Donegal Group Inc. (NASDAQ:DGICA) and (NASDAQ:DGICB) today reported
its financial results for the second quarter and first half of
2018. The Company will hold a live conference call on
Tuesday, July 31, 2018 at 11:00AM Eastern Time to discuss these
results. You may listen to the webcast of this conference
call by accessing the event link at
http://investors.donegalgroup.com.
Significant items included:
- Net loss of $790,000, or 3 cents per Class A share, for the
second quarter of 2018, compared to a net loss of $2.3 million, or
8 cents per Class A share, for the second quarter of 2017, with
both periods reflecting higher than average weather-related
losses
- Second quarter of 2018 results included an after-tax
restructuring charge of $1.3 million, or 5 cents per Class A share,
related to a restructuring charge for severance costs the Company
incurred in connection with the closure of its Salisbury, Maryland
branch office
- Net premiums earned of $185.7 million for the second quarter of
2018 increased 6.1% compared to the prior-year second quarter
- Net premiums written1 increased 2.7% to $195.9 million for the
second quarter of 2018 compared to the prior-year second
quarter
- Combined ratio of 105.6% for the second quarter of 2018,
compared to 106.4% for the prior-year second quarter
- Book value per share of $14.85 at June 30, 2018, compared to
$15.95 at year-end 2017
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2018 |
|
|
|
2017 |
|
|
% Change |
|
|
2018 |
|
|
|
2017 |
|
% Change |
|
|
(dollars in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement Data |
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned |
$ |
185,714 |
|
|
$ |
175,015 |
|
|
6.1 |
% |
|
$ |
367,479 |
|
|
$ |
344,171 |
|
6.8 |
% |
|
Investment income, net |
|
6,342 |
|
|
|
5,650 |
|
|
12.3 |
|
|
|
12,721 |
|
|
|
11,405 |
|
11.5 |
|
|
Net realized investment gains |
|
1,517 |
|
|
|
1,097 |
|
|
38.3 |
|
|
|
599 |
|
|
|
3,646 |
|
(83.6 |
) |
|
Total revenues |
|
195,790 |
|
|
|
183,581 |
|
|
6.7 |
|
|
|
385,118 |
|
|
|
362,552 |
|
6.2 |
|
|
Net (loss) income |
|
(790 |
) |
|
|
(2,319 |
) |
|
(65.9 |
) |
|
|
(18,968 |
) |
|
|
2,786 |
|
NM2 |
|
Non-GAAP operating (loss) income1 |
|
(536 |
) |
|
|
(3,032 |
) |
|
(82.3 |
) |
|
|
(18,108 |
) |
|
|
416 |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income – Class A (diluted) |
$ |
(0.03 |
) |
|
$ |
(0.08 |
) |
|
(62.5 |
) |
|
$ |
(0.68 |
) |
|
$ |
0.10 |
|
NM |
|
Net (loss) income – Class B |
|
(0.03 |
) |
|
|
(0.08 |
) |
|
(62.5 |
) |
|
|
(0.63 |
) |
|
|
0.09 |
|
NM |
|
Non-GAAP operating (loss) income – Class A (diluted) |
|
(0.02 |
) |
|
|
(0.11 |
) |
|
(81.8 |
) |
|
|
(0.65 |
) |
|
|
0.02 |
|
NM |
|
Non-GAAP operating (loss) income – Class B |
|
(0.02 |
) |
|
|
(0.11 |
) |
|
(81.8 |
) |
|
|
(0.60 |
) |
|
|
0.01 |
|
NM |
|
Book value |
|
14.85 |
|
|
|
16.23 |
|
|
(8.5 |
) |
|
|
14.85 |
|
|
|
16.23 |
|
(8.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
1The “Definitions of Non-GAAP and Operating Measures” section of
this release defines and reconciles data that the Company prepares
on an accounting basis other than U.S. generally accepted
accounting principles (“GAAP”).
2Not meaningful.
Management Commentary
Kevin G. Burke, President and Chief Executive
Officer of Donegal Group Inc., noted, “Throughout the second
quarter of 2018, Donegal Group continued to focus on improving
underwriting performance while also completing a significant
corporate initiative. On June 12, 2018, we announced that we
had entered into an agreement with Northwest Bancshares, Inc. for
the sale of Donegal Financial Services Corporation and Union
Community Bank. We currently expect to close on this
transaction in the first quarter of 2019. We plan to utilize
the proceeds from this sale to support our strategic goals as we
focus on our core property and casualty insurance business.”
