Donegal Group Inc. (NASDAQ: DGICA) and (NASDAQ:DGICB) today
reported its financial results for the second quarter and first
half of 2019. The Company will host a conference call to discuss
these results on Tuesday, July 30, 2019 at 11:00 A.M. Eastern Time.
You may listen to the webcast of this conference call by accessing
the event link at http://investors.donegalgroup.com. A replay of
the conference call will also be available via the Company’s
website.
Significant financial highlights included:
- Net income of $4.8 million, or 17 cents per Class A share, for
the second quarter of 2019, compared to a net loss of $790,000, or
3 cents per Class A share, for the second quarter of 2018
- Net income of $27.8 million, or 99 cents per diluted Class A
share, for the first six months of 2019, compared to a net loss of
$19.0 million, or 68 cents per Class A share, for the first six
months of 2018
- Net premiums earned of $188.8 million for the second quarter of
2019 increased 1.6% compared to the second quarter of 2018
- Net premiums written1 of $197.8 million for the second quarter
of 2019 increased 0.9% compared to the second quarter of 2018
- Combined ratio of 102.0% for the second quarter of 2019,
compared to 105.6% for the second quarter of 2018
- Book value per share of $15.34 at June 30, 2019, compared to
$14.05 at year-end 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2019 |
|
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
|
2018 |
|
|
% Change |
|
|
|
(dollars in thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement Data |
|
|
|
|
|
|
|
|
|
Net premiums earned |
$ |
188,763 |
|
|
$ |
185,714 |
|
|
1.6 |
% |
|
$ |
376,837 |
|
|
$ |
367,479 |
|
|
2.5 |
% |
Investment income, net |
|
7,290 |
|
|
|
6,342 |
|
|
14.9 |
|
|
|
14,338 |
|
|
|
12,721 |
|
|
12.7 |
|
Net investment gains |
|
1,566 |
|
|
|
1,517 |
|
|
3.2 |
|
|
|
19,663 |
|
|
|
599 |
|
|
NM |
|
Total
revenues |
|
198,789 |
|
|
|
195,790 |
|
|
1.5 |
|
|
|
413,503 |
|
|
|
385,118 |
|
|
7.4 |
|
Net
income (loss) |
|
4,789 |
|
|
|
(790 |
) |
|
NM |
|
|
|
27,812 |
|
|
|
(18,968 |
) |
|
NM |
|
Non-GAAP operating income (loss)1 |
|
3,551 |
|
|
|
(536 |
) |
|
NM |
|
|
|
10,853 |
|
|
|
(18,108 |
) |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data |
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) – Class A (diluted) |
$ |
0.17 |
|
|
$ |
(0.03 |
) |
|
NM |
|
|
$ |
0.99 |
|
|
$ |
(0.68 |
) |
|
NM |
|
Net
income (loss) – Class B |
|
0.15 |
|
|
|
(0.03 |
) |
|
NM |
|
|
|
0.90 |
|
|
|
(0.63 |
) |
|
NM |
|
Non-GAAP
operating income (loss) – Class A (diluted) |
|
0.13 |
|
|
|
(0.02 |
) |
|
NM |
|
|
|
0.39 |
|
|
|
(0.65 |
) |
|
NM |
|
Non-GAAP
operating income (loss) – Class B |
|
0.11 |
|
|
|
(0.02 |
) |
|
NM |
|
|
|
0.35 |
|
|
|
(0.60 |
) |
|
NM |
|
Book
value |
|
15.34 |
|
|
|
14.85 |
|
|
3.3 |
% |
|
|
15.34 |
|
|
|
14.85 |
|
|
3.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
1The “Definitions
of Non-GAAP and Operating Measures” section of this release defines
and reconciles data that we prepare 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, “We were pleased with the improvement in our
results for the second quarter of 2019. The improvement represented
a continuation of the favorable operating metrics Donegal Group
reported in the first quarter of 2019. Net income of $0.17 per
diluted Class A share for the second quarter of 2019 and net income
of $0.99 per diluted Class A share for the first half of 2019
improved significantly compared to the results we reported for the
comparable periods in 2018. We attribute our 2019 performance to a
number of different factors, the most notable being strong
underwriting performance within our commercial lines business
segment.”
