Donegal Group Inc. (NASDAQ:DGICA) Q3 2023 Earnings Call Transcript

Donegal Group Inc. (NASDAQ:DGICA) Q3 2023 Earnings Call Transcript October 26, 2023

Donegal Group Inc. misses on earnings expectations. Reported EPS is $-0.02422 EPS, expectations were $0.08.

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.

An individual signing financial documents with a representative from the life insurance company nearby.

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 is my pleasure to turn it over to Mr. Kevin Burke. Kevin?

Kevin Burke: Thank you, Karin, and welcome everyone. We are pleased to provide an update today on many of the strategic initiatives we have in flight, as we execute an intentional strategy to improve our financial performance, modernize our operations and put us in a position to grow profitably as economic conditions begin to stabilize. Donegal's third quarter of 2023 showed significant disparity between business segments. While we saw significant improvement in our commercial lines segment results, our personal lines segment results continued to reflect the ongoing impact of inflationary pressures in several lines of business, with the largest impact in personal automobile, as claim severity remained at historically high levels due primarily to higher repair and replacement costs.

We experienced an increase in the frequency of severe weather events throughout our regions during the quarter. None of these events generated an accumulation of losses that exceeded our catastrophe retention level. But the active weather patterns, coupled with ongoing inflationary impacts on repair and labor costs, generated the highest weather-related loss ratio we reported in any quarterly report going back to 2018. On a positive note, we saw a significant decline in large commercial fire losses in the third quarter of 2023, as well as an improvement in our core loss ratios in each of the major commercial lines of business lines. Jeff Hay will provide further details on our individual segment and line of business results later in the call.

Moving to business drivers impacting premium revenues, we began non-renewing all commercial policies in the states of Georgia and Alabama during the third quarter, which was the start of a process that will continue over the next several quarters that we expect will have significant favorable impact on our operating results moving forward. The primary strategy we are deploying to offset the loss of topline revenues in those states is to emphasize and promote our brand new BOP product and modernized commercial auto and commercial umbrella products, which are available on our new technology platform in all of the 22 states in which we offer commercial lines. We are actively monitoring quote activity, engaging with our agents, and refining our pricing and straight-through processing guidelines to increase our writings of smaller commercial accounts in targeted geographies, industries, and classes that we believe will be the primary driver of profitable growth over the next few years.

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