Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Donegal Group Inc (NASDAQ:DGICA) reported its highest quarterly earnings in history with a net income of $24 million for the fourth quarter of 2024.
• The company achieved a significant improvement in its combined ratio, which was 92.9% for Q4 2024, compared to 106.8% in the prior year quarter.
• Net investment income grew by 12.5% in Q4 2024, contributing to a 10% growth for the full year, marking the highest annual net investment income in the company's history.
• The company successfully implemented substantial premium rate increases, averaging 11% across major lines of business, excluding workers' compensation.
• Donegal Group Inc (NASDAQ:DGICA) made excellent progress in its systems modernization project, which is expected to enhance competitiveness and efficiency.

Negative Points

• Net premiums written decreased by 0.6% in Q4 2024, with a notable 5% decline in personal lines premiums.
• The company experienced unfavorable development in commercial auto and personal auto lines, attributed to higher than expected severity for previously reported bodily injury losses.
• Despite improvements, the personal lines segment saw a decrease in the number of policies in force by 11.6% at the end of 2024 compared to the prior year.
• The company faced challenges with social inflation trends impacting liability claim severity, particularly in commercial auto and multipayer lines.
• Donegal Group Inc (NASDAQ:DGICA) had to increase its external retention amount for its casualty excess of loss reinsurance program due to high renewal costs.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with KNRRY.

Q: What were the key drivers behind Donegal Group's record net income in the fourth quarter of 2024? A: Kevin Burke, Chairman, President, and CEO, highlighted that the primary drivers were substantial improvements in core loss ratios in both commercial and personal lines, alongside lower-than-average weather-related losses. The company benefited from underwriting actions, state strategies, premium rate increases, and technology enhancements.

Q: How did Donegal Group's commercial lines perform in the fourth quarter of 2024? A: Jeffery Hay, Senior Vice President and Chief Underwriting Officer, reported a 2.8% growth in net premiums written for commercial lines. The statutory combined ratio improved to 97.3%, driven by a decrease in core loss and weather loss ratios. The company completed its exit from certain states and focused on profitable growth in targeted geographies.

Q: What were the results for Donegal Group's personal lines in the fourth quarter of 2024? A: Jeffery Hay noted a 5% decrease in net premiums written for personal lines, with a statutory combined ratio of 89.5%. The improvement was attributed to higher earned premiums from rate increases and favorable weather and fire loss impacts. The company plans to gradually increase new business levels in personal lines in 2025.

Q: How did Donegal Group's investment strategy contribute to its financial performance in 2024? A: V. Anthony Viozzi, Senior Vice President and Chief Investment Officer, stated that the investment strategy focused on diversification across asset classes with attractive risk-adjusted yields. This approach led to a 12.5% growth in net investment income for the fourth quarter and a 10% increase for the full year, marking the highest annual net investment income in the company's history.

Q: What are Donegal Group's strategic priorities for 2025? A: Kevin Burke emphasized the completion of the major systems transformation project, execution of profit-focused initiatives, and achieving measured growth. The company aims for high single-digit growth in commercial lines and plans to stabilize personal lines by increasing new business levels while maintaining rate adequacy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.