The Donegal Group’s commercial insurance underwriting loss is “still unacceptable,” CEO Kevin Burke told analysts on an earnings call on Wednesday.
The line of business was Donegal’s worst by far for underwriting profitability, even after the combined ratio improved by 4.7 percentage points to 12.7% last year.
Donegal increased net commercial auto premiums by 10.8% in 2020 to $135mn, representing the carrier’s largest single commercial line.
“As we earn the premium increases that we put through in 2020, and then the 2021 planned increases are earned, we expect to get a lot closer to having an underwriting profit,” Burke told analysts in an earnings call this week.
He said the company wanted the commercial auto book to be writing at 96% combined – the same figure New York-listed Donegal achieved group wide in 2020 – but said it would take the business at least two years to hit the target. By 2022, he said Donegal would get the combined ratio down to at least 100%, if not slightly below.
Burke said that commercial auto profitability was a problem across the insurance industry, with the business line not making an underwriting profit since 2011.
Donegal’s poor performance in commercial auto contrasted with its strong performance in personal lines, workers’ compensation and commercial multiperil.
Donegal’s personal lines division improved its combined ratio by 10.2 points to 92.4%, while its workers compensation book improved by 90 basis points to 86.3% in 2020.