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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