Mr. Burke continued, “We continue to shift our overall mix of
business to a higher proportion of commercial business, where we
see greater opportunities for profitable growth for the foreseeable
future. Net premiums written within our commercial segment grew
13.5% for the second quarter of 2019 and comprised approximately
52.3% of our total writings. We attribute this growth to new
commercial accounts our insurance subsidiaries have written
throughout their operating regions, a continuation of renewal
premium increases that averaged 2.1% and lower reinsurance
premiums. Renewal premium increases, excluding workers’
compensation, averaged 4.6% for the second quarter of 2019. Our
commercial multi-peril and workers' compensation lines generated
profitable results, and we have continued to implement commercial
automobile rate increases to improve results in that line.
“Our commercial lines growth was offset partially by a 10.0%
reduction in net premiums written within our personal lines
segment. The decline in personal lines net written premiums largely
reflected the impact of underwriting actions our insurance
subsidiaries have taken to slow new business growth and improve
profitability and the impact of our exit from the personal lines
markets in seven unprofitable states. Those factors were partially
mitigated by rate increases that averaged 5.9% for the quarter and
lower reinsurance premiums. We remain committed to maintaining a
balanced mix of commercial and personal lines products at pricing
levels that we expect will allow us to remain profitable through
fluctuating market cycles.”
Jeffrey D. Miller, Executive Vice President and Chief Financial
Officer of Donegal Group Inc., commented on the second quarter
underwriting results, “We were pleased that our commercial lines
insurance segment generated a statutory combined ratio1 of 92.9%
during the second quarter of 2019, driven primarily by our
commercial multi-peril and workers’ compensation lines of business.
That performance was offset by underwriting losses within our
personal lines insurance segment, although both our homeowners and
personal automobile lines of business showed improvement from the
prior-year period. Our expense ratio was relatively stable at 31.3%
for the second quarter of 2019. Overall, our combined ratio was
102.0% for the second quarter of 2019, compared to 105.6% for the
prior-year quarter. While we were pleased with the incremental
improvement, our results for the second quarter of 2019 did not
reflect our targeted level of underwriting profitability.”
Mr. Burke concluded, “Our net income during the first half of
2019, which included a gain on the March 2019 sale of Donegal
Financial Services Corporation, and unrealized gains within our
available-for-sale fixed-maturity portfolio during the period
contributed to an increase in our book value to $15.34 at June 30,
2019, compared to $14.05 at December 31, 2018. We are focused on
improving our financial performance, utilizing technology to
improve our operational efficiency, strategically modernizing our
business, and enhancing our market position to compete effectively.
Our goal remains to generate consistent favorable returns for our
stockholders over the long term.”
Insurance OperationsDonegal Group is an
insurance holding company whose insurance subsidiaries offer
personal and commercial property and casualty lines of insurance in
three Mid-Atlantic states (Delaware, Maryland and Pennsylvania),
three New England states (Maine, New Hampshire and Vermont), six
Southern states (Alabama, Georgia, North Carolina, South Carolina,
Tennessee and 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, |
|
|
2019 |
|
|
2018 |
|
% Change |
|
|
2019 |
|
|
2018 |
|
% Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Net
Premiums Earned |
|
|
|
|
|
|
|
|
|
|
Personal lines |
$ |
93,975 |
|
$ |
101,162 |
|
(7.1 |
%) |
|
$ |
190,568 |
|
$ |
200,701 |
|
(5.0 |
%) |
Commercial lines |
|
94,788 |
|
|
84,552 |
|
12.1 |
|
|
|
186,269 |
|
|
166,778 |
|
11.7 |
|
Total net premiums earned |