Mr. Burke continued, “We are confident that our
entire team is fully engaged in addressing the challenges we
encountered in the first quarter of 2018, which included adverse
reserve development primarily related to higher-than-expected loss
severity in our personal and commercial automobile lines of
business. Our automobile combined ratios for the second
quarter of 2018 reflected our expectations for a continuation of
elevated loss severity trends in these business lines, but we did
not incur any additional material reserve development for losses
incurred in prior years. We have implemented, and will
continue to implement, automobile rate increases in all of the
states in which we are actively writing business. In
addition, we have implemented predictive analytical scoring for all
commercial automobile policy renewals in order to further refine
our underwriting and pricing, and we are in the process of
extensively re-underwriting all commercial automobile policy
renewals in several underperforming states. To this point,
market conditions have allowed us to achieve steady net written
premium gains without a meaningful decline in policy retention
rates throughout the majority of our regional markets. We
expect the higher premium rates and enhanced implementation of
technological advancements to yield incremental profit improvement
over time as our net premiums earned reflect more appropriate
pricing for automobile risks throughout all of our marketing
regions.”
Jeffrey D. Miller, Executive Vice President and
Chief Financial Officer, commented, “Weather-related losses totaled
approximately $17.7 million for the second quarter of 2018,
representing an improvement over the $20.1 million of
weather-related losses for the second quarter of 2017 but
reflecting an increase compared to the previous five-year average
for second quarter weather-related losses of $12.3 million. The
higher-than-average losses resulted from a series of wind and hail
events in the Company’s operating regions during the second quarter
of 2018. None of the losses from wind and hail events
exceeded the Company’s $5.0 million third-party catastrophe
reinsurance retention.”
Mr. Miller continued, “Our workers’ compensation
line of business continued to perform well during the second
quarter of 2018, as indicated by the statutory combined ratio1 of
92.9% in this line of business. We achieved that favorable
ratio despite an increase in loss severity, primarily due to
several unusually severe reported claims we incurred during the
period. We were also pleased that our commercial multi-peril
line of business returned to profitability, as the 91.2% second
quarter 2018 statutory combined ratio demonstrated. The
favorable results in commercial multi-peril and workers’
compensation helped us to achieve overall underwriting
profitability in our commercial segment for the quarter.”
Management Conclusion and
Outlook
Mr. Burke concluded, “Our core values include
fostering a conservative underwriting culture and pricing
discipline, continuing our investment in technology and maintaining
a conservative investment approach to deliver value to all of our
stockholders. We believe that our management team has made
considerable progress on key initiatives to improve our
underwriting performance, and we expect more favorable results for
the remainder of 2018.”
Insurance Operations
Donegal Group is an insurance holding company
whose insurance subsidiaries offer personal and commercial property
and casualty lines of insurance in four Mid-Atlantic states
(Delaware, Maryland, New York and Pennsylvania), three New England
states (Maine, New Hampshire and Vermont), seven Southern states
(Alabama, Georgia, North Carolina, South Carolina, Tennessee,
Virginia and West Virginia) and eight Midwestern states (Illinois,
Indiana, Iowa, Michigan, Nebraska, Ohio, South Dakota and
Wisconsin). Donegal Mutual Insurance Company and the insurance
subsidiaries of Donegal Group conduct business together as the
Donegal Insurance Group.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
|
2018 |
|
|
2017 |
|
% Change |
|
|
2018 |
|
|
2017 |
|
% Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal lines |
$ |
101,162 |
|
$ |
95,921 |
|
5.5 |
% |
|
$ |
200,701 |
|
$ |
188,458 |
|
6.5 |
% |
|
|
Commercial lines |
|
84,552 |
|
|
79,094 |
|
6.9 |
|
|
|
166,778 |
|
|
155,713 |
|
7.1 |
|
|
|
Total net premiums earned |
$ |
185,714 |
|
$ |
