Donegal Group Inc (NASDAQ:DGICB) Q3 2018 Earnings Conference Call - Final Transcript

Oct 31, 2018 • 11:00 am ET


Donegal Group Inc (NASDAQ:DGICB) Q3 2018 Earnings Conference Call - Final Transcript


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Good morning, ladies and gentlemen. My name is Terry and I will be your conference operator today. At this time, I would like to welcome everybody to the Donegal Group, Inc. Q3 2018 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) Please note that today's call is being recorded. Thank you.

I'd now like to turn the call over to your host for today, Mr. Jeff Miller. You may begin your conference.

Jeff Miller

Thank you very much. Good morning, everyone. Welcome to the Donegal Group conference call for the third quarter ended September 30, 2018. Yesterday afternoon, we issued a news release outlining our quarterly results. For a copy of that release, please visit the Investor Relations section of our website at In today's call, Kevin Burke, President and Chief Executive Officer, will discuss a number of our recent developments and update you on our business strategy and initiatives. And I'll follow his comments with a brief overview of our quarterly financial details. Following our prepared comments, we will open the line for any questions you might have.

(Forward-Looking Cautionary Statements)

We also use certain non-GAAP financial measures to analyze our business results and refer you to the reconciliation of non-GAAP information included in the news release we issued yesterday.

With that, I'll turn it over to Kevin.

Kevin Burke

Thanks, Jeff, and welcome, everyone. In the third quarter, we continued to make progress on key initiatives to improve our underwriting performance and operating efficiency. Over the course of 2018, we've been working diligently to manage the mix of our new business writings, to build upon our commercially-focused agency relationships and to get Donegal back on track to achieve our core objectives, which are consistent underwriting profitability, enhanced financial stability and book value appreciation for the benefit of all of our stockholders.

Let me begin with an assessment of our underwriting performance. We continue to shift our mix of business to include a greater percentage of commercial insurance and we are pleased to report higher net premiums earned and a continuation of net premiums written growth in our commercial business segment. Our commercial growth was largely due to a combination of rate increases and new business writings. In the first half of the year, we spoke at length regarding the challenges within the commercial auto line of Donegal and across the entire property and casualty space. We've taken proactive measures to address the loss severity increases. Those measures include comprehensive re-underwriting of the commercial automobile policy renewals in several underperforming state as well as definitive underwriting and pricing actions, primarily based on predictive model scoring of each renewal policy.

We are obtaining high single and, in some cases, double-digit renewal premium increases throughout our commercial auto line, depending on the individual loss experience of a given account. We've implemented and will continue to implement commercial automobile rate increases in all the states in which