$ |
188,763 |
|
$ |
185,714 |
|
1.6 |
% |
|
$ |
376,837 |
|
$ |
367,479 |
|
2.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Net
Premiums Written |
|
|
|
|
|
|
|
|
|
Personal
lines: |
|
|
|
|
|
|
|
|
|
|
Automobile |
$ |
56,197 |
|
$ |
66,511 |
|
(15.5 |
%) |
|
$ |
112,223 |
|
$ |
131,417 |
|
(14.6 |
%) |
Homeowners |
|
32,685 |
|
|
35,030 |
|
(6.7 |
) |
|
|
57,713 |
|
|
61,587 |
|
(6.3 |
) |
Other |
|
5,458 |
|
|
3,265 |
|
67.2 |
|
|
|
10,638 |
|
|
6,194 |
|
71.7 |
|
Total
personal lines |
|
94,340 |
|
|
104,806 |
|
(10.0 |
) |
|
|
180,574 |
|
|
199,198 |
|
(9.3 |
) |
Commercial lines: |
|
|
|
|
|
|
|
|
|
|
Automobile |
|
31,245 |
|
|
27,857 |
|
12.2 |
|
|
|
65,547 |
|
|
58,103 |
|
12.8 |
|
Workers' compensation |
|
29,024 |
|
|
26,566 |
|
9.3 |
|
|
|
62,416 |
|
|
59,696 |
|
4.6 |
|
Commercial multi-peril |
|
35,454 |
|
|
29,710 |
|
19.3 |
|
|
|
73,294 |
|
|
61,895 |
|
18.4 |
|
Other |
|
7,740 |
|
|
7,010 |
|
10.4 |
|
|
|
15,887 |
|
|
12,313 |
|
29.0 |
|
Total commercial lines |
|
103,463 |
|
|
91,143 |
|
13.5 |
|
|
|
217,144 |
|
|
192,007 |
|
13.1 |
|
Total net premiums written |
$ |
197,803 |
|
$ |
195,949 |
|
0.9 |
% |
|
$ |
397,718 |
|
$ |
391,205 |
|
1.7 |
% |
|
Net Premiums Written
The 0.9% increase in net premiums written for the second quarter
of 2019 compared to the second quarter of 2018, as shown in the
table above, represents 13.5% growth in commercial lines net
premiums written, offset by a 10.0% decline in personal lines net
premiums written for the reasons we describe below. The $1.9
million growth in net premiums written for the second quarter of
2019 compared to the second quarter of 2018 included:
- $12.3 million increase in commercial lines premiums that we
attribute primarily to new commercial accounts our insurance
subsidiaries have written throughout their operating regions, a
continuation of renewal premium increases and lower reinsurance
premiums.
- $10.4 million decline in personal lines premiums that we
attribute to net attrition as a result of underwriting measures our
insurance subsidiaries implemented to slow new policy growth and to
increase pricing on renewal policies, as well as the non-renewal of
unprofitable personal lines business in seven states, partially
offset by premium rate increases our insurance subsidiaries have
implemented over the past four quarters and lower reinsurance
premiums.
Underwriting Performance
We evaluate the performance of our commercial lines and personal
lines segments primarily based upon the underwriting results of our
insurance subsidiaries as determined under statutory accounting
practices. The following table presents comparative details with
respect to the GAAP and statutory combined ratios for the three and
six months ended June 30, 2019 and 2018:
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
GAAP
Combined Ratios (Total Lines) |
|
|
|
|
Loss ratio (non-weather) |
60.7 |
% |
|
63.6 |
% |
|
60.5 |
% |
|
71.3 |
% |
Loss ratio (weather-related) |
9.0 |
|
|
9.5 |
|
|
7.1 |
|
|
8.3 |
|
Expense ratio |
31.3 |
|
|
31.8 |
|
|
32.0 |
|
|
32.1 |
|
Dividend ratio |
1.0 |
|
|
0.7 |
|
|
1.1 |
|
|
0.7 |
|
Combined ratio |
102.0 |
% |
|
105.6 |
% |
|
100.7 |
% |
|
112.4 |
% |
|
|
|
|
|
|
|
|
Statutory Combined Ratios |
|
|
|
|
|
Personal
lines: |
|
|
|
|
|
|
Automobile |
107.2 |
% |
|
109.7 |
% |
|
104.2 |
% |
|
113.8 |
% |
Homeowners |
113.6 |
|
|
113.9 |
|
|
104.4 |
|
|
112.8 |
|
Other |
89.2 |
|
|
104.9 |
|
|
79.9 |
|
|
119.5 |
|
Total
personal lines |
108.5 |
|
|
111.0 |
|
|
103.1 |
|
|
113.6 |
|
Commercial lines: |
|
|
|
|
|
|
Automobile |
112.7 |
|
|
116.0 |
|
|
114.5 |
|
|
143.5 |
|
Workers' compensation |
71.7 |
|
|
92.9 |
|
|
80.2 |
|
|
88.1 |
|
Commercial multi-peril |
93.2 |
|
|
91.2 |
|
|
92.1 |
|
|
103.8 |
|
Other |
95.1 |
|
|
67.1 |
|
|
80.9 |
|
|
54.5 |
|
Total commercial lines |
92.9 |
|
|
97.3 |
|
|
94.6 |
|
|
108.0 |
|
Total lines |
100.7 |
% |
|
104.5 |
% |
|
98.9 |
% |
|
111.0 |
% |
|
|
|
|
|
|
|
|
For the second quarter of 2019, the loss ratio decreased to
69.7%, compared to 73.1% for the second quarter of 2018.