175,015 |
|
6.1 |
% |
|
$ |
367,479 |
|
$ |
344,171 |
|
6.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Written |
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal lines: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
$ |
66,511 |
|
$ |
65,699 |
|
1.2 |
% |
|
$ |
131,417 |
|
$ |
126,991 |
|
3.5 |
% |
|
|
Homeowners |
|
35,030 |
|
|
35,311 |
|
(0.8 |
) |
|
|
61,587 |
|
|
60,902 |
|
1.1 |
|
|
|
Other |
|
5,119 |
|
|
5,378 |
|
(4.8 |
) |
|
|
9,921 |
|
|
10,106 |
|
(1.8 |
) |
|
|
Total personal lines |
|
106,660 |
|
|
106,388 |
|
0.3 |
|
|
|
202,925 |
|
|
197,999 |
|
2.5 |
|
|
|
Commercial lines: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
27,857 |
|
|
25,889 |
|
7.6 |
|
|
|
58,103 |
|
|
52,724 |
|
10.2 |
|
|
|
Workers' compensation |
|
26,566 |
|
|
27,749 |
|
(4.3 |
) |
|
|
59,696 |
|
|
61,233 |
|
(2.5 |
) |
|
|
Commercial multi-peril |
|
29,710 |
|
|
27,967 |
|
6.2 |
|
|
|
61,895 |
|
|
57,997 |
|
6.7 |
|
|
|
Other |
|
5,156 |
|
|
2,779 |
|
85.5 |
|
|
|
8,586 |
|
|
5,320 |
|
61.4 |
|
|
|
Total commercial lines |
|
89,289 |
|
|
84,384 |
|
5.8 |
|
|
|
188,280 |
|
|
177,274 |
|
6.2 |
|
|
|
Total net premiums written |
$ |
195,949 |
|
$ |
190,772 |
|
2.7 |
% |
|
$ |
391,205 |
|
$ |
375,273 |
|
4.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Written
The 2.7% increase in the Company’s net premiums
written for the second quarter of 2018 compared to the second
quarter of 2017, as shown in the table above, represents the
combination of 5.8% growth in commercial lines net premiums written
and 0.3% growth in personal lines net premiums written. The $5.2
million growth in net premiums written for the second quarter of
2018 compared to the second quarter of 2017 included:
- $4.9 million in commercial lines premiums that the Company
attributes to a combination of new policy growth and a continuation
of modest renewal premium increases. In addition, the
increase in other commercial lines net premiums written reflects a
modification to third-party reinsurance coverage related to
umbrella liability policies effective March 1, 2018.
- $272,000 in personal lines premiums that the Company attributes
to premium rate increases the Company has implemented over the past
four quarters, partially offset by net attrition as a result of
underwriting measures the Company’s insurance subsidiaries
implemented to slow new policy growth and to increase pricing on
renewal policies.
Underwriting Performance
The Company evaluates the performance of its
commercial lines and personal lines segments primarily based upon
the underwriting results of its insurance subsidiaries as
determined under statutory accounting practices. The
following table presents comparative details with respect to the
Company’s GAAP and statutory combined ratios for the three and six
months ended June 30, 2018 and 2017:
| |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Combined Ratios (Total Lines) |
|
|
|
|
|
|
|
|
Loss ratio (non-weather) |
|
63.6 |
% |
|
61.6 |
% |
|
71.3 |
% |
|
60.4 |
% |
|
|
Loss ratio (weather-related) |
|
9.5 |
|
|
11.5 |
|
|
8.3 |
|
|
10.0 |
|
|
|
Expense ratio |
|
31.8 |
|
|
32.6 |
|
|
32.1 |
|
|
32.9 |
|
|
|
Dividend ratio |
|
0.7 |
|
|
0.7 |
|
|
0.7 |
|
|
0.6 |
|
|
|
Combined ratio |
|
105.6 |
% |
|
106.4 |
% |
|
112.4 |
% |
|
103.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory Combined Ratios |
|
|
|
|
|
|
|
|
|
|
Personal lines: |
|
|
|
|
|
|
|
|
|
|
Automobile |
|
109.7 |
% |
|
108.9 |
% |
|
113.8 |
% |
|
106.8 |
% |
|
|
Homeowners |
|
113.9 |
|
|
122.3 |
|
|
112.8 |
|
|
114.3 |
|
|
|
Other |
|
93.6 |
|
|
126.0 |
|
|
107.3 |
|
|
107.9 |
|
|
|
Total personal lines |
|
110.3 |
|
|
114.1 |
|
|
113.2 |
|
|
109.2 |
|
|
|
Commercial lines: |
|
|
|
|
|
|
|
|
|
|
Automobile |
|
116.0 |
|
|
107.6 |
|
|
143.5 |
|
|
107.3 |
|
|
|
Workers' compensation |
|
92.9 |
|
|
87.4 |
|
|
88.1 |
|
|
84.1 |
|
|
|
Commercial multi-peril |
|
91.2 |
|
|
93.4 |
|
|
103.8 |
|
|
99.5 |
|
|
|
Total commercial lines |
|
97.5 |
|
|
92.8 |
|
|
108.5 |
|
|
93.6 |
|
|
|
Total lines |
|
104.5 |
% |
|
104.5 |
% |
|
111.0 |
% |
|
102.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Loss Ratio
For the second quarters of both 2018 and 2017,
the Company’s loss ratio was 73.1%. Weather-related losses
contributed 9.5 percentage points to the Company’s loss ratio for
the second quarter of 2018, compared to 11.5 percentage points of
the Company’s loss ratio for the second quarter of 2017.
