Donegal Group Inc (NASDAQ:DGICB) Q4 2014 Earnings Conference Call - Final Transcript

Feb 20, 2015 • 11:00 am ET

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Donegal Group Inc (NASDAQ:DGICB) Q4 2014 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Good morning. My name is Tania, and I will be your conference operator today. At this time, I would like to welcome everyone to the Donegal Group Inc.'s Quarter Four 2014 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions).

Thank you. Jeffrey Miller, CFO. You may begin your conference.

Executive
Jeffrey D. Miller

Good morning everyone and welcome to the Donegal Group conference call for the fourth quarter and year ended December 31, 2014. As introduced, I am Jeff Miller, CFO, and I will begin today's call by discussing highlights of our quarterly and full year financial results.

Kevin Burke, COO and Acting CEO joins me on the call this morning. Kevin will provide additional commentary on the quarter and an update on our current business trends.

Don Nikolaus, our President and Chairman, while officially on a medical leave of absence as CEO is back in the office regularly now and we are pleased to have him joining us on the call today as well.

(Forward-Looking Cautionary Statements)

Reconciliation of non-GAAP information as required by SEC Regulation G was provided in our news release which we have also made available in the Investor section of our website.

Turning to our fourth quarter results, we had 4.5 million in net income and 3.9 million in operating income. With 101.8% statutory combined ratio for the quarter, our underwriting results did not meet our expectations and I will provide more details about the increased non-weather claims activity as compared to the prior year quarter in just a moment.

For the full year of 2014, our net income was 14.5 million and our statutory combined ratio was 100.5%. Catastrophe losses and reinstatement premiums from weather events in the first half of the year contributed 2.6 percentage points to our 2014 combined ratio and it accounted for most of the increase from our 97.4% statutory combined ratio for 2013.

Turning back to the fourth quarter, from a revenue perspective earned premiums grew by 8.4% and net premiums written grew by 9.4%. We continued to benefit from premium rate increases, new commercial lines business growth, and the additional contribution from a reduction in Michigan Insurance Company's external quota share reinsurance. Kevin will talk in a few minutes about our growth initiatives and our ongoing marketing efforts across our operating regions. Let's walk through some of the loss trend details for the fourth quarter.

Beginning with weather losses, we incurred $4 million of weather related losses during the quarter. That amount was less than the 4.6 million of weather losses we incurred during the prior year fourth quarter and reflected the absence of catastrophe weather events in our operating areas.

The fourth quarter is typically quieter for our operating regions from a weather perspective and we were pleased that trend continued again this year.

Large fire losses were 7.1 million for the quarter and that was in line with the prior year quarter