Weather-related losses of $17.0 million for the second quarter of
2019, or 9.0 percentage points of the loss ratio, decreased from
$17.7 million for the second quarter of 2018, or 9.5 percentage
points of the loss ratio. Weather-related loss activity for the
second quarter of 2019 was higher than our five-year average of
$14.0 million for second-quarter weather-related losses.
Large fire losses, which we define as individual fire losses in
excess of $50,000, for the second quarter of 2019 were $6.2
million, or 3.3 percentage points of the loss ratio. That amount
was modestly lower than the large fire losses of $6.7 million, or
3.6 percentage points of the loss ratio, for the second quarter of
2018.
Net development of reserves for losses incurred in prior
accident years decreased the loss ratio for the second quarter of
2019 by 1.5 percentage points, compared to virtually no impact for
the second quarter of 2018. Our insurance subsidiaries experienced
favorable development in workers’ compensation losses, partially
offset by modest unfavorable development in several other lines of
business for the second quarter of 2019.
The expense ratio was 31.3% for the second quarter of 2019, in
line with the 31.8% expense ratio for the second quarter of
2018.
Investment OperationsDonegal 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, we had invested
93.4% of our consolidated investment portfolio in diversified,
highly rated and marketable fixed-maturity securities at June 30,
2019.
|
June 30, 2019 |
|
December 31, 2018 |
|
Amount |
|
% |
|
Amount |
|
% |
|
|
|
(dollars in thousands) |
Fixed
maturities, at carrying value: |
|
|
|
|
|
U.S. Treasury securities and obligations of U.S. |
|
|
|
|
government corporations and agencies |
$ |
120,708 |
|
|
11.2 |
% |
|
$ |
120,432 |
|
|
11.7 |
% |
Obligations of states and political subdivisions |
|
233,081 |
|
|
21.7 |
|
|
|
234,508 |
|
|
22.8 |
|
Corporate securities |
|
291,846 |
|
|
27.1 |
|
|
|
264,843 |
|
|
25.7 |
|
Mortgage-backed securities |
|
358,573 |
|
|
33.4 |
|
|
|
309,574 |
|
|
30.0 |
|
Total
fixed maturities |
|
1,004,208 |
|
|
93.4 |
|
|
|
929,357 |
|
|
90.2 |
|
Equity
securities, at fair value |
|
46,767 |
|
|
4.3 |
|
|
|
43,667 |
|
|
4.2 |
|
Investments in affiliates |
|
- |
|
|
0.0 |
|
|
|
41,026 |
|
|
4.0 |
|
Short-term investments, at cost |
|
24,453 |
|
|
2.3 |
|
|
|
16,749 |
|
|
1.6 |
|
Total
investments |
$ |
1,075,428 |
|
|
100.0 |
% |
|
$ |
1,030,799 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
Average investment yield |
|
2.7 |
% |
|
|
|
|
2.6 |
% |
|
|
Average tax-equivalent investment yield |
|
2.8 |
% |
|
|
|
|
2.8 |
% |
|
|
Average fixed-maturity duration (years) |
|
4.0 |
|
|
|
|
|
4.4 |
|
|
|
|
|
|
|
|
|
|
|
Net investment income of $7.3 million for the second quarter of
2019 increased 14.9% compared to $6.3 million in net investment
income for the second quarter of 2018. The increase in net
investment income reflected primarily an increase in average
invested assets relative to the prior-year second quarter.
Net investment gains of $1.6 million for the second quarter of
2019 were primarily related to unrealized gains in the fair value
of equity securities held at June 30, 2019. That amount was
comparable to net investment gains of $1.5 million for the second
quarter of 2018.
Net investment gains of $19.7 million for the first six months
of 2019 included $12.7 million from the March 2019 sale of Donegal
Financial Services Corporation and $6.1 million related to
unrealized gains in the fair value of equity securities held at
June 30, 2019.