Workers compensation losses in excess of $50,000 were $7.1 million
in the second quarter of 2018, compared to $3.8 million in the
second quarter of 2017.
Large fire losses, which the Company defines as
individual fire losses in excess of $50,000, were $6.7 million for
the second quarter of 2018, or 3.6 percentage points of the
Company’s loss ratio. That amount was modestly lower than the
large fire losses of $7.6 million for the second quarter of 2017,
or 4.3 percentage points of the Company’s loss ratio. The
Company noted a modest decrease in the impact of both homeowners
and commercial fire losses in the second quarter of 2018.
Development of reserves for losses incurred in
prior accident years had virtually no impact on the Company’s loss
ratio for the second quarter of 2018, compared to 3.3 percentage
points of the Company’s loss ratio for the second quarter of 2017.
During the first quarter of 2018, the Company received new
information on previously-reported commercial automobile and
personal automobile claims and determined that its actuarial
assumptions did not fully anticipate recent changes in severity and
reporting trends. The Company attributed these trends to increased
litigation and delays in reporting information with respect to the
severity of claims. As a result, the Company’s actuaries
increased their projections of the ultimate cost of prior-year
commercial automobile and personal automobile losses and added $7.4
million to our reserves for personal automobile claims and $18.8
million to our reserves for commercial automobile claims. As
a result of the reserve strengthening actions in the first quarter
of 2018, development of reserves for losses incurred in prior
accident years added 7.1 percentage points to the Company’s loss
ratio for the first half of 2018, compared to 2.4 percentage points
to the Company's loss ratio for the first half of 2017.
The Company’s expense ratio was 31.8% for the
second quarter of 2018, compared to 32.6% for the second quarter of
2017. The Company attributes the decrease to a reduction in
underwriting-based incentive costs for the second quarter of 2018
compared to the prior-year quarter, partially offset by a $1.9
million restructuring charge in the second quarter of 2018 for
employee termination costs associated with the consolidation of
certain operations and closing of the branch office of The
Peninsula Insurance Company. The Company expects to achieve
annualized expense savings of approximately $3.7 million as a
result of implementing the Peninsula consolidation. While the
Company expects net proceeds from the sale of Peninsula’s branch
office real estate, the Company does not have definitive purchase
arrangements and cannot estimate such proceeds at this time.
Investment Operations
Donegal Group’s investment strategy is to
generate an appropriate amount of after-tax income on its invested
assets while minimizing credit risk through investment in
high-quality securities. As a result, the Company had invested
89.6% of its consolidated investment portfolio in diversified,
highly rated and marketable fixed-maturity securities at June 30,
2018.
| |
|
|
|
|
|
|
|
|
|
|
June 30, 2018 |
|
December 31, 2017 |
|
|
|
Amount |
|
% |
|
Amount |
|
% |
|
|
|
(dollars in thousands) |
|
|
Fixed maturities, at carrying value: |
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and obligations of U.S. |
|
|
|
|
|
|
|
|
|
government corporations and agencies |
$ |
116,296 |
|
|
11.5 |
% |
|
$ |
115,786 |
|
|
11.5 |
% |
|
|
Obligations of states and political subdivisions |
|
247,693 |
|
|
24.5 |
|
|
|
269,698 |
|
|
26.8 |
|
|
|
Corporate securities |
|
237,636 |
|
|
23.5 |
|
|
|
213,764 |
|
|
21.2 |
|
|
|
Mortgage-backed securities |
|
304,176 |
|
|
30.1 |
|
|
|
306,353 |
|
|
30.5 |
|
|
|
Total fixed maturities |
|
905,801 |
|
|
89.6 |
|
|
|
905,601 |
|
|
90.0 |
|
|
|
Equity securities, at fair value |
|
53,602 |
|
|
5.3 |
|
|
|
50,445 |
|
|
5.0 |
|
|
|
Investments in affiliates |
|
39,451 |
|
|
3.9 |
|
|
|
38,774 |
|
|
3.9 |
|
|
|
Short-term investments, at cost |
|
11,787 |
|
|
1.2 |
|
|
|
11,050 |
|
|
1.1 |
|
|
|
Total investments |
$ |
1,010,641 |
|
|
100.0 |
% |
|
$ |
1,005,870 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Average investment yield |
|
2.5 |
% |
|
|
|
|
2.4 |
% |
|
|
|
|
Average tax-equivalent investment yield |
|
2.7 |
% |
|
|
|
|
2.9 |
% |
|
|
|
|
Average fixed-maturity duration (years) |
|
5.2 |
|
|
|
|
|
5.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
Net investment income of $6.3 million for the second quarter of
2018 increased 12.3% compared to $5.6 million in net investment
income for the second quarter of 2017. The increase in net
investment income reflected primarily an increase in average
invested assets relative to the prior-year second quarter.
