Vincent Viozzi: Thank you, Jeff. We are happy to report $10.5 million of net investment income for the third quarter of 2023, which is our sixth consecutive quarter of higher investment income. This 23% increase from the same period last year, was primarily reflective of an increase in average investment yield as compared to the prior-year period. During the third quarter of 2023, the average tax-equivalent yield was 3.22%, up from 2.66% from the same period in 2022, and reaching the highest level of yields we have seen in the last decade. Short-term cash rates, close to 5.25%, were higher than we achieved in both the preceding quarter and the third quarter of 2022. Of note, the average bond reinvestment yield was 5.46%, or approximately 175 basis points higher than the bond yields coming off the books in the third quarter.
We continued to strategically shift our investment mix from equities, corporate bonds and municipal bonds into U.S. treasuries and agencies, as well as mortgage-backed securities. This shift will provide a more favorable risk-return profile and should perform well in both the short and long term. Net investment losses were $1.2 million for the third quarter of 2023 compared to $2.4 million in the prior-year period. Losses in both periods were primarily related to unrealized losses in the fair value of equity securities we held at September 30. As a reminder, our equity portfolio continues to represent a very modest 2.7% of our total investments, in line with our equity holdings at December 31, 2022, but down from 3.6% of our portfolio 1 year ago.
We will maintain our conservative investing approach, limiting our equity exposure due to the current volatile nature of the U.S. equity markets amid current world events. During the first 9 months of the year, after-tax unrealized losses within our available for sale bonds lowered our book value per share by $0.32, leading to book value per share of $14.26 at September 30, 2023, compared to $14.79 at December 31, 2022. With that, I will now turn it back to Kevin for closing remarks.
Kevin Burke: Thanks, Tony. I would like to take a moment to thank our dedicated staff members for their ongoing, tireless efforts during this time of strategic transformation for Donegal. And of course, thanks to our stockholders for your continued interest and support. I look forward to speaking to you in the next call, in February 2024. I’ll now turn the call back to Karin.
A – Karin Daly: Thank you, Kevin. I would like to move into our question-and-answer session. In advance of today’s call, we requested and received questions from interested parties, and while we answered many of the questions within management’s prepared remarks, we will address a few of the questions directly. The first question is relating to workers’ compensation. Can you talk more broadly about your updated view on the workers’ comp market, both from a pricing, competitive landscape, and pair it with loss cost trends?
Jeffery Hay: This is Jeff Hay. I can take that one. Workers’ compensation continues to be the most profitable line of business for us. In fact, we are taking specific actions to grow the mix of workers’ compensation within our commercial segment. And while medical inflation remains largely in check, we have seen some recent upward pressure on indemnity severity due to higher wage inflation. But since wages are the exposure base for premiums in this line of business, we believe we are well-positioned for this upward pressure on severity. The market itself for workers’ comp remains highly competitive as we are far from the only carrier to be experiencing profit within the line and to be looking for ways to write more of it.
Karin Daly: The second question relates to commercial auto. Can you provide an update on where the commercial auto line is from a rate adequacy perspective?
Jeffery Hay: We have made good progress in commercial auto profitability over the past several years. And this has been the result of a lot of hard work to regain rate adequacy in a line of business that’s been very challenging for the entire industry over the last decade. And we expect our exit from the commercial market in Georgia will further improve our commercial auto results over time. We’re very pleased with the progress that we have made, but will continue to take rate and non-rate actions to stay ahead of the continuing inflationary trends in both liability and physical damage losses.
Karin Daly: And one last question on the investment portfolio. Can you remind us how much of your portfolio you expect to be reinvested over the next 12 months? Tony?
Vincent Viozzi: Sure, Karin. Looking at our current cash flow projections for 2024, we estimate that approximately $94 million of our bond portfolio will become available for reinvestment during the next calendar year. Those investments are currently yielding around 3.60%. So we should be able to reinvest those funds at higher yields if market interest rates remain higher for longer, as many now expect.
Karin Daly: Thank you for those responses. If there are any additional questions, please feel free to reach out to us. This now concludes the Donegal Group third quarter 2023 earnings webcast. Thank you and have a great day.