Definitions of Non-GAAP and Operating
MeasuresWe prepare our consolidated financial statements
on the basis of GAAP. Our 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, we also utilize certain
non-GAAP financial measures that we believe provide value in
managing our business and for comparison to the financial results
of our 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. We define net premiums written as the
amount of full-term premiums our insurance subsidiaries record for
policies effective within a given period less premiums our
insurance subsidiaries cede to reinsurers. We define operating
income or loss as net income or loss excluding after-tax net
investment gains or losses, after-tax restructuring charges and
other significant non-recurring items. Because our calculation of
operating income or loss may differ from similar measures other
companies use, investors should exercise caution when comparing our
measure of operating income or loss to the measure of other
companies.
The following table provides a reconciliation of
net premiums earned to net premiums written for the periods
indicated:
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2019 |
|
|
2018 |
|
% Change |
|
|
2019 |
|
|
2018 |
|
% Change |
|
|
|
(dollars in thousands) |
Reconciliation of Net Premiums |
|
|
|
|
|
|
|
|
|
Earned to Net Premiums Written |
|
|
|
|
|
|
|
|
|
Net premiums earned |
$ |
188,763 |
|
$ |
185,714 |
|
1.6 |
% |
|
$ |
376,837 |
|
$ |
367,479 |
|
2.5 |
% |
Change in
net unearned premiums |
|
9,040 |
|
|
10,235 |
|
(11.7 |
) |
|
|
20,881 |
|
|
23,726 |
|
(12.0 |
) |
Net
premiums written |
$ |
197,803 |
|
$ |
195,949 |
|
0.9 |
% |
|
$ |
397,718 |
|
$ |
391,205 |
|
1.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides a reconciliation of net income
(loss) to operating income (loss) for the periods indicated:
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2019 |
|
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
|
2018 |
|
|
% Change |
|
|
|
(dollars in thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income (Loss) |
|
|
|
|
|
|
|
|
to Non-GAAP Operating Income (Loss) |
|
|
|
|
|
|
|
|
Net
income (loss) |
$ |
4,788 |
|
|
$ |
(790 |
) |
|
NM |
|
|
$ |
27,812 |
|
|
$ |
(18,968 |
) |
|
NM |
Investment gains (after tax) |
|
(1,237 |
) |
|
|
(1,001 |
) |
|
23.6 |
% |
|
|
(16,959 |
) |
|
|
(395 |
) |
|
NM |
Restructuring charge (after tax) |
|
- |
|
|
|
1,255 |
|
|
NM |
|
|
|
- |
|
|
|
1,255 |
|
|
NM |
Non-GAAP
operating income (loss) |
$ |
3,551 |
|
|
$ |
(536 |
) |
|
NM |
|
|
$ |
10,853 |
|
|
$ |
(18,108 |
) |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Reconciliation of Net Income (Loss) |
|
|
|
|
|
|
|
to Non-GAAP Operating Income
(Loss) |
|
|
|
|
|
|
|
|
Net
income (loss) – Class A (diluted) |
$ |
0.17 |
|
|
$ |
(0.03 |
) |
|
NM |
|
|
$ |
0.99 |
|
|
$ |
(0.68 |
) |
|
NM |
Investment gains (after tax) |
|
(0.04 |
) |
|
|
(0.04 |
) |
|
0.0 |
% |
|
|
(0.60 |
) |
|
|
(0.02 |
) |
|
NM |
Restructuring charge (after tax) |
|
- |
|
|
|
0.05 |
|
|
NM |
|
|
|
- |
|
|
|
0.05 |
|
|
NM |
Non-GAAP
operating income (loss) – Class A |
$ |
0.13 |
|
|
$ |
(0.02 |
) |
|
NM |
|
|
$ |
0.39 |
|
|
$ |
(0.65 |
) |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) – Class B |
$ |
0.15 |
|
|
$ |
(0.03 |
) |
|
NM |
|
|
$ |
0.90 |
|
|
$ |
(0.63 |
) |
|
NM |
Investment gains (after tax) |
|
(0.04 |
) |
|
|
(0.03 |
) |
|
33.3 |
% |
|
|
(0.55 |
) |
|
|
(0.01 |
) |
|
NM |
Restructuring charge (after tax) |
|
- |
|
|
|
0.04 |
|
|
NM |
|
|
|
- |
|
|
|
0.04 |
|
|
NM |
Non-GAAP
operating income (loss) – Class B |
$ |
0.11 |
|
|
$ |
(0.02 |
) |
|
NM |
|
|
$ |
0.35 |
|
|
$ |
(0.60 |
) |
|
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, excluding anticipated salvage
and subrogation recoveries, 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.
