Donegal Mutual Insurance Co. is exiting the personal lines business in seven of the 22 states in which it does business and will transfer those personal lines accounts worth $25 million in premium to Safeco Insurance.
Safeco will assume Donegal’s personal lines business in the states of Alabama, Maine, Nebraska, New Hampshire, North Carolina, South Carolina and South Dakota. Donegal said the transfer to Safeco will give its independent agents in those states an option for those policyholders.
Donegal said it did not have enough personal lines business in those seven states to make it profitable. The approximately $25 million of personal lines premiums in those states represented about 2.6 percent of its overall premium writings.
The company stressed that it is looking to grow its commercial lines business in all of its states as well as its remaining personal lines business. The company sells through 2,400 independent agents.
“While we are actively seeking growth in our commercial lines of business throughout our operating regions, Donegal also remains solidly committed to maintaining and expanding our personal lines of business in markets where we have sufficient scale and spread of risk to achieve profitability. This transfer represents an opportunity for us to exit seven states where we have been unable to achieve that objective and to enable us to focus our efforts on our personal lines operations in other states,” said Kevin G. Burke, president and chief executive officer of Donegal, in prepared remarks.
In its 2017 annual report, the company cited disappointing results in its auto business, both personal and commercial, and said it had begun taking steps to curtail new business growth in underperforming states and to improve the loss experience in those lines. Its total (auto and homeowners) personal lines combined ratio in 2017 was 108.5; in 2016 it was 101.8.
“We are taking measures in 2018 to mitigate the adverse loss trends we, along with many of our peer companies, have experienced as a result of a combination of factors, such as increasing repair costs, distracted driving and an increase in driving activity,” the report said. “While we recognize that these efforts will require focused attention and resolve in 2018, we are committed to taking the necessary actions to restore our automobile business lines to profitability.”
Safeco said it will give Donegal’s agents an opportunity to build their partnership with Safeco.
The deal marks the second personal lines transaction for Safeco in as many months. In August, Safeco bought QBE North America’s personal insurance independent agency policies in 47 states, representing $230 million in gross written premium.
Donegal Mutual offers personal and commercial property/casualty insurance in 22 Mid-Atlantic, Midwestern, New England and Southern states, as well as commercial lines in four Southwestern states. In May 2017, Donegal Mutual completed the merger of Mountain States Mutual Casualty Co. into Donegal Mutual, which gives it four Southwestern states —New Mexico, Colorado, Texas and Utah —for selling commercial insurance products. Donegal sees entrance into the Southwestern region as a future growth opportunity.
Safeco is a Liberty Mutual Insurance company that sells personal automobile, homeowners and specialty products through 10,000 independent insurance agencies.
*This story ran previously in our sister publication Insurance Journal.