Insurer Donegal Group Inc. plans to close the Maryland office of one its subsidiaries and shift the work to its home office in Lancaster County.
The subsidiary, The Peninsula Insurance Co. in Salisbury, Maryland, employs about 50 people, according to Jeffrey D. Miller, CFO and executive vice president of Donegal Group, which sells a range of personal and commercial insurance policies.
The Peninsula office is slated to close July 2. Roughly 40 people will be laid off, largely in underwriting, marketing and support roles, Miller said.
The remainder, in claims and underwriting, are being offered the opportunity to work remotely or move to Donegal’s headquarters in East Donegal Township, Miller said. Some may be retiring.
The move is part of a plan to expand distribution for one of Peninsula’s products, commercial garage insurance sold to independent used-car lots, auto repair shops and small towing operations, Miller said.
“Peninsula has done it successfully and profitably,” Miller said.
But, he said, future growth would be better supported by Donegal’s Lancaster County office, which employs 550 people.
“We expect there may be a handful of positions that will be added,” Miller said. But for the most part, existing staff will handle the work.
The commercial garage products are currently sold in nine states, but Donegal plans to sell them in all 26 states where it does business, Miller said. Donegal purchased Peninsula in 2004 for $23 million, according to Business Journal records.
The insurer said it expects to record employee termination costs of $1.9 million to $2 million as part of the office consolidation, but save $3.7 million per year in expenses, according to a filing with the U.S. Securities and Exchange Commission.
Donegal also plans to sell two office buildings used by Peninsula but was not sure what price they would fetch.
For all of its products, not just the commercial garage policies, Peninsula wrote premiums of $59 million in 2017, Miller said. It has a target of $64.5 million for 2018.
Donegal and its subsidiaries sell personal and commercial property and casualty insurance in 26 states in the Mid-Atlantic, Midwest, New England and Southwest.
The company posted net income of $7.1 million in 2017, down from $30.8 million in 2016, largely due to higher claims and an adverse impact from the new tax law.