About Donegal Group Inc.
Donegal Group is an insurance holding company. The insurance
subsidiaries of Donegal Group and Donegal Mutual Insurance Company
conduct business together as the Donegal Insurance Group. Our Class
A common stock and Class B common stock trade on the NASDAQ Global
Select Market under the symbols DGICA and DGICB, respectively. We
are focused on several primary strategies, including improving our
financial performance, utilizing technology to improve our
operational efficiency, strategically modernizing our business in
order to achieve operational excellence and enhancing our market
position to compete effectively.
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 from time to time 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, |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
Net premiums
earned |
$ |
188,763 |
|
$ |
185,714 |
|
Investment income,
net of expenses |
|
7,290 |
|
|
6,342 |
|
Net investment gains |
|
1,566 |
|
|
1,517 |
|
Lease income |
|
112 |
|
|
123 |
|
Installment
payment fees |
|
1,058 |
|
|
1,306 |
|
Equity in earnings
of DFSC |
|
- |
|
|
788 |
|
Total revenues |
|
198,789 |
|
|
195,790 |
|
|
|
|
|
Net losses and
loss expenses |
|
131,507 |
|
|
135,754 |
|
Amortization of
deferred acquisition costs |
|
30,925 |
|
|
30,579 |
|
Other underwriting
expenses |
|
28,208 |
|
|
28,492 |
|
Policyholder
dividends |
|
1,969 |
|
|
1,214 |
|
Interest |
|
303 |
|
|
566 |
|
Other expenses,
net |
|
339 |
|
|
518 |
|
Total expenses |
|
193,251 |
|
|
197,123 |
|
|
|
|
|
Income (loss)
before income tax expense (benefit) |
|
5,538 |
|
|
(1,333 |
) |
Income tax expense
(benefit) |
|
749 |
|
|
(543 |
) |
|
|
|
|
Net income
(loss) |
$ |
4,789 |
|
$ |
(790 |
) |
|
|
|
|
Net income (loss)
per common share: |
|
|
Class A - basic and diluted |
$ |
0.17 |
|
$ |
(0.03 |
) |
Class B - basic and diluted |
$ |
0.15 |
|
$ |
(0.03 |
) |
|
|
|
|
Supplementary
Financial Analysts' Data |
|
|
|
|
|
|
Weighted-average number of
shares outstanding: |
|
|
|
Class A - basic |
|
22,932,894 |
|
|
22,685,964 |
|
Class A - diluted |
|
23,132,683 |
|
|
22,887,365 |
|
Class B - basic and diluted |
|
5,576,775 |
|
|
5,576,775 |
|
|
|
|
|
Net premiums
written |
$ |
197,803 |
|
$ |
195,949 |
|
|
|
|
|
Book value per common share at
end of period |
$ |
15.34 |
|
$ |
14.85 |
|
|
|
|
|
Donegal Group Inc. |
Consolidated Statements of Income |
(unaudited; in thousands, except share data) |
|
|
|
|
|
Six Months Ended June 30, |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
Net premiums
earned |
$ |
376,837 |
|
$ |
367,479 |
|
Investment income,
net of expenses |
|
14,338 |
|
|
12,721 |
|
Net investment gains |
|
19,663 |
|
|
599 |
|
Lease income |
|
223 |
|
|
246 |
|
Installment
payment fees |
|
2,147 |
|
|
2,653 |
|
Equity in earnings
of DFSC |
|
295 |
|
|
1,420 |
|
Total revenues |
|
413,503 |
|
|
385,118 |
|
|
|
|
|
Net losses and
loss expenses |
|
254,618 |
|
|
292,337 |
|
Amortization of
deferred acquisition costs |
|
61,517 |
|
|
60,244 |
|
Other underwriting
expenses |
|
58,893 |
|
|
57,815 |
|
Policyholder
dividends |
|
4,319 |
|
|
2,516 |