Net realized investment gains were $1.5
million for the second quarter of 2018, compared to $1.1 million
for the second quarter of 2017.
The Company owns 48.2% of the outstanding stock
of Donegal Financial Services Corporation (“DFSC”). DFSC owns all
of the outstanding stock of Union Community Bank (“UCB”). The
Company accounts for its investment in DFSC using the equity method
of accounting. Donegal Mutual Insurance Company (“DMIC”) owns the
remaining 51.8% of the outstanding stock of DFSC. On June 12,
2018, the Company and DMIC announced that the Company and DMIC had
entered into an agreement to sell DFSC and UCB to Northwest
Bancshares, Inc. (“Northwest”) for approximately $85.0 million in a
combination of cash and Northwest common stock. Immediately
prior to the closing of the merger, DFSC will pay a dividend of
approximately $30.0 million to the Company and DMIC. Thus,
the total proceeds to the Company and DMIC will be approximately
$115.0 million. As the owner of 48.2% of DFSC’s common stock,
the Company will receive a dividend payment from DFSC of
approximately $14.5 million and consideration from Northwest that
will range in value from $38.9 million to $43.0 million. The
Company anticipates that it will realize an after-tax gain, net of
transaction-related expenses, within a range of $8.9 million and
$12.5 million, or approximately $.32 to $.45 per Class A common
share, upon closing of the transaction expected in the first
quarter of 2019.
Definitions of Non-GAAP and Operating
Measures
The Company prepares its consolidated financial
statements on the basis of GAAP. The Company’s insurance
subsidiaries also prepare financial statements based on statutory
accounting principles state insurance regulators prescribe or
permit (“SAP”). In addition to using GAAP-based performance
measurements, the Company also utilizes certain non-GAAP financial
measures that it believes provide value in managing its business
and for comparison to the financial results of its peers. These
non-GAAP measures are net premiums written, operating income or
loss and statutory combined ratio.
Net premiums written and operating income or
loss are non-GAAP financial measures investors in insurance
companies commonly use. The Company defines net premiums written as
the amount of full-term premiums the Company records for policies
effective within a given period less premiums the Company cedes to
reinsurers. The Company defines operating income or loss as net
income or loss excluding after-tax net realized investment gains or
losses and after-tax restructuring charges. Because the Company’s
calculation of operating income or loss may differ from similar
measures other companies use, investors should exercise caution
when comparing the Company’s measure of operating income or loss to
the measure other companies use.
The following table provides a reconciliation of
the Company's net premiums earned to the Company's net premiums
written for the periods indicated:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2018 |
|
|
2017 |
|
% Change |
|
|
2018 |
|
|
2017 |
|
% Change |
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Premiums |
|
|
|
|
|
|
|
|
|
|
|
|
Earned to Net Premiums Written |
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned |
$ |
185,714 |
|
$ |
175,015 |
|
6.1 |
% |
|
$ |
367,479 |
|
$ |
344,171 |
|
6.8 |
% |
|
Change in net unearned premiums |
|
10,235 |
|
|
15,757 |
|
(35.0 |
) |
|
|
23,726 |
|
|
31,102 |
|
(23.7 |
) |
|
Net premiums written |
$ |
195,949 |
|
$ |
190,772 |
|
2.7 |
% |
|
$ |
391,205 |
|
$ |
375,273 |
|
4.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
The following table provides a reconciliation of the Company's
net (loss) income to the Company's operating (loss) income for the
periods indicated:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
|
2018 |
|
|
|
2017 |
|
|
% Change |
|
|
2018 |
|
|
|
2017 |
|
|
% Change |
|
|
|
(dollars in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net (Loss) Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
to Non-GAAP Operating (Loss) Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
$ |
(790 |
) |
|
$ |
(2,319 |
) |
|
(65.9 |
%) |
|
$ |
(18,968 |
) |
|
$ |
2,786 |
|
|
NM |
|
|
Realized gains (after tax) |
|
(1,001 |
) |
|
|
(713 |
) |
|
40.4 |
|
|
|
(395 |
) |
|
|
(2,370 |
) |
|
(83.3 |
%) |
|
|
Restructuring charge (after tax) |
|
1,255 |
|
|
|
- |
|
|
NM |
|
|
1,255 |
|
|
|
- |
|
|
NM |
|
|
