Donegal Q1 2023 results

Donegal Insurance Group hosted its Q1 ’23 earnings call on April 27, 2023. The highlights –

  • First-quarter profits fell short of the carrier’s anticipated profitability, according to CEO Kevin Burke.
  • The underwriting loss it incurred for the first quarter of 2023 was more than offset by $9.4 million of investment income, resulting in after-tax net income of $5.2 million, which declined from $13.1 million for the first quarter of 2022 when their results benefited from milder weather conditions and unusually favorable loss reserve development.
  • Its commercial lines footprint will eventually include 22 states and the next major commercial lines release will include the development of a new commercial lines package policy and migration of its remaining commercial lines products to a new platform.
  • Rate increases across commercial lines averaged 11%, excluding workers’ compensation during the first quarter.
  • Exited the commercial lines of business in the states of Georgia and Alabama due to profitability challenges – “We are no longer writing new commercial business in these 2 states and will begin non-renewing existing accounts beginning in July.”
  • The carrier is enhancing the data it provides to underwriters to assist them in underwriting and pricing of catastrophe-exposed properties
  • It is also expanding the use of advanced analytics in its new business and renewal decisions – for example, it introduced a new pricing guidance model for commercial package policies earlier in the first quarter.
  • It plans to rollout a new agency facing portal with enhanced small commercial products and straight-through processing capabilities – “this enhancement was 2 years in the making.” The rollout will be completed in the third quarter of this year.
  • Saw double-digit premium growth in personal lines during the first quarter.
  • Agents have reengaged with the insurer since it introduced new personal lines products in 9 of its 10 personal line states. Recently received regulatory approval for new products in Michigan, its 10th and final state for the rollout – expect to begin issuing policies in that state in June.
  • Accelerated planned personal lines rate increases for 2023, both in new and legacy personal lines products.
  • Filed homeowners rate increases averaged 9.5% for the first quarter, and it continues to automatically increase insured values north of 8% at renewal.
  • Personal automobile rate increases for the first quarter averaged 5%, but filed rate increases with future effective dates were higher, averaging 13%.
  • In both auto and home, Donegal plans to take additional rates throughout the remainder of the year.

Bottom Line: Donegal prioritizes expanding its commercial lines book of business, finishing the first quarter of 2023 with 103,936 policies, down from 105,549 policies in 2022.