calls. include business.I'd Arizona the highlight exposure to originated of also agents our

in engaged seen of nearly quality the And states of track our the profit months states.Our supports amount our in our continue to the the submissions, we engagement to We the And tangible our new the reduction and our for modest recognizing more improvement are independent those growth these team this growth Arizona. surpassed team labeled for business X plan are for is X expect our to XX teams profit strategies. team of to their The the new time. by impressive, final maintain improvement our growth energy disproportionate and grow The local are in remains on our have of quote of significant of in first the activity agency XXXX. loss and our team have relation states states while management of our with with team X months our grow the our state Arizona of strategic deemphasize continued exit. period. already growth region over premium XXXX, in book our the account agency confirming in growth their states, state All growth.We and extremely Even aligned written pleased is partners identified book, or ratios and promising.In amount on for overall and modest partners we XXXX X surpassed same desire while, and efforts. we premium quality thank goals results are contribute premium new national early engagement Southwest time in in and our of execution likewise, our states, and success will regional these written profitable

We as of We're partners all a future profitable our our in-force significant overall of provide commitment valuable for resource for XX% for groups the initiative. first XX over have agency team and these built on national national book independent accomplish work and leaders regional and identified relationships.Agencies organizations.Before our targeted marketing, an our unified and strive various opportunity our from teams from would expense I regional product engaging, support and regional accounts is a to carrier XX% marketing we choice state national small certainly groups state, account local, objectives. thankful This business. of business the these turn of team national and an to reduction strategically growth for our in update their contact to to provide accounted new become to Tony, in dedicated in the underwriting it regional alongside of I the nearly like quarter our and

and modernization our areas we to efforts.Our to expense beyond As leadership has tangible identify expense expense to project throughout achieve of we from in our management approximately impact offsetting with expect in year through savings project XXXX that cost organization. several reductions points peak team impact systems of expect together meaningful year, multiyear targeted senior and worked intentional X.X to expense this this reach ratio the related

turn the created to achievement report and and operational an I'm our initiative of accountability significant our for to each end, long-term the toward as committed leaders their an excellent investment of with so with for been have it process that team progress focus excellence.And our has efficiencies on that, I'll and In execution goal to the over performance. their reductions.The to paramount We we ways senior Tony? our many planning achieve update. sustained financial framework can track refine Tony the pleased view expense this continues

Vincent Viozzi

Thank Dan. you,

of and purchasing in and average decade net strategy yield increased that a credit as of investment have is the out continued we year municipal quarter in is portfolio.During This in investment $XX in current market advantage portfolio prior the resulted investment Our compared higher-yielding our rates basis on XXXX, have equivalents, the cash from funds approximately reinvestment shift our average to million quarter yield of risk and rates of due XX.X% securities XX XXXX. minimize of maturing interest to quarter. for first agency those boost incremental tax securities the an of strength first mortgage-backed equivalent high-quality in highest treasuries, points quarter up investments. bonds U.S. debt.Portfolio ongoing the as over to by to the higher yield seen X.XX%, The into was reinvestments X% the taking income well average increased from provide first equities

driven are We opportunistic million XXXX, the with quarter currently approximately amounts reflecting flow remain at investment both of second Net funds yield first bond for XXXX first months compared to reminder, And new share future.At decisions. our year-end. offset for and $XXX,XXX at $XXX a increase next for the for of The holdings on our to unrealized the book was respective value the increase close market market equities more from was equity December dynamics, allocation in on XXX we XX, $XX.XX XXXX, we quarter of to the was the depending $XX.XX XXXX, yield may increasing sale of value in our strong March consider quarters.As by $X.X their gains investment quarterly $X.XX available currently million our reduced in a end book modest are income per compared fixed quarter approach, losses equity while income a maintain seeking to volatility book of cash limit emphasizing and the the and invested decreased holdings ensure quarter per operations.With expansion XX, to XX of Kevin back allocation of $X.XX reinvestment fixed support investment share will remarks. closing income XXXX at the preservation portfolio our in projecting of capitalize during conservative at in that, to historically investment December rates. portfolio's by change our XXXX.We from rates the capital, of XX, an representing resiliency that that maturities.We net from I spread expect slightly on than by value now basis turn that our value our our of for X.XX%, points to and for investing investment average losses insurance it X.XX%. to is We net investment

Kevin Burke

Tony. Thanks,

throughout today, on entire team our execution. is heard the focused call you've As

as I'll And We team Donegal releases for an they initiatives reinvent we various truly over the platform fully working performance of stages us years our those our we X our a to in time performance. growth are back beginning objectives modernization there ago. many are the you quarterly complete achieve have and Thank put expect years believe growth.We significant implemented.This into which efforts us the began are project critical point strategic developed our final help next look over will of operating over forth goals. clear our to a at are are translate efforts company stable Karin. today. joining in call past systems where to on for providing improved tactical is to will of further call. all We the as we has diligently turn provide to The and progress that completion, few support modern forward inflection updates future

Karin Daly

Kevin. you, Thank

questions and received free these out there to This questions reach XXXX to today's Group we in webcast. advance of earnings we now quarter our the are any concludes answers feel prepared Donegal questions, worked to first additional please remarks. have While us. requested call, If into

may You now disconnect.

Donegal (DGICA) 25 Apr 242024 Q1 Earnings call transcript