Non-GAAP operating (loss) income |
$ |
(536 |
) |
|
$ |
(3,032 |
) |
|
(82.3 |
%) |
|
$ |
(18,108 |
) |
|
$ |
416 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Reconciliation of Net |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income to Non-GAAP Operating (Loss)
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income – Class A (diluted) |
$ |
(0.03 |
) |
|
$ |
(0.08 |
) |
|
(62.5 |
%) |
|
$ |
(0.68 |
) |
|
$ |
0.10 |
|
|
NM |
|
|
Realized gains (after tax) |
|
(0.04 |
) |
|
|
(0.03 |
) |
|
33.3 |
|
|
|
(0.02 |
) |
|
|
(0.08 |
) |
|
(75.0 |
%) |
|
|
Restructuring charge (after tax) |
|
0.05 |
|
|
|
- |
|
|
NM |
|
|
0.05 |
|
|
|
- |
|
|
NM |
|
|
Non-GAAP operating (loss) income – Class A |
$ |
(0.02 |
) |
|
$ |
(0.11 |
) |
|
(81.8 |
%) |
|
$ |
(0.65 |
) |
|
$ |
0.02 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income – Class B |
$ |
(0.03 |
) |
|
$ |
(0.08 |
) |
|
(62.5 |
%) |
|
$ |
(0.63 |
) |
|
$ |
0.09 |
|
|
NM |
|
|
Realized gains (after tax) |
|
(0.03 |
) |
|
|
(0.03 |
) |
|
0.0 |
|
|
|
(0.01 |
) |
|
|
(0.08 |
) |
|
(87.5 |
%) |
|
|
Restructuring charge (after tax) |
|
0.04 |
|
|
|
- |
|
|
NM |
|
|
0.04 |
|
|
|
- |
|
|
NM |
|
|
Non-GAAP operating (loss) income – Class B |
$ |
(0.02 |
) |
|
$ |
(0.11 |
) |
|
(81.8 |
%) |
|
$ |
(0.60 |
) |
|
$ |
0.01 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
The statutory combined ratio is a non-GAAP standard measurement
of underwriting profitability that is based upon amounts determined
under SAP. The statutory combined ratio is the sum of:
- the statutory loss ratio, which is the ratio of calendar-year
incurred losses and loss expenses to premiums earned;
- the statutory expense ratio, which is the ratio of expenses
incurred for net commissions, premium taxes and underwriting
expenses to premiums written; and
- the statutory dividend ratio, which is the ratio of dividends
to holders of workers’ compensation policies to premiums
earned.
The statutory combined ratio does not reflect
investment income, federal income taxes or other non-operating
income or expense. A statutory combined ratio of less than 100%
generally indicates underwriting profitability.
Conference Call and Webcast
The Company will hold a conference call and
webcast on Tuesday, July 31, 2018, beginning at 11:00 A.M. Eastern
Time. You may listen via the Internet by accessing the webcast link
on the Company’s website at http://investors.donegalgroup.com. A
replay of the conference call will also be available via the
Company’s website.
About the Company
Donegal Group is an insurance holding company.
The Company’s Class A common stock and Class B common stock trade
on the NASDAQ Global Select Market under the symbols DGICA and
DGICB, respectively. As an effective acquirer of small to
medium-sized “main street” property and casualty insurers, Donegal
Group has grown profitably over the last three decades. The Company
continues to seek opportunities for growth while striving to
achieve its longstanding goal of outperforming the property and
casualty insurance industry in terms of service, profitability and
book value growth.
Safe Harbor
We base all statements contained in this release
that are not historic facts on our current expectations. These
statements are forward-looking in nature (as defined in the Private
Securities Litigation Reform Act of 1995) and involve a number of
risks and uncertainties. Actual results could vary materially.
Factors that could cause actual results to vary materially include:
adverse and catastrophic weather events, our ability to maintain
profitable operations, the adequacy of the loss and loss expense
reserves of our insurance subsidiaries, business and economic
conditions in the areas in which our insurance subsidiaries
operate, interest rates, competition from various insurance and
other financial businesses, terrorism, the availability and cost of
reinsurance, legal and judicial developments, changes in regulatory
requirements, our ability to integrate and manage successfully the
insurance companies we may acquire from time to time and other
risks we describe in the periodic reports we file with the
Securities and Exchange Commission. You should not place undue
reliance on any such forward-looking statements. We disclaim any
obligation to update such statements or to announce publicly the
results of any revisions that we may make to any forward-looking
statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such
statements.
