The following is a summary of the Donegal Group, Inc. (DGICA) Q4 2023 Earnings Call Transcript:

Financial Performance:

• Donegal Group reported a 6.2% increase in net premiums earned and a 6.1% increase in net premiums written, totalling to $226.2 million for Q4.

• The firm conveyed an increase in their combined ratio, reporting it at 106.8% for Q4 2023, primarily due to a lower level of net favourable prior year reserve development.

• The expense ratio for the same period, at 34.1%, increased slightly, mainly due to higher technology costs as a part of their modernization efforts.

• Loss ratio saw little change, standing at 69.1% for 2023, with weather-related losses contributing as much as 8.3 percentage points.

• There was a 1% decrease in net premiums in the commercial lines due to targeted nonrenewals while net premium written for personal lines saw an 18.1% increase.

• The company saw seven quarters of successive higher investment income, with a 20% YoY growth in 2023 and a record net investment income of $40.9 million.

• A decrease in book value per share YoY was reported, from $14.79 in 2022 to $14.39 in 2023.

Business Progress:

• Donegal achieved double-digit percentage rate increases in all major lines of business except for workers' compensation in Q4 2023.

• The company launched an expense reduction initiative to counterbalance the higher costs of their technology and data investments.

• Donegal plans to focus on addressing increased loss costs due to labor shortages and high repair prices while observing social inflation trends closely.

• The company took steps to diversify their property book's geographic footprint and reduce risk associated with losses from severe weather events.

• Underwriting guidelines for roof coverages were tightened and new actions, like limited loss settlement, roof endorsement, and wind hail deductibles on new homeowner policies, were implemented.

• The company reached an all-time high with net investment income and experienced net investment gains of $3.2 million as opposed to net investment losses of $10.2m in 2022.

• Donegal completed the realignment of their regional structure from six to four operating regions, aiming to improve operational efficiencies and achieve greater economies of scale.

• The company launched an expense reduction effort aimed to mitigate the impact of the multiyear systems modernization project and expects to achieve meaningful cost reductions throughout 2024 and beyond.

• The company anticipates generating savings approximating a full point of their expense ratio in 2024 with a target of achieving two full points of expense ratio reduction by end of 2025.

• They have set strategies to expand the national accounts team and grow in the small commercial market segment while a conservative investment approach will be maintained to increase capital, limit volatility, and support their operations.

More details: Donegal Group-A IR

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