|
Interest |
|
869 |
|
|
1,030 |
|
Other expenses,
net |
|
904 |
|
|
1,044 |
|
Total expenses |
|
381,120 |
|
|
414,986 |
|
|
|
|
|
Income (loss)
before income tax expense (benefit) |
|
32,383 |
|
|
(29,868 |
) |
Income tax expense
(benefit) |
|
4,571 |
|
|
(10,900 |
) |
|
|
|
|
Net income
(loss) |
$ |
27,812 |
|
$ |
(18,968 |
) |
|
|
|
|
Net income (loss)
per common share: |
|
|
Class A - basic |
$ |
1.00 |
|
$ |
(0.68 |
) |
Class A - diluted |
$ |
0.99 |
|
$ |
(0.68 |
) |
Class B - basic and diluted |
$ |
0.90 |
|
$ |
(0.63 |
) |
|
|
|
|
Supplementary
Financial Analysts' Data |
|
|
|
|
|
|
Weighted-average
number of shares outstanding: |
|
|
Class A - basic |
|
22,891,535 |
|
|
22,650,899 |
|
Class A - diluted |
|
23,027,205 |
|
|
23,139,596 |
|
Class B - basic and diluted |
|
5,576,775 |
|
|
5,576,775 |
|
|
|
|
|
Net premiums
written |
$ |
397,718 |
|
$ |
391,205 |
|
|
|
|
|
Book value per common share at
end of period |
$ |
15.34 |
|
$ |
14.85 |
|
|
|
|
|
Donegal Group Inc. |
Consolidated Balance Sheets |
(in thousands) |
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2019 |
|
|
|
2018 |
|
|
(unaudited) |
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
Investments: |
|
|
|
Fixed maturities: |
|
|
|
Held to maturity, at amortized cost |
$ |
434,458 |
|
|
$ |
402,799 |
|
Available for sale, at fair value |
|
569,750 |
|
|
|
526,558 |
|
Equity securities, at fair value |
|
46,767 |
|
|
|
43,667 |
|
Investments in affiliates |
|
- |
|
|
|
41,026 |
|
Short-term investments, at cost |
|
24,453 |
|
|
|
16,749 |
|
Total investments |
|
1,075,428 |
|
|
|
1,030,799 |
|
Cash |
|
35,946 |
|
|
|
52,594 |
|
Premiums
receivable |
|
176,258 |
|
|
|
156,702 |
|
Reinsurance
receivable |
|
357,629 |
|
|
|
343,369 |
|
Deferred policy
acquisition costs |
|
64,274 |
|
|
|
60,615 |
|
Prepaid
reinsurance premiums |
|
143,969 |
|
|
|
135,380 |
|
Other assets |
|
47,779 |
|
|
|
52,619 |
|
Total assets |
$ |
1,901,283 |
|
|
$ |
1,832,078 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
Liabilities: |
|
|
|
Losses and loss expenses |
$ |
845,282 |
|
|
$ |
814,665 |
|
Unearned premiums |
|
535,999 |
|
|
|
506,529 |
|
Accrued expenses |
|
25,180 |
|
|
|
25,442 |
|
Borrowings under lines of credit |
|
35,000 |
|
|
|
60,000 |
|
Subordinated debentures |
|
5,000 |
|
|
|
5,000 |
|
Other liabilities |
|
16,968 |
|
|
|
21,572 |
|
Total liabilities |
|
1,463,429 |
|
|
|
1,433,208 |
|
Stockholders'
equity: |
|
|
|
Class A common stock |
|
260 |
|
|
|
258 |
|
Class B common stock |
|
56 |
|
|
|
56 |
|
Additional paid-in capital |
|
264,320 |
|
|
|
261,259 |
|
Accumulated other comprehensive loss |
|
(1,837 |
) |
|
|
(14,228 |
) |
Retained earnings |
|
216,281 |
|
|
|
192,751 |
|
Treasury stock |
|
(41,226 |
) |
|
|
(41,226 |
) |
Total stockholders' equity |
|
437,854 |
|
|
|
398,870 |
|
Total liabilities and stockholders' equity |
$ |
1,901,283 |
|
|
$ |
1,832,078 |
|
|
|
|
|
For Further Information:Jeffrey D. Miller,
Executive Vice President & Chief Financial OfficerPhone: (717)
426-1931E-mail: investors@donegalgroup.com
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