| |
| Donegal Group Inc. |
| Consolidated Statements of Income |
| (unaudited; in thousands, except share data) |
| |
|
|
|
|
|
| |
|
|
Quarter Ended June 30, |
| |
|
|
|
2018 |
|
|
|
2017 |
|
| |
|
|
|
|
|
| Net
premiums earned |
$ |
185,714 |
|
|
$ |
175,015 |
|
| Investment
income, net of expenses |
|
6,342 |
|
|
|
5,650 |
|
| Net
realized investment gains |
|
1,517 |
|
|
|
1,097 |
|
| Lease
income |
|
123 |
|
|
|
128 |
|
| Installment
payment fees |
|
1,306 |
|
|
|
1,304 |
|
| Equity in
earnings of DFSC |
|
788 |
|
|
|
387 |
|
| |
Total
revenues |
|
195,790 |
|
|
|
183,581 |
|
| |
|
|
|
|
|
| Net losses
and loss expenses |
|
135,754 |
|
|
|
128,006 |
|
|
Amortization of deferred acquisition costs |
|
30,579 |
|
|
|
28,700 |
|
| Other
underwriting expenses |
|
28,492 |
|
|
|
28,259 |
|
|
Policyholder dividends |
|
1,214 |
|
|
|
1,212 |
|
|
Interest |
|
|
566 |
|
|
|
383 |
|
| Other
expenses |
|
518 |
|
|
|
417 |
|
| |
Total
expenses |
|
197,123 |
|
|
|
186,977 |
|
| |
|
|
|
|
|
| Loss before
income tax expense (benefit) |
|
(1,333 |
) |
|
|
(3,396 |
) |
| Income tax
benefit |
|
(543 |
) |
|
|
(1,077 |
) |
| |
|
|
|
|
|
| Net
loss |
|
$ |
(790 |
) |
|
$ |
(2,319 |
) |
| |
|
|
|
|
|
| Net loss
per common share: |
|
|
|
| |
Class A -
basic |
$ |
(0.03 |
) |
|
$ |
(0.09 |
) |
| |
Class A -
diluted |
$ |
(0.03 |
) |
|
$ |
(0.08 |
) |
| |
Class B -
basic and diluted |
$ |
(0.03 |
) |
|
$ |
(0.08 |
) |
| |
|
|
|
|
|
|
Supplementary Financial Analysts' Data |
|
|
|
| |
|
|
|
|
|
|
Weighted-average number of shares |
|
|
|
| |
outstanding: |
|
|
|
| |
Class A -
basic |
|
22,685,964 |
|
|
|
21,704,733 |
|
| |
Class A -
diluted |
|
22,887,365 |
|
|
|
22,497,195 |
|
| |
Class B -
basic and diluted |
|
5,576,775 |
|
|
|
5,576,775 |
|
| |
|
|
|
|
|
| Net
premiums written |
$ |
195,949 |
|
|
$ |
190,772 |
|
| |
|
|
|
|
|
| Book value
per common share |
|
|
|
| |
at end of
period |
$ |
14.85 |
|
|
$ |
16.23 |
|
| |
|
|
|
|
|
| Donegal Group Inc. |
| Consolidated Statements of Income |
| (unaudited; in thousands, except share data) |
| |
|
|
|
|
|
| |
|
|
Six Months Ended June 30 |
| |
|
|
|
2018 |
|
|
|
2017 |
| |
|
|
|
|
|
| Net
premiums earned |
$ |
367,479 |
|
|
$ |
344,171 |
| Investment
income, net of expenses |
|
12,721 |
|
|
|
11,405 |
| Net
realized investment gains |
|
599 |
|
|
|
3,646 |
| Lease
income |
|
246 |
|
|
|
270 |
| Installment
payment fees |
|
2,653 |
|
|
|
2,440 |
| Equity in
earnings of DFSC |
|
1,420 |
|
|
|
620 |
| |
Total
revenues |
|
385,118 |
|
|
|
362,552 |
| |
|
|
|
|
|
| Net losses
and loss expenses |
|
292,337 |
|
|
|
242,439 |
|
Amortization of deferred acquisition costs |
|
60,244 |
|
|
|
56,383 |
| Other
underwriting expenses |
|
57,815 |
|
|
|
56,749 |
|
Policyholder dividends |
|
2,516 |
|
|
|
2,047 |
|
Interest |
|
|
1,030 |
|
|
|
747 |
| Other
expenses |
|
1,044 |
|
|
|
859 |
| |
Total
expenses |
|
414,986 |
|
|
|
359,224 |
| |
|
|
|
|
|
| (Loss)
income before income tax (benefit) expense |
|
(29,868 |
) |
|
|
3,328 |
| Income tax
(benefit) expense |
|
(10,900 |
) |
|
|
542 |
| |
|
|
|
|
|
| Net (loss)
income |
$ |
(18,968 |
) |
|
$ |
2,786 |
