Donegal Group, Inc.

Good day, and thank you for standing by. Welcome to the Donegal Group, Inc. Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's call is being recorded. I would now like to hand the conference over to Karen Daly, Vice President at the Equity Group. Please go ahead.

Good morning and thank you for joining us today. Yesterday afternoon, Donegal Group issued its fourth quarter 2021 earnings release outlining its quarterly and full year results. The release and a supplemental investor presentation are available in the investor relations section of Donegal's website at donegalgroup.com. Speaking today will be President and Chief Executive Officer Kevin Burke and Chief Financial Officer Jeffrey Miller. Please be aware that statements made during this call that are not historical facts are forward-looking statements and necessarily involves risks and uncertainties that could cause actual results to vary materially. These factors can be found in Donovan Group's filings with the Securities and Exchange Commission, including its annual report on Form 10-K and quarterly reports on Form 10-Q. The company disclaims any obligation to update or publicly announce the results of any revisions that they may make to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statement. With that, I turn it over to Kevin Burke. Kevin?

Thanks, Karen, and welcome, everyone. I will focus my remarks on our strong top-line growth and discuss the progress we've made on several strategic initiatives. Jeff will then provide details on our financial results for the fourth quarter of the full year and I'll return for closing remarks before we open the lines for questions. Net premiums written increased 7.3% for the fourth quarter and 8.4% for the full year of 2021 compared to prior year periods. We are pleased with the strong growth in our commercial lines, which was driven by strong retention and solid rate increases across most of our lines. Commercial lines net premiums Britain increased 14.6% for the fourth quarter of 2021 compared to the prior year quarter. Similar to the first three quarters of 2021, the growth reflected premiums from our Mountain States region. As a reminder, Mountain States premiums were excluded from our results in 2020 and prior. The Donegal Mutual began placing policies into our underwriting pool effective in the calendar year of 2021. As a result, all of our commercial lines of business achieved growth for the full year, led by commercial multi-parallel with a growth of 27%. We continue to view commercial market conditions as favorable for growth across our regions, and we've targeted several well-performing regions for our new business growth. However, given the recent inflationary trends we've seen across multiple industries, we are focused on pricing increases and retention of premium while continuing to grow profitably. Personal lines net premiums written decline 2.8% and 4.3% for the fourth quarter and full year of 2021, primarily as a result of strategic underwriting measures we took over the past several years to improve the profitability of our personal lines business as we awaited the development of new products. We are pleased to announce the successful launch of new personal auto homeowners and personal umbrella liability products in three initial states in the fourth quarter of 2021. The new products include coverage enhancements, modernized rating methodology, enhanced pricing segmentation, application of new predictive analytical models, and expanded utilization of third-party data. As a result of the new product rollout, we implemented a new personal lines agency portal, as well as the rating underwriting policy issuance capabilities that will ultimately support our personal lines business in 10 states on our new technology platform. Currently, the portal and systems are fully live in the states of Indiana, Ohio, and Pennsylvania, and the initial agency feedback in these states has been very positive. Technical and business teams will continue to support the phased rollout of our new personal lines products in seven additional states throughout 2022. We are excited to effectively compete for new quality personal lines accounts and expect to generate modest levels of premium growth that will contribute to sustained profitability and stability in our personal line segment over the next few years. Jeff will provide more details in a moment. But in summary, our underwriting results for the fourth quarter of 2021 were hindered by several headwinds that prevented us from achieving our profit targets. While weather-related losses were in line with our five-year average, we saw an increase in large fire losses and experienced higher commercial auto severity compared to the prior year quarter. Commercial multi-peril results reflect the large fire activity as well as the impact of inflation of the cost to repair properties. While we are pleased with the overall profitability of our personal line segment in 2021, those results benefited greatly from favorable development of prior reserves that masked underlying inflationary increases in core loss trends. As we enter 2022, we continue to experience higher personal auto claims frequency and severity as driving activity has largely returned to pre-pandemic levels. And the impact of supply chain and labor market disruption is contributing to substantial increases in auto repair and replacement costs. We are quickly responding by increasing personal auto rates across our regional footprint, and it will take some time before our 2022 rate increases will begin to offset loss-cost trends we are experiencing. At this point, I'll turn the call over to Jeff for a review of our financial results, and then I'll return with a few closing comments.