| |
|
|
|
|
|
| Net (loss)
income per common share: |
|
|
|
| |
Class A -
basic |
$ |
(0.68 |
) |
|
$ |
0.11 |
| |
Class A -
diluted |
$ |
(0.68 |
) |
|
$ |
0.10 |
| |
Class B -
basic and diluted |
$ |
(0.63 |
) |
|
$ |
0.09 |
| |
|
|
|
|
|
|
Supplementary Financial Analysts' Data |
|
|
|
| |
|
|
|
|
|
|
Weighted-average number of shares |
|
|
|
| |
outstanding: |
|
|
|
| |
Class A -
basic |
|
22,650,899 |
|
|
|
21,625,240 |
| |
Class A -
diluted |
|
23,139,596 |
|
|
|
22,561,519 |
| |
Class B -
basic and diluted |
|
5,576,775 |
|
|
|
5,576,775 |
| |
|
|
|
|
|
| Net
premiums written |
$ |
391,205 |
|
|
$ |
375,273 |
| |
|
|
|
|
|
| Book value
per common share |
|
|
|
| |
at end of
period |
$ |
14.85 |
|
|
$ |
16.23 |
| |
|
|
|
|
|
| Donegal Group Inc. |
| Consolidated Balance Sheets |
| (in thousands) |
| |
|
|
|
|
|
| |
|
|
June 30, |
|
December 31, |
| |
|
|
|
2018 |
|
|
|
2017 |
|
| |
|
|
(unaudited) |
|
|
| |
|
|
|
|
|
| ASSETS |
|
Investments: |
|
|
|
| |
Fixed
maturities: |
|
|
|
| |
|
Held to maturity, at
amortized cost |
$ |
385,822 |
|
|
$ |
366,655 |
|
| |
|
Available for sale, at
fair value |
|
519,979 |
|
|
|
538,946 |
|
| |
Equity
securities, at fair value |
|
53,602 |
|
|
|
50,445 |
|
| |
Investments
in affiliates |
|
39,451 |
|
|
|
38,774 |
|
| |
Short-term
investments, at cost |
|
11,787 |
|
|
|
11,050 |
|
| |
|
Total
investments |
|
1,010,641 |
|
|
|
1,005,870 |
|
| Cash |
|
|
53,652 |
|
|
|
37,833 |
|
| Premiums
receivable |
|
169,221 |
|
|
|
160,406 |
|
| Reinsurance
receivable |
|
311,645 |
|
|
|
298,343 |
|
| Deferred
policy acquisition costs |
|
64,609 |
|
|
|
60,290 |
|
| Prepaid
reinsurance premiums |
|
143,727 |
|
|
|
135,033 |
|
| Other
assets |
|
51,844 |
|
|
|
40,145 |
|
| |
|
Total assets |
$ |
1,805,339 |
|
|
$ |
1,737,920 |
|
| |
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS' EQUITY |
|
Liabilities: |
|
|
|
|
| |
Losses and
loss expenses |
$ |
747,630 |
|
|
$ |
676,672 |
|
| |
Unearned
premiums |
|
535,877 |
|
|
|
503,457 |
|
| |
Accrued
expenses |
|
24,120 |
|
|
|
28,034 |
|
| |
Borrowings
under lines of credit |
|
60,000 |
|
|
|
59,000 |
|
| |
Subordinated debentures |
|
5,000 |
|
|
|
5,000 |
|
| |
Other
liabilities |
|
13,041 |
|
|
|
17,061 |
|
| |
|
Total liabilities |
|
1,385,668 |
|
|
|
1,289,224 |
|
|
Stockholders' equity: |
|
|
|
| |
Class A
common stock |
|
257 |
|
|
|
256 |
|
| |
Class B
common stock |
|
56 |
|
|
|
56 |
|
| |
Additional
paid-in capital |
|
258,666 |
|
|
|
255,401 |
|
| |
Accumulated
other comprehensive loss |
|
(17,974 |
) |
|
|
(2,684 |
) |
| |
Retained
earnings |
|
219,892 |
|
|
|
236,893 |
|
| |
Treasury
stock |
|
(41,226 |
) |
|
|
(41,226 |
) |
| |
|
Total stockholders'
equity |
|
419,671 |
|
|
|
448,696 |
|
| |
|
Total liabilities and
stockholders' equity |
$ |
1,805,339 |
|
|
$ |
1,737,920 |
|
| |
|
|
|
|
|
For Further Information:Jeffrey D. Miller, Executive Vice
President & Chief Financial OfficerPhone: (717) 426-1931E-mail:
investors@donegalgroup.com
Donegal (NASDAQ:DGICA)
Historical Stock Chart
From Aug 2024 to Sep 2024
Donegal (NASDAQ:DGICA)
Historical Stock Chart
From Sep 2023 to Sep 2024
